10B
Friday, February 10, 1995
UNIVERSITY DAILY KANSAN
Six charged with insider trading
The Associated Press
NEW YORK — Federal prosecutors announced a sweeping securities fraud indictment against six people yesterday, charging them with illegal profits on insider tips about the corporate takeover plans of AT&T Corp.
Several others, including a former AT&T labor relations executive, also were implicated in the alleged scheme, which netted $2 million and marked one of the biggest cases of Wall Street corruption since the takeover heyday of the 1980s.
The six defendants were charged with conspiracy to commit securities fraud, fraud in connection with takeover offers, wire fraud and obstruction, U.S. Attorney Mary Jo White told a news conference in Manhattan.
Federal officials emphasized that AT&T itself was never implicated in the scheme.
The indictment says that for more than four years, the defendants were fed illicit tips about the takeover plans of the nation's biggest long-distance telephone company and used the information to buy and sell securities for profit.
Federal law prohibits this practice, known as insider trading, which proliferated during the 1980s when takeovers frequently drove up the stock prices of target companies.
"This indictment sends a clear message that insider trading will not be allowed to erode investor confidence in the stock market," White said. "The public demands a level playing field for all investors."
Between December 1988 and last year, White said, the defendants bought and sold securities of companies that AT&T planned to acquire, acting before other potential investors knew about the company's plans.
Paradyne, NCR Corp., Digital Microwave Corp. and Teradata Corn.
The defendants were identified as Joseph Cusimano, William Mylett, Robert Flanagan, Thomas Flanagain, Albert Brody and Robert Allen. Allen is unrelated to AT&T's chairman, Robert E. Allen.
The companies targeted were
Four of the six defendants were arrested today.
The indictment also said two former AT&T employees already have pleaded guilty to criminal charges in relation to the scheme. They were identified as Charles Brumfield, a former labor relations manager at AT&T's Morristown, N.J., office, and Thomas Alger, his aide.
The federal Securities and Exchange Commission simultaneously announced civil law violations by 17 individuals, including the six against whom the U.S. Attorney's Office brought criminal charges and the two former AT&T employees.
The SEC complaint seeks a return of the illegal profits and penalties.
AT&T is the country's largest U.S. long-distance telephone company, with an estimated 60 percent of the nation's long-distance traffic. It has purchased a number of big companies in recent years and moved aggressively into the cellular telephone business with its $11.5 billion acquisition of McCaw Cellular Communications last September.
The company made a $4.71 billion profit in 1994 — its best performance since the 1984 divestiture of the local phone companies. Its previous record profit was $3.67 billion in 1990. It had revenues of $75.09 billion in 1994, up from $69.35 billion.
The company has been facing stiff competition from other long-distance carriers, losing customers to MCI Communications Corp. and Sprint Corp. The company began an aggressive marketing promotion last spring to win back customers.
Russia's weaknesses become obvious in Chechen conflict
By Edith M. Lederer Associated Press Writer
LONDON — David didn't defeat Goliath in Chechnya — but he delivered powerful and unexpected blows to the body and especially to the ego.
What went wrong? Why did poorly equipped, inexperienced Chechen fighters hold off heavily armed Russian troops carrying the mantle of the old Soviet superpower for more than a month?
As Chechen separatists take their war for independence from Russia into the countryside, military analysts have been examining Moscow's poor performance in its first military encounter since the Cold War ended.
Some reasons for Russia's bungled invasion of Chechnva are clear.
Units that had never trained together were sent to fight together motorized rifle troops, airborne troops, naval infantry and Ministry of Interior soldiers.
Commanders used disastrous military tactics to try to take the Chechen capital of Grozyn, sending tanks that were destroyed by Chechen petrol bombs.
On top of that, the high command in Moscow was wracked with dissension about the merits of the war.
Jonathan Eyal of the Royal United Services Institute for Defense Studies said the decision to fight was taken by the Security Council in Moscow, which is responsible only to President Boris Yeltsin, and never had real military support.
Behind the shind to invade Chechyna in the inhospitable winter, with
little preparation time, was a bungled covert operation by Russia's security service to topple Chechen President Dzokhar Dudayev, Eyal said. After 20 captured Russian security agents were paraded on Chechen television, the security council decided in late December to invade.
"As far as the military is concerned, the entire urgency of the operation was to cover the backsides of the security services, to cover this bungled operation. Their hearts were not in it. They sent units not up to full strength — kids with a few months of training." Eyal said.
Mark Galeotti, a lecturer in international history at the University of Keele, wrote in Jane's Intelligence Review that the first month of the Chechen invasion cost more Russian lives than the first six months of the
Afghan war. He gave no figures, but Russian officials have reported 1,200 servicemen dead.
Col. Andrew Duncan, a representative for the International Institute for Strategic Studies, said the Russian military faced "very real challenges" in mounting the Chechnya operation because it was in a period of transition.
Eyal said the real impact of Chechnya was that Yeltsin was now more detested by the military than ever before.
"For the West, the real message is that whenever confronted by what is essentially a difficult constitutional problem, the first reaction of the Russian government is to resort to force. This is not the instinct of democracy that we expected," he said.
The Palestinians accused Rabin of using security concerns as an excuse not to honor an agreement to withdraw troops from the West Bank and permit Palestinian elections.
While the two leaders met, Palestinian police raided the Gaza City headquarters of Islamic Jihad, the radical group that carried out the latest bomb attack. Police also detained three leaders of the Muslim militant group Hamas.
"If there is an Israeli wish for political separation, then we welcome it," Arafat said. "But we will not welcome that they lock us in Gaza and the West Bank and hold the keys to the big prison."
Israeli, PLO leaders fail to resolve any disputes
"Security guarantees should be given through the political process and not through procrastination," said Palestinian spokesman Yasser Abed-Rabbo.
Rabin also refused Arafat's demand that Israel lift a 19-day closure of the West Bank and Gaza Strip imposed after a bombing attack last month by Islamic militants that killed 21 Israelis.
But Rabin said yesterday that Arafat must do more, including disarming his opponents.
Israeli Prime Minister Yitzhak Rabin and Palestine Liberation Organization chief Yasser Arafat did not resolve any disputes during their 21/2-hour meeting yesterday at an Israel-PLO command post in northern Gaza.
On a related issue, negotiator Yossi Sarid said Israel could not open the border yet because of warnings that Islamic militants planned attacks marking the Feb. 25 anniversary of the Hebron massacre of 29 Muslims by a Jewish settler.
Rabin told Arafat he must rein in Islamic militants before Israel will talk about expanding Palestinian self-rule to the West Bank. Fifty-five Israelis have been killed by Palestinian militants since October in a surge of suicide bombings.
Reflecting the tensions, the two did not hold a joint news conference. However, they agreed to meet again next Thursday.
a tense Arafat, speaking later at his Gaza City office, complained that Israel was turning the Palestinian areas into a giant holding cell.
EREZ JUNCTION, Gaza Strip — The crisis in Israeli-Palestinian relations deepened yesterday after the countries' leaders failed to agree on how to expand Palestinian autonomy without endangering Israel's security.
The Associated Press
"If Rabin doesn't help Arafat in proving to the Palestinians that peace pays off, Arafat will not be able to gain control over the opponents of peace," an editorial in the Israeli daily Maariv said yesterday. "But if Arafat does not succeed in overcoming the terrorist organizations, Rabin will not be able to help him."
The closure bars Palestinians from entering Israel, and keeps tens of thousands of Palestinians from their jobs.
If Arafat intensifies his crackdown on militants by next Thursday's meeting with Rabin, "we will respond in kind," Sarid told Israel TV.
Under the Israel-PLO autonomy accord, Israel troops should have pulled out of West Bank towns by July 1994, in advance of Palestinian general elections. Delays in implementing autonomy pushed back the election date. Then Israelis had second thoughts following this fall's attacks by Palestinian militants.
Wages earned in Israel are a mainstay of the Palestinian economy.
Yesterday's summit rehashed the arguments that have bogged down the negotiations for months.