Wednesday, April 12, 2006

Insider trading case of the decade

You have to read this! It has everything any insider trading case could want---from a retired seamstress, to classified ads placed to hire accomplices, to the theft of advance copies of BusinessWeek, to strippers, to Russian baths. (I am not making this up!)

From the Globe and Mail:
"The case is “one of the most extensive insider trader cases in this district in decades,” Michael Garcia, the U.S. Attorney for the Southern District of New York, said during a press conference."
From the NY Times: 2 Wall Street Employees Charged With Insider Trading - New York Times:
"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."
Later in the same article:
"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."
Again from the Globe and Mail:
"According to court filings, the two hatched a scheme to hire exotic dancers to ply investment bankers for information (that didn't appear to go very far, but one dancer allegedly participated in some of the illegal trading)."
From the Buffalo News:
"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 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.""

From TheAge:
"Plotkin and Pajcin led a trading ring that netted $US6.4 million on the tips, according to Mr Garcia's suit. With advance notice of "stocks favourably mentioned in BusinessWeek's 'Inside Wall Street' column", they made $US340,000, the Government said"
From the Sarbanes-Oxley Compliance Journal:
"This case demonstrates that despite all the advances in technology and electronic security, businesses remain as vulnerable to infiltration as the people they employ."

Oh and less you think this story was missing the Russian Baths, according to both the Globe and Mail and TheAge , at least some of the dealings at Spa88 in NY.

From TheAge:
"Shpigelman was a summer intern at Merrill in 2000 and 2002. Plotkin and Pajcin recruited him for the insider-trading scheme in 2004 during a meeting at Club 88, a day spa and Russian sauna in Manhattan, according to the complaint."
See, this story has everything. it really doesn't get much better than this! We'll be talking about it in classes for years to come! Or as the Boston Herald puts it:
" a cross between a Ken Follett novel and “The Sopranos.” "
For a more permanent archive: try the BBC's coverage.

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