Ex-Trader Says Drexel ‘Parked’ Firm’s Bonds

A former Princeton/Newport L.P. trader testified Tuesday that his superiors at the investment firm illegally placed bonds with Drexel Burnham Lambert Inc. in order to create false tax losses for Princeton executives.

William Hale, who had worked as a junior convertible securities trader at Princeton/Newport’s arbitrage unit, testified at the trial of Lisa Jones, a Drexel assistant trader charged with perjury.

Hale said Princeton/Newport executives had engaged in insider trading and had also parked stocks with Drexel. The alleged purpose of the parking, the illegal holding of a stock or bond to conceal ownership, was to create short-term tax losses for Princeton/Newport officers, he said.

“Basically, Lisa Jones and I did the parking,” Hale said.

This is the first trial of a Drexel employee to grow out of the government’s long-running probe of insider trading and other unlawful activity on Wall Street.

Drexel itself had agreed to plead guilty to six felonies to settle a criminal case brought by the government. Michael Milken, Drexel’s “junk bond” chief, is not part of the agreement and is expected to be indicted.

June Trial Scheduled

Jones, who is on a leave of absence from Drexel, was indicted on charges of lying to a grand jury about her knowledge of Drexel’s alleged wrongdoings. The indictment charged that the 29-year-old perjured herself in testimony regarding parking activities at Drexel.

Jones had reported to former Drexel trader Bruce Newberg, who reported directly to Milken.

Newberg was indicted in August along with five officers of Princeton/Newport on racketeering charges in connection with an alleged scheme to create illegal tax losses through bogus stock deals.

Princeton/Newport is an investment partnership with headquarters in Princeton, N.J., and Newport Beach. The firm itself was not indicted, but since the indictment of its officers under the Racketeer Influenced and Corrupt Organizations statute, it has been in the process of liquidating.

The trial of the Princeton/Newport officers is scheduled to begin June 5.