Dow Jones insider dealing mystery grows
Share account transfers revealed
The mystery surrounding the circumstances which led to a Hong Kong couple being accused by US authorities of insider dealing in Dow Jones stock ahead of a proposed bid for the company by News Corporation deepened yesterday as further details of the legal action emerged.
The US Securities and Exchange Commission (SEC) has accused Charlotte Wong Leung Ka-on - a former China Mobile People's Telephone director - and Wong Kan-king of using inside information to buy US$15 million of Dow Jones stock.
The SEC says in court papers that US$3.1 million was transferred to the Wongs' account with Merrill Lynch in Hong Kong on April 18 from her father, businessman Michael Leung Kai-hung. The SEC alleges that this money was used to buy some of the Dow Jones stock in question.
The Wall Street Journal said: 'One possible connection the US SEC is expected to pursue involves Dow Jones director David Li [Kwok-po], chairman and chief executive of Bank of East Asia.'
The report said: 'Mr Leung and Mr Li share a history of business and social dealings.' But Mr Li told the Journal: 'I did not disclose to anyone, not even my wife, any information about Dow Jones.' He added: 'I know Michael [Leung], and he is a friend, but I certainly did not talk to him about Dow Jones.'
Mr Li told the daily he did not recall exactly when he learned about the offer by Rupert Murdoch's News Corp but believed it was during a telephonic board meeting before Dow Jones' April 18 annual meeting, according to the report.
The report made it clear the SEC does not name Mr Leung as a defendant and that Mr Li is not mentioned in the legal papers filed by the SEC.
It also stated that some investment bankers, lawyers, executives and editors at Dow Jones and News Corp were aware of the pending takeover bid before it became public.
Mr Li - an independent non-executive director of SCMP Group - had no comment on the case, a Bank of East Asia spokesman said yesterday.
According to SEC documents filed with the US District Court, the Wongs bought 415,000 shares in Dow Jones for US$15.02 million, an average of US$36.20 a share, between April 13 and 30. The company announced a US$60 per share bid by News Corp on May 1. The couple sold their Dow Jones shares for US$23.21 million, making a paper gain of US$8.18 million. The US court froze the account with Merrill Lynch before the couple could withdraw their money.
On its website the SEC says the Wongs bought 200,000 shares of Dow Jones for US$7.17 million between April 13 and 17. Sums of US$3.19 million, from Mrs Wong's father, and US$3.99 million from someone with an account in JP Morgan International Bank in Brussels were then paid into the account - exactly the amount needed to cover the purchases.
On April 17, News Corp made its secret bid for Dow Jones.
Before May 1, the couple bought an additional 215,000 shares for US$7.85 million, paid for with a margin loan and US$2.8 million cash from the same Brussels account.
The SEC document says the couple's reliance on a margin loan of US$4.84 million suggested they 'were confident the price of Dow Jones stock would rise'.