Galleon Group insider trading turns into a largest US scandal with 14 defendants

 Federal prosecutors in Manhattan are filing charges against 14 people that are allegedly accused of another insider trading scheme that involved hedge fund managers, top Silicon Valley executives and a group of white-shoe advisers. Complaints were filed against nine individuals and it is unclear if there is any connection with the previous complaints filed three weeks ago against Raj Rajaratnam, the founder of hedge fund Galleon Group, and Danielle Chiesi, an employee at the New Castle Group hedge fund.

According to the filing of the federal prosecutors Zvi Goffer, a former employee of Schottenfeld Group, a broker dealer located in New York, and of Galleon Group, the hedge fund at the center of the original insider trading scandal, was the boss of an insider trading operation that paid sources for non-public information. He and 13 others were charged on Thursday.

The complaint alleges that Goffer along with his conspirators have engaged in insider trading between April 2007 and May 2008 in shares of 3Com, Avaya, Kronos, Axcan Pharma, and Hilton Hotels.

In a phone conversation intercepted by investigators in February 2008 Goffer warned his confederates: don’t be too obvious about making big money.

"Someone's going to jail, going directly to jail, so don't let it be you, OK?" Goffer said, according to a criminal complaint. "That's a ticket right to the (expletive) Big House."

"Some of the defendants -- taking a page from the drug dealer's playbook -- deliberately used anonymous, hard-to-trace, prepaid cellphones in order to avoid detection," U.S. Attorney Preet Bharara told a news conference on Thursday.

"When sophisticated business people begin to adopt the methods of common criminals, we have no choice but to treat them as such," he added.

The Galleon case is turning into one of the biggest insider trading rings since the Ivan Boesky scandal of the 1980s led to the end of a gilded age for Wall Street and ultimately brought down Michael Milken's Drexel Burnham Lambert.