“Do you want to cooperate?” Carberry asked. Levine said he wanted to talk to his lawyers. Doonan took him to the phone in the reception area and stood by as Levine called Arthur Liman, whom he had retained after talking with Kay earlier that day. Levine knew Liman from the Revlon deal, on which Liman had represented Revlon.
At one point the dazed Levine turned to Doonan while holding the receiver. “What’s going on?” Levine asked. “What’s happening to me?”
“You’re under arrest,” Doonan said again.
“I’m under arrest, for God’s sake,” Levine repeated into the phone.
As soon as Levine hung up, Liman called Carberry, asking him to release Levine for the night. Carberry refused, explaining that Levine could request bail at his arraignment the next day. Carberry was taking no chances. Arrests of prominent businessmen accused of white-collar crimes were often genteel affairs, with the accused agreeing to surrender at a convenient time and immediately posting bail. Carberry felt that white-collar criminals were too often coddled, however, in conspicuous contrast to the treatment meted out to less affluent defendants accused of more mundane offenses. And he felt there was real danger that Levine might flee.
It was nearly midnight when Doonan completed the processing and led Levine to the Metropolitan Correction Center, the federal prison adjacent to the U.S. courthouse on Foley Square.
Levine’s main concern seemed to be his BMW. He told Doonan he was worried about leaving the car on the street overnight. Doonan obligingly took the keys and moved the car into the nearby municipal garage. He’d never driven such an expensive car.
At the MCC, Doonan signed a form promising to pick up Levine at 9 the next morning. Levine was led away and placed in a holding pen, where his cellmates for the night were two accused drug dealers. The next morning Levine looked tired and drawn, and Doonan wasn’t surprised. In his experience, few people slept during their first night in the MCC.
Wilkis had buried all his worries about Levine by concentrating on his work at E. F. Hutton. He’d handled some relatively small deals of his own, and the head of the M&A department, Daniel Good, had all but promised Wilkis that he’d be made a managing director when he came up for consideration that year. Even so, following Levine’s lead, Wilkis was leveraging his success. He’d contacted a headhunter, who was negotiating offers with two other investment banks, both at the managing director level. Wall Street was hungry for investment bankers with Wilkis’s experience.
When the news of Levine’s arrest broke on May 12, Wilkis was in a cab heading toward La Guardia airport for a flight to Omaha. When he got to the airport, he phoned the headhunter. Like everyone else on Wall Street that afternoon, the headhunter could talk of nothing but Dennis Levine.
“There may be an opening at Drexel,” the headhunter said excitedly.
Wilkis was stunned, even though it was an event he had envisioned in his mind many times. He flew on to Omaha, but couldn’t get over his sense of panic, and couldn’t concentrate. That evening he phoned his wife, Elsa, who told him she’d seen Levine that afternoon. He’d picked up his son at the Episcopal School, an exclusive private school in Manhattan also attended by Wilkis’s son. Levine had been glad-handing, working the crowd of mothers picking up their children, claiming “I’ve been framed.” He almost seemed to be enjoying his sudden notoriety, Elsa said. It was more than Wilkis could take. Didn’t Levine realize that their lives were at stake? He felt he had to get back and talk to him.
Pleading illness, Wilkis left Omaha and flew back to New York the next day. He immediately phoned Levine, who had been arraigned, pleaded not guilty, and posted $5 million in bail that morning. He had put up $100,000 in cash and pledged his apartment and shares in Drexel.
“You’d better come right over,” Levine said.
Wilkis took a cab over to Levine’s apartment. Laurie answered the door, looking as though she hadn’t slept, her eyes red and swollen from crying. In contrast, Levine was casually dressed in athletic clothes and seemed cheerful, even excited.
“Jesus, Bob, can you imagine? They threw me in jail. Christ, I had notes and my phone book with Ivan Boesky’s name all over it! I had nine hundred bucks in my pocket.” But Levine was already hatching a plan.
“You’ll get a lawyer in the Cayman Islands to claim he owns the account,” Levine began, but Wilkis wasn’t paying attention.
“It’s too late, Dennis,” he pleaded. “Don’t you realize this? It’s over.”
Wilkis spent a tortured week, unable to sleep, unable to concentrate at work, not eating. He told his wife nothing about his own involvement, but she knew how close he was to Levine. She insisted he contact a lawyer, and Wilkis called a cousin at one of Baltimore’s leading firms, Piper & Marbury. He didn’t tell the whole truth, admitting only that he had had vague “dealings” with Levine that worried him. The cousin arranged for him to see a lawyer in New York on Tuesday.
Meanwhile, against his better judgment, Wilkis agreed to meet Levine again on Monday. To make sure they weren’t bugged, they met at the garage on West 56th Street where Wilkis kept his car. They got in the car and drove aimlessly. Wilkis was so petrified that he’d be stopped by police that he barely drove 15 miles per hour.
“You look terrible,” Levine began cheerfully. “Here I’m the one who’s been in jail and you’re the one who looks bad. None of this matters,” he continued. “It doesn’t matter as long as you’re famous.” He was impressed that The Wall Street Journal had run a front-page story on him, complete with an artist’s drawing, the previous Thursday. He told Wilkis to pull over to the curb by a corner newsstand, and hopped out of the car.
“I hear I’m on the cover of Newsweek,” he said, and moments later returned brandishing the latest issue. But he was disappointed. He was featured in the cover story, headlined “Greed on Wall Street,” but the illustration showed hands grabbing at a pile of money—not Levine. Levine’s picture was deep inside the magazine.
“I’m ready to turn myself in,” Wilkis said once Levine had finished with the magazine. “What do they know?”
“I don’t know,” Levine said.
“Has my name come up?”
Levine again said he had no idea, adding, “Don’t get a lawyer. I’ve got the greatest lawyers in the world and we’re going to fight it. I’m sealed up like a tomb.” Levine continued, “If I talked, the Russian would put a bullet through my head. Now you, you couldn’t handle this. You’d snap. But not me. I’m a stand-up kind of guy.”
Then Levine unveiled a new plan. Levine would confess, and implicate Wilkis as a source of some of the information. But he’d conceal the fact that Wilkis traded on inside information in his own foreign bank account. “We’ll go to jail. It will be one of those country-club prisons. We’ll be roommates, we’ll play tennis, and get a tan. Then we’ll retire to the Cayman Islands, and live off of your money,” Levine said.
“Dennis, where does this lead?” Wilkis asked in despair.
The next day, Wilkis broke down with the lawyer recommended by his cousin, confessing his crimes. “I don’t want to fight,” Wilkis said. The lawyer promptly referred him to a criminal lawyer, Gary Naftalis, a former assistant U.S. attorney and a partner at the New York firm Kramer, Levin, Nessen, Kamin & Frankel. Wilkis told Naftalis the whole story, sobbing periodically, including details of his own account and his recruitment of Randall Cecola. Naftalis sternly ordered Wilkis never to talk to either Levine or Cecola again.
After so many years, however, Levine’s hold couldn’t be so easily broken. When Levine called soon after, Wilkis took the call, though he tried to resist.
“Dennis, it’s not good to talk,” he said, but Levine pressed on with more plans for their eventual escape to the Cayman Islands. Wilkis cut him off.
“The newspapers are focusing on the cover-up. They’re acting like that’s worse than the trading. I won’t get involved. I’m never going to talk to you again.”
Levine seemed stunned and hurt
by Wilkis’s reaction. “Oh Bob,” he said, “you mean after everything we’ve been through, this is it?”
Yet Wilkis called Levine on Memorial Day, and again the following Friday, telling him he just wanted to see how he was doing.
“I’m holding up,” Levine said, but his spirits seemed to be waning. He seemed near despair, asking Wilkis to take care of his wife if he went to prison. He was especially emotional on Friday.
“I love you like a brother,” he told Wilkis repeatedly. “I’ll be ruined financially,” he continued. “I don’t give a fuck about the business. I’ve done all the big deals, fuck them. But I’m ruined. I won’t see my son’s bar mitzvah.” For the first time in his contacts with Wilkis, Levine seemed near tears.
Wilkis told Naftalis nothing of his exchanges with Levine, nor of another phone call. Two days after Levine’s arrest, Wilkis had heard from Cecola, the Lazard associate he’d recruited into the ring. “Do we have anything to worry about?” an anxious Cecola wanted to know.
“I do,” Wilkis replied. “My life is probably over. But I’ll protect you.” Cecola said he was going to be in New York soon, since he’d be working that summer at Dillon, Read; Wilkis promised they’d get together.
Cecola arrived on June 4. Wilkis attended what was supposed to be a festive dinner for Hutton’s M&A department, but couldn’t eat. Already thin from jogging, he’d lost 15 pounds since Levine’s arrest, and he looked emaciated. He’d begun seeing a therapist. As soon as he could get away, he left and took a cab to a restaurant at 77th Street and Broadway, where he met Cecola. The two walked east into Central Park, where they’d be shielded by the darkness.
“Do I have to worry?” Cecola asked anxiously.
“Dennis Levine knows who you are,” Wilkis said ominously.
“But they can’t prove anything, can they?” Cecola asked. “You’ll cover for me, won’t you?”
“Randy, my life is over,” Wilkis said wearily. “I hope you don’t get involved in this, but I won’t lie. I can’t commit perjury.”
Cecola paused. “You could position the truth,” he said.
“Randy, it wouldn’t do any good. Levine knows all about you.”
“Look,” Cecola said, “if you deny what he says, and I do, it’s two against one.”
“I’m sorry, I won’t lie,” Wilkis insisted. The two trudged in despair out of the park.
The next day was the last day of classes at The Brearley School, and Wilkis’s daughter Alexandra, an exceptionally talented young pianist, was being honored at an assembly. When he arrived at the auditorium, Wilkis realized suddenly that he couldn’t take his place among the other parents. Instead, he stood at the back. As the program began, he began to cry. Through his tears he could see his daughter, glowing with excitement at the school year’s end, a picture of innocence. Now he was going to ruin her young life. He fled from the room.
Ilan Reich’s phone had rung at about 5 P.M. on May 12. “Have you heard about Dennis?” a friend of his at Goldman, Sachs asked breathlessly. “He’s been charged with insider trading. It’s on the tape.”
Reich was stunned. He had been expecting to see Levine that very evening at the Mt. Sinai benefit. He hung up, then dialed the firm’s library, asking for a copy of the ticker item. In a taxi on the way home that evening, he began to reconstruct the dealings with Levine he’d tried so hard to repress. He didn’t panic; the events all seemed too remote. And he took comfort from the fact that he’d never taken any money.
But now anxiety was building. Each night, he ran out to get The New York Times at 10 P.M., as soon as the earliest edition arrived at his newsstand. He was up early in the morning to buy The Wall Street Journal, scanning for any hint that the investigation was widening. He had no contact with Levine.
Several days later, Reich flew to Los Angeles for a client meeting, and the tension and anxiety reached the breaking point. He began to fantasize about his detection and public disgrace. All of his old anxieties and insecurities were rekindled, threatening to overwhelm him. Hardly conscious of what he was going to do, he rented a car and began driving aimlessly around Los Angeles, finally ending up on a winding cliffside road high above the Pacific Ocean. Reich came quickly around a turn, accelerated, then aimed the car toward the edge of the cliff.
Only at the last moment did thoughts of his family save him from suicide. He braked, turned sharply back onto the road, and stopped. He slumped over the wheel, gulping. Somehow, he vowed, he’d fight his way out of this.
When he heard the news of Levine’s arrest, Sokolow rushed to meet David Brown, the Goldman, Sachs investment banker he’d recruited into the scheme, at Brown’s apartment. Sokolow had taken $125,000 in cash payoffs from Levine, a tiny fraction of the millions in profits his tips had generated. Of that, Sokolow had paid Brown $27,500. Panicked, the two young men took what was left of the cash they’d received from Levine, ripped it into small pieces, and flushed it down the toilet.
Once Siegel recovered from the shock of learning that the SEC had charged Levine rather than him with insider trading, he left the phone booth at National Airport and boarded a shuttle flight for New York. After he was back in his Kidder, Peabody office, he returned a phone call from Bob Freeman at Goldman, Sachs.
“He’s obviously in a ring,” Freeman said of Levine. “Who do you think’s in it?”
They speculated about various possibilities, and then Siegel dared broach the unthinkable: “You don’t think he talked to Boesky, do you?”
“Oh no, not a chance,” Freeman said firmly. “Ivan Boesky would never talk to a Dennis Levine.”
Late on the afternoon of Levine’s arrest, not long after Boesky told his employees that he’d never heard of Levine, Mulheren called him.
“What’s the definition of an arb?” Mulheren asked.
Boesky said nothing, and Mulheren plunged ahead with the punch line.
“Someone who’s never seen, heard of, or talked to Dennis Levine!”
Mulheren burst into laughter. On Boesky’s end, there was silence.
10.
By no means was Dennis Levine’s $10 million nest egg safely under government control. The restraining order freezing his assets, obtained on May 12, was temporary. The SEC also had to obtain a preliminary injunction at a federal court hearing less than two weeks later, demonstrating that it had a real case against Levine. The freeze gave the SEC its principal leverage with Levine, handicapping his efforts to lead a normal life and even making it difficult for him to pay his lawyers’ fees. His lawyers at Paul, Weiss promptly attacked the freeze, gaining the right for Levine to have access to a $300,000 account at Citibank for personal expenses and legal fees. Martin Flumenbaum, a Paul, Weiss partner working with Liman and known for his tenacious, combative style, told the court that “the government has no prima facie case, the government will not be able to make its showing, the government will not be able to come up with its proof on this in this court on Thursday.”
Flumenbaum’s challenge spurred the SEC lawyers. They worked frantically before the hearing, obtaining depositions and affidavits from Levine’s former employers at Smith Barney, Lehman Brothers, and Drexel, establishing that Levine did have access to confidential information. They gathered and analyzed the Bank Leu trading records and even retained a handwriting expert, who confirmed that the handwriting on Levine’s Smith Barney job application matched that on the Bank Leu withdrawal slips.
SEC lawyers tried to question Levine, both in person and in writing, but his lawyers instructed him to invoke the Fifth Amendment and refuse to answer on grounds that it might incriminate him. Levine defied a court order to produce an account of his finances, including the total of $1.9 million in cash he’d withdrawn from the Bank Leu account over the years. The SEC subpoenaed Levine’s wife, his father, and his brother, who had allegedly accompanied him on some of the trips to the Bahamas. Curiously, the Levine family members also invoked the Fifth Amendment. Philip Levine even took the Fifth Amendment when asked
his wife’s maiden name—which turned out to be Diamond, Levine’s alias at Bank Leu. The SEC staff wondered what the family members had to hide.
On May 21, the day before the preliminary injunction hearing, Lynch received his first call from Arthur Liman, asking for a 10-day postponement and hinting at a willingness to begin some kind of settlement talks. Lynch bluntly refused. Liman seemed taken aback. Given his reputation as one of the country’s premier trial lawyers, he evidently expected a certain deference.
“I don’t see why not,” Liman retorted sharply. “This should be a no-brainer for you.”
Lynch felt his ire rising. He’d never met Liman, but this approach was patronizing and insulting.
“I’ll do what’s appropriate,” Lynch said icily. To make matters worse, Lynch soon received a call from Ira Sorkin, the SEC’s New York regional enforcement director, who was an acquaintance of Liman. “Liman’s upset,” Sorkin said, as though that were Lynch’s fault. “He doesn’t know you.” Lynch was enraged that Liman would try to pressure him through Sorkin.
“Stay out of this,” Lynch ordered. He had no intention of giving Levine any extensions. He wanted to keep the pressure on.
The showdown came in New York federal court on Thursday, May 22. Lynch stayed in Washington, and his deputy John Sturc argued the case. It was a crucial hearing; if a judge lifted Levine’s asset freeze, he could easily finance a prolonged legal battle. He also might flee.
Sturc, in the most important argument of his career, painstakingly summarized the government’s case, detailing in nine instances the pattern of Levine’s insider trading. Liman, complaining about the “storm in the press which in my experience is unparalleled almost since Son of Sam,” offered little evidence beyond old information about the companies Levine traded in. Much of it came from the same documents Levine had cooked up for the Bank Leu cover-up.
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