Gary G. Lynch epitomizes the type of person you'd expect to be investigating some of the biggest, most high-profile scandals on Wall Street. Sometimes compared to Dragnet's Joe Friday, Lynch is widely regarded as a "just the facts" kind of guy. His intensity, which helped bring down such flamboyant characters as Ivan F. Boesky and Michael R. Milken in the 1980s, verges on the obsessive. Yet Lynch, a partner at tony New York-based Davis Polk & Wardwell, softens that drive with a low-key, unflappable, and, some would say, plain-vanilla style. His hobby: collecting fountain pens. "It's something I can collect and use at the same time," says the 44-year-old former chief of enforcement at the Securities & Exchange Commission.
It is this practicality that led Kidder, Peabody & Co. to hire Lynch in April to get to the bottom of the firm's government-trading scandal. With an unlimited budget, Lynch has been combing through documents and interviewing dozens of current and former Kidder employees to find out how trader Joseph Jett allegedly created bogus profits and how his scheme apparently went undetected by his superiors. "It's very important to Kidder Peabody that the facts come out, for better or worse," says Kidder General Counsel John M. Liftin, noting that the inquiry is costing Kidder several million dollars. "Gary is very thorough, very intense, and demands full cooperation from everybody. He controls the investigation."
Lynch declines to discuss his probe before his internal report is released in early August. But whatever it says, with Lynch, Kidder has acquired a degree of credibility that will be critical in decisions by regulators and prosecutors about whether to charge the firm or its management with wrongdoing. "When he thinks there's a problem, you can pretty much take it to the bank," says former SEC Commissioner Joseph A. Grundfest.
Lynch's judgment is deemed sufficiently solid that he is up to his suspenders in troubled Wall Street clients. Aside from Kidder, Lynch is juggling work for several other firms--including Prudential Securities, Merrill Lynch, and Nomura--battling allegations of securities law violations. In addition, Lynch handles matters for Morgan Stanley & Co. and Donaldson, Lufkin & Jenrette Securities Corp.
NO REGRETS. Lynch's ubiquitousness stems also from his 13 years with the SEC--the last four as enforcement chief. During that time, Lynch honed his skills as a first-rate gumshoe, unraveling elaborate financial plots at firms such as now-defunct Drexel Burnham Lambert Inc. He helped craft groundbreaking agreements for information-swapping with foreign law enforcers. And Lynch forged ties with influential lawyers, prosecutors, and corporate officials. "He's clearly well-connected," says New York defense lawyer Andrew J. Levander.
Like others before him, Lynch now represents the same people and institutions he once pursued while in government. He says that he has had no regrets about his move in 1989 to a cushy corner office at Davis Polk--leaving behind a government salary for one well into the six figures. "I actually think I have a very ethical client base, so I don't have a problem," says Lynch.
But some lawyers suggest that the spiderlike 6-foot, 1-inch Lynch may not be as adept in the role of corporate counsel as he was as law enforcer. These critics point to the $330 million settlement Lynch helped negotiate for Prudential Securities Inc. last October. The settlement isn't capped, meaning that Prudential must fund it as needed indefinitely; the statute of limitations was waived, so investors who allege they were ripped off many years ago can bring action against the firm; and Prudential could still face possible criminal charges.
Lynch and other lawyers who worked on the deal defend it, noting that not only did it put to rest SEC allegations of fraud but also future actions in all 50 states. "You do what you have to do," says Lynch. "A settlement had to be reached, and these were the best terms we could arrive at."
Sounds a lot like Joe Friday.