Legal News

Hello Franz! Cooperator No. 9 in Galleon Case Makes Debut

By Amir Efrati

This morning we give a Law Blog welcome to Franz Tudor, a former trader at hedge funds Galleon Group and Schottenfeld Group.

Tudor, it turns out, is cooperating in the Justice Department’s case against his former friends and colleagues at Schottenfeld and at his most recent firm, Incremental Capital. Here’s the story from WSJ’s Amir Efrati.

That makes Tudor the 9th cooperator (that we know of) who has agreed to plead guilty to insider-trading conspiracy.

But he’s not the only device wearer. Federal prosecutors in Manhattan equipped other cooperating witnesses with recording devices to try to obtain information about targets in the Galleon insider-trading probe, these people say.

Among them is Gautham Shankar, who has already pleaded guilty. Though his recording work isn’t referenced in charging documents filed by the government, people familiar with the matter say he wore a recording device in 2008 in an attempt to get employees of Incremental to make incriminating statements. We’re not sure if Shankar’s attempt worked, but it is similar to the way another cooperating witness in the case wore a recording device.

Tudor’s and Shankar’s recordings weren’t cited in the government’s criminal complaint filed last November against seven men charged in the alleged conspiracy, which is separate from the alleged ring involving Galleon Group found Raj Rajaratnam. Tudor is prepared to testify against some of the defendants, according to a person familiar with the matter.

Working with agents from the FBI’s Queens, N.Y.-based securities-fraud unit, Tudor made recordings of his colleagues at Incremental following Rajaratnam’s October arrest — which set Wall Street ablaze with chatter about insider trading — according to a person familiar with the matter.

Tudor was polite when we reached him yesterday. Eventually he referred us to his lawyer, who declined to comment.

In case it wasn’t already clear, the use of all of these cooperating witnesses pounds home the point that the feds persuaded multiple Wall Streeters to become informants to try to ensnare friends, sometimes applying techniques prevalent in organized-crime and drug investigations. Until now, just one cooperating witness had been publicly identified as having worn a recording device.

Speaking of insider trading rings and recording devices, here’s this month’s Vanity Fair piece on the upcoming “Wall Street” sequel, “Wall Street: Money Never Sleeps.”

Full post as published by Law Blog - WSJ.com on March 10, 2010 (boomark / email).