Drexel Agent Made False Claims, Panel Told

A former federal prosecutor and private investigator whose agency was retained by investment banking firm Drexel Burnham Lambert Inc. misrepresented himself as working for a House subcommittee looking into corporate takeovers, the subcommittee was told Monday.

The allegation before the House Energy and Commerce Committee’s oversight and investigations subcommittee was made by William G. Bertain, a Eureka, Calif., lawyer involved in a pending suit over the 1985 Drexel-assisted takeover of Pacific Lumber Co. by Maxxam Corp. of Houston.

Bertain told the subcommittee that John Gibbons, a former assistant U.S. attorney in California and now a private investigator for Kroll Associates, had told him on five occasions last year that he was seeking information about Maxxam’s chairman, Charles Hurwitz, on behalf of a congressional subcommittee.

In one of the conversations, taped by Bertain at the request of the subcommittee’s staff, Gibbons said he was working for the oversight and investigations panel, chaired by Rep. John Dingell, (D-Mich.), Bertain testified.

Part of the tape of that conversation in Bertain’s office was played at Monday’s hearing, the latest in a series Dingell has held concerning Drexel’s assistance in corporate takeovers by underwriting high-yield “junk bonds.”

Drexel agreed in principle in December to plead guilty to six charges of securities law violations and pay a record $650-million fine, largely in connection with its relationship to now-imprisoned speculator Ivan F. Boesky.

The Securities and Exchange Commission also has alleged that Drexel violated securities laws in Maxxam’s takeover of Pacific Lumber, the largest private holder of redwood timberland in California.

The Pacific Lumber takeover was structured by Drexel through a $300-million bank loan arranged by Irving Trust Co. of New York and a $450-million junk bond offering sold by Drexel.

Gibbons declined Monday to answer specific questions from subcommittee members, saying he had received the panel’s subpoena only a week ago and had not had adequate time to prepare.

He said he was not aware that his conversation with Bertain in Bertain’s office last Dec. 19 had been taped until this past weekend.

But Gibbons’ boss, Jules Kroll, principal owner of the detective agency, told reporters after the hearing it is “totally inconceivable” that Gibbons had misrepresented himself and predicted that he would be vindicated at a continuation of the hearing next week.

“My man was set up by Bertain and others to get our files,” said Kroll, whose agency specializes in corporate takeover investigations and includes among its clients several major investment banking firms in addition to Drexel.

Included in the subcommittee’s subpoena to Gibbons were demands for copies of any documents regarding Drexel, Boesky, Maxxam, Hurwitz, five other companies and “matters involving” securities and takeover laws in the Pacific Lumber takeover. Last October, Bertain filed a $2.25-billion lawsuit against Maxxam and Drexel on behalf of former stockholders in Pacific Lumber.

The subcommittee did not establish Monday that Gibbons was working for Drexel when he sought Bertain’s assistance. Steven Anreder, a spokesman at Drexel’s headquarters in New York, said he could not establish immediatedly if Gibbons was working on behalf of his company at the time. But Dingell said he would refer to the Justice Department evidence of anyone representing themselves as working on behalf of the subcommittee when they were not.