Ex-Broker to Plead Guilty to Fraud in Business Week Case
A former Merrill Lynch employee, who allegedly traded stocks on advance information in a Business Week column, agreed Thursday to plead guilty to one count of wire fraud in federal court in Manhattan.
U.S. Atty. Rudolph W. Giuliani filed the formal charge of wire fraud against William Dillon, who has agreed to cooperate with an investigation into the possibly illegal use of information in the magazine’s “Inside Wall Street” column.
Dillon, 33, who joined Merrill Lynch in October, 1986, and worked in its New London, Conn., office until he was fired July 28, waived his right to require the government to present its case to a grand jury for possible indictment. He also agreed to plead guilty to a similar federal charge filed in Connecticut.
“We could have charged him with many more counts, but we try to encourage people to cooperate,” Giuliani said at a press conference after the charge was filed in U.S. District Court in Manhattan. As part of Dillon’s agreement with the government, his mother will not be prosecuted in this case, although she must relinquish money she gained from the scheme. Giuliani did not know how much money she would have to return, nor would he say whether she was a knowing conspirator in the fraud. Dillon must also give up his profits of $94,000.
The criminal charge alleges that Dillon knowingly engaged in unlawful stock trading from May 1, 1986, to July 28, 1988. He and another unidentified person bought advance copies of Business Week for $20 to $30 each from R. R. Donnelly & Sons employees. Donnelly prints Business Week from midnight to 8 a.m. on Thursdays in Old Saybrook, Conn., and at other plants. The magazine is released to the public after the stock markets close Thursday afternoon.
Stocks that receive favorable mention in the “Inside Wall Street” column often increase in price after the magazine hits the newsstand. The charge alleges that Dillon purchased securities in 129 companies mentioned in the column. After holding securities for usually less than one week, Dillon sold them, for profits totaling $74,000 in his accounts with Quick & Reilly and Merrill Lynch and $20,000 for his share of an account held by the unnamed co-conspirator.
The specific wire fraud violation in the charge allegedly took place Jan. 8, 1987, when Dillon wired an order from Connecticut to New York to purchase 3,000 shares of Regency Electronics stock.
Under the charge, Dillon could face up to five years in prison and $250,000 in fines.
