(Adds details on sentencing, background on case)
By Nate Raymond
NEW YORK, Nov 12 (Reuters) - A former Bank of New York Mellon Corp employee was sentenced on Thursday to six months in prison after admitting to illegally making $737,000 trading on tips a friend at Merck & Co Inc supplied him about potential pharmaceutical mergers.
David Post, 42, was also ordered by U.S. District Judge Alvin Hellerstein in Manhattan to pay more than $787,600 in fines and forfeit proceeds in light of his guilty plea in October 2014 to charges including securities fraud.
Just a month ago, the same judge sentenced Zachary Zwerko, a former senior finance analyst at Merck, who was involved with performing work on potential corporate deals, to 37 months in prison after he likewise pleaded guilty.
Post, who at BNY Mellon was a vice president in broker dealer services product management, had sought probation after giving what U.S. prosecutors said was the “crucial” cooperation needed to prosecute his onetime friend.
But Hellerstein said a short prison term was nonetheless warranted because he was “bothered” by the duration of the insider trading, which lasted about three years.
“The crime of insider trading is a serious crime,” he said. “It eats at the capital markets and the integrity of the capital markets.”
According to prosecutors, Zwerko, who Post had befriended while they were classmates at Rutgers Business School, in 2010 proposed providing Post information about drug company deals to trade on in exchange for a cut in the profits.
After some time passed, Zwerko began funneling information to Post, resulting in him buying shares of Ardea BioSciences Inc, which while not bought by Merck was ultimately acquired by AstraZeneca Plc in 2012, prosecutors said.
Zwerko also provided inside information about ViroPharma Inc, allowing Post to buy shares ahead of the announcement in 2013 that it had agreed to be bought by Shire Plc.
Post’s trading in 2014 ahead of Merck’s acquisition of Idenix Pharmaceuticals based on information from Zwerko resulted in a major windfall of $579,000, prosecutors said.
In total, the insider-trading scheme generated illegal profits of at least $737,000 and Post paid Zwerko $57,000 as part of his expected cut, prosecutors said.
They said Post began cooperating almost immediately after being contacted by the FBI in October 2014. Zwerko was arrested days later, and later that month, Post pleaded guilty.
“I am truly sorry for my conduct that has led to my appearance here today,” Post said in court on Thursday.
The case is U.S. v. Post, U.S. District Court, Southern District of New York, No. 14-cr-715. (Reporting by Nate Raymond in New York; editing by Grant McCool)