Den of Thieves
Page 65
page 345 The article quoted is David A. Vise and Michael Schrage, “Wall Street Lambastes SEC Action,” Washington Post, Nov. 21, 1986. The investigation of Nolan and Spear Leeds was disclosed in The Wall Street Journal, Jan. 14, 1988. Neither Nolan nor the firm has been charged with any wrongdoing.
page 346 The estimate of Boesky’s profits that so upset the SEC appeared in Priscilla Ann Smith and Beatrice E. Garcia, “Boesky Apparently Reaped at Least $203 Million in Illicit Profits with Levine’s Inside Information,” Wall Street Journal, Nov. 24, 1986.
page 347 The Dingell comment on Campbell’s testimony was reported in Stewart, “Tracing a Scandal.”
Chapter 11
page 352 Siegel’s subpoena at Wachtell, Lipton and the ensuing events were first described in Stewart and Hertzberg, “Unhappy Ending.”
page 355 Attorneys’ efforts to have defendants plead before a lenient judge—a practice known as “judge shopping”—were once common in the Southern District of New York. Judges sat for two-week periods hearing pleas, and defendants were routinely granted a six-week period in which to plead; this guaranteed defense lawyers a choice among at least three judges. The six-week period has since been eliminated.
page 356 The SEC announced its settlement with Siegel in Litigation Release No. 11354, Feb. 13, 1987. It simultaneously filed its charges, SEC v. Martin A. Siegel, Complaint for Injunctive and Other Equitable Relief.
page 357 Prosecutors pressed Siegel to see if he would implicate others, including Henry Kravis. But Siegel refused, saying he wouldn’t exaggerate his value as a witness and knew of no wrongdoing by Kravis.
page 358 Many states have a homestead provision, protecting a resident’s home from seizure by creditors up to a certain dollar amount. Florida is one of the few states that protect the home no matter how great its value, and as a result has become a haven for those seeking to protect assets from creditors by buying expensive property.
page 362 Merrill Lynch said it fired Tabor because of large losses in its arbitrage operation, and not for anything related to the government’s investigation.
page 363 Williams’s life and career are described in a front-page obituary in The New York Times by Albin Krebs, Aug. 14, 1988.
pages 364–365 Milken’s hiring of criminal lawyers was first reported in The Wall Street Journal, Dec. 8, 1986.
page 365 Liman’s career is discussed in Christopher Knowlton, “The Man Asking Iranscam’s Tough Questions,” Fortune, June 8, 1987.
page 365 Fleming represented Hitachi after the U.S. conducted a massive “sting” operation designed to uncover the illegal export of American companies’ technology. Officials of the giant Japanese conglomerate were videotaped in 1982 as they tried to take delivery of stolen IBM equipment for export to Japan. Hitachi was charged with conspiracy to transport stolen property and eventually pleaded guilty.
page 370 A copy of the handwritten Thurnher document was obtained by the author.
page 371 E. F. Hutton pleaded guilty in 1985 to 2,000 counts of mail and wire fraud and agreed to pay a $2 million fine after admitting that its employees had concocted a check overdrafting scheme. Hutton never recovered from the scandal, and was later taken over by Shearson Lehman Brothers.
page 373 Davidoff’s plea and cooperation were first reported in The Wall Street Journal, Jan. 29, 1987. He was later sentenced to probation.
page 377 Thurnher’s cooperation was first reported in The Wall Street Journal, Feb. 5, 1987.
page 377 Thurnher’s account of the $5.3 million payment was described in Milken’s reply sentencing memo, p. 101.
page 378 The article described is James B. Stewart and Daniel Hertzberg, “U.S. Accumulates Evidence Supporting Case Against Drexel, Milken,” Wall Street Journal, Apr. 28, 1987.
page 379 Freeman’s and Tabor’s arrests were also described in James B. Stewart and Daniel Hertzberg, “Street Bombshell,” Wall Street Journal, Feb. 13, 1987.
page 380 When Siegel asked Pedowitz to represent him, Pedowitz had told Siegel that he couldn’t because Wachtell, Lipton had represented too many clients that figured in the Siegel-Boesky deals, and that this might give rise to a conflict. Curiously, however, although Wachtell, Lipton had also represented clients involved in the Freeman-Siegel deals, Pedowitz did agree to represent Goldman, Sachs. Pedowitz also had had an attorney-client relationship, however briefly, with Siegel, which could have created a further conflict in the event Goldman, Sachs accused Siegel of lying. Pedowitz declines comment.
page 386 Siegel was first identified as CS-1 in Stewart and Hertzberg, “Street Bombshell,” see note p. 379.
page 389 The Siegel plea was described in Stewart and Hertzberg, “Unhappy Ending.”
page 390 General Electric’s reaction to the arrests was described in James B. Stewart and Janet Guyon, “Damage Control,” Wall Street Journal, June 8, 1987.
page 393 The involvement of Roche and Little in an alleged stock parking scheme was reported in The Wall Street Journal, June 9, 1987. At the time, Roche declined comment and Little said, “I’m stuck in the middle of this thing. I had nothing to do with this parking thing.” No charges were filed, and the investigation ended when Kidder settled SEC charges.
page 394 Jefferies’s guilty plea and settlement of SEC charges were reported in The Wall Street Journal, Mar. 20, 1987.
page 395 Lewis was identified as Jefferies’s co-conspirator in The Wall Street Journal, Mar. 23, 1987. Lewis later pleaded guilty to three felonies (see Wall Street Journal, Aug. 31, 1989).
page 399 The decision to drop the charges was widely reported. See, e.g., The Wall Street Journal, May 14, 1987, which includes the “tip of the iceberg” quote from Cartusciello.
page 400 The “tool-and-die” quote, obtained by reporter Steve Swartz, appears in a Wall Street Journal article, May 15, 1987. In the same article, DeNunzio denied that his ouster had anything to do with the scandal and denied any wrongdoing with respect to Siegel’s activities at the firm.
page 401 The Kidder, Peabody settlement is reported in The Wall Street Journal, June 5, 1987.
Chapter 12
page 407 Hale testified on Mar. 14, 1989, in the government’s trial of the Princeton-Newport officials and Newberg.
page 409 The Princeton-Newport raid was described in James B. Stewart and Daniel Hertzberg, “Insider Focus,” Wall Street Journal, Apr. 6, 1988.
page 409 Jones’s life story is the subject of Stephen J. Adler, “Working Girl,” Wall Street Journal,
page 411 Transcripts of the taped conversations between officials of Drexel and Princeton-Newport were introduced as evidence in the Princeton-Newport trial. All quotes are from the transcripts.
page 412 The transcript of the conversation between Freeman and Zarzecki has been made public as government exhibit T-1 in the Princeton-Newport trial.
page 412 The quotes are from Princeton-Newport government exhibit T-1, page A-1627.
page 414 Engel’s return to Drexel, and subsequent departure, is discussed in Bruck, The Predators’ Ball, pp. 338–342.
page 415 The Drexel video at the 1987 Predators’ Ball was described in Steve Coll, “Drexel’s Faithful Sing Praises of Junk Bonds,” Washington Post, Apr. 5, 1987. The quotation, “How much did we pay that guy?” is from that article.
page 415 The “guilty conscience” quote is from Coll, “Drexel’s Faithful.”
page 416 The quote “When the going gets tough . . . ” and description of the junk-bond celebration are from Bruck, The Predators’ Ball, p. 348.
page 416 The article described is Laurie P. Cohen, “Drexel’s New Television Ad Tugs at the Heart but Fudges the Facts,” Wall Street Journal, Dec. 8, 1987.
page 417 For examples of Wall Street Journal editorials, see “Junk Prosecution?” July 12, 1988 (“The case against Drexel may be more risky than a high-yield bond”); “Drexel: Prosecution and Fall,” Feb. 15, 1990 (“It is a mockery of due process that Mr. Milken has not had his day in court after more than three
years of investigation. . . . No serious person is arguing that the government’s charges amount to a claim that Mr. Milken built the junk bond on some crooked scheme”).
page 418 The 1987 stock market crash is the subject of James B. Stewart and Daniel Hertzberg, “Terrible Tuesday,” Wall Street Journal, Nov. 20, 1988.
page 419 The Buffett quote is from David A. Vise, “Despite Setbacks, Drexel Still Calls Shots in ‘Junk Bond’ Revolution,” Washington Post, Apr. 17, 1988.
page 420 The Boesky sentencing was described in The Wall Street Journal, Dec. 21, 1987. In materials made public in connection with Boesky’s sentencing, his psychiatrist offered this explanation of his wrongdoing: Boesky “has begun to recognize that he suffered from an abnormal and compulsive need to prove himself, to overcome some sense of inadequacy or inferiority that is rooted in his childhood. He was driven to work without any limit of time or effort. He sacrificed closeness with family and friends without realizing that it was happening . . . ” (Boesky memo, p. 40).
page 420 The quotes from Judge Lasker are from U.S. v. Boesky, transcript of the sentencing hearing, Dec. 20, 1987.
page 421 The events of Feb. 18, 1988, are described in detail in Stewart and Hertzberg, “How a Wealthy Arb . . . Turned to Violence.”
page 425 The grand jury testimony quoted is from a transcript disclosed by the government in connection with U.S. v. Mulheren.
page 428 Mulheren’s quotes are from the police report, introduced in evidence in U.S. v. Mulheren.
page 429 Jamie’s dissolution is discussed in The Wall Street Journal, Feb. 23, 1988.
Chapter 13
page 431 Lompoc is no longer a minimum-security facility.
page 432 In its complaint, the SEC charged Milken and Drexel with insider trading in connection with the Viacom trading. The charges are described in detail in SEC v. Drexel Burnham Lambert et al., Complaint for Injunctive and Other Equitable Relief, pp. 166–171. Milken has said he knew nothing about the Viacom trading and that, in any event, it was a routine hedging procedure and wasn’t insider trading. After receiving immunity, Gardiner testified about his various inconsistencies in the Fatico hearing (see note to p. 517).
page 433 Drexel’s Wells submission was reported in The Wall Street Journal, Jan. 26, 1988.
page 434 The article that captured Baird’s attention was Stewart and Hertzberg, “Suspicious Trading.”
page 436 The Jones perjury charges are the subject of Adler, “Working Girl.”
page 438 Robinson was the subject of a front-page article, Joann Lipman, “Power Broker,” Wall Street Journal, Dec. 5, 1988.
page 441 Lerer of Robinson, Lake disputed a number of quotations attributed to him by others after this book was published. Specifically, he objected to the phrases “creating value,” “breast feeding,” and “salivating” (p. 441); “Americans aren’t readers” and “the errata will be longer than the book itself” (p. 447). Other witnesses stand by their recollections, and hence I have retained the original quotations in the main text.
page 441 Lerer denied or clarified some aspects of the account that appears in this chapter after this book was published. Specifically, he said that he had a Nintendo game in his office for only one month, Linda Robinson didn’t threaten the Journal, Fortune magazine was dealt with in the same manner as every other publication, and Ingersoll’s “Nightline” appearance was not “scripted” (p. 442); Robinson, Lake did not receive a $150,000 per month retainer and there was no attempt to change public opinion (p. 443); no one ever wrote a speech for Milken (p. 467); Mary Helen Thompson wasn’t hired to cultivate the black community on behalf of Milken (p. 468); Lerer never predicted the outcome of the Princeton-Newport trial (p. 490); and he was not in the office the night of April 19th, and, hence, could not have disappeared behind closed doors with Linda Robinson (p. 510).
To the extent that the main text doesn’t reflect these assertions, it is principally because other witnesses remember the events differently. In some cases, their accounts are supported by documents; for example, a draft of a “Nightline” script for Ingersoll and drafts of speeches for Milken prepared by a Robinson, Lake employee. In the case of the retainer, Lerer declined to reveal what the firm’s fees are.
page 444 The Dingell hearings are described in Thomas E. Ricks, “Milken Refuses to Testify in House Probe,” Wall Street Journal, Apr. 28, 1988.
page 446 Milken’s attempt to buy Bruck out of her book contract is described in Bruck, The Predators’ Ball, p. 359.
page 448 Liman has denied that he urged Drexel or its lawyers to try to block Bruck’s book.
page 448 The article referred to is Laura Landro, “Junk Bond People Think Book on Them Is So Much Trash,” Wall Street Journal, May 19, 1988.
page 451 The indictments were reported in The Wall Street Journal, Aug. 5, 1988.
page 451 Maultasch’s cooperation was first reported in Laurie P. Cohen, “Senior Drexel Trader Is Witness,” Wall Street Journal, Dec. 7, 1988.
page 457 Dahl’s cooperation was reported in The Wall Street Journal, Oct. 5, 1988.
page 459 Peizer testified about the desk drawer conversation with Milken, and the Solomon arrangement, at the Fatico hearing (see note to p. 517).
Chapter 14
page 461 The SEC’s complaint is summarized in the SEC’s Litigation Release No. 11859, Sept. 7, 1988. The 184-page complaint contains the most detailed account of the government’s version of Milken’s criminal enterprise. See note to p. 432.
page 464 Cogut testified in the Fatico hearing (see note to p. 517). The MacPherson situation was also described in Laurie P. Cohen, “About Face,” Wall Street Journal, Apr. 23, 1990.
page 466 The existence of plea negotiations was first reported in The Wall Street Journal, Jan. 27, 1989.
page 468 The quotation “That man of genius . . . ” is from Glenn F. Bunting, “How Drexel Made Itself Welcome with Politicians,” Los Angeles Times, May 7, 1989. The article, a detailed report on Drexel’s political contributions, also reported that Bradley intervened on Drexel’s behalf with the SEC and tried to enlist the help of California Representative Tony Coelho.
pages 467–468 Milken’s public-relations campaign aimed at blacks is the subject of Mary G. Gotschall, “The Machine Behind Michael Milken,” Regardies, January 1991.
page 469 The fight for RJR Nabisco is the subject of Bryan Burrough and John Helyar’s best-selling Barbarians at the Gate (New York: Harper Collins, 1990). Robinson’s role is described in detail in the book.
page 471 Drexel’s effort to sell the RJR bonds is the subject of Randall Smith, “Capital Coup,” Wall Street Journal, Mar. 3, 1989.
page 472 The events that led to Drexel’s settlement are described in Steve Swartz and Laurie P. Cohen, “Executive Anguish,” Wall Street Journal, Dec. 16, 1988.
page 473 The text of Joseph’s memo appeared in The Wall Street Journal, Dec. 5, 1988.
pages 474–175 Liman has acknowledged having had a broad philosophical and historical discussion about Drexel’s decision to plead guilty with Joseph, but has denied that he meant to compare Drexel’s conduct to the Nazi persecution of the Jews.
page 478 The events leading to Drexel’s demise are the subject of Laurie P. Cohen, “The Final Days,” Wall Street Journal, Feb. 26, 1990. Additional details appear in Brett Duval Fromson, “The Last Days of Drexel Burnham,” Fortune, May 21, 1990.
page 480 The RJR road show is described in Smith, “Capital Coup.”
Chapter 15
page 488 The indictment and press conference are described in Laurie P. Cohen, “The Other Shoe,” Wall Street Journal, Mar. 30, 1989, which contains the quote, “In America . . . ”.
page 489 The Jones trial is described in Adler, “Working Girl.”
page 490 The Princeton-Newport trial and verdict were reported in The Wall Street Journal, Aug. 1, 1989. The Court of Appeals reversed the convictions in part, including the RICO and tax charges, but upheld the securities and conspiracy con
victions (see Wall Street Journal, July 1, 1991). The appellate decision had little practical impact on the defendants.
page 496 The 1989 Predators’ Ball is described in Jaye Scholl, “Skeleton at the Feast,” Barron’s, April 10, 1989.
page 497 Details of the Drexel settlement were reported in The Wall Street Journal, Apr. 14, 1989.
page 497 Drexel’s first choice for the chairman’s post was former Tennessee senator Howard Baker, who reportedly declined the job because he thought he would be a mere figurehead. Though Drexel was perceived as trying to buy respectability by hiring Shad, Shad insisted at the time that he would be an “active chairman” and not window dressing. Shad added, “I wouldn’t have accepted this position but for my confidence in and my respect for Fred Joseph.” See The Wall Street Journal, Apr. 17, 1989.
page 500 The crisis at Integrated Resources is the subject of Linda Sandler, Randall Smith, and Joan Lebow, “Limited Resources,” Wall Street Journal, June 23, 1989.
page 502 The controversy over Milken’s legal fees was reported in Laurie P. Cohen, “Drexel Is Putting Milken’s Attorneys on a Strict Budget,” Wall Street Journal, Oct. 4, 1989, which contains the quote from Liman.
page 503 The collapse of the UAL deal is the subject of Jeff Bailey, Asra Nomani, and Judith Valente, “Flawed Portent,” Wall Street Journal, Oct. 16, 1990.
page 503 One of the harshest indictments of Milken’s business is Benjamin J. Stein, “Was Drexel/Milken the Biggest Scam Ever?” Barron’s, Feb. 19, 1990. “Drexel/Milken, a critic charges, was a vast Ponzi scheme. There never was a Wizard of Oz or nerd/genius, but only Michael the Cheerleader,” was how Barron’s described the piece in its table of contents. The article enraged the Milken camp, but quickly became the most talked-about survey of Milken’s economics.
page 503 The statistics on the performance of junk bonds and other investments are from George Anders and Constance Mitchell, “Junk King’s Legacy,” Wall Street Journal, Nov. 20, 1990.