Alexei Koval, accused of conspiring with former UBS AG (UBSN) investment banker Igor Poteroba to make almost $1 million in an insider-trading scheme, pleaded guilty to securities fraud in Manhattan federal court.
Koval, 36, of Chicago, who worked at Northern Trust Corp. as a pricing manager until last March, today admitted to conspiring to commit securities fraud and three counts of insider trading. He was indicted in May for his role in a scheme that prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said began in 2005.
Poteroba, 37, once an executive director at UBS Securities LLC, pleaded guilty to insider-trading charges on Dec. 22 after being accused of tipping friends to potential mergers. He wasn’t named in the May 20 indictment filed by prosecutors against Koval.
“What I did was, I agreed with others to get inside information on publicly traded securities and to use this information to trade for profit,” Koval told U.S. District Judge Paul Crotty today.
Prosecutors said Poteroba leaked to Koval and a third person tips on six UBS Healthcare client mergers and acquisitions under consideration. The ring used code such as “frequent flier miles” and references to a Macy’s Inc. wedding registry and made at least $870,000 from the illegal trades, prosecutors said.
Traded on Tip
Koval said he paid for the inside information.
“Based on a tip from a co-conspirator, I purchased securities and I traded on them for a profit,” he told Crotty.
The judge said that based on a plea agreement between the U.S. and Koval’s lawyer, the defendant could face 30 to 37 months in prison when he is sentenced April 12.
Assistant U.S. Attorney Marissa Mole asked that Koval, who like Poteroba is a Russian national and faces deportation after his prison term, should be immediately remanded to federal custody as a flight risk.
Koval’s lawyer, Fred Cohn, disagreed. He said Koval, who was released on a $5 million bond and confined to home detention with electronic monitoring, wasn’t a flight risk.
The judge gave Koval until the close of business on Jan. 14 to surrender to federal authorities, to give him time for a medical test and to get his business affairs in order.
Both Cohn and Poteroba declined to comment after court.
Mergers or Acquisitions
Prosecutors claimed the inside information was connected to mergers or acquisitions involving Guilford Pharmaceuticals Inc., Molecular Devices Corp., PharmaNet Development Group Inc., ViaCell Inc., Millennium Pharmaceuticals Inc. and Indevus Pharmaceuticals Inc.
The U.S. Securities and Exchange Commission filed a related lawsuit against Koval, Poteroba and a third man, Alexander Vorobiev, who now lives in Russia after leaving Toronto. The SEC said they made more than $1 million through the scheme.
Kris Kagel, a spokesman for Zurich-based UBS, said March 24 that the bank was cooperating with the authorities.
The case is U.S. v. Poteroba, 10-CR-443, U.S. District Court, Southern District of New York (Manhattan).
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