Fourth Suspect Charged in Massive Insider-Trading Ring

By Brooke A. Masters
Washington Post Staff Writer
Friday, May 12, 2006

NEW YORK, May 11 -- A Jersey City man was charged yesterday with fraud and criminal contempt of court for allegedly leaking information about a grand jury probe of Bristol-Myers Squibb Co. to a massive insider-trading ring.

Jason Smith, a 29-year-old postal worker, in 2005 was serving on a grand jury investigating accounting irregularities at the New York drugmaker when he arranged to pass on information about the secret probe to a friend from high school, David Pajcin, according to a 13-page criminal complaint unsealed Thursday.

Pajcin, a former Goldman Sachs Group Inc. employee, was already participating in an unrelated $6.7 million insider-trading scheme, and he used Smith's information to trade Bristol-Myers stock, the complaint said. Smith also invested money in the larger scheme, according to a parallel civil complaint filed by the Securities and Exchange Commission.

SEC assistant regional director David A. Markowitz said the case marks the first time that anyone has been charged with insider trading based on leaked grand jury information. "The grand jury lies at the heart of the judicial process, and to pervert that is particularly egregious," Markowitz said.

The case against Smith stems from a broader insider-trading investigation. Pajcin, 29, was arrested last year after authorities noticed that his aunt, a seamstress in Croatia, had made $2 million by trading Reebok International Ltd. options two days before the company announced its takeover by Adidas-Salomon AG.

A junior Merrill Lynch & Co. investment banking analyst, Stanislav Shpigelman, 23, was charged last month with leaking information about the Reebok deal and other transactions Merrill was involved in to Pajcin and a third conspirator, Eugene Plotkin, 26, who had worked with Pajcin at Goldman Sachs.

Plotkin and Shpigelman appeared in U.S. District Court in Manhattan last month but have not been asked to enter pleas. Plotkin's attorney, Martin Schmukler, said he had not seen the allegations against Smith and could not comment on them.

Pajcin is cooperating with authorities, according to the criminal complaint against Smith. His attorney declined to comment. Smith's lawyer, Frank Handelman, said his client is seeking bail and will fight the charges.

According to the SEC complaint, Smith first became involved with the plotters in mid-2004, when Pajcin and Plotkin tried to recruit him to work at a printing plant where he would have access to advance copies of Business Week magazine and be able to get them an illegal early look at the publication's market-moving Inside Wall Street column. Smith turned them down but agreed to give Pajcin and Plotkin money to fund their trading schemes.

Then, in 2005, Smith told Pajcin that he was serving on the jury probing Bristol-Myers Squibb's accounting and that it appeared that a top company officer would be indicted, the complaint said. Pajcin sold the stock short, effectively betting the price would fall, and tipped off two other people to the development. In June, Smith told Pajcin that the officer would not be indicted after all, and Pajcin and other members of the trading ring covered their short positions.

"Pajcin, Plotkin and Smith were committing a grievous offense to the integrity of the marketplace," said FBI supervisory special agent David Chaves at a news conference on the case. Insider trading "is like playing high-stakes poker when you can see everyone else's hand," he said. "It's not playing the market. It's playing the market on steroids."


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