Insider Case Widens : Executive Quits at Goldman on News of Probe

A Goldman, Sachs & Co. executive has resigned because of allegations of involvement in the Securities and Exchange Commission’s widening probe of insider trading, the New York investment banking firm said Tuesday.

David S. Brown, who had been a vice president in Goldman, Sachs’ mortgage securities department, resigned July 3 after the SEC informed the firm that he was under investigation, Goldman, Sachs spokesman Edward G. Novotny said.

“We are shocked and dismayed at this development,” Novotny said, reading a prepared statement over the telephone. He said that Brown, an attorney, had joined Goldman, Sachs three years ago and that the firm was cooperating in the SEC investigation, but he declined to elaborate.

Brown could not be reached for comment. His attorney, Michael Armstrong, at the New York law firm Barrett, Smith, Schapiro, Simon & Armstrong, declined to comment except to confirm that he represents Brown.

Case Against Levine

Mary McCue, an official at the SEC’s Washington headquarters, said agency policy is to neither confirm nor deny an investigation until it is made public in court proceedings.

Brown’s resignation is the latest development centered around the SEC’s case against Dennis B. Levine, a former merger specialist at the firm Drexel Burnham Lambert.

He was accused in mid-May of using advance knowledge of 54 pending corporate takeovers to reap $12.6 million in illicit stock trading profits, an activity known as insider trading.

It is the biggest such case in Wall Street history and has shaken the financial community.

Earlier this month, the SEC charged two former investment bankers with involvement in the Levine case. Ira B. Sokolow, formerly in the mergers and acquisitions department of Shearson Lehman Bros., and Robert M. Wilkis, formerly of Lazard Freres & Co. and E. F. Hutton & Co., reportedly agreed to implicate others in the government investigation.