Bear Stearns (BSC) sank to a new low in heavy trading Wednesday after an insider slashed his stake in the struggling investment bank. Director Paul Novelly sold 50,000 shares last week at $86.78 apiece, Reuters reports. The sale, which netted Novelly $4.3 million, leaves him with 125,000 shares, according to Securities and Exchange Commission filings.

Novelly, who runs privately held Apex Oil and has been on the Bear board since 2002, built up much of that stake last year at much higher prices, just before the firm ran into deep trouble with bad bets on the imploding mortgage market. Novelly bought around 100,000 Bear Stearns shares in the first quarter of last year - including a three-day, $7.4 million buying binge last March at around $148 a share. At recent prices, that bet is under water to the tune of $3.2 million.

Novelly’s folly shows that even insiders, whose actions are keenly observed by other investors, aren’t a foolproof gauge of a company’s health. As one observer told the St. Louis Business Journal in laying out the merits of tracking insider purchases, “The insider seems to think things are going well or the shares are underpriced.” In this instance, the insider seems to have been sadly mistaken.

By James Ledbetter

(Filling in today for Colin Barr, who’s more than earned a day off.) Financial turmoils that involve vast sums follow definite rhythms, and one predictable beat is the arrival of the subpoena. Yesterday Businessweek.com reported that federal prosecutors are investigating whether bankers at Bear Stearns (BSC) may have pulled their own money out of subprime-backed funds, even while encouraging the bank’s customers to continue to invest. This morning, the Wall Street Journal specifically names fund manager Ralph Cioffi as a target (indeed, the Journal says the sole target) of this investigation, claiming that he moved $2 million of his own money out of two funds just weeks before they famously imploded this spring.

Let’s be clear: no one has yet been charged with a crime, and there could be many explanations for Cioffi’s transfers if they did occur. Still, the tale has such a familiar ring, echoing the actions of dot-com boom bankers who touted stocks to customers while internally telling everyone the companies were dogs. For those who’ve watched the political careers of prosecutors like Rudolph Giuliani and Eliot Spitzer flourish on the backs of Wall Street investigations, however, there is one nagging question: who is Benton J. Campbell? Sure, he’s been the U.S. Attorney for New York’s Eastern District for, uh, two months, but why would his office - located in Brooklyn - have jurisdiction over alleged Wall Street malfeasance, as opposed to the Southern District, which was Rudy’s stomping ground in the ’80s? Anybody out there know?

A new wrinkle emerges in the up-and-down story of Biogen Idec (BIIB). The biotech took itself off the auction block Wednesday, two months to the day after the board - under pressure from activist investor Carl Icahn - said it would seek a buyer. The news sent Biogen shares plunging 24 percent in a day, wiping away more than $5 billion in shareholder value.

But the news isn’t all bad - at least not if you’re a Biogen executive. In the days following Biogen’s Oct. 12 announcement that it would seek a buyer, several fortunate execs happened to accelerate their pre-arranged stock selling plans to cash in on the stock’s huge rise, according to a report by Adam Feuerstein at TheStreet.com. Biogen shares reached as high as $84.75 in the days after the sale announcement, compared with $70 or so just beforehand and $59 now. The company says the changes were likely to have been triggered by the stock’s runup, but that doesn’t make Biogen investors who are still holding onto their shares any richer.