The Securities and Exchange Commission charged a Greenwich, Conn., money manager and his son, a stock analyst, with insider trading violations Thursday in connection with Bell Atlantic Corp.'s attempt to acquire two cable companies in 1993.
The charges were filed in U.S. District Court in New York against Frederick A. Moran, president of Moran Asset Management Inc., and his son Frederick W. Moran, an analyst at Salomon Bros. Inc.
Both Morans denied the charges and their lawyers said they will challenge the case in court.
The SEC alleged that in his position at Salomon Bros., the younger Moran was privy to confidential information about Bell Atlantic’s proposed acquisition and gave the information to his father, who then bought shares in the companies being acquired.
The proposed acquisition eventually fell apart. None of the companies involved have been accused of wrongdoing.
After Bell Atlantic announced that it intended to acquire the two companies, Tele-Communications Inc. and Liberty Media Corp., their shares increased in value and the elder Moran made a profit of $2.4 million, the SEC charged. The papers the SEC filed in court do not explain how the agency calculated the aggregate illegal profit figure.
Salomon Bros. said it is cooperating with the investigation.
The company said Moran has been suspended from any client involvement and will not have access to confidential client information. It said his status is subject to re-evaluation.
At the time of the alleged wrongdoing, Moran Asset Management was suffering because of bad investments, said Tom Newkirk, the SEC’s associate enforcement director. In addition, the firm had widely publicized its negative evaluation of the cable television industry and its clients held minimal positions in cable stocks before Oct. 11, Newkirk said.
The SEC said the younger Moran started working Oct. 3, 1993, on the Salomon team that was representing Bell Atlantic in the negotiations to acquire the two cable companies.
It alleged that based on his son’s tip, the elder Moran bought 340,799 Class A shares of TCI and 203,200 Class A shares of Liberty Media on Oct. 11-12 for clients, proprietary accounts and personal and family accounts.
The SEC said that following Bell Atlantic’s announcement of its plans Oct. 13, TCI’s stock rose $3 and Liberty’s moved up $2.625, resulting in $2.4 million in illegal profits for Moran.
In its complaint, the SEC also alleged that the elder Moran defrauded clients of his firm when, after the close of trading on Oct. 11, he reallocated Liberty stock originally bought for them to his personal and family accounts.
“At the time, he knew or was reckless in not knowing that his plan would require him to buy Liberty stock at a higher price the next day for his clients, which in fact he did,” the SEC alleged.
The agency said it is seeking injunctions against future violations and return of the alleged illegal profits, plus prejudgment interest and civil penalties.