Milken, 26 at Drexel, Linked to Boesky Firm
A group of 27 employees of Drexel Burnham Lambert Inc., including top deal maker Michael Milken, owned a stake in the arbitrage firm of Ivan F. Boesky beginning in 1984, according to a published report.
The previously unknown financial tie raises questions of potential conflicts of interest for Milken and Drexel, according to lawyers and Wall Street executives interviewed by the Wall Street Journal.
From 1984 to 1986, when the Drexel employee group held a stake in Boesky’s operation, Boesky was Wall Street’s most powerful takeover speculator and traded in many stocks about which Drexel had valuable inside information.
A spokesman for Drexel said the Drexel employees were only passive investors and had no role in the operations of Boesky’s firm.
The Journal said the tie was revealed in public documents filed in Washington and California, private offering documents and people familiar with the relationship.
Charges Approved
Boesky was sentenced to three years in prison last December on a criminal charge stemming from the government’s investigation into wrongdoing on Wall Street. He previously agreed to pay a $100-million penalty to settle a civil complaint of insider trading and was banished from the securities business.
The Securities and Exchange Commission approved civil charges of securities law violations against Drexel, Milken and three other Drexel employees, but so far the charges have not been filed.
The charges are based largely on allegations of illegal dealings between Boesky and Drexel, the Journal said, citing people familiar with the investigation.
The Journal said people close to Drexel say the Drexel employees, through a general partnership known as Camro Associates, invested $1 million in the Boesky firm, Seemala Corp., in 1984, and received $3 million for their stake in 1986.
‘Passive’ Investment
Camro was made up largely of employees of Drexel’s “junk”--or high-yield, high-risk--bond operations in Beverly Hills, the Journal said.
Drexel spokesman Steven Anreder told the Journal: “The investment was made over four years ago with the full knowledge and consent of” Drexel.
