European Stock Trading Scrutinized
European stock market regulators are investigating whether the masterminds of last week’s terrorist attacks attempted to profit by short-selling the stocks of insurance companies in the days leading up to the attacks, according to the regulators and sources at European insurance firms.
Regulators in Germany, England, France, Italy and Switzerland are all studying unusual patterns of stock trading, sources said.
Short selling enables an investor to profit from declining stock prices by borrowing shares in anticipation of a price drop and replacing them later with shares bought at lower prices.
On Monday, AXA, a large French-based insurer with considerable U.S. holdings, formally asked stock market regulators in Paris to look into the possibility of short selling that might be linked to the terrorist attacks.
A company spokesman said the request followed “rumors in the market.”
Another AXA source said, “There are indications that the shorting has been going on for some time.” The source, speaking on condition of anonymity, said, “People inside the company could not understand why” there had been so much shorting of the stock in recent weeks. “This could give some explanation why the stocks were going down so much when there seemed to be no apparent reason.”
The Commission des Operations de Bourse, France’s equivalent of the U.S. Securities & Exchange Commission, had no immediate comment.
European regulators were said to be looking at trading in Swiss Reinsurance, and Munich Reinsurance, one of the world’s largest reinsurers, in addition to AXA.
Munich Re’s stock dropped sharply from 307.29 euros on Sept. 3 to 273.30 on Sept. 10, the night before two hijacked planes crashed into the World Trade Center towers, a third hijacked plane slammed into the Pentagon and a fourth crashed in Pennsylvania.
The day after the attacks, Munich Re plummeted to a price of 207.02 euros, close to its lowest price in two years.
A spokesman for Munich Re said Monday that the firm had not noticed any unusual trading in the stock. No one was available for comment at Swiss Reinsurance.
AXA shares dropped almost 10% in the week before the terrorist attacks--falling to its lowest point since October 1998. Last week, Henri de Castries, AXA’s chairman, said the attacks would cost the company up to $400 million--stemming from its coverage of both airplanes and buildings.
A spokesman for the agency that regulates Germany’s stock market in Frankfurt said the agency was investigating claims of suspicious short selling ahead of the terrorist attacks last week. Agency spokeswoman Sabine Reimers told Reuters that authorities were looking at share price developments and trade volume “within the scope of our usual responsibilities.”
An Italian regulator said officials there were definitely concerned about the situation.
“I am convinced that . . . the person who organized that attack has a lucid mind and knows very well that money gives power,” Italian Defense Minister Antonio Martino told the Italian newspaper La Stampa. “I don’t think it would be exaggerated to think that the terrorist organizations were among those who speculated on international markets,” Martino added.
Along the same line, the BBC reported Monday night that Italian stock authorities were investigating abnormal movements in share prices on the Milan stock exchange prior to the terrorist attacks.
Government investigators here and abroad would want to track whether someone involved in the attack was involved in such trading not primarily because of stock manipulation but because “they might be co-conspirators in mass murder,” said John C. Coffee, a Columbia University law professor. “ ‘Follow the money’ has always been the rule of prosecutors and it looks like it may apply to terrorism,” Coffee added.
The U.S. Treasury Department announced it had formed an interagency task force to disrupt terrorist fund-raising in the U.S. The probe is being led by Treasury’s Foreign Terrorist Asset Tracking Center.
U.S. officials from President Bush on down have said that Osama bin Laden is the prime suspect in last week’s attacks.
At a New York trial this year, growing out of the bombings of U.S. embassies in Africa in 1998, Jamal Ahmed al-Fadl testified that while Bin Laden was in Sudan in the mid-1990s he set up a company to finance his terrorist activities. Al-Fadl, who described himself, in essence, as the chief financial officer of the company, testified that Bin Laden controlled companies that had bank accounts in Sudan, London, Hong Kong and Malaysia.
*
Times staff writer Carol J. Williams in Berlin contributed to this report.
