More BigLaw Insider Trading (Now With Edible Conspiracies!)
It's like the script of a bad movie.
One man, a Touro Law Center graduate (Google it -- it exists), worked as a career managing law clerk at BigLaw mergers and acquisitions powerhouse Simpson Thacher & Bartlett LLP. You can probably guess where this is going.
He'd allegedly pass along tips to a friend, who passed them to a broker, and eventually, someone noticed and the friend turned state's witness. The only surprising part of the story is the lengths that they went to to avoid getting caught.
Coffee, Smartphones, and Eating the Napkin
Here's how their typical deal went down, per The Wall Street Journal:
Steven Metro, the managing clerk, would nab the inside information. He'd text an old Touro Law School classmate, the unidentified mortgage broker-turned-witness, and say, "Let's meet for coffee," (or some other innocuous excuse). While there, he'd point at stock symbols on his smartphone, the friend would write the symbol on a napkin, and then he'd head to Grand Central Station, where he'd meet Vladimir Eydelman, a stockbroker (formerly of Oppenheimer & Co., recently of Morgan Stanley, currently suspended). The friend would flash the stock symbols under the clock, then eat the napkin.
There's no word yet on how they got caught (because seriously, they ate the evidence), but the Journal does mention that the stockbroker used the information to net $5.6 million, making trades on his behalf, on his co-conspirators' behalf, and on behalf of the rest of the clients of his brokerage. The Securities and Exchange Commission tends to notice when one firm hits too many times in a row on the roulette table, if you get our drift.
And if you're wondering how much of the $5.6 million actually made it back to the BigLaw clerk, that'd be a few thousand dollars in cash, cleverly disguised as cigars, though he may have been "owed" as much as $168,000. Meanwhile, the stockbroker used his commissions to purchase a new 2011 Maserati Gran Turismo (a fine choice) for $117,000, along with some bling.
How Does Your Company Prevent Insider Trading?
The companies here did nothing wrong, and probably couldn't have done much more than they did. There's a reason this, and the last big BigLaw insider trading scandal, made the news: they rarely ever happen. You probably already go beyond the basic steps of data security, and should be familiar with your outside counsel's data security and encryption measures, especially how they limit access to data to keep it from falling into the wrong hands.
But as Simpson Thacher embarrassingly noted to the Journal, a scandal like this is "unprecedented" in the firm's history. This pretty much doesn't happen, and an isolated incident of a greedy clerk probably doesn't indicate a leaky system.
Enjoy the latest legal news from our blogs? Keep up with the latest legal docs on Scribd.
- In-House Counsel: Review Your Company's Security Check Process (FindLaw's In House Blog)
- 5 Ways In-House Counsel Can Improve Vendor Cybersecurity (FindLaw's In House Blog)
- Survey Finds Corporate Board Communications Pose Security Risks (FindLaw's In House Blog)
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.