Posted by Edmond Geary | Posted in Conspiracy charges, Insider trading, Securities Fraud, White collar crime | Posted on 21-07-2011
Very commonly in cases prosecuted by the federal government, the authorities pressure people to “cooperate” with the government. This is a euphemism. The pejorative term for this is “snitch.” People do it because they believe it will give them a better deal, a lower sentence or no sentence, depending on their own case. Federal cases so often charge multiple people and charge conspiracies that as investigations sweep up individuals, those individuals become part of the government’s case as it increases in number of individuals and breadth.
Ephraim Karpel was one of those. He worked on Wall Street and was never charged with a crime. But federal authorities had a talk with him in 2008, and he agreed to cooperate in their investigation. The feds had some leverage on Karpel, so he agreed to cooperate for his own perceived self-interest.
Two F.B.I. agents approached him outside a restaurant, went inside with him, and told him they had evidence he was involved in insider trading. What they had was a recorded telephone conversation between Karpel and Zvi Goffer, whose phone they had tapped. In that call, Karpel had told Goffer that Walgreens, the drugstore company, had made an offer to buy Matria Healthcare. Karpel told Goffer his source was a banker.
The Walgreens buy never happened. But that call was one of 20 plus recorded calls played by the prosecution during the jury trial of Goffer, nicknamed Octopussy because his arms reached into so many sources of information. Goffer was convicted of insider trading last month with two accused co-conspirators, his brother Emanuel, and Michael Kimelman, formerly of the well-regarded Wall Street law firm of Sullivan & Cromwell.
With that conviction, the government continued its string of convictions in its campaign against insider trading at hedge funds. Of the 49 people charged, 43 have either pled guilty or been convicted at trial. Wiretaps played a crucial role in the evidence in Goffer’s case, just as it had in the recent conviction of high-profile trader, Raj Rajaratnam, of the Galleon Group. Goffer had sat in on some of Rajaratnam’s jury trial, but it apparently did not help enough.
Karpel had a lot of Wall Street connections. He had worked for 18 years at Mutual Shares, an investment firm run by Michael Price. Karpel rose to the be head trader there, and then left to work as an analyst. He worked at P. Schoenfeld Asset Management and then at Tigris Financial Group, a commodities firm. He was a specialist in metals and mining stocks.
For 3 years, Karpel was a cooperating witness. At first, he secretly taped his conversations with fellow traders. The government investigation changed Karpel’s life. It terrified him and his wife, and working for the government against his friends was a great conflict to him. Even after the F.B.I. stopped asking Karpel for help after a year, the pressure continued, because about that time, his employer, Tigris, learned of his involvement in the investigation and dismissed him. He continued to work for the company but as a consultant but was depressed after losing his job there. Finally, last month, he hanged himself in his office.