Merrill, Goldman Workers Charged in Scheme

Discussion in 'Commodity Futures' started by jerryz, Apr 11, 2006.

  1. jerryz



    NEW YORK - Two Goldman Sachs employees made more than $6.7 million insider trading in a conspiracy with a Merrill Lynch analyst and a forklift operator who leaked a market-moving magazine column, authorities said Tuesday.

    The men allegedly even tried to enlist exotic dancers to coax stock tips from investment bankers with inside knowledge of pending mergers and acquisitions.

    "We've never seen before a case involving so many different attempts to obtain information illegally," said Mark Schonfeld, regional director of the
    Securities and Exchange Commission, which brought civil charges against 13 people.

    He said the insider trading case was discovered by regulators who noticed unusually high trading volume before a merger announcement. A closer look showed that a 63-year-old retired seamstress in Croatia — the aunt of one of the defendants — had made more than $2 million.

    Schonfeld said she was "either the most successful investor in the history of Wall Street or something more nefarious had taken place."

    U.S. Attorney Michael J. Garcia told a news conference it was one of the most extensive insider trading cases in decades, showing two of Wall Street's most important firms had workers "who, motivated by greed, are willing to place their careers and their liberty in jeopardy."

    FBI Tuesday arrested Eugene Plotkin, 26, a Goldman Sachs Group Inc. analyst, and a friend from college, Stanislav Shpigelman, 23, an analyst at Merrill Lynch & Co. Inc.'s mergers and acquisitions division.

    It also arrested Juan Renteria, a 20-year-old Milwaukee resident accused of working as a forklift operator at Quad/Graphics Inc. so he could steal early copies of Business Week magazine before it was released to the public.

    Garcia said the three men were part of a wide-ranging plot that included David Pajcin, a former Goldman Sachs Group Inc. analyst who is cooperating with the government.

    Prosecutors said Plotkin introduced Pajcin to Shpigelman in November 2004 at a Russian day spa and sauna in lower Manhattan.

    In exchange for information on six different pending mergers or acquisitions, Shpigelman received cash and promises of future payments based on a percentage of profit, according to a criminal complaint filed in U.S. District Court in Manhattan.

    Plotkin and Pajcin, meanwhile, made at least $6.4 million trading off Shpigelman's tips, Garcia said.

    The pair also benefited from tips from Renteria about what was about to appear in Business Week's "Inside Wall Street" column, Garcia said.

    They allegedly placed classified ads to get Nickolaus Shuster and Renteria to work as forklift operators at Quad/Graphics Inc. of Hartford, Wis., one of four plants where the magazine was published. Shuster has previously been charged with securities fraud in federal court in Manhattan.

    The information from Shuster and Renteria enabled them to make at least $340,000 illegally by trading in about 20 different stocks just before the stocks received favorable mentions in the column, Garcia said.

    The government said the insider trading conspiracy took on an international edge when Plotkin and Pajcin, 29, of Clifton, N.J., tried to open Swiss bank accounts and provided tips to people overseas, including at least two in Europe.

    Schonfeld said the pair gave stock tips to Pajcin's aunt in Croatia and an exotic dancer they met at a gentleman's club and tried to elicit dancers to get stock tips from investment bankers. Both women are facing civil SEC charges.

    Plotkin and Pajcin and other coconspirators not identified in the court papers also tried to find other sources of inside information by helping people get jobs at investment banks in the hopes they could get more tips, prosecutors said.

    The criminal complaint alleged that Plotkin and Pajcin created a joint fund to hold their illegal gains and began tipping family and friends with the understanding that those receiving tips would kick back some of the money to the pair.

    Merrill Lynch spokesman Mark Herr said the company was cooperating.

    "These allegations, if true, represent a serious breach of trust and a violation of Merrill Lynch's fundamental principles," he said. "We do not tolerate or condone insider trading. This conduct victimizes our company and clients alike. It is outrageous, if it is true."

    Goldman Sachs spokesman Peter Rose said: "We have cooperated fully with the authorities at all times."
  2. bitrend


    WorldCom, Enron did. That's understandable but Wall Street firms did, that is not acceptable. What about their Business Principles number 14?
  3. Someone is going to take one for team. And life will go on as usual.
  4. With or without vaseline?