A rookie Wall Street analyst who once impressed others as an ambitious go-getter received three years imprisonment Wednesday for his role in the nation’s second-largest insider trading fraud.
“You truly fall into the situation of a person who bites the hand that feeds him,” U.S. District Judge Kevin Duffy said, shaking his head as he sentenced Stephen Wang, 24. “You had a brilliant future and you blew it.”
Wang, who had held a promising junior analyst job at Morgan Stanley & Co., pleaded guilty last month to fraud for conspiring with Taiwanese businessman Fred C. Lee to profit in the stock market on secrets about impending corporate takeovers that Wang stole from the firm.
He also pleaded guilty to a separate but much smaller insider trading scheme involving another person, whom prosecutors have declined so far to identify.
Wang and Lee were first exposed in late June by the Securities and Exchange Commission, which said Lee made about $19 million in illicit profits and paid Wang $200,000 for tips provided between July, 1987, and last April.
Morgan Stanley, which was deeply embarrassed and dismissed Wang immediately, said through spokesman Peter Roche that “We’re pleased justice has been served.”
Lee’s U.S. lawyer, James Morton, did not return telephone calls for comment. Lee hasn’t been charged with any crime and is believed to be living in Hong Kong.
The SEC has won court orders freezing the U.S. assets of Wang and Lee and is seeking return of the $19 million plus triple damages for a total of $76 million, making it the second-biggest insider trading scam behind the Ivan F. Boesky scandal.
A renowned stock speculator, Boesky paid the SEC a record $100 million in November, 1986, to settle insider trading charges, a stunning episode that signaled a government crackdown on Wall Street crime. He was sentenced to three years imprisonment for conspiracy to lie to the enforcement agency.
The Wang-Lee case received widespread attention not only because of the amount of money involved but because both men presumably were brazenly trading on inside information at the height of concern about the Boesky affair. Many law enforcers said this showed insider trading remains a deep-rooted problem.
Wang could have been sentenced to five years imprisonment and a $250,000 fine for each of three counts against him. But Duffy, a former SEC regional administrator, said he wasn’t imposing a fine because Wang had no money.
“As far as I can figure out, you’re worth zero,” the judge said. “Therefore, any punishment at all has to be in the area of imprisonment.”
Duffy did not explain the rationale for the three-year sentence, which also includes three years of probation. But he lectured Wang on what the judge called inexcusable acts by a young man who grew up in comfortable surroundings, enjoyed a good education and was en route to a successful career.
“You did have practically every break society could give you,” said the judge, but “apparently the first time you could have been a crook, you were.”
Wang, wearing a gray suit and dark tie, fidgeted nervously before Duffy pronounced the sentence and stood motionless while the judge spoke. Aside from a few reporters and bystanders, the courtroom was empty.
“I’m deeply sorry for what I’ve done,” Wang told the judge.