A complaint (“criminal complaint”) filed in the United States District Court for the Southern District of New York on April 11, 2006 to obtain an arrest warrant details the operations of an insider trading ring which engaged in two schemes netting over $6 million in trading profits. According to the criminal complaint, those involved included Eugene Plotkin, an associate in the Fixed Income Research Division at Goldman, Sachs & Co., David Pajcin, a former analyst at Goldman, Sachs and Stanislav Shpigelman, an investment banking analyst in the mergers and acquisition division of Merrill Lynch & Co. The criminal complaint was filed to obtain arrest warrants for Shpigelman, Plotkin and Juan Renteria, an employee of a printing plant where Business Week is produced. The criminal complaint states that it is based on information from the investigation conducted by the FBI, the SEC and Pajcin. On the same date, the SEC moved to amend a complaint (SEC complaint) it filed in August 2005 and amended later that month. The proposed second amended SEC complaint is based on the same insider trading schemes detailed in the criminal complaint but charges 13 individuals in the U.S. and Europe. The initial SEC complaint sought and obtained an order freezing a securities account in the name of Sonja Anticevic, a Croatian national and resident which had traded in Reebok call options prior to the announcement that company was being acquired Adidas. That SEC complaint was amended shortly after it was filed to include other accounts that traded on the same deal. A freeze order was also obtained as to those accounts.
In one scheme Shpigelman in return for cash and future payments gave Plotkin and Pajcin inside information on six different pending mergers or acquisitions being handled by Merrill Lynch in 2004 and 2005. Those transactions included the Procter & Gamble acquisition of The Gillette Company, the acquisition of Eon Labs by Novartis AG, the merger of Cinergy and Duke Energy, the attempt by Amgen to acquire Celgene, the acquisition of Reebok by Adidas and the acquisition of LabOne by Quest. Trading in advance of the announcement on these transactions yielded about $6.4 million in profits according to the complaint.
A second scheme involved the acquisition of advance information from the Business Week column, Inside Wall Street. According to the complaint, Plotkin and Pajcin bribed two employees of a printing plant where the magazine was produced. One of those employees is alleged to be Juan Renteria. As a result they were able to obtain advance information about stocks that would be mentioned in the column and traded in approximately 20 different stocks (the proposed second amended SEC complaint alleges at least 25 stocks) one day prior to publication. The list of stocks in the complaint include The Street.com, Alltel Corp., IMAX, PriceSmart, Federal Express, Spectrum Pharm., Inc., and Symbol Technologies. This scheme netted at least $340,000 in profits according to the complaint.
A third scheme apparently involved helping others get jobs at investment banks in the hopes that they could later misappropriate inside information according to the complaint. The results of this scheme are not detailed. A number of the tipees are not specifically identified.
The SEC press release can be found at http://www.sec.gov/news/press/2006/2006-53.htm, the SEC complaint can be found at http://www.sec.gov/litigation/complaints/2006/comp19650.pdf, and the criminal complaint can be found at https://www.secactions.com/pdf/complaint.pdf