Livermore Lab’s Former Counsel Indicted : Securities: He’s charged with insider trading of stock that crashed when deal with lab was canceled.

A federal grand jury has indicted a former Lawrence Livermore National Laboratory officer on charges of insider trading of Cray Computer Corp. stock, the U.S. attorney’s office said Thursday.

William DeGarmo, who was chief counsel to the prestigious scientific laboratory for more than 10 years, is accused of having shorted 5,000 shares of Cray stock days before Lawrence Livermore announced it was canceling a $30-million contract with Cray.

Short selling occurs when stocks, bonds or other investment instruments are sold in anticipation of a fall in price.

At the time--December, 1991--Lawrence Livermore was Cray’s only customer.

Cray’s stock price fell about 50% after the cancellation was announced, according to the indictment. DeGarmo then covered his short position and made more than $26,000 on the trades, it said.

DeGarmo advised the laboratory on contract matters, among other things, said Michael Yamaguchi, U.S. attorney for the Northern District of California. The indictment says DeGarmo had fiduciary and fidelity obligations to the lab.

The grand jury handed down charges of four counts of insider trading in violation of antifraud laws and another of giving false testimony before the Securities and Exchange Commission.

Lawrence Livermore spokesman Jeff Garberson said the laboratory had no comment on the case. “It’s a matter for the judicial system to work out,” he said.

DeGarmo was asked to resign in 1992, while the insider trading investigation was under way, and the laboratory and the University of California, which runs it, were informed of the SEC’s allegations, Garberson said.

The contract cited was a 1990 order for a Cray 3 Supercomputer, then under development, to be installed at Lawrence Livermore.