Steinberg Denies That He Is Subject of Federal Probe

Reliance Group Holdings and its chairman, Saul P. Steinberg, denied Friday that they are the subject of a federal criminal investigation.

The Washington Post, in an article carried in Friday’s Los Angeles Times, reported that Steinberg, a prominent client of Drexel Burnham Lambert, had become a target of federal prosecutors’ widening probe of the investment firm.

The Post article said federal prosecutors in New York were looking into whether Steinberg had tried to evade state insurance laws by entering into an illegal scheme with Drexel to hide Reliance’s ownership of a big stake in Wickes Cos. four years ago.

In a statement issued by Reliance, a holding company with interests mainly in insurance, the firm said: “Federal prosecutors made inquiries concerning Reliance’s transactions in Wickes stock more than a year ago.”

“Since then,” the firm said, “the U.S. Attorney’s office has explored all facets of those transactions and both Reliance and the company’s chairman, Saul P. Steinberg, have been advised that they are not targets of the government’s investigation.”

Reliance said its “purchases of Wickes common stock were in full compliance with all insurance and other regulatory requirements.”

John Carroll, an assistant U.S. attorney assigned to the Drexel case, said he couldn’t comment on the Reliance statement. “That’s not the type of thing that we could confirm or deny,” he said.

The Post had said prosecutors were looking into whether Steinberg had arranged with Drexel to hide the ownership of Wickes stock bought through a Reliance insurance subsidiary. Santa Monica-based Wickes at the time was still in proceedings under Chapter 11 of federal bankruptcy law, and some state insurance laws prohibit insurers from holding the stock of companies in bankruptcy proceedings.