Thayer Reportedly to Pay Fraud Victims : Ex-Defense Official’s Settlement in Stock Trading Complaint Told

Former Deputy Defense Secretary W. Paul Thayer and a stockbroker friend are prepared to pay several hundred thousand dollars to compensate victims of their stock fraud activities on the eve of their federal court sentencing, sources close to the case said Monday.

These sources, who spoke on the condition that they not be identified, said that Thayer and Dallas stockbroker Billy Bob Harris have agreed to the payments as part of a consent decree to settle an “insider trading” complaint brought last year by the Securities and Exchange Commission.

The agreement came to light as the pair face sentencing Wednesday on their guilty pleas to criminal charges that stemmed from the SEC investigation. Both men, who could receive maximum five-year prison terms, have sought leniency from U.S. District Judge Charles R. Richey.

Not Accused of Profiting

The SEC, in its civil fraud complaint filed in January, 1984, alleged that friends and associates of Thayer had reaped illicit stock profits of $1.9 million because of tips that he had given them while serving as chairman of LTV Corp. of Dallas before becoming the Pentagon’s No. 2 official. Thayer was never accused of profiting personally from the insider trading.

Thayer, 65, who resigned from the Pentagon just 24 hours before the SEC’s action, pleaded guilty last March to obstruction of justice in connection with the case and admitted that he had lied under oath to federal investigators. Harris, 45, entered similar pleas.

$350,000 Sum Told

The Wall Street Journal reported Monday that Thayer and Harris were prepared to pay more than $350,000 to cover the alleged illicit profits of Harris and Sandra K. Ryno, a former LTV secretary whom Thayer had helped support, as well as part of the profits made by six others charged with benefiting from the inside information.

Sources close to the case said that the payment would be substantially higher than $350,000, however.

Warned on Punishment

It was not clear whether SEC commissioners would formally approve the civil settlement before the scheduled sentencing of Thayer and Harris on Wednesday morning. Richey had warned both defendants last March that he might order them, as part of their punishment, to repay victims of their fraud.

Attorneys for the two men declined comment Monday on the proposed civil settlement. However, in court papers filed late last week, Thayer’s lawyers asked that their client be sentenced to community service, saying that a prison term “would be blind to the contributions of a lifetime.”

In those papers, Robert B. Fiske Jr. of New York, Thayer’s chief attorney, did not deny charges that Thayer had provided inside information about mergers being proposed by companies on whose boards he served.

But Fiske said that Thayer believed that the information would benefit only Ryno, Harris and Harris’ father and “had no idea” that Harris was passing the stock tips to “a wide group” that included some of their mutual friends.

Under federal securities law, it is illegal for anyone to pass along or act on non-public information that may affect the value of corporate stocks if that information originates from a so-called “insider” or company official.