Merrill Lynch warns staff on ethical behaviour
By James Politi [FT] in New York
Wednesday, April 12, 2006
Posted: 01:30 PM EDT (18:30 London)
The top brass of Merrill Lynch's investment bank have warned staff they will not tolerate unethical behaviour, after a junior member of the mergers and acquisitions department was arrested and accused of insider trading.
In a note to colleagues, Gregory Fleming and Dow Kim, presidents of Merrill's Global Markets and Investment Banking Group, said they were "gravely disappointed" to hear of the charges, and that the bank was "co-operating fully with the government".
They added: "This case appears to involve a single individual at our firm, but it underscores how the actions of any one individual has the potential to damage us all. We are deeply committed to the highest standards of ethical business conduct, and we cannot and will not tolerate behaviour that falls outside these standards."
Stanislav Shpigelman, a 23-year old analyst in the M&A department, has been accused by prosecutors of participating in a $6.7m international scheme allegedly organised by Eugene Plotkin, a Harvard graduate working as an associate in the fixed income division of Goldman Sachs (NYSE:GS) .
Details of the alleged scheme have been particularly troubling for Merrill, because they involve the disclosure of information about many large M&A deals that the bank was working on.
Prosecutors allege that Mr Shpigelman would offer Mr Plotkin tips about deals that he was working on or hearing about at Merrill, in exchange for cash payments.
These deals included Procter & Gamble's $58bn purchase of Gillette (NYSE:G) , Adidas's takeover of Reebok (NYSE:RBK) , and even a deal that was never finalised – Amgen (NASDAQ:AMGN) 's attempt to buy Celgene (NASDAQ:CELG) , a rival biotechnology group.
Goldman appears to have been less damaged because although Mr Plotkin, 26, was an employee, he has not been charged with using any of Goldman's confidential information in his trading.
To many on Wall Street, the case highlights the extent to which teams of junior bankers are entrusted with extremely sensitive information, and the challenges facing investment banks in making sure that this material is not passed around for the wrong reasons.
Typically, bankers are given training courses on how to deal with confidential information as part of their orientation.
But one New York-based securities lawyer says that may not be enough: "It is difficult, maybe impossible, to fully monitor insider trading. You can give compliance speeches, prepare special courses, have people sign documents, but if they want to commit fraud, they will."
Lawyers for Mr Shpigelman and Mr Plotkin did not return calls seeking comment. |
