Another Galleon Employee Pleads Guilty to Insider Trading

The man whose telephone conversations were among the first to be secretly taped by federal authorities and would eventually lead to the largest insider-trading investigation in U.S. history pleaded guilty Tuesday.

Craig Drimal, a former Galleon Group LLC employee, pleaded guilty to five counts of securities fraud and one count of conspiracy. The securities charges each carry 20 year prison sentences; the conspiracy charges, 5 years.

Drimal is part of the federal investigation linked to his former boss, hedge fund founder Raj Rajaratnam. He is the 21st out of 26 co-defendants who have now pleaded guilty in the case.

Rajaratnam, the central figure in the government’s multiyear crackdown on insider trading, is charged with 14 counts of conspiracy and securities fraud. The government claims he made $63.8 million illicitly between 2003 and March 2009. The jury in the Rajaratnam trial began deliberating Monday afternoon.

Drimal said he received insider information from former Ropes & Gray attorneys Arthur Cutillo and Brien Santarlas  about the mergers and acquisitions of several public companies and made trades based on that information. Those companies include 3Com Corp. and Axcan Pharma, Inc. In total he made more than $6 million based on insider tips, according to court records.

“He deeply regrets his actions and is now focused on his future with his wife of 30 years and his three children,” Drimal’s attorney JaneAnne Murray said in a statement.

Last week Drimal lost a bid to have the wiretaps in his case excluded on the grounds that the Federal Bureau of Investigation had improperly monitored multiple personal conversations with his wife, which are legally privileged. The government began taping Drimal in late 2007.

Even though the judge did not suppress the recordings he did have harsh words for prosecutors and investigators during the hearing.

“I don’t think that there was any question that at least a couple of the calls here were disgraceful and should not have been monitored the way they were,” Judge Richard Sullivan said. “It is an embarrassment to the FBI.”

Assistant U.S. Attorney Michael Levy acknowledged the sensitive nature of some of the calls and told the court the government did not dispute that some picked up during the wiretap were not relevant to its investigation.

However, Sullivan did rule that the bulk of the more than 1,000 calls were recorded appropriately.