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Another Sneak-Peek Trading Case

Business Week's "Inside Wall Street" column continues to attract the attention of speculators, both conventional and otherwise.

Federal prosecutors last week charged former daytrader David Pajcin of using advance copies of the magazine to make trades on several stocks mentioned in the column written by Gene Marcial. The criminal complaint is the third insider trading case involving the column to be filed by prosecutors in the past five years.

In the latest incident, New York authorities allege Pajcin paid an unidentified employee at Business Week's Wisconsin printing plant to send him advance copies of the magazine.

Over a five-month period ending in March 2005, Pajcin allegedly bought shares in several companies that got favorable mentions in the "Inside Wall Street" column. Some of the stocks Pajcin allegedly made advantaged trades in were Alltel (AT - Get Report), Arbitron (ARB) and Spectrum Pharmaceuticals (SPPI - Get Report).

One of the first stocks Pajcin traded was (TSCM), publisher of this Web site, which got a positive write-up in the Nov. 18, 2004, edition.

The alleged scheme employed by Pajcin is similar to one that led to an earlier insider trading prosecution involving the "Inside Wall Street" column. In 2003, federal prosecutors charged two men with paying workers at another Wisconsin printing plant to send them advance copies of the magazine so they could trade on the column's stock tips.

Paying off printing-plant employees isn't the only way rogue traders have managed to get a sneak peek at Marcial's column.

Earlier this year, a former U.S. postal worker paid a $580,000 civil fine to the Securities and Exchange Commission over allegations he had illegally traded on information in the column before the magazine was delivered to subscribers. Securities regulators also had alleged the postal worker provided advance information on the column to a friend.

Steve Weiss, a spokesman for McGraw Hill (MHP), which publishes Business Week, said the Pajcin matter is an "isolated incident of criminal activity."

Business Week takes "significant steps" to guard against a premature release of potential market-moving information, Weiss said. One thing the magazine does regularly is "review the safety of all our printers."
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