Finger Pointing

By John S. DeMott

When the Securities and Exchange Commission snared Dennis Levine two months ago in the biggest insider-trading case ever, jittery Wall Streeters were sure the scandal would spread. Last week it did. Robert Wilkis, 37, until June a first vice president of E.F. Hutton and at one time with Lazard Freres, and Ira Sokolow, 32, a former vice president of Shearson Lehman Bros., were accused in a civil complaint drawn up by the SEC of conspiring with Levine, 33, a former managing director of Drexel Burnham Lambert, as part of an insider-trading ring. They allegedly enriched themselves by using or selling important advance information about companies and profiting on the movement of those firms' stocks.

Starting in 1979 with a $70,000 deposit at Credit Suisse Ltd. in the Bahamas, Wilkis conducted some 50 trades using inside information, according to the Government. Along the way, he transferred assets to other banks in the Cayman Islands, controlling the money through still more institutions in Liberia and the Bahamas and using the code name Mr. Blake. Later, under the name of Alan Darby, Wilkis talked with Levine, who called himself Mike Schwartz, about various insider-trading opportunities. Sokolow, who did not know Wilkis, began in 1981 to supply Levine with information about the pending actions of Shearson Lehman's corporate clients.

In just one deal in 1984, Wilkis bought 20,000 shares of retailer Carter Hawley Hale because he knew that it would receive a takeover bid from Limited Inc. Since the stock's value spurted as a result of the tender offer, he cleared a $95,000 profit. Levine bought 33,000 shares of Carter Hawley Hale and made $222,000. Sokolow, meanwhile, leaked advance information to Levine about Litton Industries' 1982 bid for Itek and R.J. Reynolds' 1985 offer for Nabisco Brands. For those tidbits, the SEC said, Sokolow was paid $120,000.

Now cooperating with Government investigators, Levine has pleaded guilty to criminal charges of income tax evasion, securities fraud and perjury. He will be sentenced this week, and could receive up to 20 years in prison and a $610,000 fine. He is in the process of turning over $11.5 million in illegal profits to a federal court.

Sokolow and Wilkis signed consent decrees to settle the SEC's civil charges against them, neither formally admitting nor denying guilt. Wilkis' lawyer, though, said his client, a graduate of Harvard College and Stanford University's business school, "acknowledges . . . his own violations of the law." Both men were banned for life from the U.S. securities business, and probably still face criminal charges. To earn a chance for leniency, Wilkis and Sokolow extended swift cooperation to authorities. Wilkis resigned from E.F. Hutton even before the SEC brought its case. Sokolow's lawyer said his client, who majored in economics at the University of Pennsylvania's Wharton School and earned a master's degree from the Harvard Business School, was experiencing a "terribly sad and difficult time for a young man of great decency and enormous promise." Wilkis agreed to pay $3.3 million, which represents stock-trading profits and penalties, while Sokolow will turn over $210,000, which includes fines and the money he made from selling information.

Meanwhile, Wall Street stands by nervously, with many traders bending over backward to avoid even the appearance of dealing in inside information. Sokolow, the SEC said, "enlisted the assistance of another investment banker in New York City" to gain inside information. Who that is should be known shortly. Insider trading--once regarded as an illegal act that no one would be arrested for, like setting off firecrackers on the Fourth of July--now looks to traders like a fat cherry bomb doing a random roll down Wall Street's corridors, with a lighted fuse.

With reporting by Jay Branegan/Washington and Raji Samghabadi/ New York