Ropes & Gray Associate Arrested in Galleon Probe

A Ropes & Gray associate is one of 14 people charged Thursday in an investigation into insider trading involving the Galleon Group hedge fund.

Associate Arthur Cutillo is accused of stealing inside information from Ropes & Gray and leaking it to Jason Goldfarb, who was also arrested Thursday, Bloomberg reports. A copy of the complaint (PDF) posted on the Wall Street Journal Law Blog identifies Goldfarb as a New York lawyer.

The complaint says Goldfarb turned over the insider information to Zvi Goffer, who allegedly ran an insider trading network at Galleon and other funds where he was employed. Later reports identified Goldfarb as a personal injury lawyer who has worked for Brecher Fishman Pasternack Walsh Tilker & Ziegler.

“There is probable cause to believe the Zvi Goffer and his co-conspirators obtained and used for securities transactions inside information concerning mergers and acquisitions in which Ropes & Gray played a role,” the complaint says. They include the acquisition of Avaya Inc. by Silver Lake and TPG Capital; the acquisition of 3Com by Bain Capital Partners; and the acquisition of Axcan Pharma Inc. by TPG Capital and its affiliates.

Goffer, Goldfarb and Cutillo all used prepaid phone cards in an effort to escape detection, the complaint says, relying on tapped phone conversations between Goffer and Goldfarb. In one phone conversation, Goldfarb told Goffer that another defendant had “spooked Artie”—an apparent reference to Cutillo—but his guys were hungry because “one guy” had spent his “whole chunk of change … from the first one” on his honeymoon and another guy “bought a new kitchen.”

Above the Law says Ropes & Gray has taken biographical information for Cutillo off its website. The blog posted the bio and says Cutillo was an intellectual property litigator at the firm.

Ropes & Gray released this statement to the ABA Journal: “We are deeply disappointed to learn about this situation, which suggests an extreme breach of this person's duty of trust to our clients and to the firm. We cannot comment in detail on an ongoing investigation but we are moving quickly to protect our clients and are cooperating fully with authorities.”

Brecher Fishman partner Jordan Ziegler told the New York Law Journal that the allegations against Goldfarb have nothing to do with his practice at the firm or its relationship to clients. "We found out about it today when the press called," Ziegler said.

Related coverage:

ABAJournal.com: "Former Sullivan & Cromwell Lawyer is Among Galleon Defendants"

ABAJournal.com: "Secret SEC Data-Mining to Fuel New Insider-Trading Cases; Lawyers Targeted"

Updated at 6:35 p.m. to link to additional coverage. Updated on Nov. 6 to include additional information about Goldfarb.