Still Silence From 9-11 Stock Speculation
a month of 9-11, the SEC, acting in concert with the Department of
Justice, distributed a target list of 38 stocks to securities firms
around the world looking for information about who might have
profited by at least apparent pre-knowledge of the aerial attacks on
the World Trade Center and the Pentagon. To date there has not been
a public word from any agency as to whether they have snagged
Monday, June 3, 2002
According to market analysts, the investment of choice by someone
with pre-knowledge of the catastrophe would be a type of market
speculation involving so-called "put” options. Simplified, a put is
a bet that a particular stock will go down.
The two most obvious stocks for such speculation by anyone with
"insider” dope on the attacks are American and United airlines, the
two hapless carriers that had planes hijacked and used as aerial
Both carriers are on the SEC list, which includes among others:
Continental, Northwest, Southwest, USAirways, Lockheed Martin, John
Hancock, MetLife, General Motors, Raytheon, W.R. Grace, Lone Star
Technologies, American Express, the Bank of New York, Bank One,
Citigroup, Lehman Brothers, Bank of America, and Morgan Stanley.
Those in the industry are speculating themselves – and the best
bet so far is that the official silence by the investigating
agencies is owing to a lack of much to report.
As FBI Director Robert Mueller has conceded, precious little --
if any -- paper trail concerning the hijackers themselves has been
detected after eight months of investigation. It would be
surprising, therefore, that an alternate paper trail of illicit
profits in the market would be any less elusive.
Furthermore, market experts say that the history of pre-Sept. 11
"puts” in the key United and American stocks indicates nothing
unusual and netted investors what is deemed by industry experts as
only modest profits as those two stocks fell predictably.
On Sept. 6, 2001 2,075 put options were made on United Airlines,
and on the day before the attacks, 2,282 put options were made on
Using the United transaction as an example -- the 2,075 put
options, with each put option representing 100 shares of stock --
indicates that someone controlled 207,500 shares of United. The
stock dropped from $31 to $18, giving the speculator a $13 profit.
The action in the American Airlines is equally unspectacular – at
least by industry standards where the big players may pick up or
drop hundreds of millions in such transactions. Between United and
American, about $22 million in profits was made on the put options.
Business As Usual
Not only does the relatively modest action belie some daring
market conspiracy by those in touch with terror plans, but the
pre-Sept. 11 market history is also consistent, more or less, with
business as usual. Adam Hamilton of Zeal LLC, a consulting company
that does research on markets worldwide, has crunched the numbers
and recently told Insight magazine:
"The market was in bad shape in the summer and early fall, and
you know there were a lot of people who believed that there would be
a sell-off in the market long before Sept. 11. For instance,
American Airlines was at $40 in May and fell to $29 on Sept. 10;
United was at $37 in May and fell to $31 on Sept. 10. These stocks
were falling anyway, and it would have been a good time to short
The downward trend in the airline stocks was backed up in the
pre-Sept. 11 trading picture.
Insight reported that there were repeated spikes in put options
on American Airlines during the year before Sept. 11 (June 19 with
2,951 puts, June 15 with 1,144 puts, April 16 with 1,019 and Jan. 8
with 1,315 puts). In the same period, United Airlines had slightly
more action (Aug. 8 with 1,678 puts, July 20 with 2,995, April 6
with 8,212 and March 13 with 8,072).
With United and American stock transactions, and across the
board, there is an automated system called the CBOE Market
Surveillance System, which automatically records information trades.
The existence of this sophisticated surveillance system, designed to
ferret out inside-traders, would have given federal investigators a
pretty quick look at what, if anything, was untoward in the market
just prior to 9-11.
All the more reason to wonder what’s going on and taking so long,
say the experts.
And it is not just the SEC and FBI that is still mired in the
9-11 profiteering probe. Japan, Germany, the U.K., France,
Luxembourg, Hong Kong, Switzerland and Spain have their own
Like their U.S. counterparts, nothing has been forthcoming.
So far, the only break in the silence has been the apparent
impromptu courtroom outburst of assistant U.S. attorney Kenneth
Breen, who recently accused Amr Ibrahim Elgindy, an Egyptian-born
stockbroker on trial in San Diego, with knowing in advance about
9-11 and capitalizing on the insider information by attempting to
unload $300,000 worth of shares on Sept. 10, 2001.
In court Breen charged that on the afternoon of Sept. 10, Elgindy
contacted his broker at Salomon Smith Barney and asked him to sell
the stock, confiding in the broker that the Dow Jones industrial
average, which at the time stood at about 9,600, would soon dive to
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