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illegal actions. The disgorgement was not a fine or penalty paid
to the Government within the meaning of section 162(f).
On September 7, 1988, the Federal Government filed a three-
count criminal information against petitioner in the U.S.
District Court for the Southern District of New York, charging
him with one count each of mail fraud, 18 U.S.C. sec. 1341, wire
fraud, 18 U.S.C. sec. 1343, and securities fraud, 15 U.S.C. secs.
78j(b) and 78ff and 17 C.F.R. sec. 240.10b-5. United States v.
Wang, docket No. 88 Commissioner. 0615 (KTD) (S.D.N.Y.). It was
alleged that petitioner had taken or stolen confidential business
information from Morgan Stanley and its clients. The information
contained the names of 5 companies about which petitioner
provided insider information to Mr. Lee and Mr. Cronin and also
contained charges that insider trading occurred with respect to
at least 19 companies. Petitioner waived indictment and pled
guilty to each criminal count. He was sentenced to 3 years’
imprisonment and 3 years’ probation. Petitioner served
approximately 8 months in a Federal prison, from December 1988 to
August 1989.
Petitioner engaged two law firms to represent him in legal
matters arising from his insider trading. During 1988 and 1989,
petitioner incurred legal fees and litigation costs that totaled
$110,857.43. Petitioner’s father, Stephen S. Wang, Sr., paid
petitioner’s legal bills in the amounts of $60,000 and $50,857.43
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