Ex-Official of Petro-Lewis Indicted : In Another Insider Case, Trial of Thomas Reed Begins

A former top official of Petro-Lewis Corp. was charged Monday with insider trading by selling more than 41,000 shares of stock just weeks before the Denver oil company disclosed its financial troubles.

The Securities and Exchange Commission filed the civil complaint in U.S. District Court against Dwight C. Moorhead, former vice chairman of the board and the company’s financial wizard. Moorhead resigned last January.

Moorhead won’t have to pay back any profits from the $481,182 stock sale because he is too heavily in debt, the SEC said.

Moorhead signed a consent agreement with the commission that specifies that, without admitting or denying guilt, he submits to an injunction barring him from such actions in the future.

The company’s stock price dropped by one-half after Petro-Lewis disclosed its financial problems in early February, 1984, and announced plans to sell assets to trim its $1-billion-plus debt.

Since that time, the original work force of 2,100 people has been cut to 600, and nearly $1 billion in assets have been sold.

Moorhead was charged by the SEC with “transactions, practices and courses of business which operated as a fraud or deceit upon purchasers of such securities by selling Petro-Lewis common stock.”

Sold on Open Market

He is said to have sold about 17% of the nearly 225,000 shares that he held at the time. He sold the shares on the open market between Dec. 21, 1983, and Jan. 16, 1984, according to SEC documents.

Moorhead received $11.25 to $12.09 per share for the stock, compared to the $6-per-share going price a few weeks later, after the company’s financial troubles were announced.

The stock has recently been trading at $2.625 on the American Stock Exchange.

In another insider-trading case, Thomas Reed, a former special assistant to President Reagan for national security affairs, went on trial Tuesday in New York on charges that he made a $427,000 stock profit based on insider information provided by his father.

Reed, who was also a former Air Force secretary under President Gerald R. Ford, is accused in Manhattan federal court of trading stock in Amax Inc. with the help of information from Gordon Reed, a member of the Amax board of directors.

In his opening statements to the jury today, assistant U.S. Atty. Charles Carberry said that “this case is about fraud, deception and betrayal” by the defendant.

The prosecutor said that Reed “misappropriated” secret information from his father concerning a plan by Standard Oil Co. of California to acquire Amax.

The prosecutor said Reed talked several times with his father by phone while the latter was vacationing in Barbados in early March, 1981, and discussed an impending special board of directors meeting of Amax during which the Standard Oil offer was going to be discussed.

The oil company was offering $78 per share for the Amax stock that was then selling on the New York Stock Exchange for about $38 per share.

Shortly after the conversation with his father, Reed allegedly called his stockbroker and invested $3,000 for options on 50,000 shares of Amax. On the following day, the offer was publicly disclosed, and the price of the stock soared. Within 48 hours, Carberry said, Reed sold his options and made more than $427,000 in profit.

“The government alleges that Thomas Reed betrayed his father’s trust,” Carberry said. “He traded on non-public material information that he misappropriated.”

Reed’s lawyer, Edward Shaw, in his opening statement, denied the government’s charges, claiming that Reed had purchased the stock options in early 1981 as President Reagan was beginning his first term because he felt that the new President’s policies were “going to trigger a major turn in the economy.”

“The government will speculate that Thomas Reed was pumping his father for information,” Shaw said. “This is utter speculation.”