Shooting fat cats

The Scotsman and The New Zealand Dominion, March 28 1988

At first sight, John A Mulheren Jnr is ripe for the Rogue’s
Gallery. He is a big, brash Manhattan millionaire, aged only 38,
who has made a fortune out of the stock market, cashing in on the
orgy of greed and speculation which climaxed in last October’s
crash, indulging his every whim at the flick of a credit card,
boasting that he has far more money than he knows how to spend
and continually grabbing more. He also appears to be a crook.

He has been caught up in the huge trawl of Wall Street which
began late in 1985 when investigators stumbled on a network of
dealers who were illegally using inside information to make a
killing in the stock market. Last month, Mulheren discovered that
he was about to be indicted, at which point his behaviour slumped
from the merely disgusting to the thoroughly disgraceful.

Unlike his colleagues who had also been caught with their fingers
in various off-shore pies, Mulheren was not content to hire a
lawyer and go to court. Instead, he took a nine millimeter
semi-automatic pistol, a .357 Magnum pistol and a shotgun and set
out to find two of his fellow dealers who, he rightly suspected,
had informed the authorities about his activities.

On his first sortie, he was unable to find them. Back home – an
air-conditioned mansion with swimming pool in New Jersey –  his
wife, Nancy, had seen what was happening and called the police.
Two patrolmen came and confiscated his guns and told him to
behave. But a couple of hours later, Mulheren set out again with
yet another gun – an Israeli assault rifle. The police were
outside watching. There was a brief chase, a scuffle and he was
arrested.

So, he is a bad guy. Yet I can’t help feeling some sympathy for
him. A little bit because he is a character – he used to wear
dungarees and running shoes and listen to rock music among all
his puffed-up pin-stripe colleagues. A bit because he was
generous – he adopted five children and gave all his brothers and
sisters new cars tied in red ribbons for Christmas. But mostly, I
am afraid, because the two fellow dealers whom he went out to
find last month were Mr Ivan Boesky and his side-kick, Michael
Davidoff.

Mr Boesky is not one of those people who would be sadly missed if
he happened to get caught by a little low-flying lead. Just last
week, he started a three-year prison sentence, an event which
left eyes dry across the country, for Boesky is the biggest, most
gluttonous and most crooked of the fat cats who have had the
cream on Wall Street. Mulheren had the misfortune to be one of
his best friends.

Six years ago, when Boesky over-reached himself and faced
bankrupcy, Mulheren raised enough money to keep him afloat until
he recovered. When Boesky needed a trusted front-man to trade
stocks for him, Mulheren obliged. Then two years ago, Boesky was
confronted by investigators who had found him at the centre of
the network of insider-trading. Boesky made an infamous deal: in
exchange for lenient treatment, he would give them anything they
wanted for their inquiry. One of the things he gave them was
Mulheren’s head, spilling the details of all the trades which
Mulheren had made for him, trades which now turned out to be
crooked.

That is the real difference between the two men. When Mulheren
hit trouble, he went into a tail spin, but Boesky just carried on
dealing. He ended up paying $100 million in fines – but keeping
some $300 million of his ill-gotten wealth for himself. He has to
serve a three-year prison sentence – but he was allowed to choose
the prison, and he selected Lompoc in California, an easy-going,
low-security, white-collar settlement in the sun surrounded by
palm trees and lawn sprinklers, where Boesky will be eligible for
parole in eight months.

In this respect, Boesky is one of a crowd. Remember Nelson Bunker
Hunt? He is the big fat Texan billionaire with the mouth to
match, who was accused in 1980 of plotting to buy all the silver
in the world so that he could create a scarcity of the metal,
send the price rocketing upwards and then start selling his
supply at an enormous profit. Unfortunately for him, the price of
silver collapsed when he was still in the process of buying: he
lost $3 billion in less than a week, went bankrupt and was
engulfed in law suits.

Mr Hunt is no more lovely than Ivan Boesky, and just like Boesky,
he kept dealing to get out of trouble. Over Christmas 1980, he
bankrupted his children by calling in loans he had made to them
for immediate repayment. He then turned on two of the banks which
had backed him and sued them on the bizarre grounds that they had
lent him too much money. Now with an estimated net worth of minus
one billion dollars, he has managed to lease a slice of the Gulf
of Mexico and is drilling for oil and gas.

Similarly, there is a businessman down in Miami, Victor Pozner,
who has just been convicted of cheating the tax man out of more
than $1 million. The judge indicated that he was going to jail
him. Victor wasn’t having that. So he made a deal: he agreed to
put $3 million into a project for the homeless if the court gave
him probation. The judge agreed. Victor left court smiling: he
still has $175 million left to play with.

Then there is Dr Denton A Cooley in Houston, Texas whose property
business has just gone bust owing $100 million, some of it to
hard-up individuals like tenants in his properties who paid him
security deposits which they have not got back. But the doctor is
OK. He earns $10 million a year as a heart surgeon, owns a pair
of vintage Rolls Royces, a $1 million mansion and a 500-acre
ranch, all of which he is likely to keep under the terms of his
bankrupcy.

Mulheren’s real problem was that he was not cynical enough to
deal his way out of trouble; he never saw through his own
environment. As a counterpoint, consider the case of an
extraordinary character, Andrew J Krieger, now aged 31, who was
happily absorbed in studying Sanskrit and Indian Philosophy at
university until he took a summer job with a Wall Street broking
firm. He turned out to have a natural talent for the work, so as
soon as he had finished his degree he went back for more. That
was in 1984; he has since become a legend.

He routinely started work at five in the morning, used his car
phone to make deals in Europe as he drove to the office, made
deals all day, drove home making deals in Asia, spent the evening
dealing from his study, broke his sleep repeatedly during the
night to make more deals and ended up achieving phenomenal
results. Last year, his employers, Bankers Trust Co, made a cool
$300 million out of his work, and Krieger himself took home $3
million, substantially more than his own chairman earned.

Now here is the point. Last month, Krieger quit. Wall Street was
so astonished that trading in foreign currency ground to a halt
for several hours while the news sunk in. There was a riot of
speculation that Krieger must be involved in some scandal. The
Wall Street Journal is still scratching its head about it. But
the truth, as Kreiger keeps saying, is simple: he doesn’t like
Wall Street. He saw through it; the place has, he told the
Journal, “an absence of people who think about why they’re doing
what they’re doing. It disturbs me.”

But John Mulheren, for all his eccentricity, never saw it. After
he was arrested with his Israeli assault rifle, he spent the
night in prison and appeared in court the next day shackled by
one wrist to a long line of other prisoners. He was charged with
threatening federal witnesses, which is technically what Boesky
and his side-kick are, and sent back to prison. He was finally
released from there three weeks later when, after examining
medical reports on his state of mind, a court ordered that he be
confined in a locked ward of the Bell Mead mental hospital
outside New York.