Posted Mar 19, 2014 06:19 pm CDT
Updated: A longtime managing clerk in the New York City office of Simpson Thacher & Bartlett has been accused of using confidential information from the 800-attorney international law firm in an insider-trading scheme. It allegedly dates back to 1999 and reaped $5.6 million in illegal profits on $33 million in stock trades since 2009.
Steven Metro, 40, has been charged along with stockbroker Vladimir Eydelman, 42, with securities fraud, tender offer fraud and conspiracy to commit securities fraud and tender offer fraud, according to the Associated Press, the Asbury Park Press, Courthouse News and the Star-Ledger.
Both men were arrested Wednesday and were expected to be in federal court in Newark, N.J., at 2 p.m. ET. They also face a parallel civil case by the Securities and Exchange Commission.
Metro is accused of funneling confidential information from the law firm to Eydelman via an unidentified friend who is now a cooperating witness. Eydelman worked at Oppenheimer & Co. before moving to Morgan Stanley in 2012. The New York Times’ DealBook blog says the cooperating witness is a 40-year-old friend of Metro’s from law school. Metro has a law degree but does not work as a lawyer at Simpson Thacher.
Federal prosecutors say Metro, who made court filings for Simpson attorneys, passed on information about mergers and acquisitions to his friend, who wrote the ticker symbol and the date and pricing for the planned deal on a napkin or a small piece of paper. The friend would then meet Eydelman near the historic large clock at Grand Central Terminal to pass on the illegal tip, the feds allege. After Eydelman memorized the information, the friend chewed up and swallowed the napkin or piece of paper. The stockbroker is accused of using confidential information in purchasing stock for friends, family and clients as well as himself and Metro’s go-between.
In a written statement provided to the ABA Journal by a spokeswoman, Simpson Thacher said:
“Today’s charges against a former clerical employee of the firm are deeply disturbing and unprecedented in our long history. This behavior is completely inconsistent with our values, our culture and the strict policies we have in place to protect client confidences. We have zero tolerance for such behavior and hold ourselves to the highest standards of professional and ethical conduct.
“We had no knowledge of either Mr. Metro’s actions or the charges until this morning. We terminated his employment today and will continue to cooperate fully with the authorities.
“We have strong internal controls in place and will review our systems and procedures to determine if there are ways in which they could be further strengthened. Client confidentiality is of the utmost importance to Simpson Thacher and we are reinforcing that principle to all of our lawyers and administrative staff.”
A Morgan Stanley spokesman pledged the firm’s cooperation with authorities and said it had known nothing of the allegations until this morning, the Wall Street Journal Law Blog reports.
The news articles don’t include any comment from Oppenheimer, the two defendants or their counsel.
ABAJournal.com (Jan. 2010): “Surviving Law School Buddy Gets 39-Month Term in $9M Insider-Trading Scheme”
ABAJournal.com (Aug. 2011): “Lawyer Paid $32K for M&A Tips Gets 3 Years for Conduit Role in High-Profile Insider-Trading Scheme”
ABAJournal.com (Dec. 2012): “Unprecedented Era of Insider-Trading Enforcement Casts a Wide Net, With Help of Electronic Evidence”
ABAJournal.com (July 2013): “Record 12-year term OK’d for ex-associate who revealed BigLaw deal info in $37M insider-trade scheme”
Updated at 1:35 p.m. to include information from DealBook article and at 6:55 p.m. to include statement from Simpson Thacher.