Judge Refuses to Drop 2 Insider Trading Suits
A federal judge refused Thursday to dismiss two multimillion-dollar lawsuits against convicted Wall Street bankers Dennis B. Levine and Martin A. Siegel by investors in a partnership controlled by Ivan F. Boesky.
Once one of Wall Street’s leading stock speculators, Boesky has pleaded guilty to conspiring to violate federal securities laws and has paid a record $100 million to settle a Securities and Exchange Commission insider trading civil action.
He is scheduled to be sentenced next month at U.S. District Court in Manhattan.
The civil suits charged that limited partners in Boesky’s investment partnership were misled by the 1986 offering, which failed to disclose Boesky’s involvement in insider trading activities.
The funds of the partnership were to be used in arbitrage and other securities transactions managed by Boesky.
Direct Involvement Denied
The civil suits also claimed that Levine and Siegel, who have admitted passing confidential corporate information to Boesky, “knowingly rendered” assistance to the partnership and did not disclose their illegal activities in the offering and prospectus.
Levine and Siegel maintained they lacked direct involvement in the creation of the Boesky partnership and that their non-disclosure of involvement in his illegal transactions did not constitute aiding and abetting the violations that were charged in the lawsuits.
But U.S. District Judge Milton Pollack noted that “Levine and Siegel are charged with far more than merely possessing information and keeping silent. They are alleged to have been active and substantial conspirators and participants in Boesky’s schemes to defraud and to violate the securities laws.”
The lawsuits claim that the two investment bankers “continued to conspire with Boesky throughout the partnership’s conception, creation, promotion and capitalization.”
Pollack found that to be “a triable issue.”
Judge’s Reasoning
Even if the pair were not involved in the partnership’s creation, Pollack said, they knew “Boesky was scheming to capitalize the partnership based on representations of its legality and his status in the industry,” which was due partly to Levine and Siegel’s acts.
Both men were at one time managing directors at the investment firm of Drexel Burnham Lambert Inc., which raised funds for the Boesky investment partnership. Drexel was named a defendant in the civil suits, as well as Boesky and related companies.
One suit was brought by more than 40 limited partners, including New Republic magazine Chairman Martin Peretz and former New York Republican gubernatorial candidate Lewis E. Lehrman. The other was filed by the U.S. unit of British brewing giant Guinness PLC, which invested $100 million, making it the largest limited partner.
Earlier this year, Pollack refused to dismiss or delay the claims against Boesky.
