Ex-Dow Jones Director Settles

A former Dow Jones board member who approved the sale of The Wall Street Journal publisher to Rupert Murdoch's News Corp. (NWS Quote - Cramer on NWS - Stock Picks) has settled with U.S. regulators over allegations of insider trading in the lead-up to the deal.

Bank of East Asia Chairman and CEO David Li Kwok Po, along with three others, agreed to pay $24 million to settle charges of trading on inside information about the surprise $5 billion buyout offer from News Corp. that sent shares of the newspaper publisher up over 60% in one day.

"Tipping and trading by corporate insiders corrupts our markets, and today's action demonstrates our ability to stop this type of misconduct in its tracks -- no matter where it occurs and who is involved," said Cheryl Scarboro, associate director of the SEC's Division of Enforcement, in a press release announcing the action.

Li and the others agreed to settle the matter without admitting or denying guilt. That contrasts with Li's former position on the matter. Just after he voted with other Dow Jones directors in July to approve a sale of The Journal to News Corp., the Bank of East Asia said that he denied the allegations made against him by the SEC, and that he would defend himself vigorously, believing strongly that he would prevail in court in the matter.

According to the SEC, Li tipped off his close friend, Michael Leung Kai Hung, after learning of the News Corp. offer before it became public last spring. Leung, with the help of his daughter Charlotte Ka On Wong Leung and son-in-law Kan King Wong, bought about $15 million worth of Dow Jones shares, according to the complaint filed in federal court in Manhattan. Regulators said the Leung family members would have gained around $8 million in illegal profits if the SEC had not obtained an emergency court order in May freezing their account at Merrill Lynch (MER Quote - Cramer on MER - Stock Picks).

The settlement calls for Li to pay an $8.1 million fine and for Michael Leung to turn over $16.2 million of fines and allegedly illegal gains. K.K. Wong agreed to return $40,000 of allegedly illegal profits and pay a $40,000 fine.

The settlement could mark the final, sad chapter in the epic story of Murdoch's winning bid for The Journal. His global media empire was initially met with resistance in the deal by Dow Jones' controlling shareholders, the Bancroft and Ottaway families, as well as the company's former chairman, a union representing its employees and advocates for integrity in journalism. Eventually, the resistance caved in a wrenching family drama as Wall Street clamored for a sale, lawsuits were threatened, directors resigned in protest and competing offers fell by the wayside.

Shares of News Corp. were recently up 21 cents, or 1.1%, to $20.17.