Former brokerage executive Boyd Jefferies said Wednesday that he illegally accumulated stock for corporate raider Paul Bilzerian, who wanted to conceal his stakes in various takeover targets.
Jefferies, looking tanned and fit, testified at the trial of the 38-year-old Singer Co. chairman, who is charged with 11 counts of securities and tax fraud, conspiracy and making false statements to the government.
If convicted, Bilzerian, a Tampa, Fla., investor, faces a maximum sentence of 55 years in prison and nearly $2.8 million in fines.
The federal government charges that Bilzerian made millions of dollars through illegal acts tied to corporate takeovers in 1985 and 1986. He is charged with secretly accumulating stock in takeover targets Cluett, Peabody & Co. and Hammermill Paper Co. through the Los Angeles brokerage firm Jefferies & Co., which was once headed by Jefferies, and later selling his shares at a handsome profit.
Bilzerian is also charged with tax fraud for allegedly hiding shares of H. H. Robertson Co. and Armco Inc. through secret accounts at Jefferies & Co.
Jefferies, a key government witness who has himself pleaded guilty to securities fraud charges, told the court Wednesday that his firm hid the shares for Bilzerian.
"We didn't really make any money. These transactions were really just customer accommodation, to do a favor for a client," Jefferies said.
The Bilzerian trial is the second to grow out of information provided by Jefferies. The first was the stock manipulation case against GAF Corp. and its vice chairman, James Sherwin. The GAF case, after two mistrials, has been reset for Nov. 6.
Bilzerian's case is the second to be linked to former stock speculator Ivan F. Boesky and the first against a corporate raider since the illegal insider trading affair became public in 1986.
Jefferies, who was implicated by Boesky, pleaded guilty to two securities fraud felonies in 1987 and has cooperated with the government. GAF defense lawyers attacked Jefferies' credibility in court, implying that he lied about GAF and Sherwin to get a more lenient sentence.
Arthur Mathews, Bilzerian's lawyer, tried the same strategy Wednesday.
Under Mathews' questioning, Jefferies said he told prosecutors about other securities crimes, but the government agreed not to prosecute him for those if he cooperated. In addition, neither Jefferies & Co. nor its employees would be charged.
Mathews asked Jefferies about his current net worth.
"I'm unemployed," Jefferies said.
Sought 'Special Situations'
"You didn't go out penniless," Mathews said, asking Jefferies if his net worth at the time of his plea was $30 million to $40 million."
"That's approximate," said Jefferies, who now lives at a country club in Indian Wells, near Palm Springs.
Jefferies said that when he first met Bilzerian, the Florida investor said he had made his money in Florida real estate but did not like the market and had liquidated his holdings.
"He said now he had $20 million he was investing in the stock market and was looking for special situations in the stock market," Jefferies said.
Jefferies said he told Bilzerian he was looking forward to a "long and profitable relationship" with him.
Testifying about the Cluett Peabody deal, Jefferies said that Michael Landry, the principal account executive who dealt with Bilzerian, "asked if we could buy Cluett Peabody for Paul Bilzerian, hold it and sell it later."
Jefferies said shares were held in the firm's customer accommodation account. "It's an account we use to do favors for customers," Jefferies said.
The government has charged that Bilzerian acquired control of 24% of Cluett Peabody, made a tender offer for the rest of the company and then sold his stock to "white knight" West Point-Pepperell Inc. for a $7-million profit.
As for Hammermill, Jefferies said Bilzerian had a 4.9% stake in the company in 1986 and did not want to notify the group that he was buying its shares. The Securities and Exchange Commission requires investors to make a public filing when they obtain 5% of a company.
Jefferies said he bought 400,000 to 500,000 shares of Hammerhill for Bilzerian.
"The arrangement was that I would buy the stock for Jefferies & Co.'s firm inventory and would sell it back to Paul," he told the court.