Wall Street Rogues - Page 3 of 9

Wall Street Rogues

community. “I think that the investment community, regardless of race or color, is an industry where trust and integrity and ethics play a large role, so whenever one of our fellow colleagues is involved in a situation where that trust has been violated, it does have a ripple effect on all of us,” Chester asserts. “So there’s a little bit of a concern about all of us being tossed into the same pot, and people who probably are reluctant to encourage diversity and inclusion using it as an excuse for something they didn’t want to do in the first place.”

The real victims, however, are investors who have lost their hard-earned money. In many cases, it is virtually impossible for individuals, institutions, and enforcement officials to detect these complicated scams committed by insiders. Just take a look at how Alan Bond bilked millions from unsuspecting customers. In Bond’s cherry-picking scheme, he developed a highly sophisticated operation. He typically waited until late in the trading day, or until after the securities markets closed, to tell his broker-dealer which accounts to direct trades. By delaying his instructions, Bond was able to determine whether his trades were profitable or unprofitable. The SEC complaint alleged that he directed 17% of his unprofitable trades to his own account, while directing 83% of the unprofitable trades to his clients’ accounts.

Such swindles have taken a human toll. In an unrelated case, Roy Grace, a 50-year-old widower, alleges that one money manager cheated him out of $100,000 from his deceased wife’s insurance policy. He was investing the money to secure his children’s future. Laments Grace: “First of all, the experience of losing my wife, and then … I trust another African American who s
eems legit. He gave me all these references. Everything seemed legitimate on the surface, and I want to do what I can in the black environment, and then when this happened — it was devastating.”

BE spent more than a year reviewing court transcripts and interviewing Wall Street insiders, prosecutors, and individuals like Grace. On the following pages, we provide you with an in-depth look at these fallen stars, detailing their use of complicated transactions to gain wealth and power as well as their eventual downfall.

Nathan A. Chapman:Fall of a Power broker
Chapman began his career at accounting firm Peat Marwick Main & Co. ,where, among other things, he audited large investment banking firms. He later joined Alex. Brown & Sons Inc., where he handled retail and institutional accounts. After only three years at Alex. Brown, Chapman left the venerable firm in 1986 and founded the first of his companies, The Chapman Co., a Baltimore investment banking firm that would eventually rank among the BE 100S. He also served as chairman of the board of regents of Maryland’s state university system.

On June 15, 2000, the power broker launched an initial public offering of eChapman.com at $13 a share. But on June 20, its first day on the market, it opened at a meager $8. By the end of