Shearson Lehman Settles Insider Trading Lawsuits : Securities: Two companies went to court after former Shearson employee Dennis Levine admitted guilt.
Shearson Lehman Bros. Holdings Inc. agreed to settle several civil lawsuits that stemmed from illegal insider trading by former Shearson employee Dennis Levine.
The civil suits were filed by Litton Industries Inc. and Hercules Inc. in 1986, after Levine pleaded guilty to charges of insider trading filed by the Securities and Exchange Commission.
Levine, accused of earning $12.6 million through illegal insider trading in the stocks of 54 companies over five years, eventually provided the SEC with information that led to the arrest of his associate Ivan Boesky, according to news reports at the time.
Litton and Hercules separately alleged that Levine’s insider trading either disrupted or drove up the price of acquisitions they tried to complete in 1983. Levine obtained the confidential information through his employment at the time at Lehman Bros. Kuhn Loeb Inc., a Shearson Lehman Inc. predecessor that advised both companies on their respective transactions.
Hercules, a Wilmington, Del., chemical manufacturer, reached an agreement in principle to settle its suit against Shearson last December, according to papers Shearson filed earlier this week with the SEC. Litton, a Beverly Hills manufacturer of industrial automation, electronic and defense systems, also agreed to settle its suit against Shearson in December, according to the filing.
Under the Litton agreement, both sides promised to keep the terms of the settlement confidential, according to Robert Knapp, a Litton spokesman.
A Shearson spokesman declined further comment on the settlement described in the SEC filing, and officials at Hercules could not be reached for comment.
The American Express Co., parent company for Shearson Lehman, announced Jan. 25 that the unit took $59 million in charges for additional legal provisions, but provided no other details.
American Express plans to sell Shearson’s retail brokerage and asset management businesses to Primerica Corp. for about $1 billion.
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Litton filed a $30-million lawsuit on Aug. 19, 1986, against Levine and Lehman Bros. Kuhn Loeb, which was later acquired by American Express and eventually combined with some of the parent company’s other financial service businesses.
Lehman Bros. Kuhn Loeb advised Litton on its plan to acquire Itek Corp. in 1983.
Ira Sokolow, another Lehman executive at the time, allegedly learned about the pending acquisition before it was announced to the public and passed on the information to Levine, according to the description of the suit in Shearson’s SEC filing.
Levine allegedly proceeded to trade illegally on the inside information and also tipped off other defendants. Litton ended up paying $48 per share for Itek, or more than twice the $22 per share that the Lexington, Mass., electronic firm’s stock sold for when Litton first considered the acquisition, according to a news report.
A pair of civil suits filed by Hercules in October, 1986, also alleged that Levine traded on confidential information pertaining to the company’s 1983 acquisition of Simmonds Precision Products Inc.
