San Francisco, CA — Reports indicate State Controller Steve Westly made $286,000 in stock trades that appear consistent with a banned stock-market scheme.
Six stock market experts say Westly´s pattern of trades were consistent with a market manipulation scheme known as laddering.
This happens when an investment banks pump up the price of just-issued stock by allowing buyers to purchase coveted shares in initial public offerings only if they agree to make subsequent purchases.
A spokesman for Westly says the state controller was a hands-off investor who delegated most decisions to brokers. He says Westly never participated in improper trades, and purchases following initial public offerings were part of a legal investment strategy.
But Westly´s tax returns show 33 occasions in 1999 when he bought blocks of stocks in initial public offerings. In each case, Westly sold the stocks shortly after buying them.
Six experts in securities fraud said the trades were consistent with laddering. A seventh expert said the pattern was suspicious, while an eighth said there could have been legal reasons for making the subsequent stock purchases.