A federal judge in New York has dismissed two of four criminal charges against former White House aide Thomas C. Reed in an insider trading case.
Reed, a former deputy national security affairs adviser to President Reagan, was charged with securities fraud and wire fraud after he turned a $3,000 investment in Amax Corp. into a $427,000 profit in 48 hours.
Reed is alleged to have acted on confidential information from his father, an Amax director, that the company was about to receive a merger proposal from Standard Oil of California. News of the merger proposal caused the value of Reed's stock options to soar.
Reed also was charged with perjury and obstruction of justice for allegedly lying and falsifying documents in sworn depositions for a civil suit challenging his Amax trading. The government charged that Reed had created false handwritten notes to disguise his use of inside information in the 1981 transaction.
U.S. District Court Judge Robert J. Ward dismissed the perjury and obstruction charges in a 78-page ruling Thursday. Ward ruled that because the alleged acts occurred when Reed's depositions were taken in San Francisco, they were outside the court's jurisdiction.
Paul L. Shechtman, an assistant U.S. attorney in New York, said the Justice Department will decide within days whether to appeal the ruling. He said the decision was on technical grounds and "didn't speak to the merits at all."
"It wasn't that the judge said he didn't do it," Shechtman said. "It was that he said he didn't do it here," in New York.
Michael Shaw, Reed's attorney, said he was "obviously pleased that the perjury and obstruction counts have been dismissed."
Shaw also said the judge's ruling on the two fraud charges "will make it extremely difficult for the government to prove its case at trial." He said the ruling "requires them to prove that Tom Reed . . . breached a fiduciary relationship with his father and defrauded his own father."
But a federal official familiar with the case called that ruling a procedural victory for the government. Since prosecutors have said they will not contend that Reed's father, Gordon, had any fraudulent intent when he allegedly disclosed themerger proposal to his son, the official said, the judge could have adopted Reed's argument that there was no evidence of a crime.
Ward, however, ruled that the government could press the fraud charges without alleging improper intent on Gordon Reed's part.
Reed, a former Air Force secretary who left the Reagan administration in 1983, repaid the $427,000 in profits, without admitting or denying guilt, in a settlement with the Securities and Exchange Commission. Reed was indicted by a grand jury last August; his trial is expected to begin in February or March.