Stock trader Ivan Boesky, convicted in insider trading scandal, passes away at age 87

Ivan F. Boesky, the vibrant stock trader whose collaboration with the government exposed one of the most significant insider trading scandals in Wall Street’s history, passed away at 87 years old.

The Marianne Boesky Gallery, owned by Ivan Boesky’s daughter, has confirmed the death of Ivan Boesky. No further information has been provided at this time.

Boesky, the son of a Detroit delicatessen owner, was once regarded as one of the wealthiest and most influential risk-takers on Wall Street. With a starting capital of $700,000 from his late mother-in-law’s estate, he managed to amass a fortune estimated at over $200 million, propelling him into the coveted ranks of Forbes magazine’s list of the 400 richest Americans.

Implicated in insider trading, Boesky collaborated with a bold young U.S. attorney named Rudolph Giuliani to seek leniency. Together, they exposed a scandal that devastated promising careers, tarnished esteemed U.S. investment brokerages, and instilled a sense of unease in the securities industry.

While undercover, Boesky covertly recorded three conversations with Michael Milken, the notorious figure known as the “junk bond king,” whose groundbreaking contributions to the credit markets were made through his association with Drexel Burnham Lambert. Milken ultimately admitted guilt to six felony charges and served a 22-month sentence in prison. Boesky, on the other hand, faced a hefty $100 million penalty and spent 20 months in a minimum-security California correctional facility humorously referred to as “Club Fed,” starting from March 1988.

During a commencement address at the University of California at Berkeley in 1985 or 1986, Boesky allegedly made a statement that became widely circulated after his arrest. According to accounts, he reportedly said, “Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself.”

Michael Douglas famously echoed this line in his Oscar-winning portrayal of Gordon Gekko, a successful trader, in Oliver Stone’s 1987 film “Wall Street.”

“Ladies and gentlemen, the truth is that greed, for lack of a better word, can be advantageous,” Douglas addresses the shareholders of Teldar Paper. “Greed is justified. Greed yields results. It brings clarity, penetrates complexities, and encapsulates the essence of progress.”

According to Boesky, he claimed that he could not recall making the statement “greed is healthy” and refuted another quote that was attributed to him in the 1984 Atlantic Monthly. Allegedly, he stated that reaching the pinnacle of a large stack of silver dollars would provide “an aphrodisiac experience.”

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Despite his usual routine of working long hours, the elegant and slender Boesky indulged in a life of luxury. He adorned himself in designer attire, traveled in chauffeured limousines, private jets, and helicopters, and transformed his spacious 10,000-square-foot estate in Westchester County into a grand structure resembling Monticello, complete with a Jeffersonian dome.

During his 1993 divorce proceedings, Boesky mentioned the abundance of materiality that was at his disposal. He revealed that he owned properties in various prestigious locations such as Palm Beach, Paris, New York, and the south of France.

Boesky, a daring arbitrageur, amassed a fortune by placing bets on stocks that were believed to be potential targets of corporate takeovers. However, it was later revealed that some of his inside information came from the mergers and acquisitions departments of Drexel Burnham Lambert Inc. and Kidder, Peabody & Co.

Dennis Levine from Drexel and Martin Siegal from Kidder, Peabody provided Boesky with insider information in exchange for a share of the profits, which ranged from 1% to 5%.

Boesky made three separate payments totaling $700,000 to Siegal. These transactions were carried out in secret, with a courier delivering briefcases filled with cash. The exchanges took place in discreet locations, including a street corner and the lobby of the Plaza Hotel in Manhattan. Boesky had profited greatly from the insider information provided by Siegal, which included tips about potential takeovers of Getty Oil and Carnation Co.

Before he could receive his payout, Levine was arrested due to his involvement in insider trading. He ended up revealing everything and Boesky also started cooperating, which led to convictions or guilty pleas in cases involving various individuals. These included former stockbroker Boyd Jefferies, Siegel, four executives of Britian’s Guiness PLC, takeover strategist Paul Bilzerian, stock speculator Salim Lewis, and others.

One of the most significant arrests was that of Milken, a pioneering financier who revolutionized capital markets in the 1970s by introducing a new type of bond. This innovative bond enabled numerous mid-sized companies to access funding.

During the 1980s, “junk” bonds played a significant role in financing numerous leveraged buyouts, which included companies like Revlon, Beatrice Companies, RJR Nabisco Inc., and Federated Department Stores. This made Milken a highly controversial and feared figure within the financial industry.

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Michael Milken, a renowned financier and philanthropist, faced a slew of charges, totaling 98 counts. These charges included securities and mail fraud, insider trading, racketeering, and making false statements. According to prosecutors, Milken and Boesky collaborated in a scheme to manipulate securities prices, rig transactions, and evade taxes and regulatory obligations.

Milken eventually admitted his guilt in six securities violations. This included making a promise to Boesky that he would compensate for any losses Boesky incurred while trading the stock of Fischbach Corp, which was a company being targeted for a takeover at that time.

Boesky’s cooperation was hailed by prosecutors as the most significant source of information regarding securities law violations since the legislative hearings that resulted in the enactment of the 1933 and 1934 Securities Acts.

In a tense turn of events, it is alleged that John Mulheren Jr., a prominent Wall Street executive, armed himself with an assault rifle with the intention of targeting Boesky and Boesky’s former head trader. Fortunately, Mulheren was apprehended before he could carry out his plan.

During the trial, Thomas Puccio, Mulheren’s attorney, described Boesky as a notorious and untrustworthy individual, referring to him as a “pile of human garbage.” Puccio argued that Boesky had a history of lying and was willing to say anything to gain favor with the federal authorities in hopes of receiving a more lenient sentence.

Puccio described Ivan Boesky as the epitome of the title “Prince of Darkness.” He emphasized that Boesky was a symbol of greed, solely driven by his own ambition and desire for personal gain.

Mulheren was convicted by the jury, but his conviction was later overturned. Similarly, other convictions were also reversed, including those of GAF Corp. and a senior executive, five principals of Princeton-Newport Partners, and a former Drexel trader.

The reversals strengthened the arguments of free-traders who claimed that Wall Street had fallen prey to a self-promoting federal prosecutor who utilized racketeering statutes typically employed to combat organized crime. Historically, the government had taken minimal action to regulate insider trading, leading some to suggest that it should be made legal.

In his article for Fortune, Levine expressed his bewilderment over Boesky’s decision to partake in illegal activities that involved payoffs in the form of suitcases filled with cash.

After settling his fines, restitution, and legal fees, he found himself without any money. However, things took a turn when he received a staggering $20 million in cash and an additional $180,000 per year in alimony from his ex-wife’s $100 million fortune. As if that wasn’t enough, he also acquired a beautiful $2.5 million home in the La Jolla area of San Diego, where he resided with his lifelong friend, Houshang Wekili.

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Ivan Frederick Boesky, born in 1937 in Detroit, comes from a family of Russian Jewish immigrants. Boesky attributes his strong work ethic to his father, who successfully managed three delicatessens. Demonstrating his entrepreneurial spirit, Boesky purchased a 1937 Chevy truck at the young age of 13, painted it white, and began selling ice cream in Detroit parks. This endeavor proved fruitful, as he earned around $150 per week in small coins.

Boesky, who dropped out of college three times, enrolled in the Detroit College of Law in 1959. Surprisingly, an undergraduate degree was not a prerequisite for admission at that time. Despite facing setbacks, he persevered and finally obtained his degree after five years of hard work.

During his time in law school, Boesky tied the knot with Seema Silberstein, who happened to be the daughter of Ben Silberstein. Notably, Ben Silberstein was not only a real estate developer but also the proud owner of the prestigious Beverly Hills Hotel.

In 1966, Boesky and his wife, along with their first child, relocated to New York after struggling to secure employment at prominent law firms in Detroit. In the bustling financial hub of Wall Street, Boesky found himself navigating through various jobs.

In 1975, Boesky ventured out independently, establishing a small brokerage firm that he later transformed into a successful conglomerate of investment companies, employing over 100 individuals. He dedicated countless hours to his work, actively engaging in self-promotion through interviews with newspapers. Additionally, he authored a book in 1985 titled “Merger Mania.”

In addition to his notable achievements, he actively engaged in philanthropy, particularly in support of Jewish causes. He generously donated $20 million to establish a library at the Jewish Theological Seminary, which was subsequently renamed in his honor.

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