Ivan Boesky, convicted in 1980s insider trading scandal, dies at 87

Ivan F. Boesky, the flamboyant stock trader whose cooperation with the government cracked open one of the largest insider trading scandals on Wall Street, has died at the age of 87.

His daughter, Marianne Boesky, told The New York Times on Monday that he died in his sleep, and his wife confirmed Boesky’s death to The Washington Post. No cause of death was given.

The son of a Detroit delicatessen owner, Boesky was once considered one of the richest and most influential risk-takers on Wall Street. He had parlayed $700,000 from his late mother-in-law’s estate into a fortune estimated at more than $200 million, hurtling him into the ranks of Forbes magazine’s list of the 400 richest Americans.

But once implicated in insider trading, Boesky cooperated with a brash young US attorney named Rudolph Giuliani in a bid for leniency, uncovering a scandal that shattered promising careers, blemished some of the most respected US investment brokerages, and injected a certain paranoia into the securities industry.

Working undercover, Boesky secretly taped three conversations with Michael Milken, the so-called “junk bond king” whose work with Drexel Burnham Lambert had revolutionized the credit markets. Milken eventually pleaded guilty to six felonies and served 22 months in prison, while Boesky paid a $100 million fine and spent 20 months in a minimum-security California prison nicknamed “Club Fed,” beginning in March 1988.

‘Greed is good’

After Boesky’s arrest, accounts widely circulated that he had told business students during a commencement address at the University of California at Berkley in 1985 or 1986, “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.”

The line was memorably echoed by Michael Douglas in his Oscar-winning portrayal of Gordon Gekko in Oliver Stone’s 1987 film “Wall Street.”

“The point is, ladies and gentlemen, that greed, for lack of a better word, is good,” Douglas tells the shareholders of Teldar Paper. “Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”

Boesky said he could not remember that “greed is healthy” line and denied another quotation attributed to him in the 1984 Atlantic Monthly, in which he said climbing to the height of a huge pile of silver dollars would be “an aphrodisiac experience.”

While he usually worked 18-hour days, the silver-haired, lean and not-too-tall Boesky also certainly lived a life of opulence. He wore designer clothes, traveled in limousines, private airplanes and helicopters, and revamped his 10,000-square-foot Westchester County mansion with a Jeffersonian dome to resemble Monticello.

“There was a very substantial amount of materiality available,” Boesky said during his 1993 divorce proceedings. “We had places in Palm Beach, Paris, New York, the south of France.”

Boesky was an arbitrageur, a risk-taker who made millions by betting on stocks thought to be the target of corporate takeovers. But some of his tips came from within the mergers and acquisitions departments of Drexel Burnham Lambert Inc. and Kidder, Peabody & Co.

Dennis Levine of Drexel and Martin Siegel of Kidder, Peabody fed Boesky confidential information in return for a promised cut of profits of either 1 or 5 percent.

Boesky paid Siegel $700,000 in three installments, with a courier delivering briefcases full of cash at three clandestine meeting on a street corner and in the lobby of the Plaza Hotel. Boesky had made millions on Siegel’s tips, which included word that Getty Oil and Carnation Co. were ripe for a takeover.

Levine was arrested before his payout could come, tripped up by his own insider trading. Facing harsh penalties under the government’s racketeering statutes, Levine told everything. And Boesky sang as well, providing information leading to convictions or guilty pleas in cases involving former stockbroker Boyd Jefferies, Siegel, four executives of Britian’s Guinness PLC, takeover strategist Paul Bilzerian, stock speculator Salim Lewis, and others.

The biggest fish was Milken, the pioneering financier who had transformed the capital markets in the 1970s with a new form of bond that allowed thousands of mid-sized companies to raise money.

In the 1980s, those “junk” bonds were used to finance thousands of leveraged buyouts, including of Revlon, Beatrice Companies, RJR Nabisco Inc. and Federated Department Stores, making Milken a hated and feared figure on Wall Street.

The financier and philanthropist was indicted on 98 counts, including securities and mail fraud, insider trading, racketeering and making false statements. Prosecutors said Milken and Boesky conspired together to manipulate securities prices, rig transactions, and evade taxes and regulatory requirements.

Milken eventually pleaded guilty to six securities violations, including telling Boesky he would cover any losses he suffered trading the stock of Fischbach Corp., a takeover target at the time.

Prosecutors said Boesky’s cooperation provided the government with the most information about securities law violations since the legislative hearings that led to the 1933 and 1934 Securities Acts.

At his 1987 sentencing, Boesky’s lawyer quoted his psychiatrist as saying Boesky “has begun to recognize that he suffered from an abnormal and compulsive need to prove himself, to overcome some sense of inadequacy or inferiority that is rooted in his childhood.”

Three years after his release from a Brooklyn halfway house in April 1990, Boesky and his wife Seema divorced, after 30 years of marriage.

Claiming he had been left penniless after paying fines, restitution, and legal fees, he won $20 million in cash and $180,000 a year in alimony from her $100 million fortune. He also got a $2.5 million home in the La Jolla section of San Diego, where he lived with his boyhood friend, Houshang Wekili.

Humble beginnings

Ivan Frederick Boesky was born in Detroit in 1937 into a family of Russian Jewish immigrants. Boesky said he learned industriousness from his father, who operated three delicatessens. At the age of 13, Boesky bought a 1937 Chevy truck, painted it white, and sold ice cream from it at Detroit’s parks, making about $150 a week in nickels and dimes.

A three-time college dropout, Boesky entered the Detroit College of Law in 1959, which then did not require an undergraduate degree for admission. He withdrew twice before receiving his degree five years later.

While in law school, Boesky married Seema Silberstein, the daughter of Ben Silberstein, a real estate developer and the owner of the Beverly Hills Hotel.

Unable to find employment with any major Detroit law firm, Boesky moved in 1966 with his wife and the first of their four children to New York, where he floated from job to job on Wall Street.

In 1975, Boesky struck out on his own, opening a small brokerage that he eventually parlayed into a sprawling group of investment companies with more than 100 employees. He worked grueling hours, gave self-promoting newspaper interviews, and wrote a 1985 book entitled, “Merger Mania.”

He was also an active philanthropist, especially with Jewish causes, giving $20 million to endow a library at the Jewish Theological Seminary that was later renamed.