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), Arbitron ( ARB) and Spectrum Pharmaceuticals ( SPPI). One of the first stocks Pajcin traded was TheStreet.com ( 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."
In the Pajcin complaint, prosecutors went out of their way to note that Business Week "has taken extensive measures to secure the confidentiality" of the stocks mentioned in the "Inside Wall Street" column. The complaint says that Marcial's column is "only read by a few select editors"' at the magazine. The names of the various companies discussed in each column "are not inserted into the stock charts used in the column until 5 p.m. ET on Wednesday, the day of printing." The four printing companies Business Week employs also have a number of strict instructions for handling the column. Pajcin's attorney, Paul Lieber, declined to comment. Pajcin, 28, most recently worked at Schonfeld Securities, a proprietary daytrading firm, according to a copy of his brokerage registration statement. Schonfeld officials did not return a phone call. There's no indication the daytrading firm is implicated in the alleged scheme. The complaint says Pajcin made his trades through an account with an online brokerage firm.