Insider trader tries Post-it notes in digital age, but finds charges over $7 million gains still stick

WASHINGTON (AFP) - With no surreptitious phone call or text message on an illicit hot stock tip safe from US regulators, Frank Tamayo thought he had a perfect no-tech foil: Post-it notes.

According to charges filed Friday by the Securities and Exchange Commission (SEC), for more than five years Tamayo used to turn over lucrative insider tips to his stock broker written on the small sticky notes.

He would show the broker, Vladimir Eydelman, the tip information on Post-it notes, or sometimes a paper napkin, inside New York's Grand Central Station.

And then Tamayo would chew up and eat the note "to destroy evidence of the tip," the SEC said.

The scheme would over time garner Eydelman, Tamayo's own source, college friend and corporate lawyer Steven Metro, and others who benefited US$5.6 million (S$7 million) before the SEC caught on.

According to the charges, Metro would access information on deals under way by corporate clients of his law firm, Simpson Thacher & Bartlett LLP, and give it to Tamayo.

In meetings inside the opulent New York rail station, Tamayo would show the broker sticky notes with cryptic details of the companies involved.

After the meeting, Eydelman would return to his office and, feigning to make a normal trading recommendation to his client, would e-mail to Tamayo official research on the company and his "supposed thoughts" on why Tamayo should buy the shares.

The intent was "to create a paper trail of false and contrived e-mails that purportedly served as non-fraudulent bases for the illegal trading by Tamayo and Eydelman," the SEC said.

Besides the SEC charges, which could result in large fines, Tamayo also faces federal criminal charges. Eydelman and Metro are facing similar civil and criminal charges.