Opinion ID: 750081
Heading Depth: 2
Heading Rank: 1

Heading: Posner's Acquisition of Fischbach

Text: 3 Fischbach is a Delaware corporation whose shares were once traded on the New York Stock Exchange. In early 1980, Posner, through a corporation he controlled, began purchasing large amounts of Fischbach stock. By March 20, according to documents filed with the SEC, he controlled more than 10.5% of Fischbach's outstanding stock. That rapid accumulation of stock prompted Fischbach to negotiate a so-called Standstill Agreement with Posner and his son Steven, which restricted the Posners from increasing their interest in Fischbach to more than 24.9%. The agreement provided, however, that that restriction would end if a third party filed a Schedule 13D under the [Securities] Exchange Act [of 1934, 15 U.S.C. § 78a et seq.] relating to the acquisition of more than 10% of Fischbach's outstanding stock. Drexel I, 837 F.Supp. at 597 (internal quotation marks omitted). 4 Despite that agreement, Posner continued to pursue control of Fischbach, in part by increasing his holdings of Fischbach stock to 24.8%, just short of the cap imposed by the agreement. In addition, assisted by Michael Milken and Ivan Boesky, Posner embarked on a fraudulent stock-parking scheme to acquire still more shares and to trigger the Standstill Agreement's termination provision. Milken and Steven Posner recruited Boesky to buy more than 10% of Fischbach's outstanding shares and to file a Schedule 13D reporting Boesky's ownership. In fact, however, Boesky was not to be the real owner in interest of the stock, for when Milken and Steven recruited him, they assured him that he would be made whole if the stock price, then above $50 per share, declined. Drexel I, 837 F.Supp. at 598 (internal quotation marks omitted). 5 Boesky agreed to help implement the stock-parking scheme, and in late April 1984 began purchasing Fischbach stock in large quantities. Within a month, he filed a Schedule 13D representing that he owned more than 5% of the company; within three months, he amended his Schedule 13D to reflect that 13.4% of Fischbach's outstanding stock was in his hands. Fischbach concluded from the amended filing that the Standstill Agreement with the Posners was no longer in effect. 6 With the Standstill Agreement having ended, Posner set about completing his takeover of Fischbach, the market price of whose shares had declined from more than $50 to approximately $35. In February 1985, he purchased Boesky's block of Fischbach stock at an above-market price designed to help offset Boesky's losses. He then acquired a substantial number of Fischbach shares from Milken's firm, Drexel Burnham Lambert Inc. (Drexel). By October, Posner possessed a controlling interest in Fischbach. 7 Posner immediately installed himself as chairman of Fischbach's board and made Steven a director. Over the course of the next several years, both Posners drew millions of dollars from Fischbach, ostensibly as compensation for their services. The Posners' services, however, were of no real value to the company. See Drexel I, 837 F.Supp. at 612.