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Postal Worker Charged In Trading Scam

A postal worker who served on a grand jury was arrested Thursday after authorities said he provided secret developments about a probe of accounting fraud at Bristol-Myers Squibb Co. to people who created a massive inside trading operation.

Jason Smith, 29, of Jersey City, N.J., was charged with insider trading for his role in what authorities called a greed-driven larger effort to make millions of dollars illegally in the securities markets through any means possible.

The specifics in the wider case were announced last month, a scheme allegedly benefiting from an analyst giving tips about pending business mergers and from illegally obtained early copies of a market-moving column in BusinessWeek magazine.

Because of Smith, the wider scheme "not only corrupted securities markets but struck at the heart of our judicial system," said Mark Schonfeld, regional director of the Securities and Exchange Commission.

U.S. Attorney Michael J. Garcia told a news conference that Smith acted as a spy, violating grand jury secrecy rules designed to protect investigations so that suspects do not flee, intimidate witnesses or target grand jurors themselves.

Garcia described Smith's actions as "profoundly disturbing." He said Smith was also being charged in New Jersey with criminal contempt of court.

During a brief court appearance in Manhattan, bail was set at $3 million and home detention and electronic monitoring were ordered for Smith, who was not expected to immediately meet the conditions. His lawyer, Frank Handleman, declined to comment.

Smith served from 2003 to 2005 on a New Jersey grand jury that was investigating accounting fraud accusations against Bristol-Myers and several of its executives. He allegedly leaked the grand jury information to a former Jersey City high school friend, David Pajcin, a former Goldman Sachs analyst who is cooperating with the government.

Prosecutors say Pajcin then teamed with Eugene Plotkin, of Manhattan, a Harvard-educated Goldman Sachs Group Inc. analyst, to trade on the information and to tip others to trade in Bristol-Myers securities.

Authorities said the plot involving grand jury information did not result in any profits, though the wider scheme is estimated to have made profits of about $7 million for the participants.

On June 14, 2005, the grand jury returned an indictment against two former Bristol-Myers executives, charging them with conspiracy and securities fraud.

The probe resulted in a deferred prosecution agreement between Bristol-Myers and prosecutors in New Jersey that would likely spare the company from prosecution.

In April, the FBI arrested Plotkin and his college friend, Stanislav Shpigelman, 23, of Brooklyn, accusing them of benefiting from the scandal. Shpigelman was an analyst at Merrill Lynch & Co. Inc.'s mergers and acquisitions division.

A criminal complaint filed in U.S. District Court in Manhattan also accused Smith of participating in other attempts by Plotkin and Pajcin to gain inside information and trade on that information.

If convicted, Smith faces a maximum of 45 years in prison.

The Securities and Exchange Commission also brought civil insider trading charges against Smith.

The earlier case included claims that Plotkin and Shpigelman discussed getting strippers to coax stock tips from investment bankers with inside knowledge of pending mergers and acquisitions.

The case was discovered by regulators who noticed unusually high trading volume before a merger announcement.

A closer look showed that a 63-year-old retired seamstress in Croatia, the aunt of one of the defendants, had made more than $2 million, Schonfeld said previously. The SEC added Smith to a civil insider trading complaint that already accused 13 others in the case.