Drexel Figure Trying to Raise Buyout Money

What goes around comes around--or tries to, anyway.

Dennis B. Levine, the Drexel Burnham Lambert investment banker whose landmark insider-trading case eventually brought down Ivan Boesky and Michael Milken, has formed an investment advisory business and apparently wants to raise $100 million for a corporate buyout fund.

Levine’s plans were reported in Buyouts newsletter, a small, New York-based publication that tracks the moves of Wall Street’s major deal makers.

Levine, reached Friday through his advisory firm, Adasar Group in New York, declined to comment on his plans.

Other investment bankers reacted to the report with a mixture of astonishment and derision. On the latter count, many pros find it hard to believe that the 39-year-old Levine could raise even $1 from serious investors--given his guilty pleas to four felony counts of insider trading in 1986 and subsequent jail time.

“I don’t think this is anything but in Levine’s imagination,” said one Wall Streeter who requested anonymity.

More intriguing, they say, is how Levine could form an advisory firm, considering that part of his insider-trading settlement banned his participation in the securities business.

John Heine, a spokesman for the Securities and Exchange Commission in Washington, confirmed that Levine is specifically “barred from association with investment companies or investment advisers.”

Does that mean Levine may have violated the terms of his pact with the SEC? “We don’t speak to specific situations,” Heine said.

There are loopholes through which Levine could conceivably slip, some experts say. Technically, a money manager with fewer than 15 clients need not register as an investment adviser with the SEC. Also, were Levine to set up a buyout fund offshore (say, on some Caribbean island), he would be out of the SEC’s reach.

Despite the SEC’s official no-comment, sources say the agency is watching Levine closely, and would be eager to go to court to test the staying power of the original order against him--if he should step over a certain line. But exactly where that line is may be known only to the SEC.