U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19650 / April 11, 2006
Securities and Exchange Commission v. Sonja Anticevic et al., 05 Civ. 6991 (KMW) (S.D.N.Y.)
SEC COMPLAINT CHARGES INTERNATIONAL INSIDER TRADING RING INCLUDING PERSONNEL AT MERRILL LYNCH AND GOLDMAN SACHS
On April 11, 2006, the Securities and Exchange Commission sought leave to file a second amended complaint ("Complaint") in its pending action in the United States District Court for the Southern District of New York, alleging insider trading in advance of the August 3, 2005, announcement ("Announcement") by Reebok International Ltd. ("Reebok") that it had agreed to be acquired by adidas-Salomon AG ("Adidas"). The Complaint alleges widespread and brazen international schemes of serial insider trading orchestrated by two individuals â" Eugene Plotkin ("Plotkin"), a research analyst in the Fixed Income division of Goldman Sachs Group ("Goldman Sachs"), and David Pajcin ("Pajcin"), a former employee of Goldman Sachs â" that yielded at least $6.7 million of illicit gains.
In one scheme, Plotkin and Pajcin persuaded a mergers and acquisitions analyst at Merrill Lynch & Co., Inc. ("Merrill Lynch") to provide tips on upcoming mergers in return for a share of the trading profits. In another scheme, Plotkin and Pajcin recruited two individuals to obtain jobs at a printing plant in Wisconsin, steal advance copies of Business Week magazine and tip Plotkin and Pajcin on the names of companies discussed favorably in the "Inside Wall Street" ("IWS") column before the magazine became public. Plotkin and Pajcin traded on the inside information, initially in an account in Pajcin's name and later, in accounts in the names of others in Europe and the United States. Plotkin and Pajcin also tipped several individuals in the United States and Europe in return for a share of their trading profits.
In total, Plotkin and Pajcin traded in at least 25 stocks within one year based on inside information obtained through these schemes. The Commission's Complaint charges 13 individuals in the United States and Europe for their roles in the schemes. This Complaint follows two prior complaints filed by the Commission in August 2005, charging insider trading in Reebok securities and successfully freezing over $6 million in trading proceeds.
In its initial filing in this matter, on August 5, 2005, the Commission obtained a court order freezing a securities account in the name of Sonja Anticevic ("Anticevic"), a Croatian national and resident. The Anticevic account engaged in a series of highly profitable trades in "out of the money" call options of Reebok just prior to Reebok's Announcement. On August 18, 2005, the Court entered a Preliminary Injunction against Anticevic which, among other relief, continues the asset freeze.
On August 18, 2005, the Commission also filed an amended complaint seeking additional emergency relief against eight additional defendants, including residents of the United States, Croatia and Germany, trading through several domestic and off-shore accounts. As alleged in the amended complaint, the defendants acted in concert or under a common direction in placing the Reebok trades, and collectively netted a profit of over $6 million. Among others, the amended complaint charged Pajcin, who is Anticevic's nephew, alleging that Pajcin placed or directed some of the Reebok trades, and tipped other defendants who placed Reebok trades. Also charged were Henry Siegel, a resident of Pomona, New York; Monika Vujovic, a resident of New York, New York; Elvis Santana, a resident of Brooklyn, New York; Zoran Sormaz, a resident of Zagreb, Croatia; Perica Lopandic, a resident of Reinbek, Germany; Ilija Borac, a resident of Zagreb, Croatia; and Certain Unknown Persons trading in an account at an Austrian broker, Direktanlage.at AG (the "Direktanlage Traders").
Acting on the Commission's request for emergency relief, the Court issued temporary restraining orders which, among other things, froze the proceeds of trading in Reebok securities in the domestic accounts and required the repatriation and freezing of the proceeds in the foreign accounts. Ultimately, the Court entered a preliminary injunction against all of the defendants, and, as a result, the Commission obtained Court orders freezing over $6 million in illegal profits stemming from insider trading in Reebok securities.
The Commission's Complaint, today, alleges that Plotkin and Pajcin explored a variety of audacious insider-trading schemes. Among others, Plotkin and Pajcin met with a series of individuals employed at various investment banks in an attempt to get them to provide non-public information about deals those banks were handling. Plotkin and Pajcin also contemplated various schemes involving exotic dancers, including having them garner information from bankers while dancing, and using them to induce investment bankers to provide Plotkin and Pajcin with information. At least two schemes were consummated:
The Merrill Lynch Scheme
The Complaint alleges that Plotkin and Pajcin infiltrated the investment banking unit of Merrill Lynch, repeatedly learning of mergers and acquisitions transactions before they became public. In exchange for a share of the illegal profits, Stanislav Shpigelman ("Shpigelman"), an analyst at Merrill Lynch, leaked confidential information to defendants Plotkin and Pajcin concerning at least six mergers or acquisitions that Merrill Lynch was working on, prior to the time the deals became public, including deals between (i) The Proctor & Gamble Company and The Gillette Company; (ii) Novartis AG and Eon Labs, Inc.; (iii) Duke Energy and Cinergy Corp.; (iv) Quest Diagnostics, Inc. and LabOne, Inc.; (v) Celgene Corp. and a company considering acquiring Celgene; and (vi) Reebok and Adidas. Plotkin and Pajcin traded on the insider information and passed the insider information on to individuals in the United States and Europe ("Traders") who traded on it. Plotkin and Pajcin had an agreement with the Traders, pursuant to which they were to receive a percentage of the illicit profits made by the Traders. The Merrill Lynch Scheme yielded over $6.4 million in illicit trading profits.
The Business Week Scheme
The Complaint further alleges that Plotkin and Pajcin also infiltrated one of the printing plants utilized by Business Week, repeatedly obtaining advance copies of the market-moving IWS column in Business Week. Plotkin and Pajcin recruited two individuals â" first, Nickolaus Shuster ("Shuster"), and later Juan C. Renteria, Jr. ("Renteria") â" to obtain employment at Quad/Graphics, Inc., one of four printing plants that print Business Week magazine, for the sole purpose of stealing copies of upcoming editions of the magazine, and calling Plotkin or Pajcin to read them key portions of IWS â" a widely-read column in the magazine that generally moves the price of the securities of companies mentioned in it â" prior to the time the column became available to the public. The Complaint alleges that Shuster and Renteria provided Plotkin or Pajcin with insider information concerning at least twenty companies that were featured in the IWS column. Plotkin and Pajcin then either traded on the IWS insider information or passed the information to some or all of the Traders, who traded on the insider information. The Business Week Scheme yielded over $345,000 in illicit trading profits.
The Commission's Complaint names 5 new defendants â" Plotkin, Shpigelman, Shuster, Renteria, and Mikhail Plotkin. To date, the Commission has charged the following persons in this matter:
Orchestrators of Fraud
- Eugene Plotkin, age 26, is a resident of New York, New York. Plotkin has been employed at Goldman Sachs since July 2000, where he is currently an Associate in the Fixed Income Research division. Plotkin was, along with Pajcin, the architect of the Merrill Lynch and Business Week Schemes. Plotkin contributed funds to Pajcin's trading account, which traded on the basis of insider information obtained from the two schemes in certain of the securities referred to in the Complaint. Plotkin and Pajcin agreed to split the profits from Pajcin's trading, along with all the proceeds they collected from their tippees, evenly between themselves.
- David Pajcin, age 29, was, during the Relevant Period, a resident of Clifton, New Jersey. Pajcin was formerly associated with several broker-dealers, including Goldman Sachs. Pajcin was, along with Plotkin, the architect of the Merrill Lynch and Business Week Schemes. Pajcin traded for his own account, on the basis of insider information obtained from the two schemes, in certain securities referred to in the Complaint. Pajcin also passed the insider information on to other persons in exchange for a share of their illicit profits.
Sources of Insider Information
- Stanislav Shpigelman, age 23, is a resident of Brooklyn, New York. Shpigelman has been employed as a Mergers and Acquisitions Analyst at Merrill Lynch since July 2004. Shpigelman was the source of the non-public confidential information, and a tipper, in connection with the six mergers and acquisitions deals identified under the Merrill Lynch Scheme.
- Nickolaus Shuster, age 24, was, during the relevant period a resident of Newark, New Jersey, Hartford, Wisconsin, and, most recently, Lexington, Tennessee. Shuster was employed at Quad Graphics from approximately October 11, 2004, to approximately January 6, 2005, when he was terminated. Shuster was a source of the non-public confidential information, and a tipper, in the Business Week Scheme.
- Juan C. Renteria, age 20, is a resident of Milwaukee, Wisconsin. Renteria began working at Quad on or about May 15, 2005, where he is currently employed. Renteria was a source of the non-public confidential information, and a tipper, in the Business Week Scheme.
- Sonja Anticevic, age 63, is a Croatian national residing in Omis, Croatia. Anticevic, a retired seamstress, is Pajcin's aunt. Certain of the securities referred to in the Complaint were traded through various domestic and foreign accounts held in Anticevic's name. Anticevic permitted Pajcin to trade through Anticevic's various accounts. Anticevic received at least 30,000 Euros for her participation in the frauds.
- Henry Siegel, age 55, is a resident of Pomona, New York. Siegel traded for his own account in certain of the securities referred to in the Complaint. Siegel was a tippee of Plotkin and Pajcin in the Merrill Lynch and Business Week Schemes.
- Elvis Santana, age 23, is a resident of Brooklyn, New York. Santana traded for his own account in certain of the securities referred to in the Complaint. Santana was a tippee of Plotkin and Pajcin in the Merrill Lynch and Business Week Schemes.
- Monika Vujovic, age 23, is a resident of New York, New York. Certain of the securities referred to in the Complaint were traded through an account held in Vujovic's name. Vujovic permitted Pajcin to trade through Vujovic's account. Vujovic was promised 50% of all fraudulent proceeds made through her account.
- Perica Lopandic, age 39, is a German national residing in Reinbek, Germany. Lopandic traded for his own account in certain of the securities referred to in the Complaint. Lopandic was both a tipper and a tippee in the Merrill Lynch and Business Week Schemes.
- Mikhail Plotkin, age 49, is a resident of Palo Alto, California, and is Plotkin's father. Mikhail Plotkin traded in certain of the securities referred to in the Complaint. Mikhail Plotkin was a tippee of Plotkin and Pajcin in the Merrill Lynch and Business Week Schemes.
- Zoran Sormaz, age 40, is a Croatian national residing in Zagreb, Croatia. Sormaz traded for his own account in certain of the securities referred to in the Complaint. Sormaz was a tippee in the Merrill Lynch and Business Week Schemes.
- Ilija Borac, age 50, is a Croatian national residing in Zagreb, Croatia. Borac traded for his own account in certain of the securities referred to in the Complaint. Borac was a tippee in the Merrill Lynch and Business Week Schemes.
- The Direktanlage Traders are certain unidentified individuals who traded in certain securities as set forth in the Complaint through Direktanlage account number 34401046. The Direktanlage Traders were tippees in the Merrill Lynch and Business Week Schemes.
The Commission alleges that, as a result of trading in various securities on the basis of material, non-public information obtained pursuant to the Merrill Lynch Scheme or the Business Week Scheme, the defendants engaged in illegal insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the Commission alleges that defendants Plotkin, Pajcin, and Shpigelman violated Section 14(e) of the Exchange Act and Rule 14e-3 thereunder by trading in the stock of a company while in possession of material, non-public information related to a cash tender offer for such company's stock. Among other things, the Complaint seeks permanent injunctive relief, the disgorgement of all illegal profits plus prejudgment interest, the imposition of civil monetary penalties, and orders requiring the defendants to repatriate to the United States proceeds of the fraud in accounts outside the United States.
The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. The Commission also acknowledges the assistance of the Financial Supervisory Authority in Denmark, the Financial Market Authority in Austria, the Croatian Securities Commission, and the Financial Services Authority in the United Kingdom.