A partial settlement is close in a class-action lawsuit between one of Ivan F. Boesky's companies and investors who claim that they were defrauded by the imprisoned speculator's insider trading, lawyers said Monday.
Key details were not disclosed, but the lawyers said it would cause a realignment in the morass of civil suits and countersuits that have enveloped Boesky since he paid the Securities and Exchange Commission a record $100 million nearly two years ago in penalties and illicit trading profits.
"We've got it virtually done," said David Berger, lead co-counsel of a group of shareholders who sued Ivan F. Boesky & Co., an investment vehicle once controlled by Boesky.
Accused by SEC
The settlement would remove as defendants in the class-action suit the limited partners in Boesky's investment company, who themselves have sued Boesky on grounds he defrauded them.
Boesky would remain a defendant in the class-action suit, as would Drexel Burnham Lambert Inc., the Wall Street firm that he has implicated in a number of allegedly fraudulent deals.
Drexel was accused by the SEC earlier this month of extensive securities law violations but has denied the charges. It remains unclear what effect, if any, the partial settlement disclosed Monday would have on the Drexel litigation.
Berger declined to comment on reports that the partial settlement could involve between $30 million and $50 million in compensation payments to his clients.
"I've been working for 1 1/2 years to get this settlement and don't want to see premature publicity," he said.
Others however, speaking on condition they not be identified, said the compensation element of the settlement remains unresolved and would involve petitioning the SEC, which will use part of Boesky's surrendered money to repay others who can prove they were victimized.
Inundated With Lawsuits
In addition, these lawyers said, Berger's clients would need the approval of the U.S. District Court in Manhattan, where all of the Boesky-related civil litigation has been filed.
The SEC, which has been drafting a plan for how to compensate Boesky's victims, is scheduled to complete it by Oct. 3. SEC officials declined to comment Monday on whether plaintiffs in the class-action suit against Boesky would be part of that plan.
Boesky and the entities he once controlled were inundated with lawsuits after federal authorities disclosed his insider trading activities in November, 1986. Most of the suits were by shareholders who were selling stock at the time Boesky and his associates were buying.
Boesky began serving a three-year federal prison term last March after he pleaded guilty to a charge of conspiracy to lie to the SEC.