Defendants Had Early Access to Business Week Column : Ex-Broker, 4 Others Charged in Insider Case
The Securities and Exchange Commission filed civil insider trading charges Tuesday against a former Merrill Lynch & Co. broker, his mother and three acquaintances in connection with the previously disclosed leak of advance copies of Business Week magazine.
The broker, William J. Dillon of Old Lyme, Conn., has already pleaded guilty to two criminal counts of wire fraud in the incident and was sentenced to six months in jail. He was said to have cooperated with the SEC in its investigation of the case.
The SEC suit named Dillon’s mother, Elizabeth Baird; Francis R. Sablone Jr., a Connecticut lawyer, and two Dillon acquaintances, Benjamin and Todd Libera, who are brothers.
The insider trading incident was one of several that came to light a year ago involving people who had obtained advance copies of Business Week’s “Inside Wall Street” column. The widely followed column often influences the price of stocks after the magazine reaches subscribers. As a result, people who used advance knowledge of the contents of the column had an illicit trading advantage.
Dillon and several acquaintances allegedly got copies of the magazine from a printing plant in Old Saybrook, Conn., before the magazine was available to the public.
In spelling out new details of the case, the SEC suit, filed in U.S. District Court in Connecticut, alleges that Dillon paid employees of the printing plant $20 to $30 for copies of the magazine just after it was printed on Thursday mornings.
Dillon and the others allegedly bought stock and stock options of companies recommended in the column. The suit charges that the group made a profit totaling more than $600,000 from the allegedly illegal trades.
Lawyers for Dillon, his mother and the Libera brothers couldn’t be reached for comment Tuesday despite messages left at their offices. James Wade, an attorney for Sablone, said he hadn’t seen the SEC suit yet and declined to comment.
The SEC suit also charges that Dillon shared the information with several other individuals who then made illegal trades, including a Connecticut banker. These individuals weren’t named, however. Andrew Geist, an SEC lawyer, refused to say if charges may eventually be brought against these individuals.
Separately Tuesday, the SEC filed an insider trading lawsuit in Chicago against a former broker with A. G. Edwards & Sons and two others. The suit charges that Linda Frye, who was corporate information administrator for a unit of Household Manufacturing Inc., leaked information about a pending tender offer for Booth Inc. to her husband, Douglas Frye. The Fryes allegedly shared the information with the Edwards broker, Travis Keltner IV.
SEC attorneys said the three immediately agreed to settle the suit without admitting or denying the charges. They agreed to disgorge profits totaling $3,700 and pay penalties of $3,800, the SEC lawyers said. In addition, Keltner was said to have consented to being banned from the securities industry for one year. Telephone calls to lawyers for the Fryes and Keltner weren’t returned Tuesday.
