1986: A Masterful Wall Street Con Man Is Arrested

Ivan Boesky elevated insider trading to an art form. The police didn't see it that way, though.

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MediWound is the latest Israeli biotech company heading toward Wall Street.
MediWound is the latest Israeli biotech company heading toward Wall Street. Credit: Reuters

On November 14, 1986, federal officials arrested Ivan Boesky, a Wall Street dealer who had been caught trading on inside information. It turned out that Boesky's , who had become known for his seemingly preternatural ability to know when companies were about to be taken over, had been paying informants to give him the skinny on mergers and the like in advance. tell him just that before it was made public.

Boesky, born 1937 in Detroit, came from a well-off family that owned a number of delicatessens and bars in the city. He never finished college, but he did attend law school, graduating in 1965. For a while, he also worked in the family business, among other things, running a strip club in the basement of one of his father’s bars.

In 1962, he had married Seema Silberstein, the daughter of a Detroit real estate magnate whose holdings included the Beverly Hills Hotel, in California. After his father-in-law’s death, Boesky and Seema got into an ugly and very public feud with her sister and brother-in-law over the hotel’s ownership, which was eventually won by the Boeskys.

Feeling mighty good about himself

In 1966, the Boeskys moved to New York. Ivan worked at a series of brokerages houses before, in 1975, he opened his own firm, with $700,000 from his wife’s family. At one stage, he employed some 100 people. , and His workdays were known to regularly begin at 7 A.M., and end 18 hours later.

But the big money, which allowed him to supplement a Park Ave. apartment with a 200-acre estate in Westchester County, came from his arbitrage trades, which were informed by the insider information he purchased with cash-filledl briefcases. When Getty bought out Chevron, for example, Boesky, who had been tipped off to take a big position in Chevron stock, netted $65 million; similarly, his profit on the sale of General Foods to Philip Morris, in 1985, was some $50 million.

In May of 1986, Boesky, by now a legend, spoke at the commencement ceremony of the University of California, Berkeley’s school of management, where he told graduates that, “I think greed is healthy. You can be greedy and still feed good about yourself.”

At about the same time, federal officials were interrogating Dennis Levine, a managing director at the Drexel Burnham investment house, about insider trading. He led them to Boesky, one of his “clients.”

Boesky blows the whistle

Over several months, Boesky secretly told authorities what he knew about insider trading, which was enough to lead to charges against 14 other individuals – the most prominent of whom was Drexel Burnham’s Michael Milken -- and five different brokerage firms. Only then was he arrested and tried, by which time he had been able to sell of $1.6 billion in stocks, so he could pay back some of his debts.

In the end, he was sentenced to a mere three years in a low-security prison. (He was released after 22 months.) He also paid a fine of $100 million, and was banned from trading for life.

Boesky’s apprehension, and the other arrests it led to, sent shivers down the collective spine of Wall Street, and served as a deterrent for some time. As for Boesky, he and Seema divorced, and she agreed to pay him $23 million and $180,000 a year, for life. For a while there were rumors that he studying in a rabbinical seminary (at the time of his arrest, he asked the Jewish Theological Seminary to take his name off the library to which he had contributed $2 million), on the one hand, and that he was a serial participant in sexual orgies. Today, he is remarried, and lives in a very large house in La Jolla, California.  

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