Dennis Levine
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Dennis Levine (born 1952) was a prominent player in the Wall Street insider trading scandals of the mid-1980s. [1] As a managing director at Drexel Burnham Lambert, he was charged with insider trading by then U.S Attorney Rudy Giuliani, eventually leading investigators to the arrest of Ivan Boesky.
Levine grew up in a middle-class family in Bayside in eastern Queens. He graduated from Baruch College, obtaining an MBA from the same school in 1976. After a brief stint at Citibank, he joined Smith Barney in 1978, moving to Lehman Brothers in 1981. Shortly after Lehman was bought by American Express in 1985, he moved to Drexel.
Levine spent most of his career as a specialist in mergers and acquisitions. He was known as a good researcher with a voracious appetite for information.[2] He soon became a major player in the M&A field, and played key role in two of the more notable hostile takeovers of the 1980s--James Goldsmith's takeover of Crown Zellerbach and Ron Perelman's takeover of Revlon. It was very common to see him on a telephone with an extra-long cord while hunched over a Quotron, checking out signs of possible deals.[3]
Over the years, Levine built up a network of professionals at various Wall Street firms who engaged in insider trading. Participants exchanged and traded on inside information they obtained through their work. Levine placed his trades through an account maintained under an assumed name at Bahamian subsidiaries of Swiss banks, using pay phones to prevent his calls from being traced. After briefly doing business with Pictet & Cie., he moved his business to Bank Leu in May, 1980, eventually earning $10.6 million in illegal profits.[2] Levine believed he was safe from detection. Like most Swiss banks, Bank Leu had a long tradition of secrecy. Also, the Bahamas had some of the strictest bank secrecy laws in the world.
Bank Leu officials soon realized that Levine was trading almost entirely on inside information. In order to get a piece of the action for themselves, some of them copied, or "piggybacked," his trades for their own accounts. They also broke up his trades through several brokers. Unfortunately for Levine, they steered a large number of his trades through a broker at Merrill Lynch, who began piggybacking the trades for himself.
In May 1985, Merrill Lynch detected suspicious activity in that and two other brokers' personal trading accounts. An internal investigation led to Bank Leu. Unable to pierce the veil of secrecy, Merrill Lynch forwarded the affair to the U.S. Securities and Exchange Commission (SEC). Bank officials suggested that Levine come up with reasons to justify the trades. However, they also forged or destroyed many documents related to Levine's activity--thus opening them to charges of obstruction of justice. Their story fell apart when noted attorney Harvey Pitt, whom the bank had retained, noticed a huge gap between the actual statements of the bank's managed accounts and the omnibus records. At that point, the bank decided to cooperate with the SEC.[2]
Bahamian Attorney General Paul Adderly issued an opinion that stock trading was separate from normal banking transactions, and thus was not subject to the bank secrecy laws. The bank was thus free to reveal Levine's name, and he was arrested soon afterward.[2]
Faced with overwhelming evidence (including records of his calls), Levine pleaded guilty and was sentenced to two years in prison and a $362,000 fine.[4] He also settled an insider trading suit by the SEC, agreeing to forfeit his illegal profits.
The SEC and the US Attorney's office conducted investigations that soon extended well beyond Levine's insider trading ring. There seemed to be an entire web of relationships among Wall Street professionals exchanging information and other favors, including the parking of stock, the accumulation of stock to pressure a firms' management, and stock price manipulation. Well known market participants were soon caught up in the investigations, including investment banker Martin Siegel of Kidder Peabody, arbitrageur Robert Freeman of Goldman Sachs and arbitrageur Ivan Boesky. The investigations also led to Michael Milken, who was highly influential in the junk bond market at the time.
After his release from prison, Levine returned to the finance world as president of ADASAR Group, a financial consulting firm. He also lectures throughout the world at universities and organizations on a host of contemporary issues from business ethics to emerging technology trends.
In 1991, he wrote a book about his experiences, Inside Out. He claimed that his willingness to plunge into insider trading came from not hearing anything about ethics in his classes at Baruch; indeed, one of his main priorities at ADASAR and in his lecturs is to stress the importance of ethical standards to young professionals. He claimed that he could have contested the government's case against him on the basis that it circumvented Bahamian law in order to obtain most of the evidence against him. However, he said, the possibility of additional charges--possibly including the powerful Racketeer Influenced and Corrupt Organizations Act--and concern about the effects on his family led him to conclude that this was a battle he couldn't win. [5]
[edit] See also
[edit] References
- ^ "Greed on Wall Street". Newsweek. 1986-05-26. http://www.msnbc.msn.com/id/9926616/site/newsweek/. Retrieved 2007-08-22.
- ^ a b c d Stewart, James B. Den of Thieves. New York: Simon & Schuster, 1991. ISBN 0-671-63802-5.
- ^ Levine, Dennis; with William Hofer. Inside Out. New York: G.P. Putnam's Sons, 1991. ISBN 0-399-13655-X
- ^ "From Pinstripes to Prison Stripes". Time Magazine. 1987-03-02. http://www.time.com/time/magazine/article/0,9171,963643,00.html. Retrieved 2007-08-22.
- ^ Levine, Dennis; with William Hofer. Inside Out. New York: G.P. Putnam's Sons, 1991. ISBN 0-399-13655-X
