Reflections on the Fall of Wall Street’s Mighty : We Have All Been Robbed by Deceit of 3 ‘Geniuses’

At first glance, Ivan F. Boesky, Dennis B. Levine and Martin A. Siegel--the ringleaders in Wall Street’s epic insider trading scandal--could not be more different. But there is a common thread in their personalities: an exaggerated sense of their own entitlement.

Boesky was 59 years old at the time of his confessions. He was a lone ranger who had transformed the stuffy, mechanical world of arbitrage into a glamorous game. Levine was just 33 but already a premier designer of company takeover schemes that were financed by high-risk “junk bonds.”

After his arrest last summer, Levine’s photograph was hastily cut out of Drexel Burnham Lambert’s annual report. Instead, the investment firm pasted in a picture of Siegel, who was hired because of his “straight arrow” work defending against the kind of takeovers that were Levine’s specialty.

Two weeks ago, Siegel, like the other two, confessed his guilt and exposed several others.

Perhaps it was the arrest of Marty Siegel, the Mr. Clean of the three, that jolted Wall Street the most. It was more public for one thing, coming after two of his alleged accomplices were led away in handcuffs, traumatizing an industry where integrity is supposed to be a given.

Accepted Public Image

But it struck me that, like everyone else, I had accepted the public image of all three men without much question. Clearly it was the image they had wanted me to have, but how true was it? Did these three men have something in common?

I went back to my notes from an interview 18 months ago, when Siegel was still at Kidder, Peabody & Co., and from some phone chats that were about a year old. The notes recalled a handsome young man who was under a lot of pressure.

Siegel’s conversational line of thought was broken a number of times by other firm executives who needed him to sign off on fast-breaking developments. The telephones rang non-stop.

At 37, Marty Siegel had it all. Good looks that had caused Business Week to gush in a profile that he could “play the heartthrob in an old Greta Garbo movie.”

A Harvard MBA (Class of 1971), that talisman of corporate fortune. He had been a star since helping mastermind the 1973 defeat of Gulf & Western’s bid to take over Great Atlantic & Pacific Tea Co.

He was a nice guy. I made appreciative remarks about his young daughter’s photograph and he became the proud father. We talked about about the new house he was building in Connecticut, a cedar and glass-wall showplace, and one got a sense that this was a man who would wear success well in the years to come.

But why a corporate defender? Why had he and his Kidder, Peabody team staked out the role of the opposition when the action for the brokerage firms seemed to be in underwriting and promoting raids and hostile takeover bids?

“It’s more exciting,” he replied without hesitating. “We’re not against takeovers as such, you have to understand that. What we say to a client faced with a bid it does not like (is that) ‘You don’t have to take that offer. We can produce a better bid for your firm, or another bidder, or we can arrange it where you do not have to take any bids at all.’ So the other side says, ‘Here we come,’ and we say, ‘Oh, no you don’t,’ And we see who wins.”

So it’s a game, I prodded him.

“Only in the sense that the best man wins. You have to remember what an impact you have on people’s lives, the workers as well as the management,” he said.

There was more, though. He wasn’t sure he approved of all this junk bond financing that was going on. There was something less than classy about the “greenmail” business, too. The tone was of a man to whom prestige was as important as winning, and winning was very important too.

All this time, Marty Siegel was cheating. Some of the trades involving illegally obtained confidential information went back to that granddaddy of “Pac-Man” battles, the 1982 struggle in which Bendix had tried to gobble up Martin Marietta, only to be almost gobbled up itself.

Despite the smooth sermon on people’s lives and some practices that were not classy enough for him, Siegel had been cheating.

How could Siegel have talked one life and lived another with such apparent ease?

That question caused me to remember my conversations with Boesky. Again in retrospect, there was an effort to convince me that what I was seeing was the true man. It annoyed me to realize that I had failed to catch the con job and to wonder why it was necessary.

Boesky liked to see journalists at New York’s Harvard Club, where he went frequently to play racquetball.

He made it a point to tell you that he had never graduated from Harvard or from any undergraduate college for that matter.

He had earned a degree from the Detroit College of Law at the age of 27 and had been a tax accountant before joining the old-line brokerage firm of Edwards & Hanly in 1972.

One got a sense that here was a man who was not embarrassed by his humble beginnings but rather used them as a reference point to chart how far he had traveled.

He had a little set speech about America and being an immigrant Russian’s son in Detroit. Yes, he had been poor and not all that well-educated. Yes, his early years on Wall Street were marked by mistake and failure. But today?

“I come here because the trustees offered me an honorary membership after I contributed some money to their school of public health,” Boesky said, gesturing around him. But then he just had to add: “It’s really not my kind of place. I never actually eat here.”

And again, with the advantage of hindsight, Boesky let me know who he really was.

“What I am is the best odds-maker in the world. I can introduce you to a girl and within 15 minutes I can calculate the odds on you going to bed with her,” Boesky said. “I calculate risk better than anybody else, that is why our firm has had the success it has. I take pride in that.”

Pride in what? Even as he was pushing away the dish of salted peanuts at his reserved table in the Harvard Club, Boesky was deep into a scheme to exploit Levine’s position as a confidante to financiers as Drexel Burnham’s mergers manager.

And what of Levine? Consider this version of himself furnished through his lawyers two weeks ago to the judge who was about to sentence him to two years in prison, after noting publicly that Levine deserved at least 10 years.

In the pre-sentencing memo filed in Levine’s behalf, much was made of his lower-middle-class background, his Baruch University night school degrees and his general lack of the “academic credentials and social advantages customarily required to enter--let alone succeed in--investment banking.”

In the memo, one can read how young Dennis refused to join his father’s aluminum siding firm and pushed himself to get a second-class MBA degree.

The lawyers even included the copies Levine had kept of the more than 60 rejection letters he got a decade ago from the leading investment banking firms of New York to show how this had soured his soul.

Ultimately, judging himself a failure, Levine had to settle for second best by his lights--a $19,000-a-year job in the foreign exchange department of Citibank.

“Dennis Levine had played by the rules of the game and he had lost,” the lawyers’ memo intones.

Oh, come on now. Who does Levine think he is kidding? For that matter, did Boesky really think he was the best odds-maker in the world? Or did Siegel really believe he was a class act?

Anyone who has taken Psychology 101 knows that some emotional deprivations are so severe that some people can never be reassured of their own worth. Some use money as a way to count love, others use public success to bolster the darkened corners of their private hells.

But these three men and many others who followed them also have shown a disdain for the rest of us ordinary folks who go about our lives having to trust one another because civilized life is otherwise impossible.

There is tragedy in the fact that these three could not stand to live as we do for they destroyed themselves in the end just as surely as they robbed others.

However, there is anger too. It turns out these cheaters may have been second-rate men from beginning to end.

Whatever their emotional cravings, the Wall Street insiders have robbed us all of something more valuable than money, they have stolen our ability to judge one another with any confidence.