Inside Trader Gets 2-Year Prison Sentence

Times Staff Writer

A New York lawyer whose insider trading case was the first to come before a federal jury in 1 1/2 years was sentenced Tuesday to a two-year prison term by a federal judge who upbraided him for his "absolute abandonment of integrity."

Israel G. Grossman, 34, was convicted Aug. 18 of 38 counts of having passed secret information about a financial restructuring planned by Colt Industries in 1986 to a group of friends and relatives. Grossman's law firm, Kramer, Levin, Nessen, Kamin & Frankel, represented Colt's pension plan trustees in the transaction. The ring made profits of about $1.5 million, prosecutors said.

Judge Richard Owen rejected a defense plea that Grossman receive a suspended sentence or be forced to undertake community service. "I don't want to send a message that if you get caught (at insider trading) you will get a suspended sentence," said the judge, who is known for imposing severe criminal penalties. Owen also fined Grossman $25,000, the amount that prosecution witnesses contended that he was directly paid for his inside tips.

Grossman, the father of five children ranging from 1 1/2 to 9 years old, will have to serve between eight and 16 months of his two-year prison term, federal procedures require.

Owen also ordered Grossman back to jail without bail while his attorney prepares an appeal. Grossman has been held without bail since his conviction, when federal prosecutors contended that the prospects were great that he would flee the country rather than serve a term.

Three of Grossman's alleged co-conspirators--all of whom have been named in civil charges by the Securities and Exchange Commission--have fled, apparently to Israel, the government said.

The last insider trading case to come before a federal court jury was that of former national security adviser Thomas C. Reed, who was acquitted in 1985 of having illegally bought options in Amax Inc. after allegedly having learned from his father, an Amax director, of a takeover bid for the company.

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