Drexel Plays Down Report SEC May File Civil Charges
Drexel Burnham Lambert on Tuesday refused to confirm or deny a report that the investment banking firm and key employees may soon face civil charges of securities law violations. Drexel also sought to play down the significance of any charges that might be brought against it, saying they “appear to be based on information supplied by convicted felon Ivan Boesky.”
The investment bank was responding to a published report that Drexel has been notified that the Securities and Exchange Commission staff will soon recommend that charges be bought in connection with Drexel’s alleged role in Wall Street’s insider trading scandal. The agency and the U.S. attorney’s office in Manhattan have been gathering evidence that has included the testimony of former arbitrager Ivan F. Boesky, who reportedly has implicated Drexel “junk bond” chief Michael M. Milken and other employees.
The SEC has been investigating the possibility that Drexel employees failed to make required disclosures of stock holdings, “parked” securities during takeover battles to conceal their true ownership, and falsified books and records, according to a Wall Street Journal story that cited “people familiar with the investigation.”
Steven Anreder, a Drexel spokesman, declined to comment on whether Drexel officials have received notice of the SEC staff’s intent. But in a prepared statement, Drexel said the newspaper’s report suggested that the SEC staff was asking the commission’s approval to bring charges regarding “a limited number of transactions, virtually all of which appear to be based on information furnished by the convicted felon Boesky.”
In November, 1986, Boesky agreed to settle SEC charges for $100 million and agreed to plead guilty to one felony count. He was subsequently sentenced to three years imprisonment.
Declined Comment
Drexel noted that the staff’s request “reportedly came after 14 months of investigation and sifting through over a million pages of documents. . . . Our review of these transactions, and that of our lawyers, have not turned up any wrongdoing.”
Gary Lynch, the SEC’s chief of enforcement, and Rudolph W. Giuliani, U.S. attorney for Manhattan, declined comment.
The SEC routinely notifies firms when it is preparing to ask the commission’s approval to bring charges. The notification allows the firms a chance to persuade the SEC not to bring charges; it may also serve to commence negotiations toward a settlement of charges.
Drexel said it was not involved in such negotiations and does “not expect to resolve these issues for several months.” The firm asserted that despite the publicity surrounding the prolonged investigation, “the firm’s business has been very strong to date and . . . we enjoy a significant backlog of corporate finance business.”
Anreder declined to elaborate on the current strength of Drexel’s business.
