Pair Convicted of Insider Trading by Getting Preview of Magazine Column
LOS ANGELES (AP) _ A former print shop worker and a stockbroker were found guilty of insider trading Wednesday for buying stocks based on Business Week tips scooped from the magazine before it hit the streets.
William N. Jackson, 34, of Long Beach, a former quality control analyst at a business that prints the magazine, faces up to $80,000 in penalties following the verdict by a civil jury.
Former Prudential-Bache broker Brian Callahan, 30, of Anaheim, faces up to $110,000 in penalties.
Neither the printing company nor Business Week were charged in the case.
Jackson reviewed a freshly printed copy of Business Week each Wednesday night, then phoned Callahan the next morning to buy stocks recommended in the magazine’s ″Inside Wall Street″ column, the government charged.
Though printed on Wednesday nights, Business Week does not reach newsstands until Thursday evening.
The government said the two men traded in 53 stocks between 1987 and 1988, Jackson making more than $19,000 for himself and two brothers, and Callahan making the same for himself and his clients and $8,000 in commissions.
The Securities and Exchange Commission said it will seek all the profits, plus interest, and triple that amount in penalties. After the verdict U.S. District Judge Stephen V. Wilson froze the men’s assets.
SEC lawyer Jeffrey Zuckerman praised the jury for its ″quick and decisive verdict″ after the four-day trial. The jury deliberated about an hour.
″I’m pleasantly surprised,″ Zuckerman said.
The men’s attorney, Joseph Connolly, argued the SEC was ″stretching the securities laws almost beyond recognition″ and called the violations marginal.
″These are a couple of guys who lost their jobs,′ he said. ″They’re not wealthy, either of them.″
Jackson acknowledged he bought stock but testified he didn’t realize he was breaking the law or confidentiality requirements of his company, R.R. Donnelley and Sons of Torrance, Calif.
Callahan testified he believed Jackson got his tips from a computer program.
The convictions were the latest in the government’s investigation of insider trading related to Business Week.
Previously, S.G. (Rudy) Ruderman, a former Business Week broadcast editor, and William Dillon, a former Merrill Lynch & Co. stockbroker, both pleaded guilty to trading on advance information and were sentenced to six months in prison.