October 19, 1987 Stock market crash market drops 508 points
Oct. 26, 1987 Clore negotiating sale of his 37.6% stake in KaiserTech -
NYT
Oct. 31 Jefferies Group, house that pioneered round- I 38:6 the-Clock
trading, anticipates $5-$10 million NYT loss for October due to stock market
plunge. Nov. FHLBB Dallas begins examination of USAT
Dec. 18 Boesky sentenced to 3-year term - US v. MM
Dec. DBL/HYD underwrote 24% of USAT junk In Re: bonds purchased this
year (through Sept. '88)
USAT buys $32mm in DBL junk bonds - FDIC v. MM
USAT book $118mm loss
Connally becomes a director of Coastal Corp.
Dec. USAT books $118 million loss
Dec. 31 USAT fails again to meet minimum capital requirements for 2nd quarter
in succession.
During '87 DBL counterpart for $788mm in mortgage backed securities
DBL underwriter for 24% of junk bond issues brought by USAT.
USAT buys $321 million in DBL junk bonds.
1988
Mar. USAT determined to be insolvent by FHLBB
10-Q MCO UFG stock worthless
3/88
Mar. UFG agrees to infuse sufficient capital into USAT so as to meet minimum
regulatory capital requirements set by FHLBB.
(Undated but before March 25, 1988) Hurwitz resigns from UFG BOD - his
time is better spent elsewhere.
Mar. 01 Maxxam agrees to buy from Alan Clore stock and options on Pf. Kaiser
for $190 million. -- NYT
Hurwitz buys Clore's KaiserTech stock (27%) for about $200mm for 6.2mm
shs & 8.2mm voting convertible Pf. shares. Hurwitz negotiating with
Jefferies for 2.8mm more Clore had contracted to buy from Jefferies. Jefferies
had recorded $9.7mm on loss on default by Clore. Order came in Oct. 1987
before the market crash.
Mar. 02 Jefferies & Co. to sell 1.4 million shares of KaiserTech
Stock to Maxxam Group, Inc. for $16.8 million. -- NYT
Mar. 04 KaiserTech goes its chairman Alan Clore, seeks resignation, breach
of contract. -- NYT
Mar. 09 Maxxam negotiating purchase of 1.4 million from Jamie Securities
and two others. -- NYT
Mar. 11 Maxxam sues in Delaware to end standstill agreement. -- NYT
Mar. 24 Boesky begins serving sentence. Serves just over 2
years
Apr. 05 MCOH owns 53% MCOR. MCOR in default on its bank debt MGI-MCOH merger
created $45mm, 16% Senior Reset Notes (May 20, 2000) OTS: $45mm (12/31/89).
Underwriters: DBL and P.W. Bonds down graded because management "upstreams
cash"
Apr. 20 Net earnings of Jefferies Group rose 30% to $4.7 million
from $3.6 million. -- NYT
May 06 Jefferies Group announces first-ever WSJ quarterly dividend.
Boyd Jefferies had always opposed, but now said as a major shareholder,
he could "use the money". Jefferies appears at a shareholder meeting looking
tanned and fit. Jefferies is company's third largest shareholder,
with 10% stake. His stock is in a voting trust.
May 06 Baxter announced employees to own 30% of WSJ company through
an ESOP.
May 13 Jefferies Group receives unsolicited takeover IV 3:3 inquiry
from an unidentified third party and has adopted poison pill defense measure.
-- NYT
May 18 MPI and Hurwitz amend put call agreement. See July 7, 1989.
May 20 MCOH merges MGI into a wholly owned subsidiary. Now named
Maxxam, Inc.
May 24 KaiserTech agrees to be acquired by Maxxam for $19/share =
$872 million. -- NYT
May 29 Hurwitz' stake in Maxxam, Inc. listed at $122mm
Jun. 15 Maxxam gets 8 million shares for $120 million from Clore. -- NYT
Jun. 17 Jefferies & Co. get $6.9 million in accord with standstill
agreement with Alan Clore concerning KaiserTech. -- NYT
Aug. Hurwitz & DBL plan `bailout' of USAT
Aug. 18 Labor Dept. inquiry into whether transactions involving Drexel
Burnham Lambert defrauded pension funds and other customers; Dept. is also
examining whether transactions conducted by Jefferies & Co. violated
Federal law on pension funds; Labor Dept. working from material
from Congressman Dingell -- NYT
Oct. 26 Maxxam to pay $13 million to Wesray Capital, which it defeated
in bidding battle for KaiserTech. -- NYT
Oct. 28 KaiserTech, Ltd. merged into a wholly owned subsidiary of Maxxam.
Oct. 28 San Francisco Chronicle calls Connolly an old friend of Hurwitz.
Connolly named to Maxxam Board of Directors.
Nov. Hurwitz, Maxxam make bid to `bailout' USAT without DBL; Jenard Gross
resigns; Maxxam makes USAT "bailout" offer without DBL. USAT forced to
sign consent decree agreement with FSLIC. Both UFG & MGI submit plan
to reorganize. UFG BOD approves MGI plan. Jenard Gross resigns. USAT buys
$58mm in DBL's junk bonds
Dec. 30 Feds place USAT in receivership; USAT net worth is minus $289,700,000
in first estimate. Negative networth increases to over $500 million
in later tabulations.
DBL owned nearly 10% of USAT when seized. (New York Times 2/20/89)
UFG's capitol loss is $186mm. FSLIC demands UFG return $14mm to USAT
as a return of Federal Income tax return and a payment in excess of $100mm
to meet net worth requirement. UFG fights both demands.
According to Lewis Ranieri USAT had a classic DBL junk bond portfolio and
a total of $670mm in junk bonds.
USAT was considered a member of the DBL deep-pocket investors. These
investors helped DBL to do "difficult deals that worked, including Pacific
Lumber and Revlon". (WSJ Heard on the Street 1/23/90)
UFG 10K's shows the following amounts were involved in the trading of investment
securities including junk bonds and risk arbitrage, CMO's and MBS's
1983: $ 506,950,000
1984: $ 1,394,921,000
1985: $ 6,069,097,000
1986: $ 18,921,948,000
1987: $ 15,767,523,000 (year USAT came under restrictions for maintaining
net worth)
This measures the potential gross business UFG represented to DBL,Salomon
Bros. and others in these markets.
Dec. 21 First GAF trial starts. First tests of government's case
using Jefferies evidence; Jefferies pled guilty last year - two felony
counts - after Boesky implication. -- NYT
Dec. 22 Prosecutor says Samuel J. Heyman, Chairman of GAF, set up original
contract between senior executive and brokerage firm that led to conspiracy
to manipulate stock prices. -- NYT
Dec. 22 Bilzerian indicted - 12 counts securities and tax laws, conspiracy,
false statements to government; charges Bilzerian made millions by accumulating
stock in takeover targets, hiding his ownership using secret accounts at
Jefferies & Co., and later selling his holdings when price of stock
had risen. -- NYT
1989
Jan. Ranieri's Hyperion Partners takes over USAT total
cost $1.6 billion ($1.36 billion taxpayers bill) USAT had made no real
estate loans in 3 yrs., had sold 71% of its 90 branches, had a hodge-podge
of money losing assets including a huge JB portfolio & 2 South American
Companies whose business no one in USAT could even describe. Half of all
JB holdings among 3,000 thrifts were in the hands of only 5...each...now
insolvent, four seized by the government. (April Fools p. 194)
FDIC calculates USAT's negative net worth at $309 million
Jan 12 FDIC makes a networth claim for $534 miilion and a tax claim
for $14 million UFG offers a settlement for $6.25 million
Jan. Banner Industries lists TSG as an affiliate, Jeffrey Steiner once
a partner in a scrap business with brother-in-law of Arthur Goldberg. Goldberg
controlled Triangle Industries. Peltz used Steiner to get to Goldberg in
late 1982 taking over Triangle.
In late 1985 with DBL financing Steiner took over Banner Industries. Steiner
became a principal investor with Icahn.
In 1986 DBL/MM raised $135mm blind pool for Steiner. DBL'S underwriting
committee criticizes MM for this. See pg. 305 PB
Jan. 04 Jefferies testifies at GAF trial that GAF Vice-Chairman James T.
Sherwin asked him to manipulate price of UC stock in fall 1986 after GAF
unsuccessful in bid. -- NYT
Jan. 05 Lawyers involved in stock manipulation case of GAF Corp. say that
Boyd L. Jefferies, government's main witness in series of securities fraud
cases, may have violated Federal election laws by concealing con-tributions
made to members of Congress.-- NYT
Jan 05 Ranieri takes over USAT, costs $1.6 billion
Jan. 06 Jefferies testifies that shortly before entering plea-bargain agreement
in 1987 he destroyed many of his notes about his trading patterns and discussions
with clients.-- NYT
Jan. Mistrial, evidence tampering in GAF trial
-- NYT Index
1989
Jan. 06 Paul Bilzerian pleads not guilty to charges he made millions by
parking stock in takeover targets with Boyd Jefferies. -- NYT
WSJ
1/06/89
Jan. 15 Jefferies, testifying re insider trading scandals of 1986, has
drawn charges of betrayal that have tarnished his reputation; has
led to Jefferies' second thoughts re-deals he made with prosecutors.
Cases cited. -- NYT
Jan. 23 Wallman v. Drexel filed
Jan. 24 US v. DBL filed. See Exhibit XXV.
Jan. 25 New York Times says John Seidl becomes Kaiser Tech Chairman. Seidl
comes from Enron formed by HNG-Internorth merger. Seidl joined HNG as Senior
vice-President in 1984 to become President and CEO of Enron in 1986.
Jan. 26 Jefferies Group posts a $4.9 million fourth quarter profit, but
revenue declined from $39.2 million to $36.3 million. p.A13 -- NYT
Feb. 06 Thompson amended. Wallman amended
Feb. DBL investigation leads to questions about Executive life purchase
of junk bonds
Feb. 07 Jefferies begins testifying at second GAF trial. GAF attorney
is Arthur Liman. -- NYT
Feb. 08 Jefferies at GAF trial, does not recall verbatim the 1986 conversation
with Sherwin. -- NYT
Feb. 09 GAF Defense lawyers assail credibility of Jefferies. -- NYT
Feb. 27 SEC memo, Ross to Sturc. Maxxam not over 5%. Little evidence
to support parking.
Feb. 28 James T. Melton, head trader at Jefferies & Co., testifies
at GAF trial he executed series of UC stock purchases - he executed buy
orders by direction of Jefferies. -- NYT
Mar. 01 Melton at GAF trial, contradicts Jefferies - says he received no
requests from Sherwin, says only requests came from Jefferies. -- NYT
Mar. 08 GAF's lawyer Arthur Liman calls Boyd Jefferies a liar. -- NYT
Mar. 23 Mistrial ordered after GAF trial jury deadlocked for ten days.
Most (prob. 11) jurors favored conviction of Sherwin at at time of mistrial.
-- NYT
Apr. US v. Milken filed. See Exhibit XXVI.
May 11 Jefferies says he illegally schemed with Paul Bilzerian to
violate Federal securities laws; Testimony in Bilzerian trial (11
counts of securities fraud, tax fraud, conspiracy, and other illegal activities).
-- NYT
Jun. 01 Bilzerian says he didn't scheme with Jefferies trader; not hidden
stock purchases but delays by Jefferies firm in filling his order. -- NYT
Jun. 02 Bilzerian admits swapping many fraudulent invoices with Jefferies
& Co. -- NYT
Jun. 09 Jury deliberations begin in Bilzerian trial. -- NYT
Jun. 10 Bilzerian convicted of 9 counts securities fraud, conspiracy plus
making false statements to government. Fraudulent schemes involving
four transactions with Jefferies & Co., including concealment
of his stock purchases in takeover targets. -- NYT
Jun.
Fries v. H consolidated
Glassman v. DBL consolidated
Kaufman v. DBL consolidated
Jul. 06 Jefferies sentencing - two counts securities fraud - set for 7/6.
-- NYT
Jul. 07 Judge Morris E. Lasker sentences former top securities broker Jefferies
to 5-years probation and $250.000 fine; acts after U.S. Attorney Benito
Romano hails Jefferies cooperation in crackdown on Wall Street corruption
Jul. 07 Judge Lasker said he did not sentence Jefferies to any community
service because Jefferies is already engaged in a variety of charitable
and volunteer activities, including sports programs for children, and a
scholarship program. -- LA Times
Jul. Horizon agrees to 100% control by Maxxam
Jul. 07 MPI converts Zero Coupon Senior Subordinate Notes of July 25, 2007
to (MM shares of Maxxam, Inc. and sells these to Hurwitz for $10mm pursuant
to a put call agreement.
Aug. 18 Fries v. Jefferies consolidated
Sep. 06 Murphy v. DBL filed
Sep. 28 Paul Bilzerian gets 4 years in jail and $1.5 million fine - the
stiffest sentence in stock scandals so far. -- NYT
Oct. Third GAF trial. -- NYT index
Oct. 18 Russ v. Milken filed
Thompson 2nd amended
Nov. 20 In re Boesky (American Red Cross v H) amended
Murphy v. DBL to In Re "Conditionally"
Nov. 14 Jefferies describes at 3rd GAF trial the price manipulation at
request of Sherwin. -- NYT
Dec. 14 GAF and Sherwin found guilty of illegally trying to manipulate
stock of UC Corp. in 1986 after unsuccessful takeover attempt. -- NYT
Dec. Thompson 3rd amended
Dec. DBL and PW underwite $350mm, 14.25% Senior Subordinated Notes (Dec.
15, 1995) for Kaiser Aluminium and Chemical Corp.
1990
Jan. Russ stay for 6 mos.
Jan. Murphy joins Russ
Feb. 02 Hurwitz lectures Kozmetsky UT students on ethics
Feb. 20 Thompson stay to July 31
Mar. 16 Jefferies & Co. hires seven former Drexel employees, including
Marc Rapaport, in move to increase its activities in junk bonds. -- NYT
Mar. 26 Martel v H filed
Mar. 28 Russ amended
Apr. 22 Milken pleas US v. MM
Hurwitz owns 65% of Maxxam which owns 100% of PL
May 05 Roy Johnson, formerly of Drexel and now for Jefferies &
Co., receives target letter used by Federal prosecutors to inform recipients
they are potential defendants in criminal proceeding; letter is sign that
Jefferies reputation may be hurt by its controversial ties with ex-Drexel
employees.
Aug. 07 SEC bars Jefferies & Co. executives James T. Melton and Michael
Z. Landy from securities business for six months for their roles in events
that led to convictions of Bilzerian
