CIRCUS TIME Wall Street reels over scandal

By Gordon M. Henry. Reported by Raji Samghabadi/New York

Wall Street had its ups and downs last week--plenty of both. After the opening bell rang at the New York Stock Exchange on Monday, the Dow Jones industrial average plunged 45.75 points, to 1840.15, the worst one-day decline in history. Trading veterans, by now used to the spectacular gyrations of the ) continuing bull market, were relatively unfazed. For one thing, the drop represented only 2.43% of the Dow's value, a far cry from catastrophe. Sure enough, the plunge soon halted, and on Friday the Dow stormed back 36.06 points--its eighth-best day ever--to close the week at 1874.19. What really jolted the nerves of Wall Streeters, though, was the fallout from the Dennis Levine insider-trading scandal, the worst in history. Paranoia swept the close-knit investment community a week after Levine, 33, a former managing director at the firm of Drexel Burnham Lambert, pleaded guilty to criminal charges of income tax evasion, securities fraud and perjury and settled a civil suit charging that he had made $12.6 million in illegal stock- market profits on corporate takeovers. A Securities and Exchange Commission investigation was in full swing, along with criminal investigations by U.S. Attorney Rudolph Giuliani. No official accusations were leveled, but Ira Lee Sorkin, the SEC's New York director, disclosed that his agency has 35 insider- trading cases under investigation. Wall Street, said a senior Manhattan investment banker, ''feels like Hollywood in the McCarthy era.'' Speculation that Levine was adding new names to the scandal has been growing exponentially since the former investment wunderkind began to cooperate fully with Sorkin and Giuliani about three weeks ago. To settle charges filed by the SEC, Levine has been forced to disgorge $11.5 million--virtually all his wealth--to the court, and is barred from the securities business for the rest of his life. He still faces sentencing on July 9 on criminal charges. Levine could receive 20 years in prison and a $610,000 fine. But if he helps Giuliani to apprehend new suspects, the sentencing judge is more likely to grant him clemency. Both the SEC and Giuliani are also receiving information from the so-called Yuppie Ring, a group of young Wall Street professionals who, in a case unrelated to that of Levine, two weeks ago pleaded guilty to charges of insider trading and obstructing justice. In that turbulent climate, the Wall Street Journal stirred up instant thunder last week by claiming that unnamed investment bankers at the houses of Lazard Freres and Goldman Sachs were under SEC investigation in the Levine scandal. Officials at both firms promptly denied the report. One man that Government sources affirm is under investigation, however, is Robert Wilkis, 37, a former vice president at both Lazard Freres and E.F. Hutton. Wilkis resigned from his Hutton post earlier this month. While he was at Lazard in 1984, the firm advised Chicago Pacific in its unsuccessful takeover bid for Providence-based Textron. Government officials suspect that Wilkis passed along information regarding that and other takeover attempts to Levine. Meanwhile, Drexel, Lazard and Shearson Lehman Bros. were all conducting internal investigations. Virtually every major securities firm in Manhattan circulated memos to employees reminding them of their ethical and legal responsibilities. One Wall Street mutual-fund manager confided that he is afraid even to telephone heads of companies whose stock his fund owns to discuss their firms' performance. As the press continued to dig for revelations, Director Sorkin said sourly, ''This has become a circus.'' True enough, but the show appeared to be far from over.