Dennis Levine
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Dennis Levine (born 1953) 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 1977. 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. While he was a good researcher with a voracious appetite for information, his math skills were marginal at best. He masked this shortcoming by gathering and trading on non-public information.
Levine spent much of his working life on the phone developing a ring of professionals working at a number of Wall Street firms. 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 later in 1981, eventually earning $10.6 million in illegal profits. 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.
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.
Faced with overwhelming evidence (including records of his calls), Levine pleaded guilty to securities fraud, obstructing justice, tax evasion and an unrelated charge of perjury. His cooperation with prosecutors led to a lenient sentence by U.S. District Judge Gerard Goettel of two years in prison and a $362,000 fine.[2] He also settled an insider trading suit by the SEC, agreeing to forfeit his illegal profits. He is banned from the securities industry for life.
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. 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 morals and ethics in his classes at Baruch. He also said that while working at Smith Barney's offices in Paris in the late 1970s, he noticed that insider trading and the use of offshore bank accounts was very common among European businessmen.
[edit] See also
- Mike Milken
- Ivan Boesky
- List of insider traders
[edit] References
- ^ Greed on Wall Street. Newsweek (May 26, 1986). Retrieved on 2007-08-22.
- ^ From Pinstripes to Prison Stripes. Time Magazine (March 2, 1987). Retrieved on 2007-08-22.
