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Mystery of terror 'insider dealers'
By Chris Blackhurst
14 October 2001
Share speculators have failed to collect $2.5m (£1.7m) in
profits made from the fall in the share price of United Airlines
after the 11 September World Trade Centre attacks.
The fact that the money is unclaimed more than a month later has
re-awakened investigators' interest in a story dismissed as
coincidence.
It may be that investors who were able to predict the share price
crash so skilfully are reluctant to be seen profiting from tragedy.
But investigators now wonder whether there is a more sinister
explanation.
The authorities are examining the possibility that if they knew
what was coming, traders were intent on taking their profits
immediately, before regulators had woken up to any possible scam.
But investors failed to foresee that the first response of the US
stock markets to the disaster was to suspend all trading for four
days, thereby denying them the chance of cashing in their
profits.
Further details of the futures trades that netted such huge gains
in the wake of the hijackings have been disclosed. To the
embarrassment of investigators, it has also emerged that the firm
used to buy many of the "put" options – where a trader, in
effect, bets on a share price fall – on United Airlines stock
was headed until 1998 by "Buzzy" Krongard, now executive director
of the CIA.
Until 1997, Mr Krongard was chairman of Alex Brown Inc, America's
oldest investment banking firm. Alex Brown was acquired by Bankers
Trust, which in turn was bought by Deutsche Bank. His last post
before resigning to take his senior role in the CIA was to head
Bankers Trust – Alex Brown's private client business, dealing
with the accounts and investments of wealthy customers around the
world.
There is no suggestion that Mr Krongard had advance knowledge of
the attacks.
Between 6 and 7 September, the Chicago Board Options Exchange saw
purchases of 4,744 "put" option contracts in UAL versus 396 call
options – where a speculator bets on a price rising. Holders
of the put options would have netted a profit of $5m (£3.3m)
once the carrier's share price dived after 11 September. On 10
September, more trading in Chicago saw the purchase of 4,516 put
options in American Airlines, the other airline involved in the
hijackings. This compares with a mere 748 call options in American
purchased that day. Investigators cannot help but notice that no
other airlines saw such trading in their put options.
It was not just airlines that were targeted by remarkably canny
investors. One of the biggest occupants of the World Trade Centre
was Morgan Stanley, the investment bank. In the first week of
September, an average of 27 put option contracts was bought each
day in its shares. The total for the three days before the attacks
was 2,157. Merrill Lynch, anotherWTC tenant, saw 12,215 put options
bought in the four days before the attacks, when the previous days
had seen averages of 252 contracts a day.
InsiderTrading
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