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The Net Widens

March 22, 1987

"Mr. ---- is continuing to cooperate fully with the investigation." Those are sweet words to federal officials who are working hard to untangle what now appears to be a long skein of manipulatory illegalities involving Wall Street speculators and brokers. What they indicate is a form of plea bargaining, involving an offer of reduced punishment to those who have already been nabbed breaking the law in exchange for their help in fingering other thieves and poachers. In contrast to the malefactions that preceded it, this can be said to represent a socially beneficial way of profiting from inside information.

Arbitrager Ivan F. Boesky was the first major figure to cooperate with investigators, even as he agreed last November to plead guilty to unspecified criminal charges and to fork over a $100-million penalty for trading on insider information. There have been others since--the latest and most notable being Boyd L. Jefferies, the founder and chairman of Jefferies & Co., a Los Angeles brokerage, who will soon plead guilty to two felony counts of securities-law violations.

And so the investigation widens. Among those who know that their illicit stratagems may yet be exposed, stress levels must surely be soaring. Good. Simply put, those who gained by violating securities regulations filched money from the pockets of others, and they should be made to pay dearly for what they did. "Something went wrong in our value systems," Jefferies said in a written statement. Indeed something did. Men who can legitimately earn more in a year than most workers can earn in a lifetime are seen to have been driven by some indecent compulsion to grab still more, and never mind the rules. Now the rules are shown to mean something after all, and Congress is likely to toughen them so that they will mean even more. At stake are the safety and the integrity of the securities market. In the painful light of history that is no small thing.

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