Over the years, we’ve covered many Biglaw employees who have been accused or convicted of insider trading. This should come as no surprise, given the confidential and market-moving information that regularly flows through the hallways and computers of leading law firms.
The latest accusations of insider trading involve a lawyer who worked at a white-shoe law firm. This individual stands accused of taking confidential information he was privy to by virtue of his work and passing it along through a middleman to a broker, who then allegedly traded on it. According to the Securities and Exchange Commission, the scheme generated over $5.6 million in illegal profits, with over $168,000 going to the Biglaw tipster.
At which elite law firm did this defendant work, and from which school did he receive his law degree?
The insider trading charges being brought by the SEC in this case are civil charges, not criminal ones (which is interesting, given the size and scope of the alleged scheme).
Here’s a report from BloombergBusinessweek:
A law firm clerk at Simpson Thacher & Bartlett LLP and a stockbroker were charged in what U.S. authorities said was an insider-trading scheme that netted more than $5.6 million in illicit profit.
Steven Metro, 40, the managing clerk at Simpson Thacher in New York, was accused of stealing confidential information on mergers, acquisitions and tender offers and tipping a middleman who passed it to Vladimir Eydelman, 42. Eydelman, a broker, worked at Oppenheimer & Co. and later Morgan Stanley, federal authorities said. The middleman became a cooperating witness.
The men invested more than $33 million over four years to buy securities in 13 transactions, including OfficeMax Inc. and Sirius XM Holdings Inc., authorities said. Eydelman bought securities for himself, family members, friends, and clients, including the cooperating witness, they said.
In a sad commentary on the legal employment market, Steven Metro had a law degree but was working as a mere “managing clerk” at STB. Where did this legal eagle get his wings? From the complaint:
15. Defendant Steven Metro, age 40, is a resident of Katonah, New York. Metro currently is employed by Simpson Thacher as a managing clerk. He has a law degree from Touro College of Law in Central Islip, New York but is not a practicing attorney. Metro and the Middleman are friends who met in approximately 1995, during their first year of law school. Metro made timely purchases of securities before two of the announcements that are the subject of this action and entered into an agreement with the Middleman that apportioned some of the proceeds from the illegal transactions to Metro.
Touro Law: where insider trading schemes are born? I’m hoping this latest news helps Touro knock out Yale in the first round of ATL March Madness: The Worst Law School in America.
How did the scheme work? Here’s the general outline, which is pretty mouthwatering (pun fully intended, emphasis added):
2. From at least February 2009 through the present (the “Relevant Period”), Metro was an employee of Simpson Thacher. Metro repeatedly accessed material, nonpublic information on Simpson Thacher’s computer systems during the Relevant Period to identify documents establishing that a client of the firm was about to participate in a corporate transaction. He then arranged meetings with the Middleman at bars and coffee shops in New York City and passed on the material, nonpublic information with the understanding that the Middleman would use the information to trade.
3. The Middleman then passed the information to his friend and stockbroker, Eydelman. Except at the very beginning of the scheme, the passing of material, nonpublic information occurred at the same location – Grand Central Station. The Middleman passed the information to Eydelman by showing him a post-it note or napkin on which the Middleman wrote the stock ticker symbol of the company to be acquired. The Middleman then chewed up, and sometimes ate (with Eydelman watching), the post-it note or napkin to destroy evidence of the tip. The Middleman also conveyed to Eydelman at this time the approximate transaction price and timing of the deal. Following this interaction, Eydelman returned to his office, typically gathered research relating to the target company, and e-mailed the Middleman the research, and/or Eydelman’s supposed thoughts as to why buying the stock made sense, with the intent to create a paper trail of false and contrived emails that purportedly served as non-fraudulent bases for the illegal trading by the Middleman and Eydelman.
Alas, we suspect that everyone allegedly involved in this scheme now has a bad case of indigestion. But on the bright side:
4. Eydelman knew that the information passed to him was material and nonpublic and that the Middleman had received it from a friend who worked at a law firm. Indeed, in a recent meeting between the Middleman and Eydelman, the Middleman brought up the “boy at the law firm,” to which Eydelman responded, “What’s up with him . . . does he still have the info?”
Take heart, Steven Metro: you’re 40 years old, but people still refer to you as a “boy.” Hopefully any legal troubles won’t affect your youthful good looks.
UPDATE (11:15 p.m.): 1. Good-looking or not, Metro is out of a job. Simpson Thacher fired him after learning of the “deeply disturbing” charges.
2. Over at Bloomberg View, my former colleague Matt Levine offers insightful analysis and humorous commentary.
Flip to the next page to read the SEC complaint in full. We’ve given it just a quick skim, so please feel free to note additional interesting tidbits in the comments. And if you have info to share about Steven Metro, feel free to email us or text us (646-820-8477). Thanks.