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Outrage Deferred


CONFESSIONS OF A WALL STREET ANALYST

A True Story of Inside Information and

Corruption in the Stock Market

By Dan Reingold with Jennifer Reingold

Collins; 348pp; $25.95

(Readers'

Reviews below)

Editor's Review

The Good A pungent tell-all loaded with often appalling tales of the 1990s telco bacchanal.

The Bad Had this book appeared six years ago, it would have been more valuable.

The Bottom Line A colorful portrayal of egos, misdeeds, and Wall Street excess.

Telecom's spectacular multitrillion-dollar boom and bust seem like ancient history. Once almighty WorldCom, its remnants snapped up by Verizon Communications (VZ) and its founder headed to jail, is no more. Ditto for scores of upstart 1990s carriers. As for the Wall Street analysts who egged on the telecom train wreck, the ones who haven't been downsized or permanently barred from the industry don't have much left to analyze.

And yet six years later, the excesses of that time retain enough pungency for a Wall Street tell-all. Dan Reingold, a former top-ranked telecom analyst who left Credit Suisse First Boston (CSR) LLC in 2003, delivers just that in Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market. As he explains in his prologue: "Many of the worst transgressions...went unpunished and uncorrected. Hence this book." The cover promises: "What Eliot Spitzer Never Told You." But while Reingold, co-writing with his niece, Fast Company writer and BusinessWeek alum Jennifer Reingold, tramples over his Street confidentiality agreements to share sordid, often appalling anecdotes from the telco bacchanal, Confessions sadly arrives far too late to qualify as meaningful whistle-blowing.

In 1989, Reingold was recruited to genteel Morgan Stanley (MS) from his investor-relations job at scrappy MCI. Although at MCI he was immersed in the art of finessing earnings guidance, with all the winking and body language that entailed, he says he made the leap to Wall Street intending simply to "write reports from the quiet of an office overlooking Midtown Manhattan as competently as any telecom analyst out there." Future ?ber-analyst Jack Grubman, then a rising telecom researcher at Paine Webber (UBS), predicted to a colleague that Reingold wouldn't make it. The two would become archrivals over the following decade.

The booming 1990s -- the decade of privatization, deregulation, and the explosive growth of the Internet -- made it nearly impossible for a telecom analyst to avoid the limelight. With billions of dollars in banking fees at play, a guy like Reingold became a hot commodity worthy of headhunting and huge pay packages, first at Merrill Lynch & Co. (MER) and then at CSFB.

The ensuing workaholism inevitably took its toll. In 1997, while at the hospital where his mother was having surgery on a brain tumor, Reingold scrambled to file reports from a bank of pay phones when news broke that WorldCom was buying MCI. "Yes, my priorities were out of order," he writes, "but that was what Wall Street was all about, wasn't it?"

But Reingold claims he kept his sense of outrage about the increasingly unabashed conflicts of interest between investment banking and research, the kind that Grubman (and his $25 million pay package at Salomon Smith Barney (C)) openly espoused. As evidence, Reingold points to his refusal to let Merrill bankers pressure him to sign off on lucrative IPOs of carriers with suspect business models. At CSFB, he turned down an incentive arrangement wherein he would have answered directly to the bankers. On the other hand, Reingold argues, Grubman tailored his research calls to the demands of the underwriting calendar. Most infamously, he went bullish on AT&T (T) ahead of the carrier's record $10.6 billion wireless initial public offering in April, 2000 (partly as a quid pro quo for his children's nursery school admission). Reingold also contends that Grubman was using his privileged connection to management and bankers to leak impending merger information to clients. "Grubman's research is a sham," Reingold warned an executive. "In effect, he's a whore and everyone knows it." Grubman did not return phone calls.

And yet Reingold kept the Street's code of silence. "All I could do was sit back and watch," he writes of Grubman's unethical rise to the top. In fact, had Reingold had the courage of his convictions, he would have quit his job and blown the whistle when doing so would have mattered. Instead, he waited until April, 2003, to finally step down from his multimillion-dollar post at CSFB.

Confessions correctly argues that half-baked regulation has not put an end to rampant insider trading and compromised Wall Street research, indignantly noting that the biggest hucksters from the telecom bubble returned only a fraction of their ill-gotten gains. Still, coming in 2006, its value lies mainly in a colorful portrayal of egos, salary negotiations, and the daily dispensing of B.S. Had it been published six years ago, the book would have offered so much more.

By Roben Farzad


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