Larry Doyle loves Wall Street. “I love the markets, I love the pace, I love the competition, taking risks, managing risks, generating revenue,” Doyle told Corporate Crime Reporter in an interview last week. “I love it. And I’m still very much involved. I’m engaged with clients managing assets. America needs Wall Street and a strong flow of capital. But what happens when cronyism gets a stronghold? That erodes trust and confidence. Wall Street is suffering from a trust and confidence deficit.”
Doyle spent years on Wall Street. But then he started writing about its underbelly. And now he’s out with a book titled — In Bed with Wall Street: The Conspiracy Crippling Our Global Economy (Palgrave MacMillan 2014).
The book focuses on the Financial Industry Regulatory Authority (FINRA). And Doyle agrees with the judgment of Madoff whistleblower Harry Markopolos — FINRA is corrupt and incompetent and in cahoots with the large broker-dealers at the expense of the investing public.
Doyle believes we should do away with self-regulatory organizations like FINRA.
Doyle would also create something called the Financial Regulatory Review Board, modeled after the police review boards set up in cities around the country.
“Many cities throughout America have incorporated private, independent police review boards to address a host of issues and abuses that have transpired within their police departments,” Doyle writes.
His corporate crime police board would be “staffed and run by highly qualified private individuals with a passion for public service.
Like who?
Like Gary Aguirre, Sheila Bair, Neil Barofsky, Amar Bhide, William Black, Richard Bowen, Richard Greenfield, Bill Isaac, Simon Johnson, Harry Markopolos, David Skeel, and Robert Wilmers.
The book is littered with examples of people who have stood up to the power of Wall Street and FINRA and been run over.
Take the case of Mark Mensack.
“Mark Mensack has an extraordinary background in the 401k space,” Doyle told Corporate Crime Reporter. “He was hired by Morgan Stanley to grow his business into Morgan Stanley. Mark makes the assessment within a very short order that the manner in which Morgan Stanley was engaging these providers looked to be what amounted to a pay to play. That means that the providers of these products would have to pay the company in order for the company reps to push those products — whether those were the best products for the customers or not. Mark thought — I didn’t come here to operate under those kind of guidelines. So Mark left Morgan Stanley. Morgan Stanley was — okay, you forfeit the bonus that we provided you.”
“Mark takes the case to arbitration against Morgan Stanley. Mark lost his arbitration case with FINRA. FINRA runs the arbitration process. He loses. Mark appeals the case. At the hearing, there was 18 hours of testimony. For the appeal, Mark asks FINRA to provide the testimony so he could make the appeal. Mark got ten hours worth of testimony from FINRA.”
FINRA is required to make a recording of all the testimony for the appeal?
“Correct,” Doyle says. “And Mark goes back to FINRA and says — wait a second, there are only ten hours here. And it’s not like the first eight hours or the middle eight hours or the last eight hours were missing. I believe that at fourteen critical points in that testimony, it was deleted. Are you kidding me? I define that as a kangaroo court. Talk about travesty of justice. If that happened in a regular court of law, that would be obstruction of justice.”
Did he go to federal court?
“He did,” Doyle says “He pursued this in the courts in New Jersey. And it ran through the court systems in New Jersey for the next couple of years. And regrettably, he did not win his appeals.”
“How did FINRA respond to his question — what happened to the missing eight hours of testimony? They said it was accidentally deleted. I’ve got the actual document and I provide it in the book. That smells. Accidentally deleted at 14 critical points? That doesn’t pass the smell test.”
Doesn’t FINRA impose a lot of fines on Wall Street every year?
“During the first five years, FINRA imposed fines totalling $250,000,000,” Doyle says. “So that’s about $51 million a year in fines for an industry that generates top line revenues of well over $100 billion a year.”
What are the odds of the reformers breaking through?
“Regrettably, Wall Street owns Washington,” Doyle says. “For ten years, from 1998 to 2008, on average Wall Street would send Washington $500 million a year. In the last two election cycles, those levels have gone up dramatically. For 2010, I believe it was something like $1 billion and in 2012 it was something like $5 billion.”
“What does that get? That’s protection money. For an industry generating top line revenues in excess of $100 billion — what’s a billion?”
[For the complete transcript of the Interview with Larry Doyle, see 28 Corporate Crime Reporter 4(13), January 27, 2014, print edition only.]