Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 10, 1995 TAG: 9502100091
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Federal prosecutors announced a sweeping securities-fraud indictment against six people Thursday, charging them with illegal profits on insider tips about the corporate takeover plans of AT&T Corp.
Several others, including a former AT&T labor-relations executive, also were implicated. Prosecutors said the scheme netted $2 million and was one of the biggest cases of Wall Street corruption since the takeover heyday of the 1980s.
The six suspects were charged with conspiracy to commit securities fraud, fraud in connection with takeover offers, wire fraud and obstruction, U.S. Attorney Mary Jo White told a news conference in Manhattan.
Federal officials emphasized that AT&T itself never was implicated.
The indictment says that for more than four years, the defendants were fed illicit tips about AT&T's takeover plans and used the information to buy and sell securities for profit.
Federal law prohibits this practice, known as insider trading, which proliferated during the 1980s when takeovers frequently drove up the stock prices of target companies.
``This indictment sends a clear message that insider trading will not be allowed to erode investor confidence in the stock market,'' White said. ``The public demands a level playing field for all investors.''
Between December 1988 and last year, White said, the defendants bought and sold securities of companies that AT&T planned to acquire, acting before other potential investors knew about the company's plans.
The companies targeted were Paradyne, NCR Corp., Digital Microwave Corp. and Teradata Corp.
The defendants were identified as Joseph Cusimano, William Mylett, Robert Flanagan, Thomas Flanagan, Albert Brody and Robert Allen. Allen is not related to AT&T's chairman, Robert E. Allen.
Four of the defendants were arrested Thursday. If convicted of the criminal violations of securities laws, they face prison terms and fines.
The indictment also said two former AT&T employees have pleaded guilty to criminal charges in relation to the scheme. They were identified as Charles Brumfield, a former labor-relations manager at AT&T's Morristown, N.J., office, and Thomas Alger, his aide.
The federal Securities and Exchange Commission simultaneously announced civil law violations by 17 individuals, including the six against whom the U.S. Attorney's Office brought criminal charges and the two former AT&T employees. The SEC complaint seeks a return of the illegal profits and penalties.
AT&T is the country's largest U.S. long-distance telephone company, with an estimated 60 percent of the nation's long-distance traffic. It has bought several big companies in recent years and moved aggressively into the cellular telephone business with its $11.5 billion acquisition of McCaw Cellular Communications in September.
The company made a $4.71 billion profit in 1994, its best performance since the 1984 divestiture of the local phone companies. Its previous record profit was $3.67 billion in 1990. It had revenues of $75.09 billion in 1994, up from $69.35 billion.
AT&T said it had signed up 1 million new residential long-distance customers by the end of the year as a result of an aggressive marketing promotion.
by CNB