The inner sanctum of a law firm, a so called repository of the most confidential secrets, was among the victims in insider trading arrests on Wednesday of Wall Street insiders, including a law firm clerk in an unnamed prestigious Wall Street firm.
The NY Times reports that two “insiders”, one bank broker and the clerk were those arrested in an insider trading scheme that ran for almost four years and profited from deep secrets known to few.
Federal prosecutors in New Jersey and the Securities and Exchange Commission announced the case against Vladimir Eydelman and Steven Metro, claiming their scheme reaped about $5.6 million in illicit profits. Mr. Eydelman works at Morgan Stanley and Mr. Metro at the law firm Simpson Thacher & Bartlett.
A third participant in the scheme — and unnamed 40-year-old mutual friend who was described in court papers as the “middle man” — was not charged. Prosecutors characterized him as a “cooperating witness” in the case against Mr. Eydelman, his broker at Morgan Stanley, and Mr. Metro, an old friend from law school.
The criminal and civil complaints laid bare an elaborate, if somewhat old-fashioned, scheme. It began with Mr. Metro, who is accused of gleaning secret details of corporate deals from the internal computer system at Simpson Thacher, whose clients were involved in the deals. Mr. Metro, who earned a law degree but works as a clerk rather than a lawyer, leaked the details of the deals to the “middle man” during covert meetings at a New York coffee shop, according to the government.
In a scene that seems ripped from a television drama, the middleman would then head to Grand Central Terminal’s signature four-faced clock, where he would relay the tips to Mr. Eydelman on a Post-it note or napkin. Mr. Eydelman — who, according to the government, used the tips to place well-timed trades on behalf of himself, family and more than 50 other brokerage customers — would watch as the middle man “chewed up and sometimes even ate the note or napkin.”
The case represents the latest chapter in the government’s crackdown on leaks flowing from trusted players, including lawyers and accountants, at the center of the deal-making universe. In a 2011 case that echoes the current one, the S.E.C. and prosecutors in New Jersey accused a lawyer of sharing corporate secrets with a trader in a scheme that netted more than $32 million.
“Law firms are sanctuaries for the confidential treatment of client information, and this scheme victimized not only a law firm but also its corporate clients and ultimately the investors in those companies,” Daniel M. Hawke, the senior S.E.C. official who oversaw the case, said in a statement. “We are continuing to combat serial insider trading schemes, particularly by law firm employees and other professionals who are entrusted with extremely sensitive market-moving information.”
See: New York Times