2 Wall Street Employees Charged With Insider Trading

2 Wall Street Employees Charged With Insider Trading
Daniel Acker/Bloomberg News
By JENNY ANDERSON
Published: April 12, 2006

Ever since Michael Douglas declared that "greed is good" in the 1987
movie "Wall Street," the character he played, Gordon Gekko, has been the
face of insider trading on Wall Street.
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Text: Criminal Complaint (pdf)

But it was $2 million in profits made by a 63-year-old retired
seamstress in Croatia that tipped off the Securities and Exchange
Commission about an ambitious and unusually creative insider trading
ring, investigators say. That lead culminated in the arrests yesterday
of two junior-level employees at Goldman Sachs and Merrill Lynch.

The seamstress, Sonja Anticevic, made more than $2 million — a
seventeenfold return — on a two-day investment in options on Reebok
International after the company announced last August it would be
acquired by Adidas-Salomon and the stock surged 30 percent.

Regulators say it was her nephew, David Pajcin, a 29-year-old former
Goldman Sachs bond research analyst, who made the trades. They said he
was working with Stanislav Shpigelman, 23, an analyst in Merrill Lynch's
mergers and acquisitions department, and Eugene Plotkin, a 26-year-old
Harvard graduate who was an associate in the Goldman Sachs bond research
department until he was suspended yesterday.

The three engaged in a scheme that Michael J. Garcia, the United States
attorney in Manhattan, described as "one of the most extensive insider
trading cases in this district in decades." Bail for Mr. Shpigelman and
Mr. Plotkin was set at $3 million each; both remained in custody late
yesterday. Mr. Pajcin was released on bail in November.

Insider trading has long been a scourge of Wall Street. But, as
described by prosecutors, the efforts by Mr. Plotkin, Mr. Pajcin and Mr.
Shpigelman were notable for their brashness and far-reaching nature. One
scheme was old-fashioned: Mr. Plotkin and Mr. Pajcin, who met as young
bond researchers at Goldman, recruited Mr. Shpigelman to provide them
with information about deals Merrill Lynch was working on.

The three men also placed online ads and later recruited two employees
who worked at a private printing plant in Hartford, Wis., where Business
Week magazine is printed, according to investigators.

According to the charges against two employees there, Juan Renteria, 20,
of Milwaukee and Nickolaus Shuster, 24, now of Lexington, Tenn., stole
advance copies of the magazine and gave Mr. Plotkin and Mr. Pajcin the
names of stocks mentioned in the "Inside Wall Street" column,
information which, if favorable, often sends the prices of those stocks
up. Mr. Renteria was arrested yesterday; Mr. Shuster had been charged
earlier. The defendants netted $6.4 million by trading on information
about deals including Adidas-Salomon's acquisition of Reebok
International and Proctor & Gamble's purchase of Gillette, the
complaints say. The Business Week scheme was less profitable; the
defendants made $345,000, the S.E.C said.

Mark Schonfeld, director of the S.E.C.'s Northeast regional office, said
the defendants contemplated other innovative ways to obtain insider
information, including using exotic dancers to glean information from
investment bankers.

A dancer, Monika Vujovic, 23, of New York, allowed the defendants to set
up an account for her in which illegal trades were made, according to
the S.E.C. complaint, which charges her. Her lawyer, Mel A. Sachs, said
he was confident that the accusations against his client would be
favorably resolved in court.

Mr. Plotkin and Mr. Pajcin met when the two worked together at Goldman
Sachs in 2000. Mr. Pajcin left the firm five months after he started. In
2004, the two started to plot ways to obtain inside information, the
complaint says.

"He's an intelligent person with a depth of character that makes you
wonder about these charges," a lawyer for Mr. Plotkin, Martin L.
Schmukler, said.

Mr. Plotkin met Mr. Shpigelman, when Mr. Shpigelman was trying to get a
job on Wall Street. In July 2004, Mr. Shpigelman became an analyst in
Merrill's mergers and acquisitions department.

Mr. Shpigelman seemed aware that information about deals was secret,
according to an e-mail message cited in the S.E.C. complaint. In
response to a question about whether a deal he had mentioned was public,
he wrote, "Yes, the offer is public. I would not be telling you,
especially via e-mail, unless I wanted to chill with Martha in
Connecticut for a little while," referring to Martha Stewart, who was
convicted of obstruction of justice in an insider trading investigation.

A lawyer for Mr. Shpigelman, Katherine L. Pringle, did not return calls
for comment. Youth may have fueled the plotters' fearlessness. The three
originally traded in their own accounts but later opened accounts in
other people's names, simultaneously setting up a network of people
around the world with whom they shared inside information in return for
50 percent of the profit. The S.E.C. named 13 of those people in its
civil complaint, including Mikhail Plotkin, Mr. Plotkin's father.

Even after the S.E.C. filed a complaint against Mr. Pajcin in August
2005, Mr. Plotkin continued to trade on illegal information from the
Business Week printing plant. Both Mr. Pajcin and Mr. Plotkin also
destroyed their computers and cellphones, but continued to talk about
how to evade law enforcement efforts, according to the S.E.C. complaint.

When, after fleeing to the Dominican Republic and Cuba, Mr. Pajcin
returned to the United States to give a deposition, perhaps in an
attempt to get his bank accounts unfrozen, he lied about his
participation in both schemes, the S.E.C. complaint says. He was
arrested soon afterward and charged with illegal insider trading.

Mr. Pajcin's lawyer, Paul G. Lieber, did not return a call for comment.

The case was first uncovered by the S.E.C. last year. Immediately after
Adidas-Salomon announced it had a deal to acquire Reebok, sending
Reebok's stock up 30 percent, the market surveillance department in
Washington detected an unusual volume of trading in Reebok call options,
which allow an investor to lock in a price to buy the stock. Within 24
hours, investigators traced the trading to Croatia and Ms. Anticevic.

"Ms. Anticevic, it seemed, was either the most successful investor in
the history of Wall Street or part of something more nefarious," Mr.
Schonfeld of the S.E.C. said.

Jonathan Kaye, a lawyer for Ms. Anticevic, denied that any insider
trading took place. "This was done with research done from her nephew,"
he said.

The investigation led to Ms. Anticevic's nephew, Mr. Pajcin, revealing
the expansive efforts by Mr. Pajcin and Mr. Plotkin to find information
and trade on it. Mr. Pajcin is cooperating with regulators.

"These allegations, if true, represent a serious breach of trust and
violation of Merrill Lynch's fundamental principles," said a Merrill
Lynch spokesman, Mark Herr. "We do not tolerate or condone insider trading."

A Goldman Sachs spokesman said the firm would continue to cooperate with
the investigation. Neither firm is a target of investigators.

http://www.nytimes.com/2006/04/12/business/12inside.html?ex=1144987200&en=46fdf63a1585eb36&ei=5087%0A