Wall Street's bad guys continue to multiply even though their idol, Bernie Madoff, currently serving a 150-year jail term, would be the first guy to tell them that crime doesn't pay.
Indicative of this accelerating bad guys trend is the stepped-up number of insider trading probes by two of Wall Street's leading regulators on the securities beat -- the Securities and Exchange Commission (SEC) and the Financial Independent Regulatory Authority (FINRA), which oversees nearly 4,700 brokerage firms.
Both, I've learned, have recently kicked off investigations into the stock trading of a trio of prominent companies prior to their receiving well publicized buyout offers in recent months totaling about $58.5 billion.
These fresh, unreported investigations center on what one aspect of Wall Street killings -- the illegal kind -- are all about. In brief, you buy a stock and you're lucky. Some firm steps in and makes a bid for the company at a sizable premium to the existing share price and you reap a big gain as the price of the shares balloon.
Then again, maybe you weren't so lucky. Maybe it was a sure thing transaction. Maybe you bought the stock after obtaining privileged, non-public information, which is precisely what Gordon Gekko did before winding up in jail.
That's basically what the SEC and FINRA are looking into with regard to the three takeover offers in question. They involve:
--The $38.6 billion hostile bid by Australian-based BHP Billton, the world's largest mining company, to acquire Canada's Potash Corp., the globe's biggest fertilizer supplier. The bid was rejected.
--An $18.5 billion offer by French drug maker Sanofi-Aventis to buy Genzyme Corp., a leading U.S. biotech company. That bid was also rejected.
--A $1.2 billion offer by Hertz Corp., later raised to $1.43 billion, to acquire a rival in the rent-a-car business, Dollar Thrifty Automotive.
It's all very legal, of course, to buy the shares of a takeover candidate, but not if you have precise knowledge of an impending buyout offer that has not been publicly disclosed. That's not playing the game on the up and up. If you're caught cheating -- namely, illegally trading on inside information -- you can, as you well know, get hit with a hefty fine, join Madoff and Gekko in the clink, or both.
With the mergers and acquisitions game heating up, thanks to low interest rates, strengthened balance sheets, a desire by companies to beef up their growth prospects in a weak economic environment and pent-up efforts by overseas corporations to crack the U.S. market, the opportunities to beat the system with inside knowledge of non-publicly announced deals have become much greater.
Apparently suspicious that some unethical trading may indeed have taken place in the shares of Potash, Genzyme and Dollar Thrifty Automotive, the SEC and FINRA in recent weeks sent out inquiries to the brokerage community in which they specifically requested the names of any clients who traded in these securities both in domestic and foreign markets in specific time periods.
It's unclear whether any of the investigations mentioned here extend beyond the trading in the companies' securities.
Both agencies declined comment, but I have obtained copies of internal SEC and FINRA documents from a regulatory contact that detail the three investigations.
In addition, both agencies recently initiated a number of other stock trading investigations, with energy companies particularly conspicuous. Again, I have gotten my mitts on copies of regulatory documents detailing these investigations.
Included here are SEC probes into such stocks as Valero Energy, Hess Corp., Adobe Systems, Transocean, Ltd., Occidental Petroleum, Valeant Pharmaceuticals International, Annaly Capital Management, Lennar Corp., Hewitt Associates, Americredit Corp., BMC Software, Halliburton, Cameron International and Las Vegas Sands.
Meanwhile, FINRA, the documents show, is probing the trading in such stocks as Priceline.com, BJ's Wholesale Club, Atlas Pipeline Partners, L.P., Prospect Medical Holdings and DigitalGlobe.
What does it all mean? That insider trading is far from dead and the securities industry's cops monitoring the Wall Street beat probably need more handcuffs.
I don't want to sound like a broken record, but about a year ago I wrote a similar kind of piece on stock trading investigations and tried to explain why there are so many bad guys on Wall Street.
One answer -- "Because our product is money and money attracts scum" -- was given to me then by Malcolm Lowenthal, a stockbroker at Kern Suslow Securities. That covers it all.
What do you think? E-mail me at Dandordan@aol.com.