Ex-Merrill Lynch Analyst Gets Prison

Former Merrill Lynch investment banking analyst Stanislav Shpigelman exits Manhattan federal court following his sentencing, Friday, Jan. 5, 2007, in New York. Shpigelman was given 37 months in prison for his role in an insider trading scheme. (AP Photo/ Louis Lanzano) (Louis Lanzano - AP)

NEW YORK -- 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 punishment for financial crimes.

Shpigelman, 24, was the "brightest of the bright," one of a class of young, hard working analysts employed by investment firms, 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.

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.

The judge noted that Shpigelman sometimes sought out secret information about deals from others at his company and did so repeatedly.

"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."