Ivan Boesky scandal exposes only the tip of the iceberg

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4 SOCIALIST ACTION JANUARY 1987 If you steal $100 you go to jail. If you rip off $100 million, you just give it back and rat on your friends.

That seems to be the moral of the Boesky affair. Ivan Boesky is the Wall Street investor who paid a $100-million fine in federal court Nov. 14 for illegal insider trading.

Despite the record fine, Boesky left the court smiling and wired for sound. He was smiling because he had escaped jail and still had a few millions left. He was wired for sound because he had been secretly tape recording conversations with his business associates.

This was part of a deal in which Boesky was allowed to pay off $1.4 billion in debt by selling his stock before news of his conviction sent the prices plummeting.

Ivan Boesky is an "arbitrager." He buys stocks when he thinks the price is going to rise, and sells them when he thinks they are going to fall. These are deals that involve millions of dollars.

Boesky was a player in the merger mania that has gripped the corporate summits here and abroad. In the first nine months of 1986, about 774 corporate mergers —involving $131 billion-were consum -mated.

All it takes is money Anyone can be a raider and take over a giant corporation if its stock is held by the public. All it takes is money-and not necessarily your own.

NAN BOES Raiders set up dummy corporations and issue bonds paying a high rate of interest. They are called junk bonds because there is nothing behind them except the assets of the company the raider hopes to take over.

With the borrowed money the raider plays a no-lose game. If he (it's usually a he) can buy enough stock, he gains control of the target company. Then he can sell off some of its assets to pay off his debts. If he fails to get control, he can still make millions by the rise in the stock he has bought.

Millions stick to fingers along the way. The raider gets his profit, the banking house makes millions for underwriting the junk bonds, lawyers get rich setting up the deals. This is part of the driving force that keeps the merger mania going.

Out of all this financial churning there is absolutely no increase in productive capacity. The only product is a new crop of multimillionaires such as T. Boone Pickens and Carl Icahn.

When raiders move in, every worker's job is at risk, union contracts are abrogated, wages are slashed, and exploitation increased to pay off the junk bonds and other debts piled on the company. As branches and divisions of the conglomerate are sold, thousands of workers can see their jobs wiped out.

Boesky removes the guesswork Boesky made his millions by deter -mining which company was about to be merged, and buying its stock before it rose in price. Someone on the inside told him when a merger was imminent.

Dennis Levine, an official in the securities firm of Drexel Burnham Lambert, Inc., was in a position to know-and tell—when a company was likely to merge. He told a number of his friends, including Boesky, who rushed to buy the stock before the public heard the news.

This so-called insider trading is a "no-no" on Wall Street. It tilts the supposedly level playing field in favor of the insiders and discourages participation by the general public.

The Securities and Exchange Commis -sion (SEC) is supposed to regulate this sort of thing but has backed off for a decade or more. But the merger mania has alarmed some elements of the ruling class. The jerry-built structure of corporate debt threatens to bring the whole financial edifice tumbling down.

So the SEC has been forced to act, subpoenaing some of the easiest targets. It is doubtful, however, that the promised cleanup will eliminate more than a few fringe elements.

The frenzy of mergers and takeovers has now reached such a broad stratum of the corporate structure, it will take more than a few SEC hearings to halt the march to disaster.

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•..Contragate coverup under way (continued from page 1: “Christmas boycott in S. Africa spotlights torture of children”) one policy while the executive branch of the government blithely carries out another. And throughout the hardly concealable illegal arming of the contras, all Washing -ton pretends ignorance.

Foreign policy failures

It is not the covert and illegal governmental actions, or the dirty tricks played on political opponents, that explains the current crisis. The crisis is caused by U.S. imperialism's worsening world position and the failures of its foreign policy—particularly, the failure, so far, of the bipartisan campaign to overthrow the Sandinista revolution.

In the Vietnam War period, opposition by liberal politicians to the mayhem committed by U.S. troops in the guise of "advisers" remained muted for years. It became a little louder only when the horrifying increase in dead GIs impelled masses of American people to demand the immediate withdrawal of their sons from a war they no longer supported.

In 1983, on the other hand, when U.S. imperialism carried out an illegal and secretly planned overthrow of the government of Grenada, criticism by the liberals in Congress hardly rose above a whisper-because the overthrow succeeded.

A revealing commentary on the "contragate" events comes from the pen of New York Times columnist Anthony Lewis. His Dec. 8 column, headlined "Murder Will Out," puts the finger on the Nicaraguan focus of the current political storm:

"Cynicism, mendacity, secrecy: Those are the watchwords of the Reaganadministration underworld. Only a specialist could keep up with all the details by U.S. military advisers. The senior adviser, Col. James Steele, closely monitored the clandestine operations.

"Then it turned out that the same planes were being used for 'humanitarian' aid that Congress authorized and for weapons drops. When asked about that, Assistant Secretary [Elliot] Abrams said there was nothing wrong with it because the State Department was not paying for the leg of the flight taking weapons to the contras from llopango.

"The money for that was coming from other sources—e.g., presumably, the Sultan of Brunei." [One of the clientgovernment leaders "browbeaten" into donating funds to the contras].

Secretary of State George P. Shultz nailed down Secord's role as a direct agent of government policy when he complained central figure in the Reagan admin -istration's secret diplomacy with Iran.

But columnist Lewis, and other liberals critical of Reagan, don't probe deep enough. If Gen. Secord's "fingerprints," along with those of the officers in charge of the U.S. military operation in Central America and those of the Reagan administration itself, "are all over the contra-arms transfers," what about the role of the members of Direct military intervention, they have good reason to fear, would take U.S. troops into a Vietnam-like meatgrinder. They know that—unlike in the Vietnam adventure-resistance to an invasion by U.S. troops would explode everywhere from the very first shot fired.

The result could well be many "Nicaraguas" in Latin America, not to mention a profound political destabilization here in the heartland of world capitalism, as body bags begin arriving home.

Ruling-class "divisions"

Just like during the Vietnam War, the capitalists have been divided over how best to handle the Nicaraguan Revolution. "Hawks" and "doves" have differed over their estimates of the contras' potential.

That dispute is now coming to an end. We can expect to see a revived interest in the so-called Contadora nations' proposals for a negotiated "solution" in Central America.

But we absolutely COMMENTARY serious representative of U.S. capitalism will be comfortable until the Nicaraguan Revolution is crushed. On that, there is no division within the ruling class.

U.S. rulers will most likely look for a way to keep the contras in reserve and at the same time, use them as a bargaining chip to force the best deal they can get from the Sandinistas. We can be certain, too, that any compromise they agree to in the next period will be discarded the moment they see an opportunity to deal a decisive blow to the revolution in Central America.

The anti-intervention movement in the United States is no small factor in the contest taking place between revolution and counterrevolution in Central America. U.S. rulers must reckon with this force, which they know will multiply in direct response to new imperialist adventures.

All who believe in the right of nations to determine their fate-including the right to revolution—will need to remain on guard against further war moves by the U.S. government-which are sure to come.

In the meantime, the mass mobilization planned for this coming April 25 in Washington, D.C., and San Francisco will help drive the message home loud and clear to U.S. policy makers: U.S. out of Central America Now!

U.S. advisers training Ivador soldiers

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before a Senate hearing on Dec. 8 that the "retired" Air Force Major General was a