The government’s campaign against insider trading--which produced the criminal charges filed Wednesday against Drexel Burnham Lambert’s “junk bond” chief, Michael Milken, his brother, Lowell, and former Drexel trader Bruce L. Newberg--began claiming big-name Wall Street professionals more than two years ago. Here is a chronology of major developments in the insider trading cases:
May 12: The Securities and Exchange Commission charges Dennis B. Levine, a Drexel investment banker, with making $12.6 million in profits from illegal trading on inside information.
June 5: Levine pleads guilty to four felony charges and agrees to cooperate with the government. He agrees to pay $11.6 million in civil penalties.
Nov. 14: Stock speculator Ivan F. Boesky agrees to pay a $100-million penalty to settle charges of trading on inside information supplied by Levine. He also agrees to cooperate with investigators and to plead guilty to a criminal charge.
Jan. 28: Michael Davidoff, former head trader for Boesky, pleads guilty to one count of securities fraud and agrees to cooperate in the investigation.
Richard B. Wigton
Feb. 11-12: Richard B. Wigton, a vice president at Kidder, Peabody & Co.; Timothy L. Tabor, a former vice president at Kidder, and Robert M. Freeman, a partner at Goldman, Sachs & Co., are arrested and charged with swapping inside information that was used to make illegal profits for Kidder.
Feb. 13: Martin A. Siegel resigns as a managing director of Drexel and pleads guilty to illegal stock trading and tax evasion. He agrees to cooperate with the government and surrender $9 million to settle civil charges that he engaged in insider trading with Boesky.
Feb. 20: Levine is sentenced to two years in prison and fined $362,000 for securities fraud, tax evasion and perjury. He serves 17 months.
Boyd L. Jefferies
March 19: Boyd L. Jefferies, founder of Los Angeles-based Jefferies & Co., agrees to plead guilty to two criminal charges involving securities law violations.
April 9: Freeman, Wigton and Tabor are indicted on insider trading charges.
April 23: Boesky pleads guilty to a single criminal charge--conspiracy to “make false, fictitious and fraudulent statements” to the government. His plea involves his trading in the shares of Fishbach Corp., the nation’s largest electrical contractor.
May 19: The government drops charges against Wigton, Freeman and Tabor, saying it needs more time to prepare its case. Prosecutors predict that another indictment will be brought quickly, but no charges have been brought since.
June 4: Kidder Peabody agrees to pay $25.3 million to settle insider trading charges. The settlement represents the first time in the government’s investigation of securities law violations that charges are brought against a firm rather than individuals. Kidder also settles a second charge that it had engaged in an illegal stock trading scheme with a small firm controlled by Boesky.
Nov. 16: The U.S. Supreme Court upholds convictions of former Wall Street Journal reporter R. Foster Winans and two co-conspirators for insider trading.
Dec. 18: Boesky is sentenced to a three-year prison term.
Feb. 18: John H. Mulheren is arrested on charges of illegal possession of a gun that he allegedly intended to use on witnesses against him in a government securities investigation. Mulheren is found carrying a semiautomatic rifle in a satchel after police stop his car near his home in Rumson, N.J. He allegedly threatened Boesky and Davidoff, Boesky’s head stock trader.
March 24: Boesky enters federal prison in Lompoc, Calif.
Frederick H. Joseph
April 27-28: Frederick H. Joseph, Drexel’s chief executive, and Michael Milken, the controversial head of Drexel’s junk bond department, appear at a House subcommittee hearing on insider trading. Milken invokes his Fifth Amendment privilege and refuses to answer questions, except to state his name and home address.
June 7: Reports surface that the SEC has voted to authorize civil charges against Drexel and Milken. The government’s investigation of Drexel stems directly from information supplied by Boesky.
June 16: The SEC brings insider trading charges against Stephen S. Wang Jr., a Morgan Stanley analyst trainee, for giving inside information to Fred Lee, a Taiwanese businessman.
July 6: A federal grand jury in Manhattan indicts GAF Corp., its vice chairman and two subsidiaries, charging that they manipulated the price of shares of Union Carbide in 1986 after an unsuccessful attempt to take over the company. The 10-count indictment carries the first formal charges against an industrial enterprise that stem directly from Boesky’s investigation.
Aug. 4: Five officials of the specialty investment firm Princeton/Newport Partners and a former bond trader in Drexel’s Beverly Hills office are indicted by a federal grand jury in New York on 35 counts of racketeering, fraud and conspiracy. It is the first use of the Racketeer Influenced and Corrupt Organizations Act in a securities case. All six defendants deny any wrongdoing, and their lawyers charge that their clients were indicted only because they refused to cooperate with the continuing investigation of Drexel and Goldman Sachs.
Sept. 7: William Dillon, a former Merrill Lynch stockbroker, pleads guilty to a second count of wire fraud after admitting that he traded stock based on the contents of an investment column in undistributed copies of Business Week magazine. Dillon is the first person to face criminal charges as a result of the Business Week investigation.
Sept. 7: Wang pleads guilty to three criminal counts, two of which are related to his passing inside tips to Lee.
Sept. 7: The SEC files a civil suit against Drexel, Milken and investor Victor Posner, among others, alleging that they participated in a massive securities fraud. According to the charges, Drexel and Milken had a secret arrangement with Boesky in which at least 16 series of transactions were undertaken in violation of the securities laws from early 1984 to late 1986. The papers also charge that Posner and his son Steven, either directly or through Milken, arranged for Boesky to take positions in stocks.
Oct. 5: James Dahl, one of Drexel’s top junk bond salesmen and a close aide to Michael Milken, testifies before a federal grand jury investigating Milken and the firm. He received a court order forcing him to testify and granting him immunity from prosecution.
Oct. 18: Drexel receives a “target” letter from federal prosecutors confirming that it may soon be indicted on criminal charges under the RICO Act.
Nov. 9: A trading assistant in Drexel’s Beverly Hills office, Lisa A. Jones, is indicted by a federal grand jury on charges of perjury and obstruction of justice.
Nov. 10: The California attorney general’s office, citing concerns that directors may have benefited personally from the tax-exempt groups’ activities, launches an audit of charitable foundations established by Michael and Lowell Milken.
Dec. 6: Cary J. Maultasch, a stock trader in Drexel’s New York office, agrees to cooperate with prosecutors, strengthening the government’s investigation and decreasing their reliance on Boesky’s testimony.
Dec. 21: Drexel agrees in principle to plead guilty to six felony counts and pay $650 million in financial penalties, ending a two-year investigation by federal prosecutors and eliminating the threat of racketeering charges.
Jan. 24: Court documents of Drexel’s tentative plea agreement are released. Part of the deal requires Drexel to fire Michael Milken and withhold his estimated $200-million bonus for 1988. It also requires Drexel to put Lowell Milken on unpaid leave of absence if he is indicted and withhold more than half of his 1988 compensation.
Feb. 1: New Jersey gaming officials ask the state’s Casino Control Commission to bar Drexel, at least temporarily, from doing business with Atlantic City casinos.
March 22: Drexel trading assistant Lisa Jones is convicted on five counts of perjury and two of obstruction of justice for lying to a grand jury. Sentencing is set for May 22. Jones faces a maximum sentence of 35 years in prison and up to a $1.7 million fine. This is the first guilty verdict resulting from the federal investigation of Drexel.
March 29: Michael Milken, Lowell Milken and former Drexel junk bond trader Bruce L. Newberg are indicted on 98 counts by a federal grand jury in New York.