The corporate holiday party is a night when everyone’s supposed to pretend there are no organizational charts, no office hierarchies. Interns can kick back with the bosses—and theoretically do more intimate things with them—and the next morning everyone’s just supposed to snap back into normal behavior, hangovers be damned.
During the boom years, startups and other profligate spenders would blow colossal amounts on these events, which were as much about chief executive ego and coolness as employee morale. That’s still happening to some extent: In 2010, the Blackstone Group BX rented out the Sackler Wing of the Metropolitan Museum of Art; the party centered around cutting a mammoth cake with the word “accountability” emblazoned on top. In 2011, Bridgewater Associates, a hedge fund famous in part for its parties, rented out a 10,000-seat arena for a holiday bash; while details were kept under wraps, past events have included mud wrestling. Billionaire Paul Tudor Jones, of Tudor Investment, puts on an annual light show the “Jones-a-Palooza” synchronized to music at his estate in Greenwich, Conn. Are the parties any less awkward for their extravagance? Not really. Even the greenest 22-year-old attendees sense they’re witnessing something unsustainable—a lot of someone’s venture capital being tossed into a fire pit.
Since the financial crisis, the S.E.C. [Law & Order,” prosecutors used wiretaps to ensnare Raj Rajaratnam, the billionaire Galleon hedge fund manager whose web of tipsters stretched from Wall Street to some of the mightiest corporations in the land. For his crimes, Mr. Rajaratnam, whom prosecutors called “the modern face of illegal insider trading,” was sentenced last October to 11 years in prison.] has spent a lot of time and money trying to plug leaks. In a case worthy of “
Mr. Rajaratnam’s conviction, in the largest insider-trading scandal in a generation, handed a much-needed win to the beleaguered S.E.C. Only two years earlier, the commission had been lambasted for missing glaring evidence of Bernard L. Madoff’s vast Ponzi scheme.
But Mr. Parmigiani and others suspect that the P.R. of the Galleon case glosses over risks that insider trading can and does occur regularly at many Wall Street firms. In their view, it has become institutionalized. The flow of information between a firm’s analysts, its traders and its clients — a lucrative heads-up on stock upgrades and downgrades, for instance — can bolster trading profits, brokerage commissions and, ultimately, Wall Street paydays. Those in the know can get rich before the rest of us know what happened.
“Prosecutors say insider trading won’t be tolerated, that this is justice,” Mr. Parmigiani says of the Galleon case. “But they refuse to acknowledge that their widespread net has a very big hole in it.”
What exactly happened at Lehman? Mr. Parmigiani says traders there were routinely advised of changes in analysts’ company ratings before those changes were made public. That way, Lehman could profit on subsequent market moves. Here is how he describes it: First, research officials tipped off the traders; then Lehman’s proprietary trading desk, which cast bets with the firm’s own money, positioned itself accordingly. Lehman salespeople also alerted favored hedge funds. Only later, he says, were ratings changes made public.
Blowing the whistle on any big corporation, as Mr. Parmigiani tried to do in the case of Lehman, is almost always perilous. Shortly after noting the suspicious trading in Amkor, Mr. Parmigiani says, he was fired for not being a team player. He has since been unable to find work on Wall Street.
Strange Random Wall Street Quote:
“Do you think The Wall Street Journal is a subversive publication?” – Michael Tigar
- Sell-side research isn’t inside information (blogs.reuters.com)
- Rajaratnam Prosecutor Andrew Michaelson to Join Boies Schiller (dealbook.nytimes.com)
- Feds probing insider trading by Goldman exec (cbsnews.com)
- Goldman’s Golden Analyst Under Investigation (newser.com)
- Galleon Insider Trading Case Raises Questions about SEC-DOJ Coordination and Unprosecuted Cases (pogoblog.typepad.com)
- Take Their Money and Run (slate.com)
- Rajaratnam Receives Eleven Year Sentence (lawprofessors.typepad.com)
- Judge in Gupta Insider Trading Case Indicates He Will Allow Wiretaps (dealbook.nytimes.com)
- Goldman Analyst in Cross Hairs of Insider Trading Investigation (dealbook.nytimes.com)