Federal prosecutors filed charges today against three high-level Wall Street executives, alleging they illegally traded stock on inside information.
The U.S. attorney's office released complaints leveling the charges against Timothy L. Tabor and Richard Wigton, both vice presidents of Kidder, Peabody, and Robert M. Freeman, a partner at Goldman, Sachs & Co.
An informant told investigators that the men swapped inside information and used it to trade stock for Kidder, Peabody's own account, "resulting in millions of dollars in illegal profits to Kidder," the complaints said.
The three Wall Street executives were released on bond after their arraignment at U.S. District Court in Manhattan. They did not enter pleas, pending indictment.
The charges represent a significant widening of a massive federal investigation into insider trading on Wall Street. Federal charges were brought in May last year against investment banker Dennis Levine, a top-level mergers specialist at Drexel Burnham Lambert Inc.
In November, the insider trading investigation ensnared Ivan F. Boesky, one of Wall Street's most prominent stock speculators. Boesky settled the charges by agreeing to pay a record $100 million in penalties and pleading guilty to a federal felony charge carrying a possible prison term of up to five years.
According to the criminal complaints filed today, the alleged insider trading by the Kidder, Peabody and Goldman, Sachs officials involved misappropriated non-public information about an attempted hostile takeover of Los Angeles-based Unocal Corp. by oilman T. Boone Pickens Jr. and affiliated entities in the spring of 1985. The firm, which operates Union Oil, successfully fought off the takeover bid, but only after an arduous fight that concluded with a major restructuring of the firm.
In response to news about Pickens' takeover offer, the government complaint says, Kidder had purchased a large amount of Unocal's common stock for its own account.
At the time, Unocal was an investment banking client of Goldman, Sachs. The firm had held confidential discussions with Goldman, Sachs about certain defensive strategies for resisting Pickens' takeover attempt.
Freeman, the head of Goldman, Sachs' risk-arbitrage department, was charged with disclosing to an unidentified individual confidential non-public details about Unocal's strategy. The unidentified person, the complaint says, is an individual "who is cooperating in this investigation."