SEC ready to sue Joseph Jett

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The Independent Online
New York - Joseph Jett, the trader at the centre of the 1994 bond scandal that led to the demise of his company, Kidder Peabody, is expected to face civil charges of wrong-doing from the Securities and Exchange Commission as early as today, together with two of his former superiors at the company, writes David Usborne.

It is widely expected that as soon as US government officers are back at work after the East Coast storm, which should be today, the SEC will issue so-called civil administrative charges against the former trader as well as Edward Cerullo, who was head of bond trading at Kidder, and Melvin Mullin, who first hired Mr Jett. Both Mr Jett and Mr Mullin have indicated that they plan to fight the charges.

When it erupted in April 1994, the Kidder scandal shook the financial industry, in part because it involved Mr Jett, one of Wall Street's highest- flying African Americans. It led General Electric to dispose of the firm to PaineWebber for $670m in December 1994. The firm, which now only maintains a skeleton staff to handle legal claims, is not itself expected to face SEC charges.

Kidder Peabody fired Mr Jett when it discovered that he had allegedly generated some $350m in false profits in bond trades, apparently to enhance his year-end performance and thus his bonus. It contended that it knew nothing of Mr Jett's activities, a claim that Mr Jett disputes.

If found guilty of the SEC charges, Mr Jett would probably face being stripped of ill-gotten profits, fined up to $100,000 and banned from the securities industry from life.

The US Attorney's office in New York is also preparing some criminal charges against him, although their filing is not imminent.

"I am completely innocent of these charges, I will not allow people to condemn wrongly," Mr Jett said this week.