Galleon Group LLC ex-hedge fund trader Craig Drimal pleaded guilty to six counts of conspiracy and securities fraud in April. He has now been sentenced to five-and-a-half years in prison. Drimal admitted to insider trading based on information from lawyers at Ropes & Gray LLP, a firm based in Boston. The transactions involved Axcan Pharma Inc., 3Com Corp., Hilton Hotels Corp. and Kronos Inc.
Drimal personally profited $6.5 million from trades in 3Com Corp. and Axcan Pharma Inc., $4.3 million from trades related to Hilton Hotels Corp. and just over $950,000 from trades related to Kronos Inc., totaling more than $10 million in personal net profit as a result of his broker misconduct.
According to prosecutors, Federal Bureau of Investigation agents approached Drimal in 2009, seeking his cooperation. Contrary to the FBI’s instructions, Drimal contacted another Galleon Group trader, informing him of the government’s probe. In addition, Drimal lied to the SEC about his motivations for buying Axcan stock in a July 2008 interview.
Zvi Goffer, the former Galleon Group trader who was informed by Drimal of the FBI’s probe, was convicted in June of the 14 counts against him. Goffer asked to receive less than the 10 years called for by U.S. sentencing guidelines, citing the influence of his two young sons as evidence that he is a changed man. Court filing stated that, “The arrogant swagger of 2007 has been replaced with an honest humility in 2011.” Goffer has not yet been sentenced.
Raj Rajaratnam, Galleon Group co-founder, was convicted in May of insider training. Rajaratnam is still awaiting sentencing. Prosecutors are seeking a sentence of more than 24 years for Rajaratnam. Sentencing is scheduled for September 27.
In addition to the time in prison, Drimal will have to pay $11 million and will serve three years of supervised release following his prison term. For his part, Drimal has accepted the charges and reportedly told Judge Sullivan, “I understand I’ve committed a crime and I deserve to pay the price.”