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May 19, 2011 3:23 am
A former Diamondback Capital portfolio manager pleaded guilty to conspiracy and insider trading charges as part of an alleged stock trading scheme with ties to Galleon Group.
Anthony Scolaro, the former trader, pleaded guilty in December and agreed to co-operate with the government’s investigation into insider trading. His guilty plea was announced on Wednesday.
Mr Scolaro was allegedly part of a scheme that is the subject of a trial in a federal court in Manhattan. Prosecutors have accused Zvi Goffer, a former Galleon trader, his brother Emmanuel Goffer and trader Michael Kimmelman of trading shares in Axcan Pharma in 2007 after being tipped that the company was going to be acquired by TPG, a private equity firm.
Opening statements in the case began on Wednesday as lawyers for the defendants denied the allegations. The trial is expected to feature testimony from co-operators and recorded conversations intercepted during phone calls and obtained by co-operators wearing recording devices. It is not known whether Mr Scolaro will testify for the government. His lawyer could not be reached for comment.
The US attorney’s office in Manhattan, which brought the cases, is aggressively pursuing insider trading. Mr Scolaro signed a co-operation agreement with the government on November 12 2010. Ten days later, Federal Bureau of Investigation agents raided Diamondback’s office.
Diamondback, founded by former SAC Capital traders, declined to comment. Prosecutors have charged more than 45 people with insider trading since 2009, including several former SAC traders and portfolio managers. Neither Diamondback nor SAC have been accused of wrongdoing.
According to court documents, Mr Goffer received information about the Axcan takeover from lawyers at Ropes & Gray, who were advising TPG. Mr Goffer allegedly tipped Franz Tudor, another trader, who subsequently tipped Mr Scolaro. Mr Tudor has pleaded guilty to insider trading.
Mr Scolaro worked at Diamondback from 2005 until November 2009 when he was sacked for poor performance, said a person familiar with the firm. In 2007 the firm investigated his trading in Axcan, this person said, but did not uncover wrongdoing.
After the office raid, Diamondback said the government focused, in addition to Mr Scolaro, on a current and a former employee, but they have not been charged with any wrongdoing.
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