Friday, November 25, 2005
Former broker David Pajcin was arrested in New York for insider trading based on receiving advance copies of issues of Business Week and trading in stocks touted in the magazine's "Inside Wall Street" column. This is a type of scheme that has been tried with alarming regularity since the 1980s, particularly with Business Week, although it also was the underlying misconduct in the well-known Carpenter v. U.S. decision by the Supreme Court that upheld the conviction of defendants who traded in advance of "Heard on the Street" columns in the Wall Street Journal. An AP story (here) notes that Pajcin is accused of trading in shares of ten companies, including Alltel, thestreet.com, Arbitron, and Spectrum Pharmaceuticals.
This is not Pajcin's first brush with insider trading allegations. He was named in an SEC amended complaint on Aug. 18 alleging insider trading in Reebok stock options immediately before the company announced it agreed to be taken over by adidas, trades that generated over $2 million in profits. According to the SEC's Litigation Release (here), some of the trading took place through an account in the name of Pajcin's aunt who lives in Croatia. Look for the U.S. Attorney's Office to pursue criminal charges against Pajcin (and others) in this case, too. (ph)
UPDATE: Bruce Carton has an interesting post on the Securities Litigation Watch blog (here) noting how Pajcin's trading fits a transparent pattern of insider trading that will (usually) be noticed by the SEC.