Wall Street’s Spreading Scandal : Anatomy of a Scandal: How Alleged Insider Trading Operated

Here is a chronology of major developments in the prosecution of insider trading cases:

MAY 12, 1986

The Securities and Exchange Commission charges Dennis B. Levine of Drexel Burnham Lambert Inc. with making $12.6 million in profits from illegal trading on inside information since 1980.

MAY 13

Levine is arrested and charged with obstructing justice on suspicion that he attempted to destroy records. He is released on a $5-million bond.

JUNE 5

Levine pleads guilty to four felony charges and agrees to cooperate with the government’s investigation. In settlement of civil charges, he agrees to pay $11.6 million.

JULY 1

The SEC charges Ira Sokolow and Robert Wilkis, former investment bankers at Shearson Lehman Bros. and Lazard Freres & Co., with exchanging confidential information with Levine. They settle with the SEC. It is alleged that Wilkis made about $3 million from insider trading. Sokolow agrees to give up $120,000 in profits.

JULY 3

David Brown, an investment banker at Goldman, Sachs & Co., resigns during SEC investigation.

JULY 14

Ilan Reich, a takeover lawyer at Wachtell, Lipton, Rosen & Katz, resigns during government investigation.

AUG. 19

Litton Industries sues Shearson Lehman and Levine, charging that Levine’s insider trading made Litton pay more than necessary to take over Itek Corp. The suit seeks $30 million in damages.

SEPT. 4

Sokolow and Brown plead guilty to criminal charges of passing stolen information to Levine.

OCT. 3

Reich is indicted by a federal grand jury in the Levine case.

OCT. 9

Reich pleads guilty to two criminal counts for his role in the Levine case.

NOV. 6

Sokolow is sentenced to a year and a day in prison for his role in the Levine case.

NOV. 14

The SEC stuns Wall Street with the announcement that speculator Ivan F. Boesky agreed to pay a $100-million penalty to settle charges of trading on insider information supplied by Levine in 1985 and 1986. He also agrees to cooperate with investigators and to plead guilty to a single, unspecified criminal charge.

NOV. 20

Reports disclose that an investment fund managed by Boesky sold more than $400 million worth of stocks before Boesky’s settlement was announced. The reports infuriate traders whose holdings plummet in value in the aftermath of the announcements about Boesky.

NOV. 21

In the first lawsuit filed against Boesky by a shareholder, Angelo Oriolo of Pennsville, N.J., claims he was hurt financially in 1985 when he sold shares in General Foods, a stock that was the subject of takeover speculation by Boesky.

DEC. 18

FMC Corp. of Chicago announces a lawsuit seeking more than $260 million from Boesky and others, including Brown and Goldman, Sachs, Sokolow and Shearson and Levine and Drexel. FMC claims it was victimized by insider trading associated with FMC’s $2-billion recapitalization.

DEC. 22

Wilkis pleads guilty to four felony charges, and Randall Cecola, a former junior financial analyst at Lazard Freres, pleads guilty to two criminal counts of filing false tax returns.

JAN. 8, 1987

Investor Carl C. Icahn drops his $7.19-billion bid for USX Corp. Wall Street investors say they believe that Icahn was unable to raise the money because of pressure on his financial adviser, Drexel Burnham, from an insider trading investigation.

JAN. 25

Reich is sentenced to a year and a day in prison and five years’ probation.

JAN. 28

Michael Davidoff, the former head trader for Boesky, pleads guilty to one count of securities fraud and agrees to cooperate in the government’s continuing investigation.

FEB. 5

Aetna Life & Casualty is reported to have refused to renew a policy insuring securities accounts held by Drexel Burnham Lambert customers for up to $9.5 million per account.

FEB. 9

Wilkis, formerly of Lazard Freres and E. F. Hutton, is sentenced to a year and a day in prison in connection with the insider trading charges. Wilkis, who cooperated with the investigation, also is sentenced to five years’ probation.

FEB. 10

Cecola is sentenced to six years’ probation.

FEB. 12

Insider trading charges are filed against Richard Wigton, a vice president at Kidder, Peabody; Timothy L. Tabor, a former Kidder vice president, and Robert M. Freeman, a partner at Goldman, Sachs. They are charged with swapping inside information, which was used to trade stock for Kidder, Peabody’s own account. Prosecutors decline to say whether the case is linked to the Boesky investigation.

FEB. 13

The SEC charges Martin A. Siegel, a top merger specialist at Drexel, with taking part in insider trading schemes involving Ivan Boesky. Siegel pleads guilty to two felony counts and agrees to give up $9 million in assets. He is thought to be the informant in the arrests of Freeman, Wigton and Tabor.