…headlines the Brown University newspaper which, while it’s at it, reminds readers that this is really a kind of beat-goes-on story for Brown’s, uh, very interesting board of trustees:
[Steven] Cohen is not the first Corporation member to come under investigation for potentially unethical financial dealings. Former Corporation fellow Steven Rattner ’74 P’10 P’13 P’15, a former Herald editor-in-chief, was barred from the securities industry for two years in November 2010 as part of a settlement after his private investment firm, Quadrangle Group, was scrutinized for a pay-to-play pension fund scheme.
See but that one’s former… This one is like get on your pony and ride! Ride your pony! Stay in the saddle! Don’t issue any statements… Just sit there and pray Cohen dodges yet another bullet from the SEC…
Meanwhile, if I were a Brown student, I’d take a look at the rest of the trustees. If the university is comfortable with Cohen, there’s no telling what else you’re going to find, is there?
… NYU’s board of trustees [has] decided not to remove [Steinhardt’s] name from the school.
Read the whole thing! I promise you’ll love it.
… group. There’s insider-trading-charges-evading-tho-no-one-knows-how-the-hell-he-pulled-THAT-off Steven Cohen; there’s all-round terrific guy Ron Perelman; most recently, there’s New York’s naughty Lieutenant Governor, just today arrested on big ol’ fraud charges.
It is UD‘s considered opinion that Brown is in some kind of obscure competition with Yeshiva University (Madoff, Merkin, and oh so many more) for grubbiest greediest grotesquest trustees.
… as a judge refuses to stop a big insider trading case against him.
Trouble? Given Cohen’s utterly shocking market behavior, and the resulting extensive litigation against him which will last for the rest of his life, and given his apparently unassailable position of trust at the top of one of America’s best-known universities, UD begins to think she’s gotten it all wrong. UD begins to think that trustee-selection-wise, a long record of SEC investigation and outraged investor lawsuits is an advertisement for the position of university trustee.
UD‘s not sure why this is. She is a babe in the woods – most of us are – when we’re talking about the kind of money Brown is targeting in targeting Steven Cohen (personal fortune: close to ten billion dollars). Are they thinking in terms of a delicate, sophisticated trade-off involving delicate sophisticated timing? As in – We’ll be able to peel off a couple billion before he has to go to jail. Our PR people will be able to control the PR fallout of our association with him. Or is it far more straightforward? “Insider trading” is a bogus designation essentially describing nothing less than the working reality of all capital market players. Eventually the world will catch up to this truth, and all penalties and investigations of people like Cohen will vanish. Indeed these people will become martyrs, and we’ll be praised for having stayed the course with them.
… yet another of his employees (the career fraudster Michael Martoma) has been found guilty of insider trading? That’s the question on everyone’s mind.
“From a public perception, how do you go after all of the subordinates, but stop before getting to the guy on top,” asks trial lawyer Thomas Rohback, a partner and chairman of the litigation group at Axinn, Veltrop & Harkrider. “If somebody is a billionaire, and you’re sending other people that have worked for him to prison, isn’t there something lacking if you don’t bring the possibility of a jail sentence against that person,” continues Rohback.
… Under Dodd-Frank, the statue of limitations for financial crimes was extended to six years, from five previously, meaning Bharara and his team still have time to bring criminal charges against Cohen.
Board of trustees meetings at Brown must be awfully… awkward lately…
“So Steve any inside scoops on potential donors for the new arts center? …Ahem! … I mean… haha! … Any ideas…?”
Brown just can’t let him go yet. His fellow trustees sit across from him at that big ol’ conference table and whenever they look at him, whenever he opens his mouth, they’re all thinking the same thing:
NINE FUCKING BILLION DOLLAR PERSONAL FORTUNE! F-U-U-U-CK…
It’s just too much. They’ll hold onto him because they figure he will never go to jail because they figure there MUST be a law in the United States that says something like once you’re worth seven or more billion dollars you cannot be jailed because your legal status is no longer person. Something like that. You’re like a Gross National Product. Your legal status has actually changed and you’re actually too rich to go to prison. It’s like at some point you’re too rich to die. What’s that line from White Noise?… Babette says, of the very rich: “I have trouble imagining death at that income level.” It’s like – if Madoff hadn’t had to give it all back, he’d have been too rich to go to prison… Yeah, good ol’ Steve! He won’t go to jail. And if we hold onto him some day he’ll give Brown say one billion say…
[The SEC’s] pursuit of [Brown University trustee Steven] Cohen has been compared to Captain Ahab’s quest to vanquish the White Whale. Preet Bharara’s investigation into insider trading in the hedge-fund industry has already led to the convictions of former Galleon Group founder [and high-profile University of Pennsylvania donor] Raj Rajaratnam and former Goldman Sachs director and McKinsey managing director Rajat Gupta. Rajaratnam is currently serving an 11-year prison sentence, and last year Gupta was sentenced to two years in prison. Bharara says the U.S. Wall Street insider trading investigation is ongoing.
It’s become quite the cat and mouse game between Brown University’s Steven Cohen and law enforcement. Does someone in Brown’s English department teach Melville? There’s a great opportunity here to spice up the Moby lecture:
So powerful and persistent a metaphor has the Ahab/whale struggle become that we encounter it in the media’s account of our trustee Steve Cohen’s white whale-esque evasion of capture (so far!) by “Ahab” Bharara …
Tomorrow night, Brown has a rare opportunity to model for its students how to become a success in life: Frontline is featuring the university’s highest-profile trustee in a special report titled To Catch a Trader. UD hears echoes of To Catch a Thief in that title, but that’s probably just her.
Whether Cohen will ultimately face criminal charges, Frenkel said to “look at the example” of Rajat Gupta, the former Goldman Sachs director charged in the insider trading investigation of Raj Rajaratnam’s Galleon Group. “The SEC brought an administrative action against Gupta,” Frenkel recalled, “and within 30 days, the next thing you know, there’s a criminal indictment.”
Will our highest-profile trustee, Steven Cohen, get hit with criminal, and not just administrative actions? Stay tuned!
And he’ll stay there. He’s paid his way out of his trouble. And he’s endowed the school of finance with his (possibly) ill-gotten gains.
Nothing to see here. Fine model for the finance students.
… gets more front-page New York Times publicity today.
… FBI agents showed a former trader a sheet of paper with headshots of his former colleagues, with Mr. Cohen at the center. The agents compared the SAC founder to an organized crime boss who sat atop a corrupt organization.
…has just been moved forward.
[Steven Cohen] maintains his innocence, despite SAC agreeing to pay the biggest insider trading fine levied by the SEC. Not only his reputation, but that of his industry, now rests on it.
One of America’s great universities is in the trust of the current biggest target of the Securities and Exchange Commission.
UD assumes there’s a person at Brown whose full-time job, at this point, is Steve-watching. If Cohen is pulled in by the government, and is still on Brown’s board at the time, it will be embarrassing for Brown, which has already had to dump one trustee for attracting the attention of the SEC… and there’s the recent embarrassment over its ex-president’s activities on the Goldman Sachs compensation committee…
Yes, in defenestrating Steve, Brown stands to lose not just millions but perhaps billions of dollars, Steve being the kind of guy who routinely takes in billions in compensation. But look at it this way: SAC is losing clients very rapidly, what with all the bad publicity. Steve will be paying a huge chunk of his billions in his own defense; and of course the firm has just paid out that big ol’ insider trading fine. There will be lawsuits against SAC by investors. Etc. The money might not be there anyway.
… round-up gets going, check your university’s trustees, its Outstanding Alumni Award winners… Check the names on your most prominent buildings, because some of those donors might be going to jail…
Matt Taibbi gets at the heart of insider culture:
The other crimes on Wall Street have been so pervasive and so massive in scope in the past decade or so that good old-fashioned insider trading — hedge funds and other gamblers robbing the great mass of uninformed investors by acting on exclusive intelligence not available to the rest of us — seems almost quaint.
… However there is a mounting pile of evidence suggesting a sort of widespread culture of insider trading in which a few players (specifically the major banks and a few of the biggest and best-connected hedge funds) have milked a seemingly endless stream of exclusive information, not occasionally or opportunistically but as an ongoing commercial strategy.
For sure some of the robbers have turned some of their loot over to their beloved alma maters – rather in the way Bernie Madoff and Ezra Merkin cut Yeshiva University into some of their winnings.
UD gets a nice warm feeling as she anticipates knowing which campuses have the most insider traders in the most prominent positions.
The question is not Why is a violent woman running around the big city being violent? That’s not newsworthy. The question needs to be put to Hunter College: Why is one of these on your faculty?
Part of the answer lies in ye olde erotic attraction to radically chic violence that Leonard Bernstein made famous in that same city in the ‘seventies. Shellyne Rodriguez’s art, she tells an interviewer, “highlight[s] the audaciousness of the Biker Boys who take the streets undeterred by NYPD’s futile crackdown.” Makes elements of brainy artsy NY go pitapat.
This sort of thing also exists on some sort of urban mischief continuum with the non-revolutionary, white collar crime (undeterred by the SEC’s futile crackdown) that has always found representation on the boards of trustees of the sorts of schools that think Shellyne Rodriguez is cool. Recall the many high-level lawless money men/university trustees we’ve featured over decades on this blog, starting with Yeshiva University’s dynamic duo, Bernard Madoff and Ezra Merkin. At the very top of this mafia today are of course Trump/Giuliani (who hold far grander positions than mere trustee) and a whole world of superrich rapacious give-a-shit NY bad boys… UD‘s just saying that when a significant high-profile portion of the local culture is composed of high-risk-loving financial criminals (see Steven Cohen, Brown University etc. etc.) quite a few of them holding powerful positions on university boards of trustees, we shouldn’t be too surprised that this sort of world has room for other sorts of sociopaths. The school that hired Rodriguez features convicted insider trader and trustee Leon Cooperman.
These white/nonwhite criminal twains, trustee and professor, meet with a mutual thrill, a tacit sense of recognition, at a campus cocktail party, say, and if Rodriguez hadn’t attacked a man with a machete the other day, Cooperman would probably eventually have signed off on the tenure of Hunter’s own Jessica Krug. (‘Perhaps one of the most disgusting things [Krug] publicly did was to attempt to justify the brutal murder of 15-year-old Lesandro Guzman-Feliz, who died in a machete attack at the hands of gang members in a case of mistaken identity, by claiming that had he lived he would have ended up being a cop.‘) High-flying scofflaw cultures tend to have no trouble with nasty pieces of work like Rodriguez. Self-aggrandizing nihilist subversive meets self-aggrandizing nihilist subversive.
Yes, yes, post-machete, post-other forms of non white collar violence, Hunter has dropped Rodriguez like a hot potato.
Hunter happily goes on loving itself some bad boy Leon Cooperman, but then he’s not a poor artist. He’s a rich insider trader. He gets to keep his trusteeship.
So the question of how Hunter College found itself holding on to Rodriguez in the first place has two answers: Ever-popular radical violence, and the allied and fully mainstreamed “audaciousness” of NY white collar criminality.
With Fran Lebowitz’s words in mind (UD, you recall, interviewed Lebowitz not long ago), let us once again, very gingerly, sidle up to the Sketchy Benefactor problem — the problem with your university taking hundreds of millions of dollars from people who… eh… meh… bleh…
Take Michael Milken. Start with him because he’s local – I mean, local to ol’ UD, because he bought her university a very beautiful building which houses a very fine school of public health, which he also bought for us.
If there is a poster boy for the redemptive powers of philanthropy, it’s Michael Milken. In 1993 the former junk bond king of Drexel Burnham Lambert emerged from a minimum security federal prison after serving 22 months of a 10-year sentence for securities fraud. He seemed a new man — partly because he had abandoned his toupee — and this revised Milken took advantage of his freedom by dedicating himself to giving back. (His finances quickly recovered after he paid the $600 million in fines and restitution; his current net worth is estimated at more than $2 billion.) In the decades since, he has donated consistently and significantly: more than $60 million to teachers and $50 million to George Washington University’s school of public health. His Prostate Cancer Foundation has raised $210 million. There is plenty of evidence that these good works are sincere. Is it also useful? Well, when news of a new SEC investigation into whether Milken’s involvement with Guggenheim Partners had violated his lifetime ban from the securities industry, Milken’s official denial in Fortune magazine read like a recap of his past 20 years of giving.
So no problem with Milken’s name being all over the GW landscape because he paid his debt to society and though in a perfect world we might prefer not to be associated with someone who had to do that in the first place, okay. But what if, while no longer flagrantly stealing, he’s still a sketchy person who when cornered on alleged continued sketchiness points directly at my university and what he gave it in order to exonerate himself?
Yes, GW’s had to deal with sketchy performers and sketchy honorary degree recipients lately; but this is small-time one-off stuff compared to (switching universities here) putting Steven Cohen or Bernard Madoff on your board of trustees or plastering sketchy names all over your most prominent buildings.
I mean… Seton Hall!
Or, staying with Catholic schools here, there’s the lawsuit against Georgetown University for failing to put a donor’s name on a building he bought just because the donor was convicted of insider trading. A long lawsuit between the guy and the university ensued, and if you go to the campus today you can take in the Scott K. Ginsburg Sport & Fitness Center — although, curiously, when you click on the Google link to an article in a university publication titled GEORGETOWN LAW CELEBRATES THE SCOTT K. GINSBURG SPORT & FITNESS CENTER, the connection times out. UD‘s gonna guess they caved, they settled with the guy, they put his name on the building and grimaced through its christening, and then they removed from sight all online references to having celebrated any of this…
Anyway, it’s an old story. Lure of lucre. Lure of respectability. UD only brings it up because of the very strange ongoing latest Caspersen story. The sketchy Caspersen family has a long and important donor relationship with Harvard, and as the alleged actions of the father and now the son tarnish the name more and more, there’s the question of how much tarnishing-by-association Harvard will tolerate. It’s not merely that the Caspersen name is prominent on campus; it’s that in virtually every news article about Andrew Caspersen’s court dates and bail amounts Harvard prominently appears.
You might say Harvard’s too rich and prestigious to care. You might be right. But remember that Harvard is under constant pressure from the government and the media and even from within to account in some way for its immense accumulated wealth. Fighting an ongoing battle against releasing a nickel of its money (this cartoon is out of date; the endowment’s now worth way more than 35 billion) is not made easier by one story after another about sketchy rich people who have helped put Harvard way over the top. In the case of Caspersen’s father, for instance, if it turns out that he did in fact evade taxes on a large scale (this has not been proved; he was under investigation by the IRS at the time of his death), Americans might actually stop and ask themselves why they are both giving huge tax breaks to Harvard University and tolerating donors who are tax evaders. Is zat how Harvard got so rich that the fact of its richness has now become a national controversy? Through ripping us off via tax breaks and then ripping us off again via tax evasions?
…PLUS it comes with a fantastic photograph!
UD has been saying for years that the burgeoning business of business ethics courses is a joke (details here), and that universities should trash them and just scare their MBA students with guest lecturer/jailbirds — high-flying CEOs still in, or just out of, prison because of their clever lucrative business practices.
Just as football is inherently violent, so a good amount of this country’s way of doing business is inherently illegal, or so achingly close to illegal that… you know…
So one college course with some clueless pontificating non-multi-millionaire at the head of the room isn’t going to change that, kiddies. It’s only going to make it worse.
But a first-rate speaker drawn from the teeming ranks of our MBA internees – someone like Enron’s Andrew Fastow, who smiles and holds up his CFO of the Year trophy in one hand, and his prisoner identification card in the other – is fucking unbeatable. I ain’t saying every jailbound junior in the room is going to be scared straight. I especially make no promises about anyone enrolled at Wharton, a feeder school for the federal pen. What I am saying is that the simple souls on their way to this country’s hedge funds and insider trading units will be, er, unresponsive to discursive thought but hyperreactive to some guy who used to be fuck-you rich and is now fending off rapes in FCI Otisville. Fastow looks the part – graying temples, wry older but wiser face, slim wiry illfed post-prisoner body… And he’s got the gig down — props, pithy cautionary tales that speak right to the cynicism to which his audience clings…
In a rare public lecture, former Enron Chief Financial Officer Andy Fastow held up his “CFO of the Year” award in one hand, and his federal prison ID card in the other.
“I got both of these for doing the exact same thing,” he said before a crowd of eager [University of New Mexico] business students.
Hear that? Hear that? EAGER. CROWD. Try getting that sort of turnout and enthusiasm for a UNM football game.
Plus Fastow’s funny.
“I think inviting me to talk about business ethics is a bit like inviting Kim Kardashian to talk about chastity,” he said.
Okay, the material’s pretty shitty. But a guy like that… with his personal history and his delivery.. the line’s gonna get a big laugh.
“I thought I was so smart; I thought I was a hero for bending the rules,” Fastow said. “It comes down to individual people making a decision — we always asked ‘is it allowed?’ not ‘is it the right thing to do?’ …
You can always find an attorney to get you the answer you want. You can always find an accountant to get you the answer you want,” Fastow said. “There’s only one gatekeeper — you.”
Unfortunately, you don’t have any sense of individuality; you’ve been trained from day one in your MBA course sequence to work in groups…
I mean, I don’t think, say, even one Fastow-or-better per semester can do much about a culture where people like insider trader extraordinaire Steve Cohen and big-time fraudster Zygi Wilf are university trustees (Wilf’s a trustee of a religious university!). I just think that if our universities are going to do anything about America’s corporate culture (it’s arguable that their MBA programs, at least, shouldn’t bother, because they hopelessly reflect that culture), they’d be much better off booking charismatic cons than pious professors.
… are the subject of this post.
Michael Milkin, as Ryan Chittum points out in the Columbia Journalism Review, “pleaded guilty to six counts of securities fraud, paid $600 million in fines, was sentenced to 10 years in federal prison, and spent 26 months behind bars. He was also banned for life from the securities industry…”
“SAC Capital Advisors L.P., the hedge fund of Steven A. Cohen… was fined a staggering $1.8 billion by the federal government for insider trading activities,” notes Adam Asher. “Eight of the fund’s former employees have been slapped with criminal charges, all of whom have either pleaded or been found guilty. SAC Capital — recently rechristened Point72 Asset Management — is no longer allowed to manage outside money …”
Milken has just given UD‘s George Washington University fifty million dollars for its school of public health; Cohen remains on the board of trustees of Brown University. Chittum is annoyed that Milkin’s history is being “airbrushed.” He thinks “journalists shouldn’t deep-six who Michael Milken was, no matter what he’s done since.” Asher, a Brown University student, thinks Cohen should be off the board. “I find it hard to imagine there isn’t at least one other person on Wall Street who can offer comparable financial counsel — someone who hasn’t been fined nearly $2 billion by the federal government.” But “I have no illusions about the impact of this piece.”
I think Chittum’s right to be indignant that a man who hurt many people and profited handsomely from it, a man who significantly damaged the public’s trust in our financial system, gets a pass because, years later, he has become a major donor to excellent causes. But I don’t (as I said in an earlier post) think GW should turn his money down. I think that routine acknowledgement of Milken’s misdeeds should accompany – however subtly – his presentation to the world.
As to Cohen – lordy, lordy. I’ve been for ages amazed at his retention on Brown’s corporation. Asher writes:
Since the investigation first became public, it has always been taken as a given that Cohen would remain on the Board of Trustees so long as he wasn’t sitting in a jail cell — and even then, I’m not sure he would have gotten the boot.
UD thanks Roy.