The Unseen Wall Street of 1969-1975: And Its Significance for Today

By Alec Benn | Go to book overview

12
How the U.S. Government Has Tried to Prevent Insider Trading -- And Why It Has Failed

On December 22, 1970, the New York Times, the Wall Street Journal, and other newspapers across the country carried stories telling of insider trading by a partner of F. I. duPont Glore Forgan.1 Some facts about that scandal not included in those and subsequent stories are worth revealing for several reasons.

This was the scandal that made it impossible for the firm's partners to raise the mere $5 million they had promised Ross Perot they would contribute to the firm's capital -- and so justified Ross Perot demanding 100 percent ownership of F. I. duPont, Glore Forgan in 1971.

It involved the biggest bankruptcy of any kind of business in U.S. history till that time -- that of the Penn Central Railroad.

It is an example of the arbitrary use of government power that is being used increasingly by members of the federal government.

And the telling of these facts may give some investors a valuable insight they would not otherwise gain.

The partner accused of insider trading in the newspaper stories was Charles J. Hodge, who had been the number two man at Glore Forgan Staats, Inc. and who had spurned the possibility of becoming the firm's president when Maury Stans left in 1968.

Before this scandal, Charley Hodge had never been accused of wrongdoing of any kind. In fact, he was widely liked and admired because of his character and achievements. When Jim Lynch was Glore Forgan's compliance director, he never had any problems with Charley Hodge.

Charley had already become a legendary figure on Wall Street before World War II because of his trading of railroad bonds. The prices of railroad bonds fluctuated widely during the Great Depression years, and

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