NEW YORK — John A. Mulheren Jr., a leading stock speculator and the subject of federal investigations into insider trading and other securities law violations, was arrested Thursday after allegedly threatening the lives of convicted inside trader Ivan F. Boesky and of one of Boesky's former lieutenants.
Mulheren, 38, was arrested by local police at about 2 p.m. Thursday in affluent Rumson, N.J., just outside the home he shares with his wife and five children. He was charged with unlawful possession of a weapon and with the possession of a weapon for an unlawful purpose--that is, the threat against the "person or property" of Boesky and of Michael Davidoff, who was Boesky's chief trader.
Both Boesky and Davidoff have provided testimony to federal authorities in the government's probe of illegal activity on Wall Street.
If convicted, Mulheren faces a maximum penalty of five years in jail and $7,500 on the weapon possession charge, and 10 years and $100,000 on the second count.
After an arraignment hearing Friday afternoon in Monmouth County Court, Mulheren was jailed in lieu of $17,500 bail; he is likely to spend the weekend in county jail.
A spokesman for the Monmouth County prosecutor's office said that even if Mulheren makes bail, he is subject to a detainer warrant from U.S. Atty. Rudolph Giuliani of New York, who is conducting the criminal investigation into Wall Street practices. That means that Mulheren, once freed, would be immediately turned over to Giuliani's office.
First Assistant Monmouth County Prosecutor Alton Kenney said the warrant covered the charge of "threatening federal witnesses."
Peter Bennett, a New Jersey-based attorney for Mulheren, told Judge Lawrence Lawson at the hearing that his client had been under treatment with lithium, an anti-depressant drug, for some time but had stopped taking it about two weeks ago. Bennett received permission from Lawson to have Mulheren provided with the medicine in jail.
In New York, attorneys for Jamie Securities, the stock trading house that Mulheren founded as a vehicle for his aggressive trading, said the firm remains financially sound.
"It is known that John Mulheren has been upset by the investigation by regulatory authorities of securities activities and by the rumor and publicity which developed, which he felt unfairly impugned his honesty and integrity," read the statement issued by the law firm of Obermaier, Morvillo & Abramowitz. The statement added that Mulheren is "in the process of seeking the required medical assistance."
Burly in physique and mercurial in temper, Mulheren has for years been considered one of Wall Street's most talented and successful stock traders, although he often has been accused of profiting by manipulation.
One such case involved CBS. In November, 1985, after the broadcaster appeared to have closed the books on the long takeover attempt by Atlanta cable magnate Ted Turner, CBS stock again started gyrating sharply, gaining nearly $10 in a two-day period. Market sources attributed the run-up to an attempt by Mulheren to squeeze sellers of "naked" CBS stock options. These sellers had bet heavily on a drop in CBS' price, but their presence meant that even a slight move upward, sparked for instance by a rumor of new takeover activity against CBS, would set off a stampede of buyers desperate to cover their options sales by acquiring the stock. In that case a holder of CBS stock--like Mulheren, the sources said--would profit handsomely.
"A lot of us are being misled solely because the arbs (arbitragers) are playing a hot game," complained one veteran stock analyst at the time.
Others ascribed sharp moves in many big-ticket stocks, including such giants as Merrill Lynch, RCA and Union Carbide, either to rumors spread by Mulheren or to reports of his own trading.
Mulheren has never been charged by securities regulators with breaking the law in connection with any such activity. Still, he and Jamie Securities have repeatedly been identified by sources close to the Boesky-inspired federal investigation as targets of the probe for insider trading or "parking."
After briefly working at a small firm, the Bronx-born trader made his mark on Wall Street in 1975 as an arbitrager at the Merrill Lynch investment firm. There his responsibilities included speculating in the securities of companies involved in takeovers, acquisitions or restructurings. He later moved to Spear, Leeds & Kellogg, a leading stock trading house, and several years ago formed Jamie Securities.
'Intended to Kill'
Because Mulheren's trading was so successful and sometimes so voluminous, Jamie quickly became one of the most closely watched firms in the financial district. Among its limited partners have been corporate raider T. Boone Pickens Jr. and members of the Belzberg family of Canada and Beverly Hills.