Insider trading probe could go on

Kuwait City: The death of Hazeem Khalid Al Braikan may not halt a US regulatory probe of profits he and Middle Eastern firms allegedly reaped on bogus takeover bids.

Al Braikan, who was targeted along with three firms in a US Securities and Exchange Commission lawsuit last week, was found dead on Sunday from a gunshot wound in an apparent suicide, a security official at the Kuwaiti Interior Ministry said. He declined to be identified because the probe is ongoing.

The SEC will probably continue its case against his estate, said Jacob Frenkel, a former SEC lawyer and federal prosecutor who is now in private practice in Maryland.

"It's not the same as a criminal matter, where the death of the individual means the government folds its case entirely," Frenkel said.

"Because it's a civil suit, the SEC can still continue its efforts to pursue collecting the alleged ill-gotten gains."

Ron Geffner, another former SEC enforcement attorney, also said the government's lawsuit would not come to a halt because of Al Braikan's death.

"The reality is his estate benefited monetarily," Geffner said. "His death doesn't change that. They still have to follow through. His unforunate death doesn't alleviate responsibility in the matter."

SEC spokesman Kevin Callahan declined to comment.

The regulator last week said it persuaded a federal court judge in Manhattan to freeze assets belonging to the defendants, which include Al Raya, Kipco Asset Management and United Gulf Bank BSC.

Al Braikan was chief executive officer of Al Raya, an asset management firm created in 2007. It is 10 per cent owned by Citigroup Inc.

Gulf Bank and Kipco Asset Management Co (Kamco) are both part of the Kuwait Projects Co (Kipco) group. Kipco is the biggest investment firm by assets in Kuwait.

The SEC, which is still investigating, hasn't yet accused anyone of orchestrating the false takeover reports. All the firms have denied the allegations.

In papers filed in federal court in Manhattan last week, the SEC said Al Braikan and entities linked to him earned more than $5 million (Dh18.35 million) from well-timed trades in two US firms.

Shares of Textron, the maker of Cessna aircraft and Bell helicopters, rose the most in 28 years on April 9, climbing as much as 58 per cent after Kuwait's Al Watan newspaper reported a group was preparing to buy the company. The newspaper didn't identify its sources.

Harman, the Washington-based maker of Harman Kardon audio systems, jumped as much as 10 per cent on July 20, after AME Info reported that a group called the Arabian Peninsula Group would make a bid. Al Braikan, reached by Reuters on July 25, the day before his death, had declined to comment on the case. "I have nothing to say. It is in the hands of the lawyers now."

Hours later, he issued a statement saying he had named a US attorney to defend him, declaring: "I would like to confirm on the soundness of my legal situation."

Opec member Kuwait is home to the Arab world's second largest bourse, yet it is the only Gulf Arab state without a stock market regulator, as plans have been stalled in parliament for years.

"This incident will shed the light on the need for tougher legislation for bourse trading and leaked media reports in Kuwait," said a Kuwait-based trader. Al Braikan's death comes on the heels of another financial scandal that has rocked the Gulf region, involving two Saudi conglomerates.

Regulators and bankers are grappling with the fallout from debt restructuring and fraud allegations at privately held Sa'ad Group and Ahmad Hamad Algosaibi & Bros.

Algosaibi has sued the head of Sa'ad Group in a New York court for fraud in a case involving allegations of $10 billion in loan irregularities.