Three arrested in US$6.7m trading probe

NEW YORK - A Goldman Sachs analyst, a Merrill Lynch banker and a printing plant worker were arrested on Tuesday for allegedly participating in a US$6.7 million (NZ$10.8m)insider trading ring that involved stolen magazines, strippers and a retired underwear factory worker in Croatia.

The US Attorney said Eugene Plotkin, a bond analyst at Goldman Sachs, was co-leader of an international insider trading ring that traded off advance copies of BusinessWeek and tips from Stanislav Shpigelman, a low-level investment banker at Merrill Lynch & Co. Inc.

Shpigelman and Plotkin were arrested on Tuesday, and their bail was set at US$3 million each.

A third man, Juan Renteria, an employee at a plant that printed BusinessWeek magazine, was arrested in Milwaukee for allegedly giving pre-publication copies of the weekly to Plotkin and a co-conspirator.

"These defendants developed their sources of information in the hopes of running that insider trading business as a money-making machine, and for a little while it worked, netting millions of dollars," said Michael Garcia, the US Attorney for the Southern District of New York.

The arrests broadened an insider trading case that began in August 2005, when regulators grew suspicious of a 63-year-old Croatian retiree's options trading profits.

The account belonging to the retiree, Sonja Anticevic, was frozen in August, and her 29-year-old nephew, David Pajcin, was charged with insider trading.

Pajcin is alleged to be the co-head of the trading ring with Plotkin, and is cooperating with authorities.

The US Securities and Exchanges Commission said Plotkin and Pajcin persuaded Shpigelman to provide tips on upcoming mergers in return for a share of the trading profits.

In a second scheme, Plotkin and Pajcin placed ads in newspapers and online seeking workers to land jobs at a printing plant, steal advance copies of BusinessWeek and tip them about the names of companies discussed. Renteria was one of the workers.

The beneficiaries of Pajcin's and Plotkin's tips were far-flung, including people in Croatia, Germany and California.

Plotkin and Pajcin contemplated hiring strippers to gain information from bankers while dancing for them, but this plan was never executed, authorities said.

Plotkin, 26, faces a maximum penalty of 70 years in prison; Shpigelman, 23, could get up to 55 years; and Renteria, 20, could be jailed for 15 years.

Separately, the SEC filed civil insider trading charges against Shpigelman, Plotkin, Renteria and a number of people who allegedly received inside tips, including a New York exotic dancer.

Plotkin and Pajcin met at Goldman Sachs, and had planned to recruit other bankers for their trading ring, authorities said.

Plotkin and Pajcin's ring made at least US$6.4 million from trading on news of upcoming mergers, including Procter & Gamble Co.'s acquisition of Gillette Co. in January 2005 and Adidas' acquisition of Reebok in August.

In the other scheme, Plotkin and Pajcin allegedly bribed two employees of Quad/Graphics, a BusinessWeek printer, to pass along the names of stocks favorably mentioned in the magazine's "Inside Wall Street" column, on the trading day before it hit the newsstands.

Plotkin and Pajcin traded in about 20 different stocks on this basis, earning US$340,000 in illicit gains, the complaint said. These stocks included TheStreet.com Inc., PriceSmart Inc. and Symbol Technologies Inc..

BusinessWeek has been involved in insider trading cases before. A spokeswoman for McGraw-Hill Cos., which publishes BusinessWeek, said the magazine has taken significant steps to ensure the integrity and privacy of its stories.

Renteria has been suspended without pay pending further investigation, a spokeswoman for Quad/Graphics said. The other employee, Nickolaus Shuster, was a temporary staffer.

A spokesman at Merrill said the firm is cooperating with regulators and does not tolerate insider trading. Shpigelman was placed on administrative leave today, he added.

A spokesman for Goldman Sachs said the company has fully cooperated with authorities.

- REUTERS