Zvi Goffer et al.'s Motion to Dismiss

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORKUNITED STATES OF AMERICA,Plaintiff,- against -ZVI GOFFER, et al.,Defendants.Criminal Docket No.10-CR-0056 (RJS)

DEFENDANTS’ JOINT MOTION TO DISMISS AND SUPPRESS

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Case 1:10-cr-00056-RJS Document 102 Filed 11/03/10 Page 1 of 84

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TABLE OF CONTENTS

PageIntroduction.....................................................................................................................................1Statement Of Facts..........................................................................................................................3A. The Government’s Undisclosed Investigation........................................................41. The Investigation of Galleon......................................................................42. The SEC’s Investigation into Insider Trading on Takeover Targets..........63. The Cooperation of David Slaine ..............................................................74. The 2007 Schottenfeld Investigation..........................................................95. The Renewed Use of Failed Cooperator Roomy Khan............................11B. The Title III Interceptions over the Drimal, Goffer, Goldfarb, Shankar andHardin...................................................................................................................131. The Drimal, Goffer and Goldfarb Wires...................................................132. The Shankar and Hardin Wires.................................................................15C. The Arrest of the Defendants and Relevant Proceedings.....................................151. The Defendants are Charged.....................................................................152. The Government Provides Discovery and Particulars..............................18ARGUMENT................................................................................................................................21I. THE INDICTMENT SHOULD BE DISMISSED BECAUSE THE GOVERNMENT’SEVIDENCE IS INSUFFICIENT AS A MATTER OF LAW................................................21A. This Court May Dismiss a Count of an Indictment Where There Has Been aFull Proffer of the Government’s Evidence..........................................................22B. None of the Information Allegedly Received from Ropes & Gray Was BothMaterial and Non-Public.......................................................................................241. Material and Non-Public Information.......................................................242. The 3Com and Axcan “Tips” Were Not Material and Non-Public..........26C. Tippee Liability Cannot be Premised on Misappropriation from A Roommate..28

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TABLE OF CONTENTS

(Cont’d)

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NYDOCS1-956174.1

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1. Fiduciary Relationship or Similar Relationship of Trust and Confidence282. The Absence of Fiduciary Elements in the Roommate Relationship.......30D. There Can Be No Derivative Tippee Liability Absent Shankar’s Knowledgethat his Tips Came from an Insider in Breach of a Relationship of Trust............311. Tippee Liability Is Derivative of Tipper Liability....................................312. The Alleged Tippee Chain Involving Kronos and Hilton is FatallyFlawed.......................................................................................................31II. THE INDICTMENT SHOULD BE DISMISSED BECAUSE SECTION 10(B) IS VOID FORVAGUENESS AS APPLIED TO THIS CASE......................................................................331. Uncertain Criminal Statutes Should be Pared Down to Core,Paradigmatic Cases...................................................................................332. The Misappropriation Theory of Insider Trading is Mired inUncertainty and Inconsistency..................................................................343. The Relevant Facts in this Case Are Mired in Speculation and PureGuesswork.................................................................................................374. This Case is not a Paradigmatic Misappropriation Insider Trading Case.39III. COUNTS ONE AND TWO SHOULD BE DISMISSED BECAUSE THEY AREMULTIPLICITOUS...............................................................................................................41A. Courts Apply a “Totality of the Circumstances” Test To Determine If TwoAlleged Conspiracies Constitute One For Multiplicity Purposes.........................42B. Count Two Expressly Subsumes Count One, Which Involves IdenticalCharges, Conspiracy Objects, Personnel, Dates, Location and Overt Acts..........43IV. THE WIRETAPS SHOULD BE SUPPRESSED BECAUSE INSIDER TRADING IS NOTA PREDICATE OFFENSE UNDER TITLE III....................................................................45A. Wiretaps Are Not Permitted to Investigate Insider Trading.................................46B. This Case Does Not Fall Within Title III’s Exception to the Use of WiretapsTo Prosecute Unenumerated Offenses..................................................................49V. THE WIRETAPS SHOULD BE SUPPRESSED BECAUSE THE WARRANTAPPLICATIONS MISREPRESENTED THE NECESSITY OF THE WIRETAPS.............51

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