2 Unocal Shareholders Sue Corporate Raiders : Takeovers: The suit charges that Michael Milken, T. Boone Pickens and others violated federal laws during a 1985 buyout attempt.
Two shareholders of Unocal Corp. sued a who’s who of corporate raiders, brokerage firms and investors Thursday, alleging a conspiracy in an aborted 1985 takeover attempt by T. Boone Pickens Jr. that the suit says cost Unocal more than $750 million.
The shareholders--Dorothy Shames of New York and Rodney B. Shields of Arizona--charged that the bankrupt securities firm Drexel Burnham Lambert Inc. and its indicted junk bond wizard, Michael Milken, violated federal racketeering laws in orchestrating and financing the takeover attempt that netted Pickens $83 million.
In the suit, filed in U.S. District Court in Los Angeles, the shareholders charged that Drexel and its entities “engaged in ongoing and continuing schemes of securities fraud and manipulation, mail and wire fraud, transportation for illegal sexual activity and extortion.”
Steven Andreder, a spokesman for Drexel, said the company had not yet seen the suit and declined to comment further. Spokesmen for Mesa Limited Partnership, a company controlled by Pickens, also declined to comment. Pickens could not be reached.
The suit is the second arising from the takeover attempt by Pickens, which forced Unocal into a major restructuring, but it differs significantly from the earlier suit still pending against Mesa and others.
“This suit is much broader and seeks different types of damages and more substantial damages,” said William S. Lerach, a lawyer representing shareholders in both suits. The suit names Drexel, Milken, Pickens and Mesa, as well as investor Ivan F. Boesky and broker Boyd L. Jefferies, both of whom pleaded guilty to violations of securities laws, and scores of other investors. Unocal Corp. is not a plaintiff in the case.
Lerach said the suit was filed so long after the takeover attempt to take advantage of disclosures about Drexel’s activities contained in recent guilty pleas, indictments and bankruptcy filings.
The suit alleges violations of the Racketeer Influenced and Corrupt Organizations Act, under which damages could be trebled if the plaintiffs prevail, Lerach said.
In that, it resembles an earlier suit against American Continental Corp., the parent of failed Lincoln Savings & Loan, that was filed by Lerach on behalf of ACC shareholders--including Shields.
In both suits, there is an accusation that Drexel operated a “daisy chain,” or group of entities financially beholden to, controlled by and dominated by Milken, designed to raise capital for Drexel clients, Lerach said.
“The American Continental case more involved the savings and loan side of the daisy chain; the new Unocal case focuses more on the raider side,” he said.
The earlier Unocal case was filed on behalf of shareholder David Colan in 1985 against Mesa, Pickens and other related parties. Unocal itself is also a plaintiff in that case, which seeks recovery of so-called “short-swing” profits from the takeover attempt.
That suit alleges violations of federal securities laws that require a shareholder with 10% or more of the outstanding stock to return to the corporation any profits that are earned on sale of stock within six months of acquiring that stake, provided the shareholder owned at least 10% at the times of both purchase and sale. The suit seeks more than $95 million, said Darryl Snider, a lawyer representing Unocal in the case.
In January, a federal judge in Los Angeles granted Mesa’s motion for summary judgment on some issues in that case, but it remains pending while the judge reviews new information, Snider said.
