Boesky Partnership Liquidated, But Mountain of Litigation Pending
NEW YORK (AP) _ Partners of Ivan F. Boesky’s main arbitrage fund are getting $248 million in liquidation proceedings, but attorneys promise to continue pursuing a mountain of lawsuits involving the fallen speculator.
More than two dozen shareholder lawsuits and other litigation against Boesky, his defunct partnership CX Partners LP and affiliated entities are pending in U.S. District Court in Manhattan.
The agreement between CX Partners and its 46 investors was reached after more than three years of discussions dating to Boesky’s November 1986 settlement of insider trading charges with the Securities and Exchange Commission.
While the agreement is the first major resolution of a Boesky civil matter, it doesn’t mean lawyers are ready to settle other litigation.
″It’s going full-steam ahead,″ said David Berger, a lawyer for shareholders in some class-action lawsuits against Boesky parties.
″We will be proceeding with depositions and preparing to go to trial,″ added George Reycraft, who represents the limited partners in the Boesky fund.
Boesky and the entities he once controlled were inundated with lawsuits after federal authorities disclosed his alleged insider trading activities. Most of the lawsuits are by shareholders who were selling stock at the time Boesky and his associates were buying.
Also pending in the case that rocked Wall Street is completion of an SEC plan to use $50 million paid by Boesky to reimburse individual investors who can prove they were defrauded by his trading.
Under the agreement liquidating CX Partners, formerly known as Ivan F. Boesky & Co., most of the limited partners received 100 percent of their investment, said David R. Herwitz, the partnership’s liquidating trustee.
The total equity investment in the fund, which Boesky formed in March 1986 to buy stocks of potential takeover targets, was $338 million. Its value dropped to $285 million when Boesky was charged and has since grown to $335 million thanks to interest, Reycraft said.
But Boesky and his wife surrendered all their interests in the enterprise and some partners did not receive full compensation. People familiar with the case said the Boeskys’ interest in the fund totaled just under $10 million.
The limited partnerships included insurance companies, financial institutions and individual investors. Some future disbursements to the partnerships are possible, Herwitz said.
Guinness PLC, the largest holder in the fund with a $100 million stake, received just $37 million of its claim, Reycraft said.
Monday’s settlement included an agreement with Drexel Burnham Lambert Inc., which had an $8 million equity stake in the Boesky fund and owned $20 million of its debt.
Reycraft said Drexel received the full $20 million for the debt but no interest or any of its equity investment. Under the agreement, Drexel will be dropped as a defendant in the Boesky-related lawsuits, he said.
But Reycraft said the limited partners planned to proceed with litigation against Boesky and others, including former Drexel financier Michael Milken and admitted securities felons Dennis Levine and Martin Siegel.
Boesky, 52, is due to be released in April from a Brooklyn halfway house, where he is completing a three-year prison term. Boesky pleaded guilty to one count of violating federal securities laws and paid $100 million to settle charges he led a network of illegal trading using inside information.
The government is using $50 million of the money to compensate investors who can prove they were victimized by Boesky’s trading. SEC officials had set Jan. 15 target date to establish a plan to distibute the money.
″We are working toward achieving a plan for distribution of the money but that may or may not have anything to do with an investors’ settlement,″ said John H. Sturc, an SEC associate enforcement director.
Herwitz, a Harvard law professor, said he expected some of the lawsuits consolidated before U.S. District Judge Milton Pollack to be resolved soon.
″Some of these lawsuits will be reduced, abated or limited,″ Herwitz said. ″Part of what is happening is people are going to try to save a dollar or two on litgation costs.″