Ivan Boesky

Open full sized image

During the early 1980s, Ivan Boesky built a fortune of about $200 million as an arbitrage specialist working on corporate takeovers and mergers. After an investigation by the SEC into insider trading, he pleaded guilty in 1986 to a charge of manipulating securities, and he cooperated with the SEC to help take down junk-bond trader Michael Milken. Pictured here in New York City in 1987, Boesky was eventually sentenced to prison and fined $100 million. Boesky’s and Milken’s behavior came to typify the ethos of 1980s excess as represented in the 1987 movie Wall Street.

AP/Shutterstock.com

Ivan Boeskywas an American investment banker convicted of insider trading in 1986. The proceedings of his trial led to charges against Michael Milken, a bond trader who specialized in high-risk, or “junk,” bonds.

Boesky was the son of Russian immigrants, and his father became a top Detroit restaurateur. Boesky attended the University of Michigan without graduating, although he later earned a law degree from the Detroit School of Law (1964). After a short time as a law clerk and accountant in Michigan, he went to work on Wall Street in 1966 as a securities analyst. With the assistance of his father-in-law, real-estate magnate Ben Silberstein, Boesky started his own arbitrage firm in 1975.

Throughout the early 1980s, Boesky, working as an arbitrage specialist and known affectionately as “Ivan the Terrible,” amassed a fortune estimated at approximately $200 million by betting on corporate takeovers and mergers. Along with other corporate financiers such as T. Boone Pickens and Sir James Goldsmith, Boesky took advantage of the gap between public and private market values to raid corporate targets; the practice was within the law as long as the trading in the targets’ securities was based on public knowledge of the imminent acquisitions. In the mid-1980s the U.S. Securities and Exchange Commission (SEC) investigated Boesky for certain investments he made after receiving tips from corporate insiders regarding potential takeover targets. He had acquired securities in various companies on the basis of those tips, often making significant purchases just days before a corporation publicly announced a takeover. Such transactions brought Boesky substantial returns when the news of the pending takeovers was released. Although the use of insider information to trade in public securities was illegal, previously the SEC had rarely enforced the law.

In November 1986 Boesky pleaded guilty to one felony count of manipulating securities and agreed to cooperate with the SEC in its ongoing investigation. In return for leniency, he allowed the SEC to secretly tape his conversations with various corporate insiders and takeover specialists, including junk-bond trader Michael Milken. Boesky’s cooperation led to an insider trading probe of Milken and his firm, Drexel Burnham Lambert. Both Drexel and Milken later entered guilty pleas to securities-law violations.

As a result of his plea agreement and cooperation with the SEC, Boesky received a sentence of three and one-half years in prison, a $100 million fine, and a permanent ban from working in the securities industry. After serving two years at the Lompoc Federal Prison Camp in California, Boesky was released from prison.

The actions of Boesky and others (including Milken) came to be viewed as emblematic of the greed and excesses often seen as typifying the 1980s on Wall Street. In 1986, prior to his guilty plea, Boesky had given an infamous speech at the University of California extolling the positive aspects of greed, stating that he thought greed was healthy. Boesky’s statements inspired a key moment in the 1987 movie Wall Street in which the fictional character Gordon Gekko (played by Michael Douglas), giving a speech to corporate shareholders, opines that greed is good.

C. Bruck, The Predators’ Ball: The Junk-Bond Raiders and the Man Who Staked Them (1988); R.C. Smith, The Money Wars: The Rise and Fall of the Great Buyout Boom of the 1980s (1990); J.B. Stewart, Den of Thieves (1991).