How a reporter got mired in insider trades

Ivan Boesky, Dennis Levine, R. Foster Winans - case after insider-trading case has mounted in the past two years. Mr. Boesky's is by far the biggest inside-trading scandal ever. Mr. Levine's apparently led investigators to a wider network.

But it is the Winans case - detailed in a book by Mr. Winans, the former Wall Street Journal reporter - that gives the most personal insight into the seductive lure of profits to be made from illegal activity on Wall Street.

Early in his journalism career, Winans says, he would not accept a $5 pasta dinner from a city councilor. But in August 1985, Winans was convicted of fraud for leaking the contents of the Wall Street Journal's influential ``Heard on the Street'' stock market column. Two stockbrokers made $700,000 by trading on the leaks. He pocketed $30,000.

Therein lies a tale. Now free on appeal, Winans is trying to cover his legal expenses (estimated at $200,000) with his version of the events in ``Trading Secrets: Seduction and Scandal at The Wall Street Journal'' (St. Martin's Press, New York, $17.95).

This is an immensely readable chronicle of a controversial and precedent-setting insider-trading case - a tale of a journalist succumbing to greed and unsavory influences on Wall Street. And it's a revealing look at how ``Heard'' columns are developed, the role of tips, and how editors at the Journal decide what runs and what doesn't.

Winans freely admits to being wrong and ashamed of his deeds. But he portrays himself as being ``seduced'' by Peter Brant, a charismatic, 30-year old Kidder, Peabody & Co. broker.

```You know, we could make a lot of money,' [Mr. Brant] boomed, `if I knew the day before what was going to be in the column.' The half-smile dissolved into a mischievous, crooked grin that was conspiratorial and seductive,'' Winans writes.

He goes on to explore in fine detail Brant's meteoric rise to the top and his Gatsbyesque role as one of the richest retail brokers on Wall Street, with $70 million under management and $20 million in personal assets.

By comparison, Winans took home about $30,000 a year. (After this case, the Wall Street Journal raised salaries.) He felt insecure and unappreciated at the Journal and couldn't come up with a $6,000 down payment when his apartment building was going co-op.

``It had occurred to me that a whole lot of people were making a whole lot of money on Wall Street and that I wasn't one of them. ... I was mesmerized by the possibilities and curious to learn more of the mystery of Peter [Brant] and the stock market. His proposal triggered no ethical skirmish in my mind. I knew it was wrong.''

Yet, he did it. Indeed, Winans's ethics had already begun to erode by the time Brant came along. In early 1983, Winans began trading in a Merrill Lynch account in his roommate's name so his employer wouldn't find out.

``I knew what I was doing was technically unethical for a journalist. ... If no one ever found out, no one would perceive a potential conflict, and, therefore, I would not have done anything unethical. It was slightly circular reasoning, but it got me past the big hurdle,'' he recounts.

While admitting he was shameful and wrong, Winans contends he broke no laws.

``The government's legal theory ... was that I had committed a crime because I violated a company policy. That irritated me because I'd never seen the policy.'' The Journal editors said otherwise in court. And Winans admits to being ``verbally cuffed'' early on for naively revealing to sources the nature and content of his stories.

Today, most newspapers have a securities-related ethics policy. But with no standard policy, Winans says, ``the act required to break the law under the government's theory would be different at each newspaper or television news program. Furthermore, the Feds admitted that if the Journal hadn't had any policy, we couldn't have been prosecuted. ... That sounds crazy to me.''

Indeed, the Securities and Exchange Commission's stated goal was to let investors know ``the cop is on the beat.''

``I accept that a celebrity hanging helps keep investors honest,'' Winans writes. ``That's a tough thing to take when you are the person being hung.''

His sentence was 18 months in prison, $5,000 in fines, five years' probation after release, and 400 hours' community service. Still, Winans is reportedly selling film rights to his story for a six-figure sum - which presumably will help pay his legal fees and not turn scandal into further profit.

In a page-one article on the Ivan Boesky case in the Nov. 19 Monitor, the correct name of the Drexel Burnham Lambert official caught in an earlier insider trading case is Dennis Levine. In a related article on page 27, Peter Brant of Kidder, Peabody & Co. is no relation to newsletter publisher Peter Brandt mentioned in an advertisement on the same page.