Review: Den of Thieves by James Stewart

Part of the disgust with Washington and big business stems from the slew of mergers and acquisitions that began during the seventies and eighties and which resulted in many people losing their jobs as the larger entities pulled cash out of the acquisitions, cut jobs, and moved much of the business overseas for cheaper labor costs. In part, what drove the acquisitions mania was the tax code that taxed dividends and profits from a business or stocks and made interest costs fully deductible. It paid therefore to borrow any amount to purchase a company driving the stock price up and then reselling the same company to someone else. The brokers in the middle as well as the managers of those companies became insanely rich from the shell game.

One surprising tidbit that surprised me was how Milliken and others manipulated the press to achieve movement in stock prices and to get what they wanted. By carefully planting stories they could build momentum for mergers and speculation that would otherwise have gone unnoticed. The stock price would move in whatever direction they wanted.

It was shameful how Ivan Boesky was hailed by business magazines and university departments as some kind of business genius. His speeches were lauded and yet he achieved what he did purely by cheating.

It's instructive given today's PR strategies by the White House to see how Wall Street and the business community responded to SEC investigations and indictments. Once the information about Boesky's crimes and his indictment was released, the attacks on the SEC began. They discovered that the SEC had permitted Boesky to sell $400,000,000 of his position for a couple of reasons: the SEC wanted to make sure he would have money to pay the $100,000,000 fine he had agreed to in his plea, and they were worried that if news got out prematurely the market would tank and many investors would get hurt. As it was, his investors made a lot of money and the fine was paid. But that knowledge was used against the SEC by the business media (and others who had been guilty of the same insider trading) as a way to focus attention away from themselves and to make the SEC look bad, paving the way for future emasculation of the agency, already underfunded. The charge was that the SEC was letting Boesky get away with millions, an untruth. 

Boesky today lives in California and as a result of his 1991 divorce settlement, his wife (!) paid him $23 million and $180,000 per years. Not too shabby.

Millkin and others involved made literally billions, some served prison terms, almost all came out of it quite comfortably. My own feeling is the deck is stacked against the average investor and that the whole idea of leveraged buyouts hurts everyone except those who orchestrate the deals and collect the fees. Then again, my pension relies on a healthy and growing stock market, so perhaps my complaints should be muted.