The dark side of Wall Street
By Tim Leonard | theage.com.au | 27 February
Could there be a more compelling poster child for the dark side of modern capitalism than Jordan Belfort?
As a 31-year-old multimillionaire stockbroker, Belfort once landed his helicopter on his back lawn, flying with just one eye open because he was so stoned he had double vision.
He sank his 50-metre motor yacht, complete with seaplane and helicopter, after overruling the captain and taking it into a Mediterranean storm.
He organised a midget-throwing contest to entertain brokers on his trading floor.
And when he wasn't completely out of his head on drugs, or getting executive relief from prostitutes in the presidential suites of luxury hotels, the man nicknamed "The Wolf of Wall Street" was presiding over a firm that swindled investors out of $US200 million ($A215 million) in a shares fraud that landed him and his chief confederates in prison.
"I was a very smart kid, I was a great salesman and I was driven to make money," he says now. "Those were God-given assets. But I had some God-given detriments, mainly that I was emotionally immature, insecure and I had a predisposition to instant gratification.
"My role models were Michael Douglas's character, Gordon Gekko, in the movie Wall Street and Richard Gere from Pretty Woman. The best of everything — the presidential hotel suite, the Ferrari, the house on the beach, the gorgeous blonde, the expensive wine, the art auctions, the yacht — the ultimate Wall Street rich guy."
And then some. I can't recall Richard Gere's character falling asleep in a pile of cocaine big enough to use as a pillow, or even the venal Mr Gekko co-opting his wife's sweet old aunt to smuggle money out of the US. Belfort managed both. He used his first bonus to buy a white Ferrari because he'd seen Don Johnson drive one in Miami Vice and he once racked up a $US700,000 hotel bill.
Now 45 and, he insists, a completely reformed and penitent man, Belfort lives in a modest three-bedroom house in Manhattan Beach, a relatively inexpensive part of Los Angeles. Apart from the Bulgari gold watch on his wrist and the painting in his bedroom of his old yacht, formerly owned by Coco Chanel, he says he has nothing left from the bad old days. Fifty per cent of everything he earns is going to the investors he defrauded. In five years, he has paid back $US14 million of the $110 million he owes.
He is divorced from Nadine, a former beer commercial model, but they are friends and live near each other. They both look after their two children and Belfort describes himself as every inch the loving father and dutiful "soccer dad".
Most men in Belfort's position might hesitate to rake up the past, but the man who was so determined to make it on Wall Street is now determined to make it as a writer.
He has written a bawdy romp about his rise and fall, which predictably has been snatched up by Hollywood. Martin Scorsese, Leonardo Di Caprio and the writer of The Sopranos are all "optioned" to be involved. "Di Caprio will just have to get stoned, stumble around like a moron and drool," says Belfort, laughing.
He's not wrong. After wading through all 519 lurid pages of The Wolf of Wall Street, readers may find themselves agreeing with the former executive at LP Rothschild who — in the opening sentence of the book — informs a fresh-faced Belfort that he is "lower than pond scum".
A former meat salesman from Queens with a pronounced gift of the gab, Belfort — whose parents were accountants — was tailor-made to profit from the Wall Street bull market of the 1990s. At Stratton Oakmont, his bucket shop stockbroker firm based not in Manhattan but suburban Lake Success on Long Island, a thousand hungry young brokers were simply handed a script written by Belfort and told to read it down the phone as they cold-called potential share buyers.
Belfort had a motto: "No one hangs up the phone until the customer buys or dies." A lot of customers might ultimately have preferred the latter, as Stratton was running what was known as a "pump and dump" scheme. Its brokers would drive up the price of shares and then Belfort and his partners would sell the large chunks they owned, causing the share price to collapse and leaving Stratton's clients with heavy losses.
He claims that both his business dealings and his private life came off the rails because he kept pushing the boundaries of what he could get away with. "It was about becoming numb to what's right and wrong," he says. "The first time I took a cash kickback, I was kind of nervous and it was just five or 10 thousand dollars. Before long I was getting millions of dollars and it seemed like it was OK. 'Everyone on Wall Street does that' was how I rationalised it."
In 1991, Forbes magazine described Belfort as a "kind of twisted Robin Hood, who takes from the rich and gives to himself and his merry band of brokers". In reality, some of the investors were not rich and were ruined. Belfort was earning $US50 million a year, once reportedly making $US12 million in three minutes. In the ultimate compliment, the Mafia were sending people to Stratton on "work placements" to learn how it was done.
A pioneer in promoting office bonding activities, Belfort thought it would improve morale if staff were encouraged to have sex with each other whenever they could, even under the desks. There were mid-afternoon "coffee breaks" with a troupe of prostitutes in the office car park.
And then there were the drugs. Most Strattonites indulged heavily in cocaine. Belfort's favourite tipple was Quaaludes, a recreational drug based on a prescription sedative so powerful it was banned in many countries.
In 1997, Stratton was kicked out of the National Association of Securities Dealers for defrauding customers and the firm was ordered to be liquidated. Belfort and his cronies loved to boast of being bound by a sort of omerta, the Mafia vow of silence.
But the broker boys proved not nearly so tough when the FBI came knocking. Belfort gave evidence against his colleagues and, after admitting charges of money-laundering and securities fraud in 1999, served only 22 months of a four-year sentence in 2004.
Curiously, there is very little in the book on his decision to turn against his friends. Belfort says 90% of those involved did the same, adding that he had to reach a deal because he could have got 30 years if it had gone to trial.
Prison proved fruitful. Encouraged by cell mates to write a book about his life, Belfort found inspiration in a prison library copy of Bonfire of the Vanities, Tom Wolfe's satire about a "Master of the Universe" Wall Street yuppie whose "childish sense of self-entitlement" matched his own.
The book has been billed as an act of atonement. However, if they skip a paragraph in the prologue in which Belfort says he is writing in the "voice playing in his head at the time", readers might think he is still rather pleased with what he did.
Critics have wondered whether he doesn't still relish his depravity, but Belfort insists he "despises" the man he once was.
He is now writing a satire about the subprime mortgage disaster. For research, he has been talking to a top contact at Goldman Sachs on how traders "securitised these loans, how they essentially dressed up subprime packages to make them look good enough to buy as creditworthy".
It sounds rather like what went on at Stratton.
The subprime crisis is dragging down America's entire economy, but the fact that Belfort was able to become a mortgage broker even after admitting fraud and money-laundering charges speaks volumes about how carefully it was regulated. And he wasn't alone. "Everyone who was being thrown out of the securities industry was becoming one," he says. "Anyone could be a mortgage broker. Even me."
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First published by TheAge.com.au on February 27 2008
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