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Winans Claims He Didn’t Know Journal Policy On Conflict of Interest

March 19, 1985

NEW YORK (AP) _ Former Wall Street Journal reporter R. Foster Winans, charged with securities fraud, testified that he did not know that it was wrong to use advance knowledge of stories to make money.

The Journal, however, said in a statement that testimony by two of its editors ″makes it clear″ that Winans was aware of the policy, despite his comments Monday during his first day on the witness stand.

Winans, 36, faces a 59-count federal indictment charging conspiracy, securities fraud and mail and wire fraud.

Winans also accused the government’s main witness, stockbroker Peter N. Brant, who worked at Kidder, Peabody & Co., of initiating the scheme in October 1983. Brant, who pleaded guilty to fraud and conspiracy last summer, had maintained that Winans approached him with the plan.

Winans was one of two writers of the Journal’s ″Heard on the Street″ column between 1982 and March 1984, when the Securities and Exchange Commission launched a formal investigation into his stock transactions.

″Heard on the Street″ is a popular daily feature that offers tips to investors. Analysts say that the column can produce sharp, though temporary, swings in a stock’s price when it reports on the issuing company’s prospects.

According to the government, Winans and his co-defendants, his roommate David Carpenter and former stockbroker Kenneth P. Felis, tried to take advantage of those price changes by trading in stocks that were to be the subject of forthcoming columns.

Under questioning by his lawyer, Don Buchwald, Winans said he never learned of the Journal’s 31/2 -page policy on employee conflicts of interest until March 1984, shortly before he left the paper.

The policy, according to Buchwald, is contained in the so-called ″red book,″ a manual for Dow Jones employees.

″I don’t recall seeing anything or being told anything existed called a ’red book,‴ Winans said.

In a statement issued Monday night, the Journal said Winans’ denial of knowledge of the paper’s policy on conflicts of interest contradicted previous testimony by Journal editors Stewart Pinkerton and Richard Rustin.

″The question is whether to believe two distinguished editors or Mr. Winans,″ the statement said.

The government contends the transactions violated the Journal’s policy on conflicts of interest, jeopardizing the newspaper’s reputation, and that Winans had been repeatedly warned not to trade in stocks he was writing about.

Prosecutors claim that by using Winans’ position for their own gain the defendants committed a fraud against the Journal. In court papers filed in January, prosecutors said Winans’ actions made him in effect a ″trafficker of stolen goods.″

Insider-trading cases normally involve someone involved with the company whose securities are being traded.

Winans’ lawyers say that while his conduct may have been morally wrong it was not a crime.

The prosecution says Winans first tried to make money in the market on his own, but was hampered by a lack of capital. He then allegedly approached Brant and was paid $31,000 over four months in return for information on coming stories.

Winans testified that he was ″disappointed″ with his $530-a-week starting salary when he started working at the Journal after about a year at the Dow Jones News Service, run by the same parent company. He said he let company executives know that he was ″giving up some outside income″ by stopping his free-lance writing activities.

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