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The managing clerk of a high-profile New York City law firm and a Morgan Stanley stockbroker were charged in an insider trading scheme that used notes scribbled on napkins — then eaten to maintain secrecy — to bring in almost $6 million in illicit profits, authorities said Wednesday.
Steven Metro stole insider information from the law offices of Simpson Thacher & Bartlett and passed it on to a friend who became a cooperating witness, according to federal prosecutors in Newark, N.J. The cooperating witness would then divulge the information to Vladimir Eydelman, a stockbroker who worked at Oppenheimer & Co. and then at Morgan Stanley, authorities said.
FBI agents arrested Metro, 40, of Katonah, N.Y., and Eydelman, 42, of Colts Neck, N.J., on Wednesday. Metro's attorney, James Froccaro Jr., said his client would be entering a not guilty plea "and looks forward to being vindicated at trial."
William Silverman, a lawyer for Eydelman, did not return a message seeking comment.
Authorities said the scheme began in 2009. They said Metro repeatedly obtained inside information regarding anticipated corporate mergers and acquisitions on which his firm was working. They said he would arrange to meet the cooperating witness at a Manhattan coffee shop to pass on the inside information, which included the stock exchange ticker symbol of the company in which to invest.
The cooperating witness would write the information on a small piece of paper or napkin, prosecutors said. The witness would then meet with Eydelman near the clock at Grand Central Terminal to give him the stolen information, prosecutors said.
The cooperating witness would show Eydelman the napkin or piece of paper with the ticker symbol, they said. Eydelman would memorize the ticker symbol and the cooperating witness would put the paper into his mouth and chew it, they said.
Metro and Eydelman are charged with conspiracy to commit securities fraud, securities fraud and tender offer fraud, and face lengthy prison sentences and large fines. The Securities and Exchange Commission also charged the two with insider trading on Wednesday.