Insider-Trading Trial of Broker, Magazine Printer Opens in L.A.
A government attorney told a federal jury in Los Angeles Wednesday that a former Orange County stockbroker and a Torrance printer knew that they were breaking insider trading laws when they used advance information from Business Week to make profits in stock trades.
Defense lawyers argued that Brian J. Callahan, a former stockbroker for Prudential-Bache Securities Inc. in Anaheim, and William N. Jackson, a one-time printer for R. R. Donnelley & Sons, did not realize that they were doing anything wrong in making the trades.
Those arguments came in the first day of a jury trial in a civil suit filed in January by the Securities and Exchange Commission against the two men. The SEC alleges that the men violated securities law when they used advance information from a Business Week “Inside Wall Street” column to buy stocks.
The suit is one of five the SEC has filed nationwide involving insider trading on advance knowledge of the contents of the Business Week stock column.
In this suit, the SEC alleges that Callahan and several brokerage clients made at least $19,684 from an illicit scheme and that Jackson made illegal profits of $19,506 for himself and two brothers.
The printer and the broker made at least 53 trades between July, 1987, and July, 1988, before their scheme was discovered, SEC attorney Jeffrey Zuckerman said.
In opening statements before U.S. District Judge Stephen V. Wilson, Zuckerman said the “Inside Wall Street” column contains “the most highly sensitive information” that “generally affects the stock market.”
Jackson was a quality analyst who checked the color on Business Week’s pages at Donnelley’s Torrance plant, which prints the magazine. He had access to the magazine on Wednesday evening; the magazine is not officially released until Thursday afternoon.
The SEC charges that Jackson used that information to make trades with Callahan. The stockbroker, Zuckerman said, “suggested ways to refine the scheme and maximize profits” by giving Jackson the lowest commission rate and helping him to select the stocks.
Jackson’s attorney, Jack I. Samet, told jurors that his client “didn’t believe he was doing anything wrong and did not think he was breaking his employer’s rules--and he wasn’t.”
The attorney representing Callahan, J. Joseph Connolly, said Callahan did not learn that Jackson worked at the printing house until a month before Prudential-Bache fired him. Callahan was fired in July, 1988.
The SEC is seeking a court order barring the defendants from future insider trading and also asks that they be required to repay illegal profits, plus pay a penalty equal to three times the amount of illegal profits.
