Boesky, Ivan Frederick
BOESKY, IVAN FREDERICK
BOESKY, IVAN FREDERICK (1937– ), U.S. entrepreneur, philanthropist. Born in Detroit, the son of immigrants from Czarist Russia, Boesky rose to become one of the most successful arbitrageurs in the 1980s among private, professional Wall Street traders, only to run afoul of securities laws, for which he paid a $100 million fine and served 22 months in prison after agreeing to become a government informant, particularly against Michael *Milken. Boesky amassed a fortune by betting on corporate takeovers. Investigated by the Securities and Exchange Commission for receiving tips from corporate insiders, and then making investments accordingly, Boesky made brazen purchases, sometimes two or three days before the company announced it would be acquired. Insider trading of this type was illegal but rarely enforced. As part of his guilty plea, he agreed not to trade again. Boesky gave extensively to charities, particularly Jewish causes, and for two years ending in 1985 he was general chairman of United Jewish Appeal-Federation of Jewish Philanthropies.
In Detroit, Boesky's father, William, owned a chain of bars called the Brass Rail. Ivan attended a prestigious prep school outside Detroit, Cranbrook. He moved to New York in 1966 and worked at a series of brokerages. By 1972, convinced that arbitrage was the road to great wealth, he joined Edwards & Hanley, an old Wall Street firm, which asked him to create an arbitrage department. It soon became the company's largest profit center. Arbitrage, which involves buying a company's stock when it becomes a takeover target, is highly risky, and Boesky took the firm to the edge. In 1975 it declared bankruptcy.
That year Boesky opened Ivan F. Boesky & Company with $700,000 in capital, most of it thought to have come from his wife's family, and three years later he reorganized as the Ivan F. Boesky Corporation, whose assets in 1984 totaled more than $500 million. He advertised for investors in the Wall Street Journal and allocated just 55 percent of the operation's profits to the investors, keeping 45 percent for himself. He assigned investors 95 percent of any losses. As the man reputed to be the richest and most powerful arbitrageur of modern times, according to the New York Times, Boesky was universally feared on Wall Street. In 1986 Boesky wrote Merger Mania – Arbitrage: Wall Street's Best-Kept Money-Making Secret.
Boesky became a close associate of Michael Milken. Milken, working for the investment bank Drexel Burnham Lambert, became known as the junk-bond king: he pioneered the financing of companies with high-yield, or junk, debt. Milken believed that precisely because such bonds were shunned they offered exceptional value. Milken found buyers and his investors made handsome returns. Not all those profits were made ethically or legally, as insiders swapped privileged information and others favors freely. Boesky's excesses and take-no-prisoners attitude were epitomized in a phrase he delivered in a speech in 1986: "Greed is good," he said. The financial crimes of the 1980s inspired Oliver *Stone's movie Wall Street the following year. Its high-powered arbitrageur, Gordon Gekko, portrayed by Michael *Douglas, repeats Boesky's phrase.
For Boesky, who lived lavishly on a 188-acre estate in upstate New York purchased from John *Revson of the Revlon cosmetics family, things started to unravel on Nov. 14, 1986. That day federal prosecutors disclosed that Boesky had pleaded guilty to charges of insider trading and had agreed to pay a fine of $100 million. He had also agreed to cooperate in the ongoing government investigations. Nov. 14 came to be known on Wall Street as Boesky Day.
In addition to his market activities, Boesky was known for his philanthropies. He became a member of the chairman's council after giving $25,000 to the Metropolitan Museum of Art in New York, and he gave to the American Ballet Theater, hoping it would mount a ballet with a Holocaust theme. At the Jewish Theological Seminary, Boesky often spoke to the chief librarian about rare Jewish books, which he eagerly collected. He eventually lent the library several of his finest manuscripts, and gave the seminary $2 million to help construct a new library building. It was named for him and his wife, but as his troubles mounted he asked or was asked to withdraw his name. Shortly before his sentencing, Boesky enrolled in classes at the Jewish Theological Seminary in Hebrew and an introduction to Mishnah, Midrash, and Talmud.
[Stewart Kampel (2nd ed.)]
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