Den of Thieves

James B. Stewart's magnificent book recounts a wide conspiracy by Wall Street investment bankers, who were already some of the most highly-paid individuals in the world, to use inside information to generate instant profits for themselves at tremendous cost to ordinary shareholders, American taxpayer, and the health and credibility of the American financial system. Such a book about such greedy malicious individuals can easily degenerate into a polemic but it is a credit to the author's brilliant research skills and clear nuanced writing as well as the challenging complexities of life that "Den of Thieves" is, more than financial journalism of the best kind and more than non-fiction at its most life-like, above all a tragic epic.

"Den of Thieves" is divided into two parts. The first part recounts the rise of this conspiracy, and the second the government effort to prosecute the conspirators. It is no fault of the author's that the first part is infinitely more interesting and compelling than the second part. In the first part Mr. Stewat meticulously documents how pride and arrogance more than greed and ambition drove these conspirators to commit some of the gravest financial crimes in American history -- in short it captures the spirit of the very best Shakespearean and Greek tragedies. By comparison, the second part is a lawyer's brief, an exactingly precise recounting of the long and tired government case against Michael Milken, who was the very heart of the conspiracy.

Indeed, Michael Milken dominated the American financial world in the eighties. It was his control of the junk bond market that would finance corporate America's merger mania, which would lead to the boom in the stock market and the U.S. economy in general. Like all great men Milken was not driven by money although he made a lot of it (Milken was one of America's richest man in the eighties, and certainly the richest self-made man). He was driven by power and control: he used his reputation, junk bonds, and inside information to manipulate corporations into merging with each other, in the process generating tremendous revenues for his firm Drexel and himself. By his own admission he came to such awesome power not through brilliance but through hard work and determination: he was in his office by 4am, and pushed himself and his staff to extremes and rewarded them accordingly -- a severity and a fairness that earned him the respect and loyalty of his staff.

Even though there is no denying Michael Milken's greatness Mr. Stewart's brilliant eye knows that there isn't much of a story in him. That's why the first part is dominated by two poignant and ultimately pathetic individuals -- the cold malicious arbitrageur Ivan Boesky and the lowly unctuous Dennis Levine -- who could be seen as doppelgangers of each other, and who combined was the basis for Michael Douglas's character in Oliver Stone's "Wall Street." Even though one was considered a titan of American finance and the other a slimy upstart both were not very smart, not terribly talented individuals who nevertheless demanded the world, and who when threatend were too quick to betray their closest friends.

Ivan Boesky was fortunate enough to marry rich, and though he was certainly a psychopath like Michael Milken Boesky lacked Milken's vision and courage: when he had accumulated enough capital to be a major financier like the Rothschilds Boesky instead became risk-averse and sat on his wealth. Dennis Levine would never accumulate the wealth that Boesky did but he did accumulate a lot by breaking into legal and investment banking offices, and corrupting those around him. Even when he had enough wealth to stop Levine continued, because for him inside trading was "fun" and, more important, he was really good at it. And not only did he not stop but he blatantly flaunted his wealth.

No surprise then that the first person for the government to catch was Levine, who quickly and easily turned stool pigeon. Boesky was next, and the government was shocked to learn that this supposedly awesome financier was in fact Milken's pawn: Boesky bought and sold shares as Milken ordered, and was genuinely afraid of Milken. So it was Levine and Boesky, the two most dastardly but ultimately pathetic individuals in this whole saga, who would unwittingly work together to bring down Milken when men of higher caliber initially and recalcitrantly stood behind their God.

And ultimately it would be Levine and Boesky who would be the losers. After a long bitter legal battle Milken would go to prison, and emerged from prison one of America's richest individuals, still championed by a hardcore group of loyalists who thought his use of junk bonds had revolutionized and rejuvenated American finance. Levine and Boesky -- because they did the unthinkable in the Wall Street fraternity, and squealed -- became outcasts, and now roam the world aimlessly. So even though Milken and his co-horts cheated shareholders and American taxpayers of billions of dollars he only had to serve ten years, and he got to keep most of what he had stolen. It's not a bad deal, and that's why many financiers continue to flagrantly break the law -- they know the rewards are great, the punishment isn't that much, and if you don't squeal Wall Street will -- just like the mafia -- stand behind you. No wonder then ten years after Milken we have Enron, and shortly after Enron we have this sub-prime crisis.

Perhaps the most tragic character in this whole sordid saga is Robert Wilkis, who in many ways represents the very best of us. A Harvard graduate who set high moral standards for himself Robert Wilkis was a Wall Street banker who wanted to do international development work. Bored and frustrated he met Dennis Levine, who befriended and tempted Wilkis into joining his inside trading conspiracy. Wracked with guilt Wilkis continued mainly because of his friendship with and loyalty to Levine. And when Levine exposed the conspiracy to government agents Robert Wilkis tried to protect one of his co-conspirators, and for his loyalty the government dealt with him harshly.

And perhaps this is why "Den of Thieves" is such a gripping drama. We recognize that because American finance is highly competitive and materialistic and utilitarian -- the very characteristics that make American finance great and efficient -- anyone can, in the wrong circumstances and with the wrong people, do what one knows is fundamentally against one's character and principle. If good and noble but ultimately naive and weak Robert Wilkis learned this then so can any one of us.

I read this after enjoying Stewart's later book, Disney War. This one was more thrilling as it involved real crime but still written very well as if the author was in the room. The characters include bad guys, good guys that gave in to the dark side and a few good guys that felt strong about following the law. It was the beginning of dishing out real punishment for white collar crime although one can argue they were let off easy compared to today's convictions.

James Stewart has done an excellent job of gathering information about the insider-trading scandal of the 1980s, so if you're looking for all the details of these events, you'll find them in this book, which is clearly-written and well-organized. What you won't find, though, is great storytelling. Stewart is content to recount one fact after another, rarely putting them in context or using them to build narrative suspense or to reveal character. As a result--and despite the inherent drama of the events it lists--the book is a rather dull read, especially for readers who have no familiarity with the world of high finance. If you want to read a masterpiece of writing about business, try David Halberstam's "The Reckoning."

'Den of Thieves' was sewn together by James Stewart from numerous Wall Street Journal articles he wrote on the M&A scandals during he 80s -- and it shows. The story is very difficult to follow, not only because the fraud was so complex, but also there were numerous players; Stewart doesn't do himself any favors by jumping around a lot. Still, it was very interesting and the second half of the book, marked by Boesky's surrender to federal agents in September 1986, is nothing short of riveting! If you enjoy Kurt Eichenwald ('Conspiracy of Fools') or Bethany McLean ('Smartest Guys in the Room') you will like 'Den of Thieves' -- although probably not as much.

Next release I suggest Stewart lay out all the Drexel, Peabody, and Boesky deals in chronological order at the beginning. The cast of players at the front was helpful, but not enough for me to keep up with some of it. Enjoy!

This is my favorite book of all time. It shows how highly intelligent, creative and hard working people can lose their ethical way. This was one of the first books that I read when I got out of college and I was absolutely riveted. The idea of the millions of dollars that many of these people made made me think of how I could get my hands on such wealth. It also taught me that there's no amount of money in the world that's worth damaging my reputation as a trust-worthy, ethical individual. This should be a must read for all kids out of college along with "The Smartest Guys in the Room."

My title for this review "Will History Repeat Itself?" is a simple reminder that while the junk bond scandals and S&L scandals are over, new corporate scandals occurred with Enron and now with the sub-prime melt-down, we are sure to unveil another corporate scandal. Will history repeat itself? Of course it will.