The U.S. Parole Commission, under pressure from Congress, has backed off a plan to allow persons convicted of up to $1 million in insider stock trading to avoid serving time in prison.
The commission adopted guidelines yesterday that call for anyone found guilty of insider trading involving more than $500,000 to serve from 40 to 52 months in prison. Those convicted of illicit trading of $100,000 to $500,000 would have to serve 24 to 36 months, a sentence that would drop to 12 to 18 months for offenses involving $20,000 to $100,000.
Insider trading involves the illicit use of confidential information to buy or sell securities, often before a major event like a takeover attempt.
The tightening of the guidelines, which are generally followed by local parole boards, came after Congress suspended the earlier plan for insider trading. Sen. Frank R. Lautenberg (D-N.J.), who added the language to a continuing budget resolution last month, expressed outrage that the commission would suggest no-time to 10 months as an appropriate sentence for insider trading of up to $1 million.
Critics noted that the lighter standard would have meant more lenient treatment for former deputy defense secretary Paul Thayer, who is serving a four-year prison term in an insider trading case often cited as evidence of the administration's crackdown on the practice.
Commission chairman Benjamin F. Baer said the panel considered comments from members of Congress, the Justice Department and the Securities and Exchange Commission, all of which opposed the earlier plan.
Baer said the panel's action was "a significant step toward treating insider trading as a crime on the same level with fraud and racketeering" and would "avoid creating a public perception that white-collar offenders were the beneficiaries of a double standard."
Under interim guidelines in effect until April 1, insider traders are to serve 14 to 20 months in prison for offenses involving more than $1 million, and 10 to 14 months for offenses ranging from $100,000 to $1 million.