Catherine Rusoff
Ivan F. Boesky, the flamboyant stockbroker whose cooperation with the government opened one of the biggest insider trading scandals in Wall Street history, has died at age 87.
A representative of the Marianne Boesky Gallery, owned by Ivan Boesky’s daughter, confirmed his death. No other details were given.
The son of a Detroit deli owner, Boesky was once considered one of Wall Street’s richest and most influential risk-takers. He had invested US$700,000 from his late mother-in-law’s estate into a fortune estimated at more than US$200 million, which placed him on Forbes magazine’s list of the 400 richest Americans.
Once implicated in insider trading, Boesky cooperated with a brash young U.S. lawyer named Rudolph Giuliani in a bid for leniency, uncovering a scandal that destroyed promising careers, damaged some of the U.S.’s most respected investment brokers, and injected a certain amount of paranoia. in the securities industry.
Working undercover, Boesky secretly recorded three conversations with Michael Milken, the so-called “junk bond king” whose work with Drexel Burnham Lambert revolutionized credit markets. Milken ended up pleading guilty to six felonies and served 22 months in prison, while Boesky paid a $100 million fine and spent 20 months in a minimum-security prison in California, nicknamed “Club Fed”, starting in March 1988.
Linked to Gordon Gekko
After Boesky’s arrest, reports circulated widely that he had told business students during a commencement address at the University of California at Berkeley in 1985 or 1986: “By the way, greed is okay. I want you to know that. I think that greed is healthy. You can be greedy and still feel good about yourself.”
The phrase was memorably repeated by Michael Douglas in his Oscar-winning portrayal of Gordon Gekko, a high-flying trader, in Oliver Stone’s 1987 film “Wall Street.”
“The point is, ladies and gentlemen, that greed, for lack of a better word, is good,” Douglas told Teldar Paper shareholders. “Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”
Boesky, however, said he did not recall saying “greed is healthy” and denied another quote attributed to him in the 1984 Atlantic Monthly, in which he was reported to have said that rising to the height of a huge pile of silver dollars it would be “an aphrodisiac experience.”
Although he usually worked 18-hour days, the gray-haired and thin Boesky also lived a life of opulence. He wore designer clothes, traveled in limousines, private planes and helicopters, and renovated his 10,000-square-foot Westchester County mansion with a Jeffersonian dome to resemble Monticello.
“There was a substantial amount of materiality available,” Boesky said during the 1993 divorce proceedings. “We had places in Palm Beach, Paris, New York, the south of France.”
Folders with money
Boesky was an arbitrageur, a risk-taker who made millions betting on stocks considered targets for corporate takeovers. But some of his tips came from the mergers and acquisitions departments at Drexel Burnham Lambert Inc. and Kidder, Peabody & Co.
Dennis Levine of Drexel and Martin Siegal of Kidder, Peabody provided confidential information to Boesky in exchange for a promised 1% or 5% profit cut.
Boesky paid Siegal $700,000 in three installments, with a courier delivering briefcases full of cash to three clandestine meetings on a street corner and in the lobby of the Plaza Hotel in Manhattan. Boesky made millions from Siegal’s tips, which included the news that Getty Oil and Carnation Co. were ripe for acquisitions.
Levine was arrested before his payment could arrive, hampered by his own insider trading. Facing harsh sentences under the government’s racketeering statutes, Levine revealed all and Boesky began speaking out as well, providing information that led to convictions or guilty pleas in cases involving former stockbroker Boyd Jefferies, Siegel, four executives at British Guinness PLC, acquisitions strategist Paul Bilzerian, stock speculator Salim Lewis and others.
The most notable arrest was that of Milken, the pioneering financier who transformed capital markets in the 1970s with a new form of bonds that allowed thousands of mid-sized companies to raise money.
In the 1980s, these “junk bonds” were used to finance thousands of leveraged buyouts, including Revlon, Beatrice Companies, RJR Nabisco Inc., and Federated Department Stores, making Milken a hated and feared figure on Wall Street.
The financier and philanthropist was indicted on 98 counts, including securities and mail fraud, insider trading, extortion and making false statements. Prosecutors said Milken and Boesky conspired together to manipulate securities prices, defraud transactions and evade taxes and regulatory requirements.
Milken ended up pleading guilty to six securities violations, including telling Boesky that he would cover any losses he suffered trading shares of Fischbach Corp., a takeover target at the time.
Prosecutors said Boesky’s cooperation provided the government with the most information about securities law violations since the legislative hearings that led to the Securities Acts of 1933 and 1934.
Shot to death
When John Mulheren Jr. feared he was about to be implicated, the Wall Street executive loaded an assault rifle with the intention of killing Boesky and Boesky’s former chief trader, police said. Mulheren was captured on the way.
At trial, Mulheren’s attorney, Thomas Puccio, called Boesky a repeat liar and “pile of human trash” who was motivated to say anything to help federal authorities in exchange for leniency.
“If ever there was a person to whom the title of Prince of Darkness could be applied, Ivan Boesky is that man,” said Puccio. “The king of greed, a person who represented nothing except his own ambition, his own greed.”
The jury convicted Mulheren, but his conviction was later overturned. Other convictions were also reversed – those of GAF Corp. and a senior executive, five directors of Princeton-Newport Partners and a former Drexel trader.
The reversals reinforced the arguments of free trade advocates, who argued that Wall Street had fallen victim to a publicity-seeking federal prosecutor using racketeering statutes normally reserved for fighting organized crime. Previously, the government had done little to police insider trading and some said it should be legalized.
But no one could defend payments involving suitcases full of cash. Levine, writing in the pages of Fortune after his release, said he couldn’t understand why Boesky would risk so much by engaging in something so clearly illegal.
“And I don’t know why Ivan engaged in illegal activities when he had a fortune estimated at more than $200 million,” Levine wrote in 1990. “I am certain that he obtained much of his wealth from legitimate ventures: he was skilled in arbitration. and obsessed with his work, he must have been driven by something beyond rational behavior.”
At the 1987 sentencing, Boesky’s lawyer quoted his psychiatrist as saying that Boesky “began to recognize that he suffered from an abnormal and compulsive need to prove his worth, to overcome some feeling of inadequacy or inferiority that is rooted in his childhood.”
Landing on your feet
Three years after his release from a Brooklyn halfway house in April 1990, Boesky and his wife Seema divorced after 30 years of marriage.
Claiming he was left penniless after paying fines, restitution and legal fees, he earned $20 million in cash and $180,000 a year in alimony from his wife’s $100 million fortune. He also got a $2.5 million home in San Diego’s La Jolla neighborhood, where he lived with his childhood friend, Houshang Wekili.
Ivan Frederick Boesky was born in Detroit in 1937 to a family of Russian Jewish immigrants. Boesky said he learned to be diligent from his father, who ran three delis. At age 13, Boesky bought a 1937 Chevy truck, painted it white, and sold ice cream in Detroit parks, earning about $150 a week in dimes.
After dropping out of college three times, Boesky entered Detroit Law School in 1959, which at the time did not require an undergraduate degree for admission. He retired twice before receiving his degree five years later.
While in law school, Boesky married Seema Silberstein, daughter of Ben Silberstein, a real estate developer and owner of the Beverly Hills Hotel.
Unable to find work at any major Detroit law firm, Boesky moved in 1966 with his wife and the first of his four children to New York, where he floated from job to job on Wall Street.
In 1975, Boesky struck out on his own, opening a small brokerage firm that he eventually grew into a large group of investment firms with more than 100 employees. He worked grueling hours, gave self-promotional newspaper interviews and wrote a book in 1985 titled “Merger Mania.”
He was also an active philanthropist, especially with Jewish causes, donating $20 million to endow a library at the Jewish Theological Seminary, which was later renamed.
