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 Federal prosecutors in New York said David Post, 41, a product
manager at the bank, received nonpublic information from a former
Rutgers Business School classmate about three companies: Idenix
Pharmaceuticals, Ardea BioSciences and ViroPharma Inc [VIRO.UL].
Prosecutors did not name the classmate, but on Oct. 14 they charged
Zachary Zwerko, a former senior finance analyst with Merck, with
passing inside tips about the same three stocks to a Rutgers
classmate who worked at a bank.
The connection was confirmed when the U.S. Securities and Exchange
Commission on Friday amended a parallel civil complaint against
Zwerko to include Post as a defendant.
Ron Gruendl, a spokesman for Bank of New York Mellon, said Post's
conduct was not connected to his work at the bank.
"We have cooperated fully with law enforcement and regulatory
agencies," he said. "He is no longer employed here."
According to criminal and civil court filings, Zwerko passed
information to Post about Merck's acquisition of Idenix as well as
Ardea and ViroPharma, which Zwerko learned were potential
acquisition targets. Post then traded on the information and split
the profits with Zwerko, authorities said.
AstraZeneca PLC <AZN.L> announced a bid for Ardea in April 2012,
while Shire PLC <SHP.L> announced a takeover of ViroPharma in
November 2013.
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"Post and Zwerko tried to keep law enforcement authorities in the
dark by using prepaid cell phones and a dummy e-mail account to
communicate inside information, and Post doled out the kickbacks
inside his own home," Sanjay Wadhwa, senior associate director of
the SEC's New York regional office, said in a statement.
At a court hearing before U.S. District Judge Alvin Hellerstein, a
tearful Post admitted he executed a series of trades between 2012
and 2014 based on the tips.
He entered a guilty plea to one count of conspiracy and three counts
of securities fraud as part of a cooperation agreement with the
Manhattan U.S. Attorney's office.
Assistant U.S. Attorney Jessica Masella said in court that Post is
believed to have earned more than $700,000 in illicit profits.
Post, a resident of Livingston, New Jersey, is scheduled to be
sentenced in January and faces up to 20 years in prison on each
securities fraud count and up to 5 years on the conspiracy charge,
although a maximum sentence is unlikely.
(Reporting by Joseph Ax; Editing by Richard Chang)
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