WEBVTT
00:00:00.160 --> 00:00:05.360
And the big thing for me in the fraud triangle, and I think many people in my situation is the rationalization.
00:00:05.519 --> 00:00:08.400
I bought a small 0.9% position.
00:00:08.480 --> 00:00:10.560
I told myself under that threshold.
00:00:10.720 --> 00:00:13.439
And as you said before, I felt like everybody's doing it.
00:00:13.519 --> 00:00:15.039
Uh, I'll do it just this one time.
00:00:15.199 --> 00:00:17.359
Who am I hurting taking a flyer?
00:00:17.600 --> 00:00:21.519
And it would happen three more times that way, where she would call.
00:00:21.600 --> 00:00:24.559
There was small trades, my boss looking the other way.
00:00:24.719 --> 00:00:27.679
And the firm made just over a million dollars on these trades.
00:00:27.760 --> 00:00:36.640
But me personally, the number I have to live with for the rest of my life, and sometimes the number most shocking in my corporate talks is the amount of money I made personally.
00:00:36.880 --> 00:00:43.200
And that number was$46,000, which at 29 years old was the price of my professional career.
00:00:45.920 --> 00:00:50.560
You're listening to Bite-Size Business Law, where we discuss big issues in small doses.
00:00:50.799 --> 00:01:00.079
This podcast is sponsored by the Fordham University School of Law Corporate Law Center, which is run by Fordham Law Professor Richard Squire and me, your host Amy Martella.
00:01:00.320 --> 00:01:02.880
Okay, let's get down to business.
00:01:06.000 --> 00:01:08.079
Welcome back to Bite-Sized Business Law.
00:01:08.159 --> 00:01:15.599
We've done a few episodes about or involving insider trading, but today's episode is a true story that reads like a financial thriller.
00:01:15.920 --> 00:01:21.280
And it's ultimately a cautionary tale of ambition, temptation, consequences, and redemption.
00:01:21.519 --> 00:01:32.480
Tom Hardin is the author of the wildly successful book, Wired on Wall Street, that recounts his own story, The Rise and Fall of Tipper X, one of the FBI's most prolific informants.
00:01:32.640 --> 00:01:33.599
Tom, welcome.
00:01:34.000 --> 00:01:35.040
Thanks for having me on, Amy.
00:01:35.200 --> 00:01:36.239
It's a pleasure to be here.
00:01:36.640 --> 00:01:38.000
Thank you so much for joining us.
00:01:38.159 --> 00:01:42.400
You did an event in person for us back in the spring of this year for our law students.
00:01:42.560 --> 00:01:50.560
But I really wanted you to come back and speak to, you know, everyone else, all of our listeners, and reach a broader audience, because I absolutely loved your book and I loved your message.
00:01:50.719 --> 00:01:56.480
So, but why don't you start by telling us a little bit about yourself and your career path as a young professional?
00:01:56.719 --> 00:01:58.560
Because you're not a lawyer by training.
00:01:59.200 --> 00:02:01.359
But how did you get to where you ended up?
00:02:01.840 --> 00:02:08.719
Yeah, and I think my story really lives in the gap between uh, you know, what's legal, what's ethical, and what you can talk yourself into.
00:02:08.879 --> 00:02:12.479
So I grew up the oldest of three brothers in the suburbs of Atlanta.
00:02:12.639 --> 00:02:14.800
My dad spent his whole career at Coca-Cola.
00:02:14.879 --> 00:02:16.240
My mom stayed at home with us.
00:02:16.400 --> 00:02:25.840
My two younger brothers, first of my family to leave the South for college, attended UPenn, and I went straight into finance into the hedge fund world.
00:02:26.080 --> 00:02:27.680
Now we're talking early 2000s.
00:02:27.919 --> 00:02:30.400
I had a good reputation as an analyst.
00:02:30.479 --> 00:02:40.879
And by 2006, a few years into my career, I'd taken a junior uh partner spot at a brand new tech-focused hedge fund with money from a legendary investor.
00:02:40.960 --> 00:02:43.759
So I had a real shot to build something.
00:02:44.000 --> 00:02:54.159
And the hard thing for me looking back now is to admit that is that I wasn't some criminal mastermind twirling my mustache looking for ways to break the law.
00:02:54.240 --> 00:03:00.400
I was really a, as I sat down and wrote the book last year, an insecure kid in his 20s who wanted to belong.
00:03:00.560 --> 00:03:04.240
And that turned out to be more than enough to eventually cross the line.
00:03:04.800 --> 00:03:08.960
Yeah, you mentioned, Tom, that your story lives in that gray area.
00:03:09.280 --> 00:03:10.479
When was the first time?
00:03:10.560 --> 00:03:12.560
Now you're at, you're inside the hedge fund world.
00:03:12.639 --> 00:03:18.719
When was the first time you saw inside that hedge fund that there was kind of a legal gray area?
00:03:19.280 --> 00:03:23.439
And there is, and I guess I have to explain the job because the gray area is baked right in.
00:03:23.680 --> 00:03:28.879
As a technology analyst, I had to know my company's better than the market did.
00:03:29.039 --> 00:03:34.719
You know, could I forecast a semiconductor company's quarter better than what Wall Street was expecting?
00:03:34.879 --> 00:03:36.719
And if so, we made money.
00:03:36.960 --> 00:03:40.000
So you're paid to find an information advantage.
00:03:40.080 --> 00:03:43.039
And the legal question is how you build it.
00:03:43.360 --> 00:03:46.560
The legitimate framework is what's called the mosaic theory.
00:03:46.639 --> 00:03:54.479
So you assemble a hundred immaterial pieces into a conclusion the market hasn't reached, and that's totally legal.
00:03:54.560 --> 00:04:02.400
And the trouble is the line between a legal mosaic and illegal non-public information is blurry.
00:04:02.560 --> 00:04:05.039
And in 2006, we lived right on top of it.
00:04:05.199 --> 00:04:09.840
And in practice, I do channel checks, call the Asian supply chain about demand.
00:04:10.000 --> 00:04:12.159
Our order is strong, and that's fine.
00:04:12.240 --> 00:04:18.560
But if a supplier hands you the exact order their customer just placed, you're holding that company's non-public numbers.
00:04:18.720 --> 00:04:21.839
And and the gray area, as I mentioned in the book, was only half of it.
00:04:21.920 --> 00:04:27.360
Um around then I realized people at other hedge funds uh weren't in the gray area at all.
00:04:27.439 --> 00:04:31.680
They were flat out trading on illegal material and non-public information.
00:04:31.839 --> 00:04:44.800
And 60% of the biggest public companies taken private by private equity uh in 2006 had unexplained price spikes before the deal was announced and the share prices, and that was way up from a few years before.
00:04:45.040 --> 00:04:51.600
So the kind of trading had been normalized and it set the tone for what I was seeing seeing around me, you know, all the time.
00:04:51.759 --> 00:04:57.439
So the first time I felt the gray was really no dramatic moment, just realizing my whole job lived in it.
00:04:57.519 --> 00:05:00.959
But the more defensible it felt, the more comfortable I got.
00:05:01.040 --> 00:05:04.240
And the black really stops looking as far off as it should.
00:05:04.560 --> 00:05:07.519
Yeah, that's tough when you feel like, well, everyone is doing it.
00:05:07.680 --> 00:05:11.120
In fact, 60%, the majority of these public companies are doing it.
00:05:11.279 --> 00:05:14.399
So who am I to say no when that phone rings?
00:05:14.560 --> 00:05:16.639
Um, and one day your phone did ring, right?
00:05:16.800 --> 00:05:19.360
And there was information on there that was quite valuable.
00:05:19.519 --> 00:05:20.639
Tell us about that.
00:05:21.040 --> 00:05:22.879
So it's now March of 2007.
00:05:22.959 --> 00:05:24.480
I'm at my desk, the phone rings.
00:05:24.639 --> 00:05:29.519
It's a woman who I knew who would work for Raj Roger Otto, the most famous guy to be charged in these cases.
00:05:29.680 --> 00:05:32.000
I met her at a conference when I was 23.
00:05:32.160 --> 00:05:39.199
And I could tell right then, Amy, back then in my career, that she was not the most ethical person, always trying to get information from companies.
00:05:39.439 --> 00:05:42.079
And over the years, I stayed in touch with her.
00:05:42.240 --> 00:05:47.360
She lived out there, you know, she held all the meetings I couldn't get to with the Silicon Valley companies.
00:05:47.519 --> 00:05:51.120
But you really become the average of the five people you surround yourself with.
00:05:51.360 --> 00:05:55.519
I know that's a common trope, but it really is true, especially for young professionals.
00:05:55.680 --> 00:05:59.759
And that's somebody, you know, it only takes one person to push you or take you across the line.
00:05:59.920 --> 00:06:05.199
And, you know, she calls in this moment and says, I have something for you, Tom, but you can't tell anybody.
00:06:05.279 --> 00:06:08.800
Now that should have set up some red flags, but now, of course, I'm curious.
00:06:08.879 --> 00:06:13.040
And she tells me a public company is going to be acquired in a few weeks.
00:06:13.199 --> 00:06:16.720
Here's the date, here's the price, here's the private equity firm.
00:06:16.959 --> 00:06:19.600
A very stark piece of information.
00:06:19.839 --> 00:06:29.120
I didn't trade it that day, but later on, you know, that day I'm on the phone with a friend who worked at a prop trading firm, and he's down that month.
00:06:29.360 --> 00:06:32.879
And, you know, he's like, Are you hearing anything out there I could take a flyer on?
00:06:33.040 --> 00:06:36.800
I said, you know, I'm not trading this, but this woman just called me and told him everything.
00:06:36.879 --> 00:06:42.079
And before I bought a single share, I'd exposed myself to insider trading liability for tipping.
00:06:42.160 --> 00:06:47.279
And the next day, the next few weeks goes by and he calls me back and he says, Are you in?
00:06:47.519 --> 00:06:49.759
And in that, Wait, can you explain, Tom?
00:06:50.000 --> 00:06:52.800
Can you explain to our listeners what a flyer is?
00:06:53.279 --> 00:06:53.680
Oh, yeah.
00:06:53.759 --> 00:06:57.680
So a flyer is something we used to talk about a small trade.
00:06:57.920 --> 00:07:04.720
And so it became a euphemism for actually making small trades on illicit information.
00:07:04.959 --> 00:07:14.720
And that's very common in other types of misconduct and fraud cases where people actually use the terms as euphemisms so you don't feel as bad about what you're actually doing.
00:07:16.160 --> 00:07:17.600
Okay, so he calls you back.
00:07:18.160 --> 00:07:20.399
He calls me back and he says, you know, dude, are you in?
00:07:20.480 --> 00:07:21.279
We're all in here.
00:07:21.360 --> 00:07:26.160
And and at that moment, uh the fraud triangle, you know, clicked in big for me.
00:07:26.240 --> 00:07:28.560
And so the fraud triangle is the pressure.
00:07:28.800 --> 00:07:40.079
So a few months before I received this tip from this woman, my boss had closed the door to my office and we had lost money in the first quarter of my final hedge fund.
00:07:40.319 --> 00:07:43.199
And our goals were to make money over one to three years.
00:07:43.439 --> 00:07:48.879
But he walks in and says, now we have to make money every month or we would not survive.
00:07:49.040 --> 00:07:52.480
So the goal in our business went from one to three years to monthly.
00:07:52.720 --> 00:07:55.600
Then he also gave me the opportunity to cross the line.
00:07:55.680 --> 00:07:57.360
So it's often a lax control.
00:07:57.759 --> 00:08:06.160
I could now, after that meeting, buy a stock in our portfolio as long as it was less than 1% of the funds we manage for clients.
00:08:06.240 --> 00:08:08.480
So now I had an opportunity to buy a stock.
00:08:08.639 --> 00:08:16.319
And then the big thing without talking to him, and the big thing for me in the fraud triangle, and I think many people in my situation is the rationalization.
00:08:16.480 --> 00:08:19.360
I bought a small 0.9% position.
00:08:19.439 --> 00:08:21.519
I told myself under that threshold.
00:08:21.680 --> 00:08:24.399
And as you said before, I felt like everybody's doing it.
00:08:24.480 --> 00:08:26.000
Uh, I'll do it just this one time.
00:08:26.160 --> 00:08:26.959
Who am I hurting?
00:08:27.120 --> 00:08:28.319
Taking a flyer.
00:08:28.560 --> 00:08:32.480
And it would happen three more times that way, where she would call.
00:08:32.559 --> 00:08:35.519
There was small trades, my boss looking the other way.
00:08:35.679 --> 00:08:38.639
And the firm made just over a million dollars on these trades.
00:08:38.720 --> 00:08:47.600
But me personally, the number I have to live with for the rest of my life, and sometimes the number most shocking in my corporate talks is the amount of money I made personally.
00:08:47.759 --> 00:08:54.000
And that number was$46,000, which at 29 years old was the price of my professional career.
00:08:54.320 --> 00:09:10.080
Yeah, I definitely want to talk about that later because I'm seeing this happen in the prediction markets where people are doing informed trading and they are not making a whole lot of money, but they're still risking potential consequences, including arrests and prosecution.
00:09:10.159 --> 00:09:12.879
So I definitely want to hear about your thoughts on that later.
00:09:13.039 --> 00:09:15.279
So, but let's go back to going through kind of chronologically.
00:09:15.759 --> 00:09:24.159
So you had three of these small trades, and then uh how long was it between the last trade and when you were approached by the FBI?
00:09:24.480 --> 00:09:28.639
Uh the fourth and final trade, there were four trades, was November and July.
00:09:28.720 --> 00:09:30.559
Uh, the next July was the FBI.
00:09:30.639 --> 00:09:32.720
So eight or nine months after that fourth trade.
00:09:32.799 --> 00:09:36.960
So the trades were kind of out of sight, out of mind by the time the FBI showed up.
00:09:37.360 --> 00:09:41.519
So that in that eight or nine months, Tom, were you like, okay, I'll never do that again.
00:09:41.600 --> 00:09:46.159
Uh I got away with it, or were you just not thinking that at all, not thinking anything about it?
00:09:46.559 --> 00:09:48.879
Really, uh the phone calls stopped coming in.
00:09:48.960 --> 00:09:52.720
The woman who was tipping me had stopped calling, she kind of lost touch.
00:09:52.799 --> 00:09:57.840
And so I didn't really, you know, uh maybe it was like the only time I'd ever get those tips.
00:09:57.919 --> 00:10:01.600
But I didn't stop because of some moral epiphany, like, you know, stop calling me with this information.
00:10:01.679 --> 00:10:03.600
That the phone calls just stopped coming.
00:10:03.919 --> 00:10:04.720
I see, I see.
00:10:04.879 --> 00:10:05.200
Okay.
00:10:05.440 --> 00:10:09.919
So you were what, picking up dry cleaning when the FBI approached you?
00:10:10.320 --> 00:10:11.759
Okay, tell us about that.
00:10:12.080 --> 00:10:14.720
So now we're uh July 8th, 2008.
00:10:14.879 --> 00:10:23.360
It's 6:30 in the morning, uh, just down the street from uh Fordham Law School, 55th and 8th Avenue, close to my apartment, dropping off dry cleaning.
00:10:23.440 --> 00:10:28.639
And then as I step onto the sidewalk, somebody behind me says, Are you Thomas Covey Harden?
00:10:28.879 --> 00:10:29.759
My full name.
00:10:30.000 --> 00:10:34.480
And the only person ever who used my full name was my mother back in Georgia when I was in trouble.
00:10:34.559 --> 00:10:36.320
And it wasn't, it wasn't my mom.
00:10:36.399 --> 00:10:37.200
I turned around.
00:10:37.279 --> 00:10:42.240
There was two FBI agents with dark suits and badges, you know, straight out of central casting.
00:10:42.399 --> 00:10:48.080
And so, yes, in my gut, even though the months had passed, I knew instantly what it was about.
00:10:48.320 --> 00:10:52.399
And we sat down at the at the fast food restaurant there at 55th and 8th.
00:10:52.480 --> 00:10:54.320
And he's like, We know about your four trades.
00:10:54.559 --> 00:11:02.720
We know that you were just down in Georgia at your baby nephew's baptism, and they knew my nephew's name, who was like six weeks old, and my head was spinning.
00:11:02.960 --> 00:11:06.080
And the order of my fears kind of says everything about me then.
00:11:06.240 --> 00:11:09.360
My first thought, Amy, was, Oh my gosh, my dad's gonna kill me.
00:11:09.440 --> 00:11:10.559
You know, what's he gonna say?
00:11:10.639 --> 00:11:11.519
Of course he'll be upset.
00:11:11.600 --> 00:11:13.120
Then I thought, my wife's gonna leave me.
00:11:13.279 --> 00:11:14.399
We just got married.
00:11:14.559 --> 00:11:17.519
And then somewhere down the list, I thought, oh, I might go to prison.
00:11:17.679 --> 00:11:21.919
But, you know, they showed me a chart with names white out and two big circles at the top.
00:11:22.000 --> 00:11:29.200
So I assume one of those guys was Roger Rodnum, handed me a card and said, You can help us build these cases, it'll help you out.
00:11:29.519 --> 00:11:33.679
Okay, so at your very first meeting, they essentially asked you to inform.
00:11:34.080 --> 00:11:34.559
Yes.
00:11:34.879 --> 00:11:36.720
And how did you a few days later?
00:11:36.960 --> 00:11:37.600
Okay, I got it.
00:11:37.679 --> 00:11:39.919
So a few days later, very right away, essentially.
00:11:40.080 --> 00:11:44.559
So, what was your decision-making process in agreeing to actually go ahead and inform?
00:11:44.720 --> 00:11:46.159
Were you like, of course I will?
00:11:46.320 --> 00:11:48.879
I mean, you or did you have to think hard about it?
00:11:48.960 --> 00:11:51.279
Did you talk over with your wife or your family?
00:11:51.360 --> 00:11:52.720
Like, how did that all work?
00:11:53.039 --> 00:11:54.480
So that was a Tuesday morning.
00:11:54.559 --> 00:11:57.039
They told me I could not talk to anybody other than my wife.
00:11:57.279 --> 00:11:59.360
I couldn't talk to anybody else.
00:11:59.600 --> 00:12:01.360
So that was a lot easier said than done.
00:12:01.440 --> 00:12:05.600
But I that afternoon I I converted to Catholicism for marriage.
00:12:05.679 --> 00:12:07.840
So I went to the Sacrament of Confession sounded great that day.
00:12:07.919 --> 00:12:08.480
So I went to St.
00:12:08.559 --> 00:12:13.120
Patrick's, talked to a priest, and he said basically my penance was to help the FBI.
00:12:13.200 --> 00:12:15.519
You know, now I should have talked to a lawyer at that point, too.
00:12:15.679 --> 00:12:20.480
I talked to a priest, and then eventually I had to tell my wife, and I waited till Friday after work.
00:12:20.720 --> 00:12:23.919
She had recently left Lehman Brothers, which was about to go under that year.
00:12:24.000 --> 00:12:27.360
So she had been under a crazy amount of stress in her in her job.
00:12:27.519 --> 00:12:32.240
And I was going to drop this bomb after work on a Friday afternoon, evening.
00:12:32.320 --> 00:12:34.159
And I said, Hey, I have to tell you something, Sue.
00:12:34.320 --> 00:12:34.879
You have to sit down.
00:12:35.039 --> 00:12:36.240
I told her everything.
00:12:36.399 --> 00:12:38.240
And she said, Hey, can you say it again?
00:12:38.399 --> 00:12:39.519
And I said it again.
00:12:39.759 --> 00:12:42.639
And she said, you know, you didn't do anything to hurt me.
00:12:42.720 --> 00:12:46.080
And if the FBI's giving you a chance to clean things up, you should do it.
00:12:46.240 --> 00:12:50.879
Pretty much every spouse would have kicked out their other spouse in this situation in that moment.
00:12:50.960 --> 00:12:53.120
So I'm very lucky she took it as a way she did.
00:12:53.440 --> 00:12:54.559
Yeah, she sounds awesome.
00:12:54.639 --> 00:12:56.159
I mean, you mentioned that you don't have kids yet.
00:12:56.240 --> 00:12:59.759
So it would have been very easy for her to say this isn't working for me.
00:13:00.080 --> 00:13:01.679
Yeah, I don't know who you are, right?
00:13:01.840 --> 00:13:02.240
Exactly.
00:13:02.320 --> 00:13:02.480
Yeah.
00:13:03.120 --> 00:13:09.120
Okay, so Tom, you said you went and spoke to a priest and you should have spoken to a lawyer, which sounds like the setup of a joke.
00:13:09.200 --> 00:13:15.600
But truthfully, you cooperated with the FBI for almost two years before you ever spoke to an attorney.
00:13:15.840 --> 00:13:19.919
A lot of our listeners are law students, they're young lawyers, they're experienced lawyers.
00:13:20.720 --> 00:13:21.279
Doesn't matter.
00:13:21.440 --> 00:13:27.440
What do you wish that you knew about the legal process much earlier in those first days when you were approached by the FBI?
00:13:27.759 --> 00:13:32.720
Yeah, and this is the one I want the students to hear because I'm not a lawyer as you said, I just sort of hard-earned experience.
00:13:32.799 --> 00:13:35.919
And I cooperated without this defense attorney for two years.
00:13:36.000 --> 00:13:41.120
When I finally called one and said, you know, now I was known as Tipper X when the arrest started happening.
00:13:41.360 --> 00:13:44.240
His first question was, you know, who was your attorney before me?
00:13:44.399 --> 00:13:46.000
And I said, I've never spoken to one.
00:13:46.080 --> 00:13:50.399
And then he was totally silent and says, Tom, you're supposed to hire me the first day the FBI approached you.
00:13:50.559 --> 00:13:52.159
I said, Hey, it's my first time doing this.
00:13:52.320 --> 00:13:54.799
So another sort of humorous, uh, dark humor moment.
00:13:54.879 --> 00:14:03.519
But what I wish I understood is that the agents, you know, guilty or innocent, are not your friends, even when they're kind and they're trained in psychology.
00:14:03.600 --> 00:14:12.559
And if you think about the asymmetry, they'd been building that case and rehearsing the exact moment they approached me for weeks, you know, maybe months.
00:14:12.720 --> 00:14:16.720
And I was reacting cold on a sidewalk before I'd even had coffee.
00:14:16.879 --> 00:14:19.120
And that imbalances the whole game.
00:14:19.200 --> 00:14:28.159
And what almost nobody realizes is that the first 24 hours, again, guilty or not, are when you have the most leverage you'll ever have.
00:14:28.399 --> 00:14:30.720
And what you do with them matters enormously.
00:14:30.879 --> 00:14:36.879
And instead, you know, they kept telling me I was doing a great job over time and I was doing this for my country.
00:14:37.039 --> 00:14:38.960
And I wanted to believe it truthfully.
00:14:39.039 --> 00:14:42.240
And every word I said for two years was without counsel.
00:14:42.320 --> 00:14:52.960
So the practical takeaway is the moment law enforcement, you know, says your full name on a sidewalk, you don't explain, you don't try to talk your way out of it, and you don't agree to anything on the spot.
00:14:53.039 --> 00:15:01.759
You say almost nothing, you call a lawyer, not because you're guilty, just because the process is not built to protect somebody navigating it alone.
00:15:02.320 --> 00:15:02.799
Yeah.
00:15:03.200 --> 00:15:04.159
Great advice.
00:15:04.399 --> 00:15:09.039
So if anyone picks up your book, they're going to hear what happened from there.
00:15:09.120 --> 00:15:11.039
And it is an incredible story.
00:15:11.120 --> 00:15:15.039
Like the pool story is just, it's right out of a movie.
00:15:15.200 --> 00:15:20.000
But maybe you can give us a high level of what happened over your time informing.
00:15:20.080 --> 00:15:21.919
You know, now you don't have to go into any of the details.
00:15:22.080 --> 00:15:23.200
People can read about it in the book.
00:15:23.360 --> 00:15:26.240
And then how did the whole thing get resolved for you?
00:15:26.799 --> 00:15:27.039
Yeah.
00:15:27.120 --> 00:15:30.639
So I met with them after I told my wife Sue, and I and I drew a line.
00:15:30.720 --> 00:15:32.960
Like some people may read the book and feel like I'm a rat.
00:15:33.360 --> 00:15:35.519
I drew the line in terms of who I was going to help them with.
00:15:35.679 --> 00:15:37.759
I tried to protect two friends, and I did.
00:15:37.919 --> 00:15:43.440
And I brought them who I felt were the worst actors, but I talk about, I was kind of thrown out into the wild.
00:15:43.519 --> 00:15:46.480
There was no training as to how to wear a wire at the FBI Academy.
00:15:46.559 --> 00:15:50.080
I just thrown out there, get people in conversations at conferences.
00:15:50.240 --> 00:15:54.559
My cover story was I'm a young analyst, probably going to lose my job looking for a job.
00:15:54.720 --> 00:15:56.240
How do you get your information?
00:15:56.399 --> 00:15:58.000
And then eventually I got good at that.
00:15:58.080 --> 00:16:00.240
And I had a whole framework for how I got good at it in the book.
00:16:00.320 --> 00:16:02.240
And I developed over time again by myself.
00:16:02.399 --> 00:16:08.240
Something that I'm told later that CIA spies actually are are taught this when they're trying to flip people.
00:16:08.320 --> 00:16:09.440
And I just learned it on my own.
00:16:09.519 --> 00:16:10.559
And so that was a crazy moment.
00:16:10.720 --> 00:16:15.759
You mentioned the swimming pool story was the scariest moment when I thought my life might be at danger.
00:16:16.000 --> 00:16:20.399
And eventually Tipper X uh was who I was identified as.
00:16:20.480 --> 00:16:23.440
And then my name became public, which was the worst day of everything.
00:16:23.679 --> 00:16:30.159
And I shared that, you know, in the book when my wife came home and had to deal with it at work that day is her husband's name on the front page of the newspaper.
00:16:30.320 --> 00:16:34.240
I wasn't sentenced for seven years post that approach on the sidewalk.
00:16:34.320 --> 00:16:36.399
And so it's most of my 30s were gone.
00:16:36.639 --> 00:16:48.080
Never really had, I didn't get a prison sentence because I helped him out, but still had to take a felony, which has its own implications, terms of checking the box and that type of thing, and being debanked actually from FDIC banks.
00:16:48.240 --> 00:16:51.600
And eventually the FBI invited me to speak about this in 2016.
00:16:51.679 --> 00:16:55.200
They told me I was the youngest person charged and I made the least amount of money.
00:16:55.279 --> 00:16:57.279
And I thought they were rubbing it in of the 81 people.
00:16:57.360 --> 00:16:59.600
And they said, no, your case is really interesting.
00:16:59.840 --> 00:17:00.399
Why'd you do it?
00:17:00.480 --> 00:17:03.600
And I spoke with the FBI and they they put me on this path.
00:17:03.679 --> 00:17:10.240
And about a year and a half ago, my publisher reached out and said you should really think about, you know, writing a book to get the story out there to a bigger audience.
00:17:10.559 --> 00:17:10.880
Yes.
00:17:11.039 --> 00:17:12.319
Well, we're so glad you did.
00:17:12.480 --> 00:17:16.799
So can you talk to us about some of like your most important reflections?
00:17:16.960 --> 00:17:20.960
And I want to pick up on what you said something earlier about the fraud triangle.
00:17:21.039 --> 00:17:29.920
And this is the idea that these three things come together: pressure, opportunity, and rationalization to you know allow people to do things like insider trading.
00:17:30.160 --> 00:17:39.039
Do you think that insider trading specifically, do you think it's a more individual decision, or do you think that it is some sort of systemic problem that we have?
00:17:39.519 --> 00:17:41.680
I think it's both, but the mix has shifted over time.
00:17:41.759 --> 00:17:45.200
So back when I did it in my corner of the industry, it was heavily both.
00:17:45.359 --> 00:17:50.799
So when my boss moved the gold every month, he handed me the opportunity because I could trade small with no oversight.
00:17:50.880 --> 00:17:52.240
So that's sort of a failure of the system.
00:17:52.400 --> 00:17:57.119
Again, I made the decisions, I have agency to make these decisions, but the system certainly didn't hurt.
00:17:57.279 --> 00:17:59.359
And the culture at that time gave me cover.
00:17:59.440 --> 00:18:00.720
It felt like everybody was doing it.
00:18:00.799 --> 00:18:02.720
So I could tell myself I'm just keeping up.
00:18:02.960 --> 00:18:05.039
And the insecurity gave me a motive.
00:18:05.359 --> 00:18:09.200
But today, I'd say it's tilted more towards the individual.
00:18:09.279 --> 00:18:14.000
And the reason is that the systemic cover is mostly gone in my industry.
00:18:14.160 --> 00:18:21.920
After the crackdown, firms became, you know, really focused on compliance, surveillance, uh, software that flags euphemisms.
00:18:22.160 --> 00:18:25.200
The expert networks were cleaned up and people actually went to prison.
00:18:25.359 --> 00:18:34.559
So when somebody crosses the line now in an insider trading case, they're doing it against the system that's trying to catch them, not one that's sort of winking at it.
00:18:34.720 --> 00:18:42.480
And I'm sure they're telling themselves, you know, whatever they're rationalizing, you can't say everybody's doing it anymore, but that puts it much more squarely on the person.
00:18:42.559 --> 00:18:45.039
And culture, of course, still matters.
00:18:45.279 --> 00:18:54.640
And a bad barrel can tip a you know a wavering person over, which is why I always push companies past the bad apple obsession to actually look at the barrel.
00:18:54.799 --> 00:18:57.519
And the individual is accountable and a full stop.
00:18:57.759 --> 00:19:03.119
So if you only ever fire the apple and never inspect the barrel, you keep growing the same fruit.
00:19:03.440 --> 00:19:08.240
Do you think we still suffer from short-termism in terms of like this valuation treadmill?
00:19:08.319 --> 00:19:13.200
And people want to see results and profits constantly, not quarterly anymore.
00:19:13.279 --> 00:19:15.200
They want to see constant gains.
00:19:16.079 --> 00:19:16.559
Absolutely.
00:19:16.720 --> 00:19:24.559
That's one of the things I haven't been able to solve is I've done a deeper dive sort of into the psychology of the last 10 years, into why people cross these lines and the systemic problems.
00:19:24.720 --> 00:19:26.880
It is, it is the short termism is still a problem.
00:19:26.960 --> 00:19:32.720
And what I try to share with people is prepare yourself for when you're in that situation I was in.
00:19:32.880 --> 00:19:44.319
It won't be the exact same thing as me, of course, but you're going to be in that position in your career where you have tremendous short-term pressure and you have to have a few things you can go to in your decision-making process.
00:19:44.480 --> 00:19:46.640
Okay, here's the pressure, here's what I'm going to do.
00:19:46.720 --> 00:19:50.559
I'm not going to just react and rationalize in the moment because that's where people can get in trouble.
00:19:50.960 --> 00:19:55.440
Okay, I have a few questions for you that are kind of specific to lawyers because they make up a large part of our listenership.
00:19:55.759 --> 00:20:00.480
So many of the young lawyers listening right now will advise, you know, corporate clients.
00:20:00.559 --> 00:20:03.839
They'll serve as in-house counsels, they'll probably maybe even work as prosecutors.
00:20:03.920 --> 00:20:17.039
From your experience both inside the hedge fund and then also inside an FBI investigation, what would you say are the big warning signs that an organization is creating the conditions for misconduct, even if, as you say, no one has actually crossed that line yet?
00:20:17.359 --> 00:20:20.160
Yeah, and people love to talk about tone at the top today.
00:20:20.240 --> 00:20:21.839
And I don't really buy tone at the top.
00:20:21.920 --> 00:20:28.880
I think culture, it's important, but really culture is the behavior people actually believe will get them rewarded.
00:20:28.960 --> 00:20:32.559
So I look for three patterns that show up before any misconduct.
00:20:32.799 --> 00:20:34.880
The first would be a blame culture.
00:20:35.279 --> 00:20:37.359
Do people get punished for mistakes?
00:20:37.599 --> 00:20:40.160
When they do, they stop surfacing problems.
00:20:40.400 --> 00:20:48.400
And second is more of like a communication breakdown when there's silos inside of a company where nobody feels safe raising a hand.
00:20:48.640 --> 00:20:56.480
And third would be a fear-based culture where people are rationalizing how to get around a problem instead of walking, you know, walking it up the chain.
00:20:56.640 --> 00:21:03.119
And the quieter tells are, you know, I'll speak at companies that run an ethics survey and they don't share the results.
00:21:03.200 --> 00:21:04.240
So that's not great.
00:21:04.400 --> 00:21:13.599
So someone who asks maybe harder questions, somebody who's trying to speak up and they get labeled tiresome, which happened in the company I spoke at last year before I was there.
00:21:13.680 --> 00:21:17.759
They were having an issue where people were calling anybody who spokes up as tiresome people.
00:21:17.839 --> 00:21:18.559
So it doesn't help.
00:21:18.720 --> 00:21:25.680
And the big one again is that the the things that actually get rewarded aren't the things that leadership claims to value.
00:21:25.759 --> 00:21:31.039
And if I see those, I don't need a scandal to know the risk is already in the building.
00:21:32.160 --> 00:21:43.039
And I've heard you talk about why in that moment when you're starting to see these signs, some people, some young professionals, they decide, you know what, I'm gonna put my head down.
00:21:43.119 --> 00:21:44.880
I'm actually not gonna bother speaking up.
00:21:45.279 --> 00:21:50.400
I I think because staying quiet feels you know free and speaking up feels expensive.
00:21:50.559 --> 00:21:52.960
And people are terrible at pricing that out.
00:21:53.039 --> 00:21:57.680
And and you know, what led up to my trades was what I'd call isolated decision making.
00:21:57.759 --> 00:22:02.400
You know, the tip came in, didn't talk to my Boss, didn't talk to compliance, didn't tell anybody.
00:22:02.480 --> 00:22:06.160
And that's the thread across many other types of cases like mine.
00:22:06.400 --> 00:22:09.759
It starts with one person in their head deciding not to say anything.
00:22:10.000 --> 00:22:17.599
And we tell ourselves silence is being a team player, but it's the decision that lets a small compromise become a big one.
00:22:17.759 --> 00:22:21.200
And the fix is almost kind of stupidly simple.
00:22:21.279 --> 00:22:22.240
Like say it out loud.
00:22:22.319 --> 00:22:26.240
You can't rationalize something you're saying out loud to another person before you act.
00:22:26.559 --> 00:22:32.400
So one of the most striking details in your book is the role of lawyers inside an insider trading chain.
00:22:32.480 --> 00:22:41.039
And we know that in your investigation, you know, there were lawyers, a lawyer from Robeson Gray, another lawyer who got kind of caught up in it as well.
00:22:41.359 --> 00:22:54.000
So you mentioned that you had a target, you had a dinner with the target, and they told you that the real edge comes from the lawyers because they see term sheets, they see board minutes, they know the nicknames that lawyers give private deals before they go public.
00:22:54.559 --> 00:22:57.200
A lot of our students will be in this practice.
00:22:57.279 --> 00:23:00.000
They will be doing corporate law and MA and securities.
00:23:00.240 --> 00:23:09.039
What do you think is important for them to understand about how information flows through them as a gatekeeper and how easy it would be to compromise their role?
00:23:09.440 --> 00:23:17.039
Yeah, I think for a for a young lawyer, and that that dinner is suited into my memory from the book where he leans over and says, you know, it's about the lawyers, they see everything.
00:23:17.279 --> 00:23:26.960
I think for a young lawyer, it's a heavy thing to sit with that you'll be, you know, one of the most concentrated nodes of material non-public information in the economy.
00:23:27.039 --> 00:23:30.160
And that makes you valuable to exactly the wrong people.
00:23:30.240 --> 00:23:34.559
And the compromise rarely looks like a villain with a briefcase, right?
00:23:34.640 --> 00:23:38.000
It looks like a friend at a dinner just between us.
00:23:38.240 --> 00:23:41.359
Of course, you know, it's not from 20 years ago anymore.
00:23:41.440 --> 00:23:49.119
You know, this past May, prosecutors in Boston charged, I think, about 30 people in a decade-long ring built on exactly that.
00:23:49.279 --> 00:24:02.640
You know, the alleged ring leaders were MA attorneys from top law school grads who worked at the top white shoe firms who pulled confidential deal files straight off the firm's document management systems, including matters he wasn't even staffed on.
00:24:02.720 --> 00:24:08.720
And one logged in while on a leave of absence to view the, I think it was the Amazon iRobot deal.
00:24:08.799 --> 00:24:09.680
He had nothing to do with.
00:24:09.759 --> 00:24:13.119
And it flowed out to traders ahead of nearly 30 mergers.
00:24:13.279 --> 00:24:20.240
And the detail that got me, we were talking about this before in terms of euphemisms, is they texted in code, you know, how's the rabbi?
00:24:20.400 --> 00:24:24.000
That was one of the texts they use uh before discussing these deals.
00:24:24.160 --> 00:24:30.000
So the same distance I built calling it taking a flyer, you know, nobody types let's commit securities fraud.
00:24:30.160 --> 00:24:32.319
So two things for young lawyers.
00:24:32.400 --> 00:24:36.240
Again, like your privileged access is a fiduciary duty, it's not a perk.
00:24:36.480 --> 00:24:45.839
And the threat surface is your own firm systems, you know, narrow who sees live deal files, watch for lawyers, pulling matters they aren't on.
00:24:46.000 --> 00:24:50.880
And almost nobody, I'm sure in that Boston case, woke up one morning and decided to become a criminal.
00:24:50.960 --> 00:24:54.799
They just kept not drawing the line until it was too late to draw it.
00:24:55.200 --> 00:25:01.519
You think law schools could do a better job at emphasizing these types of courses or classes?
00:25:01.920 --> 00:25:02.559
I I think so.
00:25:02.640 --> 00:25:04.000
And I think law firms could too.
00:25:04.240 --> 00:25:16.400
I'm actually going to be speaking at a few law firms just because of the other sort of what's happened in these cases the last few months, and they realize that their sort of policies on the internal side are just, hey, you should never do this.
00:25:16.480 --> 00:25:17.440
And it's not beyond that.
00:25:17.519 --> 00:25:21.039
It's not really, it has to be more, I think, substantial on the training side.
00:25:21.200 --> 00:25:28.640
Because again, uh very sophisticated friends of lawyers who were in the hedge fund business who are other traders are really good at getting information.
00:25:28.880 --> 00:25:31.519
And so I think there has to be more training and more awareness around this.
00:25:31.599 --> 00:25:33.680
And probably to your point, start starting in law school.
00:25:33.920 --> 00:25:34.079
Okay.
00:25:34.160 --> 00:25:36.720
I want to get your thoughts quickly on the prediction markets.
00:25:36.880 --> 00:25:44.480
Um, I just did an interview with a scholar who's studying we are calling informed trading and not insider trading, apparently, in the prediction markets.
00:25:44.720 --> 00:25:49.200
And this is a phenomenon that has real consequences for business leaders in particular.
00:25:49.359 --> 00:25:51.839
So, what are your thoughts on this new frontier?
00:25:52.160 --> 00:25:57.680
Yeah, it's almost the same psychology I live, just pointed uh at a venue that the law hasn't caught up to yet.
00:25:57.759 --> 00:26:05.920
So, you know, Colchi and Polymarket, you know, they let you bet on future events, and we're watching kind of insider trading reinvent itself on a whole new platform.
00:26:06.079 --> 00:26:16.880
And you can see, you know, the most recent cases, the Army soldier who who planned the operation to capture Maduro, who charged with five felonies for betting, I think it was 33,000 and cashing out 400,000.
00:26:16.960 --> 00:26:21.200
And, you know, nine accounts made like two and a half million dollars on bets about U.S.
00:26:21.279 --> 00:26:25.039
military actions against Iran, someplace the hours before it went public.
00:26:25.200 --> 00:26:35.599
And then the most comedic one to me was in the last week where George Santos, whom the DOJ is reportedly examining for betting on Cauchi about whether he himself would be at the State of the Union.
00:26:35.759 --> 00:26:38.240
So it's pretty interesting what how these cases come about.
00:26:38.400 --> 00:26:41.680
And for a law audience, the interesting recall is the law itself.
00:26:41.839 --> 00:26:46.160
Of course, these sit under the CFTC, not the securities regime under the SEC.
00:26:46.319 --> 00:26:50.319
So what even counts as illegal insider trading here is unsettled.
00:26:50.400 --> 00:27:01.279
And I think there was an economist, I forget the name, I read an article last week that has argued, I think they've argued for decades, that insiders uh trading is the whole point of a prediction market.
00:27:01.359 --> 00:27:06.799
So the design arguably invites the behavior securities law spent 90 years stamping out.
00:27:06.960 --> 00:27:09.119
And the platforms are, of course, scrambling now.
00:27:09.200 --> 00:27:14.480
You know, Call She I saw ban Congress and from trading and the House Oversight's open investigation.
00:27:14.559 --> 00:27:18.319
But if I'm on the board of a company, this is what I want them worried about.
00:27:18.640 --> 00:27:22.880
It massively increases the surface area for insider trading.
00:27:22.960 --> 00:27:29.839
And in my world, you know, cashing in, making a trade, there, you know, there's an account, you have to place a trade, there's some friction.
00:27:30.079 --> 00:27:33.200
And when there's more friction, you know, that's where second thoughts live.
00:27:33.279 --> 00:27:38.240
Now anybody who knows anything non-public has a one-tap way to cash it.
00:27:38.319 --> 00:27:41.440
And a lot of the next wave, I think, Amy, is not going to be nefarious.
00:27:41.519 --> 00:27:43.359
Like my cases, it might be negligent.
00:27:43.519 --> 00:27:48.400
You know, picture a new employee already on the platform every night betting on basketball.
00:27:48.480 --> 00:27:56.960
And a market pops up on something that he or she knows cold from their employer, and they tap yes the same way they were just betting on the next last night.
00:27:57.039 --> 00:28:01.200
And, you know, their head didn't say this is trading on MNPI, right?
00:28:01.279 --> 00:28:02.240
They placed a bet.
00:28:02.400 --> 00:28:09.119
And that on-rep, that sort of on-rep to the app strips out the friction that might have stopped them in regular securities trading.
00:28:09.279 --> 00:28:13.200
So the person who blows up your company probably isn't a shimmer at all.
00:28:13.359 --> 00:28:17.920
It's it's the it's the otherwise good employee who got a little too comfortable tapping a betting app.
00:28:18.160 --> 00:28:18.960
Yeah, you're so right.
00:28:19.279 --> 00:28:20.880
It's basically normalizing the behavior.
00:28:21.039 --> 00:28:25.519
I mean, these apps not only are getting you in the front door, but they're gamifying it.
00:28:25.680 --> 00:28:30.079
They're doing like the confetti goes off when you make the place the bet on the contract.
00:28:30.160 --> 00:28:31.039
Like, so you're right.
00:28:31.119 --> 00:28:42.400
At some point, this is so normalized that when that guy from Google saw that they were talking about the top hits or whatever, it was very easy to go, yep, and create a market for it and basically expose that trade secret.
00:28:42.799 --> 00:28:43.039
Yeah.
00:28:43.119 --> 00:28:49.440
I mean, all some of my friends with with sons in college, I mean, it's almost like if you're not doing it, see all thing, then you're left out of the social circle.
00:28:49.519 --> 00:28:54.480
You're not betting on sports on your phone, you know, you're kind of left out, and that behavior then just sort of translates to the workplace.
00:28:54.559 --> 00:28:56.000
So I'm uh it's a concern.
00:28:56.400 --> 00:28:57.200
Yeah, for sure.
00:28:57.440 --> 00:29:10.480
Okay, so what about, you know, you mentioned that the FBI at some point told you you were the youngest, you made the least, and you know, they were obviously wanting to get you to come talk to them and the people they're training, and and that and that's great.
00:29:10.559 --> 00:29:22.559
But when you do see people who are very high up in perhaps government, when you see important heads of state not being investigated the way that you were, how do you process that?
00:29:22.720 --> 00:29:24.160
How does that feel to you?
00:29:24.559 --> 00:29:38.480
I'd be lying if I didn't say it stings a little, you know, as you I was the youngest charge, the$46,000, and I got the full machine, you know, the the guilty plea, the wire, a felony for life that has put me on every money laundering list and barred me from even coaching my my daughter's soccer teams.
00:29:38.640 --> 00:29:41.359
I'm not complaining, it's just the consequences of the choices I made.
00:29:41.519 --> 00:29:48.079
And the way I kind of keep myself sane about it is to remember this is a cross across the board problem in society.
00:29:48.160 --> 00:29:52.720
And I don't know if that's a great thing if we have a low-trust society uh in terms of what that means.
00:29:52.880 --> 00:29:59.440
But it's really like, you know, you see Congresspeople across the board making these trades and even the executive branch too.
00:29:59.599 --> 00:30:04.559
I think there was the attorney general reportedly sold Trump Media stock right before there was a tariff announcement.
00:30:04.640 --> 00:30:07.519
And I'm not accusing anybody of a crime, but that's sort of that's my point.
00:30:07.599 --> 00:30:16.319
When we see it, now there's accounts that actually, you know, there's a there's a young man who has a platform, you know, trade like this the Congress people, and he's built a big business because you just followed them.
00:30:16.400 --> 00:30:20.960
And and no Congressperson's ever been charged with insider trading.
00:30:21.039 --> 00:30:22.960
They just pay a$200 fine with the stock act.
00:30:23.119 --> 00:30:28.319
And 86% of Americans, I read a survey, agree that Congress should not be trading single stocks.
00:30:28.480 --> 00:30:32.240
And 86% of Americans probably agree on nothing other than than this.
00:30:32.400 --> 00:30:42.240
And so when I come back to my own framework, you know, the one question I tell every company to add to its code of conduct is doesn't really matter what's happening in society.
00:30:42.319 --> 00:30:46.400
It's it's if you're not sure, are you willing to be held accountable for the decision?
00:30:46.480 --> 00:30:50.079
And a lot of powerful people are betting they'll never have to answer for that.
00:30:50.240 --> 00:30:56.319
Maybe they won't, but it's worked out fine for them so far, but it hasn't worked out for everybody else's uh trust in the system.
00:30:56.880 --> 00:30:57.119
Yeah.
00:30:57.200 --> 00:31:00.319
So start at that uh start there, start at the company level.
00:31:00.640 --> 00:31:00.880
Yeah.
00:31:01.119 --> 00:31:10.640
So just in a broader sense, I do feel like we're in a political climate where, you know, less of an emphasis is on accountability and you know, norms and doing things by the book.
00:31:10.799 --> 00:31:14.720
And, you know, your book describes a culture where certain behaviors did feel normalized.
00:31:15.039 --> 00:31:19.759
60% of those companies back then were having those spikes, which indicated insider trading.
00:31:19.920 --> 00:31:24.240
So it feels like the message of this book for some reason is even more valuable than ever.
00:31:24.559 --> 00:31:35.119
Yeah, I think again, going back just when the people at the top appear to appear to skate that you know, the message that every junior person absorbs is, you know, the rules are for suckers, and that's exactly the soil my kind of decision grows in.
00:31:35.279 --> 00:31:38.000
And my whole story is downstream of everybody's doing it.
00:31:38.160 --> 00:31:44.240
And the word accountability itself, you know, people often hear it and they think punishment, you know, getting caught, getting charged.
00:31:44.319 --> 00:31:55.440
And to me, you want people to be accountable, you want them to really own decisions, you know, naming what it was owning it, carrying it forward, and punishment and ownership are two different things.
00:31:55.519 --> 00:31:58.480
And, you know, you can dodge the punishment and never own a thing.
00:31:58.559 --> 00:32:00.880
And plenty of people now will cross the line and never get caught.
00:32:01.039 --> 00:32:02.400
You still have to live with yourself, right?
00:32:02.480 --> 00:32:04.400
So who cares what people are doing up top?
00:32:04.559 --> 00:32:06.079
If you cross the line, you have to live with yourself.
00:32:06.240 --> 00:32:10.160
And so I'm often on the stage now, not even talking about insider trading.
00:32:10.240 --> 00:32:18.960
I'm talking about what I call in the book the integrity gap, you know, the distance between who you appear to be, your reputation to the outside world, and who you are when nobody's looking.
00:32:19.039 --> 00:32:22.079
And as a young man, my gap was became quite wide.
00:32:22.160 --> 00:32:31.119
And there's a line in one of my favorite books when I was writing my book, and I read other books, and David Brooks's Road to Character, where he talked about resume virtues and eulogy virtues.
00:32:31.279 --> 00:32:36.240
And I spent my 20s chasing resumes, you know, the title, the firm, the number and the spreadsheet.
00:32:36.400 --> 00:32:38.079
And I blew up everything that mattered.
00:32:38.240 --> 00:32:44.079
And, you know, I don't want to leave the students uh thinking, you know, one bad decision is the end of the story because it isn't.
00:32:44.240 --> 00:32:47.119
And 85% of marriages do into my situation.
00:32:47.200 --> 00:32:49.920
And my wife and I just celebrated 21 years.
00:32:50.079 --> 00:32:52.400
So the the point is don't mess up, everybody messes up.
00:32:52.480 --> 00:33:00.960
But it's the difference between guilt and shame, where you know, guilt says I did a bad thing and shame says I'm a bad person, and you rebuild by owning it and turning it into something useful for the next person.
00:33:01.119 --> 00:33:05.680
And the bill is always going to come due, and it's it's even if it never comes from a courtroom.
00:33:05.839 --> 00:33:08.480
I just hope a few of them hear that uh from me first.
00:33:08.799 --> 00:33:09.599
Absolutely.
00:33:09.839 --> 00:33:17.440
Well, Tom, there's so much time spent in compliance circles talking about, you know, how can we build a culture of compliance and there's conferences and there's handbooks.
00:33:17.519 --> 00:33:25.279
But when I heard your story about being unbanked, about being banned from, you know, coaching your kids' soccer game, I was like, this is it.
00:33:25.440 --> 00:33:30.079
This is the story that everyone needs to hear before they're put in any position of trust at work.
00:33:30.240 --> 00:33:33.759
So we thank you, Tom, so much for your bravery in sharing your story with us.
00:33:33.920 --> 00:33:35.519
And we will continue to follow your journey.
00:33:35.599 --> 00:33:37.279
The book is wired on Wall Street.
00:33:37.359 --> 00:33:39.119
Tom Harden, thank you so much.
00:33:39.440 --> 00:33:39.680
Thank you.
00:33:39.920 --> 00:33:41.119
It was a pleasure.
00:33:43.839 --> 00:33:49.200
Thanks to everyone at Fordham Law School, especially the Dean's Office and our corporate law center donors for supporting this podcast.
00:33:49.359 --> 00:33:52.079
Bite Size Business Law is produced by WeEdit Podcast.
00:33:52.400 --> 00:33:57.039
Listen and subscribe to Bite Size Business Law on Spotify, Apple, or wherever you get your podcasts.
00:33:57.200 --> 00:34:07.119
The information in this podcast is for educational, informational, and entertainment purposes only, and does not constitute legal advice, nor is it intended to promote the organizations with which our guests are affiliated.
00:34:07.279 --> 00:34:10.800
For more information, check out our show notes, and thanks for listening.
00:00:00.160 --> 00:00:05.360
And the big thing for me in the fraud triangle, and I think many people in my situation is the rationalization.
00:00:05.519 --> 00:00:08.400
I bought a small 0.9% position.
00:00:08.480 --> 00:00:10.560
I told myself under that threshold.
00:00:10.720 --> 00:00:13.439
And as you said before, I felt like everybody's doing it.
00:00:13.519 --> 00:00:15.039
Uh, I'll do it just this one time.
00:00:15.199 --> 00:00:17.359
Who am I hurting taking a flyer?
00:00:17.600 --> 00:00:21.519
And it would happen three more times that way, where she would call.
00:00:21.600 --> 00:00:24.559
There was small trades, my boss looking the other way.
00:00:24.719 --> 00:00:27.679
And the firm made just over a million dollars on these trades.
00:00:27.760 --> 00:00:36.640
But me personally, the number I have to live with for the rest of my life, and sometimes the number most shocking in my corporate talks is the amount of money I made personally.
00:00:36.880 --> 00:00:43.200
And that number was$46,000, which at 29 years old was the price of my professional career.
00:00:45.920 --> 00:00:50.560
You're listening to Bite-Size Business Law, where we discuss big issues in small doses.
00:00:50.799 --> 00:01:00.079
This podcast is sponsored by the Fordham University School of Law Corporate Law Center, which is run by Fordham Law Professor Richard Squire and me, your host Amy Martella.
00:01:00.320 --> 00:01:02.880
Okay, let's get down to business.
00:01:06.000 --> 00:01:08.079
Welcome back to Bite-Sized Business Law.
00:01:08.159 --> 00:01:15.599
We've done a few episodes about or involving insider trading, but today's episode is a true story that reads like a financial thriller.
00:01:15.920 --> 00:01:21.280
And it's ultimately a cautionary tale of ambition, temptation, consequences, and redemption.
00:01:21.519 --> 00:01:32.480
Tom Hardin is the author of the wildly successful book, Wired on Wall Street, that recounts his own story, The Rise and Fall of Tipper X, one of the FBI's most prolific informants.
00:01:32.640 --> 00:01:33.599
Tom, welcome.
00:01:34.000 --> 00:01:35.040
Thanks for having me on, Amy.
00:01:35.200 --> 00:01:36.239
It's a pleasure to be here.
00:01:36.640 --> 00:01:38.000
Thank you so much for joining us.
00:01:38.159 --> 00:01:42.400
You did an event in person for us back in the spring of this year for our law students.
00:01:42.560 --> 00:01:50.560
But I really wanted you to come back and speak to, you know, everyone else, all of our listeners, and reach a broader audience, because I absolutely loved your book and I loved your message.
00:01:50.719 --> 00:01:56.480
So, but why don't you start by telling us a little bit about yourself and your career path as a young professional?
00:01:56.719 --> 00:01:58.560
Because you're not a lawyer by training.
00:01:59.200 --> 00:02:01.359
But how did you get to where you ended up?
00:02:01.840 --> 00:02:08.719
Yeah, and I think my story really lives in the gap between uh, you know, what's legal, what's ethical, and what you can talk yourself into.
00:02:08.879 --> 00:02:12.479
So I grew up the oldest of three brothers in the suburbs of Atlanta.
00:02:12.639 --> 00:02:14.800
My dad spent his whole career at Coca-Cola.
00:02:14.879 --> 00:02:16.240
My mom stayed at home with us.
00:02:16.400 --> 00:02:25.840
My two younger brothers, first of my family to leave the South for college, attended UPenn, and I went straight into finance into the hedge fund world.
00:02:26.080 --> 00:02:27.680
Now we're talking early 2000s.
00:02:27.919 --> 00:02:30.400
I had a good reputation as an analyst.
00:02:30.479 --> 00:02:40.879
And by 2006, a few years into my career, I'd taken a junior uh partner spot at a brand new tech-focused hedge fund with money from a legendary investor.
00:02:40.960 --> 00:02:43.759
So I had a real shot to build something.
00:02:44.000 --> 00:02:54.159
And the hard thing for me looking back now is to admit that is that I wasn't some criminal mastermind twirling my mustache looking for ways to break the law.
00:02:54.240 --> 00:03:00.400
I was really a, as I sat down and wrote the book last year, an insecure kid in his 20s who wanted to belong.
00:03:00.560 --> 00:03:04.240
And that turned out to be more than enough to eventually cross the line.
00:03:04.800 --> 00:03:08.960
Yeah, you mentioned, Tom, that your story lives in that gray area.
00:03:09.280 --> 00:03:10.479
When was the first time?
00:03:10.560 --> 00:03:12.560
Now you're at, you're inside the hedge fund world.
00:03:12.639 --> 00:03:18.719
When was the first time you saw inside that hedge fund that there was kind of a legal gray area?
00:03:19.280 --> 00:03:23.439
And there is, and I guess I have to explain the job because the gray area is baked right in.
00:03:23.680 --> 00:03:28.879
As a technology analyst, I had to know my company's better than the market did.
00:03:29.039 --> 00:03:34.719
You know, could I forecast a semiconductor company's quarter better than what Wall Street was expecting?
00:03:34.879 --> 00:03:36.719
And if so, we made money.
00:03:36.960 --> 00:03:40.000
So you're paid to find an information advantage.
00:03:40.080 --> 00:03:43.039
And the legal question is how you build it.
00:03:43.360 --> 00:03:46.560
The legitimate framework is what's called the mosaic theory.
00:03:46.639 --> 00:03:54.479
So you assemble a hundred immaterial pieces into a conclusion the market hasn't reached, and that's totally legal.
00:03:54.560 --> 00:04:02.400
And the trouble is the line between a legal mosaic and illegal non-public information is blurry.
00:04:02.560 --> 00:04:05.039
And in 2006, we lived right on top of it.
00:04:05.199 --> 00:04:09.840
And in practice, I do channel checks, call the Asian supply chain about demand.
00:04:10.000 --> 00:04:12.159
Our order is strong, and that's fine.
00:04:12.240 --> 00:04:18.560
But if a supplier hands you the exact order their customer just placed, you're holding that company's non-public numbers.
00:04:18.720 --> 00:04:21.839
And and the gray area, as I mentioned in the book, was only half of it.
00:04:21.920 --> 00:04:27.360
Um around then I realized people at other hedge funds uh weren't in the gray area at all.
00:04:27.439 --> 00:04:31.680
They were flat out trading on illegal material and non-public information.
00:04:31.839 --> 00:04:44.800
And 60% of the biggest public companies taken private by private equity uh in 2006 had unexplained price spikes before the deal was announced and the share prices, and that was way up from a few years before.
00:04:45.040 --> 00:04:51.600
So the kind of trading had been normalized and it set the tone for what I was seeing seeing around me, you know, all the time.
00:04:51.759 --> 00:04:57.439
So the first time I felt the gray was really no dramatic moment, just realizing my whole job lived in it.
00:04:57.519 --> 00:05:00.959
But the more defensible it felt, the more comfortable I got.
00:05:01.040 --> 00:05:04.240
And the black really stops looking as far off as it should.
00:05:04.560 --> 00:05:07.519
Yeah, that's tough when you feel like, well, everyone is doing it.
00:05:07.680 --> 00:05:11.120
In fact, 60%, the majority of these public companies are doing it.
00:05:11.279 --> 00:05:14.399
So who am I to say no when that phone rings?
00:05:14.560 --> 00:05:16.639
Um, and one day your phone did ring, right?
00:05:16.800 --> 00:05:19.360
And there was information on there that was quite valuable.
00:05:19.519 --> 00:05:20.639
Tell us about that.
00:05:21.040 --> 00:05:22.879
So it's now March of 2007.
00:05:22.959 --> 00:05:24.480
I'm at my desk, the phone rings.
00:05:24.639 --> 00:05:29.519
It's a woman who I knew who would work for Raj Roger Otto, the most famous guy to be charged in these cases.
00:05:29.680 --> 00:05:32.000
I met her at a conference when I was 23.
00:05:32.160 --> 00:05:39.199
And I could tell right then, Amy, back then in my career, that she was not the most ethical person, always trying to get information from companies.
00:05:39.439 --> 00:05:42.079
And over the years, I stayed in touch with her.
00:05:42.240 --> 00:05:47.360
She lived out there, you know, she held all the meetings I couldn't get to with the Silicon Valley companies.
00:05:47.519 --> 00:05:51.120
But you really become the average of the five people you surround yourself with.
00:05:51.360 --> 00:05:55.519
I know that's a common trope, but it really is true, especially for young professionals.
00:05:55.680 --> 00:05:59.759
And that's somebody, you know, it only takes one person to push you or take you across the line.
00:05:59.920 --> 00:06:05.199
And, you know, she calls in this moment and says, I have something for you, Tom, but you can't tell anybody.
00:06:05.279 --> 00:06:08.800
Now that should have set up some red flags, but now, of course, I'm curious.
00:06:08.879 --> 00:06:13.040
And she tells me a public company is going to be acquired in a few weeks.
00:06:13.199 --> 00:06:16.720
Here's the date, here's the price, here's the private equity firm.
00:06:16.959 --> 00:06:19.600
A very stark piece of information.
00:06:19.839 --> 00:06:29.120
I didn't trade it that day, but later on, you know, that day I'm on the phone with a friend who worked at a prop trading firm, and he's down that month.
00:06:29.360 --> 00:06:32.879
And, you know, he's like, Are you hearing anything out there I could take a flyer on?
00:06:33.040 --> 00:06:36.800
I said, you know, I'm not trading this, but this woman just called me and told him everything.
00:06:36.879 --> 00:06:42.079
And before I bought a single share, I'd exposed myself to insider trading liability for tipping.
00:06:42.160 --> 00:06:47.279
And the next day, the next few weeks goes by and he calls me back and he says, Are you in?
00:06:47.519 --> 00:06:49.759
And in that, Wait, can you explain, Tom?
00:06:50.000 --> 00:06:52.800
Can you explain to our listeners what a flyer is?
00:06:53.279 --> 00:06:53.680
Oh, yeah.
00:06:53.759 --> 00:06:57.680
So a flyer is something we used to talk about a small trade.
00:06:57.920 --> 00:07:04.720
And so it became a euphemism for actually making small trades on illicit information.
00:07:04.959 --> 00:07:14.720
And that's very common in other types of misconduct and fraud cases where people actually use the terms as euphemisms so you don't feel as bad about what you're actually doing.
00:07:16.160 --> 00:07:17.600
Okay, so he calls you back.
00:07:18.160 --> 00:07:20.399
He calls me back and he says, you know, dude, are you in?
00:07:20.480 --> 00:07:21.279
We're all in here.
00:07:21.360 --> 00:07:26.160
And and at that moment, uh the fraud triangle, you know, clicked in big for me.
00:07:26.240 --> 00:07:28.560
And so the fraud triangle is the pressure.
00:07:28.800 --> 00:07:40.079
So a few months before I received this tip from this woman, my boss had closed the door to my office and we had lost money in the first quarter of my final hedge fund.
00:07:40.319 --> 00:07:43.199
And our goals were to make money over one to three years.
00:07:43.439 --> 00:07:48.879
But he walks in and says, now we have to make money every month or we would not survive.
00:07:49.040 --> 00:07:52.480
So the goal in our business went from one to three years to monthly.
00:07:52.720 --> 00:07:55.600
Then he also gave me the opportunity to cross the line.
00:07:55.680 --> 00:07:57.360
So it's often a lax control.
00:07:57.759 --> 00:08:06.160
I could now, after that meeting, buy a stock in our portfolio as long as it was less than 1% of the funds we manage for clients.
00:08:06.240 --> 00:08:08.480
So now I had an opportunity to buy a stock.
00:08:08.639 --> 00:08:16.319
And then the big thing without talking to him, and the big thing for me in the fraud triangle, and I think many people in my situation is the rationalization.
00:08:16.480 --> 00:08:19.360
I bought a small 0.9% position.
00:08:19.439 --> 00:08:21.519
I told myself under that threshold.
00:08:21.680 --> 00:08:24.399
And as you said before, I felt like everybody's doing it.
00:08:24.480 --> 00:08:26.000
Uh, I'll do it just this one time.
00:08:26.160 --> 00:08:26.959
Who am I hurting?
00:08:27.120 --> 00:08:28.319
Taking a flyer.
00:08:28.560 --> 00:08:32.480
And it would happen three more times that way, where she would call.
00:08:32.559 --> 00:08:35.519
There was small trades, my boss looking the other way.
00:08:35.679 --> 00:08:38.639
And the firm made just over a million dollars on these trades.
00:08:38.720 --> 00:08:47.600
But me personally, the number I have to live with for the rest of my life, and sometimes the number most shocking in my corporate talks is the amount of money I made personally.
00:08:47.759 --> 00:08:54.000
And that number was$46,000, which at 29 years old was the price of my professional career.
00:08:54.320 --> 00:09:10.080
Yeah, I definitely want to talk about that later because I'm seeing this happen in the prediction markets where people are doing informed trading and they are not making a whole lot of money, but they're still risking potential consequences, including arrests and prosecution.
00:09:10.159 --> 00:09:12.879
So I definitely want to hear about your thoughts on that later.
00:09:13.039 --> 00:09:15.279
So, but let's go back to going through kind of chronologically.
00:09:15.759 --> 00:09:24.159
So you had three of these small trades, and then uh how long was it between the last trade and when you were approached by the FBI?
00:09:24.480 --> 00:09:28.639
Uh the fourth and final trade, there were four trades, was November and July.
00:09:28.720 --> 00:09:30.559
Uh, the next July was the FBI.
00:09:30.639 --> 00:09:32.720
So eight or nine months after that fourth trade.
00:09:32.799 --> 00:09:36.960
So the trades were kind of out of sight, out of mind by the time the FBI showed up.
00:09:37.360 --> 00:09:41.519
So that in that eight or nine months, Tom, were you like, okay, I'll never do that again.
00:09:41.600 --> 00:09:46.159
Uh I got away with it, or were you just not thinking that at all, not thinking anything about it?
00:09:46.559 --> 00:09:48.879
Really, uh the phone calls stopped coming in.
00:09:48.960 --> 00:09:52.720
The woman who was tipping me had stopped calling, she kind of lost touch.
00:09:52.799 --> 00:09:57.840
And so I didn't really, you know, uh maybe it was like the only time I'd ever get those tips.
00:09:57.919 --> 00:10:01.600
But I didn't stop because of some moral epiphany, like, you know, stop calling me with this information.
00:10:01.679 --> 00:10:03.600
That the phone calls just stopped coming.
00:10:03.919 --> 00:10:04.720
I see, I see.
00:10:04.879 --> 00:10:05.200
Okay.
00:10:05.440 --> 00:10:09.919
So you were what, picking up dry cleaning when the FBI approached you?
00:10:10.320 --> 00:10:11.759
Okay, tell us about that.
00:10:12.080 --> 00:10:14.720
So now we're uh July 8th, 2008.
00:10:14.879 --> 00:10:23.360
It's 6:30 in the morning, uh, just down the street from uh Fordham Law School, 55th and 8th Avenue, close to my apartment, dropping off dry cleaning.
00:10:23.440 --> 00:10:28.639
And then as I step onto the sidewalk, somebody behind me says, Are you Thomas Covey Harden?
00:10:28.879 --> 00:10:29.759
My full name.
00:10:30.000 --> 00:10:34.480
And the only person ever who used my full name was my mother back in Georgia when I was in trouble.
00:10:34.559 --> 00:10:36.320
And it wasn't, it wasn't my mom.
00:10:36.399 --> 00:10:37.200
I turned around.
00:10:37.279 --> 00:10:42.240
There was two FBI agents with dark suits and badges, you know, straight out of central casting.
00:10:42.399 --> 00:10:48.080
And so, yes, in my gut, even though the months had passed, I knew instantly what it was about.
00:10:48.320 --> 00:10:52.399
And we sat down at the at the fast food restaurant there at 55th and 8th.
00:10:52.480 --> 00:10:54.320
And he's like, We know about your four trades.
00:10:54.559 --> 00:11:02.720
We know that you were just down in Georgia at your baby nephew's baptism, and they knew my nephew's name, who was like six weeks old, and my head was spinning.
00:11:02.960 --> 00:11:06.080
And the order of my fears kind of says everything about me then.
00:11:06.240 --> 00:11:09.360
My first thought, Amy, was, Oh my gosh, my dad's gonna kill me.
00:11:09.440 --> 00:11:10.559
You know, what's he gonna say?
00:11:10.639 --> 00:11:11.519
Of course he'll be upset.
00:11:11.600 --> 00:11:13.120
Then I thought, my wife's gonna leave me.
00:11:13.279 --> 00:11:14.399
We just got married.
00:11:14.559 --> 00:11:17.519
And then somewhere down the list, I thought, oh, I might go to prison.
00:11:17.679 --> 00:11:21.919
But, you know, they showed me a chart with names white out and two big circles at the top.
00:11:22.000 --> 00:11:29.200
So I assume one of those guys was Roger Rodnum, handed me a card and said, You can help us build these cases, it'll help you out.
00:11:29.519 --> 00:11:33.679
Okay, so at your very first meeting, they essentially asked you to inform.
00:11:34.080 --> 00:11:34.559
Yes.
00:11:34.879 --> 00:11:36.720
And how did you a few days later?
00:11:36.960 --> 00:11:37.600
Okay, I got it.
00:11:37.679 --> 00:11:39.919
So a few days later, very right away, essentially.
00:11:40.080 --> 00:11:44.559
So, what was your decision-making process in agreeing to actually go ahead and inform?
00:11:44.720 --> 00:11:46.159
Were you like, of course I will?
00:11:46.320 --> 00:11:48.879
I mean, you or did you have to think hard about it?
00:11:48.960 --> 00:11:51.279
Did you talk over with your wife or your family?
00:11:51.360 --> 00:11:52.720
Like, how did that all work?
00:11:53.039 --> 00:11:54.480
So that was a Tuesday morning.
00:11:54.559 --> 00:11:57.039
They told me I could not talk to anybody other than my wife.
00:11:57.279 --> 00:11:59.360
I couldn't talk to anybody else.
00:11:59.600 --> 00:12:01.360
So that was a lot easier said than done.
00:12:01.440 --> 00:12:05.600
But I that afternoon I I converted to Catholicism for marriage.
00:12:05.679 --> 00:12:07.840
So I went to the Sacrament of Confession sounded great that day.
00:12:07.919 --> 00:12:08.480
So I went to St.
00:12:08.559 --> 00:12:13.120
Patrick's, talked to a priest, and he said basically my penance was to help the FBI.
00:12:13.200 --> 00:12:15.519
You know, now I should have talked to a lawyer at that point, too.
00:12:15.679 --> 00:12:20.480
I talked to a priest, and then eventually I had to tell my wife, and I waited till Friday after work.
00:12:20.720 --> 00:12:23.919
She had recently left Lehman Brothers, which was about to go under that year.
00:12:24.000 --> 00:12:27.360
So she had been under a crazy amount of stress in her in her job.
00:12:27.519 --> 00:12:32.240
And I was going to drop this bomb after work on a Friday afternoon, evening.
00:12:32.320 --> 00:12:34.159
And I said, Hey, I have to tell you something, Sue.
00:12:34.320 --> 00:12:34.879
You have to sit down.
00:12:35.039 --> 00:12:36.240
I told her everything.
00:12:36.399 --> 00:12:38.240
And she said, Hey, can you say it again?
00:12:38.399 --> 00:12:39.519
And I said it again.
00:12:39.759 --> 00:12:42.639
And she said, you know, you didn't do anything to hurt me.
00:12:42.720 --> 00:12:46.080
And if the FBI's giving you a chance to clean things up, you should do it.
00:12:46.240 --> 00:12:50.879
Pretty much every spouse would have kicked out their other spouse in this situation in that moment.
00:12:50.960 --> 00:12:53.120
So I'm very lucky she took it as a way she did.
00:12:53.440 --> 00:12:54.559
Yeah, she sounds awesome.
00:12:54.639 --> 00:12:56.159
I mean, you mentioned that you don't have kids yet.
00:12:56.240 --> 00:12:59.759
So it would have been very easy for her to say this isn't working for me.
00:13:00.080 --> 00:13:01.679
Yeah, I don't know who you are, right?
00:13:01.840 --> 00:13:02.240
Exactly.
00:13:02.320 --> 00:13:02.480
Yeah.
00:13:03.120 --> 00:13:09.120
Okay, so Tom, you said you went and spoke to a priest and you should have spoken to a lawyer, which sounds like the setup of a joke.
00:13:09.200 --> 00:13:15.600
But truthfully, you cooperated with the FBI for almost two years before you ever spoke to an attorney.
00:13:15.840 --> 00:13:19.919
A lot of our listeners are law students, they're young lawyers, they're experienced lawyers.
00:13:20.720 --> 00:13:21.279
Doesn't matter.
00:13:21.440 --> 00:13:27.440
What do you wish that you knew about the legal process much earlier in those first days when you were approached by the FBI?
00:13:27.759 --> 00:13:32.720
Yeah, and this is the one I want the students to hear because I'm not a lawyer as you said, I just sort of hard-earned experience.
00:13:32.799 --> 00:13:35.919
And I cooperated without this defense attorney for two years.
00:13:36.000 --> 00:13:41.120
When I finally called one and said, you know, now I was known as Tipper X when the arrest started happening.
00:13:41.360 --> 00:13:44.240
His first question was, you know, who was your attorney before me?
00:13:44.399 --> 00:13:46.000
And I said, I've never spoken to one.
00:13:46.080 --> 00:13:50.399
And then he was totally silent and says, Tom, you're supposed to hire me the first day the FBI approached you.
00:13:50.559 --> 00:13:52.159
I said, Hey, it's my first time doing this.
00:13:52.320 --> 00:13:54.799
So another sort of humorous, uh, dark humor moment.
00:13:54.879 --> 00:14:03.519
But what I wish I understood is that the agents, you know, guilty or innocent, are not your friends, even when they're kind and they're trained in psychology.
00:14:03.600 --> 00:14:12.559
And if you think about the asymmetry, they'd been building that case and rehearsing the exact moment they approached me for weeks, you know, maybe months.
00:14:12.720 --> 00:14:16.720
And I was reacting cold on a sidewalk before I'd even had coffee.
00:14:16.879 --> 00:14:19.120
And that imbalances the whole game.
00:14:19.200 --> 00:14:28.159
And what almost nobody realizes is that the first 24 hours, again, guilty or not, are when you have the most leverage you'll ever have.
00:14:28.399 --> 00:14:30.720
And what you do with them matters enormously.
00:14:30.879 --> 00:14:36.879
And instead, you know, they kept telling me I was doing a great job over time and I was doing this for my country.
00:14:37.039 --> 00:14:38.960
And I wanted to believe it truthfully.
00:14:39.039 --> 00:14:42.240
And every word I said for two years was without counsel.
00:14:42.320 --> 00:14:52.960
So the practical takeaway is the moment law enforcement, you know, says your full name on a sidewalk, you don't explain, you don't try to talk your way out of it, and you don't agree to anything on the spot.
00:14:53.039 --> 00:15:01.759
You say almost nothing, you call a lawyer, not because you're guilty, just because the process is not built to protect somebody navigating it alone.
00:15:02.320 --> 00:15:02.799
Yeah.
00:15:03.200 --> 00:15:04.159
Great advice.
00:15:04.399 --> 00:15:09.039
So if anyone picks up your book, they're going to hear what happened from there.
00:15:09.120 --> 00:15:11.039
And it is an incredible story.
00:15:11.120 --> 00:15:15.039
Like the pool story is just, it's right out of a movie.
00:15:15.200 --> 00:15:20.000
But maybe you can give us a high level of what happened over your time informing.
00:15:20.080 --> 00:15:21.919
You know, now you don't have to go into any of the details.
00:15:22.080 --> 00:15:23.200
People can read about it in the book.
00:15:23.360 --> 00:15:26.240
And then how did the whole thing get resolved for you?
00:15:26.799 --> 00:15:27.039
Yeah.
00:15:27.120 --> 00:15:30.639
So I met with them after I told my wife Sue, and I and I drew a line.
00:15:30.720 --> 00:15:32.960
Like some people may read the book and feel like I'm a rat.
00:15:33.360 --> 00:15:35.519
I drew the line in terms of who I was going to help them with.
00:15:35.679 --> 00:15:37.759
I tried to protect two friends, and I did.
00:15:37.919 --> 00:15:43.440
And I brought them who I felt were the worst actors, but I talk about, I was kind of thrown out into the wild.
00:15:43.519 --> 00:15:46.480
There was no training as to how to wear a wire at the FBI Academy.
00:15:46.559 --> 00:15:50.080
I just thrown out there, get people in conversations at conferences.
00:15:50.240 --> 00:15:54.559
My cover story was I'm a young analyst, probably going to lose my job looking for a job.
00:15:54.720 --> 00:15:56.240
How do you get your information?
00:15:56.399 --> 00:15:58.000
And then eventually I got good at that.
00:15:58.080 --> 00:16:00.240
And I had a whole framework for how I got good at it in the book.
00:16:00.320 --> 00:16:02.240
And I developed over time again by myself.
00:16:02.399 --> 00:16:08.240
Something that I'm told later that CIA spies actually are are taught this when they're trying to flip people.
00:16:08.320 --> 00:16:09.440
And I just learned it on my own.
00:16:09.519 --> 00:16:10.559
And so that was a crazy moment.
00:16:10.720 --> 00:16:15.759
You mentioned the swimming pool story was the scariest moment when I thought my life might be at danger.
00:16:16.000 --> 00:16:20.399
And eventually Tipper X uh was who I was identified as.
00:16:20.480 --> 00:16:23.440
And then my name became public, which was the worst day of everything.
00:16:23.679 --> 00:16:30.159
And I shared that, you know, in the book when my wife came home and had to deal with it at work that day is her husband's name on the front page of the newspaper.
00:16:30.320 --> 00:16:34.240
I wasn't sentenced for seven years post that approach on the sidewalk.
00:16:34.320 --> 00:16:36.399
And so it's most of my 30s were gone.
00:16:36.639 --> 00:16:48.080
Never really had, I didn't get a prison sentence because I helped him out, but still had to take a felony, which has its own implications, terms of checking the box and that type of thing, and being debanked actually from FDIC banks.
00:16:48.240 --> 00:16:51.600
And eventually the FBI invited me to speak about this in 2016.
00:16:51.679 --> 00:16:55.200
They told me I was the youngest person charged and I made the least amount of money.
00:16:55.279 --> 00:16:57.279
And I thought they were rubbing it in of the 81 people.
00:16:57.360 --> 00:16:59.600
And they said, no, your case is really interesting.
00:16:59.840 --> 00:17:00.399
Why'd you do it?
00:17:00.480 --> 00:17:03.600
And I spoke with the FBI and they they put me on this path.
00:17:03.679 --> 00:17:10.240
And about a year and a half ago, my publisher reached out and said you should really think about, you know, writing a book to get the story out there to a bigger audience.
00:17:10.559 --> 00:17:10.880
Yes.
00:17:11.039 --> 00:17:12.319
Well, we're so glad you did.
00:17:12.480 --> 00:17:16.799
So can you talk to us about some of like your most important reflections?
00:17:16.960 --> 00:17:20.960
And I want to pick up on what you said something earlier about the fraud triangle.
00:17:21.039 --> 00:17:29.920
And this is the idea that these three things come together: pressure, opportunity, and rationalization to you know allow people to do things like insider trading.
00:17:30.160 --> 00:17:39.039
Do you think that insider trading specifically, do you think it's a more individual decision, or do you think that it is some sort of systemic problem that we have?
00:17:39.519 --> 00:17:41.680
I think it's both, but the mix has shifted over time.
00:17:41.759 --> 00:17:45.200
So back when I did it in my corner of the industry, it was heavily both.
00:17:45.359 --> 00:17:50.799
So when my boss moved the gold every month, he handed me the opportunity because I could trade small with no oversight.
00:17:50.880 --> 00:17:52.240
So that's sort of a failure of the system.
00:17:52.400 --> 00:17:57.119
Again, I made the decisions, I have agency to make these decisions, but the system certainly didn't hurt.
00:17:57.279 --> 00:17:59.359
And the culture at that time gave me cover.
00:17:59.440 --> 00:18:00.720
It felt like everybody was doing it.
00:18:00.799 --> 00:18:02.720
So I could tell myself I'm just keeping up.
00:18:02.960 --> 00:18:05.039
And the insecurity gave me a motive.
00:18:05.359 --> 00:18:09.200
But today, I'd say it's tilted more towards the individual.
00:18:09.279 --> 00:18:14.000
And the reason is that the systemic cover is mostly gone in my industry.
00:18:14.160 --> 00:18:21.920
After the crackdown, firms became, you know, really focused on compliance, surveillance, uh, software that flags euphemisms.
00:18:22.160 --> 00:18:25.200
The expert networks were cleaned up and people actually went to prison.
00:18:25.359 --> 00:18:34.559
So when somebody crosses the line now in an insider trading case, they're doing it against the system that's trying to catch them, not one that's sort of winking at it.
00:18:34.720 --> 00:18:42.480
And I'm sure they're telling themselves, you know, whatever they're rationalizing, you can't say everybody's doing it anymore, but that puts it much more squarely on the person.
00:18:42.559 --> 00:18:45.039
And culture, of course, still matters.
00:18:45.279 --> 00:18:54.640
And a bad barrel can tip a you know a wavering person over, which is why I always push companies past the bad apple obsession to actually look at the barrel.
00:18:54.799 --> 00:18:57.519
And the individual is accountable and a full stop.
00:18:57.759 --> 00:19:03.119
So if you only ever fire the apple and never inspect the barrel, you keep growing the same fruit.
00:19:03.440 --> 00:19:08.240
Do you think we still suffer from short-termism in terms of like this valuation treadmill?
00:19:08.319 --> 00:19:13.200
And people want to see results and profits constantly, not quarterly anymore.
00:19:13.279 --> 00:19:15.200
They want to see constant gains.
00:19:16.079 --> 00:19:16.559
Absolutely.
00:19:16.720 --> 00:19:24.559
That's one of the things I haven't been able to solve is I've done a deeper dive sort of into the psychology of the last 10 years, into why people cross these lines and the systemic problems.
00:19:24.720 --> 00:19:26.880
It is, it is the short termism is still a problem.
00:19:26.960 --> 00:19:32.720
And what I try to share with people is prepare yourself for when you're in that situation I was in.
00:19:32.880 --> 00:19:44.319
It won't be the exact same thing as me, of course, but you're going to be in that position in your career where you have tremendous short-term pressure and you have to have a few things you can go to in your decision-making process.
00:19:44.480 --> 00:19:46.640
Okay, here's the pressure, here's what I'm going to do.
00:19:46.720 --> 00:19:50.559
I'm not going to just react and rationalize in the moment because that's where people can get in trouble.
00:19:50.960 --> 00:19:55.440
Okay, I have a few questions for you that are kind of specific to lawyers because they make up a large part of our listenership.
00:19:55.759 --> 00:20:00.480
So many of the young lawyers listening right now will advise, you know, corporate clients.
00:20:00.559 --> 00:20:03.839
They'll serve as in-house counsels, they'll probably maybe even work as prosecutors.
00:20:03.920 --> 00:20:17.039
From your experience both inside the hedge fund and then also inside an FBI investigation, what would you say are the big warning signs that an organization is creating the conditions for misconduct, even if, as you say, no one has actually crossed that line yet?
00:20:17.359 --> 00:20:20.160
Yeah, and people love to talk about tone at the top today.
00:20:20.240 --> 00:20:21.839
And I don't really buy tone at the top.
00:20:21.920 --> 00:20:28.880
I think culture, it's important, but really culture is the behavior people actually believe will get them rewarded.
00:20:28.960 --> 00:20:32.559
So I look for three patterns that show up before any misconduct.
00:20:32.799 --> 00:20:34.880
The first would be a blame culture.
00:20:35.279 --> 00:20:37.359
Do people get punished for mistakes?
00:20:37.599 --> 00:20:40.160
When they do, they stop surfacing problems.
00:20:40.400 --> 00:20:48.400
And second is more of like a communication breakdown when there's silos inside of a company where nobody feels safe raising a hand.
00:20:48.640 --> 00:20:56.480
And third would be a fear-based culture where people are rationalizing how to get around a problem instead of walking, you know, walking it up the chain.
00:20:56.640 --> 00:21:03.119
And the quieter tells are, you know, I'll speak at companies that run an ethics survey and they don't share the results.
00:21:03.200 --> 00:21:04.240
So that's not great.
00:21:04.400 --> 00:21:13.599
So someone who asks maybe harder questions, somebody who's trying to speak up and they get labeled tiresome, which happened in the company I spoke at last year before I was there.
00:21:13.680 --> 00:21:17.759
They were having an issue where people were calling anybody who spokes up as tiresome people.
00:21:17.839 --> 00:21:18.559
So it doesn't help.
00:21:18.720 --> 00:21:25.680
And the big one again is that the the things that actually get rewarded aren't the things that leadership claims to value.
00:21:25.759 --> 00:21:31.039
And if I see those, I don't need a scandal to know the risk is already in the building.
00:21:32.160 --> 00:21:43.039
And I've heard you talk about why in that moment when you're starting to see these signs, some people, some young professionals, they decide, you know what, I'm gonna put my head down.
00:21:43.119 --> 00:21:44.880
I'm actually not gonna bother speaking up.
00:21:45.279 --> 00:21:50.400
I I think because staying quiet feels you know free and speaking up feels expensive.
00:21:50.559 --> 00:21:52.960
And people are terrible at pricing that out.
00:21:53.039 --> 00:21:57.680
And and you know, what led up to my trades was what I'd call isolated decision making.
00:21:57.759 --> 00:22:02.400
You know, the tip came in, didn't talk to my Boss, didn't talk to compliance, didn't tell anybody.
00:22:02.480 --> 00:22:06.160
And that's the thread across many other types of cases like mine.
00:22:06.400 --> 00:22:09.759
It starts with one person in their head deciding not to say anything.
00:22:10.000 --> 00:22:17.599
And we tell ourselves silence is being a team player, but it's the decision that lets a small compromise become a big one.
00:22:17.759 --> 00:22:21.200
And the fix is almost kind of stupidly simple.
00:22:21.279 --> 00:22:22.240
Like say it out loud.
00:22:22.319 --> 00:22:26.240
You can't rationalize something you're saying out loud to another person before you act.
00:22:26.559 --> 00:22:32.400
So one of the most striking details in your book is the role of lawyers inside an insider trading chain.
00:22:32.480 --> 00:22:41.039
And we know that in your investigation, you know, there were lawyers, a lawyer from Robeson Gray, another lawyer who got kind of caught up in it as well.
00:22:41.359 --> 00:22:54.000
So you mentioned that you had a target, you had a dinner with the target, and they told you that the real edge comes from the lawyers because they see term sheets, they see board minutes, they know the nicknames that lawyers give private deals before they go public.
00:22:54.559 --> 00:22:57.200
A lot of our students will be in this practice.
00:22:57.279 --> 00:23:00.000
They will be doing corporate law and MA and securities.
00:23:00.240 --> 00:23:09.039
What do you think is important for them to understand about how information flows through them as a gatekeeper and how easy it would be to compromise their role?
00:23:09.440 --> 00:23:17.039
Yeah, I think for a for a young lawyer, and that that dinner is suited into my memory from the book where he leans over and says, you know, it's about the lawyers, they see everything.
00:23:17.279 --> 00:23:26.960
I think for a young lawyer, it's a heavy thing to sit with that you'll be, you know, one of the most concentrated nodes of material non-public information in the economy.
00:23:27.039 --> 00:23:30.160
And that makes you valuable to exactly the wrong people.
00:23:30.240 --> 00:23:34.559
And the compromise rarely looks like a villain with a briefcase, right?
00:23:34.640 --> 00:23:38.000
It looks like a friend at a dinner just between us.
00:23:38.240 --> 00:23:41.359
Of course, you know, it's not from 20 years ago anymore.
00:23:41.440 --> 00:23:49.119
You know, this past May, prosecutors in Boston charged, I think, about 30 people in a decade-long ring built on exactly that.
00:23:49.279 --> 00:24:02.640
You know, the alleged ring leaders were MA attorneys from top law school grads who worked at the top white shoe firms who pulled confidential deal files straight off the firm's document management systems, including matters he wasn't even staffed on.
00:24:02.720 --> 00:24:08.720
And one logged in while on a leave of absence to view the, I think it was the Amazon iRobot deal.
00:24:08.799 --> 00:24:09.680
He had nothing to do with.
00:24:09.759 --> 00:24:13.119
And it flowed out to traders ahead of nearly 30 mergers.
00:24:13.279 --> 00:24:20.240
And the detail that got me, we were talking about this before in terms of euphemisms, is they texted in code, you know, how's the rabbi?
00:24:20.400 --> 00:24:24.000
That was one of the texts they use uh before discussing these deals.
00:24:24.160 --> 00:24:30.000
So the same distance I built calling it taking a flyer, you know, nobody types let's commit securities fraud.
00:24:30.160 --> 00:24:32.319
So two things for young lawyers.
00:24:32.400 --> 00:24:36.240
Again, like your privileged access is a fiduciary duty, it's not a perk.
00:24:36.480 --> 00:24:45.839
And the threat surface is your own firm systems, you know, narrow who sees live deal files, watch for lawyers, pulling matters they aren't on.
00:24:46.000 --> 00:24:50.880
And almost nobody, I'm sure in that Boston case, woke up one morning and decided to become a criminal.
00:24:50.960 --> 00:24:54.799
They just kept not drawing the line until it was too late to draw it.
00:24:55.200 --> 00:25:01.519
You think law schools could do a better job at emphasizing these types of courses or classes?
00:25:01.920 --> 00:25:02.559
I I think so.
00:25:02.640 --> 00:25:04.000
And I think law firms could too.
00:25:04.240 --> 00:25:16.400
I'm actually going to be speaking at a few law firms just because of the other sort of what's happened in these cases the last few months, and they realize that their sort of policies on the internal side are just, hey, you should never do this.
00:25:16.480 --> 00:25:17.440
And it's not beyond that.
00:25:17.519 --> 00:25:21.039
It's not really, it has to be more, I think, substantial on the training side.
00:25:21.200 --> 00:25:28.640
Because again, uh very sophisticated friends of lawyers who were in the hedge fund business who are other traders are really good at getting information.
00:25:28.880 --> 00:25:31.519
And so I think there has to be more training and more awareness around this.
00:25:31.599 --> 00:25:33.680
And probably to your point, start starting in law school.
00:25:33.920 --> 00:25:34.079
Okay.
00:25:34.160 --> 00:25:36.720
I want to get your thoughts quickly on the prediction markets.
00:25:36.880 --> 00:25:44.480
Um, I just did an interview with a scholar who's studying we are calling informed trading and not insider trading, apparently, in the prediction markets.
00:25:44.720 --> 00:25:49.200
And this is a phenomenon that has real consequences for business leaders in particular.
00:25:49.359 --> 00:25:51.839
So, what are your thoughts on this new frontier?
00:25:52.160 --> 00:25:57.680
Yeah, it's almost the same psychology I live, just pointed uh at a venue that the law hasn't caught up to yet.
00:25:57.759 --> 00:26:05.920
So, you know, Colchi and Polymarket, you know, they let you bet on future events, and we're watching kind of insider trading reinvent itself on a whole new platform.
00:26:06.079 --> 00:26:16.880
And you can see, you know, the most recent cases, the Army soldier who who planned the operation to capture Maduro, who charged with five felonies for betting, I think it was 33,000 and cashing out 400,000.
00:26:16.960 --> 00:26:21.200
And, you know, nine accounts made like two and a half million dollars on bets about U.S.
00:26:21.279 --> 00:26:25.039
military actions against Iran, someplace the hours before it went public.
00:26:25.200 --> 00:26:35.599
And then the most comedic one to me was in the last week where George Santos, whom the DOJ is reportedly examining for betting on Cauchi about whether he himself would be at the State of the Union.
00:26:35.759 --> 00:26:38.240
So it's pretty interesting what how these cases come about.
00:26:38.400 --> 00:26:41.680
And for a law audience, the interesting recall is the law itself.
00:26:41.839 --> 00:26:46.160
Of course, these sit under the CFTC, not the securities regime under the SEC.
00:26:46.319 --> 00:26:50.319
So what even counts as illegal insider trading here is unsettled.
00:26:50.400 --> 00:27:01.279
And I think there was an economist, I forget the name, I read an article last week that has argued, I think they've argued for decades, that insiders uh trading is the whole point of a prediction market.
00:27:01.359 --> 00:27:06.799
So the design arguably invites the behavior securities law spent 90 years stamping out.
00:27:06.960 --> 00:27:09.119
And the platforms are, of course, scrambling now.
00:27:09.200 --> 00:27:14.480
You know, Call She I saw ban Congress and from trading and the House Oversight's open investigation.
00:27:14.559 --> 00:27:18.319
But if I'm on the board of a company, this is what I want them worried about.
00:27:18.640 --> 00:27:22.880
It massively increases the surface area for insider trading.
00:27:22.960 --> 00:27:29.839
And in my world, you know, cashing in, making a trade, there, you know, there's an account, you have to place a trade, there's some friction.
00:27:30.079 --> 00:27:33.200
And when there's more friction, you know, that's where second thoughts live.
00:27:33.279 --> 00:27:38.240
Now anybody who knows anything non-public has a one-tap way to cash it.
00:27:38.319 --> 00:27:41.440
And a lot of the next wave, I think, Amy, is not going to be nefarious.
00:27:41.519 --> 00:27:43.359
Like my cases, it might be negligent.
00:27:43.519 --> 00:27:48.400
You know, picture a new employee already on the platform every night betting on basketball.
00:27:48.480 --> 00:27:56.960
And a market pops up on something that he or she knows cold from their employer, and they tap yes the same way they were just betting on the next last night.
00:27:57.039 --> 00:28:01.200
And, you know, their head didn't say this is trading on MNPI, right?
00:28:01.279 --> 00:28:02.240
They placed a bet.
00:28:02.400 --> 00:28:09.119
And that on-rep, that sort of on-rep to the app strips out the friction that might have stopped them in regular securities trading.
00:28:09.279 --> 00:28:13.200
So the person who blows up your company probably isn't a shimmer at all.
00:28:13.359 --> 00:28:17.920
It's it's the it's the otherwise good employee who got a little too comfortable tapping a betting app.
00:28:18.160 --> 00:28:18.960
Yeah, you're so right.
00:28:19.279 --> 00:28:20.880
It's basically normalizing the behavior.
00:28:21.039 --> 00:28:25.519
I mean, these apps not only are getting you in the front door, but they're gamifying it.
00:28:25.680 --> 00:28:30.079
They're doing like the confetti goes off when you make the place the bet on the contract.
00:28:30.160 --> 00:28:31.039
Like, so you're right.
00:28:31.119 --> 00:28:42.400
At some point, this is so normalized that when that guy from Google saw that they were talking about the top hits or whatever, it was very easy to go, yep, and create a market for it and basically expose that trade secret.
00:28:42.799 --> 00:28:43.039
Yeah.
00:28:43.119 --> 00:28:49.440
I mean, all some of my friends with with sons in college, I mean, it's almost like if you're not doing it, see all thing, then you're left out of the social circle.
00:28:49.519 --> 00:28:54.480
You're not betting on sports on your phone, you know, you're kind of left out, and that behavior then just sort of translates to the workplace.
00:28:54.559 --> 00:28:56.000
So I'm uh it's a concern.
00:28:56.400 --> 00:28:57.200
Yeah, for sure.
00:28:57.440 --> 00:29:10.480
Okay, so what about, you know, you mentioned that the FBI at some point told you you were the youngest, you made the least, and you know, they were obviously wanting to get you to come talk to them and the people they're training, and and that and that's great.
00:29:10.559 --> 00:29:22.559
But when you do see people who are very high up in perhaps government, when you see important heads of state not being investigated the way that you were, how do you process that?
00:29:22.720 --> 00:29:24.160
How does that feel to you?
00:29:24.559 --> 00:29:38.480
I'd be lying if I didn't say it stings a little, you know, as you I was the youngest charge, the$46,000, and I got the full machine, you know, the the guilty plea, the wire, a felony for life that has put me on every money laundering list and barred me from even coaching my my daughter's soccer teams.
00:29:38.640 --> 00:29:41.359
I'm not complaining, it's just the consequences of the choices I made.
00:29:41.519 --> 00:29:48.079
And the way I kind of keep myself sane about it is to remember this is a cross across the board problem in society.
00:29:48.160 --> 00:29:52.720
And I don't know if that's a great thing if we have a low-trust society uh in terms of what that means.
00:29:52.880 --> 00:29:59.440
But it's really like, you know, you see Congresspeople across the board making these trades and even the executive branch too.
00:29:59.599 --> 00:30:04.559
I think there was the attorney general reportedly sold Trump Media stock right before there was a tariff announcement.
00:30:04.640 --> 00:30:07.519
And I'm not accusing anybody of a crime, but that's sort of that's my point.
00:30:07.599 --> 00:30:16.319
When we see it, now there's accounts that actually, you know, there's a there's a young man who has a platform, you know, trade like this the Congress people, and he's built a big business because you just followed them.
00:30:16.400 --> 00:30:20.960
And and no Congressperson's ever been charged with insider trading.
00:30:21.039 --> 00:30:22.960
They just pay a$200 fine with the stock act.
00:30:23.119 --> 00:30:28.319
And 86% of Americans, I read a survey, agree that Congress should not be trading single stocks.
00:30:28.480 --> 00:30:32.240
And 86% of Americans probably agree on nothing other than than this.
00:30:32.400 --> 00:30:42.240
And so when I come back to my own framework, you know, the one question I tell every company to add to its code of conduct is doesn't really matter what's happening in society.
00:30:42.319 --> 00:30:46.400
It's it's if you're not sure, are you willing to be held accountable for the decision?
00:30:46.480 --> 00:30:50.079
And a lot of powerful people are betting they'll never have to answer for that.
00:30:50.240 --> 00:30:56.319
Maybe they won't, but it's worked out fine for them so far, but it hasn't worked out for everybody else's uh trust in the system.
00:30:56.880 --> 00:30:57.119
Yeah.
00:30:57.200 --> 00:31:00.319
So start at that uh start there, start at the company level.
00:31:00.640 --> 00:31:00.880
Yeah.
00:31:01.119 --> 00:31:10.640
So just in a broader sense, I do feel like we're in a political climate where, you know, less of an emphasis is on accountability and you know, norms and doing things by the book.
00:31:10.799 --> 00:31:14.720
And, you know, your book describes a culture where certain behaviors did feel normalized.
00:31:15.039 --> 00:31:19.759
60% of those companies back then were having those spikes, which indicated insider trading.
00:31:19.920 --> 00:31:24.240
So it feels like the message of this book for some reason is even more valuable than ever.
00:31:24.559 --> 00:31:35.119
Yeah, I think again, going back just when the people at the top appear to appear to skate that you know, the message that every junior person absorbs is, you know, the rules are for suckers, and that's exactly the soil my kind of decision grows in.
00:31:35.279 --> 00:31:38.000
And my whole story is downstream of everybody's doing it.
00:31:38.160 --> 00:31:44.240
And the word accountability itself, you know, people often hear it and they think punishment, you know, getting caught, getting charged.
00:31:44.319 --> 00:31:55.440
And to me, you want people to be accountable, you want them to really own decisions, you know, naming what it was owning it, carrying it forward, and punishment and ownership are two different things.
00:31:55.519 --> 00:31:58.480
And, you know, you can dodge the punishment and never own a thing.
00:31:58.559 --> 00:32:00.880
And plenty of people now will cross the line and never get caught.
00:32:01.039 --> 00:32:02.400
You still have to live with yourself, right?
00:32:02.480 --> 00:32:04.400
So who cares what people are doing up top?
00:32:04.559 --> 00:32:06.079
If you cross the line, you have to live with yourself.
00:32:06.240 --> 00:32:10.160
And so I'm often on the stage now, not even talking about insider trading.
00:32:10.240 --> 00:32:18.960
I'm talking about what I call in the book the integrity gap, you know, the distance between who you appear to be, your reputation to the outside world, and who you are when nobody's looking.
00:32:19.039 --> 00:32:22.079
And as a young man, my gap was became quite wide.
00:32:22.160 --> 00:32:31.119
And there's a line in one of my favorite books when I was writing my book, and I read other books, and David Brooks's Road to Character, where he talked about resume virtues and eulogy virtues.
00:32:31.279 --> 00:32:36.240
And I spent my 20s chasing resumes, you know, the title, the firm, the number and the spreadsheet.
00:32:36.400 --> 00:32:38.079
And I blew up everything that mattered.
00:32:38.240 --> 00:32:44.079
And, you know, I don't want to leave the students uh thinking, you know, one bad decision is the end of the story because it isn't.
00:32:44.240 --> 00:32:47.119
And 85% of marriages do into my situation.
00:32:47.200 --> 00:32:49.920
And my wife and I just celebrated 21 years.
00:32:50.079 --> 00:32:52.400
So the the point is don't mess up, everybody messes up.
00:32:52.480 --> 00:33:00.960
But it's the difference between guilt and shame, where you know, guilt says I did a bad thing and shame says I'm a bad person, and you rebuild by owning it and turning it into something useful for the next person.
00:33:01.119 --> 00:33:05.680
And the bill is always going to come due, and it's it's even if it never comes from a courtroom.
00:33:05.839 --> 00:33:08.480
I just hope a few of them hear that uh from me first.
00:33:08.799 --> 00:33:09.599
Absolutely.
00:33:09.839 --> 00:33:17.440
Well, Tom, there's so much time spent in compliance circles talking about, you know, how can we build a culture of compliance and there's conferences and there's handbooks.
00:33:17.519 --> 00:33:25.279
But when I heard your story about being unbanked, about being banned from, you know, coaching your kids' soccer game, I was like, this is it.
00:33:25.440 --> 00:33:30.079
This is the story that everyone needs to hear before they're put in any position of trust at work.
00:33:30.240 --> 00:33:33.759
So we thank you, Tom, so much for your bravery in sharing your story with us.
00:33:33.920 --> 00:33:35.519
And we will continue to follow your journey.
00:33:35.599 --> 00:33:37.279
The book is wired on Wall Street.
00:33:37.359 --> 00:33:39.119
Tom Harden, thank you so much.
00:33:39.440 --> 00:33:39.680
Thank you.
00:33:39.920 --> 00:33:41.119
It was a pleasure.
00:33:43.839 --> 00:33:49.200
Thanks to everyone at Fordham Law School, especially the Dean's Office and our corporate law center donors for supporting this podcast.
00:33:49.359 --> 00:33:52.079
Bite Size Business Law is produced by WeEdit Podcast.
00:33:52.400 --> 00:33:57.039
Listen and subscribe to Bite Size Business Law on Spotify, Apple, or wherever you get your podcasts.
00:33:57.200 --> 00:34:07.119
The information in this podcast is for educational, informational, and entertainment purposes only, and does not constitute legal advice, nor is it intended to promote the organizations with which our guests are affiliated.
00:34:07.279 --> 00:34:10.800
For more information, check out our show notes, and thanks for listening.
