SEC Announces New Charges Against Insider Trading Ring
Defendants Traded on Information from Secret Grand Jury Proceedings
FOR IMMEDIATE RELEASE
Washington, D.C., May 11, 2006 - The Securities and Exchange Commission today filed securities fraud charges against a New Jersey letter carrier who illegally leaked secret grand jury information to members of one of the most pervasive insider trading rings ever prosecuted. The new charges bring to 14 the number of people charged in the international scheme that netted at least $6.7 million in illicit gains through tactics that also included stealing information from Merrill Lynch and advance copies of BusinessWeek Magazine.
The new charges allege that, while serving on a federal grand jury investigating Bristol-Myers Squibb Co., Jason Smith leaked information about the proceedings to the ringleaders of the insider trading scheme, co-defendants Eugene Plotkin and David Pajcin, who traded in Bristol-Myers securities based on the information. By leaking the information, Smith, age 29, a resident of Jersey City, N.J., and a letter carrier with the U.S. Postal Service, violated grand jury secrecy rules and his oath as a grand juror.
The grand jury scheme is the third insider trading scheme orchestrated by Plotkin and Pajcin. In previous complaints, the SEC charged Plotkin and Pajcin with orchestrating a scheme to obtain advance knowledge of mergers and acquisitions transactions being handled by Merrill Lynch, and a scheme to obtain advance copies of a market moving column in BusinessWeek. The complaint also alleges that Smith provided money to Plotkin and Pajcin to use in all of the insider trading schemes in return for a share of the profits. Today's charges were made in a Third Amended Complaint that is subject to Court approval.
Linda Thomsen, the Director of the Commission's Division of Enforcement, said, "Today's charges reveal how far and wide this insider trading scheme had spread. The defendants seized every possible opportunity to profit from the theft of information."
Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, said, "The defendants' misuse of grand jury information for their own advantage is particularly insidious. The defendants flouted a duty of confidentiality to the people of the United States."
As alleged in the complaint, beginning in early 2005, Smith was serving on a federal grand jury in the District of New Jersey convened to investigate potential accounting fraud involving Bristol-Myers and certain officers of that company. Plotkin and Pajcin set up a scheme with Smith in which Smith leaked information about the grand jury proceedings to Pajcin and Plotkin in order to enable them to trade on this non-public information. Among other things, Smith communicated to Plotkin and Pajcin that it appeared as if a high-ranking Bristol-Myers officer would be indicted, and based on that information, Plotkin and Pajcin traded in an attempt to profit on the negative information, initially in an account in Pajcin's name, and later, in a foreign account in the name of his aunt, defendant Sonja Anticevic. Plotkin and Pajcin also tipped Plotkin's father, defendant Mikhail Plotkin, and defendant Henry Siegel, in return for a share of their trading profits. Later, a day before the announcement of a deferred prosecution agreement with Bristol-Myers that did not include an indictment of the high-ranking officer, Smith tipped Plotkin and Pajcin that the grand jury had decided not to return an indictment against the high-ranking officer. Based on this tip, Plotkin and Pajcin caused various accounts to liquidate or cover their positions in an attempt to avoid losses. Smith also provided Pajcin with some funding for Pajcin's and Plotkin's other insider trading schemes, and Plotkin and Pajcin agreed to provide Smith with a percentage of Pajcin's trading profits based upon information derived from this scheme, as well as other insider trading schemes.
This complaint follows three prior complaints filed by the Commission which charged insider trading resulting in at least $6.7 million of illicit gains from two other schemes orchestrated by Plotkin and Pajcin. In the first scheme, Stanislav Shpigelman, a mergers and acquisitions analyst at Merrill Lynch, provided Plotkin and Pajcin with information about pending mergers and acquisitions deals on which Merrill Lynch was working, prior to the time such information became public in exchange for a share of the profits made from trades based on this information. In the second scheme, Plotkin and Pajcin recruited two individuals, first Nickolaus Shuster, and later Juan C. Renteria, Jr., to obtain employment at a printing plant which prints BusinessWeek magazine for the sole purpose of stealing advance copies of the magazine before it was distributed to the public. Plotkin and Pajcin then traded on the basis of a market moving column in the magazine and tipped others to trade in exchange for a percentage of their trading profits. In total, Plotkin and Pajcin traded in at least 26 stocks within one year based on inside information obtained through these schemes.
To date, the Commission has charged 14 individuals located in the United States and Europe for their roles in the scheme. Today's filing adds Smith as a defendant. A description of the other defendants is available in the Commission's press release dated April 11, 2006, http://www.sec.gov/news/press/2006/2006-53.htm.
The Commission alleges that, as a result of trading in various securities on the basis of material, non-public information obtained pursuant to the grand jury and other schemes, 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, and that defendants Smith, Pajcin, Plotkin, Anticevic, Siegel, and Mikhail Plotkin also violated Section 17(a) of the Securities Act of 1933 by virtue of their insider trading in Bristol-Myers. 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, the United States Attorney's Office for the District of New Jersey, 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.
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Mark K. Schonfeld
Director, Northeast Regional Office
Associate Regional Director, Northeast Regional Office
David A. Markowitz
Assistant Regional Director, Northeast Regional Office
Scott L. Black
Senior Trial Counsel, Northeast Regional Office
Additional materials: Litigation Release No. 19696