Figure in Biggest Insider Case Is Jailed Overnight : Obstruction of Justice Charges Filed Against Drexel Investment Banker
Dennis Levine, the investment banker charged Monday in a record $12.6-million insider trading case, was jailed late Monday and released Tuesday after posting bond, the U.S. attorney’s office said.
Levine, 33, was charged with the criminal offense of obstruction of justice after prosecutors said he had destroyed documents and fabricated a cover story to avert suspicion from himself on the illicit trading accusation.
A preliminary hearing was scheduled for June 3 on the criminal count, on which he faces a maximum sentence of five years in prison and a $250,000 fine if convicted.
Prosecutors said Levine, who has been suspended from his job as co-director of mergers and acquisitions at the investment house of Drexel Burnham Lambert, posted security of more than $1 million toward bail, which was set at $5 million. He reportedly put up $100,000 in cash, shares in his Park Avenue co-op apartment valued at $700,000 and 2,100 shares, valued at $273,000, in closely held Drexel Burnham.
Levine was charged Monday with civil violations dating back to 1980 of federal insider trading laws. According to the complaint filed by the Securities and Exchange Commission, Levine bought and sold stock in at least 54 companies involved in mergers, tender offers or leveraged buyouts using confidential information that he received as an investment banker.
Another Faces Charges
Levine traded under the alias of “Mr. Diamond” and through accounts at a Bahamian financial institution, the SEC said.
Also facing civil charges filed by the SEC is Bernhard Meier, 35, a former executive at the institution. Meier, a Swiss citizen, is living in Switzerland. Prosecutors here said they have not charged Meier with a crime.
The SEC is seeking to recover all of the $12.6 million in allegedly illegal profits that Levine made and treble damages on the more than $6 million that he made in trading after the effective date of the Insider Trading Sanctions Act of 1984. That law allows the SEC to recover three times the amount of profits turned on illegal trades. The agency is seeking more than $152,000 from Meier.
The companies included in Levine’s trading were involved in some of the most important such deals of the period. The SEC charged that Levine made $2.7 million on stock of Nabisco Brands during its merger talks with R. J. Reynolds last year, nearly $1 million on Houston Natural Gas in connection with its 1985 merger with InterNorth and more than $222,000 on stock of Carter Hawley Hale during its 1984 takeover fight with the Limited.
Levine began working at Drexel in February, 1985. Before that, Levine worked at Shearson Lehman/American Express (now Shearson Lehman Bros.) and its predecessor firm, Lehman Bros. Kuhn Loeb, starting in November, 1981, and at Smith Barney, Harris Upham & Co. beginning in mid-1978. None of the firms has been accused of any wrongdoing.
Levine was arrested Monday evening when he reported to the U.S. attorney’s office in New York to answer a subpoena and spent the night in jail, Assistant U.S. Atty. Charles M. Carberry said Tuesday.
A federal judge froze more than $10 million in Levine’s assets Monday after SEC officials contended that he was attempting to move the money from the Bahamas to a bank in the Cayman Islands. A second judge released some of that Tuesday to enable Levine to secure bail.
When Levine was freed on bail, U.S. Magistrate Kathleen A. Roberts ordered him to restrict his movements to portions of the New York metropolitan area. He and his wife, Laurie, were also ordered to surrender their passports to the U.S. attorney’s office.
