Wall St. Scandal Leaves So Many to Cope With Shame
Last week’s tentative settlement between Drexel Burnham Lambert Inc. and federal prosecutors marked a landmark development in a chain of Wall Street corruption prosecutions that has riveted public attention for 2 1/2 years.
Drexel’s agreement to plead guilty to six felony counts and pay a record $650-million fine represents a stunning blow to the nation’s most successful and controversial investment firm in the 1980s--an outfit that refashioned securities markets and stirred fear as it financed a string of hostile corporate takeovers.
Still ahead for prosecutors is the biggest fish of all, Drexel’s “junk bond” genius, Michael Milken. Milken and a cadre of aides are likely to be indicted soon. Their trials, even more than the Drexel guilty plea, may amount to a national forum on the ethical character of Wall Street and its lavishly paid practitioners.
A Milken indictment would come in the wake of some impressive victories by federal prosecutors. Authorities have obtained convictions of prominent Wall Street investment bankers, takeover lawyers and stock speculators, as well as obscure traders, stock analysts and others.
Some sit in prison. Others now work in obscurity, seeking to rebuild their lives. Some of the most prominent players have moved far from the nation’s financial capitals, cooperating as needed with investigators and awaiting sentencing.
Below are descriptions of some of the principal figures in a scandal that still shows no sign of ending.
Ivan F. Boesky, 51, formerly the financial world’s most celebrated takeover-stock speculator, became a symbol of Wall Street corruption in November, 1986, when federal prosecutors accused him of amassing a fortune trading stocks on leaks of secrets corporate information. Boesky pleaded guilty to one felony count, gave up $100 million in fines and illegal profits and began providing prosecutors information that dramatically broadened their insider trading investigation.
Boesky has served nine months of his three-year sentence at the minimum-security prison camp in Lompoc, 50 miles north of Santa Barbara. He works a five-day week on the prison’s maintenance detail, earning up to 44 cents an hour. Like the camp’s 666 other inmates, Boesky is permitted to wear his own casual clothes during most of the day, provided they are not too flashy. The camp is a landscaped, unwalled compound that was built as an Army base. Boesky has also visited New York recently to provide information for government investigators. He began intensive Hebrew studies at the Jewish Theological Seminary in New York before beginning his sentence. He is eligible for parole next March.
Dennis B. Levine, 35, a wisecracking former investment banker with the Shearson Lehman Hutton and Drexel Burnham Lambert firms, was first to be snared in Wall Street’s biggest scandal. Levine organized a network of financiers and takeover lawyers who swapped secret corporate information. Arrested in May, 1986, he was accused of earning $12.6 million in insider trading through foreign stock accounts. He pleaded guilty to four felony counts, gave up $11.3 million and was sentenced to two years in prison.
Levine was free in mid-September after serving 15 months in the minimum-security federal prison in Lewisburg, Pa., and two months in a federal halfway house near Manhattan’s seamy Times Square. The Queens, N.Y., native, who led investigators to Boesky and others, has refused all public comment since his arrest. Once plump, he is now noticeably thinner. A Wall Street executive recently saw Levine on Park Avenue, where Levine owned a luxurious coop apartment. Levine assured the executive that he had found work, a story the executive later learned to be untrue.
Martin A. Siegel, 41, once one of Wall Street’s most admired merger experts, pleaded guilty in February, 1987, to two insider trading violations. Siegel, known as a charming and loquacious man during his days at Kidder, Peabody & Co. and at Drexel, agreed to pay $4.2 million to settle civil charges.
Siegel continues to await sentencing. The settlement is said to have largely wiped out his personal wealth. Siegel has sold his luxurious home on Long Island’s north shore and moved to Florida, where he is reportedly unemployed and “spends a lot of time on the beach,” according to an acquaintance.
Boyd L. Jefferies, 57, the hard-driving founder and former chairman of the Jefferies & Co. investment house, was implicated in the scandal by Boesky in March, 1987. Jefferies, who led his innovative Los Angeles firm to a major role in the takeover game, pleaded guilty to one criminal count of illegally holding stock to conceal its ownership and a second count of violating margin, or credit, requirements.
Jefferies is living in a four-bedroom condominium in Aspen, Colo., and running a golf clinic he founded for disadvantaged youths. Barred from the securities business, he has cooperated with investigators and continues to await sentencing.
John A. Mulheren Jr., 38, brilliant and flamboyant founder of the Jamie Securities risk arbitrage firm, was arrested last February and accused of threatening the lives of Boesky and Boesky’s chief trader, Michael Davidoff. Caught with a semiautomatic rifle in his car’s trunk, Mulheren feared that the two would implicate him in the scandal, authorities said. Mulheren’s lawyer told a federal judge that Mulheren was suffering from mental illness at the time and has been diagnosed a manic-depressive.
Prosecutors are still considering whether to bring a case against him. Jamie Securities, meanwhile, has been liquidated because of the risks posed by Mulheren’s personal liability in the case. Mulheren, whose personal wealth has been estimated at $100 million, continues to live in the posh seaside town of Rumson, N.J., and spends his time managing his investments.
Robert M. Wilkis, 38, formerly an investment banker at Lazard Freres & Co. and E. F. Hutton, was a member of Levine’s insider-trading network. Prosecutors accused him of earning $4 million by trading on inside information through stock accounts in the Cayman Islands and the Bahamas. Wilkis pleaded guilty to four felony counts and agreed to repay $3 million to settle civil charges. He was sentenced to 366 days in jail and five years’ probation.
Freed last December after serving seven months in prison and two months in a Manhattan halfway house, Wilkis is living in a modest apartment on 78th Street on Manhattan’s Upper West Side. After his release he worked for a nonprofit organization in New York City but has told acquaintances he hopes to get another job in the financial industry.
Ira B. Sokolow, 34, another former Shearson investment banker, passed insider secrets to Levine. He pleaded guilty in September, 1986, to criminal charges of tax evasion and securities fraud. He agreed to pay $120,000 to settle civil charges and was sentenced to eight months in prison and five years’ probation.
Freed in June, 1987, after serving seven months in prison, Sokolow is working as an outside consultant to the management consulting firm of Detri Associates in a Connecticut suburb of New York.
Ilan K. Reich, 34, a former takeover lawyer, leaked Levine information on pending takeover deals that he had gained at his firm, Wachtell, Lipton, Rosen & Katz. He pleaded guilty to two felony counts, paid fines of $485,000 and was sentenced to 366 days in prison and five years’ probation.
Reich was freed last December after serving eight months at the Lewisburg prison and two months in the Manhattan halfway house. He is expected soon to be readmitted to the Bar in New York. U.S. District Judge Robert W. Sweet, quoting Proust and others, told Reich at his sentencing that he was “a symbol of the sickness in our society.” But Sweet noted that Reich had aided Levine out of friendship, rather than for money, and said he would support Reich in his reapplication to the Bar.
David S. Brown, 34, former investment banker at Goldman, Sachs & Co., leaked information to Levine for a fee. He pleaded guilty in September, 1986, to insider trading, agreed to repay $145,790 and was sentenced to 30 days in jail and 300 hours of community service.
Brown today works for the Archdiocese of New York, on the staff of the unit that runs the archdiocese’s buildings. Last year, Brown spent several days as a consultant to actor Charlie Sheen, briefing him for his role in the film “Wall Street.”
Michael Davidoff, 44, Boesky’s chief lieutenant and top trader, pleaded guilty to one count of securities fraud in January, 1987.
Davidoff has been cooperating with authorities and is awaiting sentencing. He lives in New York and reportedly is not working.
Bernhard Meier, 37, carried out stock trades for Levine while an account manager at Bank Leu International in the Bahamas. He allegedly traded for himself as well with Levine’s information. U.S. authorities charged the Swiss national with civil securities law violations, in May, 1987, saying he had made $152,000. But Meier moved back to his home city of Zurich when he was fired by the bank, leaving the U.S. charges unresolved. “I’m not working,” Meier recently told a caller. “But who cares, anyway?” Meier’s wife is believed to have inherited wealth.
Randall D. Cecola, 27, leaked Levine inside information that he had gained on his job as a financial analyst for Lazard Freres. In February, 1987, he pleaded guilty to two criminal charges of filing false tax returns, agreed to pay back $21,000 and was sentenced to five years’ probation.
Cecola, who grew up in a Chicago suburb, left New York later in 1987, after telling acquaintances he wished to go back to school. Harvard Business School had suspended Cecola, in his second year there, when charges against him were announced.
PORTRAITS OF A SCANDAL
DENNIS B. LEVINE
Age: 35
Former job: Investment banker at Shearson Lehman Hutton and Drexel Burnham Lambert.
Crime: Organized a network of financiers and lawyers who swapped secret information.
Punishment: Pleaded guilty to four felony counts, gave up $11.3 million and was sentenced to two years in prison.
Current status: Said to be unemployed. Has no comment.
MARTIN A. SIEGEL
Age: 41
Former job: Leading merger expert at Kidder Peabody and Drexel Burnham Lambert.
Crime: Insider trading violations.
Punishment: Agreed to pay $4.2 million to settle civil charges. Awaiting sentencing.
Current status: Sold luxurious home on Long Island and moved to Florida, where he is reportedly unemployed and spending a lot of time on the beach.
BOYD L. JEFFERIES
Age: 57
Former job: Founder and former chairman of the Jefferies & Co. investment house in Los Angeles.
Crime: Pleaded guilty to “parking,” or illegally holding, stock and violating margin rules.
Punishment: Barred from the securities business. Awaiting sentencing.
Current status: Lives in condo in Aspen, Colo. Runs golf clinic for disadvantaged youths.
JOHN A. MULHEREN JR.
Age: 38
Former job: Founder of the Jamie Securities arbitrage firm.
Alleged crime: Accused of threatening Ivan F. Boesky and Boesky’s chief trader. Arrested with a rifle in his car.
Punishment: No charges have been filed yet. Jamie Securities has been liquidated.
Current status: Lives in posh Rumson, N.J., and spends his time managing his investments.
