2 Plead Guilty to Giving Insider Tips to Levine

Two former investment bankers pleaded guilty in federal court on Thursday to criminal fraud charges and admitted passing inside information about merger stocks to Dennis B. Levine, who is at the center of the largest insider trading case ever prosecuted.

Ira B. Sokolow, 32, a former vice president at Shearson Lehman Bros., and David S. Brown, 31, a former vice president at Goldman, Sachs & Co., entered the pleas and pledged to cooperate with the Justice Department and the Securities and Exchange Commission, which are investigating the case.

The two men, who were undergraduate classmates and friends at the University of Pennsylvania’s Wharton School, have already given testimony to both agencies, sources said.

Sokolow pleaded guilty to one count each of securities fraud and tax evasion, and Brown to one count each of securities fraud and mail fraud. The defendants, who are scheduled to be sentenced Oct. 24, face maximum penalties of five years in prison and a $250,000 fine on each count.

Neither defendant is charged with having traded stocks himself on inside information but rather with having received payoffs from Levine for their tips.

In settling an SEC civil case earlier this summer, Sokolow agreed to forfeit $210,000, representing a penalty plus his payments from Levine for tips on about a dozen transactions. In pleading guilty to tax evasion on Thursday, Sokolow said he received about $85,000 from Levine last year alone.

Brown’s attorney, David Frankel, said in an interview that his client received about $30,000 from Sokolow.

Sokolow and Brown are the only defendants in the case other than Levine himself to plead guilty to criminal charges so far.

Levine himself settled SEC civil charges by forfeiting nearly $12 million that he had made in five years of trading stocks on the basis of non-public information that he gleaned as a merger specialist at three Wall Street firms, including Shearson Lehman Bros.

Levine is also cooperating with federal authorities pursuing his trading contacts. Sources familiar with the probe said in interviews that Levine has given authorities the names of 65 persons with whom he spoke in connection with illegal trades. The list, sources say, includes Ivan F. Boesky, who is Wall Street’s most prominent arbitrageur, or investor specializing in short-term trading of stocks subject to takeovers.

Without confirming the specifics of Levine’s testimony, SEC officials noted that it is not unusual for insider trading defendants to have legitimate contact with scores of people. Levine’s testimony does not mean that any of his contacts will be charged, they said.

Times staff writer Debra Whitefield also contributed to this story.