Stock market addictions

DAVID LINDORFF January 4 1988

Stock market addictions

DAVID LINDORFF January 4 1988

Stock market addictions



The New York Police Department (NYPD) and the U.S. federal Drug Enforcement Agency (DEA) called them Operation Buy and Cry and Operation Closing Bell. Last spring the two agencies launched joint undercover campaigns against drug abuse on Wall Street, the heart of New York’s financial district. Within six weeks the NYPD had arrested 120 individuals, including securities industry clerks, secretaries, brokers and floor traders, on drug possession charges. At the same time, DEA agents arrested a total of 15 people, nine of them employees of an obscure brokerage company called Brooks Weinger Robbins & Leeds Inc. The employees, including firm partner Wayne Robbins, were charged with possession and conspiring to distribute cocaine. Police alleged that those charged operated a drug ring that exchanged cocaine and heroin for stocks and stock tips. Six have since pleaded guilty to charges of drug possession, and nine others are still facing charges. But despite the two antidrug operations, in which officers made arrests after watching users buy drugs openly in the financial district, police officials now ruefully admit that drug abuse remains rampant on Wall Street.

In the U.S. securities industry, the combination of high pressure and big money has created a major drug problem. Said Robert Strang, a special agent in the DEA’S New York office: “Drug use is everywhere today, but it is especially bad on Wall Street.” Although most stock exchange officials dispute the DEA’S assessment of drug abuse, most employees in the district support the police’s contention. Said

one floor trader at the New York Commodities Exchange Inc. (COMEX), in which investors speculate on future prices of natural resources: “We have had people pass out from overdoses of cocaine. They get carried out, and ev-

erybody knows what the problem is, but nothing ever happens.”

In fact, the same trader—who spoke to Maclean ’s on the condition that his identity not be revealed—estimated that 65 per cent of the employees at the COMEX use illicit drugs, mainly cocaine and marijuana, while at work. And

those floor traders working under the influence of drugs increase the risks for investors, the trader said, because they cannot execute buy-and-sell orders with maximum efficiency. As a result, he said, an investor could pay too much for a transaction when buying or get a lower price than he should when selling. The veteran trader also told Maclean's that in the days following the devastating stock market crash last Oct. 19, so-called Black Monday, drug use rose dramatically. “A lot of guys mistakenly think that coke lets them work faster and go longer without sleep,” he said. “They won’t admit that it impairs their judgment.”

One high-ranking COMEX official, who also requested anonymity, admitted that marijuana and cocaine use are rampant among floor traders at every New York exchange, despite strict policies against drug use. “I can walk into the bathroom anytime and find people down there snorting coke and smoking joints,” said the official. And recently a Maclean's reporter watched a senior floor trader at the New York Stock Exchange (NYSE) leave the exchange at lunch and approach a group of young men on the street. The trader purchased a hand-rolled marijuana cigarette that he quickly smoked. Approached by the reporter on his way back to the exchange, the trader said: “Look, smoking doesn’t affect me. Everybody should know his limit, that’s all.”

The scope of Wall Street’s drug problem astounded even police officials who participated in Operation Buy and Cry. “I was heartsick myself,” NYPD Lieut. David Lynott told Maclean's. “It was unbelievable, the kind of people we

were collaring; secretaries, brokers, traders—every kind of person.” Lynott said that the arrests resulted in anguished phone calls to spouses and embarrassing requests for bail money. The officer added that the crackdown “worked for a few weeks,” but as word spread, “people just started going elsewhere” to buy drugs.

Meanwhile, in Chicago, trading floor employees say that drug abuse is a problem at the Chicago Mercantile Exchange (CME)—where investors speculate on future prices of stocks— despite statements to the contrary by exchange officials. Declared CME media relations officer Andrew Yemma; “You judge these things by whether you have had a raid or bust—and we have never had either.” But a university student, who requested anonymity because he wants to return to his summer job on the CME floor, told Maclean's that drug abuse was widespread. “One time I went to the men’s

room and found a paper bag with more coke powder in it than some people would buy from a dealer,” he said.

Despite such open use of illicit drugs in U.S. financial districts, police narcotics squads have made little progress in stopping the problem. Over the past three years DEA officials successfully completed five busts in New York’s financial district on charges of selling cocaine. Eight years ago DEA agents conducted a successful undercover operation on the floor of the Chicago Board Options Exchange (CBOE), a market where investors can trade options to buy stocks for a certain price at a future date. After making 10 purchases from floor traders at work, the agents arrested seven people working on the floor, including three »traders, and seized a large quantity of cocaine. Still, the CBOE maintains that drug abuse is not a major problem, although one official told Maclean's, “We are dealing with it by making confidential

counselling and treatment available.”

Indeed, counselling and treatment are the most common methods of dealing with drug and alcohol abuse, as well as a range of other personal problems. Both the NYSE and the American Stock Exchange (ASE) have established programs with outside companies that will provide confidential treatment for employees who seek help on personal matters. Said NYSE vice-president Richard Torrenzano: “Our view is that we do have a drug problem in this nation. The problem on Wall Street is not any greater or less than in any other industry.”

Although Canadian stock exchanges are similar to the United States markets in most respects, industry officials and health care professionals contend that drug abuse is not widespread among Canadian floor traders or brokers. “I am not aware of it being an issue in our industry,” said John Wegener, a vice-president and director of administration at Wood Gundy Inc., one of Canada’s largest brokerage firms. Still, Wood Gundy and at least two other major brokerage firms have retained the services of Vancouver-based Wilson Banwell & Associates Ltd., a company that specializes in counselling and treating employees with drug, alcohol, marital or other personal problems across the country. Dr. Sidney Folb, a psychol-

ogist who works with Wilson Banwell, said that alcohol abuse is much more widespread than the use of illicit drugs within the Canadian securities industry.

So far, on Wall Street, such counselling and treatment for employees have not alleviated drug abuse problems, said DEA agent Strang. As a result, he added, the DEA currently has several drug investigations under way in New York’s financial district and “has had co-operation from several brokerage houses.” But effectively penetrating an exchange is a difficult task for police.

One COMEX floor trader said that a successful police investigation would depend upon the co-operation of an exchange’s board of directors. But most members of an exchange, primarily brokerage firms or other financial institutions, are not willing to risk having their floor traders arrested on drug charges because of the potential damage to the reputation of the firm. The only alternative for the police is to give an undercover officer the opportunity to start at

the bottom of the industry and work his way through the ranks. The COMEX floor trader said that the DEA placed an agent on the floor of the exchange, which the

DEA refused to confirm, but that his true identity quickly became known. Said the trader: “Everybody knows who he is, because someone in the firm he works for leaked the information.”

Police officials also admit that stock exchange members must change their attitudes before Wall Street’s drug problems are cleaned up. But one exchange executive said that the decline in stock values following Black Monday may play an unexpected role. Although many brokers made huge commissions as a result of the heavy volume traded during the stock market crash, since then the markets have levelled off, resulting in less trading activity—and less money for the traders. “Part of the equation has been the amount of mon_ ey people have had to § spend,” said the executive. “Now that a lot of aren’t so rich, maybe they will have to _ cut back on their habits.”

1 That would undoubtedly

2 be a relief to their employers, not to mention investors who entrust

brokers and floor traders with their dollars.

—DAVID LINDORFF in New York City with