Nahum Vaskevitch and David Sofer were well known respectively in London and Jerusalem financial circles, where they seemed the very models of the modern investment wizard. Less known to their colleagues -- in fact, their deep, dark secret -- was the amount of time they spent in frequent, terse phone conversations. Last week the subject of their calls became the stuff of scandal when the Securities and Exchange Commission charged Vaskevitch, 36, the head of international mergers in Merrill Lynch's London office, and Sofer, 46, an Israeli stock speculator, with ringing up more than $4 million in illegal profits from a transatlantic insider-trading scheme.
The plot, which authorities say operated independently of the ring associated with Arbitrager Ivan Boesky, was nonetheless based on inside knowledge of U.S. corporate takeovers. As such, it provoked fresh concern in both the U.S. and Britain about the spreading abuse of inside information, which now appears to be virtually a way of life in a growing list of financial institutions. Said John Smith, the British Labor Party's top spokesman on trade and industry: "Quite frankly, it stinks."
These charges also revealed the growing ability of the SEC to crack cases without the help of the leads that played such a major role in the still spreading Boesky probe. Just as important, it demonstrated the SEC's willingness to track down suspects beyond U.S. borders, a crucial enforcement step in an era of global stock trading.
As a top Merrill Lynch mergermaker, Vaskevitch was in a prime position to know about any takeover deal being planned by one of the giant investment house's clients. The SEC says Vaskevitch illegally passed such tips to Sofer, who then arranged to buy the takeover stocks through two Wall Street brokerage firms, MKI Securities and Russo Securities, neither of which has been charged with wrongdoing. The profits from the trades returned in a roundabout way to Vaskevitch and Sofer through two intermediate companies, situated in England and Liechtenstein, in which Sofer held an interest, the SEC claims.
Vaskevitch and Sofer allegedly used their setup to profit from at least twelve deals involving Merrill Lynch clients. Vaskevitch worked directly on one of them, the purchase in March 1986 of Herman's Sporting Goods by Britain's Dee Corp., which the SEC says produced a profit of $263,988 for the two suspects. Their biggest haul was K mart's 1985 takeover of Pay Less Drug ! Stores Northwest, which the SEC contends brought them nearly $1.2 million.