Mulheren Says Boesky Gave Him Tips : Securities: The stock speculator turns hostile at his trial when cross-examination begins.

Stock speculator John A. Mulheren Jr. admitted under cross-examination Thursday that he had received “sensitive and confidential information” about takeover stocks from convicted inside trader Ivan F. Boesky.

But Mulheren stuck to his claim that he had done nothing illegal, saying favors he had done for Boesky in the mid-1980s were normal and proper.

Mulheren, 40, has been on trial for a month in U.S. District Court in Manhattan on mail fraud, securities fraud and conspiracy charges related to an allegedly illegal arrangement with Boesky. Mulheren is accused of “parking” stock for Boesky to help him evade taxes and avoid securities regulations. He also allegedly manipulated the stock market for Boesky.

Mulheren, a diagnosed manic-depressive, testified firmly and clearly under questioning by his own lawyer, Thomas Puccio. But when Assistant U.S. Atty. Alfred Pavlis began cross-examination, Mulheren became hostile. He claimed to have no memory of events that the prosecutor asked him about, and he asserted that he had never seen many of the basic financial reports of his own firm, including profit and loss statements.

But when Pavlis asked him, “Isn’t it true that Boesky would share information with you that was considered sensitive and confidential?” Mulheren answered: “Completely correct.”

Mulheren isn’t specifically accused of insider trading, although sharing of confidential inside information is one of the elements of the alleged conspiracy.

The former risk arbitrager’s performance on the witness stand may be crucial to his defense. Puccio has based his defense on Mulheren’s “state of mind,” asserting that while Boesky may have had illegal intent in dealings with Mulheren, the defendant himself never knowingly engaged in any illegal activity.

Under questioning at the beginning of the day by Puccio, Mulheren gave his own version of the alleged manipulation of Gulf & Western stock in October, 1985. Boesky and other witnesses in the case have testified that Mulheren agreed to a request by Boesky to push up the price of the stock when Boesky wanted to sell a large block after an unsuccessful bid to make a leveraged buyout of Gulf & Western, now called Paramount Communications.

But Mulheren claimed that Boesky had called him and recommended the stock as a good investment, and based on Boesky’s record of giving good advice, Mulheren bought the stock, incidentally driving up the price. He said he felt betrayed by Boesky a short while later when he discovered that Boesky had sold his stake in Gulf & Western at the same time.

Under cross-examination, Mulheren admitted that he had never contacted the Securities and Exchange Commission or any other authorities when he received illegal proposals from Boesky’s head trader, Michael Davidoff. He also admitted inflating floor brokerage fees paid to Boesky’s firm, although he said he believed that this was an ordinary occurrence on Wall Street. The government claims that the fees were inflated so that Mulheren could secretly funnel back money owed to Boesky under their allegedly illegal arrangement.