Drexel, Hurwitz and AMSTAR In May 1983, Simplicity put AMSTAR in play. ELIC owned 10% of AMSTAR common stock. Drexel advised SPC in this acquisition. By August SPC held 12.4%. In September 1983 SPC made a $35 million, long term investment in AMSTAR valued at $53 million during Mar.-Sept. 1983. Under pressure from SPC talks began regarding an Leverage Buy Out. By October a group led by KKR received AMSTAR's board's approval for a tender offer. SPC sold its shares to AMSTAR in a greenmail prior to the approval of the offer. Jefferies was also involved in AMSTAR. Maxxam's 10Q ending September 30 reports a net gain of $12 million in sale of a Pf stk investment thought to have been AMSTAR. In July, 1983 Drexel financed MCI communications for $1 billion and the WSJ reported the successful Jefferies stock trading -in the third market - through telephone deals. By August the market had risen 50%, over the prior 12 months. In September HITS, a junk bond mutual fund, was formed by Milken. Milken engineered securities swaps so First Executive, COL S&L, Drexel unload Pf in Integrated Resources, Inc. at $37 when market at $32. Integrated, a client of Drexel, does private real estate deals with Milken. This was also the time of the worst economic decline since Great Depression. Interest rates were in double figures, Mexico was ready to default on its loans, and stocks were cheap. *** Castle & Cook On October 14, 1983 Hurwitz attacked Castle & Cooke (C&C) through United Financial Corp & MCO Holdings. UFC was a subsidiary of USAT. Hurwitz is chairman of UFC Board. C&C owned 150,000 acres in Hawaii; the entire island of Lanai and the 5,700 acre Sea Ranch in California. In December 1983, MCO Holdings, which had begun buying Castle & Cook stock in October, halted its purchases short of HSR limit. MCOH-UFG file 13D claiming C&C stock for investment purposes only. On March 9, 1984, Hurwitz threatened a takeover if not "greenmailed" by C&C. This attempt at a takeover using insured deposits was halted by a Federal court when on March 12, Hurwitz was restrained by thecourt, C&C sued H for false 13D filing, using USAT deposits for takeover bid & failing to disclose "excessive unsecured loans". On March 15 Hurwitz filed a 13D on C&C at 11.8%. In April, Hurwitz "greenmailed" C&C. USAT's share of the $13 million total is said to be $7 million. *** On October 15, 1982, Reagan signed the Garn-St. Germain Act, "I think we've hit the jack pot," he said. On October 25, Boesky filed a 13(D) on Financial Corp. of Santa Barbara. On November 9, Boesky made a tender offer for Financial Corp. of Santa Barbara with Drexel as banker. FHLBB sandbagged the offer. Deal withdrawn. In late 1982, the NYT quoted Jill Delaney, saleswoman with Jefferies & Co., when she described a deal with Caesar Cone,II, where he agreed to sell his shares in Cone Mills (takeover target of Western Pacific Ind.) NYT also reported Gulf & Western'ssale of its 25% stake in Amfac to Jefferies & Co. ELIC acquired a 13% position in Fischbach, a Posner target. Milken orders Boesky to take a large stake. Carr depended upon Milken and generally did as Milken asked. This because Milken made a market for ELIC's junk bond purchases. Boesky was becoming dependent upn Milken as most of Boesky's financing was through Drexel. Milken also ordered Boesky to take a large position in Columbia Savings creating a Drexel secret interest in a Drexel client. Drexel created a $1 billion airfund for Charles Knapp, of FCA, selling Preferred & SSN's; major buyers incl Atlanta/Sosnoff Capital Corp., AFC (Lindner); Sallis Securities Co. (Fred Carr's street name); 338 Rodeo (COLS&L); Worldwide Trading Service (Atlantic Capital and Clarendon IC) Steinberg set up a partnership Reliance Capital Group, Ltd. Partnership (RCG). Investors incl: Boesky, Perelman, Posner, Belzberg, Spiegel, & the largest is Mantar Associates, Milken and other Drexel clients. Reliance LP investors: $ 1 mm Wm. McGowan, MCI Communications (Drexel raises $2 billion in JB's for MCI) $ 3.5 mm Wynn and others $ .75 mm Spiegel family $ 1 mm Mr. & Mrs. Boesky $ 2 mm Gene Phillips & Wm. Friedman (Southmark and San Jacinto S&L) $ 1.5 mm Perelman $ 1.5 mm Posner $ 1.5 mm Belzberg family $ 1 mm Sinatra $ 2 mm Diana Ross $ 6 mm Mantar Association $ 1.6 mm Michael Milken From 1977, 225 companies issue $19.5 billion in JB's but in 1983 $40 billion in junk bonds are issued v $375 billion issued in straight bonds Drexel has 23 offerings over $100 million and a total of $4.69 billion for all JB offerings. First Executive bought 100% of Drexel junk bond issues. Fred Carr (First Executive) and Thomas Spiegel (COLS&L) were said to be thriving on junk bonds. During 1983 MCOH openned a trading account with Jefferies & Co. In January, 1983 Tom Gaubert took over a small thrift in Grand Prairie, TX; moved it to Dallas, and changed its name to Independent American S Association (IASA). Assets double by (1/84). Examiners catch wind of odd deals & weird clients. In early 1984, UFG hired Salomon Bros. & Goldman, Sachs to sell up to half of USAT's 90 branches. By March 1984, USAT has 95 real estate projects. of these, one residential and 6 commercial are in Florida & New Mexico; USAT's real estate investments are in 6 projects, 2 of which are in Florida. In March, Icahn testifies against Greenmail before Congress. In the same month, Drexel arrangement with Boesky, Jefferies begins. In return for agreement to raise $800 million for Boesky, Boesky agreed to buy and to sell securities at the direction of and for the benefit of Drexel without revealing true ownership. Drexel used Boesky "to manipulate securities prices and to facilitate merger & acquisition activities" PL Takeover Era Sometime in the Spring of 1984, Drexel brought takeover candidate Pacific Lumber to Maxxam's attention. That July, Drexel began raising blind pools for its customers for the purpose of "creating equity" for potential acquisitions. Drexel and Maxxam discussed Pacific. Maxxam/Drexel openned talks on Pacific Lumber (PL) as one of morw than two dozen Forest Products Industry target companies. Quirk says he introduced Maxxam to the forest product industry about this time period by meeting with Reid. Quirk discussed Champion International with Maxxam. But C.I. announced plan to acquire St. Regis so Maxxam lost interest. Quirk discussed three Forest Products corporations with Maxxam in September. Decision was made to invest in PLC apart from potential acquisition no later than 12/84. In June the stock market a sharp rise lasting until April 1986. Stanley Rosenberg, MCOH director is also a Director of Groos Bank NA (San Antonio), COB. Ezra Levin is a director of UMB Bank & Trust. SEC v Data Point filed, settled, enjoined its directors although "Kozmetsky and Leone were not named". In July, Michael Milken raised $100 million `blind pool' for Triangle. One of the early ones Milken issued for his players. That Summer at the Gobhai seminar: Drexel identified the need to find those players who no one else could or would finance, who therefore would be desperate enough to pay the price (interest, rates, fees, equity stakes) Ex: Ichan, Wm. Farley. That Summer, Drexel began its mortgage backed securities dept. USAT buys increase from $250 million ('84) to $6.5 billion ('86). In July MCOH acquired 1 million shares (15.6%) of Horizon Corp., which lead to a merger. Jefferies & Co. acquired 1.2 million shares (3.5%) of Walt Disney Prod.; 690,000 of these are held for unidentified customers of First N.B. of Minneapolis. NYT had an interview with Ronald A. Alghini, president of Jefferies Group, described as active in third market; he discusses outlook for 24-hour trading. From mid-August through December, Maxxam held a board meetings regarding its investment company status and its need to acquire new producing company. Rosen attended On August 30, Rosen's calendar shows a meeting with Quirk, "here." On August 31, Maxxam Group, Inc. openned an account with Jefferies & Co. In September, PLC hired Dillon Read to commence a stock buy back program. When was the dog and pony show Quirk attended? Rosen calendar on September 11 shows a meeting with Reid and Quirk at "60 Broad St." In October, Maxxam began buying United Nuclear Corp. Was this from Jefferies? Rosen, was a director of FAB Industries, Inc., Kozmetsky, a director of Republic Bank (Austin). It was October that Robert Quirk remembered as the time Drexel initiated discussions of PL with Maxxam Formation Of Maxxam As An Investment Company In 1984, after taking control of Maxxam (formerly Simplicity Pattern), Hurwitz sold the major operating businesses of Maxxam and terminated the employee pension plans, in effect liquidating the company for cash. He is now seeking to reinvest that cash by acquiring Pacific Lumber. (PL0003451) Maxxam Group Inc (Maxxam), the eventual purchaser of Pacific Lumber, was created from Simplicity Pattern Corp (SPC) in June, 1984. Maxxam was formed as an acquisition vehicle through the sale of Simplicity Pattern, Inc (SPI), a newly formed production subsidiary of SPC, to Triton Group Inc (TGI). TGI simultaneously merged with Republic Corp. SPI's parent corporation Simplicity Pattern Corp (SPC) changed its name to Maxxam Group Inc (Maxxam) and renamed its real estate subsidiary, Twin Fair, to Maxxam Properties Inc (MPI) which simultaneously merged with Maxxus, a subsidiary of FDC and MCO Holdings. The cost of the mergers was born by TGI, which transferred $34 million to Maxxam. Maxxam took over 10% of TGI in the merger. The merger costs and the funds for the repurchase of Maxxam's TGI stock was funded later by the issuance of Drexel underwritten junk bonds. Maxxam became an Investment Company, a shell corporation, under the meaning of the Investment Company Act. Triton Group Inc In 1970's, Chase Manhattan Mortgage and Realty Trust was the largest real estate investment trust. It entered bankruptcy in February 1979 and emerged from bankruptcy in the May 1980 as Triton Group, Ltd. Triton was four real estate properties & tax carry forward. By mid-1984 Triton was a resort, Palmas Del Mar, and the indebtedness. On June 2, 1982, American Financial Corp. reported owning 36% of Triton Group, Ltd. common. Ten banks held warrants for Triton stock. Reliance Financial Services, Inc. also held common. Mar.1983, Fuqua bought a large block of Triton and took over its management. Fuqua Industries reported holding 24.7%, J. B. Fuqua held 5.2% and Chase Manhattan Bank held 11% from the conversion of warrants. May 31 Triton published, as exhibit 13 to its 10-K, a sales presentation seeking a buyer for Triton Group. At the time of the merger of Simplicity into Triton, Triton was controlled by J.B. Fuqua (7.5%) and Fuqua Industries (20.4%). In the merger Triton will also merge with Republic Corporation controlled by New America Fund, Inc. Triton will also trade Palmas & Triton stock to Maxxam for Simplicity Pattern. Republic Corporation In 1978 Republic Corp. emerged from bankruptcy with no owners holding over 5% of common stock. A group of banks controls Republic through ownership of its Pfd. stock. By 1979, New America Fund (NAM) held 11%. In 1981, it held 15.6 % and in 1982, NAM held 20.097%. In 1983, NAF held 20.792%, and J. P. Morgan & Co. converted its Pfd. to common and held 8.723%. In 1983, _____________ Felt of Trafalgar Industries?????? joined the Board of Directors of Republic and by March 1984, Felt was its Chairman. By August 13, 1984, Glen Kassan was President of Triton. Republic Corp. directors incl chair John P. Guerin, a managing partner of Pacific Partners & Richard Seaver, Pres. of Hydril. (Kozmetsky is listed as a director of Hydril in Oct. 1984). Guerin is also COB, Pres. of New America Fund which owns 40% of Republic Corp. Dec.1984 Triton was 40% controlled by Fuqua. Triton merged with Republic Corp. then traded money, Triton stock, warrants and Palmas Del Mar for Simplicity Pattern and a warehouse. SPC has changed its name to Maxxam Group, Inc. (Maxxam) and merged with Maxxus as part of Simplicity sale. Republic Corp. was controlled by New America Fund. Republic had been brought out of bankruptcy in the 1970's by Sanford Sigoloff now chair of Wickes. MM owned or controlled vast portions of Sigoloff's debt. New America Fund now has 40% of Republic. Republic's directors include chair John P. Guerin, a managing partner of Pacific Partners and COB, Pres. of New America; and Richard Seaver of Hydril. Kozmetsky was also a director at Hydril. Felt of Triangle Ind.????? was Chairman of the Board. Maxxus Maxxus was brought out of the bankruptcy of Maryland Realty Trust. FDC owned 45.7% of Maxxus, Kozmetsky owned 20% of Maxxus. Hurwitz, Kozmetsky and Munitz were directors with Munitz chair and CEO. On October 10, Maxxam and Maxxus agreed to merge. The Maxxus - Maxxam merger caused Maxxam to buy $3,100,000 in Maxxus shares and to distribute 567,600 shares of Maxxam to Maxxus stock holders. Maxxam Maxxam received from Triton $64,700,000 as $35mm in cash, $10mm in Triton common stock, $8mm in Simplicity Pf series A&B and warrants to buy 3.5mm shares of Triton. Maxxam also received Palmas Del Mar which it booked at a $2mm loss. Maxxam declared a $24.4mm gain on the sale. Triton paid $130.7mm for Republic at $33 and a $10 stated value Triton Conv.Pf share for each Republic share. Triton raised funds for Simplicity and Republic purchases with bank loans. Triton formed a partnership with Maxxam called SPI Acquisition Corp., a subsidiary of both Maxxam and Triton. After the SPI sale Maxxam had control of 13-20% of Triton (20% with the conversion of the warrants. By May 7,1985 Robert Rosen was made the Vice-Chairman of Triton Board of Directors In December 1985, Triton issued $125mm in JB's to retire the bank debt from the SPC and Republic acquisitions. These were underwritten by Drexel. In April 1986, Fuqua sold its holdings in Triton to Charles "Red" Scott of Intermark, Inc. (40%). Fuqua sold its shares in Triton for $34 million and an after tax gain of $11.5 million. In January 1987, Maxxam held 7.1% of Triton common, a reduction in control, from 19.2% as additional Triton shares had been issued to "3rd parties", possibly connected to the junk bond issuance. In May 1987, with Robert L. Rosen, general partner in Ballantrae Partners still on Triton BOD, Triton redeemed Maxxam's SPC series A&B Pf for $8mm and Triton warrants for $2 million following a Drexel bond offering? According to Triton's Annual Report, dated May 1987: "The excess of the Simplicity acquisition cost over the fair value of the net assets acquired was approximately $42 million." "The excess of the Republic acquisition cost over the value of the net assets acquired was approximately $15 million." Acquisition Excess Fair Cost Value Simplicity $ 64,700,000 $ 42,000,000 $ 22,700,000 Republic $130,679,000 $ 15,000,000 $115,000,000 In February 1988,Simplicity Holding Co. was acquired by WesRay from Triton in a $117mm LBO with $52mm in senior debt and $61 million in subordinated debt both underwritten by Drexel. In 1989 Paul Schwartz Director of Maxxam & UFG BOD is a Director of Triton. In 1990, Triton becomes a sub. of Intermark in a stock trade. By then Intermark now owned 23.7% of Fuqua Ind. and Scott had become a Director of Fuqua. *** On October 11, Rosen's calendar shows a meeting with Quirk. Quirk initiated the discussion of PLC. Prior discussions centered upon the timber industry in general and a set of possible candidates for aquisition only in this era did the discussion focus upon PLC with the motive being Hurwitz' interest being sparked by the buy back. In November, Maxxam bought into Transcontinental Services Group with Maxxam holding 3,469,500 Common shares & 100 thousand warrants of TSG. Sometime in November or December, Hurwitz meet with W.P. Fitzgerald (hired him 1/85) for 3 hrs. The topic was USAT. On page 12 and 13 of the 10/16/85 deposition of Maxxam's Walter Fitzgerald, he speaks of a meeting with Hurwitz for the purpose of Maxxam's hiring him as Senior VP and Director of Investments. WF reports `we spent a lot of time' talking about UFG. In December, Jefferies & Co. acting for Irwin Jacobs, says NYSE specialist sold Jefferies broker 2 million shares of ITT instead of 500,000 specialist maintains; dispute arose after 2 million ITT trade crossed ticker only to be corrected by Big Board to 500,000; Big Board upholds specialist's contention. Jacobs says his broker Jefferies & Co. has been able to fill his order for 3.8 million shares of ITT despite initial mixup on NYSE in handling. That is about 3% of ITT common. From October through November Quirk prepared a 5 volume report on PLC for Maxxam. On December 13 and 14, Lynch meet with Maxxam to review timber industry and PLC. Quirk and Reid were involved, Rosen attended for Maxxam. Quirk presented Drexel's PL analysis to Hurwitz and Rosen. Maxxam develops major interest in PLC. From December through Frebruary 1985, Drexel analyzed PLC. Lynch tried to find out who owned PLC stock. Dec. L. Reid mentions Levine as having direct contact with Hurwitz during 1984-1985 Hurwitz claims to have met Levine once. Drexel's John Sort: `We used the high yield weapon twice, Steinberg took Greenmail. We decided not to do this for Greenmail. Too much criticism.' In Mesa's run at Gulf, MM had $2.2 billion in commitments from Network before public announcement. Word leaked. Pickens was fading. Drexel raises $300 million from Lindner but Pickens bid was too small pushing Gulf to Standard Oil of Calif., a White Knight. In December, Pickens is Greenmailed in `Phillips' There were 3,157 takeovers in 1984. Alliance for Capital Access PAC, lobby formed of Drexel clients at Drexel's prompting to oppose federal limits on JB's; Larry Mizel of MDC Holdings was leader. In 1984 Maxxam booked a $42.3 million gain with a $24.4 million on the sale of SPC & $12.2 million on sale of Pf Stock (unnamed but probably AMSTAR). Maxxam held 19.2% of Triton following the merger. MAXXAM GROUP INC'S SECURITIES HOLDINGS AS OF 12/31/84 (Source - 1984 10-K) Name of Issuer of Market Value Notes Preferred Shares (mm=millions) American General $ 1.063 mm If this is Amer. Gen. Capital Corp., then it is Caywood, a Drexel client Burlington Northern 1.459 mm Centrust .930 mm a Drexel client First Arkansas Capital .945 mm First City Bankcorp .632 mm a Drexel client James River Corp. .432 mm Kaneb Services .450 mm Landmark Funding .709 mm a Drexel client Occidental Petroleum 14.625% .524 mm a Drexel client, Boesky involved per US v. Drexel Occidental Petroleum 15.50% 2.160 mm PSFS Finance .950 mm Reading & Bates .420 mm Tidewater Inc. .497 mm Torchmark Corp. .513 mm US Steel 1.530 mm In 1984, Federal court blocks merger with National Intergroup. Inc. Common Shares UNC Resources 13.191 mm Longterm Investments Leveraged Pf Trusts 6.621 mm TSG NV 9.395 mm SPC Series A Pf 5.000 mm SPC Series B Pf 3.000 mm Triton Common 8.000 mm Triton Warrants .370 mm Other notes receivable 8.000 mm *** Drexel Ownership In UFG-USAT Also, at the end of 1984 the FHLBB approved the June 1983 application by FDC-MCOH but among "several conditions" was one requiring a pro rata guarantee of capital to maintain networth or if FDC-MCOH exceeded 50% of common stock then 100% of networth was to be maintained. Other conditions were not revealed in SEC disclosures by MCOH. FDC-MCOH opened discussions with the FHLBB regarding a modification of the networth conditions. These discussions were never concluded. At the end of 1984, Drexel reported having bought 7.1% of UFG-USAT common. However, Drexel did not disclose when the purchase was made. Given Milken's habit of holding stock for others, without disclosing that fact, it is possible that Drexel was holding this stock for Hurwitz. Or was it similar to Columbia, Centrust and Imperial? During 1984 BancUnited `discontinued' USAT entered into many joint ventures with Barry Lotz; USAT real estate investments included $34 million in Cinco Ranch with Gibraltar Savings USAT purchased a real estate investment in Houstonian, Inc. (were Hurwitz lives) USAT was a limited partner with a Houston developer Treplow Co. building a large office building in L.A. USAT became associated with a newly formed insurance company United Texas Insurance Agency USAT started a new sub called United Capital Venture, Inc. USAT buys $251,299,000 in mortgage backed securities, earned $12,393,000 from sales what from Drexel? USAT buys $361,850,000 in investment securities, earned $33,323,000 from dividends & sales. USAT bought $5 million in Drexel bonds. The sale of USAT branches to IASA yielded UFG's best year and consequently the only dividend paid to UFG in its history. Beverly Hills S&L bought $300 million in junk bonds mostly from Drexel. On July 30, 1985 the Feds close Beverly Hills S&L, call it dumping ground Milken using `Richard Sandler' owns 9.9% of COLS&L; Drexel groups control 10.3%; MM controls Drexel Grps.; Milken, therefore controls 20% COLS&L. Jefferies Group reports 4th quarter earnings $3.5 million compared with $1.7 million a year earlier for same period. 1985 Transactions Note that these are all the known deals from 10K's and public sources. In 1985, Milken gives deposition. In SEC deposition of Milken says, "I don't have investment authority!" Milken moves his players like a chess game. Highly confident letter first used. Jan. 07 Hurwitz, Rosen meet at Drexel Jan. 16 Maxxam & Maxxus merge, Maxxus is controlled by FDC and the Kozmetsky group. Maxxam controlled by Hurwitz, Kozmetsky, Munitz and MCOH. MCOH controls Maxxam, FDC controls MCOH (64.4%). Hurwitz sued by Shamrock & Associates over Horizon proxy fight alleging issuing notes to go private without stockholder approval Coastal Corporation-ANR On January 14, Coastal Corp. began to acquire American Natural Resources Corp. (ANR) stock. Coastal Corporation (CC) owned 1.66 million shs of American Natural Resources (ANR) common. CC hired Drexel (1/14). CC/ANR talked began. In February Levine arrived at Drexel. Kay assigned him to CC/ANR. He assured Coastal executives that ANR was increasingly vulnerable because more and more of the stock was falling into the hands of arbitrageurs eager to sell into a tender offer. In March, according to LA Times (12/6/86) Drexel in attempting to line up buyers of JB's to finance ANR-CC sent sealed envelopes to Drexel clients on (3/1) identifying the target. Those who later financed the takeover (and therefore presumably received the information) include Steinberg, Belzberg, Perelman, Wynn, Peltz, Riklis, and Hurwitz' Maxxam. According to New York Times (12/9/86) Drexel began seeking financing on (2/23). On (2/27) ANR stock had climbed from $46.50 (2/22) to $49.75 a share. Maxxam held ANR stock prior to March 25, indicating a possible inside trade. As talks between ANR & CC commence, ANR threatens a "poison pill". CC authorizes a tender offer at $60 on (3/4) but no public announcement is made. A press release on (3/12) states "meetings held". ANR-CC agree to $65 and announce on (3/13). During the period (2/14-3/1) Levine (now at Drexel) bought 145,000 shares ANR. Levine tell Wilkes and Boesky. Boesky bought 3,735,00 shs of ANR. In Maxxam's 10-K for 1984 dated March 25, 1985, reference is made in the notes on Exhibits no 10(s) of a securities purchase agreement dated 3/13/85 among CC,Maxxam, "and other purchasers named therein" (incorporated by reference to Exhibit (b)(6) of Amendment No. 9 dated March 18, 1985, to the schedule 14D-1 of Colorado Interstate Corporation with respect to common stock of American Natural Resources Company). Also, according to an Exhibit to Kassan's 10/3/85 deposition, Maxxam held on 10/3/85 $16,025,000 of C.C. Pf. CC/ANR was the first junk bond financed hostile (turned friendly) takeover by Drexel. The plan was for a lightning fast strike with an all cash tender offer. *** Maxxam, ITC, Jefferies, Drexel, Boesky And AMF Early in 1985, Morgan Stanley, AMF's investment banker, brought AMF to Hurwitz' attention. AMF sought out Maxxam and Minstar to finance an LBO.Maxxam put AMF into play, engaging Shearson Lehman to raise funds for a proposed AMF acquisition. Irving Trust Co, which would later join with Drexel to finance the PL takeover, agreed to help finance Maxxam's part of an offer for AMF through formation of a bank syndicate. Ezra Levin is said by ITC to have introduced ITC to Maxxam. Jefferies, under a contract with Minstar, had been buying AMF stock and filed a 13D on April 15, 1985. Hurwitz and Jefferies worked together on option agreement for the AMF takeover bid. Minstar filed a 13D on April 26th. Jefferies eventually sold his AMF holdings to Minstar on July 8th. Minstar filed a 14D-1 on July 18th. Drexel was deal manager for Minstar. (Boesky was also involved in the AMF takeover.) The AMF contract with Jefferies was an example of the contract Hurwitz requested of Jefferies on August 5, 1985 for the PL purchases. *** Feb. 06 Rosen calendar shows meeting "here" with Dan Lynch, Bob Quirk, Doug McClure. Drexel calendar shows meeting with Rob and Charles Feb/Mar. Moradian learns about the Boesky-Milken arrangement re: certain stocks By Mar. Hurwitz is president and CEO of UFG MCOH's "after tax equity" in UFG's 1984 net earnings of $50.3 million was $4.9 million. MCOH holds 100% MCOP, 37.3% Maxxam, 17.8% Horizon and majority of MCOR. Maxxam has subs: MPI, Maxxus Properties, Inc., Palmas. Maxxam holds 12% TSG valued at $9,600,000 In March, the Columbia S&L stockholders include Drexel (10.2%), Sandler (Milken) (9.9%), Integrated Resources, Inc. (Harvey Eisen) (9.8%), Boesky (9.8%), Sosnoff (9.7%) On Mar. 18 & 19 Daniel Lynch discussed with John Hancock Mutual "timber put" and the financial transactions being contemplated by Maxxam. Letter dated this era does not reveal names but does demonstrate real property as target On March 19, 1985, Drexel's Daniel Lynch sent a letter to John Hancock Insurance re: A Drexel "Client's" acquisition intentions. Spring Maxxam & Drexel worked on tender offer. First mention from Hurwitz of PLC as interesting to look into per Affinito. Alliance for Capital Access PAC gives big bucks to Rep. Tim Worth of Colorado. Other contributors and targets see (259-260 in Pred Ball) Mar. 27 Predators Ball date Phillips In February, Icahn's bid for Phillips was 1st takeover launched without finance in place. The list of buyers in Icahn's Phillips deal include no S&L's `even though we had a lot of them'; growing concern about JB's and S&L's; so no S&L's in hostile takeovers to avoid drawing suspicion. Buyers include Triangle, Wynn, Belzbergs, Knapp, Atlantic (biggest). Belzbergs are First City Properties, First City Financial, Far West Financial. Maxxam holds $10 million in Phillips notes in Oct 85 The first and only media mention of Drexel junk bonds purchased by a subsidiary of USAT was the April purchase of $50 million in Picken's Unocal bonds by United Houston Financial. In April 1985, USAT Finance, a sub of UFG-USAT issued DARTS (Dutch Auction Rate Transferrable Securities). A Drexel underwriting for the purpose of supply funds for junk bond purchases. In April, the National Can takeover by Peltz and Mays Triangle Industries begins. May Triangle makes all cash offer for National Can (NC) NC wants more. Peltz says `I had to get MM's OK' By March 1985, Maxxam began buying United Nuclear Corp and Amsted stock through Jefferies. The Amsted purchases were by Maxxam Associates, a partnership of MPI and MCOH. *** UNC Apr. 01 Maxxam holds 6.9% UNC Com. at $14,350,000 Apr. 10 Maxxam holds 8.7% UNC files 13(D) May 14 Maxxam current holdings 5% or more: AMSTED, UNC, TSG, Informatics, Triton. Aug. Jefferies acquiring AMSTED and UNC stock for Hurwitz. Aug. 09 MCOP & Maxxam associates hold 8.6% Amsted, Maxxam holds 12.4% UNC Oct. 02 Jefferies & Co. deliver 1,216,500 shares of UNC to MPI Oct. 02 Jefferies & Co. delivers 1,216,500 shares of UNC (United Nuclear) to Maxxam Properties, Inc. *** Amsted Apr. 10 Maxxam Associates formed, as a partnership between Maxxam Group and MCO Properties Apr. 16 Maxxam Associates, Maxxam hold 8.7% AMSTED file 13(D). Hurwitz sued by Amsted for false 13(D), leads to "greenmail" in Feb. 1986 show maxxam amsted buy from jefferies *** Apr. 01 Rosen calendar shows meeting "Bilger-Drexel-L.A." Apr. 04 Drexel calendar shows meeting with Gallagher. Apr. 09 Rosen calendar shows meeting, "Drexel here." Apr. 09 First meeting of Drexel and Maxxam personnel (Fitzgerald, Quirk, Reid, Rosen and Lynch) re: PLC. On Apr 10, 1985, Lynch sent a letter re: timber put to John Hancock revealing that Maxxam was the "Client". Apr. 11 Rosen calendar shows meeting, "Drexel at Kramer Levin." American Can-Jefferies In mid-April Gerald Tsai's American Can Co. bought 9.8% of Jefferies Group shares for $20 million "for investment purposes only". By August 7, American Can Co. agreed to increase its stake to 20%. In October, due to poor quarterly reports on earnings, stock in Jefferies Group dropped from 22 in July to 13 in October. Ron Alghini and Boyd Jefferies sold their Jefferies stock at 19 to American Can Co, which largely was responsible for bringing its stake to 20%. *** HNG - Internorth On (4/20/85) Houston Natural Gas (HNG) and Internorth start talks. HNG hires Lazard (4/22/81). Internorth hires Goldman (4/25). Public announcement (5/2). May 3 Internorth files a 13D re HNG 0 to 18.5% Before the announcement, Goldman's Brown tells Sokolow who tells Levine. Levin had joined Drexel's M&A Dept. in February 1985. Lazard's Wilkis also tells Levine who never the less tells Boesky. From 4/30 to 5/1, Wilkis buys 35,000 shares shares of HNG. Levine (74,000), Boesky (301,000 in Seemala and 285,00 thru other entities). Goldman's Freeman tells Siegal (Kidder M&A then to Drexel in Feb. 1986), Siegal, et al. buy 60,000 shares of HNG. According to Oct. 5, 1987 Dingell Memorandum, Pg.7, TSG surfaced in four NYSE investigations in the years around the takeover of PL. In each case TSG bought stock before the announcement of tender offers. In HNG, TSG bought stock in the acquiring company Internorth. According to Dingell's Committee Report and Maxxam's filing within it, Maxxam purchased 3,469,540 shs of TSG on Nov. 9, 1984. On Mar. 22, 1985, Maxxam holds 12% of TSG. In April 1985, Maxxam holds 12% of TSG, FDC & H hold 41.8% of Maxxam, H owns 52.5% FDC. *** In the Spring, Maxxam first became a client of Drexel according to Art Bilger. Drexel retained by Maxxam. Maxxam and Drexel worked on tender offer. Art Bilger meets with Hurwitz regarding $150 million bond issue. Rosen and Hurwitz tell Bilger Maxxam had no specific acquisition target at this time. In the Spring of 1985, according to his later testimony, Hurwitz became interested in PL as an acquisition target. Apr. 18 Rosen meeting with (Drexel/Lynch)? calendar. Apr. 19 Drexel calendar shows meeting with John Hancock. Apr. 28 Drexel calendar shows meeting with Chas. Hurwitz. May 09 Maxxam Group, Inc. applies for new account with Jefferies & Co. May 13 Drexel calendar shows "Maxxus filed" May 13 Irving Memo from D.E. Lee to William Klausing, Sr VP re Lilyan Affinito. This is a superficial research profile on Maxxam and its directors. May be related to AMF deal. May 14 ITIB letter to PALCO Int'l. controller Roccaforte (see Irving/PL file). May 14 Drexel calendar shows "Pacific Lumber luncheon". Is this the dog and pony show? On May 14, Drexel's committment committee approved a $75mm senior subordinated 13-5/8 notes due 1992 (SSN) offering for Maxxam. Maxxam filed for registration of $75 million in SSN's due in 95. Bond offer for $75mm came back $300mm. Maxxam took $150mm. $150mm blind pool financing through Drexel originally for AMF per Hurwitz. No limit of using excess proceeds for Drexel investments. Maxxam realized $143mm in proceeds, buyers include: AFC 10,000 split into 6 accts. COLS&L Centrust First Columbia Gibraltar Mani Hani Mountain West Ohio Cas. & Pacholder(?) Bass Equitable Atlantic Corp.(Clarnedon IC) Hutton Keystone (Hong Kong) FEC bought $51 million. Out standing: $150mm on 12/31/89, debt held as Maxxam. *** Hurwitz and Munitz focussed on deals and organizational strength building showing a growing-into-reltionaships with Milken, Jefferies and ITC. Milken began to finance Boesky's firms in 1982 and Boesky was immediately impressed with Milken's huge cash infusions so much so Boesky did not pay much attention to the fees Milken extracted. These fees and warrants demanded by Drexel put enormous pressure on the operation to earn huge arbitrage returns to make the interest payments. And the equity stake gave Drexel enormous influence over fundamental decisions affecting the business. In 1982 Boesky began doing business with Jefferies and Co. MCO Holdings opened an account with Jefferies & Company sometime in 1983. In March 1984, Milken's arrangement with Boesky and Jefferies began. By February 1985, Boesky and Milken had a special arrangement regarding "certain stocks." After more than a year of Boesky buying stocks at Milken's request and with Milken guaranteeing Boesky against all losses both Milken and Boesky realized that they could use each other, not only to generate insider trading profits for Boesky, but to achieve far greater dreams of corporate conquest and control. *** Informatics General On April 16, 1985 Transcontinental Services Group and Maxxam Properties Inc filed a joint 13D as a registered group declaring that each owned 331,500 shares of Informatics for a value just short of $15 million each. The 13D was signed by both Robert Rosen for Maxxam and Stanley Cohen for TSG. TSG said to be an offshore Investment Co. with principles S. Cohen, R.P. Burrows & a Carribean Mgmt. Co. named Carabsche Beheers Maatschappij NV of Curacao, Netherland Antilles. TSG's Chair & CEO is Nathaniel de Rothschild. Directors incl. NC de Rothschild, Chrm J. Rothschild Holdings, plc & FJP Mayer, senior managing director of LF Rothschild, Unterberg, Towbin on Dec. 22, 1986, NYT reports Thomas Unterberg Chrm. & A. Robert Towbin, V-Chair. resign form LF Rothschild Unterberg, Towbin Holdings, Inc., FJP Mayer, 45, named co-CEO. LF Rothschild, et al. is an investment banking firm. Stanley Cohen According to the 1987 testimony before Dingell, in 1983 Stanley Cohen left his association with Kramer-Levin and joined the Transcontinental Services Group's Board of Directors. Cohen's 1986 biography provided in a Freedom of Information Act request of the NYSE shows him residing in NY and Paris during the PL takeover era. He -graduated from Cornell in 1955 -took his law degree from Harvard in 1959 -served in the US Army 1959-60 -was an associate in the firm Gotshal & Manges in NY in 1960-61 and in its Paris office 1961-68 -was a partner in Cohen and Meyohas, Klien and Associates, NYC and Paris, 1961-68 -was not listed as to his associations from 1969-81 except that he was decorated chevalier de l'Ordre National du Merite (France) in 1979 and served on the Conseil Juridique International (France) in 1979 -was a partner in Kramer,Levin,Cohen & Klien NYC and Paris from 1981. This partnership was set up by Cohen to provide legal counsel in Europe for some unnamed clients of Cohen according to his testimony to congress in 1987. His 1986 associations are listed as -CEO J. Rothschild International NV -Director in TSG, NV which engaged in arbitrage -Director in RIT & No plc -Director in Holmes Protection Inc which provided security services in Europe and the US -Director in Matra Datavision Inc -Director in Hottinger Bros -Alt. Director in L F Rothschild, Unterberg, Towbin a brokerage Material produced by the NYSE regarding its investigation of inside trading in PL stock in the takeover era shows Cohen as -Treasurer and General Counsel of International Protective Systems Inc, NYC -Vice President of Security Corp of America, NYC Holmes Protection is a sub of SCA which in turn is a sub of IPS. Persons of interest associated with the above firms are -Olivier Grinda, VP and Secretary of IPS, President of Holmes Investments. He also served as a Director of Ketchum Communications Inc. Ketchum is of interest for two reasons. 1) Robert Rosen of Maxxam was a neighbor of and a commuter with suspected inside trader in PL stock Herbert Gordon known to be an owner of a NYC sound studio. Ketchum lists its President of the Specialized Services Group through 1990 as Herbert David Gordon also a director of WNEU-TV. 2) Ketchum's clients include Clorox which hired Ketchum to defame Greenpeace because of its campaign to halt the use of chlorine in industrial processes that produce Dioxin as a bi-product. In Humboldt County major Dioxin producers in 1990 include Louisiana Pacific and Simpson both of which operated pulp or paper mills polluting Eureka and environs with Dioxin. Because PR firms such as Ketchum hired ex- intelligence community officers to run campaigns in psy-ops and CIA- style disinformation and because listings of CIA agents include one named Herbert Gordon there is a concern that either Ketchum or Gordon may have been involved in the bombing of California Earth First! activists in 1990. Gordon's relationship to the CIA is also of interest because during the PL takeover era the CIA through its ex-SEC director William Casey is suspected of using various illegal techniques to raise funds for its covert actions. These techniques included S&L fraud and perhaps inside trading as well as diversion of funds from domestic charitable fund raising. The three references to Herbert Gordon as Rosen-neighbor, as Ketchum employee and as CIA employee are not necessarily the same person but may be the same. -Joseph Riggio, Sr VP of Holmes Protection who pled guilty to inside trading in the 1980 acquisition of Santa Fe International Corporation by Kuwait Petroleum. Riggio was related to and received information from Robert (or Ronald) A Feole, General Counsel to S F Minerals Inc a sub of SFIC. Other inside traders include employees of Charter Oil, controlled by the DuPont's and later Carl Lindner, and a Qatari named Ahmed Mannai who later became a major stockholder in Houstonian/Livingwell. H/L investors and financiers included UFG/USAT, Drexel and Drexel-controlled Pacific Asset Holdings, also suspected of CIA related dealings with Centrust and BCCI. -Other parties in TSG include IFI International SA affiliated with Instituto Bancario San Paolo di Torino, a buyer of the Maxxam/PL Bridge Notes. *** Early History of Maxxam-TSG connection From June 1984 to at least March, 1986 Maxxam held a significant investment in TSG and then from December 1986 until some unknown date UFG-USAT held a significant investment in TSG. In November, 1984 TSG NV formed. This was a type of corporate reorganization. On November 9, 1984, Maxxam, through its sub Maxxam Properties Inc, purchased in a private placement, 3,469,540 common shares and warrants to purchase 100,000 additional shares for a total of 12% of TSG NV. The holding was valued at $9,600,000. This mades TSG an affiliate of Maxxam. On November 14, 1984, a WSJ news article claimed TSG, an arm of Charterhouse J Rothschild PLC has $80 mm available for investments. *** Informatics General From 1982, ELIC held 1% of Informatics stock and Fred Carr and fellow FEC and ELIC board member Albert Handschumacher served on Informatics Board of Directors. On January 1, 1985, Andriba, controlled by Cohen, began buying Informatics General. On March 7, 1985, TSG began buying Informatics stock. Cohen before the Dingell committee in October 1987 said that Informatics was suggested by Maxxam. "We did a great deal of research on it. I did not participate in the discussions. Maxxam became disinterested. Very heavy buying drove the stock up. We spoke to the Maxxam people. We decided to purchase on our own. A 13D was filed by Sterling at that time. We continued to buy shares." Cohen went on to tell Dingle that MPI paid TSG $99,000 to investigate whether "Informatics had any merit or not." On April 8, 1985 TSG halted purchasing of Informatics. Market ranged from $17-19 over the prior 30 days. when was first bid made? Drexel was Sterling Software's dealer manager. Mar. 22 Jeffery Neuman of Drexel bought Informatics General Corp. Neuman is in RocamII, Moredon, PL&D, Kidpix, Dunmore, Chanticleer, Carlyle II, Camro, Conterburg Group in 1983 or longer. Apr. 01 Neuman sold his Informatics (Maxxam/TSG is still buying stock)* On April 8, 1985, TSG halted purchasing of Informatics. Market ranged from $17-19 over the prior 30 days. On April 15, 1985, Informatics rejected Sterling Software's first bid. On April 16, 1985 TSG bought Informatics at 23 1/4-24 1/8. TSG, MPI filed a joint 13D as a registered group declaring that each owned 331,500 shares of Informatics for a value just short of $15 mm each. The 13D was signed by both Rosen and Cohen. On April 22, 1985, TSG bought Informatics at 23 1/2-24 5/8. MPI bought 200,000 shares of Informatics from TSG at 21.60. On April 25, 1985, TSG and MPI each purchased 88,000 shares of Informatics at 24.25 per share. MPI agreed, on this date, to purchase 42,600 shares of Informatics on April 26 from TSG for 23.85 per share. On April 26, 1985 Informatics rejects Sterling's second bid. Sterling filed a 13D at 8.6%. On April 29, 1985 TSG and MPI made a bid for Informatics. On May 2, 1985 Informatics reportedly was "Exploring a sale". On May 4, 1985 Sterling reports "talking to large shareholders" of Informatics. On May 10, 1985 Informatics reported "talking" to unnamed parties. Jun 5 Kramer Levin memo "Summary Termsheet" refers to tender offer of Maxxam to AMF at $24. On June 22, 1985 Informatics agreed to Sterling buyout. On June 24, 1985 Sterling commenced purchasing Informatics shares under its tender offer. On August 8, 1985 MPI tendered its 331,500 shares of Informatics to Sterling with a value of about $7.5 mm for $9 mm. TSG reported a gain of $2 mm on its tendering of Informatics stock. Andriba sold its 5,500 shares of Informatics into the tender offer. On August 9, 1985 Sterling halted its tender offer for Informatics having succeeded in gaining control. Aug. 06 Maxxam sells Informatics for a net pre-tax gain of $1.5mm On August 8, 1985, MPI tendered its 331,500 shares of Informatics to Sterling with a value of about $7.5 mm for $9 mm. TSG reported a gain of $2 mm on its tendering of Informatics stock. On August 9, 1985, Sterling halted its tender offer for Informatics succeeding in gaining control. Andriba sold its 5,500 shares of Informatics into the tender offer. *** TSG and Insider Trades On February 28, 1985 TSG, Glen Kassan, Robert Rosen and Herbert Gordon all bought Hoover Universal Inc on the same day prior to the announcement of a takeover of Hoover by Johnson Controls. On April 20, 1985, HNG-Internorth talks began in secret but TSG bought Internorth stock before the announcement. From June through November 1985 TSG and Maxxam both engaged in an arbitrage of Baxter Travenal Lab's takeover of American Hospital Supply. In September and October TSG and Maxxam were both involved in the arbitrage of the Pantry Pride takeover of Revlon and the Phillip Morris takeover of General Foods. The trading in General Foods shares by unidentified parties was said to be under investigation by the SEC for inside trading. On September 20, TSG director Harold Geneen was said to have contacted Revlon Chair Bergerac to offer him a golden parachute if he would agree to complete the merger with Pantry Pride which was waging a bitter battle to acquire Revlon. Pacific Lumber and Andriba On September 3, 1985, Rothschild Bank's agent in Switzerland bought 5,000 shares of PL. On September 4, 1985, Andriba bought 3,000 shares of PL. On September 23, 1985, Andriba bought 3,000 shares of PL and TSG bought 15,000 shares of PL. It is interesting to note that according to the NYSE investigation of possible inside trading in PL stock numerous entities involved were Swiss or oddly related. For instance Salomon Bros was the broker for Rothschild Bank AG (9/23 and 9/26) and for Winterthur I C (8/1). Rothschild Bank AG also bought through Wm Blair & Co. TSG bought through Rothschild Inc which cleared through Bear Stearns (9/24 and 9/25). On these same days Windsor Associates bought through Bear Stearns. Andriba bought through Wertheim & Co. In following the NYSE investigation into possible inside trading in the takeover of Pacific Lumber by Hurwitz controlled entities, a study of the investments of Transcontinental Services Group NV (TSG) and Andriba Enterprises, Ltd. (Andriba) was made. The public record; established by SEC filings, the report of the hearings before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, dated October 5, 1987 (Dingell Report) and our FOIA request from the NYSE; shows a strong co-relation between the investment activities of Hurwitz and Stanley Cohen of TSG and Andriba. See attached table. The record shows two investment involving Hurwitz, Drexel Burnham Lambert, Executive Life I.C., TSG and Andriba; namely Pacific Lumber and Informatics. On August 14, 1985, Andriba's stock holding records for the period 8/14 through 9/30 show that it held the Drexel related Informatics General also held by Maxxam,TSG and ELIC Revlon United Financial Group also held by MCOH and FDC Bally Mfg Corp Maxxam Loews Corp Pacific Lumber also held by Maxxam,TSG and ELIC Andriba also held Dayco also held by TSG Amsted also held by Maxxam On August, 30, the Andriba holdings (Amsted,Maxxam,UFG) related to Maxxam were 34.8% of Andriba's total holdings. On 9/30 these holdings (Maxxam,PL,UFG) represented 56.4% of Andriba's total. ANDRIBA HOLDINGS 8/14/85 & 9/30/85 Hurwitz TSG Drexel ELIC X X X X Informatics General Corp. X X Revlon X Dayco Corp. Kansas City Southern Ind., Inc. X X United Financial Group Spanish-American Med. Systems,Inc. InterCo, Inc. X Bally Mfg. Corp. X AMSTED X X X Maxxam Group, Inc. OMI, Corp. X Loews, Corp. X X X X Pacific Lumber Company TSG goes from MPI to USAT As for Maxxam's holdings in TSG, Maxxam, divested itself of its 12% ownership of TSG stock in the Spring of 1986 only to have Maxxam's subsidiary, UFG, holding TSG shares by the end of 1986 when the REVCO deal closed.