INSIDE OUT: AN INSIDER'S
ACCOUNT OF WALL STREET.
Dennis B. Levine
with William Hoffer.
431 pages. $22.95.
One evening in the middle of the much-publicized insider stock trading scandals of the late 1980s, I attended a barbecue at a neighbor's house. The dinner conversation, among people who had no great interest in the stock market or the securities industry, had a consistent theme. They thought the scandals showed the system was rigged, that the individual investor didn't have much of a chance.
Perhaps that was the greatest crime of those who flouted securities laws in the '80s, the message received by many in the general public: The financial markets, those supposed engines of capitalism, were not places where people always cared about playing fair.
Dennis B. Levine was one of those inside traders, and with the help of William Hoffer here gives his side of the story. It is a straightforward and well-written account. Happily, Mr. Levine doesn't whine or maintain that he got a bum deal. He knows he did wrong, and seems to feel lucky to have gotten a second chance.
If there's one question you'd want to ask a man who built up more than $10 million in illegal trading profits, much of it when he was at the very epicenter of the mergers and acquisition craze and earning a legitimate annual salary counted in the millions, it's a simple one. Why?
Mr. Levine struggles to answer. He says it was not just greedand offers a few other possibilities: "Something deep inside forced me to try to catch up to the pack of wheeler-dealers who always raced in front of me." He says money became a way of keeping score. "If I checked the Quotron and discovered that I had just earned several hundred thousand dollars on an inside trade, I felt a rush of euphoria that had to be akin to a drug high. But the high always wore off, because I soon remembered that there were so many ahead of me on the scoreboard."
And: "Ambition eclipsed rationality. I was unable to find fulfillment in realistic limits."
One comes away thinking there has to be something more. MrLevine at a young age sent into motion a scheme involving an ever-widening group of people (eventually adding the arbitrageur Ivan Boesky) resulting in Mr. Levine's conducting inside trades on dozens of stocks in takeover situations. He didn't need the money. He loved his job as investment banker, which provided both power and prestige. The question of why lingers.
He does present a cogent picture of Wall Street in the 1980s as a meritocracy (he rose quickly based on investment banking skills) and a monetary fantasyland. Starting in the business world in 1977, which positioned him well to be part of the explosion of markets and mergers in the Reagan years, Mr. Levine had an annual salary of $19,000. Nine years later, he was a managing director of Drexel Burnham Lambert, then perhaps the most important securities firm in the country thanks to its dominance in the "junk" bond market and its key role in the merger field. His legitimate income was more than $2 million a year.
There's something very American in the rise and fall (and postjail rise again) of Dennis Levine. There's the unquestioning view that money and power are all that matter, and that as long as you're smart enough you can beat the system. Morality just never seemed to be an issue in his actions. Mr. Levine weighed the risks and rewards of illegally trading on knowledge he or one of his cohorts were privy to in their roles as investment bankers and lawyers. He concluded the risks were minimal, the rewards great, and went on his merry way.
Mr. Levine carried on illegal trading based on privileged information through much of his investment banking career, barely missing a beat as he switched firms several times. It got to the point that fresh from advising some big corporate raider on how to best acquire a huge company in a hostile takeover, he would rush to a pay phone and through his offshore bank place a buy order for the stock of the target company. Despite his feeling that he had covered his tracks, the boldness of some of these moves is amazing. Later, when it all had crashed down around him, he says: "It was apparent that I had grossly underestimated the capabilities of the government investigators."
In addition to an account of his misdeeds and prosecution (he pleaded guilty to violating insider trader laws, cooperated with authorities and served 17 months in prison), Mr. Levine takes the reader into the midst of the merger mania that engulfed Wall Street. As an investment banker, he played a role in many of the big deals of the mid-1980s. A lot of famous names in 1980s finance, from Boesky and Michael Milken to the top corporate raiders, appear in these pages. We also get a behind-the-scenes look at the "Predators' Balls" held by Drexel, those Beverly Hills gatherings where the takeover specialists and big junk-bond buyers came to celebrate themselves.
This is a forthright and intriguing book, and a cautionary tale. There are familiar lessons to be learned. Love and appreciation of family and friends bring fulfillment, not a ride on the fast track fueled by insatiable ambition. Oh yes, there's a more subtle moral. Don't count on a foreign bank to protect your illegal doings, secrecy laws or no.
Mr. Lipschutz is a writer living in New York.