List of Allegedly Illegal Deals by Key Figures
Here is a list of allegedly illegal securities transactions involving Drexel Burnham Lambert Inc. or other defendants named in a Securities and Exchange Commission civil enforcement action Wednesday. The list includes transactions that involve the stock or merger activity of several prominent Southern California companies.
Diamond Shamrock and Occidental Petroleum
In January, 1985, Drexel executive Michael Milken, allegedly using inside information about a proposed merger between Diamond Shamrock Corp. and Occidental Petroleum Corp.--a Drexel client--told Ivan F. Boesky-controlled entities to buy Diamond common stock and sell Occidental common stock. Milken and Boesky allegedly agreed to split profits and losses but the Diamond board did not approve the proposed merger.
Kohlberg Kravis Roberts & Co. and Storer Communications Inc.
Drexel allegedly made $1 million in profit in April, 1985, by insider trading after learning details of client Kohlberg Kravis Roberts & Co.’s leveraged buyout offer for Storer Communications.
Maxxam Group Inc. and Pacific Lumber
Drexel allegedly obtained more than $22 million in fees from Maxxam in its 1985 acquisition of Pacific Lumber because Boesky was buying Pacific Lumber under Milken’s directions at prices above the tender offer price even though Maxxam was a Drexel client.
Wickes Cos. and National Gypsum
Drexel allegedly made $6.6 million in trading profit through Boesky purchases of National Gypsum stock before Wickes, a Drexel client, made public its tender offer in April, 1985. Drexel also allegedly made $1 million in fees from Wickes on the attempt to acquire National Gypsum.
Stone Container Corp.
Drexel allegedly had Boesky buy Stone’s common stock with inside information about a planned public stock offering in April, 1986, thus manipulating the price of a client’s stock.
Wickes Cos.
Drexel allegedly made a $2.3-million fee as a standby underwriter to a Wickes preferred stock offering after getting Boesky to drive up the price of Wickes common stock through massive purchases in April, 1986.
Fischbach Corp.
Boesky allegedly bought more than 10% of Fischbach’s outstanding shares secretly for Milken, Drexel and Victor Posner in 1984, allowing Posner to acquire 51% of the Fischbach voting stock.
Harris Graphics
Milken allegedly got Boesky to purchase secretly Harris Graphics stock for him and Drexel and make an acquisition offer while Drexel was encouraging clients to buy the company in 1985 and 1986.
MGM-UA and Turner Broadcasting Systems
Drexel made $66 million in fees from the merger agreement between MGM-UA and Turner Broadcasting in 1985 while Boesky allegedly was secretly buying MGM-UA stock at Drexel’s request.
False and Misleading Books and Records
The SEC claimed that Drexel and Boesky’s Seemala Corp. maintained false or misleading records regarding:
- Seemala’s alleged purchase of MCA Inc. stock at Drexel’s behest after an aborted takeover by Golden Nugget Inc. in 1984.
- Boesky’s short sales of Wickes securities in 1985 at the alleged direction of Drexel and Milken. A short sale is the sale of a borrowed security.
- Alleged rigged and prearranged securities transactions between Drexel and Boesky to create fictitious tax losses for Seemala in March, 1985.
- Boesky’s short selling of Lorimar common stock, allegedly for Drexel in 1986, even though Lorimar was on Drexel’s “restricted list,” meaning the firm could not trade in the security because of conflicts of interest.
Phillips Petroleum Co.
Drexel allegedly assisted Seemala violate net capital requirements by buying Phillips common stock to cover up Seemala’s $50-million net capital deficiency in 1985. Milken and Boesky allegedly agreed that Boesky would guarantee against any loss and Drexel and the Boesky organization would split any profit.
Boesky Offering
When Boesky reorganized some of his entities into a limited partnership in March, 1986, a $5.3-million cash payment to Drexel to reconcile secret securities trading gains and losses was allegedly listed falsely as a consulting services fee.
Lorimar
Drexel allegedly made $1.23 million in trading profit using insider information on a pending merger between Lorimar and Telepictures in 1985.
Viacom
Drexel avoided about $1.78 million in losses in 1986 when it eliminated its short position in Viacom stock and options after allegedly receiving inside information from Viacom about a leveraged buyout proposal.
Burnup & Sims
Posner and his son, Steven Posner, allegedly got Boesky to buy Burnup shares secretly for them during a dispute with that company.
