April 11, 2006

Merrill, Goldman in insider trading probe: source

NEW YORK (Reuters) - Federal prosecutors will reveal an
insider trading scheme on Tuesday involving a Merrill Lynch
analyst and two people tied to Goldman Sachs, according to a
source briefed on the investigation.

The case is linked to the arrest last year of a former
stockbroker who allegedly made stock trades from stolen
prepublication copies of Business Week magazine, the source
said, speaking on condition of anonymity.

Merrill Lynch and Co. Inc. declined to comment and Goldman
Sachs Group Inc. had no immediate comment.

There are at least two strands of the scheme, said the
source. One involved an employee at the company that prints
Business Week magazine, who obtained information from the
"Inside Wall Street" column ahead of time.

The other strand involved an analyst at Merrill Lynch who
provided merger and acquisition information to co-conspirators.

One former Goldman employee and one current one were
involved in both schemes, the source said. The source
originally said two former Goldman employees were involved.

Earlier Tuesday, federal prosecutors here said they would
announce at an 11 a.m. (1500 GMT) press conference the arrest
of several people charged with participating in the
international insider trading scheme, which they said netted
more than $6.7 million.

The source said three arrests would be announced and were
being made this morning, but had no further details.

Michael Garcia, the U.S. Attorney for the Southern District
of New York, will make the announcement along with FBI and
Securities and Exchange authorities, his office said in a

David Pajcin, a former stockbroker arrested in November by
the FBI was involved in both schemes, said the source. Pajcin
was accused of insider trading, using stolen advance copies of
Business Week magazine.

Pajcin was named in August in a separate civil case brought
by securities regulators for his role in alleged trading
misconduct and phony identities involving Reebok International
options. Reebok is now owned by Adidas.

Prosecutors accused Pajcin of obtaining advanced access to
the "Inside Wall Street" column and buying 10 separate stocks
ahead of the column's publication.

Earlier this month, a man who worked in one of four
printing plants used by BusinessWeek was charged with
conspiracy to commit securities fraud.