(Reuters) - A federal appeals court threw out the 46-month prison sentence of a former clerk at a major Wall Street law firm, who was part of an insider trading ring that passed merger tips on napkins and Post-it notes in New York’s Grand Central Terminal.
The 3-0 decision by the 3rd U.S. Circuit Court of Appeals in Philadelphia on Wednesday is likely to result in a lesser punishment for Steven Metro, 44, of Katonah, New York, who was a clerk at Simpson Thacher & Bartlett.
The appeals court said the sentencing judge did not make enough factual findings to attribute all $5.6 million of the ring’s illegal trading profit to Metro.
It also found a lack of proof that Metro, who pleaded guilty to securities fraud and conspiracy charges, “acted in concert with” or “provided inside information” to a former Morgan Stanley stockbroker who made the illegal trades. Metro claimed not to know the stockbroker at the time.
“A guilty plea alone is not necessarily determinative of sentencing accountability,” Circuit Judge Kent Jordan wrote.
Matthew Reilly, a spokesman for U.S. Attorney Craig Carpenito in New Jersey, whose office handled the case, said prosecutors will review their legal options.
Lawrence Lustberg, Metro’s lawyer, said he will seek his client’s release from prison, and “a sentencing that really reflects his conduct and not the unknown conduct of others.”
Metro is not scheduled to be released from prison before May 2019, federal records show.
Prosecutors said Metro passed tips about corporate mergers and other transactions involving Simpson Thacher clients to Frank Tamayo, a mortgage broker he knew from law school, at midtown Manhattan bars or coffee shops.
Tamayo wrote down the relevant stock ticker symbols, passed the tips to Morgan Stanley stockbroker Vladimir Eydelman at Grand Central’s main clock, and then chewed up the papers on which the tips were written, prosecutors said.
The scheme ran from 2009 to early 2014, and Metro made $168,000, prosecutors have said.
Eydelman and Tamayo also pleaded guilty, and Tamayo cooperated with prosecutors. They were sentenced to three years and one year in prison, respectively.
The appeals court said U.S. District Judge Michael Shipp in Trenton, New Jersey, must determine how close Metro and Eydelman were before resentencing Metro.
The case is U.S. v. Metro, 3rd U.S. Circuit Court of Appeals, No. 16-3813.
Reporting by Jonathan Stempel in New York; Editing by Jeffrey Benkoe