SEC swoops on alleged insider scam

US prosecutors lifted the lid on an alleged massive insider trading scam after making arrests at investment banks Merrill Lynch and Goldman Sachs.

The Securities & Exchange Commission claimed the schemes yielded at least $6.7m (£3.8m) in illicit gains and were orchestrated by Eugene Plotkin, a Goldman Sachs research analyst, and David Pajcin, a former Goldman Sachs employee.

The two men are alleged to have bribed two workers at a printing plant for Business Week magazine. The printers, Juan Renteria and Nickolaus Shuster allegedly smuggled out copies of the magazine and gave the two men the names of stocks favourably mentioned in that week's "inside Wall Street" share tipping column before the magazine hit news-stands.

After buying shares of 20 companies, Plotkin and Pajcin netted around $340,000 in profit when the stock rose on Business Week's recommendation, the SEC said.

Mr Plotkin and Mr Pajcin are also accused of paying Merrill analyst Stanislav Shpigelman for inside information on forthcoming mergers and acquisitions, including that of Procter & Gamble and Gillette, the court documents added. That scheme led to profits of about $6.4m.

The two men are also said to have tipped off several individuals in the US and Europe in return for a share of their trading profits. At least eight other people, including Mr Plotkin's father Mikhail and Mr Pajcin's aunt Sonja Anticevic are alleged to be part of the ring.

The SEC claimed that Mr Shpigelman provided such information for cash and promises of further payments based on a percentage of profits from any deals.

The charges are just the latest insider trading allegations to hit Mr Pajcin, who no longer works at Goldman Sachs.

In November, he was arrested by the FBI, accused of trading on information contained in stolen advance copies of Business Week magazine - charges he denied.

Earlier in 2005, he was caught up in a separate insider trading case regarding shares of sports firm Reebok during its takeover by Adidas.