Key U.S. Prosecutor in Insider Trading Cases Leaving Government

Charles M. Carberry, the federal prosecutor who has directly supervised most of the government’s ground-breaking insider trading cases, will leave the government in October to become a criminal defense lawyer, fellow prosecutors said Tuesday.

Carberry, 37, will join the New York office of Jones, Day, Reavis & Pogue, a Cleveland-based law firm, after eight years with the U.S. attorney’s office in Manhattan, including two years as head of its securities fraud unit.

His departure from his job as an assistant U.S. attorney comes at a delicate moment in the prosecution of the insider trading cases. After an unbroken string of successes, the government in May asked for dismissal of its charges against arbitrageurs Robert M. Freeman of the investment firm of Goldman, Sachs & Co., and Richard B. Wigton and Timothy L. Tabor, both formerly of Kidder, Peabody & Co., another Wall Street firm.

While prosecutors have said they plan to seek new and broader indictments against the three, some critics have wondered if the government’s year-old drive against insider trading is losing momentum.

Rudolph W. Giuliani, who, as U.S. attorney in Manhattan, has been Carberry’s boss, insisted that while the securities fraud unit “has made history under Charlie’s leadership, . . . this should have no effect on the investigation. He’s given us lots of notice, and we’re used to heavy turnover around here.”

But a defense lawyer familiar with the office’s operation described the news as “a serious blow” to the government’s effort to investigate and prosecute inside traders.

“They have lots of bright, capable people, but they don’t have Charlie’s depth of experience,” said the lawyer, who is not representing any of the insider trading defendants. “It’s a real advantage for the defendants in the case.”

Carberry was traveling Tuesday and said to be unavailable for comment. As chief of the securities fraud unit of the U.S. attorney’s office here, he has directed the 10-lawyer staff that has investigated and prosecuted Dennis B. Levine, the former mergers specialist for the investment banking firm of Drexel Burnham Lambert; arbitrageur Ivan F. Boesky and mergers specialist Martin A. Siegel.

Replacing Carberry will be Bruce Baird, 39, who is now directing operations of the U.S. attorney’s 21-lawyer narcotics unit, Giuliani said. While Baird has had only limited experience in the securities fraud field, Carberry was also new to the subject when he took the post, Giuliani said.

Carberry, a portly man, had a reputation for shunning publicity and for being as careless about his appearance as he was painstaking in his research. “He has a real fetish about staying out of the limelight,” said Peter J. Romatowski, who preceded Carberry as head of the securities fraud unit and is now a defense lawyer in Washington.

Influences Decisions

The chief of the fraud unit makes key recommendations on which prosecutions to pursue, who to charge and what to charge them with. “He doesn’t make the final decisions, but he has strong influence,” Romatowski said.

Several former prosecutors noted that Carberry’s eight-year stint at the office is far longer than the three or four years that many assistant U.S. attorneys spend in the job. One said Carberry had been considering at least one “attractive” offer from a law firm when he became head of the securities fraud unit in the summer of 1985.