Serpent on the Rock Read Online Free Page B

the head of retail at the firm, whose taste for liquor, eye for women, and desire for power became ingredients in decisions he made as Darr’s supervisor.
    The inside story of this massive fraud begins in the dawn of the 1980s at Bache & Company, a struggling third-tier brokerage already mired in scandal. In 1981, the firm was reborn and elevated to a newfound public esteem when it was purchased by Prudential, the respected insurance company. But as Bache’s image improved, many of its shoddy practices worsened. By the end, the firm experienced a chain of scandals with connections like an archipelago, visible only beneath the surface. It is only in hindsight that each of those scandals can be seen as warnings—tragically missed, though sounded repeatedly over more than fourteen years—about the terrible secrets at Prudential-Bache Securities.
    At its base, this is a cautionary tale about an abuse of the investor faith that is an essential building block of the American economy. That faith has created great industries, from the dawn of the railroad to the age of computers, by allowing huge pools of money to be channeled from individual investors to growing businesses. It has touched almost every American home, helping working people achieve financial independence or reach goals only dreamed of by their parents. At its essence, it is what allows billions of dollars of securities to trade each day based on nothing more than a voice on the telephone. By taking advantage of that faith, Prudential-Bache cracked the foundation of the marketplace. It robbed us of our ability to believe. It betrayed us all.

PART ONE
BEGINNINGS

CHAPTER 1
    SOMEBODY AT BACHE & COMPANY was out to get them. The lieutenants in the firm’s tax shelter department just knew it. They recognized all the old tricks—the sudden audits of expense statements, the false whispers about misconduct, the unrealistic sales expectations. Probably, they guessed, this was the revenge of that skirt chaser, Bob Sherman. But their boss, Stephen Blank, disregarded the signs. A political war was under way, and Blank would not even arm himself.
    It was the spring of 1979, and a quiet power struggle at Bache was coming to a head. Blank, a handsome, dark-haired thirty-three-year-old, won some dangerous enemies at the firm during his six years running the tax shelter department. His tough standards in selecting deals for Bache had stepped on the toes of the executives whose pet projects he rejected. When certain of his decision, Blank refused to yield in his judgment—he often told colleagues that reputations in the business were built not on the successful deals that were sold but on the flops that weren’t.
    Still, Blank surprised even some admirers when he refused to sell a real estate deal brought in by Sherman, who as the cohead of retail sales stood higher on the Bache corporate ladder. Sherman was a tough, demanding executive who did not like to be turned down. For Blank, the refusal was a fatal move, one that helped set in motion a series of decisions that reshaped the firm forever.
    STEVE BLANK wound up running the tax shelter division at Bache almost by default. A former high school teacher, he backed his way onto Wall Street in 1970 as a consultant helping brokerage firms manage their paperwork. The timing was perfect—the back offices of brokerages were being crushed by the huge volume of paper they needed to move each day in a booming market. When the back-office problems started clearing up, Blank took a job at Bache sprucing up its training programs.
    Two years later, in 1973, Blank’s big opportunity arrived. The executive who ran Bache’s tiny tax shelter department abruptly resigned, and the firm launched a desperate search for a successor. Blank quickly emerged as the top candidate. He seemed the only one likely to have instant credibility with the sales force—he had already forged strong relationships with brokers