Lengthy Year-Old Indictment Names Fugitive

Federal prosecutors disclosed Tuesday that Fred C. Lee, the Taiwanese businessman implicated in a major insider trading scandal involving the investment firm Morgan Stanley & Co., was named in a 439-count criminal indictment returned a year ago but kept under seal.

The indictment was unsealed Tuesday because prosecutors said Lee, a fugitive believed to be living in Taiwan, undoubtedly is aware that he is wanted by U.S. authorities. Assistant U.S. Atty. John M. McEnany said no purpose would be served by continuing to keep the document secret.

The criminal charges relate to allegations that Lee, 39, made at least $19 million in illegal profits using confidential information on pending corporate takeovers and mergers supplied by Stephen S. Wang, a young Morgan Stanley trainee. Wang has pleaded guilty to three criminal charges and is cooperating with federal prosecutors. The case has been described as the second-largest insider trading scandal uncovered by the federal government in terms of the amount of illegal profits, smaller only than the case that involved former stock speculator Ivan F. Boesky.

As reported, in August Lee settled civil insider trading charges filed by the Securities and Exchange Commission, paying more than $25 million in penalties without admitting or denying guilt. The settlement was arranged by Lee’s lawyers in the United States, while Lee remained out of the country.

Extradition Unlikely

Lee S. Richards III, a lawyer who represented Lee in the SEC settlement, said he hasn’t spoken with Lee recently and doesn’t know if he will be representing him in the criminal case. He said the indictment “comes as no surprise,” but he said: “Mr. Lee has not yet been served with a copy of it, so we’re in no position to comment.”

Richards refused to comment on Lee’s whereabouts.

McEnany also declined to say if prosecutors know Lee’s exact location. But he said that gaps in the current treaties between the U.S. and Taiwan mean that there is “little or no chance of extraditing him from Taiwan.”

The indictment charges that the illegal trading took place between June, 1987, and July, 1988. Lee lived in McLean, Va., during at least part of that time. He allegedly was introduced to Wang at a cocktail party and later persuaded Wang to leak confidential information on pending deals that Morgan Stanley’s mergers and acquisitions department was working on.

Each of the 439 counts carries a maximum sentence of five years in prison. Prosecutors said they hadn’t calculated the maximum potential fine but said in a written statement that it could total in the “many tens of millions of dollars.”