Infectious Greed (79 page)
Authors: Frank Partnoy
97
Michael Pettis, “Latin America Needs a Bond Market,”
Wall Street Journal,
September 4, 1998, p. A11.
Michael Pettis, “Latin America Needs a Bond Market,”
Wall Street Journal,
September 4, 1998, p. A11.
99
Kolman, p. 15.
Kolman, p. 15.
100
Lewis, p. 24.
Lewis, p. 24.
101
Kolman, p. 16.
Kolman, p. 16.
102
Dunbar. The principals of LTCM easily avoided federal prosecution, but they had more trouble dodging the taxman. In 2003, the Internal Revenue Service brought an action against LTCM, seeking to recover $75 million of taxes LTCM had avoided through complex financial engineering. Government officials had expressed concerns about tax shelters, and LTCM was infamous for its “tax avoidance” deals. The Senate Finance Committee had estimated that such shelters cost the government at least $10 billion in lost tax revenue. At the LTCM trial during summer 2003, the Nobel laureate Myron Scholes was asked whether taking a $100 million tax deduction for something LTCM paid $1 million for was a tax shelter. His response was, “I prefer not to go into definitions like that. It was a mitigation of taxes.” Ben White, “Long-Term Capital Case Puts Tax Shelters on Trial,”
Washington Post,
July 23, 2003, p. E01.
Dunbar. The principals of LTCM easily avoided federal prosecution, but they had more trouble dodging the taxman. In 2003, the Internal Revenue Service brought an action against LTCM, seeking to recover $75 million of taxes LTCM had avoided through complex financial engineering. Government officials had expressed concerns about tax shelters, and LTCM was infamous for its “tax avoidance” deals. The Senate Finance Committee had estimated that such shelters cost the government at least $10 billion in lost tax revenue. At the LTCM trial during summer 2003, the Nobel laureate Myron Scholes was asked whether taking a $100 million tax deduction for something LTCM paid $1 million for was a tax shelter. His response was, “I prefer not to go into definitions like that. It was a mitigation of taxes.” Ben White, “Long-Term Capital Case Puts Tax Shelters on Trial,”
Washington Post,
July 23, 2003, p. E01.
103
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. 42.
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. 42.
104
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. 29.
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. 29.
105
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. B-9.
“Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management,” p. B-9.
106
Tanya Styblo Beder, “Guidelines for a Brave New Pension World,”
Derivatives Strategy,
November 1995, p. 59.
Tanya Styblo Beder, “Guidelines for a Brave New Pension World,”
Derivatives Strategy,
November 1995, p. 59.
108
Capital Market Risk Advisors, “SEC Market Risk Disclosure SurveyâResults” (1998), pp. 2-3; Capital Market Risk Advisors, “Outlook 2000” (2000), p. 3.
Capital Market Risk Advisors, “SEC Market Risk Disclosure SurveyâResults” (1998), pp. 2-3; Capital Market Risk Advisors, “Outlook 2000” (2000), p. 3.
110
17 C.F.R. § 229.305 (1999); Release Nos. 33-7386; 34-38223; IC-22487; FR- 48, January 31, 1997, p. 37.
17 C.F.R. § 229.305 (1999); Release Nos. 33-7386; 34-38223; IC-22487; FR- 48, January 31, 1997, p. 37.
111
Hansell and Muehring, p. 49.
Chapter 9: The Last One to the PartyHansell and Muehring, p. 49.
1
Susan Pulliam and Randall Smith, “Silicon Touch: For Frank Quattrone, With a Fief at CSFB, Tech Was a Gold Mine,”
Wall Street Journal,
May 3, 2001, p. A1.
Susan Pulliam and Randall Smith, “Silicon Touch: For Frank Quattrone, With a Fief at CSFB, Tech Was a Gold Mine,”
Wall Street Journal,
May 3, 2001, p. A1.
2
Randall Smith, “High-Tech Banker Scores Deals with Mule and âRocky Raccoon, '”
Wall Street Journal,
September 24, 1999, p. C1.
Randall Smith, “High-Tech Banker Scores Deals with Mule and âRocky Raccoon, '”
Wall Street Journal,
September 24, 1999, p. C1.
3
Pulliam and Smith, p. A1.
Pulliam and Smith, p. A1.
4
Smith, p. C1.
Smith, p. C1.
6
Michael Siconolfi, “Under Pressure: At Morgan Stanley, Analysts Were Urged to Soften Harsh Views,”
Wall Street Journal,
July 14, 1992, p. A1.
Michael Siconolfi, “Under Pressure: At Morgan Stanley, Analysts Were Urged to Soften Harsh Views,”
Wall Street Journal,
July 14, 1992, p. A1.
7
Lux, p. 43.
Lux, p. 43.
8
Anita Raghavan, “Credit Suisse Hires Frank Quattrone in Bid to Boost High-Tech Bank Effort,”
Wall Street Journal,
July 1, 1998, p. B6.
Anita Raghavan, “Credit Suisse Hires Frank Quattrone in Bid to Boost High-Tech Bank Effort,”
Wall Street Journal,
July 1, 1998, p. B6.
9
Susan Pulliam, Randall Smith, Anita Raghavan, and Gregory Zuckerman, “Coming to Terms: CSFB Agrees to Pay $100 Million to Settle Twin IPO Investigations,”
Wall Street Journal,
December 11, 2001, p. A1.
Susan Pulliam, Randall Smith, Anita Raghavan, and Gregory Zuckerman, “Coming to Terms: CSFB Agrees to Pay $100 Million to Settle Twin IPO Investigations,”
Wall Street Journal,
December 11, 2001, p. A1.
10
Lux, p. 43.
Lux, p. 43.
11
Smith, p. C1.
Smith, p. C1.
12
Joann S. Lublin, “As IPO Looms, Software CEO Cedes Her Post,”
Wall Street Journal,
October 12, 1999, p. B1.
Joann S. Lublin, “As IPO Looms, Software CEO Cedes Her Post,”
Wall Street Journal,
October 12, 1999, p. B1.
15
John Maynard Keynes,
A General Theory of Employment, Interest, and Money
(1936; Prometheus Books 1997), p. 131; Donald C. Langevoort, “Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation,”
Northwestern University Law Review,
forthcoming.
John Maynard Keynes,
A General Theory of Employment, Interest, and Money
(1936; Prometheus Books 1997), p. 131; Donald C. Langevoort, “Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation,”
Northwestern University Law Review,
forthcoming.
16
Joseph J. Mezrich and Lakshmi Seshadri, “It Started in Mexico,”
Morgan Stanley U.S. Investment Perspectives,
March 6, 2002, p. 10.
Joseph J. Mezrich and Lakshmi Seshadri, “It Started in Mexico,”
Morgan Stanley U.S. Investment Perspectives,
March 6, 2002, p. 10.
17
Jeremy J. Siegel,
Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies
(McGraw-Hill Trade 2002).
Jeremy J. Siegel,
Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies
(McGraw-Hill Trade 2002).
18
Frank Easterbrook and Daniel Fischel, “Mandatory Disclosure and the Protection of Investors,”
Virginia Law Review, Volume 70
(1984), p. 669.
Frank Easterbrook and Daniel Fischel, “Mandatory Disclosure and the Protection of Investors,”
Virginia Law Review, Volume 70
(1984), p. 669.
19
Andrei Shleifer,
Inefficient Markets: An Introduction to Behavioral Finance
(Oxford University Press 2000); Robert Shiller, “Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?”
American Economic Review, Volume 71
(1981), p. 421.
Andrei Shleifer,
Inefficient Markets: An Introduction to Behavioral Finance
(Oxford University Press 2000); Robert Shiller, “Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?”
American Economic Review, Volume 71
(1981), p. 421.
20
Andrei Shleifer and Robert Vishny, “The Limits of Arbitrage,”
Journal of Finance, Volume 52
(1997), p. 35.
Andrei Shleifer and Robert Vishny, “The Limits of Arbitrage,”
Journal of Finance, Volume 52
(1997), p. 35.
22
Saul Hansell and Kevin Muehring, “Why Derivatives Rattle the Regulators,”
Institutional Investor,
September 1992, p. 49.
Saul Hansell and Kevin Muehring, “Why Derivatives Rattle the Regulators,”
Institutional Investor,
September 1992, p. 49.
24
Inmoo Lee, Scott Lochhead, Jay Ritter, and Quanshui Zhao, “The Costs of Raising Capital,”
Journal of Financial Research, Volume 19
(1996), p. 59.
Inmoo Lee, Scott Lochhead, Jay Ritter, and Quanshui Zhao, “The Costs of Raising Capital,”
Journal of Financial Research, Volume 19
(1996), p. 59.
25
Mark Hulbert, “The Fantasy and the Fact of New Stock Offerings,”
New York Times,
January 2, 2000, Section 3, p. 8.
Mark Hulbert, “The Fantasy and the Fact of New Stock Offerings,”
New York Times,
January 2, 2000, Section 3, p. 8.
27
John Cassidy, “Striking It Rich; The Rise and Fall of Popular Capitalism,”
The New Yorker,
January 14, 2002, p. 63.
John Cassidy, “Striking It Rich; The Rise and Fall of Popular Capitalism,”
The New Yorker,
January 14, 2002, p. 63.
28
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,”
In the Matter of An Inquiry by Eliot Spitzer, Attorney General of the State of New York,
Supreme Court of the State of New York, County of New York, April 2002, p. 21.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,”
In the Matter of An Inquiry by Eliot Spitzer, Attorney General of the State of New York,
Supreme Court of the State of New York, County of New York, April 2002, p. 21.
30
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 24.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 24.
31
Cassidy, p. 63.
Cassidy, p. 63.
32
Hulbert, Sec. 3, p. 8.
Hulbert, Sec. 3, p. 8.
33
Charles Mackay,
Memoirs of Extraordinary Delusions and the Madness of Crowds
(1852; Metro Books 2002).
Charles Mackay,
Memoirs of Extraordinary Delusions and the Madness of Crowds
(1852; Metro Books 2002).
34
William G. Christie and Paul H. Schultz, “Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?”
Journal of Finance, Volume 49
(1994), p. 1,813.
William G. Christie and Paul H. Schultz, “Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?”
Journal of Finance, Volume 49
(1994), p. 1,813.
36
Lux, p. 43.
Lux, p. 43.
37
Securities and Exchange Commission v. Credit Suisse First Boston,
Complaint, U.S. District Court, District of Columbia, January 22, 2002, paragraph 47.
Securities and Exchange Commission v. Credit Suisse First Boston,
Complaint, U.S. District Court, District of Columbia, January 22, 2002, paragraph 47.
40
Pulliam and Smith, p. A1.
Pulliam and Smith, p. A1.
41
“That Was Then.”
“That Was Then.”
42
Susan Pulliam and Randall Smith, “CSFB Official Set Quota for Repayment of IPO Profits in Form of Commission,”
Wall Street Journal,
August 10, 2001, p. C1.
Susan Pulliam and Randall Smith, “CSFB Official Set Quota for Repayment of IPO Profits in Form of Commission,”
Wall Street Journal,
August 10, 2001, p. C1.
43
Securities and Exchange Commission v. Credit Suisse First Boston,
paragraphs 35, 38, 40, 41, and 43.
Securities and Exchange Commission v. Credit Suisse First Boston,
paragraphs 35, 38, 40, 41, and 43.
45
Pulliam, Smith, Raghavan, and Zuckerman, p. A1.
Pulliam, Smith, Raghavan, and Zuckerman, p. A1.
47
Pulliam and Smith, “Silicon Touch: For Frank Quattrone, With a Fief at CSFB, Tech Was a Gold Mine,” p. A1.
Pulliam and Smith, “Silicon Touch: For Frank Quattrone, With a Fief at CSFB, Tech Was a Gold Mine,” p. A1.
49
Administrative Complaint,
In the Matter of: Credit Suisse First Boston Corp.,
No. E-2002-41, October 21, 2002, pp. 5-6.
Administrative Complaint,
In the Matter of: Credit Suisse First Boston Corp.,
No. E-2002-41, October 21, 2002, pp. 5-6.
50
Pulliam and Smith, “CSFB Official Set Quota for Repayment of IPO Profits in Form of Commission,” p. C1.
Pulliam and Smith, “CSFB Official Set Quota for Repayment of IPO Profits in Form of Commission,” p. C1.
51
Randall Smith and Susan Pulliam, “CSFB Says It Has Fired 3 Brokers,”
Wall Street Journal,
June 29, 2001, p. C1.
Randall Smith and Susan Pulliam, “CSFB Says It Has Fired 3 Brokers,”
Wall Street Journal,
June 29, 2001, p. C1.
52
NASD Rule 2440.
NASD Rule 2440.
53
Susan Pulliam and Randall Smith, “CSFB's Defense: We Didn't Break IPO Rules,”
Wall Street Journal,
June 12, 2001, p. C1.
Susan Pulliam and Randall Smith, “CSFB's Defense: We Didn't Break IPO Rules,”
Wall Street Journal,
June 12, 2001, p. C1.
54
Tom Cahill, “CSFB's Mack Targets Goldman, Morgan Stanley: Mission Possible?”
Bloomberg News,
January 17, 2002.
Tom Cahill, “CSFB's Mack Targets Goldman, Morgan Stanley: Mission Possible?”
Bloomberg News,
January 17, 2002.
55
Cahill.
Cahill.
57
Patrick McGeehan, “His Rallying Cry at First Boston: Smaller, Cleaner, Fairer,”
New York Times,
January 27, 2002, Sec. 3, p. 1.
Patrick McGeehan, “His Rallying Cry at First Boston: Smaller, Cleaner, Fairer,”
New York Times,
January 27, 2002, Sec. 3, p. 1.
59
David Wells, “C. E. Unterberg's John Gutfreund Comments on CSFB IPO Probe,”
Bloomberg News,
December 11, 2001.
David Wells, “C. E. Unterberg's John Gutfreund Comments on CSFB IPO Probe,”
Bloomberg News,
December 11, 2001.
60
Pulliam, Smith, Raghavan, and Zuckerman, p. A1.
Pulliam, Smith, Raghavan, and Zuckerman, p. A1.
61
Siconolfi, p. A1.
Siconolfi, p. A1.
62
Gretchen Morgenson, “Requiem for an Honorable Profession,”
New York Times,
May 5, 2002, Sec. 3, p. 1.
Gretchen Morgenson, “Requiem for an Honorable Profession,”
New York Times,
May 5, 2002, Sec. 3, p. 1.
63
Charles Gasparino, “Analysts' Contracts Link Pay to Deal Work,”
Wall Street Journal,
May 6, 2002, p. C1.
Charles Gasparino, “Analysts' Contracts Link Pay to Deal Work,”
Wall Street Journal,
May 6, 2002, p. C1.
67
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 21.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 21.
68
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” pp. 8-9.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” pp. 8-9.
69
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 10.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 10.
70
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 11.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 11.
71
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 12.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 12.
72
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 11.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 11.
73
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 19.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 19.
74
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 25.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 25.
75
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 17.
“Affidavit in Support of Application for an Order Pursuant to General Business Law Section 354,” p. 17.
77
In the Matter of Microstrategy Inc.,
Securities Exchange Act Release No. 43724, Administrative Proceeding File No. 3-10388, December 14, 2000.
In the Matter of Microstrategy Inc.,
Securities Exchange Act Release No. 43724, Administrative Proceeding File No. 3-10388, December 14, 2000.
78
Charles Gasparino, Susanne Craig, and Randall Smith, “Salomon Faces Questions on IPO,”
Wall Street Journal,
July 10, 2002, p. C1.
Charles Gasparino, Susanne Craig, and Randall Smith, “Salomon Faces Questions on IPO,”
Wall Street Journal,
July 10, 2002, p. C1.
79
Code of Federal Regulations, Volume 17,
Section 243.100 (2000); “Selective Disclosure and Insider Trading,” Exchange Act Release No. 43,154 (August 20, 2000).
Chapter 10: The World's Greatest CompanyCode of Federal Regulations, Volume 17,
Section 243.100 (2000); “Selective Disclosure and Insider Trading,” Exchange Act Release No. 43,154 (August 20, 2000).
1
Johnny Roberts and Evan Thomas, “Enron's Dirty Laundry,”
Newsweek,
March 11, 2002, p. 22; Valentine Low, “Sex, Money and Power . . . The Fatal Mix that Spelt the End of Enron,”
Evening Standard,
March 6, 2002, p. 19; Patricia Sellers, “Women, Sex & Power,”
Fortune,
August 5, 1996, p. 42.
Johnny Roberts and Evan Thomas, “Enron's Dirty Laundry,”
Newsweek,
March 11, 2002, p. 22; Valentine Low, “Sex, Money and Power . . . The Fatal Mix that Spelt the End of Enron,”
Evening Standard,
March 6, 2002, p. 19; Patricia Sellers, “Women, Sex & Power,”
Fortune,
August 5, 1996, p. 42.
3
Loren Steffy, “Enron's Original Sins: Lies Began Long before Current Crisis,”
Bloomberg News,
March 20, 2002.
Loren Steffy, “Enron's Original Sins: Lies Began Long before Current Crisis,”
Bloomberg News,
March 20, 2002.
5
Steffy.
Steffy.
6
“U.S. Attorney Probing Alleged Illegal Trading by Former Enron Oil Executives,”
Platt's Oilgram News,
June 15, 1988, p. 4.
“U.S. Attorney Probing Alleged Illegal Trading by Former Enron Oil Executives,”
Platt's Oilgram News,
June 15, 1988, p. 4.
7
Tricia Crisafulli, “Bulk Oil, Nichimen, Among Defendants in Enron Suit Charging Fraudulent Trading,”
Platt's Oilgram News,
June 16, 1998, p. 4.
Tricia Crisafulli, “Bulk Oil, Nichimen, Among Defendants in Enron Suit Charging Fraudulent Trading,”
Platt's Oilgram News,
June 16, 1998, p. 4.
8
“Former Enron Oil Officials Charged with Fraud, Tax Violations by U.S. Attorney,”
Platt's Oilgram News,
December 21, 1989, p. 3.
“Former Enron Oil Officials Charged with Fraud, Tax Violations by U.S. Attorney,”
Platt's Oilgram News,
December 21, 1989, p. 3.
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