In May 1980, according to the Securities and Exchange Commission, Dennis Levine, a promising young investment banker, opened an account in the Bahamas with the subsidiary of a Swiss bank and began a pattern of stock trades that resulted in charges that he had used secret inside information about takeovers and other major corporate developments to enrich himself by $12.6 million.

Not quite a year later, on April 10, 1981, the then-general manager of Bank Leu International in Nassau wrote a memo, according to testimony and documents filed by the SEC last week as it sought a preliminary injunction barring Levine from violations of federal securities laws and freezing $10.3 million that the SEC said was his.

The memo was attached to a Wall Street Journal article about the SEC's attempts to obtain data from a Swiss bank in connection with an investigation into insider trading.

"Mr. J. P. Gabriel said in Miami, that the SEC was getting very tough on insiders and that we had to be quite careful if we had clients sailing a bit too close to the wind," J. P. Fraysee wrote. "We have one."

The memo was included with the SEC's transcript of testimony by Bruno Pletscher, who succeeded Fraysee as the bank's general manager. The testimony indicates that the bank was aware early on that the SEC was keeping a wary eye on trades that the SEC has said since were made by Levine. And it tells of the bank's attempts both to handle the transactions in a way that would not attract SEC attention and of how bank officials profited by copying the transactions of a customer whom they initially identified to investigators as Mr. X.

The bank identified that customer as Levine after it received immunity from the SEC and the Justice Department for the bank and its employes, except for Bernhard Meier, a former Bank Leu employe who is alleged to have been Levine's broker and who also has been charged by the SEC with profiting illegally from insider information. Attorneys for Levine -- who has denied the SEC's charges -- have raised questions about the credibility of testimony from bank officials, suggesting that they were covering up their own culpability. Pletscher also testified to the SEC that Levine had devised a coverup of his activities in which bank officials initially participated. Levine faces criminal obstruction of justice charges based on allegations of a coverup attempt.

Early on, according to Pletscher, the bank took steps to make Levine's trades less conspicuous, spliting his orders and placing them with several brokers.

At the same time, bank officials were aware, according to Pletscher, that Levine was going to great lengths to keep his stock market transactions secret. Pletscher testified that Levine had told him that he never flew directly to Nassau, that he flew through different destinations including Canada, that he paid for his trips and expenses in cash and that he never told his wife of either the trips or the accounts he maintained.

Later, Pletscher described his own stock trading activities, saying that he opened a personal account on the advice of Meier. After Pletscher lost money trading in options that Meier had recommended, Meier suggested a means to recoup the loss.

"He said to me, 'You must be aware of the fact that Mr. X has an excellent track record and that Mr. X has made a lot of profits.' He said, 'Why should not you also benefit from such trades.' He said, 'Mr. X is investing in securities, and it happens that most of these trades are related to a take-over situation. This guy must know more than other people.' This sounded reasonable to me, and exciting, so I said, 'Let me know if you have the next deal coming up,' " according to Pletscher's testimony.

Pletscher did well, he told SEC investigators. But, in the meantime, the SEC's investigation pulled closer to the bank. At one point, according to the transcript, Levine recommended a lawyer to the Bank Entangled In Levine Probe By Martha M. Hamilton Washington Post Staff Writer

In May 1980, according to the Securities and Exchange Commission, Dennis Levine, a promising young investment banker, opened an account in the Bahamas with the subsidiary of a Swiss bank and began a pattern of stock trades that resulted in charges that he had used secret inside information about takeovers and other major corporate developments to enrich himself by $12.6 million.

Not quite a year later, on April 10, 1981, the then-general manager of Bank Leu International in Nassau wrote a memo, according to testimony and documents filed by the SEC last week as it sought a preliminary injunction barring Levine from violations of federal securities laws and freezing $10.3 million that the SEC said was his.

The memo was attached to a Wall Street Journal article about the SEC's attempts to obtain data from a Swiss bank in connection with an investigation into insider trading.

"Mr. J. P. Gabriel said in Miami, that the SEC was getting very tough on insiders and that we had to be quite careful if we had clients sailing a bit too close to the wind," J. P. Fraysee wrote. "We have one."

The memo was included with the SEC's transcript of testimony by Bruno Pletscher, who succeeded Fraysee as the bank's general manager. The testimony indicates that the bank was aware early on that the SEC was keeping a wary eye on trades that the SEC has said since were made by Levine. And it tells of the bank's attempts both to handle the transactions in a way that would not attract SEC attention and of how bank officials profited by copying the transactions of a customer whom they initially identified to investigators as Mr. X.

The bank identified that customer as Levine after it received immunity from the SEC and the Justice Department for the bank and its employes, except for Bernhard Meier, a former Bank Leu employe who is alleged to have been Levine's broker and who also has been charged by the SEC with profiting illegally from insider information. Attorneys for Levine -- who has denied the SEC's charges -- have raised questions about the credibility of testimony from bank officials, suggesting that they were covering up their own culpability. Pletscher also testified to the SEC that Levine had devised a coverup of his activities in which bank officials initially participated. Levine faces criminal obstruction of justice charges based on allegations of a coverup attempt.

Early on, according to Pletscher, the bank took steps to make Levine's trades less conspicuous, spliting his orders and placing them with several brokers.

At the same time, bank officials were aware, according to Pletscher, that Levine was going to great lengths to keep his stock market transactions secret. Pletscher testified that Levine had told him that he never flew directly to Nassau, that he flew through different destinations including Canada, that he paid for his trips and expenses in cash and that he never told his wife of either the trips or the accounts he maintained.

Later, Pletscher described his own stock trading activities, saying that he opened a personal account on the advice of Meier. After Pletscher lost money trading in options that Meier had recommended, Meier suggested a means to recoup the loss.

"He said to me, 'You must be aware of the fact that Mr. X has an excellent track record and that Mr. X has made a lot of profits.' He said, 'Why should not you also benefit from such trades.' He said, 'Mr. X is investing in securities, and it happens that most of these trades are related to a take-over situation. This guy must know more than other people.' This sounded reasonable to me, and exciting, so I said, 'Let me know if you have the next deal coming up,' " according to Pletscher's testimony.

Pletscher did well, he told SEC investigators. But, in the meantime, the SEC's investigation pulled closer to the bank. At one point, according to the transcript, Levine recommended a lawyer to the bank to represent it in the investigation -- Harvey Pitt, who ultimately negotiated the agreement with the SEC that led to the bank's identification of Mr. X as Dennis Levine.