Inside Traders’ Ringleader Gets Two-Year Term

Investment banker Dennis B. Levine was sentenced to two years in prison and fined $362,000 on insider trading charges Friday, but the relatively light sentence was widely appraised as a handsome reward for helping government investigators break open the most damaging scandal ever uncovered on Wall Street.

“An entire nest of vipers on Wall Street has been exposed” thanks to Levine’s “truly extraordinary” cooperation, U.S. District Judge Gerard L. Goettel said, adding that he would otherwise have imposed a 5- to 10-year term. The maximum sentence was 20 years.

Levine led investigators to his millionaire accomplice, stock speculator Ivan F. Boesky, who in turn implicated prominent merger specialist Martin A. Siegel.

Probe Broadened

In all, 11 Wall Street executives have fallen because of Levine’s testimony. Now, the investigation, once narrowly focused on stock trading by people who illegally use information not available to the public, has broadened into a probe of the entire corporate takeover business.

The cherubic 34-year-old Levine was one of the four most senior merger specialists at the investment banking firm of Drexel Burnham Lambert until his arrest last May.

Judge Goettel, noting that Levine has “little or no liquid assets left,” acknowledged in court that the fine “may never be collected.”

Arthur Liman, Levine’s lawyer, told the judge Friday that “every penny (Levine) ever earned is gone” since he paid the government $11.6 million to settle charges by the Securities and Exchange Commission that he ran an illicit stock-trading ring for five years. Using information stolen from his own employers and from the companies that employed his recruits, Levine traded stocks and hid the profits in secret bank accounts in the Bahamas.

Levine was expressionless as he stood before the judge for sentencing early Friday afternoon. But, in a short plea for leniency just before sentence was passed, the once-cocky and ambitious takeover specialist, who wore his success on the sleeves of his $1,000 suits, seemed beaten down.

He spoke softly and his voice cracked frequently as he asked the judge to “let me put the pieces of my life together again.”

‘Life of Disgrace’

When the government exposed his trading scheme last May, “I was automatically sentenced to a life of disgrace,” Levine said. “I have disappointed my wife, my children, my friends and colleagues, and I will never forgive myself. I swear I will never violate a law again.”

In a passionate, 25-minute discourse, defense lawyer Liman painted Levine’s new life as stark and lonely.

“He’s an outcast, a leper,” Liman said. “ . . . All his friends have dropped him.”

When Levine’s wife had a baby girl on Dec. 18, the couple received “not one card or acknowledgment,” Liman said. And, whenever Levine’s 5-year-old son goes out to play, he plays alone, Liman said, because “parents don’t want their children to play with the child of Dennis Levine.”

Until now, the stiffest sentence received by any member of Levine’s intricate insider trading network was one year and a day.

Tried to Flee

But Levine’s crimes were more extreme than those of his recruits. And he had lied under oath and tried to flee the country when he learned that the government was on to his scheme.

So Levine had been expected to spend more time than the others behind bars. The only question was how the court would weigh his cooperation, and it was clear Friday that it had been given considerable weight.

New evidence of the degree of his cooperation emerged from Friday’s 40-minute hearing in a small, cramped courtroom here.

Even during a tense 10-day period after Levine’s life was threatened, he continued to cooperate, said Charles Carberry, the assistant U.S. attorney in charge of the criminal part of the Levine case. Carberry said Levine was forced to leave New York briefly until prosecutors determined that the threat was a hoax.

Public Outcry Cited

Goettel said he was influenced in his sentencing decision by the public outcry over the light sentences that other inside traders have received. “The public perception of Wall Street and the financial community is that these people can commit a crime and then, once they get caught, all they have to do is cooperate and nothing happens,” he said.

U.S. Atty. Rudolph W. Giuliani, whose office prosecuted the Levine case, called the two-year sentence “entirely appropriate,” adding: “The court very properly weighed the seriousness of the crimes committed against Levine’s cooperation with law enforcement.”

Securities lawyers were equally approving.

“Two years is not an insignificant amount” of prison time for a professional man and first offender, said Gerald Walpin, a New York securities lawyer and former federal prosecutor.

Prosecutors Pleased

It is not surprising that federal prosecutors are pleased with the sentence, said former prosecutor Michael Feldberg, who has been retained by several men being investigated as part of the government investigation arising from the Levine case.

“The government has a lot of reason to be pleased with the sentence,” Feldberg said. “The government needs witnesses in cases like this and, to get them, they have to show that something good comes out of talking. It very clearly did help Levine.”

Liman refused to comment on the sentence, which Levine will begin serving on April 6.

But Levine, as he emerged from the courthouse holding his wife’s hand, pronounced the sentence “fair” and once again apologized for his crime.

“My family and I have been through a very tragic ordeal. It was a very painful lesson to learn,” he said. “The judge did what was fair. I hope other young professionals have learned not to make the same mistakes I did.”