Lynch, Who Led Wall St. Probes for SEC, to Resign : Sanders, an Assistant U.S. Attorney, Replaces Einhorn As Adminstrator of Agency's Los Angeles Office

Times Staff Writer

Gary G. Lynch, who as director of enforcement for the Securities and Exchange Commission has overseen the agency's most far-reaching investigations of Wall Street corruption, said Wednesday that he is resigning his post in mid-July.

Widely viewed as one of the individuals most responsible for the watershed securities fraud cases brought against Dennis B. Levine, Ivan F. Boesky and the Drexel Burnham Lambert securities firm, Lynch said he will probably enter a private legal practice. He added that so far he has not "lined anything up."

Separately, the SEC announced that James L. Sanders, an assistant U.S. attorney in Los Angeles, has been named regional administrator of the commission's Los Angeles office. Sanders, 41, who is assigned to the federal prosecutor's major fraud unit, will replace Irving M. Einhorn, who is leaving this week to become executive vice president and general counsel of a discount brokerage in Los Angeles.

Lynch indicated in an interview that the decision to leave was his alone.

"It's the right time," he said. "I have been at the agency for almost 13 years and director of enforcement for over four years. . . . I've gotten to a point where it's time to move on to something else."

Judgment Praised

Lynch, 38, won praise from friends and colleagues for his skillful handling of the office, to which he was named on short notice at the youthful age of 34 amid a scandal involving his predecessor, John Fedders. Fedders resigned in 1985 after it came out in divorce proceedings that he had beaten his wife.

SEC Chairman David S. Ruder, in a statement, cited Lynch's "excellent judgment, strong leadership and total dedication" to enforcement of securities laws.

"He was responsible for bringing the largest cases at the division," said Howard Schiffman, a Washington defense lawyer who is a former SEC enforcement division lawyer and a friend of Lynch. "With the conclusion of the Drexel case, it was an appropriate time to move on to the next step in his career."

To settle an SEC complaint, Drexel agreed last month to be placed on administrative probation, to appoint high officials acceptable to the SEC, to cooperate with continuing investigations of securities violations, and to commit no further violations.

The son of the owner of a small trucking company, Lynch grew up in Upstate New York. He was graduated Phi Beta Kappa from Syracuse University in 1972 and from Duke University Law School in 1975. He spent the next year working for a private Washington law firm before joining the SEC staff.

At the commission, he soon established a reputation for taking on complex investigations. In 1978, he built a case against Bateman Eichler, Hill Richards, a Los Angeles brokerage, which later accepted stiff penalties to settle charges of manipulating stock prices and making unauthorized purchases for customers.

Improved Cooperation

That, however, paled next to the blockbuster cases that came to light in 1986 with Levine's settlement of insider trading charges.

"I think his most significant contribution was his willingness to open up the doors of the SEC to permit closer cooperation with the Department of Justice," said Ira Lee Sorkin, a New York attorney who was director of the SEC's New York office during Lynch's first 21 months as the agency's top enforcer.

Both Lynch and outside observers agreed that his departure is not likely to affect ongoing cases involving Drexel and others. The observers also noted that the naming of a successor would fall to whoever succeeds Ruder when he steps down, a move that is expected soon.

As an assistant U.S. attorney in Chicago and Los Angeles, Sanders, too, has acquired a reputation for tackling tough cases involving stock market manipulation, bribery of public officials, income tax evasion and mail fraud. He has played a central role in an insider trading case against Alvin DeShano, an official of Carl Karcher Enterprises, that is scheduled to come to trial in Los Angeles on May 23.

Sanders said he expects to see that case through, then will begin overseeing the Los Angeles and San Francisco SEC offices in June.

Staff writer Scot J. Paltrow contributed to this story.

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