Law clerk in trading fraud involving chewed napkins pleads guilty

Reuters News
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Posted: Nov 12, 2015 4:26 PM

By Jonathan Stempel

(Reuters) - A former clerk at a prestigious New York law firm on Thursday became the third and final defendant to plead guilty in an insider trading scheme in which an accomplice ate evidence written on napkins to conceal the fraud, federal prosecutors said.

Steven Metro, a former managing clerk at Simpson Thacher & Bartlett, pleaded guilty to one count of securities fraud, and one count of conspiracy to commit securities fraud and tender offer fraud, before U.S. District Judge Michael Shipp in Trenton, New Jersey. A third count is being dismissed.

James Froccaro, a lawyer for Metro, did not immediately respond to requests for comment.

Metro, 41, of Katonah, New York, was accused of having from 2009 to 2013 passed tips about mergers and other transactions involving Simpson Thacher clients to his friend and law school classmate Frank Tamayo, 42, a Brooklyn mortgage broker.

Prosecutors said Tamayo would then go to the four-faced clock in Grand Central Terminal, and show a napkin or Post-it containing the ticker symbol of the company involved to Vladimir Eydelman, 43, then a Morgan Stanley stockbroker.

Once Eydelman memorized the symbol, Tamayo was said to have chewed up and sometimes swallowed whatever he wrote the tip on.

Eydelman, formerly of Colts Neck, New Jersey, made most of the $5.6 million of illegal profit from trades ahead of at least 13 corporate transactions based on the tips, while Metro's take was just $168,000, prosecutors said.

Authorities said the scheme unraveled in early 2014 after Tamayo began to secretly record the other defendants.

During one conversation, Eydelman gave Tamayo $7,000 meant to help Metro buy and renovate a new home, after Metro expressed a desire to "cash out," prosecutors said.

Tamayo pleaded guilty in September 2014, and Eydelman on Sept. 16 of this year. Neither has been sentenced.

Metro faces up to 20 years in prison on the securities fraud count at his Feb. 17, 2016 sentencing, but is likely to get much less. He may also be fined, and must forfeit illegal profits.

Neither Morgan Stanley nor Simpson Thacher was accused of wrongdoing. They have fired Eydelman and Metro, respectively.

The case is U.S. v. Metro, U.S. District Court, District of New Jersey, No. 15-cr-00028.

(Reporting by Jonathan Stempel in New York; Editing by Frances Kerry)