September 19-20, 2013 — Exclusive to WMR: SEC destroyed pre-9/11 stock “put” data
Baltimore-based investigative reporter David Callahan has shared with WMR a Securities and Exchange Commission (SEC) letter, dated December 23, 2009, that states that the commission destroyed all records pertaining to the pre-9/11 “put” options on the shares of United and American Airlines, the two airlines whose planes were hijacked on 9/11, as well as three insurance companies and a securities firm that was a World Trade Center occupant.
Prior to the 9/11 attacks, insider trading “put options” were placed on United and American Airlines stocks. The speculative options on United were placed between September 6 and 7, 2001 and on American on September 10 at the Chicago Board of Options Exchange. Put options are bets that a stock will fall in value and the owner has the option of selling the stock at a lower rate and sell them at the highest rate, thus earning a quick windfall profit. The put options on the two airlines’ stock was reportedly six times higher than normal. Other unusual “put option” activity was registered with three European re-insurance firms, Germany Re, Swiss Re, AXA of France, in addition to World Trade Center occupant Morgan Stanley Dean Witter.
Specifically sought in Callahan’s Freedom of Information Act request to the SEC were files in reference to Footnote 130 in the 9/11 Commission report:
Highly publicized allegations of insider trading in advance of 9/11 generally rest on reports of unusual pre-9/11 trading activity in companies whose stock plummeted after the attacks. Some unusual trading did in fact occur, but each such trade proved to have an innocuous explanation. For example, the volume of put options—investments that pay off only when a stock drops in price—surged in the parent companies of United Airlines onSeptember 6 and American Airlines on September 10—highly suspicious trading on its face.
Yet, further investigation has revealed that the trading had no connection with 9/11. A single U.S.-based institutional investor with no conceivable ties to al Qaeda purchased 95 percent of the UAL puts on September 6 as part of a trading strategy that also included buying 115,000 shares of American on September 10. Similarly,much of the seemingly suspicious trading in American on September 10 was traced to a specific U.S.-based options trading newsletter, faxed to its subscribers on Sunday, September 9, which recommended these trades.These examples typify the evidence examined by the investigation.The SEC and the FBI, aided by other agencies and the securities industry, devoted enormous resources to investigating this issue, including securing the cooperation of many foreign governments.These investigators have found that the apparently suspicious consistently proved innocuous. Joseph Cella interview (Sept. 16, 2003; May 7, 2004; May 10–11, 2004); FBI briefing (Aug. 15, 2003); SEC memo, Division of Enforcement to SEC Chair and Commissioners,“Pre-September 11, 2001 Trading Review,” May 15, 2002; Ken Breen interview (Apr. 23, 2004); Ed G. interview (Feb. 3, 2004).
Footnote 130, Chapter 5, 9/11 Commission Report
The SEC destroyed the briefing notes described in the footnote and other documentation pertaining to the SEC’s and 9/11 Commission’s investigation.
On September 23, 2003, at a 9/11 Commission interim report news conference, this
editor asked 9/11 Commission co-chairman Thomas Kean about the Commission’s investigation of the pre-9/11 suspicious stock transactions:
Are you satisfied with that, or are you planning to continue your
And also, as a result of the take-down of a missile smuggling ring in New York a few weeks back, are you going to look at possible terrorist financing and money laundering, especially that which seemed to involve the diamond business – international diamond business?
There were reports after 9/11 that the put options involved the old firm of CIA executive director Alvin “Buzzy” Krongard. Before joining the CIA in 1998, Krongard was the chairman of Alex. Brown & Sons Inc., a private equities firm, which was acquired by Bankers Trust. Krongard became vice chairman of Bankers Trust after the acquisition. On March 16, 2001, CIA director George Tenet appointed Krongard as the CIA’s executive director, the number three spot at the agency.