Broker Indicted on Charges of Insider Trading
A retail broker at Gruntal & Co., a New York stock brokerage, was indicted on 31 counts of insider trading, perjury and mail fraud for allegedly using inside information to buy stock in a supermarket chain before it was acquired in 1986 by Great Atlantic & Pacific Tea Co.
A federal grand jury in Manhattan on Wednesday accused Robert Chestman, 41, a senior vice president at Gruntal, of buying stock in Waldbaum Inc., a New York regional supermarket chain, in November, 1986. The shares were bought hours before A&P;’s bid for the company was announced. The indictment charges that Chestman acquired the stock based on a tip from Keith Loeb, who is married to the niece of Waldbaum’s former chairman.
Chestman allegedly made total profits of more than $250,000 for himself, Loeb and several of Chestman’s brokerage clients. U.S. Atty. Rudolph W. Giuliani said Loeb wouldn’t be charged with any criminal violation. Giuliani noted that Loeb already has settled a Securities and Exchange Commission lawsuit arising from the same incident and paid more than $45,000 in penalties. Giuliani refused to say if Loeb had cooperated in the criminal investigation.
Chestman’s secretary at Gruntal referred calls to his lawyer, Otto G. Obermaier, who said he hadn’t seen the indictment yet. But he said Chestman “vigorously denies” the charges. He noted that an SEC lawsuit is pending against Chestman and said “we are distressed that this matter has escalated to the point of filing criminal charges.”
An outside spokesman for Gruntal said the firm doesn’t plan to suspend Chestman. The spokesman described Chestman as a retail broker who, although he has the title of senior vice president, isn’t a corporate officer. In a statement, Gruntal said the firm was “distressed” by the allegations but said Chestman “is entitled to a presumption of innocence and an opportunity to defend himself.”
The case is one of a growing number of insider trading cases in which Giuliani’s office has filed criminal charges since 1986. At a press conference Wednesday, Giuliani noted that the alleged illegal trading took place just 10 days after it was publicly announced that financier Ivan F. Boesky had agreed to pay a $100-million penalty in Wall Street’s biggest insider trading scandal. He called it “troubling” that the Boesky case hasn’t acted as more of a deterrent. Giuliani said the Chestman case is an “indication why you have to continue to put emphasis on prosecuting these cases.”
The one perjury count against Chestman stems from his testimony under oath in an SEC deposition. The indictment charges that he lied when he said he hadn’t spoken with Loeb before buying the Waldbaum stock.
According to the indictment, Chestman bought 11,000 shares of Waldbaum stock on Nov. 26, 1986, at prices ranging from $24.625 to $25.75 a share. Later that day, after the stock markets closed, A&P; announced its $50-a-share tender offer for Waldbaum.
In a separate case in March of this year, an A&P; executive secretary and her husband settled SEC insider trading charges that stemmed from allegations that they also had bought stock in Waldbaum shortly before the tender offer was announced.
