Lower Stock Values May Lessen Worth of Boesky’s Insider Fine
The federal government may get $13 million less than had been expected from the settlement of insider trading charges against Ivan F. Boesky because of the dwindling value of the stock that the Wall Street arbitrageur gave up to resolve the case.
The settlement, announced last November, was valued at $100 million, including $50 million in cash and $50 million in stock from two companies in which Boesky was a principal.
However, the trustee for the Boesky assets now believes that the government would do well to sell the shares of one of the firms for $37 million, rather than the more than $50 million that had been expected, according to Securities and Exchange Commission officials. That would reduce the value of the total settlement to $87 million.
The value of the Cambrian & General Investments stock plunged as a consequence of Boesky’s downfall. The company, a British mutual fund, held a $20-million investment in Boesky & Co., the arbitrageur’s principal firm, which has seen a decline in the value of its investments. The Boesky firm also faces dozens of civil suits charging fraud and insider trading.
Cambrian & General has set aside a $20-million reserve to cover the possible loss of that investment and has established a second reserve, of undisclosed size, to cover other losses, according to SEC officials.
Trustee Douglas Rosenthal cited the company’s reduced value at a June 25 hearing in Manhattan before U.S. District Judge Richard Owen. He recommended sale of the stock to a bidder, whom he did not identify.
Gary Lynch, chief of enforcement for the SEC, said in an interview that commission officials expected that Cambrian & General would be liquidated shortly after the November settlement was announced. But liquidation was not feasible then under British law because of contingent liabilities now faced by the company, and it is not likely in the months ahead, Rosenthal testified at the court hearing.
Nonetheless, Lynch insisted that the government may net more than $37 million from the 14.1 million shares of Cambrian & General stock. Cambrian & General has sued Boesky & Co. to recover its damages from Boesky’s fall and may emerge in better shape than expected from settlement of the civil suits, he said.
The decision to sell the holdings will not be made by the trustee but by the SEC, he said.
The stock “might go for the lower price if it had to be sold today, but it doesn’t, and it’s just hard to say what it’ll be worth, eventually,” Lynch said. He added that the reduced value of the stock does not mean that Boesky suffered less of a penalty, since the loss to him was the value of what he gave up last November.
Separately, the Boston Globe reported Thursday that Boesky “shielded” more than $160 million of his wealth from government prosecutors by transferring assets to his wife and children, even as he was negotiating a deal with the SEC that would prevent the agency from seeking penalties from his family. The newspaper said SEC officials acknowledged that some of that wealth may have been the proceeds of illegal insider trading.
The newspaper said that two weeks before he reached his settlement with the SEC he sold his interests in an Oklahoma television station and in the Beverly Hills Hotel to his wife Seema. The newspaper did not specify the source of its information or disclose how it arrived at the $160-million figure. Harvey Pitt, an attorney for Boesky, denied that any transfers of assets had taken place.
