Accused of Violating Federal Racketeering Laws : Lawyer Indicted in Insider Trading Case

CHICAGO — A federal grand jury indicted a former Chicago lawyer Tuesday on charges that he allegedly made $680,000 in illegal insider trading profits by using information gained through work at his law firm.

The lawyer, Alfred Elliott, was the first person indicted on insider trading charges to be accused of violating federal racketeering statutes, prosecutors said.

“In the future, we expect to use the racketeering laws as a powerful weapon in these cases,” U.S. Atty. Anton Valukas said of the charges against Elliott, 44.

Elliott was one of 12 people named by a federal grand jury in indictments returned Tuesday in three unrelated cases of alleged financial crimes.

Heavy Investing Alleged

Elliott, now a resident of Melbourne Beach, Fla., was charged with making the illegal profits by using the information he gained when he was a partner of Schiff, Hardin & Waite, a prominent law firm in Chicago.

The government alleged that on nine occasions, Elliott learned of impending large stock acquisitions by clients of the law firm. In each case, he invested heavily in the company whose stock was being bought, Valukas said.

“He misappropriated the confidential information of his firm and of the clients,” the prosecutor said.

Elliott is charged in the 70-count indictment with wire fraud, securities fraud, racketeering and filing a false income tax return. If convicted on all counts, he could be fined $13.5 million and forced to make restitution of any illegal profits.

Elliott could not be located for comment. His former law firm said it had no knowledge of his whereabouts.

Eight of the 12 people indicted by the federal grand jury were accused of participating in a $1.2-million scheme of “churning” accounts, a practice of brokers trading on customers’ accounts merely to generate commissions.

3 Indicted in Merc Case

“None of the 120 customers, most of whom were solicited by telephone, ever made a profit,” said Valukas.

The government said the alleged scheme was carried out by officers and employees of Whitehall Investors International Inc., based in Chicago with branches in Irvine and Boca Raton, Fla.

Those indicted include Walter S. Josten, an owner and president of Whitehall, who could face 105 years in prison if convicted.

The U.S. attorney’s office said Josten was last know to be living in Los Angeles. However directory assistance had no listing for him.

Indictments also were returned against three people in a continuing investigation of trading violations at the Chicago Mercantile Exchange.

They are accused of participating in fraudulent trading involving Jeffrey G. Donnelly, a former broker with CRT Services Inc. Donnelly pleaded guilty of two counts of fraud in February and was sentenced to three years in prison.

The government said Donnelly would take successful trades he executed for his company and make it appear the trades had been made for one of the three independent traders named in the indictment Tuesday.

Valukas said more than $700,000 was illegally diverted to the defendants, while Donnelly got a 35% cut.

Indicted were Denise Bigelow, 29, who the government said had $142,500 illegally diverted to her account; John D. Riss, 29, $390,727, and Paul M. Kelly, 35, $180,000. All are from the Chicago area.

Conviction would carry a maximum 10-year prison sentence and a $750,000 fine.