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Former financial analysts accused of insider trade
NEW YORK, May 10 (Reuters) - U.S. prosecutors on Thursday said a former Morgan Stanley (MS.N: Quote, Profile , Research) financial analyst and her husband, an ex-hedge fund analyst at ING Group (ING.AS: Quote, Profile , Research), have been arrested on insider trading charges.

The pair, Xujia "Jennifer" Wang and Ruopian Chen of Englishtown, New Jersey, are accused of trading based on material, nonpublic information that Wang obtained from Morgan Stanley, the U.S. Attorney's Office in Manhattan said.

Wang and Chen were each released on $2 million bail bonds on their own recognizance.

Prosecutors said the couple, from December 2005 through March 2007, traded in the securities of Town and Country Trust, Glenborough Realty Trust Inc. and Genesis HealthCare Corp. (GHCI.O: Quote, Profile , Research), based on nonpublic information.

The bail is secured by their New Jersey home and $150,000 in cash and property. Chen consented to freeze his Charles Schwab account and to strict electronic monitoring of his whereabouts. Both surrendered their travel documents.

Glenborough was acquired by a Morgan Stanley affiliate in November 2006. Town and Country announced in late 2005 it would sell itself to investors led by units of Morgan Stanley and Onex Corp. (OCX.TO: Quote, Profile , Research) of Canada.

The two resigned earlier this year from their respective employers, following an SEC inquiry and internal investigations by Morgan Stanley and ING, prosecutors said. Prosecutors said the couple conducted the trades in an Interactive Brokers Group Inc. (IBKR.O: Quote, Profile , Research) account set up in the name of Wang's mother, Zhiling Feng, who lives in Beijing, China.

Wang, 31, who worked as a vice president in Morgan Stanley's finance department, and Chen, 34, then the vice president at ING Investment Management Americas, were each charged with one count of conspiracy to commit securities fraud and three counts of securities fraud.

The pair were expected to appear before a U.S. magistrate judge in Manhattan federal court later on Thursday.

Earlier on Thursday, a former Morgan Stanley lawyer and her attorney husband pleaded guilty to conspiracy and securities fraud in a Wall Street insider trading case that has snared more than a dozen people. That case was first disclosed in early March.

Last week, a former Credit Suisse (CSGN.VX: Quote, Profile , Research) investment banker was accused of leaking inside information. Prosecutors contend he tipped off a banker in Pakistan about acquisitions before they were publicly disclosed, including the $32 billion buyout of Texas power company TXU Corp. (TXU.N: Quote, Profile , Research).

Meanwhile, a married couple in Hong Kong were accused in a civil complaint by the SEC this week of insider trading stemming from what the government said was unusual and suspicious purchases of Dow Jones & Co Inc. (DJ.N: Quote, Profile , Research) stock prior to News Corp.'s (NWSa.N: Quote, Profile , Research) $5 billion takeover bid.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070511:MTFH56003_2....


Prominent in Hong Kong and, Perhaps, in the Dow Jones Inquiry

HONG KONG, May 9 — Like David Rockefeller in the United States and a succession of Rothschilds in Europe, David K. P. Li has long received the accolades that come to aristocratic bankers who combine wealth, political influence and public service.

Mr. Li is a cabinet official here, a senior member of the legislature and the chairman and chief executive of the Bank of East Asia, the flagship of the Li family’s business empire. And he has been leading Hong Kong’s recent campaign to establish itself as Asia’s main financial center.

So it has been all the more surprising that American regulators are expected to examine whether Mr. Li had any role in the possible leak of confidential information to a Hong Kong couple accused of making millions of dollars from insider trading of shares in Dow Jones.

Mr. Li, a longtime director of Dow Jones, publisher of The Wall Street Journal, has not been accused of any wrongdoing, and has denied leaking any information about a pending bid by the News Corporation for Dow Jones. But people close to Dow Jones said that the company had opened an internal review of his actions, in a case that highlights the dangers that accompany the perks of being a company director.

The case has expanded beyond the Dow Jones review, as both the Securities and Exchange Commission and the attorney general for New York State are investigating trading in Dow Jones stock and options in the days before the News Corporation bid was made public.

In a court filing in New York on Tuesday, the Securities and Exchange Commission accused Kan King Wong and Charlotte Ka On Wong Leung of Hong Kong of making $8.2 million from a “highly suspicious” pattern of trading. Ms. Wong is the daughter of Michael Leung, a longtime business associate and charity board ally of Mr. Li. According to the court filing, some of the couple’s stock purchases were financed by $3.1 million transferred by Mr. Leung.

The S.E.C. gave no indication of how the couple might have learned about the purchase and did not mention Mr. Li. Dow Jones and the News Corporation both have operations in Hong Kong, while at least six banks and law firms in the United States are advising the two companies, creating many possibilities for leaks.

Hong Kong’s prominence in the Dow Jones stock inquiry could hurt the city’s long-running attempts to shake its reputation for financial regulations that are weaker than the West’s although stronger than in most of Asia. The inquiry could also hurt the effort by Hong Kong, championed by Mr. Li, to become Asia’s dominant financial center.

The 68-year-old Mr. Li is a leading member of one of the most prominent families in business and politics in Hong Kong, where family connections are crucial. Mr. Li’s brother, Arthur, is Hong Kong’s education secretary and a cabinet official; their cousin, Andrew Li, is the chief justice of Hong Kong’s highest court.

One of David Li’s uncles, Ronald, was once the chairman of the Hong Kong stock exchange. Another uncle, Simon, is a former judge who ran unsuccessfully to become Hong Kong’s chief executive in 1996.

The Li family has one of Hong Kong’s most aristocratic lineages. David Li’s great-grandfather, Li Shek-tang, grew wealthy as a rice mill and shipping magnate, bringing rice to Hong Kong from Vietnam. David Li’s grandfather, Li Koon-chun, was a founder of the Bank of East Asia in 1918, the first bank in Hong Kong not owned by immigrants from Britain.

“Looking at the Li family, they just produce so many people involved in so many things over generations, and I don’t see any other Hong Kong family that can match this,” said Frank Ching, a local columnist who wrote a book about the family, “Li Dynasty” (Oxford University Press, 1999).

While Mr. Li denies he was the source of the leak, he is known to have social and business ties to Mr. Leung, the father of one of the people under scrutiny.

Mr. Leung is a director of the board of the Bank of East Asia (Canada) and a director of the bank’s insurance unit, Blue Cross (Asia Pacific) Insurance, which is not affiliated with Blue Cross/Blue Shield in the United States, corporate filings show. Mr. Leung is also a member of the supervisory board of the Chinese operations of the Bank of East Asia.

When the Bank of East Asia bought the holding company of First Pacific Bank in 2001, Mr. Leung was one of three directors chosen by the Bank of East Asia to help oversee a merger of the two financial institutions.

Mr. Leung, a 64-year-old former social worker who became a textiles and logistics entrepreneur in the 1970s and 1980s, has also been the vice chairman since 1982 of St. James Settlement, a social welfare charity here. Mr. Li is the charity’s chairman, and the younger of his two sons, Brian, is also on the charity’s executive committee.

Today, Mr. Leung is retired though he still has his hands in various business interests. He has also remained an active investor, discussing his stock trading strategies last month with The Sing Tao Daily, a Chinese business-oriented newspaper.

Mr. Leung told the newspaper that he liked to buy new stocks and sell them quickly for a profit, and that when he found a new stock that interested him, he would advise family members to invest. Mr. Leung “would call a family meeting with his children, son-in-law, mother and even his girlfriend — nine people in all — so they could buy big together,” the newspaper reported.

Mr. Leung and his daughter and son-in-law all have unlisted numbers and could not be reached for comment.

Mr. Li declined through a spokeswoman to comment but in an interview on Tuesday night with The Wall Street Journal he denied that he leaked information to anyone. He has been a director of Dow Jones since 1993 and serves on the audit and corporate governance committees.

Mr. Li has used his connections in Beijing to push for Hong Kong to be built up as a financial center to rival Tokyo and Singapore. He has contended that Shanghai cannot be a strong contender because the rule of law is less clear there than in Hong Kong, and because mainland China still has many capital controls.

“If we do not act now, inertia will set in and business will gravitate to established financial centers overseas,” he warned in January.

Insider trading cases are often difficult to unravel and even harder to prosecute. In the United States, someone who discloses inside information in violation of a duty can be held liable for insider trading if the person who receives the tip then trades securities on the basis of that information. The S.E.C. has filed charges against tippers who did not trade. Regulators would have to show that the tipper knew the person receiving the information would, in fact, trade.

Hong Kong has been trying to improve its reputation for financial dealings, especially in comparison with the Shanghai and Shenzhen stock markets, where insider trading and other forms of stock manipulation have long been a problem.

But Hong Kong only made insider trading a criminal offense in 2003, and has not yet brought any prosecutions under the statute, said David M. Webb, a director of the Hong Kong stock exchange and longtime advocate of improved corporate governance.

“They should by now have been able to find at least one case that they’d be able to prove beyond a reasonable doubt,” he said.

James To, a senior member of the Hong Kong legislature, said that Hong Kong’s extradition agreement with the United States covers criminal cases of insider trading. Only civil complaints have been filed so far in the Dow Jones stock case.

Cindy Tam, a spokeswoman for the Hong Kong Securities and Futures Commission, said the government agency had agreed to cooperate with the S.E.C. when needed, but she declined to comment on any specific cases.

http://www.nytimes.com/2007/05/10/business/media/10dow.html?em&ex=1178942400&en=601463a0ce9a....