By Michael Calia
A Wall Street stockbroker and a managing clerk at a law firm face federal charges the two engaged in an insider-trading scheme that netted $5.6 million in illegal profits.
Both the Securities and Exchange Commission and federal prosecutors in New Jersey charged Morgan Stanley's Vladimir Eydelman and Simpson Thacher Bartlett's Steven Metro with participating in a scheme that ran from February 2009 through February 2013 and involved trades on more than a dozen mergers and other corporate transactions.
The two men were arrested Wednesday. Mr. Eydelman is charged with eight counts of securities fraud, while Mr. Metro is charged with nine counts. Both are charged with four counts of tender-offer fraud.
Morgan Stanley said Mr. Eydelman, who joined the firm from Oppenheimer & Co. in September 2012, had been placed on leave pending further review.
"We were just informed of the arrest this morning and will cooperate fully with the authorities as they pursue this matter," Morgan Stanley spokesman James Wiggins said. "Obviously we don't tolerate insider trading and will take appropriate action based on the facts."
Meanwhile, a representative for Simpson Thacher Bartlett called the charges against a former clerical employee at the firm "deeply disturbing and unprecedented in our long history."
"We had no knowledge of either Mr. Metro's actions or the charges until this morning," said the Simpson Thacher Bartlett representative. "We terminated his employment today and will continue to cooperate fully with the authorities."
According to authorities, Mr. Metro, who had access to corporate clients' confidential information at the firm, would tip off a middleman. The middleman would then meet Mr. Eydelman, usually at a spot near the large clock in Grand Central Terminal in New York City, and convey the tip through a piece of small paper or a napkin. Mr. Eydelman would memorize the ticker symbols on the notes and trade on the tips. The middleman, in turn, would chew the napkin or paper until it was destroyed.
"Law firms are sanctuaries for the confidential treatment of client information, and this scheme victimized not only a law firm but also its corporate clients and ultimately the investors in those companies," Daniel M. Hawke of the SEC's enforcement division said.
A representative for Oppenheimer wasn't immediately available for comment, nor was Mr. Eydelman's attorney. Mr. Metro's defense counsel is to be announced, according to the New Jersey U.S. attorney.
Mr. Metro, 40 years old, lives in Katonah, N.Y., and Mr. Eydelman, 42, lives in Colts Neck, N.J., the New Jersey U.S. attorney said.
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