Former Grand Juror in Bristol-Myers Squibb Case Charged with Contempt for Violating Grand Jury Secrecy to Assist Insider Trading

NEWARK – A Jersey City man who served on a grand jury that indicted two former executives of Bristol-Myers Squibb (BMS) was charged today with contempt of court for violating his duty of grand jury secrecy by assisting others to commit insider trading based on information he disclosed leading up to the indictment, U.S. Attorney Christopher J. Christie announced.

Jason Smith, 29, was arrested this morning at his home on a criminal Complaint by Special Agents of the FBI from New Jersey and New York. The arrest, however, was on a separate and related criminal Complaint brought by the U.S. Attorney’s Office for the Southern District of New York, which charged Smith with involvement in a wider insider-trading scheme involving former Wall Street analysts and others. That scheme also involved the trading of BMS stock.

Smith was expected to make an initial appearance today before a U.S. Magistrate Judge in Manhattan federal court. He will be required to make a subsequent appearance in federal court in Newark at a day and time to be determined. Smith is charged in New Jersey with contempt of court, which carries no specific statutory penalty and leaves any term of imprisonment at the discretion of a federal judge.

“Grand jury secrecy is not an option, it’s the law – period. We will always act to enforce this principle,” said Christie. “Such an abuse is extremely rare in our system of justice, and virtually all grand jurors recognize the solemn importance of their role. This is a sad and unfortunate exception.”

Smith, a postal worker in Jersey City, was on the grand jury panel that investigated and returned an Indictment on June 14, 2005, against former BMS executives Frederick Schiff and Richard Lane. That Indictment, which was unsealed the next day, charged Schiff and Lane with conspiracy to commit securities fraud in connection with the alleged practice of inventory “channel stuffing” that artificially inflated BMS sales. (Follow links at www.usdoj.gov/usao/nj/publicaffairs/ to the June 14, 2005 news release on the Indictment and Deferred Prosecution Agreement with BMS.)

According to the criminal Complaint filed in Newark, then grand-juror Smith maintained contact during the grand jury investigation with David Pajcin, a former analyst at Goldman Sachs & Co. and a longtime friend of Smith’s.

Smith allegedly kept Pajcin abreast of progress and developments in the grand jury and what he believed was the anticipated indictment of one particular BMS officer who appeared multiple times before the grand jury. The two allegedly discussed trading in BMS stock and also met in Manhattan with another of Pajcin’s co-conspirators, Eugene Plotkin, then an associate at Goldman Sachs’ fixed-income research unit.

Pajcin was arrested and charged with insider trading in November in the Southern District of New York’s insider-trading investigation, and has since been cooperating with the investigations in New Jersey and New York, according to today’s criminal Complaints. Plotkin and others were charged last month with conspiracy by the Southern District of New York.

According to Pajcin, as related in the criminal Complaint from the District of New Jersey, Pajcin told Smith of the insider trading scheme with which he, Plotkin and others were engaged. Pajcin said he opened a brokerage account in the fall of 2004 with about $6,000 or $7,000 provided by Smith, as well as with money from a $20,000 bank loan taken by Plotkin.

Pajcin said Smith told him to use Smith’s money in the insider trading scheme. Subsequently Smith began passing along information on the progress and status of the BMS grand jury investigation. Smith and Pajcin allegedly agreed to share in any profits made as a result of Smith’s information.

According to the Complaint, Smith told Pajcin in early June 2005 that he believed that the grand jury would likely be indicting the BMS officer at their next session, which was scheduled for June 14.

Based on that information from Smith, Pajcin and several others that Pajcin and Plotkin had tipped executed short sales of BMS stock prior to that scheduled grand jury session, according to the Complaint. Trading records indicate that on June 10, 2005, Pajcin sold BMS stock short through a foreign account in the name of Pajcin’s aunt, Sonia Anticevic. Trading records also reveal that on the same day, a Plotkin family member and another tippee executed short sales of BMS stock.

According to Pajcin, on June 14, 2005, Smith called Pajcin to tell him that, in fact, the particular BMS officer whom Smith believed would be indicted would not be indicted after all. Pajcin and others who had acted on the tips then closed their short positions, including the short position held in the Anticevic foreign account, according to the Complaint.

The Indictment naming Schiff and Lane was sealed until the next day, June 15, 2005, when the Indictment and the BMS Deferred Prosecution Agreement were publicly announced by the U.S. Attorney’s Office in Newark.

During a recorded telephone conversation on April 12, 2006, according to the Complaint, Pajcin told Smith he was considering cooperating with authorities. If he did, Pajcin told Smith, he might have to tell the government about “the jury thing.” In response, Smith expressed, among other things, serious concerns for himself and discussed possibly fleeing, according to the Complaint.

A criminal Complaint is merely an accusation. All defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

The case is being prosecuted by Assistant U.S. Attorney John M. Fietkiewicz of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Christie credited Special Agents of the FBI in New Jersey, under the direction of Special Agent in Charge Leslie G. Wiser, Jr., and in New York, under the direction of FBI Assistant Director-in-Charge Mark J. Mershon, for their investigations of Smith and the insider trading case. Christie also thanked his colleague in New York, U.S. Attorney Michael J. Garcia, for his office’s mutual assistance in the matter of Smith.

Christie also credited the work of the Securities and Exchange Commission in New York, under the direction of Mark Schonfeld, the SEC Regional Director.