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Context of 'September 10, 2001: Suspicious Trading on United Airlines Stock Occurs at Pacific Exchange'

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There is a sharp increase in the short selling of American and United Airlines stocks on the New York Stock Exchange prior to 9/11. A short sell is a bet that a particular stock will drop. Short selling increases 40 percent over the previous month for these two airlines, compared to an 11 percent increase for other big airlines and one percent for the exchange overall. United’s stock will drops 43 percent and American 39 percent the first day the market reopens after the attack. (Jacobs and Atkins 9/20/2001; Berthelsen 9/22/2001) There is also a short spike in the short interest in Dutch airline KLM three to seven days before 9/11, reaching historically unprecedented levels. (Farrell 9/26/2001)

A. B. “Buzzy” Krongard.A. B. “Buzzy” Krongard. [Source: Public domain]Suspicious trading occurs on the stock of American and United, the two airlines hijacked in the 9/11 attacks. “Between 6 and 7 September, the Chicago Board Options Exchange [sees] purchases of 4,744 put option contracts [a speculation that the stock will go down] in UAL versus 396 call options—where a speculator bets on a price rising. Holders of the put options would [net] a profit of $5 million once the carrier’s share price [dive] after September 11. On September 10, 4,516 put options in American Airlines, the other airline involved in the hijackings, [are] purchased in Chicago. This compares with a mere 748 call options in American purchased that day. Investigators cannot help but notice that no other airlines [see] such trading in their put options.” One analyst later says, “I saw put-call numbers higher than I’ve ever seen in ten years of following the markets, particularly the options markets.” (Carpenter 9/18/2001; Berthelsen 9/19/2001) “To the embarrassment of investigators, it has also [learned] that the firm used to buy many of the ‘put’ options… on United Airlines stock was headed until 1998 by ‘Buzzy’ Krongard, now executive director of the CIA.” Krongard was chairman of Alex Brown Inc., which was bought by Deutsche Bank. “His last post before resigning to take his senior role in the CIA was to head Bankers Trust—Alex Brown’s private client business, dealing with the accounts and investments of wealthy customers around the world.” (Blackhurst 10/14/2001)

The trading ratio on United Airlines is 25 times greater than normal at the Pacific Exchange. Pacific Exchange officials later decline to state whether this abnormality is being investigated. (Berthelsen 9/19/2001)

American Airlines orders all of its airborne flights to land at the nearest airport. (Mccartney and Carey 10/15/2001; 9/11 Commission 8/26/2004, pp. 31) Managers at the American Airlines System Operations Control (SOC) center in Fort Worth, Texas have learned of the second plane hitting the World Trade Center. Initially, they mistakenly believed this second plane was American Airlines Flight 77 (see 9:08 a.m. September 11, 2001). Gerard Arpey, the airline’s executive vice president for operations, conferred with other operational managers, and they all agreed that the airline needed to land its aircraft immediately. American Airlines’ president Don Carty then arrives at the SOC and also agrees, telling Arpey, “Do it.” So, at about 9:15, the airline orders all its planes to land at the nearest suitable airport. (Mccartney and Carey 10/15/2001; 9/11 Commission 1/27/2004) This is the first time an airline has ever ordered all its planes to land. (Levin, Adams, and Morrison 8/12/2002) The FAA will give out a similar order to all its facilities about 30 minutes later (see (9:45 a.m.) September 11, 2001). (9/11 Commission 7/24/2004, pp. 29) Around that time, United Airlines will also order its aircraft to land (see (9:45 a.m.) September 11, 2001). (9/11 Commission 1/27/2004) American Airlines ordered a ground stop earlier on that prevented any new takeoffs of its aircraft (see Between 9:00 a.m. and 9:10 a.m. September 11, 2001). (9/11 Commission 8/26/2004, pp. 30-31) Most of its domestic flights will have landed by about 11:50 a.m., though it will take longer to ground its international and trans-Pacific flights. (9/11 Commission 1/27/2004)

$2.5 million in put options on American Airlines and United Airlines are reported unclaimed. This is likely the result of the suspension in trading on the New York Stock Exchange after the attacks which gave the SEC time to be waiting if the owners showed up to redeem their put options placed the week before the 9/11 attacks. (Berthelsen and Winokur 9/29/2001)


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