Kidder to Pay $25 Million for Insider Trading

Kidder, Peabody & Co. will pay the government more than $25 million in fines and profits from illegal insider trading under an agreement disclosed today to settle civil charges against the prestigious brokerage.

The settlement is the second-largest in Wall Street history and stems from a widening federal investigation into insider trading, the illicit use of non-public information to gain unfair advantages in securities deals.

A Securities and Exchange Commission civil complaint filed in U.S. District Court in New York this morning said Kidder, Peabody will give up $13.67 million in illegal profits and pay $11.62 million in penalties.

As part of the settlement, Kidder neither admitted or denied the charges but said it will never again violate federal securities-fraud laws.

Siegel and Boesky

Kidder, Peabody spokesman Hugh Covington did not return two telephone calls seeking comment. SEC spokesman Mary McCue in Washington had no comment. General Electric Co., Kidder’s parent company, said it will have no immediate comment.

The SEC’s complaint stemmed from admission of an insider-trading scheme by Martin A. Siegel, formerly Kidder, Peabody’s top merger specialist, who pleaded guilty to criminal charges in February.

Federal investigators were led to Siegel by Ivan F. Boesky, a well-known stock speculator who agreed in November to pay the SEC a record $100 million in illicit profits and fines to settle insider-trading charges. He has also pleaded guilty to one criminal charge and is cooperating with the government.

Kidder, Peabody is one of Wall Street’s oldest and best-known firms. Last year GE acquired an 80% stake in the company.