Ivan F. Boesky, a flamboyant stock trader, who played a pivotal role in exposing one of the biggest insider trading scandals in Wall Street’s history, has passed away at the age of 87.
A representative from the Marianne Boesky Gallery, which is owned by Ivan Boesky’s daughter, has confirmed the news of his passing. However, no further details have been provided at this time.
Boesky, the son of a Detroit delicatessen owner, was once hailed as one of the most affluent and influential risk-takers on Wall Street. He transformed a modest inheritance of $700,000 from his late mother-in-law’s estate into a staggering fortune exceeding $200 million, propelling him to the esteemed ranks of Forbes magazine’s prestigious list of the 400 wealthiest individuals in America.
Implicated in insider trading, Boesky worked alongside a bold young U.S. attorney named Rudolph Giuliani to seek leniency. Together, they uncovered a scandal that not only shattered promising careers but also tarnished the reputations of esteemed U.S. investment brokerages. Their efforts injected a sense of paranoia into the securities industry.
Working in disguise, Boesky clandestinely recorded three discussions with Michael Milken, known as the “junk bond king,” whose innovations in credit markets had a significant impact. Milken later admitted guilt to six criminal charges and served a 22-month sentence, while Boesky was fined $100 million and spent 20 months in a minimum-security correctional facility in California, humorously referred to as “Club Fed,” starting in March 1988.
During his commencement address at the University of California at Berkeley in 1985 or 1986, it was widely reported that Boesky made a statement that became notorious. He allegedly told the business students, “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.” These accounts circulated widely after Boesky’s arrest, becoming an infamous reflection of his mindset at the time.
In Oliver Stone’s 1987 film “Wall Street,” Michael Douglas delivered a memorable line as he portrayed Gordon Gekko, a successful trader, earning him an Oscar for his performance.
“Ladies and gentlemen, the message is clear: greed, for lack of a better word, is beneficial,” Douglas emphasizes to the shareholders of Teldar Paper. “Greed is justified. Greed is effective. Greed brings clarity, overcomes obstacles, and encapsulates the true nature of progress.”
Boesky, on the other hand, claimed that he could not recall ever uttering the phrase “greed is healthy.” He also refuted another quote that was attributed to him in the 1984 Atlantic Monthly. According to the alleged quote, he supposedly stated that reaching the pinnacle of a massive heap of silver dollars would be an exhilarating experience.
In addition to his grueling 18-hour workdays, Boesky, with his silver hair and slender frame, indulged in a life of luxury. He adorned himself in designer attire and traveled in style, frequently opting for limousines, private airplanes, and helicopters. Furthermore, he spared no expense in renovating his expansive 10,000-square-foot Westchester County mansion, transforming it into a magnificent residence complete with a Jeffersonian dome reminiscent of Monticello.
During his divorce proceedings in 1993, Boesky revealed the significant amount of materiality at his disposal. He disclosed, “We had properties in Palm Beach, Paris, New York, and the south of France.”
Boesky, a daring risk-taker, amassed his fortune as an arbitrageur by placing lucrative bets on stocks that were likely to be acquired by other companies. However, it was later revealed that some of his insider tips originated from the mergers and acquisitions divisions of Drexel Burnham Lambert Inc. and Kidder, Peabody & Co.
Dennis Levine from Drexel and Martin Siegal from Kidder, Peabody provided Boesky with confidential information in exchange for a promised share of the profits, either 1% or 5%.
Boesky handed over a total of $700,000 to Siegal through three separate payments. These transactions took place in secret, with a courier discreetly delivering briefcases filled with cash. The clandestine meetings occurred on a street corner and in the lobby of the Plaza Hotel in Manhattan. It was through Siegal’s tips that Boesky had managed to earn millions. The inside information provided by Siegal included knowledge 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. As a consequence of facing severe penalties under the government’s racketeering statutes, Levine decided to cooperate and revealed everything he knew. Subsequently, Boesky also started cooperating and provided valuable information that led to convictions or guilty pleas in various cases. These cases included former stockbroker Boyd Jefferies, Siegel, four executives of Britain’s Guiness PLC, takeover strategist Paul Bilzerian, stock speculator Salim Lewis, and several others.
Milken, the visionary financier who revolutionized capital markets in the 1970s with his groundbreaking bond, faced the most significant arrest. His innovative financial instrument enabled numerous mid-sized companies to access much-needed funds.
During the 1980s, Michael Milken utilized “junk” bonds to fund numerous leveraged buyouts, which included companies like Revlon, Beatrice Companies, RJR Nabisco Inc., and Federated Department Stores. As a result, Milken became a highly despised and intimidating figure within the realm of Wall Street.
Michael Milken, a prominent financier and philanthropist, faced a daunting indictment consisting of 98 charges. These included securities and mail fraud, insider trading, racketeering, and making false statements. The prosecution alleged that Milken and Boesky colluded to manipulate securities prices, engage in fraudulent transactions, and evade taxes and regulatory obligations.
Milken eventually admitted guilt to six securities violations, which included his promise to Boesky that he would take responsibility for any trading losses incurred while dealing with the stock of Fischbach Corp, a company being targeted for a takeover.
Boesky’s cooperation proved to be invaluable for the government as it provided them with the most comprehensive insights into securities law violations. In fact, the information he provided was deemed to be even more substantial than the evidence gathered during the legislative hearings that led to the creation of the 1933 and 1934 Securities Acts.
John Mulheren Jr., a Wall Street executive, was apprehended while he was on his way to potentially harm Boesky and Boesky’s former head trader. Mulheren had become concerned about potential implications and had even armed himself with an assault rifle. However, authorities were able to intervene and prevent any harm from occurring.
During the trial, Mulheren’s lawyer, Thomas Puccio, vehemently criticized Boesky, referring to him as a chronic liar and a despicable individual who was willing to say anything to gain favor with the government and receive a lighter punishment.
Ivan Boesky, according to Puccio, is a man who truly embodies the title Prince of Darkness. Puccio describes him as the epitome of greed, a person driven solely by his own ambition and desire for wealth.
Mulheren was convicted by the jury, but his conviction was later overturned. Furthermore, 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 supported the claims of free-traders who argued that Wall Street had fallen prey to a federal prosecutor seeking publicity by using racketeering statutes typically employed to combat organized crime. Previously, the government had taken little action against insider trading, leading some to advocate for its legalization.
In his article for Fortune, Levine expressed his bewilderment at Boesky’s decision to engage in blatantly illegal activities, such as payoffs involving suitcases full of cash. He found it difficult to comprehend why Boesky would risk so much for such illicit actions.
In 1990, Levine expressed his puzzled sentiment towards Ivan’s involvement in illegal activities despite possessing a substantial fortune of over $200 million. Levine acknowledged that Ivan had likely accumulated much of his wealth through legitimate means, given his expertise in arbitrage and his unwavering dedication to his work. Consequently, Levine speculated that Ivan’s motivations may have stemmed from something beyond rational reasoning.
During his 1987 sentencing, Boesky’s lawyer referenced his psychiatrist’s observation that Boesky had developed an awareness of his abnormal and compulsive desire to prove himself. This drive stemmed from deep-seated feelings of inadequacy and inferiority rooted in his childhood.
After spending three years in a Brooklyn halfway house, Boesky and his wife Seema decided to end their 30-year marriage.
Boesky, who dropped out of college three times, enrolled in the Detroit College of Law in 1959, where an undergraduate degree was not a requirement for admission. However, he withdrew from the program twice before finally obtaining his degree after a span of five years.
In 1966, Boesky and his wife, along with their first child, made the decision to leave Detroit and move to New York. Despite his efforts, Boesky struggled to secure a job with a major law firm in Detroit. Determined to find success, he set his sights on Wall Street, where he took on various positions in an attempt to establish himself in the financial industry.
In 1975, Boesky ventured out on his own, establishing a small brokerage firm that he later transformed into a thriving conglomerate of investment companies employing over 100 individuals. He dedicated long hours to his work, actively engaging in self-promotion through newspaper interviews and even penning a book in 1985 titled “Merger Mania.”
In addition to his notable achievements, he actively contributed to philanthropic endeavors, particularly in support of Jewish causes. One of his remarkable contributions was the endowment of a library at the Jewish Theological Seminary, which later received the honor of being renamed. He generously donated a sum of $20 million towards this noble cause.
