Stock analyst sentenced for NYC insider trading


NEW YORK (AP) – A young former Merrill Lynch analyst caught in a sprawling $7 million insider trading scheme must serve more than three years in prison to show Wall Street that sharing valuable inside secrets will not be met with leniency, a judge said Friday.

U.S. District Kenneth M. Karas said he was sending Stanislav Shpigelman, 24, of Brooklyn to prison because he did not want those entrusted to protect secrets about stocks to think stellar academic backgrounds and great families will protect them from prison for financial crimes.

Shpigelman, 24, was the “brightest of the bright,” one of a class of young, hard working analysts chosen by investment firms to protect the secrets of pending acquisitions and mergers from those who might try to make millions of dollars off the inside tips, Karas said.

He said it did not matter that Shpigelman only made $10,000 and did not know that his tips were part of a large inside trading plot using leaked copies of a market-moving magazine, a corrupt grand juror and a plan for strippers to coax secrets from investment bankers.The judge noted that Shpigelman sometimes sought out secret information about deals from others at his company and did so repeatedly.

Karas called Shpigelman the “essential component in the scheme” as he rejected pleas for even more leniency than the three to four years of prison called for by Shpigelman’s deal with prosecutors, in which he pleaded guilty to conspiracy to commit insider trading.

“This is the kind of case that comes along that people talk about,” Karas said, referring to conversations in investment circles about the dangers of leaking inside facts that might enable others to make millions of dollars illegally.

Others made more than $6.7 million from October 2004 to August 2005 from various schemes, including tips Shpigelman provided while he worked in Merrill Lynch’s mergers and acquisitions division.

“It is unfortunately a classic insider trading scheme,” Karas said.

The case originated after regulators noticed unusually high trading volume before a merger announcement and discovered that a 63-year-old retired seamstress in Croatia – the aunt of one of the defendants – had made more than $2 million.

The case also resulted in the arrests of a Milwaukee forklift operator who allegedly obtained early copies of a market-moving column in BusinessWeek magazine and a New Jersey grand juror who allegedly disclosed secrets about an accounting fraud probe.

Before he was sentenced, Shpigelman said: “My actions were foolish and I regret considerably what I have done.”

Assistant U.S. Attorney Benjamin Lawsky said Shpigelman provided others in the scheme “the most valuable inside information there is on Wall Street” – exact information about when deals would occur.

“Shpigelman did this for the oldest reason in the book – greed and the desire to make bundles and bundles of money,” he said.

Shpigelman’s lawyer, Mary Mulligan, said greed was not a factor for a client who still lives with his parents in the same bedroom he had in high school.

“He sits before you a humble, repentant man,” she said, noting that he now works for a moving company and does charity work.

At the heart of the scandal was David Pajcin, a former Goldman Sachs Group Inc. analyst who is cooperating with the government after he was charged with conspiracy, securities fraud and insider trading, prosecutors said.

Prosecutors say Pajcin and Eugene Plotkin, 26, of Manhattan, a Harvard-trained former Goldman Sachs analyst who has pleaded not guilty to charges in the case, made more than $6.7 million through inside trades. Plotkin is awaiting trial.

Investigators said Plotkin introduced Pajcin to Shpigelman in November 2004 at a Russian day spa and sauna in lower Manhattan.

The forklift operator, Nickolaus Shuster, 25, has pleaded guilty to conspiracy to commit insider trading and insider trading and awaits sentencing.

The grand juror, Jason Smith of Jersey City, N.J., has been sentenced to two years and nine months in prison after pleading guilty to conspiracy and insider trading. At sentencing, he said he had made a “terrible mistake.”

Lawsky said nobody in the scheme made much money because the government froze securities accounts containing most of the profits after the plots were discovered.