The cooperation of two former hedge fund managers in a 2007 insider trading case led to the arrest of seven traders and lawyers last November in the wide-ranging Galleon prosecutions, a U.S. prosecutor said on Thursday.

During a sentencing proceeding for former Chelsey Capital hedge fund manager Mark Lenowitz in the 2007 case, Assistant U.S. Attorney Andrew Fish told the judge that Lenowitz's cooperation led to the prosecution and cooperation of his onetime colleague at Chelsey Capital, David Slaine.

He said Slaine's help to the FBI and U.S. prosecutors led to arrests and charges in the Galleon case against trader Zvi Goffer and six others last November 5. All seven pleaded not guilty to charges of conspiracy and secruties fraud in Manhattan federal court on Tuesday.

Fish said in court that Lenowitz's cooperation was one of the catalysts for Slaine's cooperation that led to the additional arrests.

Meanwhile, Rajiv Goel a former director of Intel Capital who was charged along with Galleon hedge fund founder Raj Rajaratnam last October 16, appears ready to waive indictment and plead guilty, according to a court filing by U.S. prosecutors. Intel Capital is the venture capital arm of Intel Corp .

Goel's lawyer, David Zornow, declined to comment. Goel was scheduled to appeaer in court on February 8.

Goel would be the ninth guilty plea among 21 individuals facing criminal or civil charges in the probe that shook Wall Street and Silicon Valley. The case involves employees of some of America's best-known companies, including International Business Machines Corp .

U.S. District Judge Sidney Stein sentenced Lenowitz to six months of home confinement followed by three years of supervision and 160 hours of community service per year.

When Lenowitz was charged and pleaded guilty in 2007, he was among 13 people accused in a complicated case involving inside information from UBS AG's UBS Securities LLC affiliate and Morgan Stanley . Lenowitz pleaded guilty to charges of conspiracy and securities fraud.

Lenowitz could have been sentenced to as much as 25 years in prison, but the judge showed leniency because of the extent of his cooperation. Some of the other defendants in the case were also sentenced to probation, while one was sentenced to 6-1/2 years in prison.

Slaine was added to the UBS case and pleaded guilty in December 2009 under an agreement to cooperate with the government, the Manhattan U.S. Attorney's office announced on Tuesday. Slaine's sentencing date is June 25.

The case is USA v Lenowitz, U.S. District Court for the Southern District of New York, No. 07-416

(Reporting by Grant McCool, editing by Gerald E. McCormick and John Wallace)

Investment Raj Rajaratnam