Nu took the opposite tack. At his sentencing, when the judge asked Nu if he would like to address the court, he barely stood up to offer a simple “No,” and sat right back down again. I learned later that Nu was so outraged by Zvi’s sentence that he had to be talked into standing at all.
Fortunately for Nu, his approach worked significantly better than Zvi’s insincere change of heart. Nu was facing five to seven years under the guidelines. Sullivan sentenced him to three. Nu was the only one who fared about the same going to trial as he would have done had he pled to the charge.
As for me, my sentencing followed a strange and unexpected event.
I suppose Elle magazine is a respected name in the fashion world—if you respect the world of fashion, that is. I, for one, don’t. I’ve never been tempted by Savile Row suits or hand-stitched shirts from Naples. Even Brooks Brothers seems a dandified stretch. Clothes don’t make the man, in my opinion.
Anyhow, imagine my surprise—and jaw-dropping, heart-sinking shock—when I learned that Lisa had decided to pen a piece for Elle magazine just before my sentencing. She had not told me, or anyone, that she was going to do this. The absurdly long title of the article—Elle seems to play a bit fast and loose with these things—was: The Verdict: When Lisa Kimelman had to face the trial of her life (and look good for it), she found armor, and an ally, on the fifth floor of Barneys.*
The piece was about how shopping at Barney’s had allowed her to prepare herself for my trial. Needless to say, this was not the kind of publicity likely to garner me favor with a judge who seemed to have it out for me (or with a public fed up with rich, spoiled Wall Streeters). Reading the piece, I could tell that Lisa, in her way, had tried to be self-deprecating and down-to-earth. She opened by admitting that she’d only been shopping at Barney’s once before, several years earlier, with a few friends and after a couple of cocktails. She even mentioned how hard a time the sales assistant had when helping her on with a pair of jeans, growling, “You gotta tuck your fat in, girl! You tuck that fat in!”
But she also dropped the fact that her father was something of a political and financial heavyweight. And near the end of the piece she told the story of how her mother had once been seated next to Henry Kissinger, back when her husband was in the Nixon White House, and how Henry had complimented her hair.
“Oh, you can wear it too,” Connie had told America’s Metternich, taking off her wig and dangling it over the White House china.
To Lisa’s way of thinking, these were innocent facts and cute anecdotes. And to those in her social circle, they may have been. But to outsiders, they undeniably gave the impression of our trying to “clout” our way out of this. Of signaling that, ahem, we were not the sort of people to whom this was supposed to happen.
To this day, there is no way to know what sort of damage the article did, or to know whether Judge Sullivan read it (I’m inclined to think that he does not have a subscription to Elle, but I believe people who work for him might have brought it to his attention). What I can tell you with great certainty is that my legal team was very upset, and thought it would bode poorly.
I was upset too, but I also felt for my wife. Here she was, on the brink of being entirely on her own. The magazine article was a smart move as far as publicity for her catering business—which would be all she would have to sustain our family while I was away.
Yeah, it pissed me off—and yeah, I thought it was a pretty self-serving move—but no, I didn’t for one second blame her.
So there I was. After two years in purgatory, finally overlooking the abyss. I was the last of the three defendants to be sentenced. The courtroom was packed on the day of my sentencing, the energy and anticipation palpable. I had a sense of fatal resignation, a grin-and-bear-it mentality. I had made the decision to go to trial and now had to accept the outcome and face my punishment. I couldn’t risk being defiant in my statement—at least not in terms of tone or attitude. I’d seen enough of Sullivan’s “hang ’em high” tactics to know I couldn’t risk enraging him. In an attempt to brighten the mood, I slid Moe a copy of the angry version of the statement I’d written—the one I wanted to give but knew I could not give—with the actual orange Monopoly Get out of Jail Free card on top of it.
“Do I hand this to the bailiff before or after I make my statement?” I asked him.
Here is what, deep down, I wanted to say. It was sloppy and angry and full of my soul. Here is what that statement said:
My attorneys have advised me, because of the posture of the case, not to say anything. I would like to go ahead anyway and make a brief statement.
At this point in my life, I am filled with regrets.
I regret not testifying. Not having the opportunity to give my side of the story.
The consensus was you don’t testify unless you are losing the case—and at no point during the trial did I or my attorneys feel that was happening. Besides, the AUSAs in this case should have already been nominated for a best actor award in a fiction drama for their performance during the close and rebuttal—and I didn’t want to give them additional fodder to feign outrage and confusion over.
It’s easy to ask someone on the stand about a date four years ago and get an ‘I don’t know.” The lead case agent offered up some version of “I can’t recall” or “I don’t know” over fifty-eight times that I counted during one relatively brief cross exam. I can barely remember what happened last week, much less four years ago. Those non-answers would have been pounced upon during the close and rebuttal as evasions or lies.
“How could the defendant ‘forget’ making $50K or $100K in a single day? I guarantee you I would remember if I made that kind of money.”
Never mind the fact that when one manages millions of dollars, swings of this magnitude happen quite often, or that making more in a day than most jurors will make in a year, is, wrongfully, on its own, inculpatory.
While I am not guilty of insider trading, I do know that I am certainly guilty of bad judgment. I regret and am sorry for lowering my standards so far that I chose to go into and stay in business with someone whom I knew had a habit of shading the truth and of serial exaggeration. For lack of a better term, and please excuse my language—a “BS” artist. Those who knew Zvi Goffer for more than a few months understood his tendency to boast. We took what he said with a grain of salt. That is markedly different than being a knowing conspirator in a serial insider trading scheme. Zvi actively and deliberately misled me and numerous others (including dozens of people at his own firm) about the “source” of his information. He would say things like: “My friend’s friend is a portfolio manager at Hedge Fund X and he is hearing so and so” or “My SAC guy is telling me Y.” These were common refrains. The origins of most of Zvi’s calls weren’t even capable of being identified.
I suspect that the jury’s analysis centered on whether or not I was “tipped” by Zvi Goffer. But as we know, “tips” are not illegal. Tips where the tippee knows that the information is material, nonpublic, and acquired in breach of a fiduciary duty for some pecuniary benefit—that is what is illegal.
Nothing in Zvi’s history put me on notice that he was actually involved in an active knowing breach. Instead, he appeared to be just relaying or repeating rumors or research from others. There are whole industries and websites, blogs, other media and analyst research dedicated to these areas of trading. The law has gone from “knowledge” to a more subjective “should have known” to now, in this case, a “could have known” standard. As my attorney Mr. Sommer has spoken about, we traded over 347 stocks together during the time frame in question. Of the 100 or so “calls” Zvi relayed prior to and after 3Com, I probably lost money on ninety-seven of them.
Once we became partners at Incremental, actually working together, almost a year after 3Com took place, I was able to observe Zvi on an everyday basis. I read the riot act to Zvi. I told him that I would have a zero-tolerance policy for any moral or ethical breaches. There is a reason why info
rmant after informant could not point to a single transgression of mine. You can be certain that neither coincidence nor luck had anything to do with that. Based on the number of informants and wiretaps and tremendous resources exerted, it didn’t happen for want of looking.
And as for the jury, I sincerely believe these types of cases are too complex. This is not murder, grand theft auto, or a bar brawl. The issues here are too sophisticated, the laws too vague and ill-defined—intentionally so, I might add—and the elements too specialized to be interpreted and analyzed by laymen. They are more like patent cases, which the law is beginning to recognize are incapable of being adjudicated by a jury and therefore better suited to be heard by a judge.
Over the last two years, my life has been summarily destroyed. Everything I’ve ever worked or studied for has been wiped out. Everything. The firm I built for two years, working eighteen hours a day and investing most of my net worth, is wiped out. Professionally and personally, my reputation has been ruined. I am bankrupt and about to lose my freedom. Starting over my life as a felon, in my forties, with over a million dollars in debt, scares me—but not being there as a father or husband when my family needs me is what truly terrifies me.
I think your honor presided in a fair manner over the trial and I want to thank you for treating my family and me with respect throughout this process.
I understand the rules of the system. And I was fully aware that turning down the government’s probation offer and submitting myself to the verdict of a jury engendered certain risks. The fact the jury rendered the decision they did means I have to be punished. I stand here ready to accept your honor’s sentencing decision.
I believe in redemption, and will one day make it right, as a husband and father, as a friend and a son, for those who have sacrificed for me.
Thank you, your honor.
And here, instead, is what I actually read:
I’ll be very brief, Your Honor.
Over the past two years, I have had the opportunity—privately—to express my feelings to my family and friends who have supported me throughout this difficult period in my life. So I won’t do that now.
Today, I would like to thank the Court for presiding over my trial in a fair manner and treating me and my family with respect throughout the process. When I chose to go to trial, I was fully aware of the risk that a jury would find me guilty, and now I am ready to accept the consequences of that decision.
I believe in redemption and one day hope to make it right, as a husband, father, son, and friend for those who have stood by my side and sacrificed for me. Thank you.
In retrospect, I should have released the text of the statement to the media, but Sommer and Moe were against that. I believe this was ultimately bad advice, as some journalists reported that I had stood and “accepted the consequences of [my guilt],” which is false and incomplete. It felt like the final dagger thrust. The reporting on my trial had involved numerous mistakes. There had even been stories saying that I had worked with Raj at Galleon. So many things were wrong, but they were out there now, and could hurt my reputation for years to come.
After my statement, I sat down and looked at Moe. He mustered a smile, but I could tell his heart wasn’t in it. He had been here before.
For Moe, sentencing was never enjoyable, even when he was standing with the government on the winning side. There is something about sitting in judgment of one’s fellow human beings that weighs heavily. Perhaps it should. Moe had been a lead prosecutor in the Ronell Wilson murder trial, in which Wilson was convicted of killing two undercover New York police officers on Staten Island back in 2003. Moe wrote to then US Attorney General Alberto Gonzales, arguing that life in prison was sufficient punishment for Wilson. Gonzales told Moe to seek the death penalty or resign immediately from his job.
Now my fate was in the hands of the Honorable Richard Sullivan.
After my statement, he asked the prosecution if I was of “a different caliber” than the other defendants. They said I was, and the “least culpable.” Over a hundred letters of support had been offered for me—“the most I’d ever seen for a defendant,” Sullivan observed. He also conceded that my verdict had probably been a “close call,” and one that “could have gone either way.” But he also said I should have known better than to get mixed up with my codefendants.
Then, for a moment, he said nothing more. This was it. I knew the sentence would come next.
I was given thirty months, followed by three years’ probation. It was basically the same sentence received by Nu, who had made more than $1 million, used a prepaid phone, written cover-up emails, and doled out illegal cash.
The wind went out of me. I could feel hearts sinking behind me.
Sullivan stood and exited the courtroom. The government prosecutors grabbed their Redweld folders and headed for the doors. I knew that Moe and Sommer’s promises to file an immediate appeal were sincere—it was par for the course, after all, and more work for them. In a daze, I turned around and saw my poor parents, my father red in the face, struggling with tears, as well as my mom, who remained impressively strong-looking, considering her broken heart. Lisa was surprisingly stoic—jaw clenched, glassy-eyed. She was the one I hugged first. I needed that strength to face what I knew awaited me outside—the cameras, the klieg lights, the microphones.
“Mr. Kimelman, Mr. Kimelman! Over here, over here! Do you have anything to say about the decision?”
Looking straight ahead, believing that my head was held high, with Lisa by my side, I’d officially crossed over. I had become a convict. There was nothing more to say. That was it, my two-year wait was officially over. I was going away.
There were forms to fill out, and interviews with psychiatrists, doctors, the media, and representatives from the Bureau of Prisons. I was also occupied with legal matters for my appeal and lots of goodbyes, capped off by a positively funereal “going away party” at a dive Irish bar near Times Square. As I shared my last drink with friends, their stories about careers and families echoed in my mind. As my life would disintegrate, as I would be trapped in a new hellish limbo, the larger world would keep spinning.
A couple of days after my sentencing, and two months before I had to surrender myself to federal authorities at a prison in central Pennsylvania, Peter Lattman from the New York Times called me up. He said he was writing a story on me and requested an interview. I was hesitant, but also did my due diligence. Lattman, a seasoned, savvy, and serious journalist, struck me as someone I could really talk to. I mean, what was the worst that could happen: He writes a scathing piece and makes me look bad—me, whose face had just been on every major news network in the United States and beyond, beneath the all-capped word: GUILTY! I’d tossed the dice over much bigger things in my day, including my very own freedom; this one seemed about as harmless as could be.
As I learned writing this book, it’s as much about what you leave out of a story as what you decide to put in—and this was clearly the case with the Lattman article. Sommer was firmly against it, believing all media was bad media, but Moe, to a degree, felt that humanizing the so-called “beast” might not be a bad thing, especially in light of what the federal prosecutors and the FBI had done to make me look like a monster.
Lattman’s article made the rounds. Some of the reactions were expected, others were definitely not. Lisa, at least, got great exposure—mostly because of her flattering picture. Long red hair, curvy body in a clingy dark dress, and porcelain skin have a way of piquing a interest. Suddenly “when does Kimelman report” became the question du jour, as the underlying tenor was “Perhaps poor Mrs. Kimelman will need some company,” as at least one FBI agent reportedly noted.
Preet himself said he was making the article mandatory reading for all Assistant US Attorneys, so they would understand and appreciate the power they have and the lives they can impact.
That last line of mine in Lattman’s article is one of the truest, most painful things I have ever said, let alo
ne thought. “It’s the kids that’ll kill you.” Concern for my children was all that went through my head as I sat in the back yard, waiting to report. It stayed with me through the long quiet hours, the days and nights, the weeks rolling into months, lying on my cramped prison bunk, hands behind my head, staring at the peeling ceiling. And it stays with me now, three years on, a convicted felon but a free man.
In the article, Lattman mentioned that we still had yet to tell the kids. Looking back, I’m not even sure when exactly we told them. It was such an emotional time. Maybe it was that October, right after the sentencing, or closer to “departure time,” in December, when Lisa and I sat down on Cam’s toy-cluttered floor and finally talked to him and to Syl about it. (Phin was simply too young to understand, and too disruptive.) Among the Tyco trucks, G. I. Joes, and stuffed animals, I tried to explain to my children that, in life, we are held responsible for the things we do, and sometimes for things our friends do. I said it’s important to surround yourself with good people. I explained that Daddy had chosen some of his friends poorly, and they had done some bad things. Maybe not very bad. They didn’t hurt anyone, or kill anyone. But they did cheat at the game we were playing, ignoring the agreed-to rules. And because I was their partner, I had also been held responsible for the things they’d done. So now—I told them—I have to go away … to a prison camp. I will probably be gone about a year. But I will be back, and life will be normal again. Mom will be here, Grandma and Grandpa, and Chris (Lisa’s sous chef, who became a true friend to our kids), Brett (another Iona grad and occasional prep chef), and Annette (or “Netta,” our Czech babysitter). All of them will be here. And you can call Daddy and talk to him on the phone every night, and we can write letters … and … And there was a lump of pain in my throat the size of a baseball, which no amount of swallowing would get rid of.
I don’t know how I got through that without breaking down and bawling. It was the hardest thing I’ve ever had to say or explain to anyone, ever. It was also hard to process their looks of childish confusion. The gently furrowed brows. The utterly innocent frowns. They did not cry at the time—they were, I think, still processing—but they were clearly saddened.
Confessions of a Wall Street Insider Page 29
