Insider Trading Scandals
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When Michael Milken, Ivan Boesky, Martin Siegel and Dennis Levine were arrested and prosecuted, the media and the public perceived the issue to be the esoteric insider trading. The various defendants were charged with crimes that most Americans did not understand, shrouded as they were in the area of high finance, hostile takeovers, junk bonds and mergers and acquisitions. The public did understand the level of some of the fines imposed on the defendants, fines which reached into the hundreds of millions of dollars, but the actual charges were never fully explained or comprehended by the public at large. James B. Stewart, an editor for the Wall Street Journal, examines the insider trading scandal and exposes a series of events that hinged not merely on insider trading, but which paint a picture of greed and predatory tactics unmatched in the history of the securities markets in this country. This research examines Stewart's work and the events he describes, as well as the overall effect of the scandal itself on the securities industry.Dennis Levine was the individual whose activities eventually broke open the entire scandal. His bank account at a Swiss bank in the Bahamas prompted an anonymous and poorly written letter. Peppered with misspellings and poor grammar, the letter might have been ignored but for the mention of two Merrill Lynch executives that prompted closer investigation by the compliance officers at the firm (269). Levine was an insignificant figure, re
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en was able to sell the idea that a company could issue high-yield bonds in order to raise needed capital, then repay those bonds once the company had returned to sound financial footing. In theory, this is a fine idea; in practice, Milken created a pyramid scheme.
Under Milken's plan, Drexel would issue a ôhighly confidentö letter that a particular client could raise some amount of money in order to takeover a company. Drexel would do this by selling the company's high-yield bonds to other Drexel clients, reaping the fees in the process. When the bonds came due, the company would either be in a situation to pay them, or would issue new bonds at the prevailing interest rates, essentially financing the old debt. Tax laws favored this type of debt structure, and companies could augment their cash flow by purchasing healthy competitors, for example, and selling off pieces. In this way, small companies could pursue much larger companies with no intention of running the acquisition, but with the sole intention of dismantling it (36). The idea, announced at a so-called Predators' Ball, became popular beyond even Milken's expectations.
At this point, Milken had not engaged in illegal activities, although the ethical question of p
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Some common words found in the essay are:
Boesky Milken, Company Paris, West Coast, Americans Americans, Milken Boesky, Dennis Levine, Merrill Lynch, Milken Stronger, Ivan Boesky, Predators' Ball, insider trading, mergers acquisitions, stock market, boesky milken, high-yield bonds, poorly written letter, various companies, hostile takeovers, milken able, poorly written, junk bonds, hundreds millions dollars,
Approximate Word count = 1770
Approximate Pages = 7 (250 words per page)
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