Confessions of a Wall Street Analyst

by REINGOLD DANIEL

• ISBN13: 9780060747695
• ISBN10: 0060747692
• Format: Hardcover
• Copyright: 2006-01-18
• Publisher: HarperCollins Publications

Summary

Here is the true story of a top Wall Street player's transformation from a straight-arrow believer to a jaded cynic, who reveals how Wall Street's insider game is really played. Dan Reingold was a top Wall Street analyst for fourteen years and Salomon Smith Barney analyst Jack Grubman's chief competitor in the red-hot sector of telecom. Reingold was part of the "Street" and believed in it. But in this action-packed, highly personal memoir written with accomplished Fast Company senior writer Jennifer Reingold the author describes how his enthusiasm gave way to disgust as he learned how deeply corrupted Wall Street and much of corporate America had become during the roaring stock market bubble of the 1990s. Confessions of a Wall Street Analyst provides a front-row seat at one of the most dramatic -- and ultimately tragic -- periods in financial history. Reingold recounts his introduction to the world of Wall Street leaks and secret deal-making; his experiences with corporate fraud; and Wall Street's alarming penchant for lavish spending and multimillion-dollar pay packages. Reingold spars with arch rival Grubman; fends off intense pressures from Wall Street bankers and corporate CEOs; and is wooed by Morgan Stanley's CEO, John Mack, and CSFB's uber-banker Frank Quattrone. Reingold describes instances in which confidential deals are whispered days before their official announcement. He recalls the moment he learns that Bernie Ebbers's WorldCom was massively cooking its books. And he is shocked to have been an unwitting catalyst for a series of sexually explicit e-mails that would rock Wall Street; bring Jack Grubman to his knees; and contribute to the stepping aside of Grubman's boss, Citigroup CEO Sandy Weill. Some of Reingold's stories are outrageous, others hilarious, and many are simply absurd. But, together, they provide a sobering expose of Wall Street: a jungle of greed and ego, a place brimming with conflicts and inside information, and a business absurdly out of touch with the Main Street it claims to serve. He shows how government investigators, headlines notwithstanding, never got to the heart of the ethical and legal transgressions of the era. And how they completely overlooked Wall Street's pervasive use of inside information, leaving investors -- even sophisticated professionals -- cheated. The book ends with a series of important policy recommendations to clean up the investing business. In the tradition of Liar's Poker and Den of Thieves, Confessions of a Wall Street Analyst is a no-holds-barred insider's account that will open the eyes of every investor.

Author Biography

Dan Reingold is currently Project Director for Telecom Finance at Columbia's Graduate School of Business Jennifer Reingold is a senior writer at Fast Company magazine

Table of Contents

Acknowledgments	xi
Cast of Characters	xv
Prologue: Tuesday, March 15, 2005	1	(259)
1. The Plunge: 1989-1991	11	(29)
"This Is the Street Where They Fool People."	11	(2)
From Consulting to Communications: MCI	13	(4)
My First Run-in with Jack Grubman	17	(2)
Street Smarts	19	(3)
Ed Comes Knocking	22	(6)
From the Jetway to the Attic	28	(6)
"We Do Not Make Negative or Controversial Comments About Our Clients."	34	(6)
2. Around the World in Seven Days (or Less): 1992-1993	40	(26)
Climbing Over the Wall	40	(3)
"You're the Only One."	43	(5)
'Hi, I'm John Mack..."	48	(5)
Privatization Pandemonium	53	(4)
The Perils of Papadam	57	(3)
Mississippi Madness	60	(6)
3. Rainmaker, Dealbreaker: 1993-1996	66	(28)
Fraud 101	66	(5)
Tone and Notice	71	(3)
Jack's Knack	74	(4)
Afternoon Tryst	78	(6)
My Major Opinion Change: Upgrading the Bells, Downgrading AT&T	84	(3)
The Power of the Poll	87	(4)
"Just to Make Things Interesting"	91	(3)
4. Intimidation: 1996-1997	94	(21)
M&A Mania	94	(1)
Nothing Personal?	95	(3)
Internet Ignorance	98	(2)
Suffocation	100	(4)
My Failed Quest for Qwest	104	(5)
Fido Loves WorldCom	109	(1)
Irrational Exuberance	110	(5)
5. Merger Mania: July 1997–January 1999	115	(31)
The Case of the Secret Document	115	(9)
MCI/BT: The "BloodBath"	124	(4)
Jack and Bernie: Inextricably Linked	128	(5)
Jack Plays Loose: I Play Banker	133	(5)
How I Lost My Bank $25 Million	138	(8)
6. Oxygen Deprivation: 1999	146	(27)
My Multibillion-Dollar Mistake: AT&T	146	(5)
"You're Missing the Fucking Boat on Level 3"	151	(5)
"You Know He Can't Keep His Mouth Shut"	156	(5)
The SEC's Deadly Mistake	161	(4)
"How Can Your Best Friends Become Your Worst Enemies?"	165	(5)
To Publish or Not?	170	(3)
7. The Leak, the Ambush, and the Dupe: 1999	173	(28)
"Shame on Them?"	173	(1)
The $14 Billion Leak	174	(4)
The Ambush	178	(4)
A Piece of the Action at CSFB	182	(6)
Merrill: I'm Outta Here	188	(3)
"Any Idea What the Hell They Were Talking About?"	191	(2)
The $1.5 Million Mistake	193	(1)
The Dupe: Jack's AT&T Upgrade	194	(3)
"I've Never Had a Conversation Like This."	197	(4)
8. Humpty-Dumpty: 2000	201	(29)
Playing with the Devil	201	(4)
My Mountaintop Message	205	(4)
Who Wants to Be a Millionaire?	209	(2)
Two Minutes to Midnight	211	(4)
The Beginning of the End	215	(5)
The Guide-down Game	220	(3)
A Week from Hell	223	(7)
9. Crash and Burn: 2001	230	(30)
The Crash	230	(4)
The Show Must Go On	234	(2)
Global's Insider Game	236	(4)
Nacchio's Wrath	240	(2)
The Analyst Plays the Villain	242	(4)
Jack, the All-Knowing	246	(2)
Qwest and Global: The Swapstakes	248	(2)
Vindicated—But So What?	250	(4)
Outed: Qwest's Accounting Gimmicks	254	(1)
"How Do You Know This?"	255	(5)
10. Jack Fell Down: 2002—April 2003	260	(32)
The Worm Turns	260	(7)
WorldCon	267	(2)
Hearings from Hell	269	(7)
"What's a Level 3?"	276	(3)
Sex, Lies, and Videotape	279	(8)
So Long to the Street	287	(5)
Epilogue: Where Are They Now?	292	(6)
Afterword: Back to the Future: Some Policy Prescriptions	298	(18)
The Middleman's Dilemma	301	(1)
Why Spinning Off Research Won't Work	302	(1)
A Critique of Actual and Proposed Reforms	303	(6)
What Needs to Be Done	309	(7)
Notes	316	(9)
Glossary	325	(4)
Index	329

Excerpts

Confessions of a Wall Street Analyst
A True Story of Inside Information and Corruption in the Stock Market

Chapter One

The Plunge

1989-1991

Ed picked me up at my house in a taxi. My home, at the time, was nothing super fancy, but Paula and I had put a lot of sweat into it and were quite proud of it.

Ed took one look at the house and almost started laughing. "You ought to come to Wall Street and hit the big time," he said.

July 14, 1989

"This Is the Street Where They Fool People."

That's what I was thinking as I stepped off the early morning express train from Scarsdale and stood on Madison Avenue, blinking nervously in the bright sunlight. As I gazed up at the rows of tall buildings and tried to avoid colliding with the natives, I felt the tiniest sense of relief.

At least my job was on Wall Street. Madison Avenue, by contrast, was the center of the advertising world, the place where smart and manipulative companies burned loads of cash and creative energy to convince us that we needed to wash our hands with Dial, brush our teeth with Colgate, and wipe our derrières with Charmin. At least I was going to be an analyst whose job it was to evaluate companies on their merits, not someone whose raison d'être was to seduce America's soap-opera watchers with meaningless slogans and exaggerated promises.

My new job in equity research, I believed, had nothing to do with manipulation and everything to do with balanced, rational thinking. I had made the leap to Wall Street in part because of the money, but also because being an analyst seemed like the perfect job for a serious guy like me who liked to reason his way through life. Sure, emotion and hype sneaked into my line of work occasionally, but in the end, the stock market was rational, analytical, cool. Fooling people wasn't part of this equation.

Or so I thought. In retrospect my naïveté sounds charming or—let's not be charitable—silly. Of course Wall Street was as much about fooling people as Madison Avenue was, at least if you were one of the corporate executives trying to convince investors—and analysts—that your company's shares would shoot to the moon. But my job, I hastened to tell myself, was all about shooting straight. I had been in a sales role before, and I'd never liked it. Now I'd have a chance to focus entirely on the facts.

I grabbed on to that belief as if it were a life preserver and clutched it as I walked up Madison, then west on Forty-eighth Street and north on Sixth Avenue until I reached the headquarters of Morgan Stanley at Fiftieth and Sixth. I was 36 years old, it was my first day on Wall Street, and I was scared out of my mind.

Not that I had fallen off the turnip truck or anything. I had moved here from Washington, D.C., where I had been director of business analysis at MCI, the brash upstart that was shaking up the telecommunications business. I had interacted with Wall Street and its analysts and bankers for the past two years, trying to make them see my company as positively as I did. What I loved the most was the intellectual sparring as we debated the future of MCI and the telecom industry. It had been a great gig.

But this was the big time. I had been recruited by one of the premier investment banks, a place better suited to Brooks Brothers-clad Greenwich bluebloods than a middle-class public school guy from Buffalo, New York. I was going to be one of a select group of some 35 analysts at Morgan Stanley whose job it was to recommend stocks—and, I had been told, move the financial markets. The prestige and power of my new job filled me with pride. But the responsibility terrified and humbled me. All of a sudden I was in the major leagues, and I'd never even played Class A ball. What was I doing in the middle of this?

Already, I'd ventured pretty far from my beginnings as the son of a scrap-metal dealer with a high school education. I'd been a political science major and math minor at the State University of New York at Albany, where I'd met my wife-to-be, Paula Zimmer, during a Wiffle ball game on the first day of our second year. She studied art history and then went back to school to become a pediatric-intensive-care nurse. And I'd gone on to become a starry-eyed graduate student of Middle East politics at the University of Chicago and Princeton University, certain I wanted to devote my life to bringing peace to that powder keg of a region.

I ended up at the LBJ School of Public Affairs at the University of Texas, earning a master's degree in 1979. I was hoping for an assignment that involved foreign policy but instead accepted a $24,000 offer from Coopers & Lybrand, one of the world's largest accounting and consulting firms, as an economic consultant in its Washington, D.C., office. For a few years, I was really happy at Coopers. The job appealed to my inner wonk, and I worked my way up the food chain. But once I was promoted to manager, my job became more and more about selling new consulting services to clients. The whole selling thing turned me off. I didn't want my life to be defined by the spin and hype of selling. Working inside a growing company began to sound a lot more interesting.

From Consulting to Communications: MCI

It just so happened that the Coopers's D.C. office building backed up against the new offices of MCI, an upstart telecommunications company that had been in business since 1968. MCI had emerged as a young, exciting David to AT&T, the ultimate corporate Goliath, with a more responsive, entrepreneurial culture. Its founder, Bill McGowan, had found a way to compete against AT&T in the long distance market even . . .

Confessions of a Wall Street Analyst
A True Story of Inside Information and Corruption in the Stock Market. Copyright © by Daniel Reingold. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

---

Excerpted from Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market by Dan Reingold
All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.