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No evidence found of scheme involving trades of airline stocks

Some officials starting to doubt that plan existed

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After almost two weeks of investigation, financial regulators around the world have found no hard evidence that people with advance knowledge of the terrorist attacks in New York and Washington used that information to profit in the international securities markets. And a number of officials are beginning to express doubt that such a scheme existed.

While the investigations are continuing and additional evidence still must be reviewed, many of the leads that initially seemed to indicate a conspiracy to profit from the terrorist attacks have instead been found to have less sinister explanations.

For example, regulators have already traced some of the most suspicious trades in London — involving what appeared to be huge bets that the stocks of certain large airlines would decline — to the trading accounts of a smaller airline. That airline, which officials declined to identify, was said to have made the trades as part of a common hedging strategy designed to reduce the financial impact of a downturn in the industry.

"We have been through thousands and thousands of trades and followed up on anything that seemed unusual," said Patrick Humphris, a spokesman for Britain's Financial Service Authority, which is investigating trades on the London Stock Exchange, the London Futures Exchange and the Petroleum Exchange, as well as direct trades between institutions. "So far, we have found nothing irregular."

A law enforcement official, speaking on condition of anonymity, also expressed doubt that a trading conspiracy existed, saying that it was unlikely a terrorist group, which had worked for months if not years to orchestrate its attack, would be reckless enough to create even a subtle signal of its plans by engaging in the high-profile trading of public securities.

Regulatory authorities are also working with the FBI and other law enforcement and intelligence agencies in an attempt to track down financial and brokerage accounts tied to suspected hijackers of the planes that crashed into the World Trade Center, the Pentagon and in Pennsylvania, as well as to their associates.

Someone who knew that the attacks were coming could have profited in a number of ways. One would be to sell stocks short — borrowing the shares and then selling them, hoping they could be repurchased later after a price drop. Another would be to buy put options, which give the owner the right to sell at a certain price for a limited time.

The examination of possible illegal trading began in Germany, where financial regulators first noticed suspicious trades in the stocks of reinsurance companies, which ultimately will pay billions of dollars in the wake of the attack. German authorities shared that information with officials in other European countries and in America. Those officials in turn launched their own investigations.

Public concerns about possible illegal trading were heightened last weekend when Ernest Welteke, president of the German Bundesbank, said that his staff's research supported suspicions that some people might have profited by advance knowledge of the terrorist attacks. "There have been fundamental movements in these markets, and the oil price rise just ahead of the attacks is otherwise inexplicable," Welteke said at the time.

But by Monday, the Bundesbank had retreated a bit, saying in a faxed statement that Welteke's remarks were "based on information already revealed to the public by the authorities who are primarily in charge." Even so, Germany's securities regulator says the investigation is still being pursued at "full steam."

Since then, more doubts have grown about possible trading in the reinsurance stocks. The most suspicious trading involved Munich Re-insurance, whose stock dropped precipitously the week before the terrorist attack. In addition, there was a big surge in put options on Munich Re shares.

But Rainer Kuppers, a spokesman for Munich Re, noted that the company's shares had been declining from the beginning of September. And in the week before the attack, he said, two investment houses downgraded the stock because of concerns about the decline in the capital markets.

"So far, there is still no indication that there were insiders at work," Christian Pawlick, a spokesman for the German securities regulator, Bundesaufsicht fuer Wertpapierhandel, told Deutsche Presse Agentur on Thursday.