SEC's Holly Becker Case Slowly Fades Away

The Lehman analyst remains on sabbatical 15 months after a probe began into her and her husband.
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Federal securities regulators appear ready to let the clock run out on a high-profile investigation into allegations of insider trading involving Holly Becker, a onetime star analyst at

Lehman Brothers



Officially, the

Securities and Exchange Commission's

investigation of Becker and husband Michael Zimmerman remains active. The agency has never notified the couple that they won't face charges -- something the SEC sometimes does in highly publicized investigations.

But for all intents and purposes, people familiar with the investigation said, the matter has been put on the agency's back burner, despite all the media attention it spurred last winter.

A spokesman for the SEC declined to comment on the status of the Becker investigation. David Brodsky, the attorney for Becker and her husband, also would not comment.

The case, which focuses on allegations that Becker tipped Zimmerman, a hedge fund trader, to research reports she was preparing on several Internet stocks, has all the signs of an investigation that's stuck in the mud.

Nearly 15 months has passed since the SEC first notified Becker and Zimmerman that regulators were leaning toward bringing an enforcement action against them. Typically, charges are filed within two months of the issuance of a Wells notice, which is the SEC's way of notifying a person they are about to be charged with a securities violation, said several formerSEC attorneys.

In fact, the SEC was on the verge of filing charges earlier this year, but the agency pulled back at the last minute, people familiar with the investigation said.

The SEC's enforcement division had planned to recommend an insider trading action against Becker and Zimmerman, who is a trader with hedge fund behemoth

SAC Capital Advisors

. The matter was even put on the calendar for a formal presentation and vote by the SEC's five top commissioners, a process that's followed in almost every enforcement action.

But after the impending charges were leaked to the news media, the Becker/Zimmerman investigation was suddenly pulled from the commission's docket. A few weeks later, newly appointed SEC Chairman William Donaldson, one of the SEC's five voting commissioners, sent an email to the agency's 3,100 employees warning them against media leaks. The vote was never rescheduled.

A former SEC commissioner, who did not want to be identified, said it is not uncommon for cases, even high-profile ones, "to just fade away." The former commissioner said it's also common for insider trading investigations to end with no action, since they're so "tricky" to prove.

Indeed, when news of the Becker investigation first broke in January, many on Wall Street thought regulators had their work cut out for them inbuilding an

insider trading case.

Securities lawyers said regulators would have to show a pattern of suspicious trading by Zimmerman, and offer evidence that he didn't come to his own independent conclusions about the stocks Becker was covering. Regulators would have to distinguish the improper sharing of potential market-moving information from harmless pillow talk.

Some sources suggest the investigation may be stymied because the SEC's top brass is unwilling to go forward with a case that would be tough to prosecute and difficult to win at trial. Critics, meanwhile, seesomething else in the SEC's investigative morass: proof the inquiry never should have been opened in the first place.

"From the get-go, the Holly Becker case seemed a bit heavy-handed," said Bill Singer, a New York securities attorney and former NASD prosecutor. "The Wells process doesn't take 15 months."

Without a definite resolution of the investigation, Becker and Zimmerman seem stuck in regulatory limbo.

Zimmerman remains at his trading post at SAC Capital, but with a cloud over his head. Becker, meanwhile, continues to be on a leave of absencefrom her analyst post at Lehman. She's been away since June 2002, which is about the time the SEC notified her that it was likely to file charges. A Lehman spokeswoman declined to comment.

"This woman's career should not have been put on hold for this long," said Singer. "It's more than embarrassing. It's unfair."