Justices: Texas Court Can Hear Insider Trading Case
Jun. 17, 1991
WASHINGTON (AP) _ The Supreme Court today refused to block a $1.6 billion lawsuit against the brokerage firm of Kidder, Peabody & Co. over insider information allegedly given to Ivan F. Boesky.
The justices, without comment, let stand a ruling that forces Kidder to defend itself against allegations that the company violated the Texas Business and Commerce Code.
Maxus Energy Corp. contends in the $1.6 billion lawsuit that, among other things, it paid $300 million more than it should have in its 1983 takeover of Natomas Co. because Martin Siegel, a former Kidder vice president who headed a team of financial advisers for the merger, gave Boesky confidential information.
U.S. District Judge Milton Pollack in New York City ruled that Maxus could not assert violations of federal securities law against Kidder, and also blocked the Texas state court litigation.
But the 2nd U.S. Circuit Court of Appeals ruled last February that Pollack lacked the authority to squelch the Texas lawsuit.
Diamond Shamrock Corp. merged with Natomas in 1983 in a transaction in which both became wholly owned subsidiaries of a newly created parent, Maxus Energy.
In 1987, the Securities and Exchange Commission charged Siegel with illegally disclosing confidential material about the planned merger to Boesky. The SEC said Boesky used the information to purchase Natomas stock, reaping at least $4.8 million in insider profits.
Boesky was the central figure in Wall Street's largest insider trading scandal. He paid $100 million in penalties and pleaded guilty to one felony count to settle criminal and civil charges filed by the SEC.
Boesky was released last year after serving two years of a three-year prison sentence.
The case is Kidder, Peabody & Co. vs. Maxus Energy Corp., 90-1665.