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SEC Charges British Executive With Insider Trading

November 23, 1994

WASHINGTON (AP) _ A federal judge on Wednesday froze the assets of a British businessman as regulators charged him with reaping $425,000 from insider trading in Hilton Hotels Corp. stock.

U.S. District Judge Robert Patterson in Manhattan also issued a temporary restraining order preventing Jeffrey C. Morris of Leeds, England, from further violations of federal securities laws. Patterson’s order also requires Morris to give a sworn statement and set a hearing for Dec. 6.

Securities and Exchange Commission regulators moved with unusual speed to file the insider trading case. The agency, which polices the financial markets, feared Morris would take the profits for the illegal trading back home - outside the jurisdiction of the United States - which would greatly complicate prosecution.

The SEC charged Morris purchased Hilton stock and options while possessing inside information about an upcoming announcement last week by the Beverly Hills, Calif.-based hotel chain. On Nov. 17, Hilton said it would hire an investment banker to explore possible repurchase of shares, sale or merger of the company, news that sent the company’s stock soaring by 17 percent that day.

Morris opened a brokerage account with Lehman Brothers on Nov. 14, the SEC said, just three days before the Hilton announcement.

Over the next two days, Morris purchased 10,000 shares of Hilton Hotels Corp. as well as 575 call options on Hilton’s stock on the Pacific Stock Exchange, the SEC said. Call options are bets that a stock’s price will rise in the future.

The Lehman broker tried to dissuade Morris from purchasing the risky call options, but the executive persisted, the SEC said.

The SEC said Morris sold the Hilton securities the day of the hotel chain’s announcement. The SEC asked the court to order Morris to surrender the profits from the trading and pay penalties totaling three times his illegal profits, or $1.28 million.

The SEC documents didn’t specify how or where Morris received the insider information. Morris told his broker at Lehman Brothers by telephone that he received a tip from a friend that ″Hilton Hotels was going to go up,″ SEC documents said. He also asked the broker if he had ever heard of Ben Lambert, who is a member of Hilton’s board of directors.

Lambert is not named in the case.

″We’re not making allegations against anyone else,″ said William R. McLucas, the SEC director of enforcement.

A Hilton spokesman declined comment. A telephone call placed to Morris’ attorney, after the close of business in England, was not answered.

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