An Anaheim stockbroker and a Torrance printing plant worker, who were convicted in May on civil charges relating to an insider trading scheme using advance information from Business Week magazine, were ordered Wednesday to repay $28,655 in illegal profits and fined $37,445.
Brian J. Callahan, a high-profile broker with Prudential-Bache Securities in Anaheim before he was fired for his role in the scandal, was ordered to repay $1,149 in personal profits and $8,000 in commissions earned on sales to clients.
U.S. District Judge Stephen V. Wilson in Los Angeles also issued a permanent injunction barring Callahan from future securities law violations and ordered him to pay a fine of $27,445, or an amount equal to three times his illegal profits.
William N. Jackson, a former quality control inspector at the R.R. Donnelley printing plant in Torrance, was ordered to give back $19,507 in illegal profits and pay a $10,000 fine. He also has been fired from his job.
The case was one of five around the country involving stock transactions based on advance knowledge the contents of Business Week's "Inside Wall Street" column. Securities and Exchange Commission attorney Christopher Petito said three of the other cases have been settled and one is still outstanding.
Patricia A. Friedel, an attorney for Callahan, said he would appeal both the original verdict and the penalty.
Jackson's attorney, Jack Samet, said his client would not appeal. "Given the determination of the jury that the conduct was unlawful, we accept as reasonable the conclusions of the judge," Samet said.
Samet noted that Jackson was not formally barred from future violations of securities laws and interpreted that as an indication that Jackson was "viewed by the judge as less culpable."
The SEC had asked that Callahan also be forced to repay nearly $20,000 in profits his clients earned between 1987 and 1989 from trades based on the inside information. But Petito said the penalty of three times the illegal personal profit is the largest allowed under the law and that he believes Callahan is the first defendant ever to be subject to that sanction.
Jackson said during the trial that he did not believe he was doing anything wrong by using information from "Inside Wall Street." He would call Callahan after the magazine had been printed but before it hit the streets and order stocks based on what was in the column.
Callahan maintained that he did not know where Jackson worked and that he had no idea that the stock tips were coming from Business Week. Attorneys for the defendants also argued that in any case, the information did not truly constitute insider information.
The SEC countered that Donnelley kept its workers well informed of the law and that Callahan was fully aware of the origins of Jackson's information.