Michael Douglas is a greedy corporate raider who relied on illegal information to succeed. At least, he played one on the big screen. Now, he is doing the FBI’s public relations through their first Public Service Announcement with the simple message: if you know a greedy corporate raider who relies on illegal information to succeed, run and tell someone. In the 1980’s we had “This is Your Brain on Drugs” (cue the sound of a frying egg). Today, the FBI has ushered in “This is Your Voice on The Wire” (cue murky tape recording of two guys exchanging illicit information).
That Michael Douglas would be the face of honest encouragement on Wall Street came on the heels of the FBI’s announcement that it is investigating over 240 individuals for illegal exchange of information. Reportedly, 120 of the 240 are “targets” of the FBI’s insider trading investigation. These numbers do not include the government’s success in already charging over 60 individuals with securities fraud over the last 5 years, including of course Raj Rajaratnam the most high profile of these cases.
So the FBI is saying: we have more to come, just wait and see. Gee, how surprising. From the FBI to U.S. Attorney Preet Bharara, the government has been singularly focused (if not obsessed) with exerting influence on the old school practices of Wall Street. When the government used wiretaps for the first time ever in the prosecution of a white-collar case (poor Raj!), the message was clear: insider trading is our flavour of the moment. If before yesterday’s announcement anyone thought the FBI had rested its case against insider trading, they weren’t paying attention. Wiretaps bring for the FBI what Journey remixes do for everyone over the age of 30: glee, nostalgia, satisfaction.
What is strange about the FBI’s PSA that asks people in the know to come forward with information is that both Dodd Frank and Sarbanes Oxley mandate hotlines for such types of intelligence. So either the FBI needs information to secure its cases OR the FBI would rather hear the tips directly from you. This might mean it is finally time for hedge funds and others to proactively implement their own hotlines to manage the information themselves instead of going to the FBI (lest you think Michael Douglas really is going to answer your call like in a telethon).
As “The Artist” swept up the Oscars, we noticed Hollywood embracing silence; Wall Street should follow suit and exercise discretion now that the FBI has taken a serious interest in their exchanges.