Boesky Alleged to Have Pushed Studio Buyout

The chairman of Paramount Communications testified Thursday that Ivan F. Boesky tried to lure him into a leveraged buyout of the company with promises that he could personally profit by $100 million to $200 million.

Martin S. Davis, chairman and chief executive of Paramount, which at the time was Gulf & Western, was a government witness at the trial of John Mulheren Jr., who is accused of helping Boesky break a number of securities laws, including manipulating the price of G&W; shares.

Prosecutors allege that Boesky, once one of Wall Street’s most powerful stock speculators, had accumulated a large stake in G&W; during 1985 and tried to talk Davis into a leveraged buyout. When Davis refused, Boesky tried to resell his block to Davis.

In a leveraged buyout, a group that often includes company management takes a company private with borrowed money.

Because Boesky wanted to maximize his profit on the transaction, Boesky allegedly asked his friend Mulheren to manipulate the price of shares higher by buying large blocks of the stock at the end of the trading day, prosecutors said.

During Thursday’s testimony, Davis gave details of Boesky’s repeated attempts to get the company to agree to a leveraged buyout. He said that corporate raider Carl C. Icahn, whom Davis knew socially, had set up a meeting of the three men.

Davis testified that both men said they each had a 4.9% stake in the company. “He (Boesky) said if he did not do a leveraged buyout, he discussed going up to 9.9% and getting two seats on the board,” Davis said.

Davis said he responded with “an emphatic no” but Boesky kept calling. “Boesky continued to persist (extolling) the virtues of an LBO. . . . He indicated I would personally make between $100 million and $200 million,” Davis said. The executive told Boesky he would consider an LBO attempt “a move on the company” that would “disenfranchise shareholders.”

Later Boesky tried to persuade Davis to repurchase his stake at a price above market value. “I told him we had no interest whatsoever in doing any business with him,” Davis said.

Davis said he was later approached by Mulheren, who said he had some investors who were interested in talking to Paramount about buying CBS Inc. or parts of the network.

Mulheren, former head of now-defunct Jamie Securities Co., is charged with 41 counts of conspiracy, securities and mail fraud stemming from deals with Boesky.