Two Firms, Three Wall Street Pros Indicted in Insider Scam
Nov. 02, 1988
NEW YORK (AP) _ A federal grand jury indicted two small brokerage firms and three investment professionals Wednesday, including a researcher for embattled Drexel Burnham Lambert Inc., on insider trading and other fraud charges.
The multiple-count indictment announced by the U.S. Attorney's office stemmed from the government's nearly 3-year-old crackdown on Wall Street corruption.
It cast a new cloud over Drexel, which is fighting civil fraud charges by the Securities and Exchange Commission and is under investigation by a separate grand jury over the company's relationship with Ivan F. Boesky, the imprisoned insider trader who turned state's evidence.
The latest charges are partly an outgrowth of the so-called ''Yuppie Five'' insider trading scandal two years ago, in which four young investment professionals and one of their clients confessed to charges of stealing secret information about takeovers and using it to profit in the stock market.
Those five, already sentenced in the earlier charges, have been cooperating with federal investigators.
Accused in the Wednesday indictment were Marcus Schloss & Co. and Victor Teicher & Co., two small investment firms in Manhattan. Also accused were D. Ronald Yagoda, head of arbitrage trading at Marcus Schloss; Victor Teicher, head of Teicher; and Ross Frankel, head of arbitrage research at Drexel.
Through their attorneys, all the defendants denied any wrongdoing and vowed to fight the charges in court.
The indictment accused the defendants of participating in an insider trading ring with the Yuppie Five and an unidentified trader in Boesky's now- defunct firm.
They allegedly used non-public information about Union Carbide Corp., American Can Corp., Allegheny Inc., Avondale Mills and American Brands Inc. to trade profitably in the stocks of those companies.
The indictment also alleged that Frankel improperly funneled to Teicher the identities of four companies on Drexel's so-called confidential ''phantom list,'' identifying potential targets of takeovers the firm might finance. The indictment identified the companies as Republic Airlines Inc., Westchester Financial Services Corp., Western Union Corp. and Warnaco Inc.
The defendants face varying counts of securities fraud, mail fraud, wire fraud, perjury and obstruction of an SEC investigation.
Yagoda was accused of 10 counts, Teicher 22 counts and Frankel seven counts. Each faces a maximum penalty of five years in prison and a $250,000 fine for each count.
Schloss was accused of eight counts and Teicher's firm 22 counts. Both face a maximum fine of $500,000 for each count.
The defendants will enter their pleas in federal court on Nov. 10.
Yagoda 44, lives in Far Hills, N.J.; Teicher, 37, resides in Englewood, N.J., and Frankel, 32, is from Manhattan.