GAF Corp. Found Guilty of Stock Manipulation : Wall Street: The firm’s vice chairman was also found guilty on all counts. The case resulted from Ivan F. Boesky’s cooperation with prosecutors.

After two earlier trials ended without a verdict, the government succeeded Wednesday in a third attempt to convict GAF Corp. and its vice chairman on criminal stock market manipulation charges.

A federal jury found the company and the executive, James T. Sherwin, 55, guilty on all eight felony counts pending against each.

In the previous trial, the jury became deadlocked after 12 days of deliberations. But this time, after a four-week retrial, a jury of eight men and four women reviewed the evidence for only a little more than a day before returning the guilty verdicts.

The case was part of the group of criminal securities fraud cases brought as a result of former stock speculator Ivan F. Boesky cooperating with prosecutors. GAF, a Wayne, N.J.-based maker of chemicals and building products, and Sherwin had been accused of hiring the Los Angeles brokerage firm Jefferies & Co. to bid up the price of Union Carbide stock in 1986. The manipulation occurred as GAF was preparing to sell off a 5-million-share block of Carbide stock it had amassed in an unsuccessful takeover attempt.

Evidence also showed that Sherwin promised to reimburse Jefferies & Co. for any loss that it suffered in the illegal activity, and Sherwin approved a falsified $40,000 invoice from the brokerage, which made the payment falsely appear to be for investment banking advisory services.

Lawyers for the company and for Sherwin immediately said they will appeal. Sherwin, appearing shaken and near tears, said: “I’m terribly disappointed in the verdict, and I’m innocent of the charges.” He then left the courthouse with his wife and daughters, who had been present with him throughout all three trials. The first trial ended before the case went to the jury when U.S. District Judge Mary Johnson Lowe declared a mistrial because evidence had been withheld from the defense.

Assistant U.S. Atty. Carl H. Loewenson Jr., the lead prosecutor in the case, said: “We’re extremely gratified by the jury’s verdict.”

In a written statement, GAF said it continued to have “complete confidence” in Sherwin, who will remain vice chairman. The company said it was disappointed by the verdict, promising that “we will leave no stone unturned in pursuing every avenue of appeal.”

Judge Lowe set sentencing for March 9. Sherwin faces up to five years in prison on each of the eight counts and a total fine of up to $2 million. The company could be fined up to $4 million. The jury returned a verdict of not guilty on charges pending against two GAF subsidiaries.

The guilty verdict for Sherwin and GAF was a blow to defense lawyers, including Arthur L. Liman, GAF’s lead defense attorney, who is also due sometime next year to defend former Drexel Burnham Lambert junk bond chief Michael Milken against pending racketeering charges. The defense’s hope for a complete acquittal in the GAF case had been raised at the end of the third trial when lawyers obtained what they considered to be dramatic new evidence in the form of telephone records, apparently refuting a central part of the government’s case.

The government had claimed that Jefferies & Co.’s head trader, James T. Melton, had called Sherwin at the end of three consecutive trading days in October, 1986, to report that he had manipulated upward the price of Carbide’s stock. Melton testified in the case that he had called Sherwin and told him the number of shares he had purchased and the closing price of the stock. The new evidence, AT&T; microfilm records listing outgoing WATS line phone calls from Jefferies & Co., appeared to show that no such calls were made.

In closing arguments, however, prosecutors argued that there was plenty of other evidence and testimony in the case to prove that the manipulations did indeed occur.

Prosecutors used some new tactics in the third trial and called two additional witnesses, which Loewenson said may have helped win the conviction. This time, for example, Boyd L. Jefferies, the founder and former chairman of Jefferies & Co., was called as the very first witness. As in the previous trials, Jefferies was the main prosecution witness. But Loewenson said that having him testify first this time may have helped the jury focus from the start on the main charges in the case.

The new witnesses were Maureen O’Connor, a trading assistant at Jefferies & Co., who said she overheard Melton making telephone calls relating to the stock manipulation, and Raymond Lacroix, a former chief financial officer at GAF, who testified about the falsified invoice.

Loewenson also credited the other prosecutor in the case, Assistant U.S. Atty. Kevin Czinger, with giving a particularly effective summation at the end of the trial.

The third trial contained the first testimony--a statement by Boyd Jefferies--suggesting that GAF’s chairman and chief executive, Samuel J. Heyman, knew about the stock manipulation. GAF’s lawyers have strongly denied that Heyman was aware of any wrongdoing.

The guilty verdict was a vindication of sorts for Boyd Jefferies, who had been subjected to grueling cross-examinations by defense lawyers in all three trials. Jefferies earlier had pleaded guilty to two felony counts for securities fraud and agreed to cooperate with prosecutors. He was fined $250,000 and placed on five years probation in July.

In a telephone interview, Jefferies denied that he was pleased by the verdict and said he felt badly for Sherwin. Jefferies lately has expressed doubts about whether the wrongdoing in the case was serious enough to justify a criminal trial. “I really don’t think it was a serious case,” Jefferies said. “I thought the government shouldn’t even be trying it.”

Jefferies’ testimony earlier this year also helped win the conviction of former corporate raider and Singer Co. Chairman Paul A. Bilzerian on securities and tax fraud charges. Jefferies isn’t due to testify in any cases in which indictments have already been brought. But prosecutors declined to comment on whether he might be a witness in cases still under investigation by grand juries.

During the trial, GAF became a privately held company following a $1.47-billion management-led leveraged buyout.