Newspaper article St Louis Post-Dispatch (MO)

17 Named in Trading Violations Suspects Called Privy to Secret At&t Deals

Newspaper article St Louis Post-Dispatch (MO)

17 Named in Trading Violations Suspects Called Privy to Secret At&t Deals

Article excerpt

In one of the biggest insider trading scams outside Wall Street, federal authorities charged a former AT&T Corp. executive and 16 other people on Thursday in a far-flung scheme to exploit the secret takeover plans of the huge telephone company.

The participants are alleged to have used information supplied by the mid-level executive in the company's human resources department to trade on the stock of potential AT&T acquisition targets over a four-year period. The scheme, described by prosecutors as a web of friends and family spanning five states, cast Main Street in a light once relegated to Wall Street's most notorious professionals such as Ivan Boesky.

Boesky, later convicted and imprisoned, made at least $50 million through the illegal use of nonpublic tips about impending corporate takeovers.

The scheme also reflected the federal government's inability to quell the enormous temptation to profit illegally in the stock market, a persistent source of white-collar lawbreaking.

"One of the problems in this area, why you have recurring violations, is that people are tempted by the ability to make a lot of money with little risk," said John Sturc, former associate director of enforcement at the Securities and Exchange Commission. He is now a private securities lawyer in Washington. But, he said: "People who engage in schemes seem to fail to recognize that sooner or later the scheme will go awry."

Six people were charged in a federal indictment and two others pleaded guilty, the U.S. attorney's office in Manhattan said. These eight people and nine others were named in a civil securities fraud action by the SEC, the federal agency that polices the financial markets.

AT&T itself was not charged with any wrongdoing and cooperated with the investigation that led to the indictment.

Officials provided no explanation of how the scheme was discovered. But the action marked the most aggressive crackdown on securities fraud since the Wall Street scandals of the 1980s that made Boesky a household name. …

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