The bad barrel.

• Author: Auletta, Ken
• Position: Insider trading in securities

THE BAD BARREL

Jay Leno, the comic, tells of the timehe performed in rural Alabama and told his bagel joke. No one laughed. He was morose--until it dawned on him: Suppose they don't know what a bagel is?

"How many of you know what a bagel is?' heasked, peering out at his audience. A lone hand went up, and a burly man exclaimed, "A bea-gel is a huntin' dog!'

Something like that happened recently on WallStreet. Not until the notoriety of Dennis Levine did many denizens of the financial community seem to know what insider trading was. They assumed it was a form of thievery practiced by a handful of corrupt individuals. Few believed it was systemic. In this sense they were kindred souls of Washington officialdom, which at first did not comprehend why Michael Deaver might have behaved improperly because in Washington trading on relationships is normal.

Yet the question begs to be asked about theripening scandal on Wall Street as it does about Deaverism: Are just a few apples rotten, or is it the entire barrel?

Wall Street elders insist that up-and-coming investmentbankers like Dennis Levine, who pleaded guilty to parlaying insider information to build a $12.6 million fortune, are merely the rotten apples in an otherwise clean barrel. Maybe 1 percent are rotten, it is commonly said. "I firmly believe it's an aberration, and it's happening at the fringe,' observed Shearson Lehman Brothers CEO Peter Cohen last July. Most of the press coverage of the Levine case has adopted this tone--Levine and his cronies were yuppies, members of a uniquely corrupt generation, and were motivated by personal greed.

The people who say this are, I fear, hiding fromthe truth. As in the case with Washington lobbying or political fund-raising, or municipal corporation, the problem is more endemic than episodic. Dennis Levine may be a thief, but the culture or ethos of Wall Street bears at least a measure of blame. It looks very much as if yuppies weren't the only ones stealing, or as if Levine and his friends did it at least as much to impress their superiors as to shovel fast money in their pockets. During the time he worked at three investment banks, Levine is alleged in 54 instances to have used insider information to buy stock in companies about to be acquired or to make other deals. In more than half of these transactions, neither Levine nor his employer were insiders. This suggests that Levine relied for his tips on a network of people who may not think it unusual...