Wall Street sound bites which will live in infamy
E-discovery has caused Wall Street firms a great deal of humiliation as of late. Financial services execs should be aware that anything they say or write can come back to haunt them--resulting in a courtroom loss or a PR disaster.
The latest leak to make headlines is from Goldman Sachs' (NYSE: GS) "Fabulous" Fabrice Tourre. One email in particular made Goldman public enemy number one. Read on to relive some of the infamous soundbites, from recent years, that ensnared companies in scandal.
Did we miss a notable quote? Please leave your favorite flubs in the comment section below.
Fabrice Tourre of Goldman Sachs - 2010
This past April the SEC slapped Goldman Sachs and trader Fabrice Tourre with a criminal complaint for securities fraud. Tourre exchanged a number of emails with his girlfriend, where he discussed the nature of CDOs, as well as some questionable practices that pitted the interests of two different clients against one another.
"When I think that I had some input into the creation of this product (which by the way is a product of pure intellectual [expletive], the type of thing which you invent telling yourself: "Well, what if we created a "thing", which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?") it sickens the heart to see it shot down in mid-flight... It's a little like Frankenstein turning against his own inventor ;)"
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Raj Rajaratnam of Galleon Group - 2009
In one of the biggest insider trading scandals in history, twenty people from Galleon Group LLC (Galleon Group news) have been criminally charged, including co-founder Raj Rajaratnam (Raj Rajaratnam news). This marks the first time that the FBI has used wiretaps in such a case. As reported by The Huffington Post, among the evidence being submitted is one conversation that allegedly took place between Rajaratnam and a former New Castle Funds LLC consultant, who was questioning whether they would have bought AMD stock if they didn't have inside information. Rajaratnam said, "Yeah, no. I wouldn't." Galleon's Danielle Chiesi (Danielle Chiesi news) said that she "wouldn't of touch[ed] it with a [expletive] 10-foot pole."
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Joesph Cassano of AIG - 2008
In the wake of the massive taxpayer bailout for AIG (NYSE: AIG), the SEC has begun investigating the fault of individual members within AIG and the viability of a civil securities fraud case.
According to the Washington Post, no charges have been filed yet. Investigators are still determining whether internal emails reveal a criminal level of optimism indicative of negligence that defrauded investors, or merely a lack of judgment.
In a November 2008 email, while preparing for a public conference call, AIG's head of its financial-products division Joesph Cassano said, "No other company of our ilk--dealers, bank etc. have gone into explaining these exposures [sub-prime] in any detail, this is just normal course [of] business with highly rated counterparts. Attempting to explain this segment of the business briefly I worry will only add to the confusion of the audience."
Shareholders have already filed a lawsuit in New York federal court, and the complaint alleges that AIG executives ignored warning signs and downplayed the crisis. In response, AIG has claimed optimism is not the same as intent to deceive.
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Jack Grubman of Salomon Smith Barney - 2002
Back in 2002, Wall Street was under fire from the then-ambitious prosecutor Eliot Spitzer (Eliot Spitzer news) for fraudulent investment research to draw investment banking fees.
As reported by USA Today, over 10 banks were charged as part of Spitzer's bloodbath, but Citigroup's Salomon Smith Barney unit was singled out as one of the worst offenders. Internal emails revealed that the company submitted faulty research in exchange for perks. The case focused on one research analyst, Jack Grumban.
You know everyone thinks I upgraded T [AT&T] to get lead for AWE [AT&T Wireless tracker]. Nope. I used Sandy to get my kids into 92nd St Y pre-school (which is harder than Harvard) and Sandy needed [the AT&T's CEO's] vote on our board to nuke [John] Reed in showdown. Once coast was clear for both of us (ie Sandy clear victor and my kids confirmed) I went back to my normal negative self on T. [AT&T's CEO] never knew that we both (Sandy and I) played him like a fiddle."
Research analysts in the firm acted more like boosters for the investment bankers, allowing them to reap in millions in banking fees. Citigroup (NYSE: C) ultimately agreed to pay $400 million, while Grubman payed $15 million in and fines and restitution.
Henry Blodget of Merrill Lynch - 2002
In 2002 the SEC filed suit against Merrill Lynch's senior research analyst--in a similar situation to the Grubman case--for the Internet sector, Henry Blodget. Blodget recommended stocks, while privately bashing them. As reported by The Street, in one email he famously wrote, "Let's put lipstick on this pig" and after conviction was banished from Wall Street.
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