U.S. Judge Declares Mistrial in GAF’s Stock Trading Case
In a big setback for the government, a federal judge granted a mistrial today in the GAF Corp. stock manipulation case on ground that the prosecution had withheld a report showing that a key document had been altered.
The decision by U.S. District Judge Mary Johnson Lowe marked a victory for the defense, GAF and its vice chairman, James Sherwin, whose attorneys requested a mistrial last week. The ruling appeared to surprise all of the participants.
The judge said there will be another trial, although she did not set the date. Defense attorneys said, however, that they would appeal to a higher court to have the case thrown out on grounds that the prosecutor did not act properly.
They argued last week that the U.S. attorney’s office withheld an expert’s report regarding the authenticity of a Jefferies & Co. invoice sent to GAF in October, 1986.
Boyd Jefferies, former head of the Los Angeles-based brokerage firm and the prosecution’s star witness, has testified that the invoice was designed to cover up payments made in connection with an alleged scheme to boost the price of Union Carbide Corp. stock.
The indictment against GAF and Sherwin alleges that GAF secretly agreed with Jefferies to artificially inflate the price of Union Carbide stock by buying blocks of shares. The purpose of the scheme, according to the government, was to boost the price that GAF would receive when it sold its 10% stake in Carbide after an unsuccessful attempted takeover of the chemicals group.
The case against GAF and Sherwin is the first trial in the government’s huge investigation into Wall Street crimes stemming from the Ivan Boesky insider trading scandal.
Jefferies resigned as head of Jefferies & Co. and pleaded guilty in 1987 to two felony counts after being implicated by Boesky, who is at the heart of the government’s probe.
The government has a lot riding on the GAF case because it has not yet won a jury trial during its investigation aimed at cleaning up Wall Street.
