– July 10, 1985 Inscription to Dennis Levine from Ivan Boesky, within a copy of “Merger Mania”
Concern about insider trading dominated the early 1980s. The U.S. Securities and Exchange Commission and the Supreme Court sparred over how to rein it in. The Court’s decisions in Chiarella v. United States and Dirks v. SEC raised questions about what defined insider trading and limited SEC authority over it. The Insider Trading Sanctions Act of 1984 sought to clarify the law and further empowered the SEC, providing for triple damages and raising the maximum criminal fine to $100,000. It did not, however, define insider trading; the SEC believed that doing so would invite crafty traders to exploit loopholes.
A year later, the SEC and U.S. Attorney Rudolph Giuliani began pulling threads from a tangle of fraud and insider trading. A tipster fingered Dennis Levine, architect of a $12 million insider trading ring. Levine’s cooperation led authorities to Ivan Boesky, one of Wall Street’s leading arbitrageurs. Boesky had worked his way up from Wall Street trainee to running his own firm. He was in good position to extract profits from the 1980s takeover boom through corruption and collusion, by using insider information to time trades and by working with investors to manipulate the market. Boesky eventually received $3 billion in financial leverage from Michael Milken. Together, Boesky and Milken committed infractions ranging from 13-D violations to conspiracy and market manipulation. (26)
As investigators closed in, Boesky cut a deal, accepting a $100 million fine and turning government witness. Boesky tutored investigators in takeover bids, stock manipulations, and corporate raids. He also recorded calls and meetings with associates, most importantly an October 1986 conversation with Michael Milken which provided proof of their illegal arrangements. On November 14, after two months of undercover work, the government revealed its case against Ivan Boesky.
