Inside Trades Alleged at Gas Firm’s Parent : * Inquiry: Pacific Enterprises informs its employees of evidence that some of them may have profited from foreknowledge of a drop in the price of company stock.

Employees of Pacific Enterprises may have engaged in illegal insider trading of the company’s stock before a surprise announcement Feb. 4 that the parent of Southern California Gas Co. would suspend payment dividends and sell many of its subsidiaries, according to President and Chief Executive Willis B. Wood Jr.

In an unusual internal letter to employees dated Feb. 27, Wood wrote: “It appears that some people may have used inside information they had received prior to the announcement to speculate in PE’s stock.”

The letter has been distributed to about 22,000 employees--of 40,000 total--at Pacific Enterprises headquarters and its subsidiaries, Pacific Enterprises Oil Co., SoCal Gas and Thrifty Corp. A copy of the letter was made available to The Times.

On Feb. 4, Pacific Enterprises surprised the investment community by saying it would suspend its dividend indefinitely. The company’s stock dropped $6 a share, to $18.875, the next trading day on the New York Stock Exchange.

From a review of trading activity, Wood told employees, “we have determined that an unusual number of individuals, some of whom were reportedly employees, traded in company stock” before the Feb. 4 announcement. “It can be assumed that the Securities and Exchange Commission will be making the same review,” Wood added.

The SEC, according to agency policy, would neither confirm nor deny whether it is conducting such an investigation, an SEC spokesman said Friday.

Pacific Enterprises spokesman Tom Sangern on Friday declined to elaborate on the possible insider trading.

“It’s appropriate for us to remind employees of the company’s code of conduct,” Sanger said, pointing out that company standards have banned employees from “trading in puts, calls, options or rights to purchase or sell Pacific Enterprises stock” since at least 1986.

Insider trading involves the illegal use of non-public information. It can involve the use of the information in several ways: to sell or buy stock in anticipation of a rise or fall in price; short-selling--that is, borrowing stock with the expectation of replacing it later at the lower, cheaper price; or buying what are known as put options.

Most observers agreed that any insider trading in this case would be in such “puts”--a market in which the seller bets that a stock price will drop.

The put holder contracts with another party to sell a specified amount of stock, at a specified price, within a certain period of weeks or months. If the stock drops below that price within that period, the put holder pockets the difference as profit.

According to figures provided Friday by the American Stock Exchange--where Pacific Enterprises’ put options are traded--put contracts on the company’s stock averaged 32 transactions a day in the four weeks preceding the Feb. 4 announcement. On Feb. 3, though, 297 put contracts were made--a jump that many observers consider typical of insider trading.

David Fleischer, Prudential Securities vice president and utilities analyst who follows the company, was surprised by the letter. “Here (Wood is) putting right out in the public forum that somebody was lying, cheating, stealing,” Fleischer said.

Federal and state laws prohibit the sale or purchase of a company’s stock by anyone holding non-public information that could bear on the stock’s price. Criminal penalties include fines up to $1 million and a term of up to 10 years in prison.

Some observers looked for other meanings to the letter, saying that the Feb. 4 announcement was far from unexpected. Critics of the current management--including union officials who began contract talks this week with SoCal Gas--speculated that the letter was at least partly intended to divert attention from the larger troubles of the company.

“There is no hidden agenda, no greater meaning,” Sanger insisted.

In the letter, Wood asked employees to notify Pacific Enterprises’ general counsel, Les LoBaugh, by March 4 of any trading in company stock that they have engaged in since Jan. 1.

Times staff writer Tom Petruno contributed to this story.