The Ethics of Greed: The Ivan Boesky Scandal
“[Greed ] is healthy. You can be greedy and still feel good about yourself”
– Ivan Boesky
Is greed good? All humans are inherently greedy and it can be argued that a certain level of greed is healthy; it motivates hard work and fosters innovation. Where then, do you draw the line between morally and socially acceptable and greed? The financial scandals of the 1980s, particularly that of Wall Street arbitrageur Ivan Boesky, are unquestionably rooted in greed, but what about Boesky’s particular scandal prompted the United States Government and the public to re-evaluate their stance on corporate greed?
Ivan Boesky amassed a fortune of over $200 million dollars by the time he was eventually arrested for insider trading in 1986. He is now considered one of the most famous arbitrageurs in American history. Arbitrageurs are investors who generate a risk-free profit through betting on corporate takeovers using privileged information.
“After May 12, 1986 [The Greed Decade] was doomed,” (p.20 Den of Thieves) In the United States, the 1980s were a time of great financial prosperity and even greater financial scandal. Although technology has rapidly evolved since the Industrial Revolution, the 1980s were an era characterized by the accelerated evolution of affordable and accessibly technology for personal consumption. The average consumer could purchase luxury technology; tape players, VCRs, microwaves and personal computers. The divorce rate was climbing, and with it, the number of women in the workforce. More women in the workplace meant more houses with two breadwinners, and therefore more disposable income.
While the average civilian prospered, so did the not-so average criminal. White-collar crime seemed to grow proportionally with financial revolution. Existing laws prohibited these illegal practices, but until the arrest of Ivan Boesky in 1986, they were rarely enforced. Boesky and others illegally reaped millions as the federal government, as well as the general public, turned a blind eye to the rampant fraud that had overtaken Wall Street.
Because he cooperated with the Securities and Exchange Commission (SEC) and “ratted out” other arbitrageurs, he was sentenced to 3.5 years in a minimum-security prison in Lompoc, California, and fined $100 million.
Boesky was the perfect Wall Street arbitrageur; he was in love with the power, respect and money he earned from his illegal practices. In the mid-1980s, the SEC began to investigate the back-room dealings on Wall Street. Although Boesky was not the initial target, tapped phone conversations by the SEC began to lead the investigation in his direction. Boesky was the perfect public offering, a white-collar criminal, who blatantly profiteered off of insider information, had no regard for the law, and was a greedy, outspoken egomaniac.
In the case of Boesky, there was a clear distinction between the “right” and “wrong” decisions. Not only were his decisions illegal, they were socially unacceptable, and the “good” outcome definitely did not outweigh the “bad” for the majority of involved parties.
Boesky and other arbitrageurs amassed great wealth at the expense of others. On the other hand, illegal profiteering was the standard on Wall Street in the 1980s. Egoism reigned supreme and Boesky could not have been a successful investor in that financial climate by following United States trade laws. Additionally, it can be argued that Boesky was simply an unfortunate victim in the federal government’s pursuit to save face for allowing these egregious crimes to persist. A system cannot produce corrupt people unless those people agree with or do not disagree with the incentives that make the system function.
Ivan Boesky and others served their time, and their scandals made international headlines. Today, however, the climate has not changed much. What lessons, if any, can be taken from the prosecuted scandals of the 1980s? Different respondents can glean two different answers; do not break the law at any cost, or just don’t get caught doing it.
“The popular perception among investors is that this kind of Boesky crap goes on all the time. The real tragedy is that we keep living up to peoples worst expectations.” – Robert Hannesy, Going After the Crooks, Time Magazine, December 1, 1986
Today, headlines are still made by insider trading scandals and corporate fraud. The 19080s movie based on the Ivan Boesky scandal, Wall Street, will see a revival in the fall of 2010, with Michael Douglas playing the Boesky-inspired character of Gordon Gekko.
Ivan Boesky amassed a fortune of over $200 million dollars by the time he was eventually arrested for insider trading in 1986. He is now considered one of the most famous arbitrageurs in American history. Arbitrageurs are investors who generate a risk-free profit through betting on corporate takeovers using privileged information.
“After May 12, 1986 [The Greed Decade] was doomed,” (p.20 Den of Thieves) In the United States, the 1980s were a time of great financial prosperity and even greater financial scandal. Although technology has rapidly evolved since the Industrial Revolution, the 1980s were an era characterized by the accelerated evolution of affordable and accessibly technology for personal consumption. The average consumer could purchase luxury technology; tape players, VCRs, microwaves and personal computers. The divorce rate was climbing, and with it, the number of women in the workforce. More women in the workplace meant more houses with two breadwinners, and therefore more disposable income.
While the average civilian prospered, so did the not-so average criminal. White-collar crime seemed to grow proportionally with financial revolution. Existing laws prohibited these illegal practices, but until the arrest of Ivan Boesky in 1986, they were rarely enforced. Boesky and others illegally reaped millions as the federal government, as well as the general public, turned a blind eye to the rampant fraud that had overtaken Wall Street.
Because he cooperated with the Securities and Exchange Commission (SEC) and “ratted out” other arbitrageurs, he was sentenced to 3.5 years in a minimum-security prison in Lompoc, California, and fined $100 million.
Boesky was the perfect Wall Street arbitrageur; he was in love with the power, respect and money he earned from his illegal practices. In the mid-1980s, the SEC began to investigate the back-room dealings on Wall Street. Although Boesky was not the initial target, tapped phone conversations by the SEC began to lead the investigation in his direction. Boesky was the perfect public offering, a white-collar criminal, who blatantly profiteered off of insider information, had no regard for the law, and was a greedy, outspoken egomaniac.
In the case of Boesky, there was a clear distinction between the “right” and “wrong” decisions. Not only were his decisions illegal, they were socially unacceptable, and the “good” outcome definitely did not outweigh the “bad” for the majority of involved parties.
Boesky and other arbitrageurs amassed great wealth at the expense of others. On the other hand, illegal profiteering was the standard on Wall Street in the 1980s. Egoism reigned supreme and Boesky could not have been a successful investor in that financial climate by following United States trade laws. Additionally, it can be argued that Boesky was simply an unfortunate victim in the federal government’s pursuit to save face for allowing these egregious crimes to persist. A system cannot produce corrupt people unless those people agree with or do not disagree with the incentives that make the system function.
Ivan Boesky and others served their time, and their scandals made international headlines. Today, however, the climate has not changed much. What lessons, if any, can be taken from the prosecuted scandals of the 1980s? Different respondents can glean two different answers; do not break the law at any cost, or just don’t get caught doing it.
“The popular perception among investors is that this kind of Boesky crap goes on all the time. The real tragedy is that we keep living up to peoples worst expectations.” – Robert Hannesy, Going After the Crooks, Time Magazine, December 1, 1986
Today, headlines are still made by insider trading scandals and corporate fraud. The 19080s movie based on the Ivan Boesky scandal, Wall Street, will see a revival in the fall of 2010, with Michael Douglas playing the Boesky-inspired character of Gordon Gekko.
