Watch CBSN Live

14 More Charged in Alleged Insider Trading

Federal prosecutors say criminal charges have been filed against 14 people, including attorneys and Wall Street professionals, in a widening $25 million insider trading case that has already snared one of the richest men in America.

According to court papers filed in U.S. District Court in Manhattan, Zvi Goffer operated an insider trading network in 2007 and 2008 that included a lawyer who fed tips gleaned from his firm's work on acquisition deals.

Goffer worked at Shottenfeld Group LLC in Manhattan in 2007 and at Galleon Group for the first nine months of 2008 before he started his own trading firm, the papers said.

Last month, authorities Galleon Group founder Raj Rajaratnam and five others in an insider trading scheme that the Securities and Exchange Commission estimated produced $25 million in profits for its participants. A bail hearing for Sri Lankan-born Rajaratnam, who is free on $100 million bail, was scheduled for later Thursday.

Rajaratnam has denied through his lawyer participating in the scheme to use inside information to trade stocks at a profit ahead of public announcements.

In court papers, new details about the alleged scheme emerged to show how the government built its case.

The papers put Goffer in a central role. It was not immediately clear who would represent him at an initial court appearance.

A criminal complaint prepared by FBI Agent David Makol said Goffer paid others to obtain secrets about public companies' planned merger and acquisition activity that he then used to execute profitable securities trades.

The complaint said Goffer provided conspirators with prepaid cellular telephones so they could communicate in a way that reduced their chance of detection by law enforcement.

Among those who fed him tips that reached Goffer was Arthur Cutillo, a lawyer with Ropes & Gray, a law firm that held secrets regarding mergers and acquisitions, the complaint said. The tips included information about the announcement in September 2007 that Bain Capital Partners LLC would acquire 3Com, a technology company, the court papers said.

According to the complaint, Cutillo fed tips to another lawyer, Jason Goldfarb, who relayed them to Goffer.

In a statement, Ropes & Gray said it was "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."

It added: "We cannot comment in detail on an ongoing investigation but we are moving quickly to protect our clients and are cooperating fully with authorities."

The complaint said the government broke the case with the help of a confidential informant and three court-authorized wiretaps, including one on Goffer's cellphone that captured conversations in 2007 and 2008 and another on Goldfarb's phone.

The informant, who executed trades based on insider information while working at a hedge fund, has cooperated with the FBI since July 2007 and has agreed to plead guilty to charges of conspiracy and securities fraud in the hopes of getting leniency, the complaint said.

The U.S. attorney in Manhattan, the FBI and the Securities and Exchange Commission scheduled a midday news conference Thursday to discuss the case.

SEC spokesman John Nester in Washington declined to comment.