Possible insider trading by Wachovia brass?

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Wednesday October 07, 2009 · 5:44 AM PDT

2009/10/07 · 05:44

Roughly a year ago, Wachovia nearly suffered the largest bank failure in American financial history. Now, a suit by a former Wachovia shareholder makes a potentially damning allegation--former CEO Ken Thompson and several other Wachovia executives may have been engaging in illegal insider trading.

Cameron Harris, a Charlotte insurance magnate, is suing Wachovia, Wells Fargo, Thompson and several executives for fraud and other offenses. However, the most explosive allegation is that Thompson and other Wachovia executives were dumping their stock even as they told Harris and other shareholders that all was well. The Charlotte Observer doesn't play up this part of the story as much, which is disappointing given the ramifications.

Harris was thinking of selling his Wachovia stock because his stock price had been tailing off since its ill-fated purchase of Golden West. That purchase, as it turned out, was one of the major factors in the collapse of Wachovia. However, during a hunting trip in February 2008, Thompson assured Harris that he had nothing to worry about--and that he himself was buying more stock.

However, only a few days after Thompson came back to Charlotte, he sold over $510,000 worth of Wachovia stock. A month later, he sold another $250,000 of stock. This was well before the first public sign that Wachovia was in trouble. Even more damningly, Harris sold over 116,000 shares in the 16 months after Wachovia closed on Golden West--after only selling 61,000 shares in the 16 months before the closing. The obvious question--what did Thompson know, and when did he know it? His answer to that question on the witness stand could determine whether he gets whacked on charges of insider trading.

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