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Two charged in U.S. insider case involving chewed-up napkins


(Reuters) — U.S. prosecutors on Wednesday charged a Morgan Stanley stockbroker and an employee at a prominent New York law firm with insider trading in more than one dozen mergers and corporate transactions, resulting in more than $5.6 million of illegal profit.

Authorities said Steven Metro, a managing clerk at Simpson Thacher & Bartlett L.L.P., would pass tips about pending deals involving the law firm's clients through a middleman to Vladimir Eydelman, the stockbroker.

They said Mr. Eydelman would then trade on the inside information for himself, family members, the middleman and customers, and kick a portion back to Mr. Metro.

Authorities allege that the middleman would write the ticker symbol of the stock to be purchased on a napkin or Post-it note that he showed to Mr. Eydelman, and then chew up or even swallow the napkin or note once the stockbroker had memorized the symbol.

Prosecutors said the scheme began in 2009, and resulted in more than $33 million of illegal trades.

Mr. Eydelman, 42, of Colts Neck, N.J., was charged with eight counts of securities fraud, four counts of tender offer fraud and one count of conspiracy.

Mr. Metro, 40, of Katonah, N.Y., was charged with nine counts of securities fraud, four counts of tender offer fraud and one count of conspiracy.

The U.S. Securities and Exchange Commission filed related civil charges against both men. The defendants are expected to appear in a Newark, N.J., federal court on Wednesday.

William Silverman, a lawyer for Mr. Eydelman, declined to comment. Mr. Metro's lawyer could not immediately be located.

Morgan Stanley spokesman James Wiggins said the company has put Mr. Eydelman on leave and will cooperate with authorities. "We do not tolerate insider trading and will take appropriate action based on the facts," he said.

Simpson Thacher did not immediately respond to requests for comment.