Merrills tight-lipped on accused trader
Sydney Morning Herald
Friday June 19, 2009
A COURT has been told that Dan Ritchie, the Merrill Lynch executive at the centre of insider trading allegations made by former client David Waterhouse, may no longer be an employee of the merchant bank.In testimony before the Victorian Supreme Court yesterday, former Merrill Lynch executive John Laws said he did not believe Mr Ritchie, the former head of equities at the bank, was still with Merrill Lynch.Merrill Lynch and its subsidiary, Berndale Securities, is suing Mr Waterhouse's company, How Trading, over a $9.8 million debt from failed options trades. How Trading has a counter-claim for deceptive conduct.Lawyers for Mr Waterhouse subpoenaed the Australian Securities Exchange demanding documents relating to short trades conducted by How Trading in January last year amid claims that Mr Waterhouse's signature might have been forged.Counsel for Mr Waterhouse told the court last week that $55.86 million in short-sale trades were made in the name of How Trading without his approval.Mr Waterhouse alleges in his witness statement that Mr Ritchie passed to him inside information about the "awful" state of the bank's subprime mortgage exposure in the US, warning him not to be "long" in the market as share prices would fall. A "long" trade is a bet the market will rise.Mr Waterhouse says he was given that information three days before Merrill Lynch reported a $US16.8 billion subprime write-down in the US and he was told Merrill Lynch planned to "short the hell" out of stocks in his badly performing options portfolio to cover his losses.Solicitors for Merrill Lynch say Mr Ritchie strongly denies the insider trading allegations.Counsel for Mr Waterhouse, Don Grieve, QC, has told the court that "Mr Ritchie has not filed any witness statement and we take it from that that he concedes the accuracy of Mr Waterhouse's account".Merrill Lynch has refused to confirm whether Mr Ritchie remains an employee. Documents obtained by the Herald show Mr Ritchie stepped down as a director of the peak body, the Securities and Derivatives Association, on February 25 and was replaced by Merrill Lynch Australia's chief executive, Paul Masi, the same day.Mediation between Berndale and How Trading broke down on February 20. Neither party would confirm whether the insider trading allegations were aired.Yesterday Mr Laws told the court he deleted a clause from the contract with How Trading that allowed Mr Waterhouse to breach his trading margin for 48 hours after which Berndale would seize the account.Mr Waterhouse emailed Mr Laws after discovering the 48-hour clause had been removed, saying he felt "very cheated" by the "deceptive action", and he would take legal action to have the clause reinstated.
© 2009 Sydney Morning Herald
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