Confessions of a Wall Street Insider Page 6

  “Okay,” I said, exhaling slowly through my nose.

  I had a hundred grand.

  It would hurt, sure, but if I could keep the costs there and we could get this thing dismissed or deferred, it wouldn’t be fatal.

  But just as the clouds seemed to be parting, Sommer’s face fell. His expression told me that this rosy scenario was unlikely. I realized had to ask the big, scary question.

  “What happens if I get indicted?”

  “Then, again, you have three paths to choose from,” Sommer explained. “You can plead guilty and cooperate, plead guilty and not cooperate, or go to trial. If you plead guilty right away and don’t cooperate, it won’t cost that much. Maybe another $100,000, maybe less; it depends on how long it takes to settle the SEC case and whatnot. If you cooperate, it will be more expensive, but you’ll be looking at either no jail time or a significantly reduced jail sentence. Also, the SEC and DOJ will likely waive any financial penalties or fines, or at least hit you with a much smaller penalty.”

  I swallowed hard and asked about the granddaddy of them all. The mother lode. The big kahuna.

  “What if I want to go to trial?”

  “Hard to say,” Sommer replied casually, like I’d asked if it would rain later. “It will depend on if there are multiple defendants and how complex the case is. A boost to those elements can make a trial last longer and become more expensive. If you’re the only defendant, that would be less expensive.”

  I couldn’t believe I had to press him on this. I swallowed again and forced myself to proceed.

  “Look, I’m not going to hold you to a quote … but for planning, I’d like to have a ballpark figure.”

  “If you’re the only defendant and it’s a simple trial, it could be as little as $500,000,” Sommer said. “If it’s complex, with multiple defendants and witnesses, it will run into the millions.”

  Sommer said this so matter-of-fucking-factly that I felt myself reflexively grabbing the handles of my chair just to keep myself from sliding under the table. The sensation was physical, nauseating, and imparted a terrifying vertigo. Hitchcock had got it completely right. It was just like what you see in the movies. Endless, bottomless panic as you sink into the spinning abyss.

  Sommer continued talking. Perhaps he did this to shake up my vertigo. Perhaps I was not the first client to have this reaction in front of him.

  “It will also depend on you, Michael. You’re a lawyer. If you do some of the work, you can alleviate some of the costs. For example, if there are multiple wiretaps, we can pay an associate $450 an hour to listen to those tapes and transcribe them. Or you can do it. I may need research done, or discovery and document review. You can cut your costs significantly if you are willing to do, and can do, the work.”

  He was offering a lifeline, but the rope still didn’t seem long enough. Millions was a lot to defray in $450 chunks.

  “I’m willing,” I told him. “I mean, I’m an attorney who hasn’t practiced law in ten years and doesn’t know shit about criminal law. But sure, I can listen to tapes. Transcribe and review documents. I know the players and the lingo.”

  I decided to press my luck.

  “Or what about a flat fee?” I asked. “Do you guys ever consider something like that?”

  Sommer smiled like I was a precocious child.

  “We do consider flat fees in certain exceptional cases,” he replied. “But I have to ask … Are you financing your own defense? Do you have an employer or D&O insurance that will pay for it? Can Incremental pay for it?”

  “Um, I am Incremental,” I said. “It’s my money and we don’t have D&O insurance. Even if we did, I’m not sure it would cover a criminal charge. So it’s all me. To be frank, I don’t have a lot of money. I’ve got a big chunk of my savings frozen at Incremental. I do have some other funds, but not to take this to trial. So let’s take it one step at a time.”

  “We will,” Sommer assured me. “First things first, let’s see what the government has to say and find out where the other defendants stand. I’ll contact the Assistant US Attorneys on the case tomorrow and ask for the evidence in the case. Often they’ll provide some discovery before indictment to induce the defendants to plead. So whatever they show us tomorrow, most likely, it’ll be the best they’ve got.”

  I smiled, too bewildered to be reassured.

  “Keep your head up,” Sommer instructed. “You will get through this, Michael. I know it’s overwhelming. But if you decide to retain me, I’ll help you navigate everything. I’ll help your family navigate the process and I’ll get you to the other side, hopefully to the ‘least worst’ outcome. You’ll survive this either way. And just as a small aside, I should let you know that when I was a prosecutor, I used to work together at the Southern District with Richard Sullivan, the judge assigned to your case. We still have a very good relationship.”

  Sommer stood. I realized the meeting was ending.

  He said: “If you have any questions in the meantime, don’t hesitate to call me.”

  Sommer is the friend of the judge in my case? I thought to myself.

  That seemed to make it an easy decision. Maybe my luck was turning. The vertigo began to abate. I stood up, thanked Sommer sincerely, and shook his hand heartily. There was nothing about this case that seemed typical or ordinary. Nevertheless, by the time we were through, there would be several firsts and on more than one occasion I would hear Sommer say, after more than twenty years on the job, “I’ve never seen that before.” If only I’d known that when I strolled out of that meeting room.

  Back outside, I looked up and down Sixth Avenue. The city that used to make me smile, with its possibilities of riches and beautiful women and wild nights on the town, had vanished. I used to love Manhattan, heart and soul. Now all I could think was that it had kicked my ass, and even betrayed me. I would have been better off staying in LA. The grass wasn’t any greener there; it just wasn’t caked with scum and littered with my broken, bloodied limbs and shattered years. I tried to collect myself and prepare for what was yet to come.

  CHAPTER FIVE

  ENTER THE DATEK

  ______________

  THE IDEA OF BECOMING A LAWYER first struck me as a five-year-old, after a violent hairy beast named Baron, my best friend Matt Slavin’s Germans shepherd, nearly ripped my face off. The threat of a lawsuit had been enough for them to have the thing banished from their family, something which delighted my father. Normally, my father couldn’t stand lawyers. As an OB/GYN physician, he had to pay absurd amounts of money for medical malpractice insurance and deal with being sued by ambulance-chasing predators who liked to channel dead babies at trial. Ah, but to me, a young kid with eighty-five stitches across my face, to see Baron exiled forever from the neighborhood because “we don’t want to get lawyers involved” had planted that first seed.

  I also wanted to be a pro ball player—as a Jewish Dodgers fan, the next Sandy Koufax sounded just fine—but that dream faded in high school, where the caliber of players in Southern California was so strong, it was sobering. As an undergrad at Lafayette, I still played ball freshman year but knew it was my swan song. I found myself torn between business and law school. I’d never had a burning desire to be Clarence Darrow, and I was always good with numbers. I liked the inherent risks and tempting payoffs associated with finance, and had my first taste of it when I interned at Chemical Bank right after college, at 270 Park Avenue (today, the Bear Stearns mausoleum).

  Still, law school struck me as more practical. You can always “learn” business out in the field, I told myself—most people in business don’t have business degrees, anyway—but the law was different. A degree was required. Despite my best intentions, my grades were decent, even with a semester in Australia, where I traveled the continent rather than attend class, forcing me to lobby professors just for a gentleman’s C. Even so, I crushed the LSAT. This seemed to offset my middling GPA and I soon found myself accepted at Emory, Georgetown, and USC. With no inte
rest in diplomacy or politics, it was down to Emory and USC—and with my buddy Moe going to Emory it seemed like that would be the one. But I thought about it long and hard, and realized that Emory would be the better choice only if I wanted to practice in Atlanta—and I knew I didn’t. All I knew of Atlanta was Ted Turner and the Braves. And like every other school or college choice, the bottom line is that you don’t go for the knowledge—you can get that almost anywhere—but you go for the people. The connections. If I was going to stay in Los Angeles—and at that point in my life, that was my plan—then you had to go to law school in LA.

  USC’s Gould School of Law was the oldest law school in the entire southwest. It was a great place to study; plus, I got to live in South Central LA and Brentwood, just down the block from where Nicole Simpson was murdered by someone still at large. As graduation loomed, I thought about taking the bar in California, but the pull of Manhattan became too strong. The more I heard about it—the opportunities, the lifestyle—the more I liked. It proved hypnotic. The city’s energy and women cast a genuine spell on me. Soon, I had arrived and planted my flag in New York City. I was living in a fifth floor walk-up on 28th and 3rd, a staggering 300 square feet, with a bathroom through the tiniest of kitchenettes, but still, it was mine.

  The decision to accept an offer to go work for Sullivan & Cromwell in Manhattan was an easy one. I had interned there after my second year, living in pre-trendy Tribeca, where a 5,000 square foot loft cost an outrageous $1600 a month. I split the rent with my friend Sona, a fellow USC student, in order to defray the price (which, twenty years later, is, of course, about ten times higher). By my third year of law school I was putting in a meaty forty hours a week paid externship with the firm, and seemed a shoe-in for a job. A “non-offer” from your summer employer after second year of law school meant you were literally an “untouchable.” Indian lepers in Bangalore had a better chance of employment next year than you did. Granted, it was a different economy and most people got offers, but not at Sullivan & Cromwell. Few law firms are as storied; and nowhere does the term “white shoe” fit quite so snugly. At Sullivan & Cromwell, the shoes were crafted by hand, by fabled Tuscan cobblers, and the color a brilliant and blinding snow white. Founded in 1879 by Algernon Sydney Sullivan and William Thomas Cromwell, the two worked closely with Thomas Edison as he created, in 1882, what would become General Electric. But their success and connections didn’t stop there. The much older Sullivan soon retired, and it was the colorful Cromwell whose clients included J. P. Morgan (as in the bulbous-nosed banker himself, the legend) and Andrew Carnegie. Future partners would include a secretary of state (the stern Presbyterian, John Foster Dulles), a director of the CIA (John’s roguish, pipe-smoking younger brother, Allen Dulles), and a chief justice of the Supreme Court (Harlan Fisk Stone).

  The musty Puritan WASP factor still lingered in the hallways, in the austere oil portraits of the famous and powerful partners. Yet by the time I got there—me, a nice Jewish boy from Southern California—the country club anti-Semitism of the firm was a thing of the past. Women and minorities could climb the greasy pole to partnership, which was what we all strived for.

  Office politics had certainly changed since the stuffy days of WASP ascendancy—and when it came to after hours, we definitely let our hair down. When you work all the time, your more basic needs tend to get filled around the office, so everything was on the table. And everyone. People understood this. I believe the firm’s unofficial policy was to hire the oldest secretaries and administrative staff they could find with the hopes that it wouldn’t turn into a hothouse full of a potential sexual harassment suits (still a new thing, then). Still, there were transgressions aplenty, like the senior litigation partner who took a fancy to a summer associate thirty years his junior who was also a friend of mine. At one happy hour that ran about five hours over its intended limit, she ended up blowing him in the lower level of a well-known Third Avenue bar behind a Golden Tee game (she confided that the game’s announcer had prophetically shouted “Fore!” a half-second before he erupted in her mouth).

  It was that kind of life. Always there. Always at work. Your colleagues practically your only choice when it came to socializing or antics.

  Going through the motions at the firm, glued to my cellphone and my desk, my mind would occasionally drift elsewhere. Finance continued to rattle around in my head like a recurrent daydream. Stuck in Sullivan & Cromwell, this dream soon became a full-blown desire. I knew I had the temperament to run money, to be a trader, and that I could make snap decisions, often under excruciating pressure. Not everybody can do that.

  By its very nature, finance was a poker game, one that would be open every day, with the stakes of my choosing. Perhaps playing poker for a living rather than editing documents wouldn’t be everyone’s choice, but I knew it would be mine in a heartbeat. Something told me I wouldn’t be a lawyer for long.

  When the fateful day came, I’d been at the office since 9 a.m. Sunday, reviewing a Valujet prospectus we had drafted for Goldman Sachs—our client—making sure they were “bulletproof” after one of Valujet’s planes had fallen out of the sky. I had also just done an overnight stint at “the printers,” the most useless, technology-deprived wasteland of a department I’d ever come across. There, teams of stern-faced lawyers went over drafts, going to battle over commas and colons, and every round of changes took over an hour for the typesetters to incorporate. At 10:30 on Monday morning, I was back once again at my office, which wasn’t even mine alone. I shared the space with a Chinese national named Wu whose family supposedly had politburo connections back on the mainland. Wu had attended law school in China, which I’d always guessed involved little more than an extra semester of college. After all, how comprehensive could the legal curriculum be in a country where they can unilaterally censor all print and media, where the warning shots are chest high into protesting students, and where they can kidnap and indefinitely detain anyone they please? Habeas what?

  Lurking behind my desk that morning were two extra suits (one navy blue, one medium gray), three indifferent dress shirts, a hive of discarded ties behind the door, the hypo-allergenic pillow on my bookcase that fit nicely under my desk, and the small wool LL Bean blanket (a gift from Mom) I used to cover my feet when I slept under the desk because the AC was always blasting.

  Wu was just arriving as well, fresh from a weekend of drinking, eating, and gambling in Chinatown’s finest establishments. His desk was typically immaculate, not a hint of paper, here in a world that lived on nothing but paper. I had no idea how he did that. The familiar red blinking message light that haunted me was nowhere to be seen at his desk, where he sat down and took out a Chinese book and started to read.

  “You don’t really do anything, do you?” I asked Wu.

  I had wanted to ask this question for a long time. He turned to me and smiled.

  “Onrey when dey need me,” he said slowly, smiling an even bigger smile and returning to his book. (Wu talked like a bad Chinese stereotype from a 1930s movie. Would it be better for me to lie and say that he didn’t? I assume you can handle the truth.)

  Maybe once a day, Wu would disappear for thirty minutes to speak to a partner about some hypothetical matter, or on the rare occasion when a Chinese company wanted something. At this time, although China was a budding economic powerhouse, the tiger was still decidedly number two, and the majority of real “business” they were doing with overseas partners tended toward piracy. Wu was merely a small investment in the future on behalf of the Sullivan & Cromwell partnership, which hoped that one day he would return to China, do something productive, and engage our firm as his US counsel. In the meantime, I got to watch him roll in at 10 a.m. every damn day, enjoy a two-hour lunch, and jet at 4:59.

  It was at that very moment, glaring at Wu and reflecting on the day I was supposed to spend with my parents that had vanished, that I decided to give something else a try. Something very different. I knew halfwits who were making much mor
e money than I was, and working way fewer hours. The hard part would be to deviate from the all-important Path. At Sullivan & Cromwell, as with all major Manhattan law firms (no matter the color of their shoes), there was a safe yellow brick road that ended with the Pick Six on the Upper East Side, the beach house in the Hamptons, the uber-elitist private schools, membership in the right clubs, and all the trappings and accoutrements of modern financial and material success. The hard part wasn’t so much the distance—typically eight-plus years for a partnership track. The hard part was looking at those in the Winner’s Circle. Seeing a thirty-five-year-old partner who looks forty-five years old is disheartening enough. But a lot of them looked fifty-five. Thinning gray hair on the cusp of white; premature jowls; tired eyes with dark circles. And there were forty-five-year-old partners all over the firm who looked ready to start collecting Social Security. Where’s the joy in having money if you’re ready for a premature date with the Grim Reaper and you feel even worse than you look? Never mind the fact that these partners had no time in which to spend their money because they were still working all the time.

  I looked at Wu and took a deep breath.

  It was the late 90s, and opportunity was in the air, just outside my office window. The tech bubble was ballooning; bankers were minting money in the ongoing capital markets orgy; and there was an opening in those fields for persons who were smart and aggressive enough to write their own tickets. At the same time, of course, nobody knew that the Great and Powerful Greenspan had fallen asleep at the wheel. No one knew what loomed ahead. (The real tragedy, of course, was that no one was paying attention to a lanky, turban-sporting Saudi with a portable dialysis machine some eight thousand miles away, who was starting to broadcast infomercials promising death to the Great Satan. Instead we were focused on Y2K. The computer manufacturers were throwing napalm on the fire and pulling their hair out, yelling, “If you don’t buy a new computer RIGHT NOW! your bank account will evaporate in a microsecond!” The software mitigation experts and consultants were warning that unless they were allowed to bless and re-bless everyone’s programs, planes would fall out of the sky and Solitaire and Minesweeper wouldn’t work. Blinded by green, the “expert industry” issued one big “or else” to corporate America. It meant imminent ruin, shareholder suits, bankruptcy, and criminal negligence. Not everyone bought into it, but in our litigation-centric oligopoly, if you didn’t make the CYA moves, you’d be eaten for lunch by the lawyers.)