Insider trading investigations continue to rock Wall Street. A shake-up at Kidder, Peabody Group Inc. occurred last week as a result of an internal investigation of the brokerage's operations by General Electric, the parent company.
Kidder chairman and chief executive officer Ralph DeNunzio and two other top executives will step down as of June 1. Replacing Mr. DeNunzio will be Silas Cathcart, a GE director and former chairman of Illinois Tool Works. He has no previous experience on Wall Street.
GE reportedly found subtantial problems with Kidder's internal management and financial controls.
The investigation was prompted by the arrest last February of former Kidder employees Richard B. Wigton and Timothy L. Tabor in connection with alleged insider trading.
The two were implicated by Martin A. Siegel, also a former Kidder employee, who pleaded guilty to securities violations.
Kidder also may be facing federal civil penalties but is reportedly negotiating a settlement with the Securities and Exchange Commission.
Meanwhile, the case against Messrs. Wigton, Tabor, and Robert Freeman, head of arbitrage at Goldman Sachs & Co., is scheduled to go to trial on Wednesday. Federal prosecutors have moved for dismissal, but defense lawyers, betting the government's case is weak, are expected to push for the trial. On Tuesday, a federal judge is slated to rule on the dismissal request.