For a moment, you think it's flabby filmmaking, but then it ultimately pays off. To say more would spoil the fun. Jackson "Straight Outta Compton" is terrific as a guy who may not be the naif he first appears. Schreiber does a lot with few words, making Merriman someone who feels dangerous even when he's not saying very much. Beefed up, covered in tattoos and speaking in a rasp that sounds like too much scotch and cigarettes, he goes all-in as Nick. It's his best role in years. Reach the reporter at randy. Gerard Butler stars in "Den of Thieves. Pablo Schreiber stars in "Den of Thieves.
By separating banking from securities underwriting, the raising of capital, and distribution of stocks, bonds, and other securities, the securities acts set the stage for modern investment banking. Under Gordon's guidance, Kidder, Peabody concentrated on its underwriting function. The firm was a pioneer at opening branch offices in U. The idea was, as Gordon liked to put it, to "sell your way to success. When the firm incorporated in the s, the ownership changed little; Gordon simply became the firm's largest shareholder.
He was parsimonious about bestowing ownership stakes on the firm's executives. Kidder, Peabody prospered, if not spectacularly, under Gordon's conservative leadership. Determined to avoid another capital crisis, Gordon insisted that Kidder's executives plow their earnings back into the firm. This gave the firm the capital to survive the sudden drop in trading volume and profits that struck Wall Street in DeNunzio became chairman of the stock exchange in , the same year Siegel graduated from Harvard Business School.
Martin Siegel's lineage was modest in contrast to that of the leaders of Kidder, Peabody. His father and an uncle owned three shoe stores in Boston, outlets that relied on American suppliers and catered to middle-to-working-class tastes. In the late sixties and early seventies, the stores were devastated by chains benefiting from national advertising and low-cost foreign suppliers. This was painful for Siegel, who had never seen anyone work so hard for so little as his father. As a kid growing up in Natick, a Boston suburb, he had almost never seen his father, who worked seven days a week, often spending the night in the city.
Unlike his classmates' fathers, Siegel's father never played ball with him. Siegel wasn't good at sports in school; he started first grade a year early, so his physical development lagged behind his classmates'. But starting as a freshman in high school, he excelled academically. He thought he wanted to be an astronaut. When Siegel was accepted in his junior year of high school for a work-study program at Rensselaer Polytechnic Institute, a science and engineering college, he became the first member of his family ever to attend college.
He continued to do well academically even while working part-time, and entered a master's program in chemical engineering in He knew he'd never become rich toiling as an anonymous engineer in a corporate laboratory, so he applied to Harvard Business School and was accepted for the class entering in September The turmoil sweeping American campuses during the late sixties had had remarkably little effect on Siegel, but at Harvard, he was caught up in the antiwar movement after the U.
He participated in an antiwar sit-in in Harvard Yard and smoked marijuana cigarettes a few times. Still, he was annoyed when students managed to get that year's final exams canceled. He took his anyway, exercising an option to take the exams at home and submit them by mail. For his senior thesis, Siegel tackled the mounting woes of his father's shoe store business.
His solution: The stores should be transformed into specialty high-end boutiques, catering to wealthy, fashion-conscious women. This would avoid the growing competition in the rest of the market. Siegel's father agreed in principle, but then his brother, who did the buying for the stores, had a heart attack. Siegel took naturally to Wall Street and investment banking; his energy and drive were, as he had predicted, a breath of fresh air at Kidder, Peabody. DeNunzio, now Kidder, Peabody's chief operating officer, seemed early on to have taken favorable notice of his new employee.
He too came from a modest background and seemed far more comfortable with earthy sales and trading types than he was with upper-crust investment bankers. Siegel began working on some merger-and-acquisition transactions, since no one else at Kidder, Peabody was eager to get involved. Hostile takeovers bore an unsavory taint. They generated bad feelings, especially toward those who represented the attackers.
This sometimes alienated other clients. Many of the WASP investment banks and law firms preferred to leave such work to the other firms, many of them Jewish. None of this bothered Siegel. His first takeover deal came just after the passage of the Williams Act, which spelled out new procedures to protect shareholders from coercive takeover tactics. In , recognizing the dearth of expertise in the area, Siegel wrote a textbook on mergers and acquisitions for use within Kidder, Peabody; it was hailed by his colleagues.
In only two years, he was promoted to an assistant vice president. As Siegel's career took off, trouble developed in the rest of his life. His father's business continued to worsen; Siegel flew to Boston almost every weekend to help. His marriage suffered. Janice sang with the Bel Canto opera in New York and wanted to pursue a musical career. Siegel, who had no interest in opera, gave her little support.
In February they separated. Shortly before, his father's bank and principal lender had pulled the plug on the Siegel shoe business. Robert Siegel's company filed for bankruptcy. The once-proud and energetic retailer became, at 47, a broken man. He tried selling real estate; that didn't work out. He tried doing house repairs. Finally he landed a job selling roofing at Sears. Siegel watched with alarm as his father seemed to give up on his own life. He noticed the older man beginning to live vicariously through the sons and daughter he had once never had time for. Siegel was haunted by the possibility that something similar might happen to him.
He vowed he would never wind up a broken man. After his father's misfortune, Siegel plunged even more completely into his work, frequently logging hour weeks. Emulating Gordon, still titular head of the firm, he embraced physical fitness. One of his contemporaries at the firm, a former all-American wrestler named Scott Christie, put him through a fitness regimen at the New York Athletic Club. At one point, Christie, Siegel, and John Gordon, Al Gordon's son, were standing in a corridor at the firm when Siegel boasted that he could do 50 push-ups in a minute.
Christie squeezed Siegel's bicep and rolled his eyes skeptically. He did the 50 push-ups in less than a minute. Handsome Martin Siegel became Kidder, Peabody's golden boy. He became socially poised and gregarious. DeNunzio, awkward and physically unprepossessing himself, shrewdly recognized in Siegel a talent for getting and nurturing clients, DeNunzio's major weakness.
He made Siegel a full vice president in , and soon Siegel was reporting directly to DeNunzio. When Kidder, Peabody client Gould Inc. Siegel was reticent at first; he was in awe of Rohatyn. Then, during a meeting, Rohatyn excused himself to use the bathroom. Siegel thought, "My God, he's human! Siegel was flattered, though he knew it didn't take much to be an expert. Anyone who'd handled even one post-Williams Act deal was considered qualified.
Siegel was even more flattered when he met the other participants: Ira Harris, one of Salomon Brothers's leading investment bankers; Robert Rubin, a fast-rising star at Goldman, Sachs; John Shad, head of E.
Den of Thieves by James B. Stewart
Collectively, the panel's expertise covered the emerging field of hostile takeovers, a field that was to transform the face of corporate America to a degree that none of them then dreamed possible. American industry had undergone other periods of industrial consolidation, most recently in the sixties, when the fad to diversify had led many large companies into mergers, generally financed with stock during that decade's great bull market.
Those acquisitions were mostly friendly. Earlier, the monopolistic corporations of the Morgan era had been produced by numerous mergers some of them not-so-gently coerced by the great financier himself. None of these kinds of deals were really comparable to the hostile takeover boom that began in the mid-seventies and surged in the eighties, however, except in one key respect: they offered enormous opportunities to profit on the stock market. Siegel noticed that Lipton was scribbling notes furiously while others made their presentations. Then, when Harris's turn came to speak, Lipton shoved the notes in front of him, and Harris virtually read his presentation.
After Siegel's presentation, Lipton stayed behind to compliment him. They made an unlikely pair; the glamorous Siegel and the portly Lipton with his thinning hair and heavy darkframed glasses. But Siegel recognized Lipton's mastery of the field and became an eager student.
Lipton and Flom had developed a new and lucrative retainer arrangement with their clients. Companies who wanted to ensure the firm's availability in the event they became the target of a hostile bid paid the lawyers a substantial retainer fee each year. In the event that they were attacked by another client of either Lipton or Flom, the attacking client agreed in advance to waive any conflict of interest, with the understanding that the lawyers would defend the target company. Scores of major corporations eventually signed on with Lipton and Flom, even as some established bar members cringed.
These lawyers billed strictly by the hour, eschewing even contingency fees. The Lipton and Flora retainers, since they didn't necessarily require work, were more like an insurance policy. The establishment viewed the advance waiver of conflicts with distaste. Yet clients themselves seemed unfazed, a measure of the clout Lipton and Flom could wield. Siegel began to think Kidder, Peabody should begin to make similar deals. By the time of the panel discussion in , he had become convinced that the merger wave was going to continue, even grow. Siegel thought Kidder, Peabody could carve out a niche on the defensive side.
He began to visit potential corporate clients, selling what he called the "Kidder, Peabody tender defense product. This meant retaining Kidder, Peabody -- and paying a lucrative retainer like those paid to Lipton and Flom -- to ensure preparedness and the firm's availability. Siegel's real boost came in May , when Business Week hailed him as the leading takeover defense expert. After describing his success in several large deals, the article also mentioned in passing that he was so good-looking he was considered a "Greta Garbo heartthrob.
Siegel was amazed that the story, which wasn't given major play in the magazine, conferred such instant status and legitimacy. Kidder, Peabody's copiers went into high gear, sending out copies to prospective clients. From on, Siegel called personally on to clients a year. These were the companies most vulnerable to a hostile offer from a larger company. Siegel's product sold.
He eventually had corporations paying Kidder, Peabody an annual six-figure retainer. His main competition came from Goldman, Sachs, the much larger, more powerful firm that had also decided to stake out takeover defense work as its special preserve, albeit for somewhat different reasons. At the time, Goldman had made it a policy to eschew the representation of hostile bidders. With the most enviable roster of large corporate clients on Wall Street, Goldman didn't want to risk alienating them by representing anyone who might be construed as a raider.
Traditional investment banking services for these established clients were the bread and butter of its lucrative business. Siegel loved beating Goldman out of a client. Sachs, according to the chairman, boasted of the "Goldman prowess. The chairman was of Japanese descent.
Although Siegel had never eaten raw fish in his life, he joined Sato at his home for sushi. In awarding him the business, Sato told Siegel, "I can't believe that you actually listen. All Goldman told me was how great Goldman is. Then Siegel would step in. I want you as a future client. But Siegel's message frequently convinced the targets' managements that he had their interests at heart -- instead of the investment banking fees to be reaped if the company had to be sold.
In , Siegel invented a brilliant but controversial tactic that also endeared him to scores of corporate managers -- the go]den parachute. The golden parachute, essentially a lucrative employment contract for top corporate officers, provided exorbitant severance payments for the officers in the event of a takeover. Supposedly, the contracts were intended to deter hostile takeovers by making them more expensive. In practice, they tended to make the officers very rich. DeNunzio was thrilled by Siegel's success, even though Siegel was working so hard and traveling so much that he rarely saw him.
DeNunzio ran Kidder, Peabody in the paternalistic way he had learned from Gordon, usually setting salaries and bonuses singlehandedly. In , Siegel was made a director of Kidder, Peabody, the youngest in the firm's history with the exception of A1 Gordon, who had owned the firm. Soon after, DeNunzio called Siegel into his office. DeNunzio paused, and Siegel didn't know what was coming. It's too much. Siegel assumed DeNunzio meant that his style was too racy for some of Kidder, Peabody's clients, or perhaps the other directors, but DeNunzio wasn't more explicit and Siegel couldn't be sure.
Greenwich was the WASPiest, whitest, most exclusive suburb in Connecticut, a bastion of country clubs and conventional respectability. It was also filled with some of the dullest, most straitlaced people Siegel knew. In addition, he couldn't see living right under DeNunzio's watchful eyes. But Siegel went out to look at the house. Afterward he got into the offending sports car and drove on Interstate 95 for exactly one-half hour.
He found himself in Westport, and called a realtor from a pay phone. He'd been thinking of selling the Fire Island house anyway. The realtor took him to an old house on a small river north of town, and Siegel loved it.
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He bought it, and spent his weekends fixing the place up. Siegel told DeNunzio that he was heeding his advice and buying a house in Connecticut. It was in slightly bohemian Westport, not in Greenwich. One day, not long after he had bought the house in Connecticut, Siegel's secretary told him he had a call from an Ivan Boesky. But Siegel also knew that Boesky was a trading client of Kidder, Peabody. He took his call. Siegel was impressed with Boesky's market acumen, his knowledge of takeover tactics and stock accumulation strategies. They became friends though they didn't actually meet for some time.
In the peculiar world of Wall Street, close friendships can develop entirely on the telephone. Gradually Siegel began to see Boesky as someone he could discuss strategy with, bounce ideas off of, gossip with. He needed this information since he had no Kidder, Peabody arbitrageur to turn to.
The firm had traditionally shunned arbitrage, and had no department. DeNunzio and Gordon believed arbitrageurs were unsavory, tried to get inside information, and gave rise to conflicts of interest within the firm. Historically arbitrageurs had traded to take advantage of price discrepancies on different markets, such as London and New York. It was conservative, nearly risk-free trading yielding small profits. But they had become progressively more daring, first buying heavily stocks that were the subjects of announced takeover bids, betting the deals would go through; eventually they started buying stocks they only suspected would be the targets of takeover bids.
When they guessed right, the profits were huge. Evaluating the effects of these massive purchases of rumored or real takeover stocks had become a crucial part of Siegel's job. Arbitrageurs were also fonts of information, from clues to the other side's tactics, to rumors of impending bids that could be used to attract defense clients. Arbitrageurs tended to be crass, excitable, street-smart, aggressive, and driven almost solely by the pursuit of quick profits.
Their days were defined by the high-pressure periods between the opening and closing bells of the stock exchange, during which they screamed orders into phones, punched stock symbols into their electronic terminals, scanned elaborate screens of constantly shifting data, and placed phone calls to every potential source of information they could imagine.
After work, they tended to blow off steam by carousing in bars like Harry's, just across Hanover Square from Kidder, Peabody, or, if they'd had a good day, in expensive Manhattan restaurants. One day in , Siegel confided to Boesky that he'd fallen in love. The affair was threatening to become a minor scandal at Kidder, Peabody. In the late seventies, the first wave of women business school graduates reached Wall Street's shores. Jane Day Stuart turned heads at Kidder, Peabody on the day she first swept through the corporate finance offices.
A Columbia Business School graduate, she was smart, blonde, thin, personable, stylish, and married. Kidder, Peabody had long maintained an unspoken policy against office affairs. A fling with a summer employee had damaged another investment banker's career. But in late , Stuart and her husband were divorced. Shortly after, Siegel and Stuart played tennis. By August , they were living together. When colleagues tried to warn Siegel, he brushed them aside, saying he wasn't interested in firm politics and didn't care whether he ever ran the firm. When Henry Keller, head of corporate finance, learned of the affair, he went to DeNunzio, prompting speculation that DeNunzio would bring the relationship to an abrupt halt.
DeNunzio did nothing. Unknown to many, DeNunzio's son, David, was also having an affair at the firm. DeNunzio's tolerance was interpreted as a sign of the times and a measure of Siegel's clout. DeNunzio also seemed relieved that Siegel's bachelor days appeared to be numbered. Some of Stuart's friends and relatives in Baltimore warned her against marriage to someone Jewish, even someone as nonreligious as Siegel. But she was headstrong and in love, even though some of her male colleagues speculated unkindly that she was using her business acumen to trade up the marriage ladder.
She and Siegel were quietly married in May and began drawing up plans for a new, larger house in Westport. It was Boesky's first social invitation to the Siegels, a small dinner for three couples: Boesky and his wife Seema; financier Theodore Forstmann, who numbered Boesky among the investors in his partnership, and his date; and the Siegels. Siegel decided to bring along a copy of his house plans to show the Boeskys. Following Boesky's directions, the Siegels drove north from Manhattan for about 45 minutes, through the exclusive towns of Bedford and Mount Kisco.
The area is one of large estates, wooded rolling hills, and some pre-Revolutionary houses. Few of the large houses are visible from public roads, and the Boesky house is set so far back in its acres of property that visitors sometimes got lost winding through the maze of driveways and service roads leading from the entrance gates.
The Siegels pulled into the drive between large pillars and a gatehouse and stopped as a security guard parked in a pickup truck waved them to a halt. Siegel went over to the guard, introduced himself, and was cleared for entry -- but not before he was startled to see the blue-black steel of a large pistol in a holster strapped to the guard. As they approached the house, the Siegels were awed. Behind a cobblestone courtyard rose a massive, red-brick Georgian-style mansion.
The estate had previously been owned by Revlon founder Charles Revson. In the distance, past formal gardens studded with Greek statuary, was a large pool house. On one side was a large pool, on the other a sunken indoor squash court, and at the side, a tennis court with a bubble that could be inflated in winter for indoor play.
The Siegels were greeted at the entrance by Seema Boesky, an attractive, talkative brunette who immediately struck them as warm and friendly. She led them through rooms decorated in traditional style with beautiful wallpaper, elaborate moldings, rare Aubusson carpets, and expensive antique furniture. The walls featured what looked to Siegel's untrained eye like serious art; Seema, it turned out, was an enthusiastic collector of American paintings and antiques.
They continued through the gardens and pool house, where the carpeting was embossed with a large, intertwined monogram, IFB. Boesky was a gracious host, dressed impeccably as always in a black three-piece suit and white shirt that complemented his year-round tan. Asked why he wore the same suit every day, Boesky once replied, "I have enough decisions in my life already. His prominent cheekbones and piercing eyes could make him look driven, even gaunt, but he was relaxed and affable as a dinner host, tending constantly to his guests and eating little himself.
Jane Day mentioned their house plans, and Seema exclaimed, "You've got to have a big kitchen. I'll show you mine.
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Siegel was impressed by the signs of wealth. Boesky must have been far more successful at arbitrage than even Siegel had realized. Siegel decided that he wouldn't show the house plans he'd brought along. They now seemed embarrassingly modest. Later, after dinner, Siegel took Boesky aside and mentioned that he'd noticed that the guard at the estate entrance carried a pistol.
Boesky Co. Inside Boesky's own glass-enclosed corner office, he could see his boss's eyes roving, first toward the trading floor where his buy and-sell orders were executed, then toward Lessman's research area. Suddenly Boesky's eyes locked on his. The intercom on Lessman's desk crackled to life. Lessman frantically scanned his computer screen, looking for big price and volume movements in individual stocks in order to figure out what had caught his master's interest.
Every desk had a speaker connected to a central control panel manned by Boesky himself. He could activate individual speakers or throw open the system for office-wide announcements. Now he had everyone on line. I want service," he repeated in ever louder and more demanding tones. I want it now.
Who's buying? A few weeks earlier that year, , Boesky had shocked the office with an abrupt announcement: He was liquidating Ivan F. The Hunt silver panic and resulting stock market plunge had hit Boesky hard, and he had decided to cash out with his remaining profits. He wanted to take advantage of the favorable long-term capital-gains tax rates available to partners liquidating their interest.
But, to get the rates, he needed someone to keep the firm going. His recent efforts to force his top lieutenants to take over the remains of the partnership and assume all its liabilities had led to screaming matches. When they balked, he fired them. During a short period that year, Boesky had lost his two top strategists, his head trader, and his head of research.
Few people really expected Boesky to be out of arbitrage for long. Despite the Hunt setbacks, he had been a phenomenal success. Ivan F. Arbitrage was Boesky's life. His earnings had brought him the estate in Westchester and a Manhattan townhouse. A chauffeured limousine drove him into town every morning. His efforts had also finally brought him the grudging respect of a father-in-law who had believed his daughter had married beneath her.
Boesky seemed to share his father-in-law's disdain for his own family and background. He constantly tried to burnish his resume and family connections in conversations with New York colleagues. He often implied that he had graduated from Cranbrook, a prestigious prep school outside of his native Detroit, and the University of Michigan. Others assumed he had attended Harvard, since Boesky made so much of his Harvard Club membership.
He said his father ran a chain of delicatessens in Detroit. During Boesky's childhood, his family lived in a spacious Tudor-style house in what was then considered a nice, upper-middle-class neighborhood. Ivan's father, William, had emigrated from Russia in , and owned a chain of several bars, called the Brass Rail, rather than delicatessens his uncle's business. To boost profits, the Brass Rails introduced topless dancing and strip shows. In the eyes of many, the bars hastened the decline of their neighborhoods. Boesky worked hard while he was in school, selling ice cream from a truck.
He was picked up repeatedly by the local police for staying in business past the 7 P. He did attend Cranbrook for two years, though he didn't graduate. His academic record there was undistinguished, but he excelled at wrestling, starving himself to lower his weight category and driving himself to the point where he could do an astounding push-ups. He was constantly in the gym with his best friend, an Iranian exchange student named Hushang Wekili.
As a sophomore, Boesky won the school's Craig trophy as outstanding wrestler. Boesky often used wrestling analogies to describe his work as an arbitrageur. In wrestling he also found a metaphor for life. There are plenty of opportunities in life to be beaten down. People feel beaten, demolished, demoralized, and they give way to it. I don't. It became the symbol for Ivan F. Boesky Corp. Not everyone shared his enthusiasm. He never graduated from college. Exactly what Boesky did in Iran remains a mystery. He later testified that he worked for the U. Information Agency, teaching English to Iranians.
Boesky told Siegel in one of their early conversations that he had worked in Iran as an undercover agent for the CIA. After returning from Iran, Boesky enrolled at Detroit College of Law, a low-prestige law school that didn't require a college degree for admission. He graduated five years later, in , after twice dropping out. When Boesky was 23, his father made him a partner in the Brass Rails.
Boesky was rejected by all the law firms he applied to for a job. Boesky's desultory record made it all the more surprising that he caught the eye of Seema Silberstein, whose father, Ben, was a wealthy Detroit real estate developer. But colleagues say it was Seema who fell in love with and tracked after Boesky after meeting him in June A relative of hers, a federal district court judge, hired him for a one-year clerkship.
Boesky and Seema were married soon after and had their first child, Billy. Colleagues recall Boesky's feeling that Detroit was too small and confined for his ambitions. Boesky's father-in-law installed Ivan and Seema in an elegant Park Avenue apartment. Boesky landed a job as a trainee at L. Rothschild that lasted a year. He moved to First Manhattan, getting his first taste of real arbitrage trading, then shifted to Kalb Voorhis.
Boesky was contemptuous of a firm that put any store in the loss of such a paltry sum. Boesky made a splash in the small world of arbitrage almost immediately. He was considered audacious and bold. By , the firm was bankrupt. Tired of begging for a position at a prestige firm, Boesky decided to open his own operation, devoted primarily to arbitrage.
He stunned his fellow arbs by actually taking out advertisements in The Wall Street Journal, seeking investors and extolling the profit potential in arbitrage the last thing members of the "club" wanted others focusing on, fearful that it would attract more competition.
He didn't attract enough capital to meet his ambitions. It was his wife's family's money that gave him enough to go forward. From the first day of Ivan F. If he needed something fast, he wouldn't hesitate to pay private couriers. He dressed in what he deemed the image of the successful Wall Street financier: his signature three-piece black suit, starched white shirt, and gold chain dangling from the vest pocket. It looked like a Phi Beta Kappa key. Boesky didn't waste money on the firm itself. It was housed in a single room in an aging Whitehall Street office building.
The room was so small that a stock exchange auditor ordered Boesky to move into larger quarters. One of his first employees was an accountant hired to manage the firm's "back office. The firm, more than any other, specialized in arbitrage accounting. Though he didn't tell Boesky, Mooradian had been severely sanctioned for violating capital requirements. It had made it hard for him to get a job, and he was always grateful to Boesky for hiring him. Boesky told Mooradian to be at work every morning promptly at 7 A.
If Boesky wasn't going to be in the office, he'd call in at ; if no one answered, he'd fly into a rage. Once, years later, Boesky called in when a fire drill was in progress. No one answered the phone immediately. The next day a memo appeared on everyone's desk. I understand there was a fire alarm. Certainly, I don't want you to risk your lives. But I extend my appreciation to those of you who stayed behind. He never came into the office the Friday after Thanksgiving, when most Manhattan offices are reduced to skeleton staffs.
But no one else was allowed the day off. Boesky checked attendance by calling so many times -- in some cases, as many as 10 times to a single employee that the others in the office figured Boesky might as well have come to work. He also refused to hand out paychecks until after 3 P. When employees complained, he explained that he didn't want the "disruption" of his staff dashing out to cash and deposit checks in the middle of the day. But they suspected he wanted the extra interest that would accumulate over the weekend.
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Almost from the beginning, Boesky screamed at everyone regularly. After several such incidents, Mooradian asked Boesky to stop yelling. Once his wife found him still up at A. But as the years went by, Boesky seemed to need less and less sleep and became even more demanding. A favorite tactic was to call Mooradian with a complex question. Boesky sometimes spent the workday at his estate.
Near the "Wall Street" sign he had placed on a lamppost on one of the roads was an office complex with secretaries and all the electronic market and communications gear he needed to stay in constant touch with the market. Boesky had bought the pet as a surprise for Seema, but she had banned the terrier from the house. So Boesky said the dog would live at the office, and his chauffeur, Johnny Ray, could take care of it at night and on weekends.
Soon Boesky and the puppy were inseparable. He even took the dog along to meetings with investors. Just a week later, Lessman and others heard a shriek from Boesky's office. They rushed in to discover a stricken look on Boesky's face. The puppy looked confused. In a pile right in front of Boesky's desk, on his spotless beige carpeting, the dog had demonstrated convincingly that it wasn't yet housebroken.
Boesky wiped up the mess. No one ever saw the dog again. Boesky had other idiosyncrasies, namely, his eating habits. Some days it seemed as though he ate nothing, as if he were still training for a wrestling weigh-in. For breakfast, he liked to order a single croissant. He would pick at it, then eat a single flake. One colleague recalls that once, when Boesky took a normal bite, he said, "Ivan, you little pig. Boesky often invited prospective investors in his partnership for lunch in the private dining room in his office.
One afternoon Meshulam Riklis, the chairman of Rapid-American Corporation who bankrolled a film career for his much younger wife, Pia Zadora, was scheduled for lunch. Boesky had his people call ahead to find out what Riklis liked to eat, then ordered a lavish spread from the 21 Club.
At the table, Boesky fretted that Riklis didn't seem to be enjoying the food. Eat more. Boesky ate a single grape. As he had vowed, Boesky "retired" in early , liquidating his interest in Ivan F. Having failed to persuade any of his senior employees to take over most had been fired or quit , he had recruited an arbitrageur from Morgan Stanley, Steve Royce, to take over the entity, renamed Bedford Partners. Though Boesky had none of his own money in Bedford, he was on the phone to Royce every day, usually six to eight times, making investment decisions as though he were still in charge.
Boesky set about almost immediately raising money for a new arbitrage partnership, Ivan F. As a corporation rather than a limited partnership, the new entity had a more complicated ownership structure, divided between common stockholders and preferred stockholders. Investors received mostly preferred stock, and the profits were allocated heavily to the common stockholders Boesky, principally and the losses to the preferred holders. Boesky enlisted Lessman, one of the few holdover employees from the earlier company, in his endless quest for investors' capital.
In addition to the projected returns based on investors' performance in the prior partnership, Boesky offered a unique advantage: direct access to him. He promised to pass on market intelligence that the investors would be free to use in their own portfolios. The campaign wasn't all that successful, despite the impressive rate of return Boesky had amassed for his previous investors. One day Lessman dared to suggest that the allocation of profits and losses turned potential investors off. Boesky glared.
Boesky offered him the same stiff terms he was offering other outsiders. Even in those close quarters, Boesky liked to boast that no one knew everything about his operation except himself. He deliberately kept even his own employees off guard. Lessman was instructed to answer Royce's calls and share his research with him.
Late one evening, Royce called and said, "Ivan wants your position" in a particular stock.
Lessman pulled it up on his computer screen and told Royce. Boesky called Lessman soon after, and Lessman mentioned in passing that Royce had called and he'd disclosed the position. There was silence on the line. Then Ivan screamed, "I should fire you for this. Don't ever give away a position again. Soon after, Royce called Lessman again one night seeking a stock position. Lessman refused, saying he'd been ordered by Boesky not to talk.
The phone rang again. This time Boesky reamed out Lessman for failing to answer Royce's question. Finally Royce called asking for Boesky's position in Marathon Oil, then a potential takeover target; this was highly sensitive information. Lessman, anxious not to be caught in the middle, gave Royce an answer, but greatly understated the true position. Then Boesky called from a dinner party. Lessman proudly told Boesky that Royce had pumped him for information, and that he'd deliberately misled him. Lessman's head was spinning.
Why would Boesky lie to someone managing his own wife's money? Soon after, Lessman had to call Boesky one evening at home in Bedford, and Boesky's eldest son, Billy, answered. There was someone, Burnham explained, that he wanted Joseph to meet right away, someone who just might help Joseph realize his outsize ambitions for his new firm. Joseph, then 41 years old, a well-built former amateur boxer with graying hair, had landed the Drexel corporate finance job with an audacious claim: "Give me fifteen years," he had said.
In Goldman, Sachs was at Wall Street's pinnacle. Its capital was thin. The stock market was in a slump. And despite the illustrious Drexel name, Drexel Burnham barely ranked as a second-class citizen on Wall Street. Harper distillery, and a few remnants of old-line Drexel Firestone, which traced its lineage from the illustrious Philadelphia Drexel family and the unabashedly anti-Semitic J. Morgan empire. Burnham was mostly Jewish, filled with rough-and-tumble traders who survived on their selling skills.
Drexel, by contrast, had an old-line aversion to hard sales tactics and a steadily dwindling roster of corporate clients who increasingly opted for firms with more aggressive distribution networks.
Drexel was tottering, surviving largely on its reputation and its historical status as a major-bracket firm. Indeed, Tubby Burnham sought out Drexel as a merger partner primarily to hoist his company out of the submajor bracket and attract more underwriting work. When Burnham visited the chairmen of Goldman, Sachs and Morgan Stanley, the eminent firms whose blessing and goodwill the merged firm would need to survive in the still-clubby world of Wall Street, they gave their approval on one condition: The venerable Drexel name had to come first, regardless of the true balance of power in the firm.
The survivors of the two firms still mostly shunned one another, even now, three years after the merger. As they walked through the firm, Burnham told Joseph that when he first met the head of Drexel at the time of the merger, he'd asked how many of the firm's more than employees were Jews. He was told that there were a total of three.
One, Burnham said, was the man he wanted Joseph to meet: Michael Milken. Joseph shook hands with the intense, slender young man with dark, deep-set eyes. Joseph wondered briefly how someone like Milken had ever ended up at Drexel Firestone, but otherwise Milken didn't make much of an impression. They didn't work directly together. Joseph headed the more upscale investment banking area, and Milken was the head of convertibles and noninvestment-grade securities, later dubbed the high-yield department.
He reported to a longtime Burnham trader, Edwin Kantor, and, as far as compensation was concerned, directly to Burnham. To encourage Milken, who complained that he'd always been treated as a second-class citizen by the starched-shirt Drexel WASPs, Burnham let Milken set up his own semi-autonomous bond trading unit. In , he gave Milken a compensation arrangement crafted to provide strong performance incentives.
Like all Wall Street firms, Drexel paid relatively low salaries, and most employee compensation came in the form of bonuses. But Milken's bonus arrangement was unusually generous.