Federal authorities revealed a stunning securities fraud scheme today that implicated 17 people including an ex-AT&T; Corp. executive and his son, accusing them of illicit stock trading on secret takeover plans of the giant telephone company for more than four years.
Six people were charged in a federal indictment and another two pleaded guilty, the U.S. Attorney’s office in Manhattan said. These eight people and nine others were named in a civil securities fraud action by the Securities and Exchange Commission, the federal agency that polices the financial markets.
AT&T; itself wasn’t charged with any wrongdoing, but the action marked the most aggressive crackdown on securities fraud since the Wall Street scandals of the 1980s takeover heyday that made household names out of Ivan Boesky and Michael Milken.
Officials said the 17-person ring was masterminded by Charles Brumfield, a former AT&T; labor relations manager at the company’s Morristown, N.J., offices, who parlayed secret knowledge of takeover plans by the company into lucrative tips to friends and family to make $2.6 million from stock purchases. The alleged wrongdoers were spread throughout five Eastern states.
Federal law prohibits this practice, known as insider trading, which proliferated during the 1980s era of takeovers that frequently drove up the stock prices of target companies.
Six defendants were charged with conspiracy to commit securities fraud, fraud in connection with takeover offers, wire fraud and obstruction in connection with AT&T;’s takeover plans between December 1988 and last year.
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 unrelated to AT&T;’s chairman, Robert E. Allen.