SEC Penalizes 4 in New Case of Insider Trading : Agency Imposes a Record $2.3 Million in Fines and Bars Lazard Freres Analyst

Wall Street’s insider trading travails mounted Thursday as a former Lazard Freres & Co. junior analyst was barred from the securities industry and his father, grandfather and a stockbroker agreed to give up more than $2 million in illicit profits that they are accused of having made on advance word of last year’s multibillion-dollar acquisition of RCA by General Electric.

The Securities and Exchange Commission also imposed a record $2.3 million in fines in what the watchdog agency characterized as the third-largest insider trading case in history.

All four men, without either admitting or denying liability, entered consent agreements to settle the SEC charges as soon as they were filed.

Both larger settlements came earlier this year. In February, eight foreign investors gave up $7.8 million in illicit profits stemming from the 1981 acquisition of Santa Fe International by the Kuwaiti government. And four months later, in a case that has deeply shaken Wall Street, investment banker Dennis B. Levine agreed to repay more than $11.5 million in profits from illicit insider trading deals.

Case Is Unrelated

SEC officials said the latest case is related neither to the Levine scandal nor to the unrelated “Yuppie Five” case, which involves four young Wall Street professionals who pleaded guilty in June to having used secret takeover information allegedly stolen by a fifth.

As the scheme is detailed in the SEC complaint filed in U.S. District Court here, Houston resident Harvey Katz, 54, was tipped about the deal by his 23-year-old son, Marcel, then a trainee at the Lazard Freres investment banking firm, which was advising RCA on the merger.

The SEC accuses the elder Katz of parlaying that inside information into profits exceeding $1 million for himself and four friends. He also was accused of tipping off his father-in-law and his stockbroker, who reportedly made a combined profit of more than $1.1 million by hurriedly buying RCA stock before the price shot up when the merger was announced to the public.

Will Return Profits

The father-in-law, 74-year-old Elie Mordo, has consented to return $1.05 million in illicit profits and to pay interest of $37,000.

The stockbroker, Fred Aizen, will give up $60,000 in illegal profits and pay a penalty of $20,000. Aizen, whom the SEC barred from working in the securities industry for at least three years, was fired from his job at Milwaukee Co., a regional brokerage in Milwaukee, when the alleged scheme came to light earlier this year.

Marcel Katz was fined $173,891 by the SEC and permanently barred from working in the securities industry. The junior Katz had worked for Lazard since September, 1985, as a trainee in a two-year internship program, but he was put on a leave of absence earlier this year when the SEC brought his alleged involvement to the firm’s attention.

The senior Katz agreed to give up $1.03 million in illicit profits and was fined more than $2.1 million, a record in such cases.

Neither the Katzes nor their New York lawyer could be reached for comment, and Mordo could not be located. The SEC said he is “living abroad” but would not be more specific.

A spokesman for Lazard, whose name also surfaced last month in connection with the Levine insider trading scandal, said the firm would have no comment on the Katz case. In July, Robert Wilkis, a former Lazard employee, settled SEC charges that he had swapped confidential information with Levine, formerly a high-ranking mergers and acquisitions specialist at Drexel Burnham Lambert.

James Quarto, chief operating officer for Aizen’s former employer, Milwaukee Co., said the brokerage has hired a compliance officer as part of a move to “enhance our procedures to make sure this doesn’t happen again.”

John H. Sturc, an SEC enforcement official in Washington who worked on the Katz investigation, said this case marks the first time that the agency has used a 1982 memorandum of understanding between the United States and Switzerland to identify Mordo even though his RCA stock purchases allegedly were made through a secret Swiss bank account.

Because of the Swiss government’s cooperation, Sturc said, the illicit profits in Mordo’s account at the Geneva office of Union Bank of Switzerland were frozen and the investigation was closed much faster and more efficiently than otherwise would have been possible.

Sturc said the investigation was triggered by unusually large jumps in the price of RCA stock in the week before the RCA-GE merger was announced last Dec. 11.