A former Bank of New York Mellon Corp (BK.N) employee on Friday pleaded guilty to insider trading based on tips from a former Merck & Co Inc (MRK.N) employee about potential pharmaceutical mergers.
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.
"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.
