Analyst Involved in Earlier Scheme, Court Papers Show : Wang Agrees to Plead Guilty in Taiwanese Insider Case
Stephen S. Wang Jr., 24, a former junior analyst at the investment banking firm Morgan Stanley & Co., agreed Wednesday to plead guilty to three criminal insider trading charges and to cooperate with a government investigation.
Court papers in the case disclosed that Wang had also been involved in another insider trading scheme that predated the one reported in June, when the Securities and Exchange Commission filed civil charges against him and a Taiwanese businessman.
Court papers filed Wednesday charged that Wang began leaking secret details of pending Morgan Stanley transactions practically from the moment he started working there in June, 1986. These leaks were to an individual in Chicago who allegedly later paid Wang $4,000.
Rudolph W. Giuliani, the U.S. Attorney in Manhattan, refused to disclose the identity of the person in Chicago who received the information and allegedly made profits of more than $13,000 from stock trades.
But Giuliani said the individual isn’t a relative of Wang’s and isn’t in the securities business. It is expected that charges may eventually be filed against the individual.
As reported, Wang in June was accused by the SEC of leaking details of potential mergers, acquisitions and leveraged buyouts being handled by Morgan Stanley to the Taiwanese businessman, Fred C. Lee, 38. The SEC at the time described the case as the second-largest insider trading case ever filed, smaller only than that filed in 1986 against stock speculator Ivan F. Boesky.
The court papers filed Wednesday disclosed that Wang received about $200,000 in payments from Lee, who allegedly used the advance knowledge of potential mergers and buyouts to buy stocks and options. The SEC charged that Lee made at least $19 million in profits from the trading.
Lee has been out of the country since the SEC charges were filed. Giuliani declined to say Wednesday if prosecutors know where Lee is.
Wang appeared before a federal magistrate Wednesday and agreed to plead guilty later to a three-count criminal information. Two charges relate to the transactions with Lee, and the third relates to the leaks to the person in Chicago.
The charges carry a maximum penalty of 15 years in prison and a fine of $750,000. Wang was allowed to remain free on bail of $250,000, at least part of which was guaranteed by his father.
During a press conference on the plea agreement, Giuliani appeared implicitly to criticize Morgan Stanley officials for not having detected the leaks or the suspicious trading that ensued.
Asked to comment on Morgan Stanley’s role in the case, the prosecutor noted that the suspicious trading occurred at a time big insider trading cases, including the Dennis B. Levine case, were receiving a lot of publicity.
“You would think that there would be better controls and tighter procedures,” Giuliani said. But he added that “there is no suggestion that Morgan Stanley is criminally responsible.”
In another insider trading case Wednesday, a former Merrill Lynch & Co. broker pleaded guilty, as expected, to a single wire fraud charge in federal court in New York for trading on information illegally obtained from a plant in Connecticut that prints Business Week magazine.
As reported, the former broker, William Dillon, 33, has agreed to cooperate with investigators looking into leaks of stock tips that later appeared in the magazine’s widely followed “Inside Wall Street” column. Dillon has already pleaded guilty to a similar one-count charge in federal court in Connecticut.
