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Still Silence From 9-11 Stock Speculation Probe
Dave Eberhart, NewsMax
Monday, June 3, 2002
Within 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 anyone.

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 bombs.

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 American Airlines.

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 them.”

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 investigations running.

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 below 3,000.

Read more on this subject in related Hot Topics:


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