The Securities and Exchange Commission yesterday charged Michael Davidoff, the former top stock trader for Ivan F. Boesky, with violating securities laws in connection with various stock "parking" schemes.
Davidoff, who pleaded guilty to related criminal charges in January, settled the SEC case without admitting or denying the charges. As part of the settlement, he was barred from the securities industry and agreed not to violate securities laws in the future.
Stock parking is a technique used to conceal ownership of shares. By parking -- or placing shares with others -- Davidoff helped Boesky conceal that he was buying stock, even though he lacked the capital required to make the purchases.
The SEC said Davidoff's stock parking involved bogus sales beginning in January 1985. The sales were bogus, the SEC said, because Davidoff secretly agreed that he would buy the stock back within a short period of time.
The SEC said that Davidoff acted under orders from Boesky, who paid the government $100 million in November to settle charges that he illegally purchased stock on the basis of confidential information about upcoming takeovers.
In January, Davidoff pleaded guilty to criminal charges that he participated in a parking arrangement with Seligmann, Harris & Co., a stock brokerage firm with offices in New York and London. The 43-year-old New Jersey man faces a maximum of five years in prison and a $250,000 fine for stock parking and related falsification of Boesky's books and records.
"It is important to note that the SEC did not charge Mr. Davidoff with any insider trading or with personally profiting from any wrongdoing," said Joel S. Weiss, an attorney with the law firm of Esanu Katsky Korins & Siger. "We hope this will be kept in mind when judging Mr. Davidoff and his conduct."
Davidoff also helped Boesky participate in an illegal parking scheme with the Los Angeles brokerage of Jefferies & Co., SEC attorneys Richard P. Murphy and Bruce A. Hiler confirmed yesterday. A brokerage controlled by Boesky parked $56 million of stock with Jefferies in March 1985 when Boesky lacked the minimum capital required, the SEC said.
William R. McLucas, SEC associate enforcement director, said the capital rules are designed to protect investors by ensuring the "safety and soundness" of brokerages.
Both Boesky and Davidoff are cooperating with the continuing government investigation by discussing details of secret Wall Street stock trading arrangements. Boesky's disclosures apparently led to the charges against Davidoff, with whom he has had a working relationship for more than a decade. The pair met in the early 1970s at the firm of Edwards & Hanly, Wall Street sources said. Since 1975, Davidoff has served as Boesky's senior vice president in charge of trading and as a member of Boesky's executive committee, according to a description prepared by Boesky.
The SEC's Hiler said the case involving Davidoff could extend to brokerage firms other than Seligmann, Harris & Co. and Jefferies & Co. However, he declined to identify other securities firms that may have been involved.
The SEC said that in addition to promising securities firms that he would buy back shares that were parked within a short period of time, Davidoff "through conversations with various persons," agreed to reimburse the firms for costs associated with holding the stock in the interim. As part of such an arrangement, Boesky paid Jefferies about $3 million in 1985, after Jefferies submitted a phony invoice for "investment advisory and corporate financial services."