Boesky Profits Understated, FMC Charges : Chicago Firm Says Gains Were $20 Million Higher
A Chicago manufacturer alleged Thursday that Wall Street speculator Ivan F. Boesky made $20 million more in illegal profits in its stock than the government has charged.
FMC Corp. sued Boesky, several of his associates and its own investment banking firm for $260 million in the affair. It is the first lawsuit filed by a corporation claiming that it was victimized by Boesky’s trades. The suit was filed in U.S. District Court in Chicago.
The Securities and Exchange Commission on Nov. 14 said Boesky had settled charges that he traded on illegal inside tips by agreeing to give up $100 million in penalties and pleading guilty to a single federal felony charge carrying a jail term of up to five years. The SEC contended that Boesky had made $50 million in illegal profits on insider tips.
Among the occasions on which Boesky traded illegally, the SEC said, was FMC’s recapitalization earlier this year. The commission charged that Boesky had made $975,000 in illegal profits by purchasing FMC stock on a tip from Dennis B. Levine, then an investment banker at the firm of Drexel Burnham Lambert, that the company would soon repurchase a large portion of its stock. Boesky made the purchases between Feb. 18 and Feb. 21; FMC publicly announced its repurchase plan the following day.
Chain of Tips
Levine received the tip from Ira Sokolow, a contact at Shearson Lehman Bros., who received it himself from David S. Brown, then an investment banker at Goldman, Sachs & Co. Goldman, Sachs managed FMC’s restructuring. Brown, Sokolow and Levine have pleaded guilty to insider trading charges.
FMC charges that Boesky made further illegal purchases of 1.9 million shares of FMC between March 12 and April 4 on tips, traceable to Brown, that the company was planning to raise its payment for stock to $80 per share from $70.
The company alleges that Boesky’s second wave of buying also contributed to a rise in the stock’s price that forced FMC to go through with the increased offer. Boesky made another $20 million on his additional stock.
Named as defendants in the lawsuit are Boesky; several of his companies; Brown; Sokolow; Levine; and the firms of Goldman, Sachs; Shearson Lehman, and Drexel.
The company is seeking recovery of Boesky’s profits of $975,000 and $20 million, return of the $17.5-million fee that it paid to Goldman for its services in the restructuring and an additional $225 million representing its increased costs in its share repurchase program. It is also seeking unspecified punitive damages and treble damages based on the federal Racketeer Influenced and Corrupt Organization Act.
