Anatomy of a Scandal: How Alleged Insider Trading Operated : Four Cases Illustrate Prosecutors’ Far-Ranging Charges of Wrongdoing
Federal prosecutors this week have weighed in with a new round of insider trading charges, rounding up high-level officials at some of Wall Street’s most prestigious firms. Four of the allegations of insider trading are detailed here.
In 1984, Continental Group, owner of Continental Can and various insurance firms, was fighting a $2.1-billion takeover bid by British industrialist Sir James Goldsmith. Its adviser was Goldman, Sachs.
As an alternative to Goldsmith’s bid, Continental turned to Los Angeles financier David Murdock and Peter Kiewit Sons Inc., who together fashioned a buyout bid.
Before the alternative $2.75-billion bid was disclosed, however, Siegel was tipped to the impending deal by Goldman, Sachs partner Robert M. Freeman, the U.S. attorney’s office in New York alleges. Siegel and unidentified others then arranged for Kidder, Peabody to purchase for its own account “a large number of shares” of Continental common stock, prosecutors charge.
From June 1, 1984, to July 2--the first trading day after the Kiewit-Murdock deal was announced--Continental Group’s stock rose to $55 from $35.
Siegel has pleaded guilty to the criminal charge of conspiracy in the case. While Siegel has consented to settle civil charges by giving up nearly $9 million in assets, he has neither admitted nor denied the allegations.
Asked about how he became involved in the Continental deal, announced June 29, 1984, Murdock said in an interview that year that Geoffrey Boisi, a Goldman, Sachs partner, “called me and asked me if I was interested in it.” Murdock added: “I, in turn, called Peter Kiewit, a longtime friend of mine.”
Kiewit’s Omaha, Neb., construction and mining firm took 80% of the all-cash deal and Murdock retained 20%. According to details given out at the time, the Kiewit-Murdock group lined up $2 billion in bank financing in less than two days. The group’s members met for the first time June 24 at Murdock’s New York apartment, stayed up all night June 28 formulating the bid and submitted it early on June 29.
The deal closed in November. After the new owners sold off some operating units and paid off $1.5 billion of bank debt, Murdock sold his 20% ownership to the Kiewit firm in June, 1985.
Murdock, who is not implicated in the insider trading charges, has long had a close business relationship with Freeman, who was arrested Thursday. Freeman has been a director for several years on two of Murdock’s firms--Castle & Cooke and Flex-Van.
