'Insider Trading Will Always Exist': Gary Weiss' Insights Into The Nature Of Corporate Greed
Feb 04, 2014 05:57 PM EST
Investigative journalist and author Gary Weiss has spent much of his career exposing the vagaries and excesses of Wall Street. Much criticism has been leveled at Martin Scorsese's film 'Wolf of Wall Street' for perhaps glorifying too much of the transgressions by its real-life protagonist Jordan Belfort, as portrayed by Leonardo DiCaprio. While the jury is still out whether or not the film is indeed a satire, which exposes the immorality by certain players on Wall Street, Weiss, meanwhile, continues to devote much of his career to expose corrupt corporate officials and their nefarious dealings. Weiss' efforts have given hope to investigative journalists who believe in the tenets of truth.
Weiss worked for news organizations in Connecticut and Washington D.C. and Barron's magazine before joining BusinessWeek in 1986. For the next 18 years, he wrote investigative stories uncovering stories on stock fraud as well as improprieties by all kinds of brokerages. Weiss also described widespread improper trading at the American Stock Exchange, while also breaking the story of the bond trading scandal at Salomon Brothers in 1991.
Weiss is the author of Born to Steal: When the Mafia Hit Wall Street (2003) and Wall Street Versus America (2006).He has been a contributing editor for Condé Nast Portfolio, and a regular weekly columnist for Salon and TheStreet.com. His most recent book is Ayn Rand Nation: The Hidden Struggle for America's Soul (2012).
In an exclusive interview with Lawyer Herald (LH), Gary Weiss provides telling insights as to the nature of white collar crime, where its exegesis arises and how corporate greed has manifested itself on Wall Street.
LH: If you were in the shoes of someone knowingly committing a white collar crime, how would you hypothetically explain the exegesis of why would one commit such unethical behavior? Is it merely a perpetual game of 'one-ups-man-ship' against a competitor or something more sinister?
Gary Weiss: I think that it's a combination of factors: the usual greed of course, but also a kind of heedlessness, a disregard of the possibility of punishment, a feeling of immunity from consequences. It's hard to generalize, but it usually comes down to one of those factors or a combination of them.
LH: In Oliver Stone's Wall Street (1987) Michael Douglas' character Gordon Gekko says: "The richest one percent owns half our country's wealth... one third of that comes from hard work, two thirds comes from inheritance... you got ninety percent of the American public out there with little or no net worth. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it." How true is this statement in today's era, concerning the continuing fall-outs of countless insider trading scandals? How do you characterize the overall cynicism, or perhaps antipathy toward corporate greed?
GW: That sentiment is still pretty true today. "How the hell we did it" - Well, they'd like you to think that it was their superior mentality, that they are entitled human beings. But usually it's because, as Gekko pointed out, they were beneficiaries of 'lucky sperm;' they inherited their fortunes. Behind every great fortune is a dad's great fortune, more often than not. As for corporate greed, I tend to think that people are actually quite tolerant of it. There is a kind of ideological sympathy toward billionaires and big business, especially among Tea Party types and Republicans, and not as much anti-corporate feeling as is generally believed.
LH: While writing investigative stories for BusinessWeek and later in your books Born to Steal: When the Mafia Hit Wall Street and Wall Street Versus America, you were credited by FBI Director Louis Freeh who said you had "done our nation an invaluable service by reporting the manipulation of the stock market by elements of organized crime." Would you explain the correlation of organized crime with some of the shenanigans of Wall Street? How can young upstarts who are trying to make it ethically on Wall Street maneuver around these 'criminal elements?' How precisely does organized crime relate to Wall Street?
GW: Organized crime became involved in securities firms through a combination of elements. For the most part they came in from the "bottom up," from crooked brokers who were in debt to mobsters in New York's outer boroughs, especially Staten Island and Brooklyn. Today I think that you probably see less of that, because the FBI's crackdown was effective. The mob is not as powerful today as it was in the 1990s. But you'll always see organized crime wherever there is money and young people with gambling and drug habits.
LH: What made you so curious about examining the morality of Wall Street, specifically to expose organized crime and the Salomon Brothers bond trading scandal of the 1990s and the 2008 financial crisis? What drove your passions about 'righting the wrongs' of corporate greed?
GW: It was just a particularly juicy story, and one led to another. My story on the Salomon Brothers bond trading scandal, for instance, led me toward other scandals, one step after another. It was just a kind of continuing story involving variations on the same mentality.
LH: From Bernie Madoff to Kenneth Lay to Bernie Ebbers, why in your opinion do CEOs such as these behave so recklessly? What sort of attitude do they pervade within their offices, which enable to act without any moral scruples? Are there too many sycophantic underlings working for high-profile CEOs who are too afraid to challenge them when they commit such transgressions?
GW: It was as I said in response to one of your earlier questions: There was simply a disregard for the possibility of consequences or punishment. Bernie Madoff ran the wildest Ponzi scheme in history, one that any rational person would realize was not going to last forever. He knew it would end one day, and he didn't care. To a varying degree it was the same factor with Lay, Ebbers and the others.
LH: Describe a situation in a typical Wall Street 'boiler room' in the 1990s, which could become the seedbed for a potential corporate scandal.
GW: A boiler room was simply a phone bank, where young men (almost no women) would cold-call people around the country. It was a very straightforward kind of fraud, and really not corporate fraud per se. Corporate fraud arises from the operation of corporations, not brokerages selling stocks. But frequently boiler rooms sold the shares of companies that were themselves engaged in fraud. There were multi-pronged scams, screwing their existing investors and the suckers who bought their shares.
LH: What did you make of the 2011 Occupy Wall Street rebellion?
GW: I thought it was great while it lasted. Unfortunately it petered out because of a failure to organize and repression by city authorities, and evolved into a kind of umbrella for crackpots and radical, conspiracy-mongering groups. I knew the end was near when prominent libertarians became involved. It was tragic; a real missed opportunity.
LH: In your opinion, what conditions encourage bribery and other instances of corporate malfeasance? Is there a cultural element to corruption and how can one prevent it?
GW: I think that the "fish rots from the head down." President Obama's Justice Department, and prosecutors like Preet Bharara, the U.S. Attorney for the Southern District of New York, have failed to give adequate emphasis to white-collar crime prosecution. They have failed totally to prosecute the bankers whose misconduct resulted in the 2008 financial crisis. Without strong action by law enforcement there will always be corruption, bribery and malfeasance. It can't really be prevented but it can be crushed, if there is a will. Unfortunately, the will does not exist at present.
LH: How can insider trading still exist today with all the safeguards reportedly put in place by regulators and financial firms?
GW: Insider trading will always exist because 1) It is only loosely defined; people may be committing that crime without knowing it and 2) It is not always easy to detect. Crimes are easy enough to commit by amoral people, but they become even easier when the actual parameters of the crime are so mushy.
LH: What's the best piece of advice you can give to an idealistic young upstart trying to make it big on Wall Street while preserving his or her moral compass?
GW: I'm not sure I know how to answer that. If ethics are a young upstart's primary concern, he or she should go into the priesthood instead of Wall Street.