Wed, 3 Oct 2001, 4:17pm EDT
Bank of America Among 38 Stocks in SEC's Attack Probe (Update4)
Bank of America Among 38 Stocks in SEC's Attack Probe (Update4)
(Adds SEC spokesman in sixth paragraph, list of companies and
reaction from corporate officials in last paragraphs)
Washington, Oct. 3 (Bloomberg) -- The U.S. Securities and
Exchange Commission is investigating whether shares of Bank of
America Corp., American Express Co., Lockheed Martin Corp. and 35
other companies were the subject of insider trading before the
terrorist attacks on New York and Washington.
Stocks with trading under review by the SEC were disclosed in
a notice posted on the Web site of the Investment Dealers
Association of Canada, that country's securities industry group.
The document, listing more than three dozen stocks the SEC has
kept confidential, asked Canadian brokerages to cooperate with the
investigation.
The SEC, the Federal Bureau of Investigation, U.S. Treasury
agents and authorities in Europe and Asia are combing brokerage,
market and banking records for bigger-than-normal trading or money
transfers that might expose who was responsible for assaults that
killed thousands of people.
The Canadian group's notice asked brokers to review trading
of the 38 stocks ``with a view of determining any unusual trading
patterns, particularly any `negative' trading'' such as buying put
options that rise in value as a company's stock price falls. The
SEC is seeking records from Aug. 27 to Sept. 11, the two-page
document said.
Markets Tumble
U.S. markets tumbled after terrorists flew hijacked passenger
jets into the World Trade Center's twin towers in New York and the
Pentagon, across the Potomac River from Washington. The Dow Jones
Industrial Average fell 14.3 percent during the first week of
trading after the attacks. The Standard and Poor's 500 Index sank
11.6 percent, and the Nasdaq Composite Index dropped 16 percent.
SEC spokesman Michael Robinson declined to comment on the
Canadian Web-site posting or the status of the investigation.
``We are still carrying on investigations into trading around
Sept. 11,'' said Karin Loudon, a spokeswoman for the Financial
Services Authority, the U.K. markets regulator. ``We haven't
discovered anything yet.''
Charlotte Judet, a spokeswoman for Paris-based Commission des
Operations de Bourse, said French investigators continue to review
unusual trading in some stocks before the Sept. 11 assault. She
declined further comment.
Option Volume Surges
A Bank of America option that would profit if the No. 3 U.S.
bank's stock fell below $60 a share had more than 5,900 contracts
traded on the Thursday and Friday before the Sept. 11 assaults,
almost five times the previous average trading, according to
Bloomberg data. The bank's shares fell 11.5 percent to $51 in the
first week after trading resumed on Sept. 17.
While investigators have focused on short selling and trading
in put options, some defense contractors on the SEC's list,
including Raytheon Co., had higher volume in options that profit
from rising stocks.
A Raytheon option that makes money if shares are more than
$25 each had 232 options contracts traded on the day before the
attacks, almost six times the total number of trades that had
occurred before that day. A contract represents options on 100
shares. Raytheon shares soared almost 37 percent to $34.04 during
the first week of post-attack U.S. trading.
No Evidence Yet
Officials at the SEC and in Europe repeatedly have said they
hadn't yet turned up solid evidence of terrorist trading, and the
trading surges may simply be coincidental. SEC Chairman Harvey
Pitt and Treasury Secretary Paul O'Neill have said they continue
to take the investigation seriously.
The SEC's list of companies, which was reported earlier today
by Associated Press, was concentrated in airline, brokerage,
insurance, banking and defense stocks.
Delta Air Lines Inc., Northwest Airlines Corp. and Southwest
Airlines Co. were among seven airlines listed, joining AMR Corp.
and UAL Corp., already known to be a focus of the probe. Trading
of bearish options in AMR and UAL surged in the days before
terrorists hijacked and crashed two American Airlines and two
United Airlines jets.
Trading in Boeing Co., Lockheed Martin, and Raytheon is being
examined, the notice said. Market activity in Cigna Corp., MetLife
Inc., American International Group Inc. and other insurers also is
being reviewed.
Lehman Brothers Holdings Inc. and American Express joined
brokerage and financial services companies on the list. It already
has been reported that securities of Morgan Stanley Dean Witter &
Co., Bear Stearns Cos. and Citigroup Inc. were being scrutinized.
Brokerage, Airline Options
Morgan Stanley was the World Trade Center's biggest tenant,
and Citigroup has estimated that its Travelers insurance unit may
pay $500 million in claims from the terrorist assaults.
Market makers handling trading in AMR and UAL options have
said they noticed suspicious or peculiar trading in those
securities in the days before the terrorist attacks.
Trading in some AMR and UAL put options surged to as much as
285 times the previous average volume during the days before
terrorists crashed hijacked jets into the World Trade Center's
twin towers and the Pentagon.
Following are companies identified in the notice as with
stock trading that's being probed by the SEC:
American Express
American International
AMR
Axa SA
Bank of America
Bank of New York Co.
Bank One Corp.
Bear Stearns
Boeing
Carnival Corp.
Chubb Corp.
Cigna
Citigroup
CNA Financial Corp.
Continental Airlines Inc.
Delta Air Lines Inc.
General Motors Corp.
Hercules Inc.
John Hancock Financial Services Inc.
L-3 Communications Corp.
Lehman Brothers
Lockheed Martin
Lone Star Technologies Inc.
LTV Corp.
Marsh & McLennan Cos.
MetLife
Morgan Stanley
Northwest Airlines
Progressive Corp.
Raytheon
Royal & Sun Alliance Insurance Group
Royal Caribbean Cruises Ltd.
Southwest Airlines
UAL
US Airways Group Inc.
Vornado Realty Trust
W.R. Grace & Co.
XL Capital Ltd.
Raytheon spokesman David Polk declined to comment. Southwest
Airlines Chief Financial Officer Gary Kelly said he hasn't been
contacted by the SEC. Boeing spokesman John Dern and Lockheed
Martin spokesman Jim Fetig each said his company hasn't been
notified by the SEC of an investigation.
General Motors CEO Richard Wagoner said on the CNBC cable
network that company officials have no information to make them
think there was unusual trading. LTV officials declined to
comment.
bloomberg.com |
