NEW YORK — The Securities and Exchange Commission filed civil insider trading charges Monday against three individuals who figured prominently in the investigation of former investment banker Dennis B. Levine.
The civil lawsuit, filed in U.S. District Court in Manhattan, accuses Carlos A. Zubillaga, Brian S. Campbell and Kevin P. Barry with insider trading and related violations of the securities laws. Zubillaga, 39, was the Merrill Lynch & Co. broker in Caracas, Venezuela, whose name was included in an anonymous note to Merrill Lynch officials in New York in 1985. The note touched off the Levine investigation. It alerted officials to suspicious trading in the stock of companies that later were takeover targets.
Levine, an investment banker at Lehman Bros. Kuhn Loeb Inc. and later at Drexel Burnham Lambert Inc., pleaded guilty in 1986 to four felony charges. The plea followed an international investigation by the SEC that turned up evidence that Levine had made $11.6 million in illegal profits by using his confidential knowledge of pending takeover deals and mergers to trade in stocks. Levine served 17 months in prison.
His cooperation with prosecutors set in motion the series of major Wall Street insider trading and securities fraud cases that included former stock speculator Ivan F. Boesky, Drexel and its former junk bond chief Michael Milken and others.
According to the SEC charges filed Monday, Zubillaga, Campbell and Barry allegedly knew of Levine's illegal trading and essentially "piggybacked" on his trades in 1984 and 1985, buying smaller amounts of the same stocks or stock options. The trading included the securities of companies such as G. D. Searle, Textron Inc. and Nabisco Brands.
The SEC charges that the three men, and a real estate concern controlled by Campbell and Barry, made at least $397,000 in profits from illegal trading. The suit also charges that Barry's mother and brother and other individuals traded on information illegally given to them by the defendants.
Telephone calls to lawyers for all three defendants were not returned late Monday.
Levine has admitted carrying out his illegal trading through a bank in the Bahamas, Bank Leu International Ltd. Bernhard Meier, an official at the bank, carried out the trades for Levine, placing some of the orders through Campbell, who was then a broker at Merrill Lynch in New York. Campbell allegedly shared the information about Levine's trades with Zubillaga, a friend whom he had met when they were both brokers in Merrill Lynch's New York office, and with Barry, a New York lawyer who was a friend of Campbell's.
SEC Seeks Penalties
Campbell later left Merrill Lynch and went to work for Smith Barney, Harris Upham & Co., but resigned in 1987, a Smith Barney spokesman said. The spokesman said he didn't know Campbell's current occupation. An SEC official said Zubillaga is still believed to be living in Venezuela, but she said she did not know his current job.
The SEC asks that the three men be forced to give up the illegal profits and pay penalties amounting to three times the illegal profits. The suit also asks for an injunction barring them from future violations of securities laws.
Thomas Neukirk, the SEC's chief litigation counsel, said the SEC had been planning to file charges against the three men for several years, but waited until Monday because the agency's enforcement staff had been swamped with what it considered more pressing cases. "This was in the pile waiting to get done," Neukirk said.