IN an old-fashioned western, the movie-house audience often cheers when the hero arrives to bring the villain to justice. That's the reaction a reader may well feel when reaching the second half of this excellent book by Wall Street Journal editor James B. Stewart.
The first half of "Den of Thieves" spells out the misdeeds of Michael Milken, Ivan Boesky, Martin Siegel, and Dennis Levine, who, as a book jacket blurb notes, "created a series of security scams that made other financial hustles look like amateur night." It is a tale of people obsessed with money in a decade of rampant greed on Wall Street. Mr. Milken and Mr. Boesky, especially, are depicted as moral idiots.
Besides spelling out the financial crimes of these four and various other thieves in the securities industry, Stewart traipses out any other gobs of scandal he can find in their lives. At times, the depravity becomes depressing.
Where are the men and women of integrity? Where are those who want to do something constructive with their lives, not just make a buck - or a billion bucks? Where are those with the independence of mind not to be overwhelmed by the flaunted money and aura of success that once surrounded these crooked big players in the mergers, acquisitions, and leveraged buyouts that weakened so many corporations in the 1980s?
Thus it is a relief when Stewart turns to "The Chase" by investigators of the Securities and Exchange Commission and the United States attorney's office in New York. One can almost hear the clatter of hooves as they ride to the rescue of the nation's securities markets. For indeed, in Stewart's view, the corruption on Wall Street threatened the system.
"At the most basic level, American capitalism has flourished because everyone, rich and poor alike, has seen the marketplace reward merit - enterprise, innovation, hard work, intelligence. The securities laws were implemented to help protect that process, to guard the integrity of the markets and to encourage capital formation, by providing a level playing field on which everyone might pursue their fortunes. Violations of the securities laws are not victimless crimes. When insider traders gain windfall s tock profits because they have bribed someone to leak confidential business secrets, when prices are manipulated and blocks of stock secretly accumulated, our confidence in the underlying fairness of the market is shattered. We are all victims."
Stewart spent much of four years reporting for this book. It shows in the fascinating detail. Harvard law professor Alan Dershowitz, hired by Milken to seek a reduced sentence, has written in the Wall Street Journal that Stewart's "account contains a core of reality, around which is woven a massive fantasy." Nonsense. Sometimes a book about real events written in narrative style raises questions about the accuracy of quotes and other details. Stewart claims the quotations he uses "came from the speaker, someone who heard the remark, or from transcripts and notes." That doesn't guarantee accuracy, of course. Nonetheless, this book is basically solid.
Stewart provides a fascinating review of how Milken hired a public relations firm, Robinson, Lake, Lerer & Montgomery, to boost his image. "The goal, Robinson and Lerer told their staff, was to turn public opinion from outrage to neutrality to acceptance, and finally to admiration," Stewart writes. "The campaign was remarkably effective." The fee included a $150,000-a-month retainer. This episode demonstrates once more how modern public relations can manipulate public opinion. Some of the press, sadly, w as sucked in by the blather.
Milken's great claim to constructive success was his enlargement of the junk-bond market. However, the forced mergers/leveraged buyout/junk-bond syndrome left a trail of devastation behind. Taxpayers are paying for some of it as a result of junk bonds in the portfolios of failed thrift institutions.
There's little evidence to support the claim that the corporate combinations and takeovers would make business more efficient. Contrariwise, many individuals can attest to the unnecessary disruption and damage to their careers and lives. Certainly any benefit to the economy was accidental. The book demonstrates that Milken, and probably many others in the investment banking community, were out to make mega-money, not improve corporate America.
One of the arguments used to corrupt potential sources of inside information on Wall Street was "Everybody is doing it." For the individual, the proper response to that temptation should have been, "So what." Fewer would have ended up disgraced and in jail. Fewer would have violated the laws of morality.