Agreement Reached To Liquidate Boesky Partnership, Distribute Assets
NEW YORK (AP) _ Ivan F. Boesky’s main arbitrage fund has been liquidated and $248 million distributed to its limited partners to settle one of many claims against the former Wall Street speculator, attorneys said Monday.
In addition, some lawsuits against the partnership, CX Partners LP, have been settled and others placed on hold in Manhattan federal court, where more than two dozen class-action lawsuits against Boesky and affiliated entities await resolution.
The agreement between CX Partners and its 46 investors was reached after more than three years of discussions and litigation dating to Boesky’s November 1986 settlement of insider trading charges with the Securities and Exchange Commission.
David R. Herwitz, liquidating trustee for CX Partners, said the agreement was ″a major step in the resolution of disputes stemming from Mr. Boesky’s conduct.″
Still pending in the case that rocked Wall Street are 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, Herwitz said.
The total equity investment in the fund, which Boesky formed in March 1986 to invest in stocks of potential takeover targets, was $338 million. But Boesky and his wife surrendered all their interests in the enterprise and some partners did not receive full compensation.
The limited partnerships included insurance companies, financial institutions and individual investors. Some future disbursements to the partnerships are possible, Herwitz said.
Other details of the agreement were not made public, but sources familiar with the case said the Boeskys’ interest in the fund totaled around $10 million.
Guinness PLC, the largest holder in the fund with a $100 million stake, received just $37 million of its claim, said George Reycraft, a lawyer for the limited partners.
Other large stakes in the fund reportedly included $28 million by Jeffrey M. Picower of New York, its largest investor; $10 million by Lincoln National Life Insurance Co.; $10 million by Britain’s Water Authorities Superannuation Fund; and $6 million by New York investor Milton Dresner.
Monday’s settlement included an agreement with Drexel Burnham Lambert Inc. resolving a series of issues surrounding the limited partners’ investments. Drexel 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.
A Delaware court last year ruled that Drexel was entitled to get its money back before or at the same time as the partners. Drexel spokesman Steven Andreder declined to comment on the agreement, saying it was confidential.
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.
Monday’s settlements could help speed resolution of a mountain of lawsuits, including class-action shareholder cases and other litigation, attorneys said. Some of the charges involving CX Partners either have been settled or placed on hold, according to lawyers involved in the case.
The lawsuits are consolidated before U.S. District Judge Milton Pollack.
″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.″
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.