Now It's Joseph Jett's TurnLeah Nathans Spiro
BLACK AND WHITE ON WALL STREET
The Untold Story of the Man Wrongly Accused of Bringing Down Kidder Peabody
By Joseph Jett with Sabra Chartrand
Morrow 387pp $25
When I first met Joe Jett, I came away tremendously impressed. It was 1994, and the former Kidder, Peabody & Co. government bond trader was widely considered a pariah, having been accused of fraud by his onetime employer. Kidder blamed Jett for causing $210 million in losses for its parent company, General Electric Co. Yet Jett's grasp of the technicalities of his business and his intelligent, friendly manner made it difficult to believe that he was a rogue trader who had single-handedly brought down an old-line Wall Street firm. Unfortunately, Jett had no documentary evidence, so I couldn't evaluate the substance of what he was telling me.
After a grueling legal battle, Jett won partial vindication. Following investigations, the U.S. Attorney's office did not pursue criminal charges against him. The National Association of Securities Dealers rejected Kidder's charges that Jett had engaged in fraud. And in July, 1998, the Securities & Exchange Commission ruled that Jett did not commit securities fraud. But an SEC judge did say Jett had intended to commit fraud, and charged him with a lesser record-keeping violation. He was fined $200,000 and ordered to disgorge $8.2 million in alleged false profits, all of which Jett is appealing.
But Jett is after more than just a legal victory. He wants to proclaim his innocence and so has collaborated with reporter Sabra Chartrand of The New York Times to write Black and White on Wall Street. It's a kafkaesque tale that, he says, involves his near destruction at the hands of one of America's most powerful companies, mangling by the legal system, stereotyping by the media, sellout by friends and co-workers, and racism.
Jett marshals compelling evidence that convinces me of his innocence. He says that the trades that led to the losses resulted from a scheme to manipulate GE's balance sheet--and that his boss, Edward Cerullo, masterminded this plan. Jett says he was ordered to make these so-called phantom trades in order to hide assets, so that it looked as if Kidder were complying with the limits GE had placed on its capital. "Greed... had driven the managers at Kidder into a scheme to wrest the company away from GE, but the plan was built on a foundation of juggled books, forward trades, and doctored balance sheets that simply gave way under its own weight," writes Jett. Both Cerullo and GE disagree. Cerullo, who was only fined $100,000, calls the book a "work of fiction" in which Jett "sets out to harm the reputations of honorable people in order to divert responsibility from himself." GE says the SEC decision rebuts Jett's key points.
Regardless, Jett tells a riveting and sobering story of race, greed, sex, hubris, and betrayal. He dishes up harsh criticism of a long list of opponents. These range from incompetent, "pimply" SEC lawyers to Michael A. Carpenter, the former head of Kidder and now a top Citicorp executive, whom he quotes Cerullo as calling a "broken toilet of a man." Jett does acknowledge a few heroes, such as his parents, the U.S. Attorney's office for believing him, and his lawyers for taking his case even though he had no money.
Jett's story is fascinating for its behind-the-scenes glimpse of the Wall Street old boy's club. He illustrates the deeply embedded hierarchies of the trading floor by describing his time at Morgan Stanley, where, like other trainees, he was demeaned, being addressed as "Joe-dog." He describes the importance and ubiquitousness of locker-room talk; the shimmering allure of beach houses and Vail (Colo.) ski lodges; and the code of manliness that made athletic accomplishment so important. Vivid anecdotes bring Wall Street's macho, hardball culture to life.
One of his biggest problems was getting regulators and the media to comprehend the highly complicated trading he did. But here, he does a fairly good job of informing readers. Jett also blames racism for his troubles. He says Cerullo limited his ability to manage, with constant warnings not to talk to white female employees because of corporate paranoia about what Jett calls "black male sexuality." He describes how the press mobbed his New York apartment building when the scandal first broke--but when no one yet knew what he looked like: The reporters let him pass unnoticed since they assumed no black man could be a big-time Wall Street trader.
But Jett is hardly a fan of affirmative action. He describes the huge impact of his domineering father, a Korean War veteran, who drilled him in habits of hard work and discipline. This left Jett vehemently opposed to lowering standards for minorities, and he detests being viewed as an affirmative-action hire, not someone who qualified on his own merits.
Finally, he is particularly bitter that his colleagues, regulators, and the media probed his sex life. Yet Jett fans the flames himself by providing tantalizing details about models he squired around New York's club scene and various women "friends" that pop up throughout the narrative.
Jett's flaws certainly come across: He antagonized his bosses, he was monomaniacally focused on making money, and he lacked common sense when it came to office politics. With no allies and scores of enemies, he was doomed. For MBAs of any color who believe a painless fortune awaits them on Wall Street, Black and White on Wall Street is a cautionary tale that should be required reading.