GAF Is Probed for Securities Law Violations : U.S. Said Investigating Link to L.A. Brokerage

GAF Corp. confirmed Thursday that it is under investigation for possible securities law violations.

According to a company spokesman, who denied that any wrongdoing was involved, the focus of the investigation appears to relate to the disposition of a portion of GAF’s stock position in Union Carbide Corp. during late 1986.

GAF made a hostile bid for Carbide in 1985, but reached a standstill agreement with the company the following year.

According to unidentified sources quoted in Thursday’s editions of the Wall Street Journal, the federal government is looking into GAF’s accumulation of Carbide stock through Jefferies & Co., a Los Angeles securities firm once headed by Boyd L. Jefferies.

Asserts Innocence

Jefferies pleaded guilty to two felonies after being implicated in a stock parking scheme by convicted arbitrager Ivan F. Boesky, who is now serving time in prison.

James Sherwin, GAF’s vice chairman and chief administrative officer, has been named as having had an agreement with Boyd Jefferies regarding alleged stock parking and manipulation, the newspaper said.

Under their alleged agreement, GAF agreed to reimburse the Jefferies firm for losses incurred in trading in Carbide stock.

The Journal’s sources noted that Sherwin did not make any money from the scheme. The U.S. attorney’s office in New York appears undecided as to whether it will seek criminal charges in the case, the paper said.

“Both the company and its officials are innocent of any wrongdoing,” a spokesman for GAF said.

According to the Journal, GAF is the first industrial company to be targeted for investigation in the government’s widespread probe of abuses within the securities industry.