Profiting from Murdoch

Posted by: Diane Brady on July 18, 2007

Who says U.S. regulators don’t pay enough attention to overseas investors these days? The SEC appears to be on the cusp of filing a lawsuit against Dow Jones Director David Li for an insider trading case that took place in Hong Kong.

Nothing has been proven yet. The Wall Street Journal (owned by Dow Jones) reports that Li, who’s chairman and CEO of the Bank of East Asia, has just received a Wells notice, which is the final step before action is taken. The case fascinates me because it shows how far afield the SEC will go to investigate suspicious trades. Even investors on the other side of the world will be pursued for activities in U.S. markets.

Li is a pal of Hong Kong businessman Michael Leung Kai Hung. Leung’s daughter and son-in-law happened to buy 415,000 shares of Dow Jones (thanks, in large part, to a loan of more than $3 million from Leung himself) two weeks before Rupert Murdoch’s bid for the company went public. Their profit (now frozen): $8 million. It reminds me of Sam Waksal telling his daughter to sell all of her stock in ImClone (which led the broker to tip off Martha Stewart, too) before a big decision came down—like the SEC wouldn’t come knocking as a result.

Big trades arouse suspicion, especially when they take place before big announcements. They’re easier to track, as are connections between individuals.(Full disclosure: I sold the stock I accrued as a Journal employee in Hong Kong during the late 1990s—two days after the news of Murdoch’s bid … Even my discount broker didn’t notice.)

Even if everyone is cleared of insider trading, this sends a powerful message to the global investment community.

Reader Comments

Thomas

July 19, 2007 2:03 AM

Incredible. People tend to go stupid when greed takes over.

I once worked for an executive who admitted to selling a block of his company shares after he reviewed the awful financial numbers a day before they got released to the public. Unfortunately for him the stock went up after the release! Served him right.

Come on, people. If you're going to cheat, don't be greedy about it. You'd think the SEC would go after David Li if he sold a few shares? No. For me, I find it much easier taking the straight and narrow --- that way I don't spend all my time worrying and looking over my shoulder. That peace of mind is worth some serious money.

Thomas

Derrick

July 20, 2007 10:15 AM

I heard there's potential for a Microsoft executive (I think his last name was Bell) to be investigated because he sold a ton of his MS shares right before the announcement of the XBOX 360 warranty extension.

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