Stock manipulator Ivan Boesky was sentenced Friday to three years in prison for masterminding Wall Street’s biggest insider-trading scandal, a crime that already has cost him $100 million.
U.S. District Judge Morris E. Lasker said that despite Boesky’s extensive cooperation with a federal investigation of Wall Street corruption, it was essential to incarcerate white-collar criminals.
“Breaking the law is breaking the law,” Lasker said. “Some kind of message must be sent to the business community that such activities cannot be wholly repaired simply by repaying people after the fact.”
In imposing sentence, Lasker said: “Ivan Boesky is not only guilty of simple insider trading, but the scope of his offenses is substantially enlarged, as he himself concedes, by engaging in many transactions at the behest of others on a scale so substantial as to represent a systemic problem in the financial market.”
Boesky, 50, could have been sentenced to five years in jail and fined $250,000 on his guilty plea to conspiring to make false statements to the Securities and Exchange Commission. He was not fined.
Once considered Wall Street’s leading speculator in stocks of potential takeover targets, Boesky shocked the securities business on Nov. 14, 1986, by settling civil SEC insider-trading charges. Without admitting guilt or innocence, Boesky agreed to pay a record $100 million in civil penalties and disgorged profits from stock trades, and to lifetime banishment from the industry.
His guilty plea to the criminal charge was part of a plea bargain in which he revealed involvement in far more widespread illegal activity including manipulating stock prices, unlawful takeover activity and false bookkeeping and record keeping. He has been cooperating with prosecutors in an insider-trading investigation.
Prosecutors, who have called Boesky’s cooperation “unprecedented” in its scope, made no specific sentencing recommendation.
In a 45-minute plea for leniency, Boesky’s attorney, Leon Silverman, said there was “a bloodlust in the community” to punish his client.
But Lasker replied that “Ivan Boesky’s offense cannot go unpunished. Its scope was too great, its influence too profound, its seriousness too substantial merely to forgive and forget.”
Boesky, free without bail since his guilty plea last April, will not have to begin his prison term until March 24 so he can conclude supplying information to investigators.
U.S. Atty. Rudolph Giuliani said after the sentencing that Boesky would be eligible for parole after serving one-third of his sentence but will most likely serve 22 months to 24 months. He said no determination has been made on where Boesky will serve his sentence.
Giuliani said the sentence “amply satisfies both important policy goals: to deter white-collar crime and to encourage people to cooperate in revealing serious criminal activity.”
In a previous insider-trading case, former LTV Corp. president and ex-deputy defense secretary Paul Thayer was sentenced to four years in 1985; he served 14 months.
At Friday’s session, Boesky referred to his statement at a Dec. 3 presentencing hearing, telling the judge in a barely audible voice: “I would like to simply say that you will recall I expressed my profound sentiments to you on the date we met, and I could not make it more deeply now.”
At the earlier session, Boesky said he was “deeply ashamed” and wanted to “redeem myself.”
After outlining the extent of Boesky’s cooperation, Assistant U.S. Atty. John Carroll asked Lasker to “fashion a sentence to instruct the financial community that power and position create no immunity from punishment.”
Silverman said Boesky’s cooperation, which included tape recording calls and meetings with numerous people, “despite considerable fears for his safety,” has led to the investigation of “at least five major brokerage firms” and touched off “the largest securities investigation in British history.”
Prosecutors have refused to reveal specifics about investigations stemming from Boesky’s cooperation, but they have acknowledged that he supplied information about a scheme to artificially inflate the stock of Guinness PLC, the giant British brewer, during a takeover battle for another company.
Silverman said, “The price Mr. Boesky has paid for that cooperation has been emotional and psychological trauma.”
He said Boesky was treated like “a leper in the financial community” and “vilified and excoriated in the press.”
Boesky also faces numerous civil lawsuits from investors seeking more than $1 billion, Silverman said.
Silverman disputed what he called “the canard” that Boesky continues to have undisclosed bank accounts in Switzerland and elsewhere, saying Boesky is “virtually wiped out.”