Legal News

Former Dow Jones Director Settles Insider Trading Allegations

By Dan Slater

Hey there Law Blog readers. By now most you have digested the news that Peter Lattman, the original Law Blog, has decamped to become the Wall Street Journal’s private-equity reporter. To paraphrase one of our readers, even legal journalists are going into private equity. (Rimshot!)

As for my background, I too have the checkered past of a recovering lawyer. An early Law Blog devotee, Law Blog contributor and WSJ.com freelancer, I passed some of my days as a litigation associate working remotely with the LB crew. (This was only, of course, after fulfilling billable-hour requirements.) Then, in 2006, I waved goodbye to law-firm life and made a full-time jump to journalism.

As the new Law Blog, I promise, whenever possible, to channel Peter’s spirit. To me, that means doggedly delivering the same combination of informative reporting, entertainment and levity to which loyal Law Blog readers have become accustomed. Now, on to the news!

On April 13, 2007 — one day after learning of Rupert Murdoch’s plan to buy the Law Blog and related properties — a former Dow Jones director leaked news of the deal to a business associate, resulting in more than $8 million in ill-gotten gains for the associate, his son-in-law and his daughter. Yesterday, all four settled the insider-trading allegations with the SEC for $24 million. Here are stories from the WSJ and NYT.

According to reports, which read a bit like a corporations-class exam question, David Li (pictured), the CEO of Bank of East Asia and then-Dow Jones director, was notified of the deal on April 12 by Dow Jones’ then-general counsel, Joseph Stern. The next day, on a flight to Shanghai, Li told his friend, Michael Leung, about Murdoch’s upcoming $60-per-share bid. Leung then called his son-in-law, Kan King Won, who helped execute Li’s trades and placed some of his own. Li received updates about the takeover offer throughout April, the SEC alleges, and during that time Li and Leung spoke over the phone and met at least once in person.

By early May, Leung’s son-in-law had executed several trades, and on May 4, placed an order to sell his own position as well as Leung’s, netting himself about $40,000 and his father-in-law $8.1 in profits.

In a statement, Linda Thomsen, the SEC’s director of enforcement, said: “We hope this case sends a forceful reminder to corporate insiders that they need to exercise careful discretion when discussing important business matters outside the boardroom and executive suite.”

Full post as published by Law Blog - WSJ.com on February 06, 2008 (boomark / email).