Maxus Sues Boesky and Kidder in Insider Case

DALLAS â€”  Maxus Energy, an oil and gas producer, Monday sued former top stock speculator Ivan F. Boesky and the investment banking firm Kidder, Peabody & Co., for alleged insider trading that boosted the price of a 1983 acquisition.

The lawsuit alleges that Martin A. Siegel, who was a vice president of Kidder Peabody at the time, leaked non-public information to Boesky about the planned takeover of Natomas Co. by Maxus, then known as Diamond Shamrock.

The suit, filed in Texas State Court in Dallas, claims the illegal trading inflated the price of Natomas. Maxus is seeking $300 million in actual damages and an unspecified amount of punitive damages.

Separately Monday, Kidder filed a suit in New York federal court seeking to protect itself from litigation growing out of the Natomas acquisition.

The Kidder suit names Boesky, Siegel and Maxus as defendants. Kidder alleges that it was not responsible for the actions of Siegel, who was not acting on the firm’s behalf. Instead, it claims that it too was a victim of Siegel’s actions.

The suit, which was filed in federal court because the parties reside in different jurisdictions, seeks a court order ruling that Kidder has no liability to Maxus in connection with the case.

If Kidder is held liable, the firm asked in the suit that it be entitled to have Siegel and Boesky contribute all or some of the damages to be paid.

The two private lawsuits are the latest in a number of actions to be filed against participants in the largest insider trading scheme in U.S. history.

Boesky, once one of Wall Street’s best known arbitragers, agreed to pay $100 million in November, 1986, to settle civil insider trading charges brought by the Securities and Exchange Commission. He has also pleaded guilty to one criminal charge and a sentencing hearing has been set for Dec. 18.

Settled Civil Charges

Arbitrage is speculation on takeover stocks.

Boesky led authorities to Siegel, a top merger specialist at Kidder, who settled civil insider trading charges and pleaded guilty to criminal charges in February. He is also awaiting sentencing. In June, Kidder agreed to pay a record $25.3 million to settle insider trading charges related to Siegel’s activities.

In Monday’s Texas case, Maxus said Siegel personally headed all of Kidder’s work on the Natomas acquisition, which involved the issuance of $1.5 billion worth of Diamond Shamrock shares and the assumption of $850 million of Natomas debt.

Maxus alleged that Diamond Shamrock proceeded with the acquisition of Natomas at prices artificially inflated by the illegal trading activities in Natomas’ stock.

The suit charges that had Diamond Shamrock known of the defendants’ inside trading, it would not have proceeded with the purchase of Natomas and thus would have avoided the subsequent writeoffs of Natomas assets, which to date have totalled more than $900 million.

In New York, shareholders have filed 10 federal class actions against Boesky, Siegel and several other defendants including Dennis B. Levine, formerly a managing director at the investment banking firm of Drexel Burnham Lambert. The shareholders allege that the defendants violated securities and racketeering laws through the huge insider trading scheme.

The shareholders say they lost millions of dollars because they sold their stock without the confidential information the defendants had access to. Defense attorneys have denied the charges.

Earlier this month, in an effort to streamline litigation, the 10 New York actions were consolidated into one lawsuit. Legal experts believe that the New York case will move ahead following last week’s U.S. Supreme Court decision upholding the conviction of former Wall Street Journal reporter R. Foster Winans. The ruling affirmed the use of Federal anti-fraud statutes in insider trading cases.