The Rise and Falling Out of Friends in Insider Trading Case

The Washington Post

Question: So my question is, when first queried on your scheme and knowing that it was wrong, you decided to blame it on David Clark, did you not?

Answer: Yes.

Q: Is that a fair measure of your loyalty and friendship, Mr. Brant?

A: I don’t see that that has got anything to do with it.


--Excerpt from the testimony of Peter N. Brant at the fraud, embezzlement and perjury trial of David W. C. Clark

On the morning of Wednesday, Oct. 28, Peter N. Brant, 33, formerly a $2-million-a-year stockbroker at the Wall Street firm of Kidder, Peabody & Co., was sitting in a hallway at the Manhattan federal courthouse here, waiting to resume his testimony against his former friend, lawyer David W. C. Clark.

By all accounts, Brant was minding his own business when Clark’s wife, Natalie, an interior decorator, approached and began to stare at Brant silently. Then, using her finger to imitate a pistol, Natalie Clark pointed at Brant’s head and simulated pulling the trigger.

“I don’t mean to make it a bigger deal (than it was),” said Assistant U.S. Attorney Robert Gage, who described the incident to the trial judge. “But it is upsetting to the witness, who at one time was close friends with the Clarks.”


It is not easy to preserve a friendship in the fast-paced culture of modern Wall Street, where career, money and the size of one’s cooperative apartment are often seen as the key measures of personal achievement. But few friendships formed during the recent years of high-flying prosperity here have proved as fragile, or as tragic, as the one between stockbroker Peter Brant and lawyer David Clark.

After meeting 11 years ago on the polo grounds of an exclusive Connecticut hunt club, the pair embarked on a mind-boggling odyssey of social ascent, high living, wild spending sprees and frenzied stock trading--finally crashing in a tangle of embezzlement and fraud.

The history between them concluded in a Manhattan courtroom Nov. 20 when a jury returned a 16-count guilty verdict against Clark. The 38-year-old lawyer was accused of embezzling money from his wealthy clients, evading taxes and lying to a Securities and Exchange Commission investigator in connection with the insider stock trading scheme involving former Wall Street Journal reporter R. Foster Winans. The verdict followed a six-week trial at which Brant was the key prosecution witness.

Wanted It All


“It’s a sad thing because, like in a book, ambition’s fine--but a lot of people get torpedoed by it,” Martin Bornstein, Brant’s father, reflected in a telephone interview from his home in Buffalo, N.Y., last week. (Brant changed his name in 1976 and has not spoken to his father in a decade.) “I think all these guys like my son, (Ivan F.) Boesky, and (Dennis B.) Levine--they get manic. They make all this money and they think they’ve died and gone to heaven.

“My son made more money in one year than I’ve made in a lifetime. . . . He wanted it all, I guess,” Bornstein said.

So, it appears, did David Clark. Both Brant and Clark await sentencing before federal judges. Brant, who earlier pleaded guilty to securities fraud charges as part of his cooperation agreement with the government, faces a maximum of 15 years in prison. Clark faces a possible term of 75 years.

Their story, as it unfolded in courtroom testimony, is about more than a friendship gone haywire. It is also suggestive of the unrestrained atmosphere on Wall Street during the 1980s, a period characterized by many critics as one of speculation and excess. At the least, it was a time of financial excess in the lives of Clark and Brant.


Q: Was it explained to you that a high degree of integrity was necessary for the position of stockbroker at Kidder Peabody?

A: No.

Q: Was it explained to you that loyalty to your customers would be an important trait for a broker at Kidder Peabody?

A: No.


--From Peter Brant’s testimony

Peter Brant was born Peter Bornstein in Buffalo, the second son of a middle-class Jewish insurance salesman who lived in a mixed neighborhood on the city’s north side. From the beginning, his father said, Brant was an exuberant, outgoing and materialistic child who took an early interest in racehorses, money and fine clothes.

“He was a great kid, he really was,” Martin Bornstein said. “He was smart, good-looking--but he wasn’t much of a student.”

Brant seemed determined to leave the prosaic setting of his Buffalo neighborhood far behind him. In 1972, he enrolled at Babson College in Wellesley, Mass., a management school. He earned high marks in classes such as music appreciation and poetry writing, but mainly Ds in finance courses. “I would say I excelled at liberal arts,” Brant recalled.


Brant fell in with a group of friends at college who were absorbed in the rituals and appearances of Northeastern privilege. The group formed a campus Bombay Club, whose uniform was a crisp white shirt, pressed slacks and a dark blazer. On the blazer was a patch depicting a pair of crossed polo mallets and a martini glass.

Started as Trainee

Brant testified that he decided in his junior or senior year at Babson that he wanted to become a stockbroker. Around the same time, he changed his name. “He wanted to make it easy to move in their circles,” Brant’s father said. “He wanted the country club and all that.”

Upon graduation from Babson in 1976, Brant was accepted as a stockbroker trainee at the large Wall Street firm of Kidder Peabody. On his application form, he listed his father’s name as Martin Brant because, he later testified, he wanted to make it consistent with his own. After training for six months at Kidder’s downtown offices, Brant became a full-fledged stockbroker. Just as he began his new career, he met David Clark.


The son of a surgeon who died young, Clark was raised by his mother in the privileged circumstances to which Brant aspired. He grew up in Fort Lauderdale, Fla., and attended the exclusive Deerfield Academy preparatory school in Massachusetts. His mother was a steady source of income. She was, Clark recalled, “in comfortable circumstances. She owned some real estate and some shares in a corporation founded by my grandfather.”

After graduating from Fordham Law School and practicing at a small firm in Manhattan that catered to wealthy clients, Clark encountered Brant at a Connecticut polo match in 1976. “I thought he (Brant) was a likable person, anxious to please, ambitious, hard working, quite bright,” Clark remembered.

Their friendship formed quickly and it ran deep. Both men testified that they saw each other socially nearly every night of the week.

“I would ride out with him when he played polo and watch the game, talk to friends of mine, things like that,” Brant remembered. “He introduced me to various people, suggested I became a member of some clubs, and had me to his house for dinner, and he was--he was very nice to me. He was a guy that I looked up to and he treated me very well, introduced me to some clients.”


Shared Investments

The axis of their lives became the exclusive social and athletic clubs that have long been bastions of wealth and status in Manhattan society. Clark helped Brant join the Gothic Racquet & Tennis Club on Park Avenue in midtown Manhattan, which Brant described in his testimony as “a gentlemen’s sporting club.” The pair lunched there frequently.

Each referred wealthy clients to the other and soon, as the stock market began its historic run-up, they were trading aggressively in the market and reaping huge profits. They spent money indiscriminately and shared in investments--a condominium in West Palm Beach, Fla., three or four racehorses valued at $200,000, and a $160,000 yacht.

Clark opened his own accounts with Brant at Kidder Peabody and poured huge sums into them. According to Brant, the pair quickly entered into an improper arrangement in which Brant shared in stock trading profits earned in Clark’s account. The profit-sharing arrangement, which is prohibited by New York Stock Exchange rules, was designed to provide Brant with incentives to trade stocks aggressively and earn huge profits, Brant said.


And the profits came fast. Brant’s commission earnings skyrocketed. After earning $600,000 annually in 1980 and 1981, the broker took home $1 million in 1982 and $2 million in 1983, much of it generated by the trading in Clark’s accounts. In the aftermath of the 1984 breakup of American Telephone & Telegraph Co., the pair made a killing speculating in telecommunications stocks.

Pair Spent Freely

They indulged themselves frequently. Clark traveled often to Europe and Africa on fishing and hunting trips. When they needed cash, or when the whim struck them, they dipped liberally into Clark’s trading accounts. A story Brant told was typical of their habits:

“I got a call from David Clark . . . and he told me that he had been by the Louis Vuitton luggage shop and had seen some nice piece of luggage and suggested (that) after lunch we go over and buy some luggage. So we did that, and then he told me to order up the check to pay for the deposit on the luggage, which in this case came to $9,350" for eight pieces.


It was nice luggage, Brant said.

Q: When you talked about the source of the funds, did David Clark tell you that the money coming into this account was in fact Roger Wilson’s money?

A: No.

--From Peter Brant’s testimony


Their dizzying whirl of money-making rested on two unsound foundations, debt and theft, according to evidence and testimony presented at Clark’s trial.

Clark traded stocks heavily “on margin,” that is, by borrowing as much as 50% of a stock’s purchase price. As long as the value of his stocks climbed, his use of margin increased profits. But when prices fell, even temporarily, Clark came under pressure to pay his debt, which often totaled hundreds of thousands of dollars.

There were bumps in the road early on, instances when Clark had to hurriedly come up with large sums of cash to cover his debt position in the Kidder accounts. But the pair experienced no serious troubles until 1983, when the price of Digital Switch, a telecommunications stock in which they had speculated heavily, suddenly collapsed.

At the time Digital Switch fell, according to Brant, Clark was attempting to buy a house on Long Island, N.Y., for about $750,000. Brant said that Clark became despondent over the condition of his accounts. Both men were looking for a way to make some quick money.


It was then that Brant was contacted by R. Foster Winans, a young Wall Street Journal reporter who wrote a widely read column about the stock market called “Heard on the Street.” Winans, in desperate need of money, agreed to provide tips about his column to Brant in exchange for a $15,000 loan and the promise of assistance in making stock trades. With advance knowledge of Winans’ subject matter, Brant could buy or sell stocks hoping to profit from the impact of the column on the market.

Was Embezzling Funds

The scheme solved Clark’s debt problems, Brant testified. Clark joined the insider ring enthusiastically, Brant said. The others involved were Winans’ roommate and longtime companion, David Carpenter, and a second broker at Kidder, Ken Felis, described as Brant’s closest friend other than Clark. Profits from trades based on Winans’ tips began to mount in Clark’s accounts at Kidder.

But the lawyer’s problems in 1983 were not confined to his involvement in an illegal insider trading ring. Evidence presented at trial showed that Clark had been systematically embezzling funds from his well-to-do clients and using the money to trade stocks improperly with Brant. One of those clients was Roger W. Wilson Jr., the son of a wealthy oil executive and an aspiring actor whose principal credits are major roles in the films “Porky’s” and “Porky’s II.”


When Wilson realized that a family trust fund managed by Clark had dwindled in several years from $2.3 million to slightly more than $1 in value, he sued Clark, charging fraud and embezzlement. Clark was also accused of stealing money from other clients.

The interwoven schemes unraveled all at once. A Kidder lawyer noticed the strange relationship between Brant’s trades and the news in the “Heard on the Street” column and asked Clark to take his business elsewhere. In 1984, the SEC found the scent and began to question Clark and Brant. Clark denied that he knew anyone at the Wall Street Journal who was providing tips for him to trade on.

Panicked, Brant proposed fleeing the country. “He came in in a state of almost hysteria, screaming that he had to go to Brazil,” Clark recalled. The pair bought airline tickets and took their passports to the Brazilian consulate hoping to obtain entry visas.

Outlined Details


While waiting in line, however, Clark excused himself, saying that he needed to take care of an errand. The lawyer went home, talked to his wife and checked himself into an alcohol detoxification program. Brant, wondering what had become of his friend, changed his mind about Brazil.

Soon Brant was talking to prosecutors at the U.S. attorney’s office in lower Manhattan. During six days of interviews that spring, he laid out the full details of his scheme with Winans, Clark and the others. Winans, Felis and Carpenter were indicted, brought to trial and, on the strength of Brant’s testimony, convicted. (The U.S. Supreme Court recently upheld the conviction. Winans will surrender himself to the federal prison system shortly.)

Clark was not indicted early largely because the case against him--involving not only Brant’s accusations but also those of Wilson and other clients--was so complex. A federal grand jury returned its indictment earlier this year.