Eugene Plotkin (banker)
| Company type | Scandal |
|---|---|
| Industry | Finance, Securities trading |
| Founded | 2004 |
| Defunct | 2005 |
Area served | United States, Europe |
Key people | David Pajčin, Eugene Plotkin, Stanislav Shpigelman, Jason Smith, Nickolaus Shuster, Juan Renteria, Monika Vujovic, Sonja Antičević |
The Reebok insider trading scandal involved illicit trading activities from 2004 to 2005, centered around confidential information leaked by a Merrill Lynch investment banker, a grand juror, and advance copies of Business Week. These trades took place across the United States and Europe. The scheme was largely managed by David Pajčin, a former trader at Goldman Sachs, who was subsequently ordered by the SEC to pay nearly $28 million in fines and penalties.
Background
David Pajčin, originally from Croatia, formed a professional relationship with Eugene Plotkin while both were employed at Goldman Sachs. In 2004, Plotkin facilitated an introduction between Pajčin and Stanislav Shpigelman, an investment banker at Merrill Lynch, during a visit to a Russian day spa in Manhattan. Pajčin also maintained connections with Jason Smith, a former postal worker from his high school days, and was involved romantically with Monika Vujovic, a Croatian-born exotic dancer.
Schemes
Shpigelman supplied Pajčin and Plotkin with non-public information regarding forthcoming mergers and acquisitions in exchange for financial kickbacks. The most lucrative opportunity arose from a tip about Adidas-Salomon AG’s planned purchase of Reebok.
Pajčin additionally capitalized on confidential details obtained from Jason Smith, who was serving on a grand jury, as well as from early copies of Business Week provided by warehouse employees Nickolaus Shuster and Juan Renteria, who received payments for leaking the information.
Trades were placed by Pajčin both for his personal accounts and those of his aunt, Sonja Antičević, along with his girlfriend Monika Vujovic. Numerous other individuals, primarily Croatian nationals, executed trades based on insider tips relayed through Pajčin and Plotkin.
Investigation
The U.S. Securities and Exchange Commission initiated an investigation into Pajčin after identifying unusual trading patterns and unusually high volumes shortly before the announcement of a corporate acquisition. Sonja Antičević, Pajčin’s 63-year-old aunt and retired tailor living modestly in Croatia, purchased $130,000 worth of Reebok call options just two days prior to Adidas-Salomon AG’s acquisition of Reebok. This transaction resulted in profits exceeding $2 million. Antičević later stated she had "never bought a stock" before and was unfamiliar with how the process worked.
A total of 8,675 Reebok options changed hands in the two days leading up to the merger announcement—over fifty times the average trading volume. The SEC discovered that multiple accounts involved in these trades had engaged in similar transactions over preceding months; these included accounts held by Monika Vujovic and other Croatian nationals. Pajčin was subsequently arrested and cooperated with federal law enforcement.
Aftermath and sentencing
Arrested in 2005, Pajčin provided assistance to authorities; all other conspirators were apprehended in 2006. After admitting guilt in 2008, Pajčin was sentenced to time already served. However, he violated probation months later by fleeing the United States, leading to an arrest warrant issued in April 2008. In 2010, he was ordered to pay a default judgment of $7.7 million along with $20.8 million in SEC penalties.
- Eugene Plotkin admitted guilt to conspiracy and insider trading charges; he received a 57-month prison sentence and a $10,000 fine in 2008.
- Stanislav Shpigelman pleaded guilty to conspiracy and insider trading; sentenced to 37 months imprisonment in 2007.
- Jason Smith pled guilty to felony criminal contempt; sentenced in 2006 to 33 months imprisonment and fined $6,000.
- Nickolaus Shuster admitted guilt to conspiracy and insider trading; sentenced to time served in 2008.
- Juan Renteria pleaded guilty to conspiracy and insider trading; received two years probation following sentencing in 2008.
External links
- New York Magazine[1], White Men with Money, The Conclusion of Eugene's Story.
- [2] American Greed Episode 22: Unveiling a Fraud: Strippers and Insider Trading