The Feds Should Quit Hounding Gaf

Michael R. Milken, the chief target of the U. S. government's extensive campaign to root out Wall Street corruption, is behind bars. Yet the government has suffered more than its share of embarrassments. One of these, it is becoming clear, is its prosecution of GAF Corp. and the company's vice-chairman, James T. Sherwin, for stock manipulation. On Mar. 18, a federal appeals court threw out the convictions of GAF and Sherwin and ordered a new trial, which would be the fourth to be brought against the defendants.

The government's case has never made a lot of sense. According to prosecutors, Sherwin in 1986 recruited Los Angeles broker Boyd L. Jefferies to push up Union Carbide Corp. stock so that GAF could unload a large block of Carbide at a higher price. Yet Jefferies moved the stock up only one-eighth of a point, which increased the value of GAF's $250 million position by $1.25 million--small beer compared to the risk of stock-manipulation prosecution. More tellingly, GAF didn't sell any of its Carbide until eight trading days after the alleged manipulation. Jefferies had given the government evidence on GAF and Sherwin as part of a plea bargain.

Trial No. 1 ended in a mistrial when Judge Mary Johnson Lowe ruled that the prosecution had improperly withheld evidence from defense attorneys. In trial No. 2, the jury was unable to agree on a verdict. The government finally secured a guilty verdict after trial No. 3. Yet the appellate court said that Judge Lowe had improperly disallowed evidence that could have helped the defense. One appellate judge cited telephone records that refuted crucial testimony by a star prosecution witness, Jefferies' head trader.

Prosecutors haven't said whether they will pursue trial No. 4. We think they should just drop it. Enough time, effort, and money have been wasted on this ill-starred venture. There are plenty of other alleged white-collar criminals far worthier of the government's attention.

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