That sucks

Ex-Merrill Analyst Gets 37 Months in Insider Case (Update4)

By David Glovin

Jan. 5 (Bloomberg) -- Former Merrill Lynch & Co. analyst Stanislav Shpigelman was sentenced to 37 months in prison for leaking secret information on a pending deal, the first analyst jailed in the million-dollar insider-trading scheme.

Shpigelman, 24, a former analyst in Merrill's mergers-and- acquisitions division, told U.S. District Judge Kenneth Karas today he was ``sorry'' for giving secret information about pending mergers to two junior employees at Goldman Sachs Group Inc., Eugene Plotkin and David Pajcin, who allegedly bought shares in companies targeted for takeover.

I realize what I've done is inexcusable,'' Shpigelman said in Manhattan federal court.I do beg for leniency.''

Today's sentencing is the second in a case that has led to criminal charges against Plotkin, Pajcin and others. Last month Jason Smith, a former mailman in New Jersey, was sentenced to 33 months in prison for leaking secret information from a grand jury he served on to Plotkin and Pajcin to use in insider trading.

Shpigelman was a mole inside Merrill Lynch,'' Assistant U.S. Attorney Benjamin Lawsky told Karas.On any one of these deals, a savvy trader could make millions of dollars.'' New York-based Merrill fired Shpigelman after the scheme came to light.

Shpigelman, who lives in Brooklyn, New York, faced from 37 to 46 months in prison under federal sentencing guidelines.

Secret Information

Prosecutors said Shpigelman leaked secret information on six pending transactions in 2004 and 2005, including Procter & Gamble Co.'s $61 billion purchase of Gillette Co. Shpigelman admitted in his guilty plea in July that he tipped the others about a single deal, Adidas-Salomon AG's $3.67 billion purchase of Reebok International.

Shpigelman was a student at the State University of New York at Binghamton when he befriended Plotkin, who helped him prepare for Wall Street job interviews, prosecutors said. Plotkin and Pajcin, a 2000 University of Notre Dame economics graduate, met at Goldman.

Shpigelman worked as a summer intern at Merrill from 2000 to 2002 before graduating with a degree in business management in 2004, the Securities and Exchange Commission said in April in a related civil suit.

Plotkin and Pajcin, who is now cooperating with prosecutors, recruited Shpigelman for the insider-trading scheme in a meeting at Club 88, a Manhattan day spa and Russian sauna, the SEC said. Prosecutors said Plotkin and others tried to recruit sources at other investment banks to leak them information.

`Bundles of Money'

Lawsky disputed Shpigelman's claim that he was pressured'' to leak information that helped others earn at least $2.5 million in illegal profits.Mr. Shpigelman did this for the oldest reason in the book -- greed -- and his desire to make bundles and bundles of money,'' Lawsky said.

Karas called Shpigelman an overachiever'' who became acritical component'' in a ``classic insider-trading case.'' Karas said he wanted the sentence to send a stern message to Wall Street.

``This is the kind of case that comes along that people talk about,'' Karas said.

Defense attorney Mary Mulligan said the safe-deposit box Shpigelman opened soon after the scheme began was for his poker winnings, a claim Karas rejected.

``Greed was not his motivation,'' Mulligan said of Shpigelman, who now works for a moving company and must report to prison on March 9. Mulligan asked unsuccessfully that her client be allowed to serve part of his sentence at home. Shpigelman's mother and sister also requested leniency.

Business Week

Separately, Plotkin and Pajcin are accused of illegally obtaining the names of stocks mentioned in Business Week magazine before issues were mailed to subscribers.

Nickolaus Shuster, who worked at a Wisconsin printing plant, pleaded guilty in October to charges that he leaked the names of companies set to appear in the magazine. Prosecutors said Shuster stole copies for Plotkin and Pajcin. Charges were filed against another plant worker, Juan Renteria, who has pleaded not guilty.

If convicted, Plotkin may face up to 15 years in jail because he allegedly helped organize the scheme.

Merrill shares fell 9 cents to $91.95 in New York Stock Exchange composite trading at 1:44 p.m. Merrill is a passive minority investor in Bloomberg LP, the parent of Bloomberg News.

The case is U.S. v. Shpigelman, 06-CR-586, U.S. District Court, Southern District of New York (Manhattan).