by Turney Duff
“You don’t want me to make money?” I ask.
“Not the point,” he says as he clicks send. “I want you in and out of these names all day. Buy a hundred Intel with First Boston, wait five minutes, and then sell it with Goldman.” His cell phone rings. “Just trade back and forth all day,” he says. He clicks the talk button and tells his driver he’ll be right down. “Stick with me, Turney. I’ll make you a star.” I watch as he gets up and leaves. The whole conversation is weird: what he wants me to do, and how nice he was in telling me.
Undoubtedly, part of Gary’s good humor is because of the business Galleon is doing. By 2000, our reputation on the Street is vicious. That happens when some of your funds have triple-digit returns. We no longer talk in millions; we talk in billions. Investors can’t give us money fast enough. If a salesman or trader won’t do what we want, there are ninety-nine other guys standing in line to service us. Each day a new analyst shows up and occupies one of the vacant offices. We’ve picked off another senior trader from Morgan Stanley, and the bosses have promised to hire a couple of younger guys to take over my grunt work.
But there’s also something about Gary’s directions that makes me suspicious. Coinciding with the firm’s insane growth is an ever-thickening atmosphere of intraoffice distrust and competition that flows down from the top. Raj is notorious for taking two analysts who are equal in status and manipulating a rivalry between them. I call it the Raj cockfight model. He whispers something to one analyst and then the other, and then likes to sit back and watch them scratch each other’s eyes out. It’s survival of the fittest. The one who wins the fight gets to keep his job; the pile of bloody feathers gets swept out the door. He tried to do it with Keryn and me, but he didn’t take into account, or didn’t know, how close we were and that we talked all the time out of the office.
On top of that, a rivalry is developing between the two funds under the Galleon umbrella. Raj, Gary, and Keryn attend the tech fund, while Krishen, Slaine, and I focus on healthcare. When I first started at Galleon, the healthcare fund made up only about 10 percent of Galleon’s assets under management. But in the short time I’ve been with the firm, healthcare has ballooned to over a billion-dollar fund. Though only a third the size of tech, it’s become wildly successful by any measure. Much of its growth is due to the bull market streaking upward, but some of the credit has to go to Slaine, the head trader. Though Gary and Slaine are friendly, go to the gym every morning together, and even pal around some, their competitive natures simmer just under the surface. So, even though Gary is my de facto boss, he’s crossing a not-so-invisible line by giving me the opportunity and telling me he’ll make me a star. But all I know is, I’m about to start trading in earnest—and that’s a lot better than ordering breakfast.
The next morning I’m back at my desk. I get through my routine and the morning meeting unscathed. When the market opens, it’s go time. I decide to buy my first hundred thousand shares of INTC with First Boston. I sell it two minutes later with Goldman. I make two cents but lose twelve cents on my commissions. A loss of a dime. I do it again. Lather, rinse, and repeat. I decide to buy two hundred SUNW, sell it a few minutes later. Again, again, again. It’s not even lunchtime and I’ve traded a couple of million shares. I’ve lost a total of $75,000, but we’ve paid Goldman and First Boston $60,000 each in commission. And that’s the point, Gary tells me at lunch. “Good job,” he says. It doesn’t feel very good, but if he’s happy, then I’m happy. Though it still doesn’t make sense to me, it’s fun. And, both my Goldman and First Boston sales traders are thrilled.
It makes more sense the next day. First Boston prices an IPO, Selectica Inc., symbol SLTC, putting four million shares on offer this morning. I have no idea what the company does, but its IPO is about a hundred times oversubscribed. Every client of First Boston is trying to get an allocation. This is what everyone refers to as a hot deal. We put in for a million shares last week just like everyone else on the street. First Boston calls and I pick up the phone. My sales trader tells me we got 100,000 shares and the deal is priced at $30. He says we got one of the highest allocations on the Street, which is probably true. Most of his clients got shut out or received an allocation of five, ten, or twenty-five thousand shares, he says. I tell Gary and then Raj. Then, like I always do, I type it into our system so the portfolio reflects the position. Gary sees the trade pop up on his screen and calls over to me: “Nah-nah-nah-nah-no,” he says in his nasally whine. “Book it in the admiral’s account.”
The admiral’s account is a private fund made up mostly of Gary and Raj’s money. I don’t know how much they have in there, but it’s substantial. Employees are also allowed to invest through the admiral’s account. When I first started at the firm it was strongly suggested that I do so. “Trust us,” they said. “Put your money in there.” I did. I had my IRA, which was about fifty grand (I had rolled it over from Morgan), and maybe five or ten thousand more.
I highlight the SLTC trade, double-click on it, and change it from the main fund to the admiral’s account: Buy 100,000 SLTC $30. After the market opens, our First Boston guy calls again and tells me SLTC will open around ten a.m. I yell it out to the desk so everyone hears me. At about ten minutes to ten he calls again. “Looks like it might open at forty,” he says. Five minutes later, our First Boston light is glowing again. “Looks like sixty-two!” Three minutes go by and First Boston is lit again. “Eighty, maybe higher!” he says, his voice electric with excitement.
When the stock opens, the office erupts in a joyous scream. “Free money, baby,” Gary yells. I look at my computer screen and see SLTC just opened at $94. It’s trading hundreds of thousands of shares a second. The last sale on my screen is trading so fast, the figure is literally dancing. It’s already through $100.
It becomes clear to me then how the game is played, and why Gary wanted me to trade in and out and didn’t care if I made money for the firm. It’s quid pro quo: the bigger the commissions we pay the sell side, the better information and allocation we receive in return. The seventy-five grand I lost for the firm the day before is just part of a business model that generates huge profits. With the stock now at $110, we make eight million bucks. It’s like they just handed it to us. And there’s nothing wrong with it from a legal standpoint, I guess. Wow. What a business.
But then Gary calls over to me: “Turney,” he says, “call Baby Arm.” Baby Arm works directly on the floor for himself. With his nighttime open-collared silk shirts that reveal a chest filled with curly black hair, and his fondness for gaudy jewelry, he looks like he’s right out of the cast of The Sopranos. If he went to college, he’s never mentioned it. He’s a big guy—supposedly all his body parts are big, hence his nickname. Whenever we need tickets, a favor, or anything, he’s available. He’s in the favor business, like a concierge service that also trades stocks. “Tell him to cross a hundred thousand SLTC,” Gary says. In simple terms, crossing stock is a transaction with one buyer and one seller. Typically, you only cross stock with another client or broker. But what Gary wants me to do, using Baby Arm as the facilitator, is cross the stock with ourselves. We’ll buy and sell the same stock—I’m not even sure this is legal. Though I don’t understand why he wants me to do this, I do as I’m told. There’s a lot, I realize, that I have to learn about Galleon. Baby Arm, when I get him on the phone, has no problem with buying and selling the stock—he stands to make six cents’ commission on both sides. A hundred thousand shares of SLTC at the same price, one trade, two sides, make him a quick twelve grand. That’s a lot of silk shirts.
It is later, maybe that night or soon after, that I realize what I’ve become a part of. The new deal was priced at $30, and I booked the buy of 100,000 shares at $30 in the admiral’s account. Our money. When the stock reached $110, I called Baby Arm on the floor and asked him to buy and sell 100,000 shares for me at the same price. I booked the sale of 100,000 shares out of the admiral’s account and booked the buy in the main fund, where inve
stors have their money. The only trace of the trade left in the admiral’s account is the $8 million profit.
This same scenario, albeit with different stocks and banks, happens with regularity at Galleon. We buy a stock in the morning and, depending on how it performs, decide in the afternoon which account it should go in. It’s never an issue with investors because the performance in the main fund is always good. If investors saw the performance of the admiral’s fund, believe me, they would start asking lots of questions. But they haven’t.
I know what we’re doing isn’t right. There must be some fiduciary responsibility. But the way the money begins piling up is intoxicating. There are times that I take out my calculator to figure out how much I’m making. On good days I might make five grand. If I had the money, I could make more from investing in the admiral’s account than from what Galleon is paying me.
A FEW weeks later, I’m in the office and it’s slow. Gary is out at a charity golf event, Raj is at an outside meeting, and Slaine is in the conference room on a call. I’m working on a spreadsheet, a guest list for a party Galleon is planning. I begin to call our sales traders to find out if they plan to attend and if they’ll be bringing anyone. I can also add five names of my own, I’m told—but only those people who supply good information. I guess that leaves out my roommates. Then I notice one of our outside lights ringing. “Galleon,” I say after one ring. The voice on the line is muffled, like they’re whispering something to me. Again I say “Galleon,” and this time I can barely make it out: “Is Gary there?”
“No,” I say. “He’s out of the office.” A few silent moments go by.
I’m just about to hang up when I hear the whisperer’s voice again: “Is Raj there?”
“Sorry,” I say. “He’s off the desk—can I help?” I can hear him breathing. His voice makes me imagine a trench coat and a phone booth. Very mysterious.
Finally, Mr. Whisper’s voice is a bit more intelligible. “Jefferies is going to upgrade Amazon in six minutes,” it says. Then I hear a click, and just like that he’s gone. I have no name, no phone number, and no idea if the information is correct. I glance at the clock on my computer. It’s 12:59 p.m. I don’t know who to tell or even if I should tell anyone. Mr. Whisper could be some kind of whack-job, or maybe this is one of Gary’s sick jokes. As crazy as it sounds, Rosenbach is capable of pulling a stunt that would cost the firm money just to get a laugh at my expense. I look back at the clock. It’s one sharp. Thoughts start to swirl in my head. Maybe I’ll just buy some AMZN and see if it’s upgraded. But then, just as quickly, I decide not to. This doesn’t make sense. Who calls in the middle of the day and talks like he’s a character in some Bond movie? The minutes on my computer clock are moving like seconds: its 1:02. But if I don’t buy any AMZN and he’s right, will Mr. Whisper call Raj or Gary later expecting a pat on the back? Fuck. It’s 1:03. I have two minutes to decide. I catch Keryn’s eye and give her a quick recap. “Who was he?” she asks. I have no idea, I say. She shrugs and goes back to work. It’s 1:04. Screw it, I say to myself. I buy 100,000 shares of Amazon and push back in my chair. I hope Mr. Whisper knows what he’s doing.
Exactly at 1:05 p.m., AMZN stock starts to move up. At first it’s a quick fifty cents and then, seconds later, it’s up two dollars. The Jefferies light starts to ring and I pick it up. He tells me they’re upgrading AMZN. I want to say I know, but I thank him and hang up. As I watch the stock go up the idea that I might have done something illegal seeps into my thoughts but lasts only for the briefest of moments. This is how it’s done, I reassure myself. Every day, Gary and Raj pound it into my head that I need to get an edge. This is what they’re talking about. Every time the outside wire rings I’m going to pick it up. I want to talk to Mr. Whisper.
The stock is up almost five dollars when Raj walks through the front door. I wait until he gets into his office. There I tell him about the call from Mr. Whisper and that I bought 100,000 shares. Our P&L shows a profit of $500k. He looks down at his computer screen and begins to giggle. Raj is a big giggler, especially when things break his way. I ask him if he wants me to sell the stock or hold on to it. “I got it,” he says, smiling. For the first time in my Galleon career, I feel less like a clerk and more like a trader. After the Amazon trade, I realize that nothing in the world of hedge funds happens by accident. It’s all about getting information the fastest, and however you can. If I’m going to make money, real money, buy side money, then I need to find some way of creating my own edge.
In the weeks leading up to the party, the hype has the office, and those jockeying for an invite, worked into a lather. One thing’s for sure: it isn’t going to be your average Wall Street social. That a buy side firm is entertaining the sell side is, by itself, unique. It’s always the other way around. But Raj doesn’t want to just entertain them; he wants the party to be remembered. The firm has rented a massive dance space—it can accommodate a thousand—in Midtown called the Supper Club. Though the party is the hottest ticket on the Street, the guest list isn’t exactly restrictive. If you cover us, back us up, or can help us in any way, you get an invite.
One morning, the guy Raj hired to plan the party and arrange for the talent, which includes the headliner Donna Summer, walks in the door. There’s something about him, a hip-looking, tall dude with shaggy blond hair, that I like immediately. Maybe it’s his entrepreneurial manner, or that his company seems ultracreative—along with having him plan the whole party, Raj has also commissioned him to write a rap theme song for Galleon—or maybe he represents a non-Wall Street part of me I’ve almost completely forgotten. He introduces himself as Jesse Itzler, and then I realize he also goes by the rap name Jesse Jaymes.
“Hey, Jesse,” one of my desk-mates yells out. “Turney here is a rapper.” I turn a baby girl’s nursery shade of pink. “That so,” he says, nodding his head in approval. “What’s your rap name?”
I contemplate choking on a pen cap so I don’t have to tell him. I remember in 1991 watching Yo! MTV Raps and seeing his videos “Shake It Like a White Girl” and “College Girls Are Easy.” I know he’s won an Emmy for “I Love This Game,” a rap song he wrote for the NBA, and he also wrote the New York Knicks theme song, “Go New York Go.”
“Cleveland D,” I say, finally.
“Nice,” he says.
Now, calling me a rapper is, to say the least, a bit of a stretch. It’s true, I love hip-hop. And it’s also true that in 1988 I formed a rap group called Maximum Intensity with my best friend, Nathaniel, who called himself Live T. Most of our other friends hated rap music. But we were in high school in Kennebunk, certainly one of the most un-hip-hop places on earth, and we mostly performed in Nathaniel’s barn to an audience of zero.
A couple of days later, the phone rings at the desk and it’s Jesse. He wants to know if I’ll help him with the lyrics for the Galleon theme song. “Really?!” I say, in an embarrassingly high-pitched voice. But I follow up with a very manly “Sure, love to.” After all, though it might be a big jump from Nathaniel’s barn, when will another opportunity like this come along?
I meet Jesse at the studio a week before the party. It’s on the Upper West Side in the basement of a building. I’m not sure I’m in the right place until I find the buzzer, above which a small tag reads MILLROSE MUSIC. I walk down the rickety staircase. The carpet is dark, the walls are dingy, and the whole place smells musty, but the studio looks professional. There’s a couple of recording booths, with the engineer’s table in the middle and a couch and chairs in the back. The engineer sees me and says, “ ’Sup?”
With only a week to write, record, and produce the song, I don’t understand how he’s going to get it done in time. I prepared for our meeting for a week—or rather, I worried about our meeting for a week. I wanted to prepare, but I didn’t know where to start. I’ve come up with one idea for the hook, but it seems foolish now. I sit on the couch and Jesse sits on a chair across from me and begins asking me questions about Galleon: what it’s
like to work there, what’s Wall Street’s perception of the firm. I tell him one of the names the Street calls Galleon is “the good ship.” And that’s when my one idea pops out of my mouth. Why don’t we sample the song “On the Good Ship Lollipop” but change the lyrics to “On the Good Ship Galleon”?
His face breaks into a smile. “Cleveland D!” he belts, his head pumping up and down. I breathe a sigh of relief.
I start to relax and the lyrics began to flow: “It’s the Good Ship Galleon … When Wall Street has a rally on … When traders trade … Everybody in the place gets paid …” Shirley Temple would be proud. Jesse has a female vocalist lay down the chorus. Then, with all of my notes and suggestions, he gets into the booth and starts to rap. I’m in awe. In less than twenty minutes, he’s done. “Your turn,” he says. Jesse had suggested I rap a few lines, or in his words, eight bars. At first I was excited, but now I’m nervous. I think about Nathaniel and all those afternoons and evenings we spent practicing, mimicking the latest hit or coming up with our own rhymes. I need to do this.
The engineer plays the track of Jesse’s last line so I’ll know where to jump in. I have to finish his line and rhyme it with “CNBC.” Here’s what I do: “And me, Cleveland D …,” I begin. “Hit me, bid me, I need liquidity … Stopped me on five? Stupidity … I’m at Galleon where it all connects, trading healthcare and biotech …” When I finish, the producer looks at me with an “Are you serious?” expression. He plays it back and I sound awful, like a tone-deaf robot. I might have to change my rap name to Tone Duff. I try it again with little improvement. Nine more times we lay it down. And nine more times the producer shakes his head back and forth. Finally, on the eleventh try, he shrugs and my first (and only, to this point) rap recording is born. So I don’t sound like Chuck D or Jay Z or even Vanilla Ice—I still have a CD I can send home to Nathaniel, which he can play as loud as he wants, silencing all the haters in Maine.