Notes From aLtttle Fish investment bankers

Notes From aLtttle Fish
investment bankers control over the
fates of large corporations. Nobody
complains when Prices are going uP,
andbusiness crimes are’hard to d+
tect and harder still to Prosecute
successfully. So the cop on the beat

Mr. Giuliani –
grabbed the slowest
and dimmest-witted miscreants, like
me, and came out a hem.
Two decades later, history may not
be repeating itself, blt it is rhyming:
an ambitious New York State attorney general Eliot SPitzer, grins
br6adly for the cameralt as he seals
the $1.{ billion deal that brings wall
Sffeet to justice. A handful of this
cycle’s bad guys will be drummed out
of the business, and a few will do timeWhy Wall Street
scandals never
nab the big guy.
‘The fines being Paid stagger the
imagination but, in the context of Wall
Street, they’re nuisance fees’ Some
reports suggest that ll billion of it
may even be tax deductible.
Research analYsts were Just the
pawnbrokers for a much larger scamTrading desks at major brokerage
houses, where the real money is made,
Vn 1985, I was Prosecuted and
I convicted of fraud for trading
I on the stock market in advance
I of mv “Heard on the Street”
I colu6ns in The’Walt Street
A Journal My share of the
S75,000 in illegal profiB amounted to
$30,000. I admiited my role, apologized
for violattung the ethics of my profession, and served nine months in a
federal prison in Danbury, Conn.
My case was brought bY an ambltiouJ unitcO States attorney, Rudolph
Giuliani, then cultivating a rePutation.
for being tough on whitecollar cilme.
The public was iust becoming interested in bustness news, and suddenly
here was a sordid, inside look at how
Wall Street reallY worked’
By the time tlte stock market scan’
aaf U the mid-1980’s had PlaYed oug
a few rich guYs had Paid heftY fines,
done a year or two in iail, and re
entered society with their fortunes intact. Tbe scandals crippled several
brokerage houses so badly they had to
be sold off, or they simply imploded.
But the big fish got awaY, as big fish
tend to. Insider trading vas epidemic
at the time, thanks to a buoYant mar’
ket and a merger manla tlat gave
By R. Foster Winans
R. Foster Winsns is outhor of “Trad’
ing Secrets.’ Seduction and Scandol
at The Wall Street Joumal.”
harvested and exploited inside infor’
mation ahut analysts’ recommendations to reward their most profitaHe
acoounts, the institutimal investGs
like mutual and penslon funds. Amolrg
the thousands of documents that reEF
lators made public this week was this
email inessage from an analyst toan
institutional investor: “Yes, ttre ‘little
guy’ who isn’t sm?{ about the nu:
ances may get misled.” !
A subcrilture sprung up iust to cash
in on corporate “whisper numbers,”
those salacious-sounding quarterly
profit forecasts leaked to analysts he’
iore the rest of the investing public’
Eandouts of surething initiai public
stock oflerings to favored clients hatrE
been well documented, but don’t ex’
pertbilliondollarsettlements. :r –
For the moment, Mr. SPitzer is ttre
hero of the little guy. The most
;iliain; –
;ce”powerful, now coPoletelv discredited anatysts like Hen- ;liffi;i-;J raci drubmarL afi
rfre corr:upt system of stock resear’ch
* ii *”i pricticed in the 1990’s ”jC
have been vanquishdd. But don’t tE
lulled by a tew public hangings into
thinking the bubble ahd its aftermath
were their fault, or that -Wall Stree]
has been reformed and it won’t haP
pen again. It maY take a few Yeary [9;
the public to forget how it was thot
ougily misled, but you can bet that thq
next greedy market will produce 4lrotherirop of scandals, another would;
be hero, and a fresh supply of dimwits,
like me, to make them look good- .B i )’

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