Between 1980 and 1990, two major revolutions began. One—actually a series of revolutions in Central Europe—spelled the end of state socialism. Encompassing the downfall of a long-maligned and readily identifiable enemy and replete with easily recognized acts of heroism, this revolution was the perfect media story. The media capitalized upon it accordingly, and many came away feeling that justice had been done and that all was right with the world. The other revolution, which began with the advent of the 1980’s, was not so easily understood, and though the media named it “The Reagan Revolution,” it went largely unnoticed by the mass of people. This is understandable; the battles—and they were large ones, the largest of their kind in history—were fought in boardrooms and men’s clubs inaccessible to most Americans. The usurped were the masses of middle-class Americans who did not and perhaps never will understand the depth and magnitude of the aggressions directed against them.
In Den of Thieves, James B. Stewart documents the tip of the iceberg of this revolution. As the tip, it is easily recognizable, featuring names like Michael Milken and Ivan Boesky, which during the end of the 1980’s were heard with some frequency. To expose any more of the iceberg is perhaps an impossible task, given the secrecy shared between members of the corporate elite. Yet the documentation presented in such books as Den of Thieves, Roy C. Smith’s The Money Wars (1990), and Connie Bruck’s The Predators’ Ball (1988), however modest is crucial insofar as it gives an idea of just how huge the rest of the iceberg must be.
Den of Thieves is split into two sections. The first, entitled “Above the Law,” is an account of how the crimes the book describes were committed; the second and less interesting section, “The Chase,” details how the criminals were brought to justice. Stewart focuses on four principal conspirators: Michael R. Milken, Ivan F. Boesky, Martin Siegel, and Dennis B. Levine. Of the four, Levine receives the harshest treatment by Stewart. Portrayed as a braggart, a compulsive big spender, and a fool who liked to throw his self-aggrandized weight around, he wanted a piece of what he perceived to be the real action happening on Wall Street—the insider trading. Overly confident that he would never be caught, he was the first to be imprisoned for his part in the growing scandal. He began his activities on a small scale by enlisting three friends—Robert Wilkis and Ira Sokolow, investment bankers, and Ilan Reich, a partner with a New York law firm—who agreed to share information regarding clients of their firms who were engaged in takeover battles.
During the 1980’s, because of the Reagan Administration’s undermining of antitrust laws, companies began taking over other companies with greater frequency. During a takeover, one company will offer the shareholders of the targeted company a price above the market value for their stocks. The resulting negotiations necessitate the hiring of brokerage firms and a small army of lawyers. Knowing ahead of time that a particular company is the target of a takeover can be extremely valuable information and can lead to market manipulation to the detriment of the average stockholder; consequently, the Securities and Exchange Commission (SEC) attempts to ensure that such information is not acted upon by prohibiting brokers from trading in their clients’ stocks. Monitoring such activity is a fairly simple matter. On the other hand, ensuring that such information is not surreptitiously shared among brokers and lawyers and then acted upon is not so easy, especially since illegal earnings from such dealings can be hidden in overseas bank accounts.
Dennis Levine began trading on inside information during the first week of his being hired by Smith Barney, Harris Upham & Co., an investment bank. In his thirst for inside tips, he would make copies at night of documents found on other brokers’ desks. He badgered his friends Reich and Wilkis for information until both nearly had nervous breakdowns. During the summer of 1984, based on tips from Reich, Levine’s profits topped $2 million. On one tip from Sokolow, he made $2.7 million. Levine, however, had far bigger plans. After years of trying, he made contact with Ivan Boesky, one of the biggest arbitrageurs on Wall Street.
Traditionally, arbitrage has been a quiet,...
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