U.S. Attorneys and the Securities and Exchange Commission charged 14 additional people on Thursday in what is a deepening of the Galleon Group insider trading case.

The defendants included a corporate executive, an attorney with the law firm Ropes & Gray, and Wall Street traders at the brokerage house Schottenfeld Group and hedge fund Incremental Capital.

The U.S. Attorney’s office for the Southern District of New York said the charges add up to a scheme that brought in $20 million in illegal profits to the insiders and traders involved.

Including last month's arrest of Galleon Group founder Raj Rajaratnam and his co-defendants, investigators said a combined $40 million in illegal profits has been made off of this insider trading scheme.

"It would be a mistake that this is focused just on hedge funds," said U.S. Attorney Preet Bharara at a press conference in Manhattan on Thursday. "This has gone beyond that, this goes to heart of fair play in the business world."

Thursday’s charges revolved around Galleon and Schottenfeld employee Zvi Goffer, 32, who allegedly built an insider trading network to obtain nonpublic information on several then publicly-traded companies, including 3Com (COMS) and Avaya. The SEC said that Goffer was nicknamed Octopussy - a James Bond reference - by friends and colleagues, because of his Rolodex of sources inside major corporations.

Other co-defendants include New York attorney Jason Goldfarb, Ropes & Gray attorney Arthur Cutillo, former Galleon trader Craig Drimal and Incremental Capital employees Emanuel Goffer, Michael Kimelman, and David Plate. Attorneys also charged Ali Harari, a vice president at Atheros Communications (ATHR), with divulging private information to traders.

Law enforcement officials say Harari, generated illegal profits of $870,000 from the scheme. Goffer allegedly provided some of the defendants with prepaid cell phones so they could reduce the chances of law-enforcement detection.

In a separate complaint, federal attorneys charged former Moody’s analyst Deep Shah with insider trading in relation to the complaint against Rajaratnam. According to the complaint, Shah, 27, an associate analyst with Moody's assigned to cover Hilton Hotels, allegedly told Galleon on July 2, 2007 that Hilton was going to be taken private sometime before July 4, 2007. By sharing this, Galleon was able to act on Hilton’s stock before the transaction was announced.

The Securities and Exchange Commission also brought civil complaints against several of the defendants in conjunction with the U.S. Attorney office’s charges. The defendants named by the SEC include all of those accused by the U.S. Attorney with the exception of Harari, as well as Gautham Shankar of New Canaan, Conn., a former registered representative at Schottenfeld. The complaint also names as a defendant Schottenfeld Group LLC.

According to the complaints, Ropes & Gray attorney Cutillo, 33, provided information to Goffer on the confidential activities of Ropes’ clients, including four transactions that the firm advised on. The deals included the unsuccessful purchase of 3Com by Bain Capital, the purchase of Avaya by Silverlake Partners, Blackstone Group's purchase of Alliance Data Systems and TPG's purchase of Axcan Pharma Inc. All four transactions occurred in 2007.

Cutillo, who joined the firm in 2005, specialized in intellectual property law in the firm's litigation department. His biography was removed from Ropes' Web site Thursday morning.

Ropes & Gray said it is "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."
According to the complaint, investigators used wire taps to monitor the information flowing among the defendants, similar to the ones used in the Galleon case.

Said Schottenfeld Group: “We are deeply troubled and shocked by the criminal allegations made today against former employees of our firm. These individuals have not been affiliated with the firm for nearly two years. None of the principals nor any present employees of the firm have been named in connection with this criminal investigation. We plan to cooperate fully and completely with the authorities in their investigations of this matter.”

The U.S. Attorney’s office also said that five additional defendants, who were previously charged with insider trading, have now pleaded guilty to the charges.

The names included Steven Fortuna, a managing director of Boston hedge fund S2 Capital, Ali Far, founder of Spherix Capital, Richard Choo-Beng Lee, president of Spherix, Roomy Khan, a trader who worked with a New York-based hedge fund, and Shankar.  Khan was identified by the Wall Street Journal as the original informant who outed Rajaratnam.

Goffer, Zvi Complaint