New York — A spate of insider trading cases is conveying the message that insider trading is rife on Wall Street. And it does not appear that such disclosures are over. Dennis B. Levine, who sometimes traded under the code name ``Mr. Diamond,'' pleaded guilty last week to four felony charges: one count of securities fraud, two counts of tax evasion, and one count of perjury.
As reported earlier, the Securities and Exchange Commission alleged that Mr. Levine snared $12.6 million in illicit profits over the last five years using confidential information.
Originally, the SEC cited 54 insider trading violations, but it dropped all civil charges in exchange for Levine's cooperation in identifying the sources of his information. As part of the settlement, Levine agreed to pay back $11.6 million. He still faces sentencing for the criminal counts, possibly up to 20 years.
The topic of the moment in financial circles: Who else was involved? Less than half of Levine's trades were related to information he might have received in the course of his normal work. Speculation is that some arbitrageurs may be implicated. Securities lawyers say that Levine got off fairly lightly so that he must have given investigators something substantial. US Attorney Rudolph W. Giuliani confirmed that Levine had been ``very helpful.''
In a separate case, four out of five young securities professionals charged with running an insider trading ring pleaded guilty. Two of the defendants, former employees of Marcus Schloss & Co. and Drexel Burnham Lambert (also the last employer of Levine), said that officials at their firms knew the information they were receiving was confidential. Both firms deny the allegations.
In yet another case, two Italian bankers were found guilty last week of profiting from insider trading based on nonpublic information obtained before Joseph E. Seagram & Co.'s takeover bid for St. Joe Minerals.
Guiseppe B. Tome and Paolo Maro Leati were ordered to pay back an estimated $6 million in profits. The two men are now in Europe and have so far refused to return to the United States.
This last case was the result of five years of SEC legwork here and abroad. And it indicates, along with the Levine case, the growing willingness and ability of the SEC to tackle trading through offshore banks, SEC-watchers say.
The SEC enforcement actions are to ensure that the formation of capital takes place in a fair market. A violation of securities law occurs when one obtains confidential information of say, a pending merger and trades before that merger is announced publicly.
While the SEC crackdown puts would-be inside traders on notice, as it continues to dig, it may yet further confirm the suspicions of the general public. A Wall Street Journal/NBC News poll taken last week showed that 2 of every 3 adults believe insider trading is common on Wall Street.
And that is troubling for an industry and a system built on trust.