Wow. Can’t believe I have to write this. When we posted Tip #1: watch out for the watch list, we thought the most-basic tip was obvious.
For crying out loud don’t trade on your own deals. Couldn’t decide if that should be Tip #0 or Tip #1, but decided to just keep it going in chronological order, rather than sorted by importance.
As DealBook reports,
Ramesh Chakrapani, 33, a managing director in the firm’s London office, was accused of leaking details about the 2006 takeover of the Albertsons supermarket chain by a consortium of retailers and private equity firms. At the time of the events in question, he worked in Blackstone’s New York office as part of the mergers and acquisitions team working on the deal.
Apparently, Chakrapani was sitting in meetings (where no one noticed his presence) and furiously texting away tips to his friends. All told, they took in $3.6 million, according to the SEC’s complaint. Steve Schwarzman, Blackstone’s co-founder, is pissed.
Deal Journal brings the BigLaw angle to the story. No matter how the bankers do on the insider trading, Example A of how stupid it is always comes back to disgraced former Wachtell partner, Ilan Reich.
The Wachtell lawyer’s story and the full text of Schwarzman’s internal memo, after the jump.
As we mentioned in passing, we’re huge fans of Drexel Burnham Lambert around here. Ilan Reich was the biggest patsy in the history of insider trading. He was basically the guy at the center of the Ivan Boesky – Mike Milken – Dennis Levine ring of the early 80s. (For those who subscribe to the theory that “if you’re going to steal, steal big,” these guys were your heroes until Madoff came along.) Anyway, Reich was their lawyer. He had a series of changes of heart, but ultimately, he was one of the main conduits of the information.
Reich made partner and was convicted in 1986, about 2 years later. In addition to being a supporting character in any of the plethora of books about the era (Den of Thieves by James B Stewart is our personal favorite), he was on the cover of The American Lawyer for a 1986 article entitled “Death of a Career.” More recently, Fortune did an extensive piece on his life, from his early days, through the malfeasance, year in jail, battle with cancer, and fight to reclaim his life. Check it out. One other anecdote about Reich, he was involved in a dispute with Gabe “Mr. Kaplan” Kotter about investments gone sour in a company called Medical Device Alliance.
That’s just a long way of saying, this shit is expected from bankers. Lawyers should know better, and if you don’t, it’s your name that will be vilified for years to come.
Schwarzman’s memo:
Message from Steve Schwarzman
Issued: January 13, 2009
I am both saddened and outraged to have to tell you that the SEC has brought a civil complaint today against Ramesh Chakrapani in our Corporate Advisory Services Group, charging him with passing on inside information three years ago about a pending transaction on which he worked as a 30 year old vice president.
We are all shocked by this alleged breach of the law and violation of our firm’s compliance policies and ethical standards. This employee has been suspended and we have told the authorities that they will have our firm’s full cooperation in their investigation into this matter.
This is the first time in the firm’s 24-year history that any employee of the firm has been accused of any infringement of securities laws. Abuse of inside information goes against everything our firm stands for. I have personally made it an absolute priority to speak to each new class of analysts and associates about the prime importance of protecting confidential information and guarding against insider trading. Our employees’ absolute integrity at all times and careful protection of any confidential information that comes into their possession have been the foundation of the reputation we have earned for professionalism and ethical conduct in everything we do, and these allegations undermine the many years of good work by all of the rest of us. I am personally infuriated that one person’s behavior could damage our unblemished record built up over nearly a quarter century.
Should you receive any calls about this matter, please refer them all to [redacted]. Because this case is the subject of a pending investigation, we would also ask you to refrain from discussing it with anyone.
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Greed, for lack of a better word, is good.
Greed, for lack of a better word, is good.