Settlement in insider trade case

Former Dow Jones & Co. director David Li and two other Hong Kong residents have agreed to pay more than $24 million to settle a U.S. probe of alleged insider trading before last year’s takeover of the media company by News Corp.

Li, chairman of Bank of East Asia Ltd. and a Hong Kong legislator, will pay an $8.1-million fine to settle allegations that he tipped off close friend Michael Leung a day after learning of the pending bid in April, the Securities and Exchange Commission said.

Leung, allegedly helped by his daughter and son-in-law, bought $15 million in Dow Jones stock before the offer became public, the agency said.

Shares of Dow Jones surged 55% when News Corp. unveiled its bid May 1.

Li “knew, or was reckless in not knowing, that he conveyed nonpublic information” to Leung, the SEC said in its complaint.

The case “makes clear that the SEC will move fast, and decisively, not only in the United States but around the world to protect investors,” SEC Chairman Christopher Cox said.

Michael Leung agreed to pay $8.1 million and the same amount in restitution. His son-in-law, Kan King Wong, accused of reaping an additional $40,000 by buying shares in a separate account at TD Ameritrade Holding Corp., agreed to forfeit that profit and pay another $40,000 as a fine.

Leung’s daughter, Charlotte Wong, who is married to Kan King Wong, was also a defendant in the case and part of the settlement. She wasn’t required to pay any money but agreed to refrain from securities law violations.

The four didn’t admit or deny wrongdoing in settling the SEC’s complaint.

An attorney for the Wongs declined to comment, as did a Dow Jones spokesman. Lawyers for Li and Michael Leung couldn’t be reached.

Li, 68, has served on dozens of public and private boards in Hong Kong, according to the SEC.

The settlement doesn’t bar him from serving as an officer or director at a U.S. company, a sanction often imposed on directors in insider-trading cases.

Faster payment to investors sought

The Securities and Exchange Commission has formed an office to quickly distribute financial penalties to wronged investors after government watchdogs said the agency wasn’t returning the money quickly enough.

The SEC’s Office of Collections and Distributions will pay out more than $5 billion the regulator has recovered from securities law violators, the agency said Tuesday.

Since gaining the authority under the Sarbanes-Oxley law to distribute financial penalties, the commission has given more than $3.5 billion to investors. Before the law was enacted in 2002, the SEC sent financial penalties collected from its enforcement actions to the U.S. Treasury.

Richard D’Anna, a former executive at Deutsche Bank’s Alex. Brown brokerage, was named director of the new SEC office, the agency said Tuesday. He will be responsible for ensuring that investors receive penalties paid by mutual funds, banks and insurers accused of violating securities laws.

Investment firm loses top rating

A firm owned indirectly by credit unions that invests on their behalf lost its AAA rating from Standard & Poor’s after reporting a $760-million drop in the value of sub-prime-affected securities in its portfolio.

U.S. Central Federal Credit Union, based in Lenexa, Kan., is owned by 26 regional or “corporate” credit unions, which in turn are owned by 8,400 local credit unions. The credit unions are owned by their customer-members, who number 95 million nationwide.

S&P cut its rating on U.S. Central’s debt by one level to AA+ and said it might further lower the rating.

“With the housing market weakening to levels not seen since the early 1990s down- cycle, we expect U.S. Central’s large portfolio of mortgage-related securities to further decline in value,” S&P said.

“I’ve never seen a market disruption or interruption like this,” U.S. Central Executive Vice President Dave Dickens said in an interview before S&P’s announcement. “Fixed-income markets are in a state of disarray.”

From Times Wire Services