NEW YORK — A federal judge on Thursday imposed a fine and probation but no prison time on Boyd L. Jefferies, the founder and former chairman of the Los Angeles-based brokerage firm Jefferies & Co.
U.S. District Judge Morris E. Lasker cited Jefferies' "exemplary" cooperation with federal prosecutors in a string of securities fraud investigations before sentencing Jefferies on the two securities fraud counts he had pleaded guilty to in 1987. Jefferies was fined $250,000 and must spend five years on probation. But the judge said Jefferies, 58, could apply after three years to end the probation.
Jefferies resigned from his firm, pleaded guilty and agreed to cooperate with the government after he was implicated in a variety of securities fraud schemes by former stock speculator Ivan F. Boesky. Since then, Jefferies has been the star government witness in three criminal trials, and he is due to testify in two more in the fall.
Jefferies drew far more lenient punishment than Boesky, who was sentenced by the same judge in December, 1987. Boesky paid a $100-million penalty and is serving a three-year prison term. Boesky, who pleaded guilty to a single charge after being accused of widespread insider trading, also has cooperated with prosecutors. But in deciding against a prison sentence for Jefferies, the judge noted that Jefferies wasn't accused of insider trading and didn't profit directly from his illegal actions.
The judge said he took into account that one of the two charges against Jefferies--that he had illegally "parked" securities in sham transactions to hide their true ownership--was a violation that never before had been prosecuted criminally.
Judge Lasker said he was also strongly influenced by several of the hundreds of letters that he had received attesting to Jefferies' good character. "There are among them letters that have really hit my heart and made me feel that there is no question that you are essentially a good man," the judge said.
Before the judge imposed the sentence, Jefferies' voice broke and he fought back tears as he told Judge Lasker that he recognized "the seriousness of my actions." Jefferies said: "I would like to take this opportunity to apologize to the court, to apologize to the government, to apologize to my friends and family who have given me so much support."
When the sentencing ended, Jefferies, visibly relieved, told reporters that "I was expecting much worse." In response to a question, Jefferies said he hopes eventually to return to Jefferies & Co. Under a separate agreement with the Securities and Exchange Commission, he currently is banned for life from the securities industry. But the agreement allows him to apply for the ban to be lifted five years after his guilty plea, which would be in March, 1992.
'Didn't Know' Law Violated
According to Jefferies' own testimony as a government witness in several recent trials, at times in the mid-1980s his firm, in seeking to keep good customers or attract new ones, agreed to perform favors that involved violating securities laws. Such favors included hiding the ownership of stock and illegally manipulating the market price of shares, deliberately driving them up or down.
Jefferies has said that, while he knew that the actions were wrong, he didn't know at the time that they violated criminal law. Under the agreement that Jefferies' lawyers negotiated with the government, the firm itself won't be charged with any violations.
After handing out the sentence, the judge addressed the spectators in the courtroom, many of whom he characterized as "members of the financial community." Lasker told them that Jefferies had earned a lenient sentence "through agony and effort" but that it shouldn't be regarded as a sign that the court takes violations of securities laws lightly.
He said people in the securities industry, like members of the legal profession, "are among the most fortunate people in the world." He said: "It is absurd and obscene for any person so engaged to undertake acts that will simply bring him possibly greater riches. . . . This country is beginning to awake, I hope . . . to the morally corrupting effect of thinking of oneself only."
Major Block Trader
In an unusual move, Benito Romano, the acting U.S. attorney in Manhattan, appeared in court to praise Jefferies' cooperation. After the sentencing, Jefferies' relatives, friends and former colleagues who filled the courtroom's spectators section burst into applause. Some former colleagues had arrived early Thursday morning on a "red eye" flight from Los Angeles to show support for Jefferies at the hearing.