Grossman Insider Trading Case Winding Up
NEW YORK (AP) _ The first insider trading case to go to trial in two years went to the jury today.
U.S. District Judge Richard Owen instructed the jury on the law for more than an hour, and the panel began its deliberations in the case of Israel Grossman at about 11:40 a.m.
Grossman, 34, of Brooklyn, is charged with 19 counts each of mail fraud and securities fraud for allegedly passing confidential corporate information to friends and relatives who, in turn, bought stock options and made more than $1.5 million.
The case has nothing to do with the widely publicized insider trading scandals involving investment banker Dennis Levine and stock speculator Ivan F. Boesky.
Referring to the other cases that have rocked Wall Street, defense attorney Irving Seidman said: ″there’s an excitement in the world about insider trading″ but Grossman is ″not an Ivan Boesky.″
Because most insider trading defendants have reached plea agreements with the government, the Grossman case is the first to go to trial since 1985.
The 38-count indictment charged Grossman, then a pension specialist at the Manhattan law firm of Kramer, Levin, Nessen, Kamin & Frankel, with illegally obtaining information in Jly 1986 about the pending recapitalization plan of Colt Industries Inc.
Grossman allegedly leaked the information to six people, most of them relatives, who made about $1.5 million on $33,000 in Colt options, a high-risk investment.
The government’s case against Grossman is based largely on circumstantial evidence including the short time span between when Grossman learned of the Colt recapitalization plan and when he made more than 40 telephone calls to relatives who subsequently bought Colt options before the plan was announced.
Those options were, in effect, bets that Colt stock would soar after the plan was announced, which it did.
The Securities and Exchange Commission began an investigation after it was informed of unusual trading activity in Colt options by the Philadelphia Stock Exchange, the only place where the options were traded.
In his closing argument to the jury Monday, Seidman attacked a key government witness as ″a convicted perjurer and liar to the SEC.″
Federal prosecutors have conceded that David Lev, a brother-in-law of a Grossman cousin, was convicted of perjury in 1978 and has admitted lying to the SEC about where he got his securities information.
Lev, 48, a self-employed Brooklyn diamond dealer, testified that he received the Colt tip from another relative who allegedly received it from Grossman.
In attacking Lev and the government’s case, Seidman told the jury: ″there is no other witness and the (record of) telephone calls are not another witness.
″There is not a shred of evidence that in any way would back up the lies and fabrications David Lev told the witness stand,″ said Seidman.
He added that the government presented numerous telephone records as evidence, but not Grossman’s bank records.
But Assistant U.S. Attorney Howard Wilson countered: ″the government doesn’t have to prove Mr. Grossman got a nickle″ from the options trading.
Wilson, chief of the Criminal Division, said the theme of the government’s case was: ″why this entire family bought Colt options unless the information came from Mr. Grossman?″