Dennis B. Levine, the former investment banker whose cooperation with government investigators led to the fall of stock speculator Ivan F. Boesky, testified yesterday that he bought inside information to help his employers win new corporate clients.
Levine is serving a two-year prison sentence for using inside information about corporate takeovers to make illegal stock trading profits. As part of that scheme, Levine paid investment bankers to provide him with tips about upcoming deals.
But in his testimony yesterday, before a closed session of the House Energy Committee's oversight and investigations subcommittee, Levine said that on certain occasions he also used the illegally obtained information to try to win new corporate clients and advance his career in investment banking, according to panel members. In those and other situations, Levine's supervisors never asked him how he got his information about upcoming corporate takeovers, only "how good" it was, Rep. Ron Wyden (D-Ore.) said after the hearing.
Sources said that Levine said there were about five instances in which he had used his information to aid his employers.
Wyden and Committee Chairman John D. Dingell (D-Mich.) told reporters that Levine's testimony indicates that lack of supervision is a major problem on Wall Street. They said Levine's testimony would be used to help draft legislation that addresses the problem of supervisors failing to ask appropriate questions about how information is obtained.
"If the supervisors don't supervise, and the watchdogs don't watchdog, there is no" effective regulatory system, Wyden said. "You will see bipartisan support for some legislation. The supervisors are asleep at the switch."
Levine, who worked at Drexel Burnham Lambert Inc., Shearson Lehman Bros. and Smith Barney, Harris Upham & Co. before his arrest last year, spent Monday night in the Fairfax County Jail, after dining at McDonald's in Alexandria, sources said.
The former investment banker, who wore a gray suit, declined to answer questions from reporters before he was whisked away in a white station wagon by officials from the federal prison in Lewisburg, Pa., where he is serving his sentence.
Wyden said after the hearing that there were major discrepancies between what Levine said yesterday about his use of inside information to win new clients and what he told the subcommittee staff when they talked to him in Lewisburg. Wyden did not give details, but sources said Levine previously said that he passed inside information to supervisors eager to win new business on about 20 occasions, rather than the five that he acknowledged yesterday.
Levine was ordered by the committee to resolve the discrepancy in writing and to outline which deals were involved. He refused to say which deals were involved under oath yesterday.
Sources said Levine was accompanied at the four-hour hearing by his attorneys, Martin Flumenbaum and Brad Karp of the law firm Paul, Weiss, Rifkind, Wharton & Garrison, who were not present when he was questioned in Lewisburg.