The world first learned that long-serving Bear Stearns cheif Jimmy Cayne liked to smoke pot from the Wall Street Journal’s Kate Kelly. So naturally now that Kelly’s new book on the demise of Bear, Street Fighters, is out, everyone is flipping through the 247 page tome looking for references to the pot.
Unfortunately, there’s far less pot smoking than we’d hoped. It really just boils down to two reported incidents. That said, the two incidents are five years apart, which suggests that Cayne was lighting up for many years.
Gawker.com pulled out the relevant excerpt:
But Cayne had another habit that would soon cause the firm embarrassment:
He liked to smoke marijuana. This pastime was well known to some close associates, who had seen him smoking in his Park Avenue apartment. It had also come to the attention of some of the regulars on the bridge circuit, where Cayne was known to retire to his room after the day’s play and tuck into his pot stash as a way to relax.
Roy Welland, an options trader, Bear client, and tournament regular, still remembers a particular run-in he had with Cayne during the Boston championships in November 1999. On the night Welland and his family arrived at the hotel, their room hadn’t been ready, so they were put in a bedroom in the presidential suite, whose occupants had not yet arrived.
The following morning, Welland’s two-year-old twin boys were still asleep when the hotel management called to say that the presidential suite’s expected guests had arrived and that the family would have to clear out. But Welland’s reserved room still wasn’t ready, and after a long evening of travel, he didn’t want to wake the sleeping boys. Still, the hotel was insistent, and security was soon banging on the door, asking the family to leave.
While Welland was arguing with the hotel staff, he and his wife noticed a funny smell seeping under the door of his room: pot smoke. Outraged by the hotel’s harassment and the fact that his neighbours were using illegal drugs so obviously that his toddlers might notice it, Welland says he called the Boston police, who sent an officer over to interview them. Afterward, when the Wellands finally left their room to move into the one they had reserved, they saw Cayne’s bridge partner standing in the hall in his underwear, surrounded by a cloud of pot smoke, and heard the unmistakable voices of Jimmy and Patricia Cayne coming from within the room. Cayne, through representatives, denies the incident. Boston police department records reflect that officers responded to a call from a Roy Welland staying at the Westin Hotel during that time period, but do not mention either Cayne or a marijuana smell. Hotel management declined comment.
Five years later, Cayne’s marijuana use was discovered by another bridge-circuit regular at a Memphis Doubletree. After the day’s competition, he invited a fellow player and a woman to join him for a smoke in a lobby men’s room. The player declined, but the woman followed him in and shared a joint with Cayne, to the amusement of a third party, who was finishing up in the men’s room when they arrived. Cayne and the woman were standing just inside the doorway, near the sinks. In November 2007, the Memphis story was disclosed in a front-page article about Cayne in the Journal, though Cayne denied the incident. He later told Fortune, “There is no chance that it happened,” he said. “Zero chance.” But when asked about his pot use generally, he refused to answer, saying he would respond only “to a specific allegation.”
For years, these situations remained mostly under wraps, as Bear and its CEO remained feared and admired. But as the housing boom showed its first signs of strain, Cayne’s foibles seemed less amusing.
Of course, all of this is a side issue to the collapse of the investment bank. An entertaining side issue, but a side issue nonetheless.
“Sigh. If only systemic risk posed by trillions of dollars worth of unregulated derivatives tied to the value of predatory subprime mortgages were so ‘unmistakable,'” comments TPM’s Moe Tkacik.