Wall Street Versus America
20 Corporate Crime Reporter 15(12), April 6, 2006

There is something about Gary Weiss’s new book – Wall Street Versus America: The Rampant Greed and Dishonesty that Imperil Your Investments (Portfolio, 2006).

It’s not the same old recitation of corporate and Wall Street crimes that have bored generations of business school students taking their required ethics courses.

While it purports to be about Wall Street, it is in fact a biting critique of the elites that populate the Wall Street firms, regulatory agencies, law firms, and newsrooms across America.

Weiss spent 18 years as a reporter at Business Week.

But he never wrote with this point of view and intensity.

He doesn’t much care for New York Attorney General Eliot Spitzer.

Or former Securities and Exchange Commission (SEC) chairman Arthur Levitt.

Or Harvey Pitt.

Or William Donaldson.

Or the class action lawyers.

Or regulation, for that matter.

He despises the fringe microcap fraudsters as much as the more mainstream hedge fund hooligans and mutual funds rip-off artists with their excessive and hidden fees.

He sees evil in the one sided agreements that all investors sign with their brokers – the agreements that strip investors of their access to the courts and shuttle them instead into an arbitration system dominated by Wall Street veterans.

Read this book.

And keep up with Weiss’ current thinking on his web site.

He’s on to something that few others in the financial press get.

In fact, he holds his fellow financial journalists in low regard.

“It is the nature of financial journalism to glorify the powerful and the wealthy,” Weiss said. “That’s true in all journalism to a great extent. . .It has to the do with the pressures of the job, the pressures of advertising, although they are never spoken of as such. It is the nature of covering a beat where there are a lot of wealthy people. You tend to be hagiographic. Fear of lawsuits has increasingly become an issue. It discourages tough reporting. It has become a background issue. It’s never spoken of. No one ever comes out and says – we are afraid of lawsuits. It is never spoken. It is always in the distance. It’s background noise. It’s part of the culture.”

In an interview with Corporate Crime Reporter, Weiss savaged the current state of corporate crime and punishment.

He says Spitzer is totally motivated by politics – “he wants to be President.”

He rips Spitzer for not taking on hedge funds – which fund his campaigns – and the Wall Street dominated arbitration system.

Instead, Spitzer focuses on “low hanging fruit.”

He’s a hit and run artiste – get the headlines, and move on – to get more headlines.

One big problem with Spitzer – he doesn’t demand that his defendants admit fault, Weiss says.

He also takes a swipe at former SEC chairman Arthur Levitt.

After leaving office in 2001, Levitt wrote a book – with former Business Week reporter and current New York Times business editor Paula Dwyer – titled Take on the Street.

“Well, he didn’t take on the street when he had the opportunity to do so,” Weiss said.

“In every single issue that he approached, it was always the same,” Weiss said. “He’d make a big stink. He’d give big speeches. But he wouldn’t actually do anything that impacted on the status quo. He delivered many speeches on the subject of Wall Street research. But when he actually had the power to do so, he didn’t bring a single case against a major Wall Street firm involving fraudulent research. That was when he had the power.”

Weiss says that Levitt was portrayed in the media as being tough on Wall Street.

That’s because “everybody in the media loved Arthur Levitt,” he said.

“You could get him on the phone,” he said. “Levitt had wonderful media relations. His media relations were always skillful. Everything was played to the media. He would take a particular action and he would spin it. He would take these weak-kneed actions and it would be spun in the financial press as a major victory.”

So, for example, Levitt was portrayed in the media as acting decisively against rogue brokers.

In fact, “Levitt was a disaster on microcap fraud,” Weiss said.

On his war against accountants, Business Week portrayed Levitt as the investor’s champion.

“But in fact it was a surrender to the accountants,” Weiss aid. “It was not a major victory.”

Does Weiss see any difference in SEC actions under former Wall Street lawyer Harvey Pitt, William Donaldson, or Arthur Levitt?

“No,” he says flatly. “It doesn’t make any difference. It’s just a question of public relations. Pitt’s public relations were awful. He made no effort to disguise his prejudice in favor of Wall Street. He was a Wall Street lawyer for many years. What do you expect? He was pummeled by the media. Then they brought in Donaldson after Pitt self-destructed. And Donaldson was much more media savvy. He really knew how to play the press. And he did. He was much more like Levitt in terms of player the press.”

(For a complete transcript of the interview with Gary Weiss, see 20 Corporate Crime Reporter 15(12), April 10, 2006, print edition only.)



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