Newspaper Says Government Investigating Corporate Raider Steinberg
WASHINGTON (AP) _ Corporate raider Saul Steinberg has become a target in an apparent expansion of the government’s investigation of alleged securities fraud at Drexel Burnham Lambert, Inc., according to a published report.
The probe by federal prosecutors of Steinberg, one of the company’s junk bond clients, focuses on an alleged ″stock parking″ scheme involving Drexel’s junk bond chief Michael Milken, The Washington Post reported in its Friday editions.
In ″stock parking″ an investor hides his ownership of stock by placing the shares with someone else and agreeing to buy them back at some other time.
The newspaper, citing sources it did not identify, said government investigators are looking into whether Steinberg four years ago hid stock he owned in Wickes Cos. through an insurance firm he controlled.
Wickes, an automotive, industrial and home furnishings company, was then operating under federal bankruptcy law and New York laws prohibit insurance companies from owning stock in firms under bankruptcy proceedings.
The newspaper also said another Drexel junk bond employee, Carl Deremer, who was responsible for Steinberg’s accounts, has been told by federal prosecutors he likely will be indicted on criminal fraud charges. The Beverly Hills, Calif.-based Milken and other Drexel employees also face possible indictment on fraud and racketeering charges.
Steinberg gained prominence as one of a new breed of corporate raiders on Wall Street in his attempts to take over such companies as Walt Disney Co., Quaker States Corp. and Penn Central Corp. Steinberg bought shares in those companies through another firm, Reliance Group Holdings Inc.
Drexel last week agreed to plead guilty to six felony counts and pay $650 million in penalties to end a U.S. attorney’s securities fraud investigations of the company. The company still faces investigation by the Securities and Exchange Commission.