Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, March 19, 1991                   TAG: 9103190077
SECTION: BUSINESS                    PAGE: A-5   EDITION: METRO 
SOURCE: Associated Press
DATELINE: NEW YORK                                LENGTH: Medium

NEW STOCK-FRAUD TRIAL ORDERED/ FEDERAL APPEALS COURT OVERTURNS CONVICTION IN

The case, which began in late 1988, was the first criminal trial stemming from the insider-trading scandals of the mid-1980s. It was watched closely on Wall Street as a test of information supplied by convicted speculator Ivan F. Boesky.

Monday's 2-1 ruling by the 2nd U.S. Circuit Court of Appeals came more than a year after a federal jury convicted the New Jersey company and former vice chairman, James T. Sherwin.

GAF and Sherwin were found guilty of trying to boost Union Carbide Corp.'s share price in 1986 shortly before selling a large block of the stock after a failed takeover bid. They also were convicted of securities fraud, wire fraud, conspiracy and record-keeping violations.

The case ended first in a mistrial, then with a hung jury before the December 1989 convictions on all eight counts of the indictment. Sherwin was sentenced to six months in prison and one year probation and GAF was fined $2 million.

The appeals court said it overturned the convictions because of errors in the lower court's instructions to the jury that prevented the defense lawyers from fully presenting their case.

The defense lawyers argued in the appeal that they were unable to raise critical questions about who was responsible for the transactions at the center of the case.

The case also marked the first courtroom appearance of Boyd L. Jefferies, a Los Angeles stockbroker caught in the Boesky web who agreed to testify in several cases as part of a plea deal. Jefferies pleaded guilty to two felony counts and received a suspended sentence.

Jefferies testified that Sherwin asked him in October 1986 to inflate the stock price of Union Carbide and agreed to cover any losses that Jefferies' firm might incur. Prosecutors said the purpose of the deal was to maximize GAF's gain from the sale of Union Carbide stock after a failed takeover of the much larger chemical company.

GAF, a specialty chemicals company, held 10 million shares of Union Carbide after the failed bid and sold 5 million in November 1986 for $23 a share.

In their appeal, defense lawyers also argued that key government testimony in the case was from witnesses who had lied. They also said incorrect statements by the government during its summation deprived the defendants of a fair trial.