Business Week’s Printer Fires One, Suspends Another

Repercussions from the growing stock trading scandal involving a Business Week column widened again Monday as an employee in the Torrance plant where the magazine is printed was suspended and another in Connecticut was fired.

Meanwhile, the number of brokerage firms conducting investigations of the scandal grew to at least eight. Paine Webber, Integrated Resources, Quick & Reilly and Charles Schwab & Co. confirmed Monday that they also are conducting internal probes of questionable trading involving leaks by printing plant employees of stock tips from Business Week’s “Inside Wall Street” column before the magazine reached newsstands.

The Securities and Exchange Commission and the New York and American stock exchanges are conducting separate inquiries, along with Prudential-Bache Securities, Merrill Lynch, Advest Inc. and Shearson Lehman Hutton.

Sources close to the investigations say more firms are likely to join the list, because tipsters with inside information of the column appear to have leaked to numerous brokers, while brokers who handled the trades also passed the tips along to friends and clients.

Monday’s disciplinary actions were the first to be taken by R. R. Donnelley & Sons, whose plants in Torrance and Old Saybrook, Conn., are two of the four regional printing facilities used by Business Week. The Connecticut worker leaked information to a Merrill Lynch broker in New London, Conn., while the Torrance employee leaked tips to a broker in Prudential-Bache’s Anaheim office, Donnelley said.

The printing company refused to identify the employees, but sources familiar with the investigations identified the suspended Torrance worker as William Jackson, who worked in the plant’s quality control department, where he had access to page proofs or the first printed copies of the magazine.

Jackson was suspended Saturday, the sources said, one day after the firing of Brian J. Callahan, the Prudential-Bache broker in Anaheim.

Donnelley spokesman James Ratcliffe refused to confirm or deny Jackson’s involvement, but a receptionist at the 650-employee Torrance plant referred a reporter’s call for information about Jackson’s whereabouts to Donnelley’s Chicago headquarters.

Jackson, sources said, opened an account at Prudential-Bache in May. He would read proofs or printed copies of Business Week early Thursday morning, a day before the magazine reached newsstands, and would place orders based on information from the magazine before the stock market opened Thursday morning.

Callahan traded on the information for Jackson’s account and for about six other clients, although none made gigantic profits from the trades and in fact some transactions were losers, the sources said.

However, perhaps to avoid suspicion, Jackson misrepresented himself to Callahan as a sales representative for a steel company. “What Callahan thought was that this guy was trading off a computer program” that could pick stocks, one source said.

But by late June, brokers and officials at Prudential-Bache began noticing that the stocks traded by Jackson closely resembled those mentioned in the “Inside Wall Street” column. The firm promptly moved to shut down the account. “The coincidence was too close to be comfortable,” one source said.

However, even after his account was closed, Jackson continued to call Callahan asking for stock quotes. And on a selective basis, Callahan traded those stocks for a handful of other clients, actions that led to his firing, sources said.

Looking for Pattern

Callahan, reached by telephone, refused to confirm or deny this account of his dealings with Jackson. Attempts to reach Jackson at his home on Monday were unsuccessful.

Donnelley spokesman Ratcliffe said the firm has given names of the two employees to the SEC and is considering filing criminal charges against one or both. The Connecticut employee was fired after admitting his complicity, but the Torrance employee has not and so far has only been suspended, Ratcliffe said.

He said there is no evidence yet of other employees involved at either plant. However, sources said investigators are looking into whether Jackson had accounts or contacts with other local branches of securities firms, possibly discount brokerages. Such a pattern appears to have occured with the Connecticut employee, who may have leaked advance information to a broker at Advest as well as one at Merrill Lynch. SEC investigators were in the Los Angeles area last week, the sources said.

However, regional officials of several firms with offices in Southern California, including Merrill Lynch, Dean Witter and Kidder Peabody, said they were not conducting internal investigations.

Donnelley, the nation’s largest commercial printer, also prints materials on takeovers, securities offerings and other sensitive financial deals and thus is expected to move quickly to keep its customers happy.

In other developments Monday:

- Paine Webber said it was conducting an internal investigation of at least two former employees of E. F. Hutton who were recently hired by Paine Webber. Shearson Lehman Hutton, which acquired Hutton earlier this year, said Friday that at least one and possibly three former employees in Hutton’s Hartford, Conn., office were involved in the scandal.

- Discount brokerages Quick & Reilly and Charles Schwab & Co. said they were investigating trading in accounts of friends and relatives of William Dillon, the Merrill Lynch broker in New London, who was fired last week for his involvement in the Business Week scandal.

- Integrated Resources, a New York investment firm, said it began an internal probe following a report in the Wall Street Journal that it had come under investigation by authorities. However, a spokesman said the firm had not been contacted by the SEC or other authorities.

Times staff writer Eric Schine in Orange County contributed to this story.