GAF Says U.S. Evidence May Link Jefferies to Illegal Contributions

Lawyers in the GAF Corp. stock manipulation trial disclosed Wednesday that the government has evidence that Jefferies Group Inc., a Los Angeles-based securities firm, may have made illegal campaign contributions to members of Congress.

Arthur L. Liman, GAF’s lead attorney, made the disclosure in U.S. District Court in Manhattan with jurors absent from the courtroom. Liman mentioned the possible violations during a discussion about the admissibility of evidence in the trial.

One source said the contributions were made primarily to several U.S. senators. Lawyers said additional details about the contributions may come out in testimony today.

In other developments, lawyers for GAF Corp. and its vice chairman asked U.S. District Judge Mary Johnson Lowe to declare a mistrial in the case, claiming that the government was too slow in turning over documents needed by the defense.

The judge didn’t issue a ruling, however, and the criminal trial is due to resume today with the government’s star witness, former Jefferies Group Chairman Boyd L. Jefferies, still on the stand. Discussions about the documents took place in closed meetings in the judge’s chambers but are believed to relate to Securities and Exchange Commission documents only recently turned over to the defense. Some of them detail discussions between SEC officials and Jefferies’ lawyers.

GAF and its vice chairman, James T. Sherwin, are accused of hiring Jefferies & Co., the main brokerage unit of Jefferies Group, to bid up the price of Union Carbide Corp. stock in 1986 at a time when GAF was poised to sell a big block of Carbide shares. Boyd Jefferies has pleaded guilty to two felony counts and is cooperating with prosecutors while he awaits sentencing.

Lawyers for both sides agreed Wednesday to limit their questioning of Jefferies about other possible criminal violations of securities laws he may have committed.