SEC Asks Swiss to Investigate Insider Case : Ruder Says Lee Traded Securities From Abroad
The Securities and Exchange Commission has asked the Swiss government for help in investigating an alleged $19-million insider-trading scheme, the chief of the agency told Congress on Wednesday.
SEC Chairman David S. Ruder told the Senate Banking Committee’s securities subcommittee that his investigators have learned that a Hong Kong businessman accused in the case, Fred C. Lee, traded U.S. securities from Switzerland.
“We’re now seeking information from Swiss authorities and trying to get a freeze on assets he has there,” Ruder said during a break in the hearing, at which Ruder urged Congress to pass a law on international securities regulation.
Ruder declined to say what the value of Lee’s Swiss trades or assets might be. But Gary Lynch, the SEC’s enforcement chief, told reporters that the trades Lee made from Switzerland were part of the $19 million Lee allegedly earned by trading on inside information.
SEC officials also acknowledged that in their investigation of the alleged scheme, they have subpoenaed trading records from at least five U.S. brokerages besides Morgan Stanley & Co. That firm employed securities analyst Stephen Wang Jr., who allegedly leaked the inside information to Lee.
$76 Million Sought
“We’ve sent subpoenas to a number of firms,” said Thomas Newkirk, the commission’s chief litigation counsel. “The reason we’re doing this is to check the defendants’ trading records. We’re not investigating the firms themselves.”
SEC officials familiar with the investigation, who spoke on condition of anonymity, said that besides Morgan Stanley, subpoenas were sent to Goldman Sachs & Co., First Boston Co., Merrill Lynch & Co., Shearson Lehman Hutton Inc. and Charles Schwab & Co.
The SEC has accused Wang, 24, of providing Lee with privileged information on at least 25 corporate takeovers handled by Morgan Stanley. The agency says Lee made at least $19 million using the information and gave $200,000 to Wang.
Lee, 38, is based in Hong Kong, but also has a home in the Washington suburb of McLean, Va. Lynch said Lee, a native of Taiwan, has claimed Canadian citizenship with at least one brokerage firm he used.
The SEC is seeking $76 million from the two men, which would cover a repayment of the money they made plus triple damages. That reward is surpassed by only the $100 million the SEC recovered when insider trader Ivan F. Boesky settled with the agency in November, 1986.
Assets Frozen
Lynch also said the SEC has 40 to 50 investigations under way of cases that involve international trading.
He said at least one of the investigations involves “very large dollar amounts,” and that others involve $40,000 to $50,000 or less.
In the case involving Lee and Wang, the SEC obtained an order Monday in federal court in New York City freezing the assets of Lee and Wang.
Wang’s attorney, Ira L. Sorkin, has declined to comment on the accusations other than to say he is studying them.
Lee’s lawyer, Michael Perlis, said in a telephone interview Wednesday from his San Francisco office that Lee intended to resist the SEC’s accusations but likely would remain outside this country.
Asked about press reports quoting Perlis as indicating that he might attempt to settle the accusations for far less than the amount the SEC is requesting from his client, Perlis said: “That’s just speculation.”
But he also said: “Every case can be settled and should be settled on terms agreeable to all parties.”
