In trading that has increased in intensity over the last several years, Los Angeles Mayor Tom Bradley has built up his personal investment portfolio with stocks, valuable real estate and, in one notable gamble, junk bonds.
A Times study showed the diverse portfolio has been accumulated, in part, by trading in stocks and bonds involved in some big corporate financial deals, including three handled by Drexel Burnham Lambert and its junk bond operation headed by Michael Milken.
Bradley has received some of his largest political contributions from Drexel and Milken's brother, Lowell Milken, and was instrumental in launching a congressional lobbying effort to persuade the Securities and Exchange Commission into allowing the firm to keep its junk bonds operation in Beverly Hills.
Milken has since been indicted on charges of racketeering, insider trading and securities fraud. While there is no indication that Bradley had any connection with Milken's troubles, an intensifying investigation into the mayor's personal finances prompted him to announce Thursday that he has placed his portfolio into a blind trust.
"Today, I voluntarily take another step to reinforce my bond of trust with the people," Bradley said in a statement.
The action is the latest in the series of moves the mayor has taken since disclosure that he has accepted more than $100,000 in fees from two local financial institutions that have had dealings with the city. Those disclosures set off a furor, and prompted an investigation by City Atty. James K. Hahn, who has asked for Police Department assistance.
Under heavy criticism, the mayor in recent weeks has returned $18,000 in adviser fees to Far East National Bank. Then, a day after his surprisingly narrow reelection victory, Bradley resigned from the board of Valley Federal Savings & Loan Assn. He also established a committee to write a tougher ethics code for city officials.
Over the last two weeks, The Times has researched the financial holdings that Bradley disclosed in the statements of economic interests that public officials are required to file. The information was supplemented by data from financial reporting services and interviews.
Because elected officials are required to disclose the value of their investments only in broad ranges, it was impossible to accurately determine the current worth of the holdings Bradley will put into the trust.
Asked in an interview Thursday how much he is worth, Bradley replied, "I have no idea, I couldn't tell you that."
While the mayor agreed to an interview only on grounds that questions would be restricted to his blind trust, he did comment on his investing.
"There's no magic in it," he said. "I don't know any expert. My losses will justify that. . . . The market is a risk and you buy from the judgment of people. Sometimes they are right. Sometimes they are wrong."
Bradley declined to say who his broker was in any of his transactions.
Asked if he likes to "play" in the securities market, Bradley demurred. "Next you'll want to know if I play the horses," he said.
Among Bradley's investments was Beatrice Foods Inc. preferred stock he bought in March, 1986--one month before the company was acquired by BCI Holding Inc. in a controversial takeover financed by Drexel Burnham's high-yield junk bonds.
The $6.2-billion leveraged buyout was one of the largest acquisitions of its kind.
Bradley's statement of economic interest shows that he purchased between $10,000 and $100,000 of Beatrice Foods stock. After he purchased the stock, its value rose sharply. That was because of a BCI stock conversion and other aspects of the deal.
After the takeover, investigators for a congressional subcommittee looked at the deal, and last year reported that they found evidence that Drexel Burnham and its employees acquired significant equity in the Beatrice takeover transaction and profited from junk bonds that were later made available at an escalated price to customers.
Questions also have been raised about the investment of Rep. Tony Coelho (D-Merced) in the Beatrice transaction. Coelho's involvement was particularly controversial because he obtained debentures (a form of corporate bonds) not normally available to individual investors. The investment netted Coelho a profit of $6,882 over six months.
Wickes Corp. was another Bradley investment. He reported purchasing between $1,000 and $10,000 worth of Wickes Corp. common stock in June, 1985, shortly after the firm made a preferred stock offering to raise cash. After the offering, the price of the stock rose and Bradley sold his shares in March, 1986.
The indictment of Milken alleges that he manipulated the market to keep up the price of Wickes stock in April. But by that time, Bradley had reported that he had sold it.
The mayor also purchased debentures in a successful leveraged buyout of Metromedia in 1984, when a group of executives took over the company in a deal involving Drexel Burnham.