Galleon Defendant Rejects No-Jail Deal

May 12 2011 | 1:02pm ET

One of the three men set to face trial next week in the Galleon Group insider-trading case refused a deal with prosecutors that would have spared him jailtime.

Michael Kimelman, a former trader at hedge fund Incremental Capital, turned down a probation-only offer as recently as last week, his lawyer wrote in a court filing. Instead, Kimelman faces as much as 45 years in prison if he is convicted of securities fraud and conspiracy.

"Mr. Kimelman's decision to decline a non-jail sentence, persist in his plea of not guilty, and face the possibility of a sentence of imprisonment if convicted at trial is probative of a state of mind devoid of guilty knowledge," Michael Sommer wrote. "It bears emphasizing that Mr. Kimelman did not just reject a plea agreement. He rejected a non-jail sentence."

Sommer is attempting to convince U.S. District Judge Richard Sullivan to allow him to introduce evidence of the rejected plea deal, which prosecutors oppose.

Kimelman's rejection of the deal, which would have him plead guilty to conspiracy and be sentenced to probation, while having the securities fraud charges dropped, came before the conviction yesterday of Galleon Group founder Raj Rajaratnam, alleged to have masterminded one of two interlocking insider-trading rings in the case.

Kimelman was allegedly a member of the second, allegedly headed by former Galleon trader and Incremental founder Zvi Goffer. Goffer is one of Kimelman's two co-defendants, along with Goffer's brother, Emanuel. Four others originally charged alongside them have pleaded guilty; in all, 21 of the 26 people charge in the case have pleaded guilty.

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