LONDON TIMES

TUESDAY SEPTEMBER 18 2001

Stocks inquiry

Millions of shares sold before disaster

BY JAMES DORAN

THE CIA has asked the City regulators in London to investigate suspicious sales of millions of shares before last Tuesday’s attacks in America in the belief that the paper trail will lead to the terrorists. American authorities are investigating unusually large numbers of shares in airlines, insurance companies and arms manufacturers that were sold off in the days and weeks before the attacks.

They believe that the sales were by people who knew about the impending disaster. The investigators are looking at so-called "short selling" transactions in several financial centres across the world involving shares that dropped dramatically after the attack.

Short selling involves borrowing shares, selling them to a third party, then buying them back when the price falls. Large profits can be made if a share price falls significantly after it has been sold to the third party. The Financial Services Authority (FSA), the stock market watchdog, was drawn into the investigation because it has a transaction monitoring department that checks suspicious share movements.

The FSA would not comment on its instructions from the CIA, but said that its team of specialists would do all they could to help the investigation. A spokesman said: "The financial authorities have great expertise in this field and could have a big part to play. It is something that is incumbent upon us all to look at to the best of our ability." Market regulators in Germany, Japan and the US received information of short selling of insurance company shares, airline stocks and shares in arms companies - all of which have fallen since the attack. Italian, French and Swiss regulators have also joined the investigation.

Munich Re, Swiss Re and Axa, all insurance companies, are also helping the authorities with the inquiries as large numbers of their shares were short-sold before the attack. A spokesman for Axa, a French company, said: "We have informed the market regulators in Paris that there are concerns about short selling."

Richard Crossley, an analyst at Teather & Greenwood, a City broker, said that he had tracked suspicious short selling and share dumping in a swath of stocks badly affected by the terrorist attacks. He said that on the Friday before the attacks, more than 10 million shares in Merrill Lynch, the US investment bank, were sold compared with 4 million on a normal day. He added that exceptionally high volumes of retail and leisure stocks had also caught his attention.

"Before the attacks there was no pattern to this phenomenon," he said. "The shares that were sold were doing very well and someone was selling them in very large quantities with no real reason." Mr Crossley believes that someone with inside knowledge of the attacks could have been making money on its expected outcome for up to three weeks before the terrorists struck. "What is more awful than he should aim a stiletto blow at the heart of Western financial markets? But to profit from it. Words fail me," Mr Crossley said.

***REUTERS

More Unusual Market Activity Reported Before Attacks

By Laura Jacobs and Thomas Atkins

9-20-1

CHICAGO/FRANKFURT (Reuters) - Chicago traders on Wednesday cited unusual

activity in airline options up to a month before attacks on U.S.

landmarks, and German bankers reported brisk activity in reinsurer

Munich Re shares, adding to speculation that those behind the attacks

tried to profit from their acts.

The reports were the latest from U.S. and European traders that have

triggered an investigation by financial regulators worried that the

attacks may not only have killed thousands of people but those behind it

profited from the carnage as well.

The U.S. has said the prime suspect in the attacks on the World Trade

Center in New York and the Pentagon in Washington is wealthy, Saudi-born

dissident Osama bin Laden, believed to be hiding in Afghanistan.

``We have received reports that those associated with the terrorist

activities of last week may have sought to exploit our securities

markets to profit from those activities,'' Stephen Cutler, the acting

top enforcement officer at the U.S. Securities and Exchange Commission,

said on Wednesday. ``We are vigorously pursuing all credible leads, but

at this time, we have drawn no conclusions.''

In Chicago, a market maker on the Chicago Board Options Exchange said

there was some unusual buying in both the September and October 30 puts

of United Airlines parent UAL Corp. days and even a month before the attack.

``They bought them before (the attacks) and the month before, September

6 and August 6, the Oct and Sept 30 puts,'' he said.

A put option gives the buyer the right to sell the underlying stock at a

specific price during the option's life.

Talk focused on stocks and options on UAL Corp and AMR Corp., the parent

companies operating the two U.S. airline carriers whose jets were highjacked.

While some industry analysts have said that the spike in volume could

have been based on fundamental and economic reasons, one industry

official familiar with the investigations said: ``From what I'm hearing,

it's more than coincidence.''

LARGE INQUIRIES IN GERMANY

In Frankfurt, bankers also noticed unusual interest in stock-lending in

shares of Munich Re, raising the possibility that at least one player

may have prepared a short position with advance knowledge of an attack

that would send the insurer's shares plummeting.

One banker, who requested anonymity, said he had received three price

inquiries from major French banks about borrowing abnormally large

stakes -- millions of shares -- in Munich Re. The requests were never

followed up with an actual share loan.

``These inquiries were very big in size and they only asked about one

share, and for that reason it stood out,'' he said.

Borrowing stocks allows investors to go short, selling the borrowed

shares in the anticipation that their price will fall, after which the

investors purchase the shares more cheaply on the market and return them

to the borrower minus a fee.

``Shorting'' a stock, like buying a put option, is one way investors can

make money in falling markets.

Buying a stock option at gives an investor the right to buy (using a

call option) or sell (using a put option) the stock at a later date for

a set price, known as the strike price. Because options can be purchased

for a relatively small amount, as they are leveraged instruments,

investors betting on a falling share price could in theory, make vast

amounts of money if the share weakens sharply.

Before the attack, September and October 30 puts, which give an investor

the right to sell 100 shares of UAL stock for $30 a share, were worth

very little because UAL was trading above that price. But after the

attack, UAL shares dropped below $20, making the options worth at least

five times their pre-attack price.

Another German banker said price inquiries for millions of shares in

Munich Re should have sounded the alarm that something very unusual was underway.

``If somebody would be looking for that many, it would be super-obvious.

The share price would go through the floor. A normal request for Munich

Re shares would be 50,000 or 100,000,'' said the banker, who also

requested anonymity.

``Even at 500,000 we would be immediately looking into the company to

see if there was something fundamental going on, a takeover or some

news,'' he added.

EUROPEAN OPTIONS TRADES JUMP

Separately, options traders in Europe also reported unusual activity in

Munich Re shares before the attack but said it was not dramatic enough

to sound an alarm, adding that a shrewd actor would not likely have used

the open market in full view of regulators.

Volatility in Munich Re shares increased sharply before the attack,

jumping 30 percent from September 4 to September 7.

Open interest -- the number of contracts outstanding on the underlying

stock -- in Munich Re also jumped by 3,500 lots on the Friday before the

attack, compared to daily average volume of 2,400.

A spokesman for Eurex said the exchange, the world's largest derivatives

exchange, had probed transactions in the days before and after the

attack but found nothing to raise an alarm flag.

On Tuesday, Chicago traders said they had detected unusually brisk

trading volume in some options of AMR Corp, the parent company American Airlines.

And in Amsterdam, Dutch traders said they had noticed unusually large

volumes in options of the national airline KLM ahead of the attacks.

***EU Finance Chiefs Add To Attack Conspiracy Theory

By A. Chalomumbai

Correspondent

9-22-1

LIEGE, Belgium (Reuters) - European Union policymakers added on Saturday

to suspicions that those who planned last week's attacks on U.S.

landmarks may have profited from the havoc they brought to financial markets.

Separately, ministers agreed to speed up ratification of an existing

U.N. resolution calling for the freezing of assets of Afghanistan's

ruling Taliban.

Bundesbank President Ernst Welteke said that in addition to strange

movements in airline and insurance shares there were signs of suspicious

dealings in gold and oil around the time of the September 11 attacks.

``There is lots of speculation and rumors at the moment so we have to be

careful. But...that there are ever clearer signs that there were

activities on international financial markets which must have been

carried out with the necessary expert knowledge,'' Welteke said during a

break in an EU finance ministers' meeting.

``With the oil price we have seen before the attacks a fundamentally

inexplicable rise in the price, which could mean that people have bought

oil contracts which were then sold at a higher price,'' he said.

Gold markets also saw movements ``which need explaining.''

Welteke said the first evidence of unusual price movements emerged last

Thursday, two days after the attacks.

He said they were now being looked at throughout the world although he

stressed that, in Germany, the Bundesbank was not in the forefront of

the probe as it was not responsible for oversight of equities markets.

Didier Reynders, the current chairman of EU finance ministers' meetings,

said ministers would receive a report on the matter after national

supervisors and regulators had completed their investigations.

Reynders said a joint meeting of EU finance and home and justice affairs

ministers in October would check member states' progress in ratifying

U.N. resolution 1333 on freezing Taliban assets abroad.

``Even in the financial sector there could be a global network (of

terrorists) and we are looking into this, in Austria as well,'' Austrian

Finance Minister Karl-Heinz Grasser said.

MORE

The Observer

Terror 'made fortune for Bin Laden'

John Hooper in Berlin

Sunday September 23, 2001

THE terrorist overlords who plotted the attacks on New York and Washington appear to have made a massive financial profit out of the resulting turmoil on international markets, one of the world's top bankers said yesterday.

Ernst Welteke, president of the Bundesbank, said a study by the German central bank pointed strongly to 'terrorism insider trading' in the days leading up to this month's carnage in the US.

He was speaking to reporters during a break in a European Union finance Ministers' meeting in Liège at which it was agreed that regulatory agencies in the 15 member states must work together to investigate the evidence.

'Even in the financial sector, there could be a global network [of terrorists] and we are looking into this,' said Austria's Finance Minister, Karl-Heinz Grasser.

He and his colleagues ordered that a joint report on the regulators' investigations should be ready by 16 October. Their decision provided by far the most authoritative support for persistent rumours that the terrorists could have funded their next strike with huge profits gained from the attacks.

Welteke said: 'There is lots of speculation and rumours at the moment so we have to be careful. But there are ever clearer signs that there were activities on international financial markets which must have been carried out with the necessary expert knowledge.'

His remarks not only reinforced suspicions, but extended them to a much broader area. So far, doubts have centred on dealings in shares and derivatives that are based on movements in share prices. But the Bundesbank president suggested the world's commodity markets might also have been used by terrorist commanders and their intermediaries.

'With the oil price we have seen before the attacks a fundamentally inexplicable rise, which could mean that people have bought oil contracts which were then sold at a higher price,' Welteke said. The gold market had also seen movements 'which need explaining'.

He had earlier said there were signs of unusual investments in German shares before the air attacks.

Belgium's Finance Minister, Didier Reynders, who chaired the informal EU meeting, said investigations were also under way in Belgium, France and several other countries.

The idea of exploiting for profit the death of thousands of people might seem as bizarre as it is repulsive. But it would be all of a piece with the stated aim of the prime suspect, Osama bin Laden.

In February 1998, he was instrumental in forging a new alliance of ultra-radical Islamist groups, the World Front for Jihad against Jews and Crusaders. A statement issued by the Front ordered all Muslims to obey 'God's order to kill the Americans and plunder their money'.

The emerging profiles of those accused of carrying out this month's attack show that most were highly educated men who had lived for long periods in the West and were used to dealing with state-of-the-art technology. It is by no means improbable that they had accomplices who were just as much at home on global financial and commodity markets.

All that was needed to make a fortune from the slaughter was an established relationship with a futures broker or a stockbroker. Then, orders for futures contracts, options and the 'short-selling' of shares could have been placed by telephone or, in some cases, through the internet.

The investment consequences of a catastrophic event like that on 11 September would not have been difficult to predict. The same movements have attended every international crisis in modern times. The price of gold, regarded as an investment of last resort, surges. At the same time, if the Middle East is involved, concern over petro leum supplies pushes up the cost of both crude oil and refined products.

On the day after the attacks, oil prices leapt more than 13 per cent. Gold went up by just over 3 per cent, but has carried on rising since - and by Friday's close it stood 7 per cent higher than on 10 September. A trader knowing what was about to befall America could, moreover, have magnified his profits many times on the derivatives markets.

This could be done either by dealing on margins in the futures markets (where only a fraction of the cost of the security has to be advanced) or by buying 'call' options (contracts that exaggerate the rise beyond a certain point of the prices on which they are based).

In this instance, an 'insider' would also have been able to foresee that the destruction of the World Trade Centre by jets would have disastrous effects on certain types of shares, notably those of insurance companies and airlines. This, too, could have been exploited, either through 'put' options (which move in the opposite direction to 'call' options), or by so-called 'short-selling' (a mechanism that allows investors to benefit from a fall in the shares' value).

Rumours of widespread 'short-selling' can be counted on to depress prices, and in the days leading up to 11 September the shares of three big European insurers, Axa, Munich Re and Swiss Re, all fell sharply. At the same time, the number of 'put' options on the firms' share prices rose above normal levels.

Welteke said yesterday: 'If you look at movements in markets before and after the attack, it makes your brow furrow. But it is extremely difficult to verify it.'

***Washington Post, Sept. 23, 2001

By William Drozdiak

Washington Post

BRUSSELS - The president of Germany's central bank said Saturday there was mounting evidence that people connected to the attacks in New York and Washington sought to profit from the tragedy by engaging in "terrorism insider trading" on European stock and commodity markets.

Ernst Welteke, head of the Bundesbank, said a preliminary review by German regulators and bank researchers showed there were highly suspicious sales of shares in airlines and insurance companies, along with major trades in gold and oil markets, before Sept. 11 that suggest they were conducted with advance knowledge of the attacks.

Welteke said his researchers came across almost irrefutable proof of insider trading as recently as Thursday, but he refused to release any detailed information pending further consultations with regulators in other European countries and the United States.

"What we found makes us sure that people connected to the terrorists must have been trying to profit from this tragedy," he said at a meeting of European finance ministers and central bankers.

Besides massive short-selling of airlines and insurance stocks, Welteke said "there was a fundamentally inexplicable rise" in world oil prices just before the attacks that suggest certain groups or people were buying oil contracts that were then sold for a much higher price. He said German researchers also detected movements in gold markets "which need explaining."

"If you look at the movements in markets before and after the attacks, it really makes your brow furrow," Welteke said. "It is extremely difficult to really verify it, but we are confident we will be able to pinpoint the source in at least one or two cases."

The comments by the central bank chief of Europe's biggest economy were the first public confirmation that regulators were close to proving that groups linked to the U.S. attacks sought to reap windfall gains by exploiting their advance knowledge through trades in international markets.

Didier Reynders of Belgium, the current chairman of the EU finance ministers, said other EU countries were investigating their stock and commodity markets to identify any suspicious trades made before Sept. 11.

European regulators are known to be studying the stock movements of three large reinsurance companies in Germany, France and Switzerland to see whether their sharp drops in value were related to block trading in the four days preceding the attacks. Reinsurance companies provide coverage for losses by insurers and could be saddled with enormous costs from the attacks.

European agencies have been working closely with the Securities and Exchange Commission in their inquiries, which include stock movements of the French insurer AXA and Switzerland's Swiss Re.

Ettore Candolfi, a board member of the Swiss stock exchange, said a preliminary review showed several large block trades in Swiss Re of up to 16,000 shares in the four days before the attacks.

German regulators said they were paying particularly close attention to "suspect movements" in the stock of Munich Re, Europe's second-biggest reinsurance company, which estimates its losses from death and destruction at the World Trade Center will exceed $2 billion. In the four days before the attacks, the stock lost 13 percent of its value.

Elsewhere in Europe Saturday, Belgian police arrested two men and seized a large quantity of chemicals in an action linked to the recent arrest of Islamic militants, a spokeswoman for the Brussels prosecutor's office said. Belgian media reported that the chemicals could have been used to make a bomb, and that the arrests foiled a "terrorist" plot.

PUBLISHED: SUNDAY, SEPTEMBER 23, 2001

--------------------

***TOPVIEW (ANONYMOUS POSTING)

09/23/01

Cheney cronies at Halliburton, linked co's profited by pre-9.11 stock trading

Securities and Exchange investigators have announced that there are

definite indications certain parties, obviously with prior knowledge of

the Sept. 11 attack on the World Trade Center, engaged in extensive

stock sell-offs, and options and puts manipulations in the days before

the tragedy. This insider trading, based on the most serious sort of

"inside" knowledge, enabled them to prevent substantial losses on key

stocks in corporations which would suffer severe repercussions in the

wake of the disaster yet to come.

Much of the suspicious movement was in insurance and reinsurance stocks,

airline stocks, and oil company stocks.

We originally had some information on this matter emailed to us by a

TOP_VIEW reader who asked to remain confidential.

The information strongly indicated that certain former business partners

and other associates of Dick Cheney, including some with Halliburton Oil

as well as several smaller linked companies, were among those suspected

of having profited handsomely via major sell-offs of large amounts of

key stocks, in corporations which were VERY negatively affected by the

9.11 atrocity; along with other related insider trading activities.

There is NO DOUBT whatsoever that such genuinely suspicious actions occurred:

there is no doubt that those who engaged in such activity had PRIOR,

inside knowledge of the impending mass carnage at the World Trade

Center. This entire body of information, then, is VERY, very important.

Further confirmation on this entire aspect of the 9.11 attacks has now

come from European Union finance officials, who likewise report that the

same kinds of highly suspicious activities have been found to have

occurred on THEIR stock markets. As with the activities on American

exchanges, people were CLEARLY seeking to safeguard against substantial

profit losses with affected corporations certain to ensue in the

economic aftermath of the 9.11 attacks.

Considering a very trusted source has relayed to us that illegitimate

vice-president Dick "Mengele" Cheney was one of the primary architects

and highest-level co-conspirators in the massive carnage of 9.11, it's

SURELY to be considered a smoking gun that some of Cheney's closest

associates -- and certainly the "Angel of death" himself -- were among

those who protected their vast economic interests from the global 9.11

economic fallout on international stock exchanges. They were able to

accomplish this because they had first-hand, prior, INSIDE knowledge of

the impending "terrorist" attacks, as investigators in the U.S., Europe

and elsewhere are FULLY aware.

A smoking gun has been revealed with regard to the WTC disaster, and on

it are the finger prints of some of Mengele Cheney's CLOSEST business

associates because they were TIPPED OFF by the "Angel of Death" himself!

***SF CHRONICLE, SEPT 29, 2001

Christian Berthelsen, Scott Winokur, Chronicle Staff Writers Saturday, September 29, 2001

Investors have yet to collect more than $2.5 million in profits they

made trading options in the stock of United Airlines before the Sept. 11

terrorist attacks, according to a source familiar with the trades and market

data.

The uncollected money raises suspicions that the investors -- whose

identities and nationalities have not been made public -- had advance

knowledge of the strikes.

"Usually, if someone has a windfall like that, you take the money and run,"

said the source, who spoke on condition of anonymity. "Whoever did this thought the exchange would not be closed for four days.

"This smells real bad."

The source and others in the financial industry speculate that the

purchaser or purchasers -- having initially assumed the money could be picked

up without detection -- now fear exposure, or that the account has been frozen.

The markets were closed for four days after the attack, giving investigators

time to notice the anomalous trades.

Securities regulators and law-enforcement agents throughout the United

States and Europe are investigating unusual patterns in short sales and the purchase of "put" options, both of which are financial-market bets that the

price of a given stock will fall. Authorities here and abroad have not

publicly disclosed any conclusions they have reached and refuse to discuss the

case.

There was an unusually large jump in purchases of put options on the stocks

of UAL Corp. and AMR Corp. in the three business days before the attack on

major options exchanges in the United States. On one day, UAL put option purchases were 25 times greater than the year-to-date average. In the month

before the attacks, short sales jumped by 40 percent for UAL and 20 percent for American.

A put option gives the buyer a right to sell the underlying security at a

certain price on a certain date; the purchaser profits when the share price drops lower than the agreed sale price. In a short sale, an investor borrows

stock from a broker and sells it, hoping to buy it back at a lower price.

October series options for UAL Corp. were purchased in highly unusual

volumes three trading days before the terrorist attacks for a total outlay of

$2,070; investors bought the option contracts, each representing 100 shares,

for 90 cents each. Those options are now selling at more than $12 each. There

are still 2,313 so-called "put" options outstanding, according to the Options

Clearinghouse Corp.

Other financial professionals have told The Chronicle that an estimated $5

million to $10 million in all could have been made on the trades, including trading on other days and purchases of options on the parent company of

American, AMR Corp. Four United and American aircraft crashed in the attacks.

BIN LADEN'S FINANCES

Meanwhile, in Herzliya, Israel, a group headed by former Israeli intelligence officials -- the Interdisciplinary Center, a counter-terrorism

think tank -- has issued a report on Osama bin Laden's finances ("Black Tuesday: The World's Largest Insider Trading Scam?") saying insiders profited

by nearly $16 million.

The money was made on Sept. 6, 7 and 10 in transactions involving United,

American, Morgan Stanley Dean Witter & Co. and Merrill Lynch & Co., the center

said. Morgan Stanley occupied 22 floors of the World Trade Center; Merrill

Lynch's headquarters offices were nearby.

The figure excluded other unusual trades involving insurance companies with significant exposure to damage claims resulting from the attacks. These

include Munich Re of Germany, which expects to pay out more than $1.5 billion,

and the AXA Group, a French firm, which could be on the hook for $550 million.

A spokesman for the Securities and Exchange Commission declined to comment

on a New York Times report yesterday that the SEC had found "benign"

explanations for the trading activity.

But the spokesman, John Heine, said the commission stands by a statement

made eight days after the attack by Stephen M. Cutler, acting SEC enforcement director. The statement -- reiterated in substance Wednesday by SEC Chairman Harvey Pitt -- said the commission was "pursuing all credible leads."

SHORT-SELLING OF INSURANCE

Spokesmen for British securities regulators and the AXA Group also

confirmed yesterday that investigations are continuing.

The source familiar with the United trades identified Deutsche Banc Alex.

Brown, the American investment banking arm of German giant Deutsche Bank, as

the investment bank used to purchase at least some of the options. Rohini Pragasam, a bank spokeswoman, declined comment.

Investigators' attentions previously had been drawn to Germany because of

the residence there earlier in the year of some of the principal suspects in

the Sept. 11 attacks and unusual patterns in the short-selling of insurance,

airline and other financial company stocks there prior to the attacks.

Last weekend, German central bank president Ernst Welteke said a study

pointed to "terrorism insider trading" in those stocks.

There are many reasons the bets against United and American could have been

innocent, in view of the tough time the airline industry has had this year and heavy losses experienced by both airlines in particular. But the trades were

not replicated in the stocks or options of any of the airlines' competitors.

CANDIDATES LIVE IN ARAB NATIONS

While the identities of possible beneficiaries of advance knowledge of the

attacks were not known publicly, experts were quick to point to possible candidates -- all presumed to be affluent residents of Arab nations.

The former chairman of the State Department's National Commission on

Terrorism, L. Paul Bremer, said he obtained classified government analyses early last year of bin Laden's finances confirming the assistance of affluent

Middle Easterners.

E-mail the writers at cberthelsen@sfchronicle.com andswinokur@sfchronicle.com.

©2001 San Francisco Chronicle

***NYT

THE INVESTIGATION

Bank of America among 38 stocks in SEC's attack probe

Bloomberg News

Wednesday, October 3, 2001

WASHINGTON - The U.S. Securities and Exchange Commission is investigating whether shares of Bank of America Corp., American Express Co., Lockheed Martin Corp. and 35 other companies were the subject of insider trading before the terrorist attacks on New York and Washington.

Companies being probed by the SEC were listed on the Web site of the Investment Dealers Association of Canada, that country's securities industry group. The note asked brokerages to cooperate with the investigation.

The SEC, the Federal Bureau of Investigation, U.S. Treasury agents and authorities in Europe and Asia are combing brokerage, market and banking records for bigger-than-normal trading or money transfers that might expose who was responsible for assaults that killed thousands of people.

The Canadian group's notice asked brokers to review trading of the 38 stocks ``with a view of determining any unusual trading patterns, particularly any `negative' trading'' such as buying put options that rise in value as a company's stock price falls. The SEC is seeking records from Aug. 27 to Sept. 11, the two-page document said.

U.S. markets tumbled after terrorists flew hijacked passenger jets into the World Trade Center's twin towers in New York and the Pentagon, across the Potomac River from Washington. The Dow Jones Industrial Average fell 14.3 percent during the first week of trading after the attacks. The Standard and Poor's 500 Index sank 11.6 percent, and the Nasdaq Composite Index dropped 16 percent.

``We are still carrying on investigations into trading around Sept. 11,'' said Karin Loudon, a spokeswoman for the Financial Services Authority, the U.K. markets regulator. ``We haven't discovered anything yet.''

Charlotte Judet, a spokeswoman for Paris-based Commission des Operations de Bourse, said French investigators continue to review unusual trading in some stocks before the Sept. 11 assault. She declined to be more specific.

Option Volume Surges

A Bank of America option that would profit if the No. 3 U.S. bank's stock fell below $60 a share had more than 5,900 contracts traded on the Thursday and Friday before the Sept. 11 assaults, almost five times the previous average trading, according to Bloomberg data. The bank's shares fell 11.5 percent to $51 in the first week after trading resumed on Sept. 17.

While investigators have focused on short selling and trading in put options, some defense contractors on the SEC's list, including Raytheon Co., had higher volume in options that profit from rising stocks.

A Raytheon option that makes money if shares are more than $25 each had 232 options contracts traded on the day before the attacks, almost six times the total number of trades that had occurred before that day. A contract represents options on 100 shares. Raytheon shares soared almost 37 percent to $34.04 during the first week of post-attack U.S. trading.

No Evidence Yet

Officials at the SEC and in Europe repeatedly have said they hadn't yet turned up solid evidence of terrorist trading, and the trading surges may simply be coincidental. SEC Chairman Harvey Pitt and Treasury Secretary Paul O'Neill have said they continue to take the investigation seriously.

The SEC's list of companies, which was reported earlier today by Associated Press, was concentrated in airline, brokerage, insurance, banking and defense stocks.

Delta Airlines Inc., Northwest Airlines Corp. and Southwest Airlines Co. were among seven airlines listed, joining AMR Corp. and UAL Corp., already known to be a focus of the probe. Trading of bearish options in AMR Corp. and UAL Corp. surged in the days before terrorists hijacked and crashed two American Airlines and two United Airlines jets.

Trading in Boeing Co., Lockheed Martin, and Raytheon is being examined, the notice said. Market activity in Cigna Corp., MetLife Inc., American International Group Inc. and other insurers also is being reviewed.

Brokerage Options Reviewed

Lehman Brothers Holdings Inc. and American Express joined brokerage and financial services companies on the list. It already has been reported that securities of Morgan Stanley Dean Witter & Co., Bear Stearns Cos. and Citigroup Inc. were being scrutinized.

Morgan Stanley was the World Trade Center's biggest tenant, and Citigroup has estimated that its Travelers insurance unit may pay $500 million in claims from the terrorist assaults.

Market makers handling trading in AMR and UAL options have said they noticed suspicious or peculiar trading in those securities in the days before the terrorist attacks.

Trading in some AMR and UAL put options surged to as much as 285 times the previous average volume during the days before terrorists flew hijacked United and American jets into the World Trade Center's twin towers and the Pentagon.

Copyright 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

***From CLG link to World Socialist Web Site:

WSWS : News & Analysis :

The US War Drive

Suspicious trading points to advance knowledge by big investors

of September 11 attacks

By Barry Grey

5 October 2001

In the two weeks preceding the September 11 terror attacks

on New York and Washington, there was a sudden and unaccountable

rush of speculative trades on the US stock and bond markets that

indicate some wealthy and well-connected investors had advance

knowledge of the impending catastrophe.

Those involved bet large sums on the prospect of a major crisis

that would drive down the value of stocks in the airline, tourism

and insurance industries, and undermine confidence in the US economy

as a whole. Investigations are currently under way by the Securities

and Exchange Commission (SEC), the federal watchdog agency for

the stock and bond markets, the Secret Service and the FBI. These

probes have been given little prominence by the media, in stark

contrast to the round-the-clock warnings of new terrorist plots

and reports of suspects detained in the US and Europe.

The SEC has issued terse acknowledgements that it is looking

into suspicious financial transactions to see if they are connected

to terrorist organizations. But the scale of the stock and bond

activity under scrutiny belies the notion that it could be the

work of Osama bin Laden’s guerrilla band, let alone the fanatics

who carried out the September 11 atrocities.

Over the past several days the Wall Street Journal has carried reports of the SEC and Secret Service probes, and dispatches

have been published by the Associated Press and USA Today.

But the New York Times and the Washington Post have

remained strangely silent, and the network news outlets have said

nothing.

The Wall Street Journal reported on October 2 that the ongoing investigation by the SEC into suspicious stock trades

had been joined by a Secret Service probe into an unusually high

volume of five-year US Treasury note purchases prior to the attacks.

The Treasury note transactions included a single $5 billion trade.

As the Journal explained: "Five-year Treasury notes

are among the best investments in the event of a world crisis, especially one that hits the US. The notes are prized for their

safety and their backing by the US government, and usually rally

when investors flee riskier investments, such as stocks."

The value of these notes, the Journal pointed out, has

risen sharply since the events of September 11.

The article went on to quote Michael Shamosh, a bond-market

strategist for Tucker Anthony Inc., who said, "If they were

going to do something like this they would do it in the five-year

part of the market. It’s extremely liquid, and the tracks

would be hard to spot."

The SEC is investigating a surge in short-selling activity

in a variety of stocks in the days preceding the attacks. It has asked US securities firms to produce customer accounts and stock-trading

records involving short selling prior to September 11.

Short sellers borrow shares and then sell them at the current

price. They wager that at the future date by which they must pay

for the borrowed shares, the price will have fallen, enabling

them to pocket the difference.

In the week prior to September 11, shares in airlines, insurance

firms, tourism-related businesses and financial companies with

offices in the World Trade Center suffered disproportionate drops

in their prices, arousing the suspicion of the SEC following the

hijack-bombings. After the attacks, these stocks were hit particularly

hard by the sell-off on Wall Street.

The SEC has been extremely tight-lipped about its probe, in

which it has enlisted securities firms and government agencies

in Europe, Canada and other countries. But on Tuesday the Investment

Dealers Association, a trade association for the Canadian securities

industry, posted on its web site a list sent by the American SEC

of 38 stocks. The US agency had asked the Canadians to look into trading in these stocks between August 27 and September 11.

As soon as US officials became aware of the Internet posting,

they demanded that the Investment Dealers Association yank it

from the web site, and the Canadian organization complied. However,

reporters and others were able to copy the list before it was

pulled.

The list includes the parent companies of American, Continental,

Delta, Northwest, Southwest, United and US Airways, as well as

Carnival and Royal Caribbean cruise lines, aircraft maker Boeing

and defense contractor Lockheed Martin. Several insurance companies

are on the list—American International Group, Axa, Chubb,

Cigna, CNA Financial, John Hancock and MetLife.

The SEC list also includes several big companies that were tenants in the collapsed Twin Towers of the World Trade Center:

investment firms Morgan Stanley, the complex’s largest occupant;

Lehman Brothers; Bank of America; and the financial firm Marsh

& McLennan.

Other major companies listed include General Motors, Raytheon,

LTV, WR Grace, Lone Star Technologies, American Express, Bank

of New York, Bank One, Citigroup and Bear Stearns.

Testifying on Wednesday before the House Committee on Financial

Services, Dennis Lormel, chief of the FBI Financial Crimes Section,

said, "To date, there are no flags or indicators ... that

people took advantage of this." However USA Today quoted

co-founder of PTI Securities Jon Najarian, described as an "active

player" on the Chicago Board Options Exchange, who said,

"The volumes were exceptional versus the norm."

It is impossible at this point to say which individuals, groups

or corporate entities had advance knowledge of the September 11

attacks and used this knowledge to cash in, or whether any of

them were based inside the US. But the otherwise inexplicable

rush of Treasury note buys and short-selling in specific stocks

is a further indication that those involved in the planning of

the attacks included highly sophisticated and well-endowed people

with a deep understanding of many facets of American society.

***COPVCIA:

SUPPRESED DETAILS OF CRIMINAL INSIDER TRADING LEAD DIRECTLY INTO THE CIA’s HIGHEST RANKS CIA EXECUTIVE DIRECTOR "BUZZY" KRONGARD MANAGED FIRM THAT HANDLED "PUT" OPTIONS ON UAL by

Michael C. Ruppert

[© COPYRIGHT, 2001, Michael C. Ruppert and FTW Publications, www.copvcia.com. All Rights Reserved. – May be reprinted or distributed for non-profit purposes only.] FTW, October 9, 2001 – Although uniformly ignored by the mainstream U.S. media, there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. That evidence also demonstrates that, in the case of at least one of these trades -- which has left a $2.5 million prize unclaimed -- the firm used to place the "put options" on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency. Until 1997 A.B. "Buzzy" Krongard had been Chairman of the investment bank A.B. Brown. A.B. Brown was acquired by Banker’s Trust in 1997. Krongard then became, as part of the merger, Vice Chairman of Banker’s Trust-AB Brown, one of 20 major U.S. banks named by Senator Carl Levin this year as being connected to money laundering. Krongard’s last position at Banker’s Trust (BT) was to oversee "private client relations." In this capacity he had direct hands-on relations with some of the wealthiest people in the world in a kind of specialized banking operation that has been identified by the U.S. Senate and other investigators as being closely connected to the laundering of drug money.

Krongard (re?) joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.

The Scope of Known Insider Trading

Before looking further into these relationships it is necessary to look at the insider trading information that is being ignored by Reuters, The New York Times and other mass media. It is well documented that the CIA has long monitored such trades – in real time – as potential warnings of terrorist attacks and other economic moves contrary to U.S. interests. Previous stories in FTW have specifically highlighted the use of Promis software to monitor such trades.

It is necessary to understand only two key financial terms to understand the significance of these trades. "Selling Short" is the borrowing of stock, selling it at current market prices, but not being required to actually produce the stock for some time. If the stock falls precipitously after the short contract is entered, the seller can then fulfill the contract by buying the stock after the price has fallen and complete the contract at the pre-crash price. These contracts often have a window of as long as four months. "Put Options," purchased at nominal prices of, for example, $1.00 per share, are sold in blocks of 100 shares. If exercised, they give the holder the option of selling selected stocks at a future date at a price set when the contract is issued. Thus, for an investment of $10,000 it might be possible to tie up 10,000 shares of United or American Airlines at $100 per share, and the seller of the option is then obligated to buy them if the option is executed. If the stock has fallen to $50 when the contract matures, the holder of the option can purchase the shares for $50 and immediately sell them for $100 – regardless of where the market then stands. A call option is the reverse of a put option, which is, in effect, a derivatives bet that the stock price will go up.

A September 21 story by the Israeli Herzliyya International Policy Institute for Counterterrorism, entitled "Black Tuesday: The World’s Largest Insider Trading Scam?" documented the following trades connected to the September 11 attacks: - Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options… Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these "insiders" would have profited by almost $5 million. - On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance;… Again, assuming that 4,000 of these options trades represent "insiders," they would represent a gain of about $4 million. - [The levels of put options purchased above were more than six times higher than normal.] - No similar trading in other airlines occurred on the Chicago exchange in the days immediately preceding Black Tuesday. - Morgan Stanley Dean Witter & Co., which occupied 22 floors of the World Trade Center, saw 2,157 of its October $45 put options bought in the three trading days before Black Tuesday; this compares to an average of 27 contracts per day before September 6. Morgan Stanley’s share price fell from $48.90 to $42.50 in the aftermath of the attacks. Assuming that 2,000 of these options contracts were bought based upon knowledge of the approaching attacks, their purchasers could have profited by at least $1.2 million. - Merrill Lynch & Co., which occupied 22 floors of the World Trade Center, saw 12,215 October $45 put options bought in the four trading days before the attacks; the previous average volume in those shares had been 252 contracts per day [a 1200% increase!]. When trading resumed, Merrill’s shares fell from $46.88 to $41.50; assuming that 11,000 option contracts were bought by "insiders," their profit would have been about $5.5 million. - European regulators are examining trades in Germany’s Munich Re, Switzerland’s Swiss Re, and AXA of France, all major reinsurers with exposure to the Black Tuesday disaster. [FTW Note: AXA also owns more than 25% of American Airlines stock making the attacks a "double whammy" for them.]

On September 29, 2001 – in a vital story that has gone unnoticed by the major media – the San Francisco Chronicle reported, "Investors have yet to collect more than $2.5 million in profits they made trading options in the stock of United Airlines before the Sept. 11, terrorist attacks, according to a source familiar with the trades and market data.

"The uncollected money raises suspicions that the investors – whose identities and nationalities have not been made public – had advance knowledge of the strikes." They don’t dare show up now. The suspension of trading for four days after the attacks made it impossible to cash-out quickly and claim the prize before investigators started looking.

"… October series options for UAL Corp. were purchased in highly unusual volumes three trading days before the terrorist attacks for a total outlay of $2,070; investors bought the option contracts, each representing 100 shares, for 90 cents each. [This represents 230,000 shares]. Those options are now selling at more than $12 each. There are still 2,313 so-called "put" options outstanding [valued at $2.77 million and representing 231,300 shares] according to the Options Clearinghouse Corp."

"…The source familiar with the United trades identified Deutsche Bank Alex. Brown, the American investment banking arm of German giant Deutsche Bank, as the investment bank used to purchase at least some of these options…"

As reported in other news stories, Deutsche Bank was also the hub of insider trading activity connected to Munich Re. just before the attacks.

CIA, The Banks and the Brokers

Understanding the interrelationships between CIA and the banking and brokerage world is critical to grasping the already frightening implications of the above revelations. Let’s look at the history of CIA, Wall Street and the big banks by looking at some of the key players in CIA’s history.

Clark Clifford – The National Security Act of 1947 was written by Clark Clifford, a Democratic Party powerhouse, former Secretary of Defense, and one-time advisor to President Harry Truman. In the 1980s, as Chairman of First American Bancshares, Clifford was instrumental in getting the corrupt CIA drug bank BCCI a license to operate on American shores. His profession: Wall Street lawyer and banker.

John Foster and Allen Dulles – These two brothers "designed" the CIA for Clifford. Both were active in intelligence operations during WW II. Allen Dulles was the U.S. Ambassador to Switzerland where he met frequently with Nazi leaders and looked after U.S. investments in Germany. John Foster went on to become Secretary of State under Dwight Eisenhower and Allen went on to serve as CIA Director under Eisenhower and was later fired by JFK. Their professions: partners in the most powerful - to this day - Wall Street law firm of Sullivan, Cromwell.

Bill Casey – Ronald Reagan’s CIA Director and OSS veteran who served as chief wrangler during the Iran-Contra years was, under President Richard Nixon, Chairman of the Securities and Exchange Commission. His profession: Wall Street lawyer and stockbroker.

David Doherty - The current Vice President of the New York Stock Exchange for enforcement is the retired General Counsel of the Central Intelligence Agency.

George Herbert Walker Bush – President from 1989 to January 1993, also served as CIA Director for 13 months from 1976-7. He is now a paid consultant to the Carlyle Group, the 11th largest defense contractor in the nation, and which shares joint investments with the bin Laden family.

A.B. "Buzzy" Krongard – The current Executive Director of the Central Intelligence Agency is the former Chairman of the investment bank A.B. Brown and former Vice Chairman of Banker’s Trust.

John Deutch - This retired CIA Director from the Clinton Administration currently sits on the board at Citigroup, the nation’s second largest bank, which has been repeatedly and overtly involved in the documented laundering drug money. This includes Citigroup’s 2001 purchase of a Mexican bank known to launder drug money, Banamex.

Nora Slatkin – This retired CIA Executive Director also sits on Citibank’s board.

Maurice "Hank" Greenburg – The CEO of AIG insurance, manager of the third largest capital investment pool in the world, was floated as a possible CIA Director in 1995. FTW exposed Greenberg’s and AIG’s long connection to CIA drug trafficking and covert operations in a two-part series that was interrupted just prior to the attacks of September 11. AIG’s stock has bounced back remarkably well since the attacks. To read that story, please go to http://www.copvcia.com/stories/part_2.html.

One wonders how much damning evidence is necessary to respond to what is now irrefutable proof that CIA knew about the attacks and did not stop them. Whatever our government is doing, whatever the CIA is doing, it is clearly NOT in the interests of the American people, especially those who died on September 11.

end

***INDEPENDENT

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.

*** LAT

October 18, 2001

Probe Into Insider Trading by Terrorists Remains Inconclusive

Investigation: Agencies continue to search for evidence that some organizations may have profited from attacks.

By WALTER HAMILTON, Times Staff Writer

Government investigators don't appear to be coming up with quick answers in their probe of possible insider trading by terrorists ahead of the Sept. 11 attacks.

Despite what seemed to some people initially to be a glaring case of market manipulation, no evidence has emerged publicly to indicate that those tied to the attacks tried to gain financially from them.

"To date, there are no flags or indicators" showing that terrorists used trading strategies known as "short selling" to profit from the attacks, Dennis Lormel, chief of the Federal Bureau of Investigation's financial-crimes unit, told a Congressional committee Oct. 3.

Some experts now say they doubt that such a scheme took place. What appears to be suspicious activity in some stocks may turn out to have been legitimate trading, they say.

What's more, there is doubt that the terrorist organization that went to great lengths to plan and conceal the attacks would have risked leaving behind a paper trail that could expose its identity.

"It would be out of pattern [for them] to just lead us so easily to their tracks," said Nikos Passas, a Temple University expert on international financial crimes. "If they [tried to manipulate the market] it would have been a strategic mistake on their part, and their track record so far shows they don't make such mistakes."

Nevertheless, the FBI, the Securities and Exchange Commission and other agencies continue to search for evidence that terrorists may have sought to profit from the post-attacks plunge in the securities of airlines and other companies.

Regulators are examining whether terrorists shorted certain stocks or whether they bought "put" options giving them the right to sell their holdings at a set price.

In a short sale, stock is borrowed from a brokerage and sold. The trader's goal is to replace the borrowed shares at cheaper prices later. Thus, a short seller must make two transactions that should be traceable: first, the sale of stock; then the purchase of new shares to close out the trade.

U.S. and foreign investigators are focusing on trading in 38 stocks, according to a notice posted on the Web site of a Canadian securities-industry trade group. Included are shares of airlines such as AMR Corp., parent of American, and UAL Corp., parent of United; insurers such as Marsh & McLennan Cos. and American International Group; and brokerages such as Morgan Stanley and Lehman Bros.

At first glance, the activity in some of those stocks just before Sept. 11 raised eyebrows. For example, the total number of shorted shares of UAL surged 40% between mid-August and mid-September, according to New York Stock Exchange data.

There also was extremely heavy buying of put contracts on Marsh & McLennan stock throughout the first half of August and again in early September, according to http://erlangersqueezeplay.com, a Web site tracking options activity.

To their advantage, regulators have conducted this sort of insider-trading probe many times in the last two decades. Though the stakes are higher than ever before, the process is the same: It involves combing through a labyrinth of trading records in the United States and abroad--an exercise at which the SEC has become quite skilled, experts say.

Crucial to the investigation, they add, is the cooperation of other countries.

Regulators are adept at tracing financial activities within the United States, and can fairly easily obtain records from domestic brokerages, experts say. That process probably was completed in the initial days of the probe.

But if the financial trail leads overseas, the probe's outcome could hinge on how successful U.S. regulators are at tracking down leads from abroad, several experts said.

The SEC has worked hard in the last decade to forge close ties with its regulatory counterparts in other countries. The agency has information-sharing pacts with more than two dozen countries in which foreign regulators have pledged their assistance in such investigations.

"There's a lot of pressure in every sense of the word being brought to bear on any one of these jurisdictions to cough up the information and cooperate," said William McLucas, a former SEC enforcement chief.

Nevertheless, tracking assets and transactions overseas can be a slow and painstaking process that is rife with obstacles. Chief among those is the likelihood that any illegal trading would have been done through shell accounts in which the identity of account-holders is purposely disguised.

In such cases, investigators must rely on foreign governments to reveal who controls the funds.

"The government's ability to trace information abroad is largely--almost exclusively--dependent on the cooperation of the government of that country," said Bill Lawler, a former Justice Department prosecutor who now is a partner with Vinson & Elkins in Washington, D.C. "Once they get to a country that says, 'No, we're just not going to help you,' that would be the dead-end."

Some analysts aren't convinced that the evidence is compelling enough to suggest that illegal trading occurred.

For example, open interest in AMR put options surged 73% on Sept. 10, a huge one-day jump, said Chris Johnson, an analyst at Schaeffer's Investment Research, a Cincinnati research firm.

But that was only the fifth-largest one-day jump in AMR put options since 1990, Johnson said. And the weakening economy was hurting airlines well before the attacks, analysts note. On Sept. 7, AMR warned that it would have disappointing second-half results.

"[The put-option activity was] significant, but at the same time it has happened in the past for reasons other than terrorist activities," Johnson said. "You can't rule out the fact that this was non-terrorist-related."

However, questions linger. The number of put contracts that have yet to be closed out remains relatively high in AMR, Johnson said. Given that the plunge in AMR shares following the attacks made the puts very profitable, those contracts normally would be closed out as traders took their profits, Johnson said.

That could be a sign that trading in the put options was legitimate, and that investors are holding on to the securities in the hope that AMR's stock price will fall further. But it also could signal that the accounts have been frozen or that the investors don't want to close out the trades for fear of drawing attention.

For information about reprinting this article, go to http://www.lats.com/rights/register.htm

***October 19, 2001

THE HALLOWEEN WAR

All Hallows Eve comes early this year

As the anthrax scare spread to Washington, D.C., they emptied out the Capitol Building, and the House of Representatives hiked up their skirts and skittered back to their home districts. Newsrooms across the nation instituted strict security measures as NBC and CBS were hit by bio-terrorists. As of this writing, 40 people in New York, Washington, Reno, and Boca Raton (Florida) have been exposed, and surely there are more to come. This morning [Thursday, October 18] we all woke to news of the penultimate horror pending: "We were notified last night that a security threat had been made against Three Mile Island," said a spokesman for the Pennsylvania nuclear facility. "That threat was deemed credible. We took extra security measures and we remain at that heightened state of alert." Halloween, it seems, has come early this year, and this trick is no treat….

MAILROOM MAYHEM

US warplanes continue to bomb Afghanistan, with more than 300 of them engaged in some capacity in the skies over Bin Laden Country, but we have hardly paid attention to any of that as news of the bizarre and the ominous on the home front sends a pre-Halloween chill down the spine. Yes, yes, Colin Powell has traveled to Pakistan and it looks like the ground troops are about to go in, but who cares about any of that when we have to worry about a procedure so hopelessly mundane as opening the mail? Even here at Antiwar.com we’re getting a little nervous, and I told Eric, our webmaster, to wear gloves and a protective mask while opening our snail-mail, and no one thought such a request in the least bit odd. But then, nothing is really odd these days, because the macabre is the commonplace: we are all of us living in a grade-B horror movie, and I’m not just talking about the threat of bio-nuclear terrorism….

PROPHETIC WORDS

To add a hint of the positively supernatural to the mix, or at least a hint of clairvoyance, we have the news that on September 6, a Brooklyn youth at New Utrecht High School was sitting in class, staring out the window which looked out over lower Manhattan. "What are you looking at?" snapped the teacher, who had been trying to stimulate a discussion of current events amongst her lethargic students. This effort no doubt met with limited success, and the probably frustrated Antoinette DiLorenzo pounced on the young daydreamer, whose thoughts seemed light years distant from the news of the day. Ah, but perhaps not: "See those two buildings over there?" he answered, pointing at the twin towers of the World Trade Center, "well they aren’t going to be there after next week."

EERIE IN RETROSPECT

The teacher failed to fully appreciate the eerieness of this remark until after 9/11, whereupon she went to the authorities: who soon had New Utecht HS in lockdown. While the rest of the kids were given lunch, shown a movie, and told to be calm, the cops hauled the clairvoyant kid and his brother off to the local hoosegaw for milk-and-cookies with the FBI. They are, we are told, still "investigating." Another ongoing investigation has focused on the curious form of "insider trading" that seems to have occurred in the days prior to the attack.

SELLING AMERICA SHORT

"Put" options and "short sales" are a means of betting that a stock will fall, and in two instances the volume in these investments increased dramatically three days before the twin towers debacle. The San Francisco Chronicle reported that "on one day, UAL put option purchases were 25 times greater than the year-to-date average. In the month before the attacks, short sales jumped by 40 percent for UAL and 20 percent for American."

THE INSIDERS

These mysterious investors, who seemed to be based in Germany, have yet to claim their profits, which amount to some $2.5 million, which seems to confirm our worst suspicions. No doubt they didn’t count on having the markets closed for 4 days, and were stymied in their plan to take the money and run. The Chronicle story sputters out toward the end, when it comes time to identify these sinister practitioners of what the head of the German central bank called "terrorist insider trading." All the Chronicle could come up with was they are "all presumed to be affluent residents of Arab nations." Although naturally the information this is based on is "classified," just like the evidence against Bin Laden himself, knowledgeable insiders assure us that this is so. "This smells real bad," said an anonymous source cited by the Chronicle, probably some SEC official, and maybe he’s right – although not quite in the way he means it.

CUI BONO?

An article in Barron’s generally ridiculing the "terrorist insider trading" scenario details the ongoing investigation, which is currently examining financial instruments linked to 38 companies, not only the two airlines but also insurance carriers and the investment firms (such as Morgan Stanley) once housed in the WTC. We are told that there are plenty of documents with Social Security numbers and tax ID numbers: they can trace the money as it flowed into investors’ bank accounts. "If there’s something there," says Mary Bender, of the Chicago Board of Exchange, "we’ll find it," adding: "I’m not confident there’s anything there." But why not? The unusual activity in UAL and American Airlines options, and similar activity a month prior to 9/11, is surely suspicious, which is why we heard about it almost immediately after the Event. Now here it is more than a month later, and what’s happened to this investigation? It seems curiously… stalled. Surely the authorities must know, by now, who profited from these highly unusual investments – and don’t tell me it was two Pakistani kids in Brooklyn.

THE WWII TROPE

The air of mystery that hangs over the Halloween War extends to its very justification. No sooner had we been told the US was going to release the evidence against Bin Laden, then the offer was promptly retracted – although Tony Blair was allowed a few peeks, so he could convey his marching orders from Washington to Parliament. Blair has been striding about and pontificating like the second coming of Winston Churchill, speaking of which: All those World War II reminiscences preceding the new Day of Infamy – the Pearl Harbor movie, The Greatest Generation, the endless TV documentaries – have come in handy, now haven’t they? "Loose lips sink ships!" is back in a big way. That and "don’t you know there’s a war on?" (a favorite phrase of Andrew Sullivan’s) are heard loudly drowning out dissenting voices. What few venture a protest are quickly quashed and smeared with the epithet "fifth columnist."

THE FASHION POLICE HAVE ARRIVED

We are not supposed to ask too many questions: that is the main feature of life in wartime America. Besides that, everything is "classified" and everyone is so intimidated that Sullivan, the neoconservatives' fair-haired boy, feels safe in smugly demanding that news anchors wear little flags on their lapels. From the Fashion Police to the Thought Police is not that far a road to travel, and soon Sullivan and his fellow neocons were haranguing Reuters for referring to Al Qaeda by name instead of "the terrorists." It’s amazing that they think they can get away with it – and what’s really changed is that they can.

POLITICS VERSUS THE ENGLISH LANGUAGE

And here’s another mystery for you: Sullivan, according to a recent profile in New York magazine, fancies himself the 21st Century's equivalent of George Orwell. Yet he seems to have missed his hero’s famous essay, "Politics and the English Language," where Orwell lampoons the literary tricks of various ideologues – and, presciently, describes to a tee the behavior of his British epigone. "Writing that aims at glorifying war usually takes on an archaic color" – ah, so that explains the World War II allusions! And here is a paragraph that fits Sullivan and his ilk quite snugly, capturing the Orwellian spirit of our post-9/11 age so perfectly that it outdoes even old Nostradamus at his most prescient:

"When one watches some tired hack on the platform mechanically repeating the familiar phrases – bestial, atrocities, iron heel, bloodstained tyranny, free peoples of the world, stand shoulder to shoulder – one often has a curious feeling that one is not watching a live human being but some kind of dummy.... And this is not altogether fanciful. A speaker who uses that kind of phraseology has gone some distance toward turning himself into a machine. The appropriate noises are coming out of his larynx, but his brain is not involved … he may be almost unconscious of what he is saying, as one is when one utters the responses in church. And this reduced state of consciousness, if not indispensable, is at any rate favorable to political conformity."

A VISION OF HACKS

Orwell’s famous novel of a future dystopia, 1984, predicted so many different aspects of the world we live in today – it’s politics, its perpetual war for perpetual peace, its nightmarish quality. It is little short of amazing that Orwell should also have anticipated the rise of such literary hacks as Andrew Sullivan. Why, I wouldn’t be at all surprised to find a portrait of David Horowitz in there, somewhere, too. Indeed, Orwell gives one example of bad political writing that brings the volatile commie-turned-conservative immediately to mind, of a writer "who knows more or less what he wants to say, but an accumulation of stale phrases chokes him like tea leaves blocking a sink." And no doubt, if we bothered to look, we could find Jonah Goldberg as well. It sometimes seems as if Orwell really did have second sight: there is a visionary quality to his writing, even his nonfiction, which gives it an eerie ring in retrospect. What Orwell failed to predict, however, is that these hacks would take his name in vain, and claim him for their own. For all the darkness of his imagination, that is something not even Orwell, a pessimist by temperament, could have foreseen.

A WARNING

Well, you might think, what phonies – particularly Sullivan! How does he manage to get away with it? You can add this to the other unsolved mysteries attending the Halloween War. As I see it, however, the spookiest mystery is how we managed to avoid all the clear warnings, none of which could have been clearer than this NewsMax story dated October 5, 1999, by Carl Limbacher, which identified not only the culprit but the target:

"The London-based Terrorism and Security Monitor is reporting that U.S. intelligence sources are worried that terrorist Osama Bin Laden may be planning a major terrorist attack on US soil. US sources are said 'to be particularly concerned about some kind of attack on New York', and they have recommended stepped-up security at the New York Stock Exchange and the Federal Reserve. US authorities believe Bin Laden may have acquired chemical weapons."

"Reports of Bin Laden’s activities come on the heels of heightened agitation among Muslims against the West. Yossef Bodansky, staff director of the Congressional Task Force on Terrorism and Unconventional Warfare, says, 'There are rumblings throughout the Islamic community right now. There’s a lot of movement and talk. It’s like a volcano just before the explosion'."

THE WORLD TURNED UPSIDE-DOWN

Halloween – a time of ghosts and goblins, monsters and ghouls, of horrors shrouded in mystery and witches cackling at human incomprehension. It seems not only to have come early, this year, but may just stay around a bit longer. As the outlines of the ghostly enemy take shape, at home as well as abroad, we are not so much frightened as … astonished. The harder we look, the more it seems that the Saudis, whom we fought to defend during the Gulf War, stand behind Bin Laden. Perhaps they even profited from the worst terrorist atrocity in American history. (Or perhaps the truth is even stranger than that.) Our friends turn out to be our enemies, and our enemies – Russia, China, Pakistan – turn out to be our friends.

Have a happy Halloween – and don’t forget to watch your back….

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SAN FRAN CHRONICLE

New scrutiny of airlines options deals

Christian Berthelsen, Chronicle Staff Writer Wednesday, September 19, 2001

The Chicago Board Options Exchange said yesterday that it is looking

into an unusual spike in trading in two airline stocks in advance of last

week's terrorist attacks.

As reported in The Chronicle, options trading in the stocks of the parent companies of American and United airlines was unusually heavy in the three

trading days prior to the attack.

That activity is the focus of an international investigation in the United

States and several other countries that is trying to determine whether people

with advance knowledge of the attacks sought to profit from the trading.

Four American and United planes, along with their crew and passengers, were

hijacked on Sept. 11. Three were used in the terrorist attacks against the

twin towers of the World Trade Center and against the Pentagon. The fourth

crashed in rural Pennsylvania.

Both airlines' stocks fell precipitously when trading resumed on Monday, with shares of UAL, the parent of United, dropping 43 percent, and shares of

AMR, the parent of American, dropping 39 percent. Both recovered slightly

yesterday, with UAL rising $1.49 to close at $18.99, and AMR rising $2, to

close at $20.

The Chicago Exchange, the largest options market in the nation and the board on which United options are officially listed, experienced volume eight

times its normal levels in the trading of UAL Corp. put options on the Friday

before the attack.

The purchaser of a put contract is guaranteed the right to sell a specific amount of shares at a specified price by a certain date. The purchaser profits

from the deal when the share price drops lower than the agreed sale price.

Lynn Howard, the exchange's chief spokeswoman, said, "As is usual, CBOE is

conducting an investigation of trading prior to the news event." Howard

declined to elaborate on the specific nature of the inquiry. Sources who have

agreed to speak on condition of anonymity say government investigators are

also looking at the trades.

Exchange officials and market markers in San Francisco refused to discuss the inquiry.

On the day before the terrorist attack there was a spike of 25 times the normal levels in the trading ratio of UAL put options, with larger-than- average volume coming through the Pacific Exchange.

Dale Carlson, a vice president of the Pacific Exchange, refused to comment

on whether an inquiry is taking place there in the trading of put options on

UAL or any other security.

A floor broker with TFM Investment Group, the market maker in UAL options

at the Pacific Exchange, also refused to comment.

E-mail Christian Berthelsen at cberthelsen@sfchronicle.com.

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SAN FRAN CHRONICLE

Brokers help probe

Pre-attack trades look suspicious

Christian Berthelsen, Chronicle Staff Writer Friday, September 21, 2001

Two online brokerage companies acknowledged yesterday they were cooperating with government investigators regarding unusual trading of

securities prior to terrorist attacks on America last week.

TD Waterhouse, of New York, and NFS, a subsidiary of Fidelity of Boston,

said they had received inquiries from financial regulators regarding trading

of options on AMR Corp., the parent of American Airlines.

Federal agencies, including the Securities and Exchange Commission and the

FBI, are looking into suspicious trading activity to see if someone with

advance knowledge of the attacks sought to profit on the resulting financial

fallout.

As previously reported, investors, whose identities at this point are still not publicly known, placed unusually large bets in the financial market against the stock of AMR the day before three planes, two from American

Airlines and one United, were hijacked and used in attacks on the World Trade

Center and the Pentagon.

Anne Crowley, a spokeswoman for Fidelity, said the company was cooperating

with the investigation but declined to release any details of the inquiry. A

spokeswoman for TD Waterhouse said the firm had looked into the trades that

originated from its brokerage, and found no evidence of suspicious activity.

Crowley said a number of other financial institutions have received inquiries from regulators.

Of particular interest in the investigation was an unusual spike in the

volumes of "put" options purchased on the stocks of AMR and UAL, the parent of

United Airlines.

Authorities say tracing the financial dealings of the hijackers and their supporters is a key means of identifying suspects and possibly heading off

other attacks.

The purchaser of a put contract is guaranteed the right to sell a specific amount of shares at a specified price by a certain date. It is essentially a

bet that the price of the stock will drop: the purchaser profits from the deal when the share price drops lower than the agreed sale price.

Treasury Secretary Paul O'Neill acknowledged the investigation in comments

before the Senate banking committee yesterday when he noted "there was a major

shift in the ratios between puts and calls," according to the Associated Press.

The transactions are easily traceable for regulators, but the trail may become difficult if the brokerage accounts were opened through an offshore

institution that shields its customers' identities, experts say. "You've got

to go through 10 veils before you get to a real source," O'Neill said.

Meanwhile, the Office of the Comptroller of the Currency, a U.S. Treasury

Department agency that regulates banks, was circulating a list of suspects'

names in the terrorist attacks and asking financial institutions to review

their records for any evidence of financial relationships or transactions with

the suspects.

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SAN FRAN CHRONICLE

Data shows heavy airline-stock short selling

Christian Berthelsen, Chronicle Staff Writer Saturday, September 22, 2001

In another sign that some investors speculated against the stocks of airlines whose jets were used in terrorist attacks on New York and the Pentagon, there was a sharp increase in short selling of the stocks of American and United airlines during the month before Sept. 11.

The trading activity far outpaced the rise in short selling for all stocks

on the New York Stock Exchange -- or other major airline stocks as a group on

the Big Board -- according to a computer analysis by The Chronicle of data

released yesterday by the New York Stock Exchange.

A short sale is essentially a financial market bet that the value of a particular stock will drop. In a successful short sale, an investor borrows

the stock from a broker, sells it and then repurchases it at a lower price,

returning the shares to their owner and turning a profit on the difference.

Federal securities and law enforcement investigators have been looking at

unusual trading activities in the stocks of AMR Corp. and UAL Corp., the

parent companies of American and United, as well as a number of other

securities in the days leading up to the terrorist attacks. Specifically, the

investigators want to determine whether someone with advanced knowledge of

what would happen was trying to profit on the ensuing financial downturn.

The data released yesterday is part of the NYSE's regular monthly report on short-selling. It shows that investors shorted nearly 4.39 million shares of UAL in portions of August and September. That represented an increase of 1.25

million shares, or 40 percent over the previous month's level.

Meanwhile, investors shorted more than 2.98 million shares of AMR, a jump

of nearly 497,000 shares, or 20 percent above what it was in August.

Those increases were far larger than the average shorting of stocks for the two companies' major competitors on the exchange, including Delta, Continental,

US Airways and Southwest. As a group, the competitors saw an increase in

shorting of only 11 percent. And shorting on the exchange overall totaled only

a one percent increase.

As reported previously, some of the suspicious trading under investigation by market monitors, the FBI and the Securities and Exchange Commission include an unusual spike in the purchase of "put" options on the stocks of AMR and UAL. A put is essentially a bet that the stock will decline, giving the buyer the right to sell the stock at a set price at a set time and delivering profits when the share price drops lower than the agreed sale price.

To be sure, there are a number of legitimate reasons to account for the increase in short selling that have nothing to do with terrorism. For instance, the airline industry was in serious finance trouble even prior to the attacks, as business and consumer travel demand slacked off in a weakening economy. And both AMR and UAL posted huge second-quarter losses in July and said they could be in the red for the rest of the year. What's more, short-selling on the exchange has become increasingly prevalent. Each month has seen a record high, with a new peak of 5.98 billion shares shorted this month. Still, anyone shorting shares of AMR and UAL would have turned a strong profit. UAL closed yesterday at $17.13 per share, off 44 percent from its close of $30.82 the day before the attack. AMR is down 40 percent, closing at $17.90 yesterday from $29.70 on Sept. 10. Only one carrier, US Airways, saw a higher jump in short sales, with an increase of 41 percent. But there were obvious reasons to short that company: US Airways is laden with debt and was the target of a takeover bid from United that failed in July. As with put options, it is difficult to tell how much money was made in the short selling of UAL and AMR stocks without more specific information about sale and repurchase prices and dates of execution.

E-mail Christian Berthelsen at cberthelsen@sfchronicle.com.

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SAN FRAN CHRONICLE

Stock-trading probe expands to Canada

Chronicle Staff and News Services Wednesday, October 3, 2001

Canadian securities officials said yesterday that the U.S. Securities

and Exchange Commission has asked North American investment firms to review

their records for evidence of unusual trading activity in securities affected

by the Sept. 11 terrorist attacks.

The Investment Dealers Association of Canada told its 190 members that the

SEC has identified 38 companies -- including the parent firms of United and

American airlines, which lost four aircraft -- whose shares were traded at

abnormally high levels in the weeks prior to the attacks, suggesting that buyers and sellers had advance knowledge of planned terrorist acts.

Canadian securities officials in Vancouver, British Columbia, late yesterday said they could not immediately comment on the communication from

the SEC. But earlier in the day, a top official of the dealers' group,

speaking in Toronto, confirmed that the SEC had asked Canadian firms to look

not only at the 38 companies but any others that showed signs of unusual

trading activity.

According to the Associated Press, the 38 companies include General Motors,

Raytheon, Continental, Delta, Northwest, Southwest, USAirways, Boeing and

defense contractor Lockheed Martin.

The SEC has declined to comment on news stories -- including five in The

Chronicle -- of pre-Sept. 11 trading that suggest possible advance information

about the attacks.

In a closely related development, the Wall Street Journal reported yesterday that trading in equities was not the only type of deal under investigation. The government also reportedly is looking into an unusual surge prior to the attacks in the purchase of five-year U.S. Treasury notes, a traditional safe-haven investment in crisis times. The Journal said agents of the U.S. Secret Service -- which regulates currency in addition to protecting the president -- have contacted a number of bond traders regarding the unusually large purchases, including one $5 billion transaction. Among the firms contacted were Dreyfus Corp., a mutual fund unit of Mellon Financial specializing in bonds, and Goldman Sachs Group Inc. The SEC equities list named several big companies that were tenants in the collapsed buildings in the heart of New York's financial district: investment firms Morgan Stanley, the towers' biggest occupant; Lehman Bros.; Bank of America; and financial firm Marsh & McLennan. While the SEC has been silent about specific investigative issues, Chairman Harvey Pitt told Congress last week that the agency's "No. 1 priority" is to pursue its worldwide investigation of possible trading by people associated with the terrorists. If such trading did occur, "We will do everything within our power to track those people down and bring them to justice," Pitt said in testimony to the House Financial Services Committee. In the days before the terrorist assaults, unusually high numbers of put options were purchased for the stocks of AMR Corp. and UAL Corp., the parents of American and United -- each of which had two planes hijacked. A put option is a contract that gives a holder the right to sell an asset at a specified price before a certain date. Several insurance companies are on the SEC's list -- American International Group, Axa, Chubb, Cigna, CNA Financial, John Hancock and MetLife. Germany's stock market regulatory agency has said it was looking into the possibility of suspicious short selling of insurance company shares just before the terrorist attacks. Similar statements have been made in interviews with The Chronicle by securities officials in London and Paris. As with put options, investors who engage in short selling are betting that the price of the stock will fall.

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SAN FRAN CHRONICLE

Canada asked to aid SEC probe - Trading before Sept. 11 checked

Chronicle Staff and News Services Wednesday, October 3, 2001

Canadian securities officials said yesterday that the U.S. Securities

and Exchange Commission has asked North American investment firms to review

their records for evidence of unusual trading activity in securities affected

by the Sept. 11 terrorist attacks.

The Investment Dealers Association of Canada told its 190 members that the

SEC has identified 38 companies -- including the parent firms of United and

American airlines, which lost four aircraft -- whose shares were traded at

abnormally high levels in the weeks prior to the attacks, suggesting that buyers and sellers had advance knowledge of planned terrorist acts.

Canadian securities officials in Vancouver, British Columbia, said late

yesterday they could not immediately comment on the communication from the SEC.

But earlier in the day, a top official of the dealers' group, speaking in Toronto, confirmed that the SEC had asked Canadian firms to look not only at

the 38 companies but any others that showed signs of unusual trading activity.

According to the Associated Press, the 38 companies include General Motors,

Raytheon, Continental, Delta, Northwest, Southwest, USAirways, Boeing and

defense contractor Lockheed Martin.

The SEC has declined to comment on news stories -- including five in The

Chronicle -- of pre-Sept. 11 trading that suggest possible advance information

about the attacks.

In a closely related development, the Wall Street Journal reported yesterday that trading in equities was not the only type of deal under investigation. The government also reportedly is looking into an unusual surge

prior to the attacks in the purchase of five-year U.S. Treasury notes, a

traditional safe-haven investment in crisis times.

The Journal said agents of the U.S. Secret Service -- which regulates currency in addition to protecting the president -- have contacted a number of

bond traders regarding the unusually large purchases, including one $5 billion

transaction.

Among the firms contacted were Dreyfus Corp., a mutual fund unit of Mellon

Financial specializing in bonds, and Goldman Sachs Group Inc.

The SEC equities list named several big companies that were tenants in the collapsed buildings in the heart of New York's financial district: investment firms Morgan Stanley, the towers' biggest occupant; Lehman Bros.; Bank of America; and financial firm Marsh & McLennan. While the SEC has been silent about specific investigative issues, Chairman Harvey Pitt told Congress last week that the agency's "No. 1 priority" is to pursue its worldwide investigation of possible trading by people associated with the terrorists. If such trading did occur, "We will do everything within our power to track those people down and bring them to justice," Pitt said in testimony to the House Financial Services Committee. In the days before the terrorist assaults, unusually high numbers of put options were purchased for the stocks of AMR Corp. and UAL Corp., the parents of American and United -- each of which had two planes hijacked. A put option is a contract that gives a holder the right to sell an asset at a specified price before a certain date. Several insurance companies are on the SEC's list -- American International Group, Axa, Chubb, Cigna, CNA Financial, John Hancock and MetLife. Germany's stock market regulatory agency has said it was looking into the possibility of suspicious short selling of insurance company shares just before the terrorist attacks. Similar statements have been made in interviews with The Chronicle by securities officials in London and Paris. As with put options, investors who engage in short selling are betting that the price of the stock will fall.

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SAN FRAN CHRONICLE

Terrorism's long, tangled money trail

Kathleen Pender Sunday, October 7, 2001

Paul Regan knows a thing or two about tracking suspicious stock trades

like those that might have been designed to profit from the Sept. 11 terrorist

attacks.

He also knows a few things about terrorism, having been a passenger on an

Ariana Afghan Airlines plane that was hijacked in 1971.

Five seconds after the hijacker announced he had a bomb, the Afghan flight

attendants -- all male -- had him pinned to the floor, Regan recalls. The

pilot made an emergency landing in the Afghan desert. Three hours later, the

passengers were told there was no bomb, and they reboarded their flight from

Kabul to Iran.

Regan is chairman and president of Hemming Morse, CPAs in San Francisco,

which specializes in forensic accounting -- a profession that helps solve and

prosecute crimes by tracing financial transactions.

His firm has been hired to track down embezzlers, testify as an expert witness in securities fraud cases and determine if money the federal government is spending on projects overseas is actually going into the projects. It was the last type of job that took Regan to Afghanistan in the 1970s.

Hemming Morse hasn't been called in on the Sept. 11 attacks, so Regan was

free to speculate about how and with what success the government is investigating unusual trades in companies whose operations were disrupted by

the devastation.

President Bush has said that following the money is an important weapon in the war on terrorism, and tracking down unusual pre-attack trades is part of

that effort.

Among the suspect trades: Unusually large purchases of "put" options in American Airlines parent AMR and United Airlines parent UAL in the three days

before the attack, and a sharp increase in short selling of UAL and AMR stock

in the month before the attacks.

Buying a put option and short-selling a stock are two ways to make money when a company's share price plummets. United and American were the carriers

whose planes were hijacked.

Last week, Canadian securities officials said the U.S. Securities and Exchange Commission has asked North American brokerage firms to review their

records for evidence of unusual trading activity in 38 companies affected

positively or negatively by the Sept. 11 attacks, including airlines,

insurance companies and defense contractors.

There is even some speculation that terrorists might have loaded up on five-

year Treasuries before the acts, knowing that U.S. government bonds usually

surge during crises.

Although he has no inside knowledge, Regan says the purchase of put options

in American and United "were probably related to the terrorists," based on the

"unusual trading patterns" in the contracts and the fact that more than $2

million in profits on those trades remain uncollected.

But tracing trades is not always easy.

"You go to the brokerage house (that handled the trade), then you track all the activity in the accounts: where did money come from, when were deposits

made to the account, who was making the deposit, which bank or brokerage house

did it come from? Then you track back to those banks and brokerage houses,"

and go through the same process, Regan says.

"Sometimes these trails are long, and they go from country to country. That

can get you stuck," he adds. The trail usually dead ends when you get to the

Cayman Islands, Panama, the Isle of Man, Switzerland and other countries and

territories where banks fiercely protect their customers' privacy.

"It's very difficult to penetrate that confidentiality," Regan says, unless it's an "egregious case" and the government puts pressure on banks and/or

their governments to divulge information. That happens occasionally, although

the banks will never admit it.

"We did one for the British government where we were getting cooperation,"

Regan says.

Hemming Morse was trying to see if money lent by Britain to a corporation for a project in Northern Ireland was being embezzled. "We tracked it from Northern Ireland to the Isle of Man, Panama, Algiers, Switzerland and back to

Northern Ireland eventually. There was cooperation" from those territories, he

says.

Regan says most countries will help the U.S. government trace the terrorists' money trail, out of a moral obligation or because President Bush has threatened to confiscate the U.S. assets of foreign banks and brokerages that won't cooperate. Foreign institutions "want to be a part of our system," he says. Even with the utmost cooperation, however, the trail can go cold if perpetrators used fake identities and addresses.

The SEC and the Federal Bureau of Investigation have said nothing about their investigation into suspect trades. Experts have said there could be innocent explanations.

"To the extent they've had success, I think they're strategically being

quiet," Regan says.

Asked why anyone with advance knowledge of the attacks would place trades

that could be traced back to them, Regan says, "They may not have realized the

magnitude of the destruction, and the magnitude of the pursuit."

They also might not have realized that the U.S. stock markets would be closed for four days, making it difficult to take the money and run.

Based on his travels across Afghanistan, Regan says the United States

should approach any military action in that country very carefully.

"The weather is extremely hot and cold . . . the mountains are extraordinarily hostile and offer enormous amounts of protection to people that know them," he says. Even in 1971, when Afghanistan was ruled by Mohammed Zahir Shah -- the exiled king now living in Rome -- Afghanistan was a "horrendously hostile, violent place," Regan says. "If you walk down the streets of Kabul, 75 percent of the males over 12 would have at least one weapon -- a submachine gun, rifle, pistol, knife or some combination. If you get out of Kabul (the percentage of armed men) is higher. "If you were to walk into Afghan National Bank in Kabul, which I would go into frequently, all you can see are guards with machine guns behind sandbags, " he says. And that was before the real problems began, he says. There is talk of bringing Zahir Shah, who was deposed in 1973, back to Afghanistan to help assemble a government to replace the Taliban. Regan says he never met the man, although he did meet one of his daughters, who was "very nice, educated at a university in London. That certainly distinguishes (the former king) from the Taliban. He educated his daughters. They were very nice, well-spoken and very Western." During his reign, Zahir Shah "was attracting a lot of interest and aid from the international community, which is what that country needs."

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

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telegraph.co.uk

Bin Laden rigged oil and gold prices - bank chief

By Philip Sherwell

(Filed: 23/09/2001)

OSAMA bin LADEN is believed to have made a massive profit from trading in oil and gold as well as shares on the eve of the suicide attacks blamed on his followers.

Ernst Welteke, president of the Bundesbank, said financial investigators had found strong indications of suspicious dealings in gold and oil, as well as unusual movements in airline and insurance shares, in the days before the September 11 attacks in the United States.

It appears that terrorist leaders capitalised on their "insider knowledge" of the planned atrocities to invest in oil and gold, knowing that the prices would rise after the attacks on the World Trade Centre and the Pentagon. Strange stock-market fluctuations have already been identified.

European Union finance ministers, meeting in Liege, Belgium, ordered national regulators to investigate the alleged market manipulations. Gordon Brown, the Chancellor, said: "Financial institutions in every part of the world should be under an obligation to report suspicious transactions where terrorist money could be in use."

Mr Welteke, speaking during a break in the same meeting yesterday, said: "There are ever clearer signs that there were activities on international financial markets that must have been carried out with the necessary expert knowledge."

He reported an unusual rise in oil prices before the attacks. This could mean that people had bought oil contracts, and later sold them at a higher price. Gold-market movements also "needed explaining".

Gold, a traditional refuge for investors in times of crisis, has risen in price each day since the attack. Oil prices soared 13 per cent within 24 hours of the atrocities.

The money-making operation, thought to have earned millions for terrorist coffers, follows to the word a 1998 exhortation by one of bin Laden's Islamist front groups to "kill the Americans and plunder their money".

--------------------------------------------------------------

ah, just kidding:

FORBES.COM

http://www.forbes.com/business/energy/feeds/ap/2004/07/22/ap1466836.html

Associated Press

Update 1: No Evidence of 9/11 Trading by Terrorists

07.22.2004, 06:49 PM

After an extensive investigation, the government has found no evidence that terrorists tried to profit from stock and options trading ahead of the Sept. 11 attacks, the Securities and Exchange Commission said Thursday.

The SEC was among several federal agencies that investigated, starting the day after the attacks, whether such market manipulation occurred. Working with stock and options exchanges, the SEC reviewed more than 9.5 million transactions that took place during the weeks preceding Sept. 11, 2001. The trades involved stocks and options of 103 companies in six industries.

"In the course of that review, we did not develop any evidence suggesting that anyone who had advance knowledge of the Sept. 11 attacks traded on the basis of that information," the SEC said.

That conclusion, included in the final report issued Thursday by the Sept. 11 commission, was the government's first public statement on the findings of the trading probe. SEC spokesmen would not say when the investigation was completed.

The probe by the SEC, in cooperation with the Justice Department and the FBI, came amid efforts by government regulators and investigators in several countries to determine whether terrorists linked to the deadly hijacking plot engaged in such trading.

The SEC asked several big Wall Street investment firms for trading records.

The world's largest options market, the Chicago Board Options Exchange, said in September 2001 that it was investigating reports of unusual trading activity before the attacks on the World Trade Center and the Pentagon. Germany's stock market regulator said it was looking into claims of suspicious short-selling of insurance company shares just before the attacks.

In the days before Sept. 11, unusually high numbers of put options were purchased for the stocks of AMR Corp. and UAL Corp., the parent companies of American Airlines and United Airlines. Each carrier had two planes hijacked.

A put option is a contract that gives a holder the right to sell an asset at a specified price before a certain date. The inverse is a call option, giving the holder the right to buy an asset at a set price in a limited amount of time.

The Chicago exchange trades options on the stocks of about a thousand companies along with several stock-based indexes, including the Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq 100, which tracks the largest non-financial companies that trade on the Nasdaq Stock Market.

All dropped steeply in the aftermath of the attacks. That would have meant substantial profits for anyone who had bet on their decline by buying put options or through short-selling.

As with put options, investors who engage in short-selling are betting that the price of the stock will fall. Short-sellers borrow stock and sell it in anticipation of buying it back later at a lower price.