A Higher Loyalty: Truth, Lies, and Leadership

by James Comey

  Patrice opened the minivan’s sliding door and the large ceramic plate that had held the bagels she took to church slid out. In a moment that was hard not to take as a prophetic metaphor, it shattered on the driveway.

  CHAPTER 5

  THE EASY LIE

  He who permits himself to tell a lie once, finds it much easier to do it a second and third time, till at length it becomes habitual; he tells lies without attending to it, and truths without the world’s believing him. This falsehood of the tongue leads to that of the heart, and in time depraves all its good dispositions.

  —THOMAS JEFFERSON

  WHEN MARTHA STEWART was released from prison in March 2005, the press was making much of the fact that her net worth grew during her time in custody. As if the goal of prosecutors had been to destroy her, rather than punish her for lying during an investigation and send a message that people, no matter who they are, can’t obstruct justice.

  I was in Las Vegas giving a speech and knew the media would try to get an ambush reaction from me on camera, because I was the United States Attorney who had indicted her and received an enormous amount of media attention and criticism as a result. As expected, a cameraperson and a local reporter with a microphone approached. The reporter stuck the microphone in my face and said, breathlessly, “Mr. Comey, Martha Stewart is getting out of prison today worth two hundred million dollars more than when she went in. How does that make you feel?” (For some reason, he pronounced “feel” to sound like “feeeeel.”)

  I paused, looked into the camera, and delivered a line I had practiced in my head a dozen times, willing myself not to smile. “Well,” I said, slowly, “we at the Department of Justice are all about the successful reentry of our inmates into society. Ms. Stewart may have done better than most of our convicts, but that’s certainly no cause for concern.” Stone-faced, I nodded and walked off. The reporter had no idea I was fooling around, but the cameraperson—they tend to be the more down-to-earth members of a media team—laughed so hard that the camera bumped up and down. The shot was too shaky to use.

  Martha Stewart didn’t commit the crime of the century. At first, I found it an annoyance compared to those we were dealing with on a daily basis, cases that had a bigger impact on people’s lives. But something caused me to change my mind. This case was ultimately about something higher, something more important than a rich person trying to sell some stock before it crashed. And in a number of ways I couldn’t imagine then, it had a significant impact on me for the rest of my career in law enforcement—offering lessons I’d make use of long after.

  * * *

  Everyone lies at some point in their life. The important questions are where, about what, and how often?

  One of the inevitable questions someone at my height is asked, especially by strangers in elevators, is whether I played basketball in college. The answer is that I didn’t. But it was a long story as to why, involving growing late, knee surgery, and various time demands. I figured nobody wanted to hear all that and, even if they did, it took too long for an elevator ride. So for a few years after college I took the easy way out and just nodded or said “yup” to any stranger who asked me that question. I did the same thing with friends I played basketball with once I entered law school. I don’t know why I did that. Maybe I was insecure. Maybe it was just easier. Or maybe I liked people to think I was a college jock. This was a seemingly small and inconsequential lie told by a stupid kid, but it was a lie nonetheless. And it ate at me. So after law school I wrote to the friends I’d lied to and told them the truth. They all seemed to understand. One of them replied—as only a true friend could—“We knew you didn’t play in college and we didn’t care. You are a great friend and a great player. Of course, you suck for other reasons.”

  I guess what concerned me most about the small lie was the danger of it becoming a habit. I’ve seen many times over the years how liars get so good at lying, they lose the ability to distinguish between what’s true and what’s not. They surround themselves with other liars. The circle becomes closer and smaller, with those unwilling to surrender their moral compasses pushed out and those willing to tolerate deceit brought closer to the center of power. Perks and access are given to those willing to lie and tolerate lies. This creates a culture, which becomes an entire way of life. The easy, casual lies—those are a very dangerous thing. They open up the path to the bigger lies, in more important places, where the consequences aren’t so harmless.

  * * *

  Every year a small number of people are prosecuted for insider trading. A few people wearing nice suits and handcuffs get paraded in front of cameras and walk into courthouses, but their cases generally go without much notice outside the financial press. But in January 2002, that was about to change, when a case about one little-known biotech company with one well-known shareholder came across my desk as the United States Attorney in Manhattan.

  In late 2001, Sam Waksal, owner of a company called ImClone, sold his many shares of the company in a panic after learning that regulators were going to deny a license for ImClone’s new wonder drug. The problem for Mr. Waksal was that the general public didn’t know anything about the denial of the license. Under the law, a CEO can’t just sell his stock when he learns something big that ordinary stockholders don’t know. That’s insider trading. Waksal’s behavior was like lighting himself on fire in front of law enforcement authorities. That he was guilty and should be charged was obvious; the remaining question for investigators was whether anyone else who sold ImClone shares after Christmas 2001 did so based on material, nonpublic information.

  Because the transactions happened in Manhattan, which was my jurisdiction, I assembled an all-star team of Assistant U.S. Attorneys to help run the investigation. My deputy was David Kelley, a career prosecutor and close friend. The chief of the Criminal Division, supervising all criminal prosecutors in the office, was another longtime friend and former prosecutor, Karen Seymour. I had convinced her to leave her partnership at a Wall Street law firm to help me lead the office. Together, the three of us chewed over all hard decisions, like the old friends we were—laughing, teasing, arguing. I valued them because they would always tell me the truth, including when I was full of it.

  The danger in every organization, especially one built around hierarchy, is that you create an environment that cuts off dissenting views and discourages honest feedback. That can quickly lead to a culture of delusion and deception. And in a leader, the tendency of too much confidence to swamp humility can lead to a dangerous self-indulgence at the expense of others. That was a major factor in the downfall of the Mafia in New York. And, ironically, it was a significant weakness at the U.S. Attorney’s office that broke the Mafia under Giuliani. I worked very hard to keep this in mind now that I had Rudy Giuliani’s old job.

  It was now my responsibility to build my own culture within the U.S. Attorney’s office, one that would get the best out of our team and drawing, in different ways, on the lessons of Giuliani and Fahey. I tried to attend to this task from the very first day. I hired about fifty new prosecutors during my time as U.S. Attorney and sat with each of them as they took the oath of office. I invited them to bring their families. I told them that something remarkable was going to happen when they stood up and said they represented the United States of America—total strangers were going to believe what they said next. I explained to them that, although I didn’t want to burst their bubbles, this would not happen because of them. It would happen because of those who had gone before them and, through hundreds of promises made and kept, and hundreds of truths told and errors instantly corrected, built something for them. I called it a reservoir. I told them it was a reservoir of trust and credibility built for you and filled for you by people you never knew, by those who are long gone. A reservoir that makes possible so much of the good that is done by the institution you serve. A remarkable gift. I would explain to these bright young lawyers that, like all great gifts, this one comes with a responsibilit
y, a solemn obligation to guard and protect that reservoir and pass it on to those who follow as full as you received it, or maybe even fuller. I would explain that the problem with reservoirs is that they take a very long time to fill but they can be drained by one hole in the dam. The actions of one person can destroy what it took hundreds of people years to build.

  * * *

  On the Waksal case, government investigators, including agents and analysts at the FBI, ran through the basics: they got a list of everyone who had sold ImClone stock at the same time as Waksal. One of those names was Martha Stewart. She had dumped her shares the same day Waksal did and before the public learned about the FDA denial on the new drug, avoiding a loss of about fifty thousand dollars. The loss was a rounding error for a wealthy person worth hundreds of millions of dollars like Stewart, but investigators would have been negligent if they didn’t at least interview her and ask her why she sold when she did.

  Stewart was a friend of Waksal’s, and investigators expected her to tell them that when she learned Sam was selling stock, she had sold hers, too. Surely she would tell them that she didn’t know there was anything wrong with that sale, and that she was very sorry if there was. There would have been a stern warning, maybe a modest financial penalty, and everyone would go on with their lives.

  Except that wasn’t what Martha Stewart did.

  Instead, she told the investigators that she had a standing agreement with her broker that he should sell her ImClone shares immediately if its stock price dropped below a certain price, or “floor.” Stewart said she had known nothing in advance about Waksal selling his stock. Maybe his sale had caused the price to drop, triggering her sell order, but this was all a big coincidence. Nothing to see here.

  Federal investigators usually aren’t big believers in coincidences. Stewart’s answer prompted them to look further. Among many oddities, they discovered that Stewart and Waksal had the same broker. They also learned the broker had called Stewart the morning of Waksal’s sale. Stewart was unavailable at the time, flying by private jet to a Mexican resort, so the broker left a message with Stewart’s secretary saying that he needed to speak to her about Sam Waksal, urgently.

  After the investigation began, the feds obtained handwritten notes from the broker. Those notes did reflect that there was a previously agreed-upon floor for selling the ImClone stock, just as Stewart had said. But the notes were written in two distinct inks. Everything was written in one brand of ink, except for the part that bolstered Stewart’s claims.

  Investigators then learned other troubling details. They interviewed Stewart’s secretary and learned that, after the federal investigation into the ImClone sale began, Stewart asked her secretary to open the telephone message from her broker on her computer. Then Stewart asked her secretary to stand up, after which Stewart took her seat at the computer. She highlighted the part that said her broker was calling about Sam Waksal, then typed over it to remove the reference to Waksal. Stewart then paused. Apparently thinking better of obstructing justice in such a clumsy way and in full view of a potential witness to a major crime, Stewart stood abruptly and instructed her secretary to restore the words she had just deleted.

  I disliked the Martha Stewart case from the beginning. It was a distraction, a shiny object, when we had so much more important work to do. The tech bubble of the late 1990s had burst, and dramatic swings in the market had exposed an extraordinary amount of corporate fraud. To paraphrase the memorable words of Warren Buffett, when the market crashed, the tide had gone out quickly and exposed a lot of naked bathers. There on the beach were the fraudsters of Enron, WorldCom, Adelphia, and so many more—those who had bankrupted companies, destroyed countless jobs, and defrauded billions from investors. We were working like mad at the U.S. Attorney’s office in New York to make these big cases. And they were very hard to make, because they all turned on the content of people’s minds. In a drug-dealing prosecution, of which I had done many, the mission for the government was simply to connect the defendants to the transaction. If federal agents burst into a hotel room and find a kilo of heroin piled in the middle of a table, everybody sitting at that table is going to jail. It isn’t open to any of them to say it had never occurred to them that this activity was illegal, or that their accountants and lawyers had reviewed the heroin and concluded it was lawful and appropriate under governing rules and regulations. Nope. Everybody is going to jail.

  In a corporate fraud case, the challenge was reversed. At the end of the day, the government would understand the transactions completely. We would know who was sitting at the table and exactly what the deal was. But everybody at the table would say they had absolutely no idea this complicated, mortgage-backed, reverse-repo, foreign-exchange-swap transaction was illegal. They would invariably say they were deeply, deeply sorry people had lost their life savings, but committing a crime was the furthest thing from their minds.

  It fell to investigators and prosecutors to prove the content of a person’s mind beyond a reasonable doubt to a jury of twelve, who must unanimously agree that the government met its burden. Really hard. Not impossible, thanks to the twentieth century’s great gift to law enforcement—electronic communications—but still hard. Sometimes email offered “kilo on the table” kind of evidence. In one case I dealt with, a financial executive emailed another, saying, “I just hope the SEC doesn’t find out what we are doing here.” His fellow executive replied, “Forget the SEC, when the FBI comes, I’m going out the window.” Good stuff.

  But more often, the government was stymied in its effort to prove criminal intent, even in the face of huge financial losses. People shouting that the CEO “must have known” or “should have known” was not good enough. Where is the proof beyond a reasonable doubt that he knew he was committing a crime? Senior executives are shocked, shocked that lower-level employees may have been breaking the law.

  In the middle of all these massive cases that we were working so hard to make, why did I want to have anything to do with Martha Stewart? It was a marginal case about a lie by a rich person who sold some stock because her friend did. We had some evidence that might add up to insider trading, if we took an aggressive view of the law, and we had a willful obstruction of justice, but it was far from an open-and-shut case, particularly if it involved a jury and a sympathetic character in America’s most beloved TV hostess. Everyone had learned something from her. I once had personally pushed basil leaves under the skin of a Thanksgiving turkey, at Martha Stewart’s suggestion. Why go to the trouble? Who cared?

  But the case was no longer marginal when one afternoon the lead investigating Assistant U.S. Attorney barged into my big office with its view of the Manhattan end of the Brooklyn Bridge and NYPD headquarters. All day long, I could watch people flow to and from Brooklyn and to and from the police. With a broad smile and both arms extended above his head as if signaling a touchdown, he told me he’d gotten the goods.

  The final piece to the case had come, unexpectedly, from Martha Stewart’s best friend, Mariana Pasternak. Just days after the allegedly coincidental stock sale, the two were sitting on a hotel balcony in Cabo San Lucas, Mexico, enjoying a New Year’s vacation drink. As they chatted, gazing out at the jewel-like Pacific, Pasternak told investigators, Stewart said she was worried about Sam Waksal. Stewart explained that she had sold all her stock in ImClone because she learned through her broker that Waksal had. She added, “Isn’t it nice to have brokers who tell you such things?”

  In other words, Martha Stewart had told us a whopper, and now we could prove it well beyond any reasonable doubt. Ugh. The lie she had told was so unnecessary. She could have offered to repay the fifty thousand dollars she had saved, chump change to her, expressed remorse, and vowed never to trade on insider information again. Instead she engaged in an elaborate deception and then involved others to try to cover her tracks.

  In addition to a celebrity fan base who cheered her on, Stewart had aggressive lawyers. One of their main arguments was th
at it was laughable to think that a person worth hundreds of millions of dollars would get personally involved—while jetting to Mexico—to sell stock simply to avoid a fifty-thousand-dollar loss. Her time was too valuable for such trifles, they said. Faced with this argument, I asked her lawyers a question: If Ms. Stewart were at her country estate and walked to the end of her winding driveway one Sunday morning to retrieve her New York Times—steaming cup of coffee in hand—and saw a five-dollar bill lying on the ground next to her paper, would she pick it up or would she not bother with such a trifle? They didn’t answer. Of course she would pick it up. Of course she would make a single phone call to her broker to save herself fifty thousand dollars. Most of us would, especially if we weren’t familiar with laws on insider trading.

  I asked Karen Seymour, the Criminal Division chief, to see if she could arrange a plea deal. Karen didn’t love that idea because she now had a strong case and worried we would signal weakness by looking for a deal, but she gave it a shot. Stewart’s lawyers at first said she would go for a guilty plea, then said she would not. My guess is they were either testing our resolve or had failed to persuade their client into pleading in a case she couldn’t win. If we wanted Stewart to pay for her crime, we were going to have to indict her and try this case against a well-known and widely admired public figure. Though the case seemed like a no-brainer, I still hesitated. I knew defenders of Stewart in the media would say just what her lawyers intimated to me when they fought against the charges—that I was bringing this case to get famous. That I was celebrity hunting—tipping the scales of justice to make an example out of someone who had been in the public eye. That I was just another Rudy Giuliani, out to make a name on the backs of others. I spent long hours staring out at the Brooklyn Bridge, hesitating to bring on the criticism and the circus I knew would come. Then, while I worried about myself and my image, I remembered a young black minister.