Couple accused of illicit trades

Inside knowledge of T&C deal alleged

May 12, 2007|By June Arney | June Arney,Sun reporter

A former Morgan Stanley vice president, who was working on the Wall Street firm's deal to buy Town and Country Trust, and her husband secretly began buying shares of the Baltimore apartment complex owner shortly after financing for the acquisition was approved, according to federal prosecutors.

The couple allegedly funneled the shares into an account set up in the name of the vice president's mother, a resident of China, and sold them two months later for more than a $21,000 profit.

That was the first of three alleged illegal trading schemes outlined in a complaint filed this week in federal court in New York after investigations by the Securities and Exchange Commission and the FBI.

Adhering to a pattern of deliberate deception that lasted from the end of 2005 to January of this year, the former Morgan Stanley executive, Jennifer Wang, and her spouse, Rubin Chen, netted more than $600,000 by trading on confidential information that Wang was privy to, the complaint alleged.

Wang, 31, and Chen, 34, of Englishtown, N.J., were arrested Thursday on charges of insider trading. The couple faces up to five years' imprisonment for conspiracy to commit securities fraud and up to 20 years on each of three counts of securities fraud. They were released on $2 million bond each.

Wang resigned from Morgan Stanley and Chen left ING earlier this year after the SEC launched an investigation and Morgan Stanley and ING began internal probes, the complaint said. Both refused to cooperate, it said.

David Spears, a Madison Avenue attorney with Spears & Imes who represents the couple, did not return calls yesterday.

According to the complaint, Wang got nonpublic information about potential real estate deals involving Town and Country and Glenborough Realty Trust as part of her job in the valuations review group at Morgan Stanley, which was serving as an adviser to its subsidiary, Morgan Stanley Real Estate.

In December 2005, Wang's group was working on the potential acquisition of Town and Country by Morgan Stanley Real Estate and its partners. After financing for the deal was approved, 3,000 Town and Country shares were purchased by an account in the name of Zhiling Feng, a Beijing resident who evidence shows is Wang's mother, the complaint said. Four days after Town and Country announced an agreement to be bought by a group that included Morgan Stanley, the shares were sold for a profit of about $10,930, according to the complaint.

Shortly afterward, Wang received minutes from a Jan. 23, 2006, meeting of her work group that reported another suitor had offered a higher price for Town and County. Four days later, the Zhiling Feng account purchased 2,000 shares. The value increased as other bidders emerged and a bidding war ensued. The shares were sold on Feb. 9, 2006, for a profit of about $10,460, the complaint said.

In August of the same year, Wang's group worked on Morgan Stanley's potential acquisition of Glenborough, a real estate investment trust that owns office properties in Washington, New Jersey and California. Minutes of a meeting distributed Aug. 16 to Wang and other members showed that Morgan Stanley expected to pay nearly 16 percent more than Glenborough's stock price at the time.

That same day, the Feng account began buying Glenborough shares and by Aug. 18 had acquired 8,400. On Aug. 22, the day after the deal was announced, the shares were sold for a profit of about $17,283.

But the greatest gain came from the purchase of call options for Genesis Health Care, a Pennsylvania company with extensive holdings in the Baltimore area through its 1993 purchase of the Towson-based Meridian nursing home chain.

In December, Morgan Stanley was retained as an adviser to a potential buyer of Genesis. Wang, the complaint alleges, had access to information about the deal through Morgan Stanley's computer system. Over the course of about 12 days, the Zhiling Feng account purchased 570 Genesis call options, which give the holder the right to buy shares at a specified price.

A week later, Genesis announced that it had reached an agreement to be purchased for $63 a share. Either that same day or the following day, all the call options in the account were sold. The gain: about $572,575, according to the complaint.

The Feng account was accessed by a person at ING in Manhattan multiple times in December and January and also from Chen's home, the complaint said.

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