Cheating the system on Wall Street
In March 1991, Michael R. Milken, once the richest and most powerful financier of his generation, entered prison, signaling the end of an era of junk bond-financed hostile takeovers and high-visibility prosecutions that law enforcement officials hoped would deter insider trading for generations.
But now, less than one generation later, federal prosecutors and enforcement lawyers at the Securities and Exchange Commission have exposed a vast network of insider trading that in its sophistication, breadth and profits dwarfs that of the earlier era. And with the emergence of Steven A. Cohen, the founder of the hedge fund SAC Capital Advisors, as a subject of interest, the government has identified a financier whose power and wealth surpasses even that of Mr. Milken in his heyday.
Why has insider trading proved so persistent, even in the face of prosecutions and popular Hollywood films like “Wall Street”?
The risk-versus-reward equation that has always been a factor in financial markets has changed drastically in the last 20 years. Ivan F. Boesky, the once-celebrated arbitrageur who admitted to insider trading after preaching to graduates of the University of California, Berkeley in 1986 that “Greed is all right, by the way,” had to pay fines and restitution then considered a milestone: $100 million.