A former Bankers Trust Securities Corp. executive, whose job was to police other brokers, was arrested Wednesday on charges of insider trading in connection with a takeover bid for Caesars World Inc.
Such serious charges are rare against a major Wall Street bank compliance officer, a professional considered to be on the first line of defense against fraud.
“This is a classic case of the fox guarding the henhouse,” said Jerry A. Isenberg, a Securities and Exchange Commission attorney who handled the case.
Nir Kantor, 39, of Riverdale, N.Y., was arrested on federal securities fraud charges and released on a $100,000 bond after an appearance in U.S. District Court in Manhattan.
In addition, the SEC filed civil charges alleging that Kantor and a second cousin, Hanan Waizman, 42, also of Riverdale, made illegal profit of about $50,000 by purchasing stock options for Caesars World. Waizman was not named in the criminal case.
A public defender representing Kantor declined to immediately comment on the case. Waizman’s attorney, Mathew J. Mari, said, “Mr. Waizman denies all allegations of insider trading, and he intends to contest the government’s charges.”
Kantor faces up to 10 years in prison and a maximum $1-million fine if convicted of the single securities fraud count, according to the U.S. attorney’s office in New York. The SEC civil case could force Kantor to repay triple the profit made through the trading.
Between April 1993 and January 1995, Kantor was assistant vice president in the compliance department of Bankers Trust Securities Corp., the trading and investment banking arm of the giant New York bank. He was one of 70 employees who monitor trading and other activities at the bank.
Because of his position, Kantor had access to the so-called grey list, which named Bankers Trust’s clients that had pending mergers, takeovers or other major corporate developments in the works.
In November 1994, Kantor learned that one of the bank’s clients, ITT Corp., was considering a tender offer for Caesar’s World. Prosecutors say that on Nov. 17, the day Bankers Trust placed both Caesar’s and ITT on its restricted list, Kantor purchased call options--bets that the stock price will rise--of Caesar’s World.
Kantor bought additional call options, through an account owned by Waizman, then sold the options after media reports of the deal were published in December 1994.
Kantor, when interviewed by SEC investigators in January 1995, denied knowing Waizman, SEC officials said. Bankers Trust then fired Kantor.
Waizman, questioned about his trades, replied that he “just got lucky,” the SEC said.