Den of Thieves, страница 1
Reviewers’ Praise for Den of Thieves:
“A must read. . . . There is intrigue, suspense, mystery, crime, penance and repentance. Careers rise and fall. The players are fascinating. . . . James Stewart recounts much that we need to know.”
—New York Law Journal
“Presents in one eye-opening saga what the multitudes of news reports only could hint.”
—St. Petersburg Times
“As good a book on Wall Street as I have ever read. . . . It is a fine, spicy tale. But to stop at that is to miss the book’s importance: it at long last gives us a full and true record of systemic criminal behavior in the financial markets.”
—Michael Thomas, The New York Times
“Packed with scenes of high drama, the narrative often moves at breakneck speed . . . a wealth of fascinating minutiae.”
“Fascinating . . . the most damning evidence yet compiled about why there will be no heroes among the 80’s moneymen . . . a masterpiece . . . will stand as the definitive history of the financial depredations of the decade . . . a work of reportage verging on history.”
—The New Republic
“A rollicking account of the insider trading and market manipulation scandals of the 1980’s.”
—Los Angeles Times
“Stewart’s tale is like a novel you can’t put down but wish would end because it is so disturbing . . . It’s a story of the decade—a revealing, disturbing tale of what can happen when greed runs rampant.”
—The Seattle Times
“A fascinating account of the financial scandals that culminated in 1990. . . . Blends narration and exposition so that we can follow the intricacies of finance and financial law without effort.”
—The New Yorker
“As The Wall Street Journal reporter who covered the story, Stewart was uniquely situated to write this book, which will doubtless become the standard work. He gained an extraordinary grasp of the names, events and mind-numbing complexities.”
—The Houston Post
“The definitive account of the insider-trading scandal.”
“[Stewart] delivers the collection of oddballs, dirtbags, and greed-heads with a sturdy moral sense, always sensitive to the ambiguities of the events he describes.”
“Den of Thieves is the best book so far on the Whoring Eighties.”
“Battling through shrouds of secrecy, Mr. Stewart has done a masterful job of linking together the chief players in this lurid drama.”
“If you doubt the culpability of this crew, get thee to a bookstore. Stewart’s exhaustive research proves that Levine, Siegel, Boesky, Milken and a busload of their colleagues were nothing more than high-priced thieves.”
—The Miami Herald
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CAST OF CHARACTERS
BOOK ONE. Above the Law
BOOK TWO. The Chase
ABOUT THE AUTHOR
NOTES AND SOURCES
FOR JANE, MY SISTER;
MICHAEL, MY BROTHER;
AND FOR KATE
And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves.
And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.
King James Edition
Cast of Characters
As crime on Wall Street neared its climax, late 1985.
AT KIDDER, PEABODY & Co., New York
Martin Siegel, investment banker
Ralph DeNunzio, chief executive
Al Gordon, chairman
John T. Roche, president
Robert Krantz, counsel
Richard Wigton, head of arbitrage
Timothy Tabor, arbitrageur
Peter Goodson, head of M&A
John Gordon, investment banker
Hal Ritch, investment banker
AT IVAN F. BOESKY CORPORATION, New York
Ivan F. Boesky, arbitrageur
Stephen Conway, investment banker
Lance Lessman, head of research
Michael Davidoff, head trader
Reid Nagle, chief financial officer
Setrag Mooradian, chief accountant
AT DREXEL BURNHAM LAMBERT INC., Beverly Hills
Michael R. Milken, head of high-yield securities
Lowell Milken, lawyer
Richard Sandler, lawyer
James Dahl, salesman
Gary Winnick, salesman
Warren Trepp, head trader
Terren Peizer, trader
Cary Maultasch, trader
Bruce Newberg, trader
Charles Thurnher, accountant
Lorraine Spurge, administrator
Lisa Ann Jones, trading assistant
AT DREXEL BURNHAM LAMBERT INC., New York
Dennis B. Levine, investment banker
Fred Joseph, chief executive
Donald Engel, consultant
Stephen Weinroth, investment banker
David Kay, co-head of M&A
Leon Black, co-head of M&A
AT GOLDMAN, SACHS & CO., New York
Robert Freeman, head of arbitrage
Robert Rubin, future co-chief executive
Frank Brosens, arbitrageur
David Brown, investment banker
AT LAZARD FRÈRES, New York
Robert Wilkis, investment banker
Randall Cecola, analyst
Felix Rohatyn, investment banker
AT SHEARSON LEHMAN BROTHERS, New York
Ira Sokolow, investment banker
J. Tomilson Hill III, co-head of M&A
Steve Waters, co-head of M&A
Peter Solomon, investment banker
AT BANK LEU, Nassau, the Bahamas
Bernhard Meier, banker
Bruno Pletscher, banker
AT MERRILL LYNCH & CO., New York
Stephen Hammerman, general counsel
Richard Drew, vice president, compliance
Carl Icahn, corporate raider and future chairman of TWA
John Mulheren, head of Jamie Securities
Henry Kravis, principal, Kohlberg Kravis Roberts Inc.
AT WACHTELL, LIPTON, ROSEN & KATZ, New York (counsel for Goldman, Sachs)
Martin Lipton, partner
Ilan Reich, partner
Lawrence Pedowitz, partner
AT PAUL, WEISS, RIFKIND, WHARTON & GARRISON, New York (counsel for Michael Milken and Dennis Levine)
Arthur Liman, partner
Martin Flumenbaum, partner
AT WILLIAMS & CONNOLLY,
Edward Bennett Williams, partner
Robert Litt, partner
AT CAHILL, GORDON & REINDEL, New York (counsel for Drexel Burnham)
Irwin Schneiderman, partner
Thomas Curnin, partner
AT FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York and Washington (counsel for Boesky)
Harvey Pitt, partner
Leon Silverman, partner
AT MUDGE ROSE GUTHRIE ALEXANDER & FERDON, New York (counsel for Siegel; later at Fried Frank)
Jed Rakoff, partner
Audrey Strauss, partner
AT ROBINSON, LAKE, LERER & MONTGOMERY, New York (public relations advisors for Michael Milken)
Linda Robinson, partner
Kenneth Lerer, partner
AT THE UNITED STATES ATTORNEY’S OFFICE, New York
Rudolph Giuliani, U.S. attorney
Benito Romano, deputy to Giuliani, future U.S. attorney
Charles Carberry, assistant U.S. attorney, future head of fraud unit
Bruce Baird, assistant U.S. attorney, future head of fraud unit
John Carroll, assistant U.S. attorney
Jess Fardella, assistant U.S. attorney
AT THE SECURITIES AND EXCHANGE COMMISSION, Washington, D.C.
John Shad, chairman
Gary Lynch, chief of enforcement
John Sturc, assistant chief of enforcement
Leo Wang, attorney
Peter Sonnenthal, attorney
Martin A. Siegel hurried through Washington, D.C.’s, National Airport and slipped into a phone booth near the Eastern shuttle gates. For years now, phone booths, often at airports, had served as his de facto offices. He complained often about his long hours and frequent absences from his wife and three children, but the truth was that he thrived on his pressure-filled life as one of the country’s leading investment bankers.
May 12, 1986, had begun much like any other day. He had flown that morning from New York to Washington to visit a major client, Martin Marietta, one of the country’s leading defense contractors. A few years earlier, he had helped Marietta fend off a hostile takeover bid from Bendix Corporation, and the deal had launched Siegel’s star. He became one of the country’s most sought-after takeover strategists.
The visit to Marietta had gone smoothly, with only one disturbing note. The company’s chairman, Thomas Pownall, was upset about a recent insider-trading case. Pownall was set to testify as a character witness for Paul Thayer, a former deputy secretary of defense in the Reagan administration, who had been charged with insider trading for leaking top-secret information he gleaned while a director of Anheuser-Busch to, among others, his Dallas mistress. Pownall, along with most of corporate America, had been stunned. He had often done business with Thayer at the defense department, and the two men had become friends. “It’s unbelievable, isn’t it?” he had remarked to Siegel.
Siegel had nodded and quickly pushed any thoughts of Thayer aside. Handsome as a movie star, tanned, fit, Siegel, at 38, had recently moved to Drexel Burnham Lambert Inc., the powerhouse junk-bond firm. He was ready to vault to even greater stardom.
Now Siegel dialed his office in New York. It was just after 2:45 P.M., and he wondered what the stock market was doing. He hated being separated from his array of sophisticated news-delivery mechanisms, from computer screens to wire services.
His secretary, Kathy, briefed him quickly and then started ticking off the many calls that needed to be returned that day. Suddenly a rapid series of bells rang at the Dow Jones ticker tape just outside Siegel’s office, a signal that a major news announcement was imminent.
Kathy moved to the ticker and gasped as the headline emerged. “SEC charges Drexel Burnham Lambert official with insider trading,” she read aloud.
As Kathy waited for the ticker to resume its account, Siegel felt his almost perfect world collapsing. Everything he had worked for all his life. His $3.5 million compensation and his $2 million bonus he earned when he moved to Drexel from Kidder, Peabody & Co. earlier that year. The astoundingly lucrative mergers-and-acquisitions practice he was melding with Michael Milken’s junk-bond money machine. The blue-chip clients, like Martin Marietta, Goodyear, and Lear Siegler, that were now flocking to use Drexel’s and his services. The house on the beach in Connecticut, with its own tennis courts and swimming pool. The four-bedroom cooperative apartment in Manhattan’s exclusive Gracie Square. The helicopter rides to Manhattan. The glowing newspaper and magazine profiles.
Suddenly the image of arbitrageur Ivan Boesky, once Siegel’s confidant and mentor, flashed before him and he felt a sudden terror. He thought Boesky might have him murdered.
“Oh my God!” Kathy exclaimed as the ticker resumed. “It’s Dennis! It’s Dennis Levine! He’s been arrested!”
Siegel told his secretary to keep reading. “The SEC charged Dennis Levine, a managing director of Drexel Burnham Lambert Inc., with insider trading in connection with an alleged scheme to buy and sell securities based on non-public information gained through his employment as an investment banker for a period of five years,” she continued. “Drexel Burnham said it will cooperate fully with the SEC in the investigation . . ”
Dennis Levine. Dennis Levine was the investment banker in the office next door. Siegel broke into a sweat. All he could think was this: A gun had been pointed at his head, the trigger had been pulled, and miraculously, the bullet had killed Dennis Levine instead. Overweight, overeager, self-promoting, ineffectual Dennis Levine.
In the Beverly Hills office of Drexel Burnham Lambert it was just before noon Pacific time, the peak of the trading day. Michael Milken sat at the center of a huge, X-shaped trading desk, his loyal traders and salesmen radiating out along the axes. As he avidly scanned the trading data on his computer screen, he reached for his two ringing phones—one for each ear.
This was the epicenter of the new economic order, the capital of the junk-bond empire that Milken had created. “Hey, Mike,” called out one of the traders as the Levine news came over the wire. “Look at this.” Just weeks before, Levine had debuted at Milken’s hugely successful 1986 junk-bond conference, the “Predators’ Ball,” hosting a breakfast on mergers and acquisitions. Milken paused in his phone conversation, glanced at the news on his computer screen, then resumed work as though nothing had happened. “It’s like a bad car wreck,” one of the salesmen shrugged. “You slow down for a couple of days and then drive fast again.” Nothing could stop the Drexel juggernaut.
Ivan Boesky, the legendary arbitrageur, emerged from the conference room at his Fifth Avenue offices and walked down the hall, trailed by several of his employees. Suddenly Jeffrey Hennig, one of Boesky’s traders, rushed out of his office waving a piece of ticker copy. He shouted toward Boesky, “Did you see this about Dennis Levine?”
Boesky stopped abruptly and turned. “Dennis who?” he asked.
“Levine,” Hennig replied. “Here.” He showed Boesky the ticker tape announcing the SEC’s charges against Levine.
Boesky read the item quickly, then handed it back. “I’ve never heard of him,” he said, walking briskly away.
Years later, looking back on that day, Siegel realized he had been wrong. The bullet that killed Levine killed him, too. It killed Ivan Boesky. It killed Michael Milken.
The same bullet shattered the takeover craze and the greatest money-making boom in Wall Street’s history, and it exposed the greatest criminal conspiracy the financial world has ever known. The Greed Decade may have taken four more years to play itself out, but after May 12, 1986, it was doomed.
Even now it is hard to grasp the magnitude and the scope of the crime that unfolded, beginning in the mid-1970s, in the nation’s markets and financial institutions. It dwarfs any comparable financial crime, from the Great Train Robbery to the stock-manipulation schemes that gave rise to the nation’s securities laws in the first place. The magnitude of the illegal gains was so large as
Dennis Levine, the small fish, confessed to $12.6 million in insider-trading profits. Ivan Boesky agreed to pay $100 million in forfeitures and penalties; no one pretends now that that is anywhere near the total of his illegal gains over the years. And then there is Michael Milken, whose crimes were far more complex, imaginative, and ambitious than mere insider trading. In 1986, Milken earned $550 million in salary and bonus alone from an enterprise that had been tainted with illegal activity for years. When he finally admitted to six felonies, he agreed to pay $600 million—an amount larger than the entire yearly budget of the Securities and Exchange Commission.
Nor were these isolated incidents. Only in its scale and potential impact did the Milken-led conspiracy dwarf others. Financial crime was commonplace on Wall Street in the eighties. A common refrain among nearly every defendant charged in the scandal was that it was unfair to single out one individual for prosecution when so many others were guilty of the same offenses, yet weren’t charged. The code of silence that allowed crime to take root and flourish on Wall Street, even within some of the richest and most respected institutions, continues to protect many of the guilty.
To dwell on the ill-gotten gains of individuals, however, is to risk missing the big picture. During this crime wave, the ownership of entire corporations changed hands, often forcibly, at a clip never before witnessed. Household names—Carnation, Beatrice, General Foods, Diamond Shamrock—vanished in takeovers that spawned criminal activity and violations of the securities laws.
Others, companies like Unocal and Union Carbide, survived but were nearly crippled. Thousands of workers lost their jobs, companies loaded up with debt to pay for the deals, profits were sacrificed to pay interest costs on the borrowings, and even so, many companies were eventually forced into bankruptcies or restructurings. Bondholders and shareholders lost many millions more. Greed alone cannot account for such a toll. These are the costs of greed coupled with market power—power unrestrained by the normal checks and balances of the free market, or by any fears of getting caught.