Former Broker Claims Winans Initiated Plan : Contradicts Ex-Journal Writer’s SEC Testimony

NEW YORK —  A former stockbroker testified Thursday that former Wall Street Journal reporter R. Foster Winans initiated a scheme by which they and two associates traded stocks illicitly on the basis of advance information of Winans’ upcoming articles in the Journal.

The witness, Peter N. Brant, 32, was the top broker at Kidder, Peabody & Co. in 1983, when he earned $1.8 million in commissions. But after the stock-trading scheme surfaced last year, he lost his job, pleaded guilty to federal conspiracy and fraud charges and agreed to cooperate with the prosecution of Winans and the others.

Brant’s assertion that it was Winans who initiated the scheme contradicts Winans’ testimony before the Securities and Exchange Commission and is certain to be sharply challenged in cross-examination by Don D. Buchwald, Winans’ lawyer. Winans has said the scheme was proposed by Brant and Kenneth P. Felis, 31, Brant’s college roommate and also a former Kidder, Peabody broker.

Code of Ethics

Buchwald said during a break in the trial that he will also challenge the prosecution’s argument that Winans’ apparent violation of the Journal’s conflict-of-interest rules amount to a criminal violation of law. The code of ethics, which bars reporters from trading stocks on which they write and from divulging the newspaper’s publication plans, is not carefully written enough to represent a legal standard, he argued.

Winans, 36, was one of two principal writers of the Journal’s Heard on the Street column, an influential daily recounting of Wall Street gossip and research, until the Journal fired him last March when word surfaced of an SEC investigation of the trading.

He is on trial in federal district court here on conspiracy and fraud charges along with David Carpenter, 35, his roommate and also a former Journal employee, and Felis. All have also been charged by the SEC with civil fraud.

Brant testified that Winans told him at a meeting at Brant’s suburban home in early October, 1983, that “he had occasionally bought stock based on information he had and was writing about but that he wasn’t very well capitalized.”

Winans, according to the testimony, proposed to call Brant as soon as he learned that a given column would be running in the following day’s newspaper. Brant and Felis were to buy or sell a company’s stock and stock options according to whether the column’s thrust was positive or negative. Ultimately, according to the indictment and the similar SEC civil suit, Winans tipped Brant and Felis, who secretly shared a Kidder, Peabody trading account in Felis’ name, to the contents of 19 columns between October, 1983, and March, 1984.

At one point, Brant testified, he invited a third partner to join the scheme: New York lawyer David W. C. Clark, a major client who complained to Brant one day that he was depressed and contemplating suicide because he had been diagnosed as an alcoholic.

Delay Suicide Try

“I told him I might have secured a way to make some money in the market through this new contact I had and he should postpone his plan to commit suicide,” Brant said. Clark, who has been charged with civil fraud by the SEC, has not been indicted in this case but remains under investigation.

Speaking Thursday in an abject monotone, Brant projected the air of an unsteady denizen of the fast track. When the stock market turned sour in January, 1984, depleting the value of his customers’ accounts, he said: “I was under a tremendous amount of pressure from my clients and I was very depressed. I was very tired, sometimes weak at the knees, had some weeping fits.”

Brant also testified that Kidder, Peabody executives, suspicious of the correlation between the trading in Felis’ and Clark’s accounts and the timing of Winans’ columns, asked Clark to move his accounts to another firm. After he did so, Brant and Felis moved their own trading to an account they held at their firm under a fictitious name through a Swiss bank.