Word: bonding
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Even as Milken heard his sentence, the firm he had built into a financial powerhouse was under legal siege once again. Federal regulators earlier this month filed a $6.8 billion claim against the bankrupt Drexel for allegedly rigging the junk-bond market and selling bonds to savings and loans before the value of the IOUs collapsed. The government expects to lose at least $2 billion on junk bonds that it has taken over from seized thrifts. Drexel said it would strongly contest the government claim...
...lives with his wife, his 78-year-old mother-in-law and three children in Sloansville, N.Y. (pop. 200). In 1986, Ruckdeschel handed his family's savings, roughly $150,000, to Joseph Ventura, a sales rep from First Investors Corp., one of the country's largest managers of junk-bond mutual funds. Four years later, Ruckdeschel estimates his total losses at $75,000 but doesn't know the exact figure because at each sales call, Ventura would toss out the old records. "He never said anything about any risk -- just that if we needed retirement income, this...
Ruckdeschel, Ventura and Loncar inhabit the lower end of the food chain that fed Michael Milken and a handful of others hundreds of millions of dollars in personal profits during the leveraged-buyout binge of the '80s. Now the continuing collapse of the junk-bond market is starving more than 270,000 First Investors clients, many of whom were lured in by deceptive tactics like those used by Ventura and Loncar. Customer losses nationwide could top $500 million...
...economic decline. In the suburbs of Detroit, where sagging auto sales have fanned recession fears, psychiatric referrals from a local counseling service are up nearly 20% over the past six months. Business is also booming at the Massachusetts Psychological Association referral service, where out-of-work lawyers and former bond salesmen seek help in coping with stress, anxiety disorders and panic attacks. Drugstores in the region report brisk sales in Tagamet (for ulcers), Prozac (depression) and Halcion (insomnia...
Overall, the sales cast further doubt on auction-house techniques. Sotheby's all but ceased lending money to buyers after it was so badly burned by Alan Bond's default on Van Gogh's Irises, bought but not paid for in 1987 for $53.9 million with the help of a $27 million loan from the auction house. But this fall's victim has been the equally controversial system of guarantees, a product of the fierce competition between Sotheby's and Christie's, whereby the auction house contracts to pay the seller a given price for artworks -- whatever the outcome...