Tuesday, July 22, 2014

You Can’t Make This Stuff Up

Preet Bharara, U.S. Attorney for the Southern District of New York, was on a roll until earlier this month.  He’d successfully prosecuted 85 insider trading cases, including sending Raj Rajaratnam, head of the Galleon Group of hedge funds, to jail for 11 years.  This month, Bharara lost against Rajaratnam’s younger brother, Rengan.  He lost in part because the judge threw out two insider trading counts, and along with them much of the evidence.  Commentators suggest that evidence would've caused jurors to convict Rengan if they had been allowed to hear it.

Still, think about it: 85 to 1.  That’s an amazing batting average.  It’s also startling that Bharara had 85 cases for which he was able to amass enough evidence that he could prosecute them.

I can remember back to a time when, as a young investment banker in the 1980s, I thought I'd seen everything with insider trading cases.  That was during the era when Rudy Giuliani had Bharara’s job as top Wall Street prosecutor.  It was the era when Ivan Boesky paid a $100 million fine and went to jail for trading on inside information.  When Dennis Levine got sent up the river for trading on inside information on his investment banking firm‘s deals, and for cutting his friends in on the action.  When Marty Siegel, who had tipped Boesky on his firm's deals—and took a (big) briefcase containing $700,000 in cash from Boesky for it one night—went to jail and lost everything in fines.  When Mike Milken paid a $600 million fine as part of a plea bargain on securities and tax violations.

In those days I was na├»ve enough to think that after that era’s firestorm of public outrage, fines and the perp walks that Giuliani invented—dragging traders out of their offices in handcuffs, or from their apartments at 6 a.m. to the sound of press cameras snapping away—that anybody with a brain would know the rewards for stepping over the line weren’t worth the penalties if you got caught.

It didn't take me long to get slapped awake to the fact that it's all part of human nature.  The combination of old-fashioned greed and thinking you're smarter than anybody else is a powerful cocktail that can induce entranced walks to the dark side.  People can’t help themselves.

I was still working on Wall Street when I started writing novels.  I relied on my experiences for most of my material, but I made up a lot of it.  In one of my early novels, Bull Street, I had the Feds use wiretaps to catch insider traders, a technique until then reserved for trying to snare Mafia dons.  Recently, wiretaps were an essential weapon in Bharara 's arsenal in bringing down Rajaratnam and his co-conspirators.  Also in Bull Street, I had the SEC use a sophisticated MarketWatch computer program, run on Cray supercomputers, to analyze an insider trading ring’s stock trades.  That’s the equivalent of a hand-held calculator compared to what the Feds are using today against insider trading activity.

In my current novel, Spin Move, John Rudiger is a fugitive financier living in Antigua, who was tricked out of $30 million by an ex-girlfriend, Katie Dolan.  As he's running out of money and the local officials are insisting on ever more exorbitant bribes to keep his alias intact, does he decide it's time to go straight?  Does he go back to the States and turn himself in, do his time?  Nope.  He's still hot for Katie, so it's natural he'd look for her, but that $30 million is also on his mind.  And when he finds out a conman has swindled her out of it, he uses all his skills to come up with an elaborate scam to get it back.  He can't help it.

In my recent novel, Mickey Outside, Mickey Steinberg is getting out of a cushy white-collar federal prison camp after a slap-on-the-wrist sentence because he turned state's evidence.  His short sentence notwithstanding, he's been stripped of his securities licenses, banned from Wall Street for life, divorced by his wife and he's broke.  Has he learned his lesson?  He hatches a scam with another ex-con to sell a near-perfect forgery of a stolen van Gogh masterpiece in the shadowy underground market for stolen art.  Human nature.

I'm not going to spoil Mickey Outside for you, but there's a point where Mickey has to decide if he stays on the other side of the line or goes straight.  What does he do?

Somebody who's read my earlier Rudiger Stories with my John Rudiger character, called a book to my attention entitled How to Become a Professional Con Artist.  It’s an eye-opener.  I knew that Three Card Monte wasn't invented on the streets of New York in the 1980s, but I had no idea that scams like the Pigeon Drop, Change Raising, the Lotto Scam, the Oak Tree Game, or the Double-Play had been around for centuries.

So I guess I'm never going to run out of material as long as human beings are greedy enough to cheat, and suckers are equally greedy enough to allow themselves to get duped by con artists.  You can’t make this stuff up; you don’t have to.