Serpent on the Rock: Crime, Betrayal and the Terrible Secrets of Prudential Bache by Kurt EichenwaldMy rating: 3 of 5 stars
regulation landscape sets the opportunity for abuse.
https://www.brookings.edu/articles/wh...
The Reagan bill, called the Economic Recovery Tax Act, promised to cut personal income-tax rates by 25 percent over three years and sharply cut business taxes to encourage new investment in plants, equipment, and real estate. After presenting the plan less than a month into his administration, Reagan, as well as his supporters, expressed confidence that the proposal would effectively kill the burgeoning tax shelter industry. On its face, the argument seemed to make sense. After all, shelters were largely a response to high tax rates, and the Reagan plan was expected to cut personal income-tax rates by an average of 25 percent over three years. But there was a critical flaw in their argument. Rather than kill the shelter business, the Reagan bill would spur their growth by making them more attractive investments.
The heart of his business tax-cut plan was a program known by the acronym ACRS, which stood for Accelerated Cost Recovery System. Under that proposal, assets such as real estate and equipment could be depreciated far faster than they had been in the past. Essentially, where the tax code once declared that a building would run itself down in twenty-five years, giving investors depreciation deductions throughout the entire period, under ACRS the time was reduced to fifteen years. That made investments in real estate and other depreciable assets far more attractive. It sharply boosted the amount of deduction bang an individual could get for each investment buck. Never had there been any legislation so significant to the growth of the tax shelter industry.
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Within a matter of days, before Wall Street barely got out of the gate, the tax shelter business got another boost. A second radical change was announced on August 18 in the staid and solemn pages of the Federal Register. A publication of the United States government, the Register carries all proposed regulation and regulatory changes, and it is hot reading among lawyers and lobbyists. On that August day, it carried a proposal from the Securities and Exchange Commission that was read widely across the financial world: The government securities regulator wanted to change the rules for selling unregistered securities like private partner-ships.
The proposal, known as Regulation D, reduced some of the restrictions on such sales. It eliminated the ceiling that restricted the sales of unregistered securities to just a hundred people, loosened the definitions of what kind of investors could participate in such offerings, and raised the dollar amount of securities that could be sold to such investors. The intent of the change was to make it easier for small businesses to sell stock to the public, opening up new ways to raise capital. But it also had a mammoth effect on private offerings in the tax shelter world-now, such offerings could be bigger, broader, and sold to more people than ever before.
By itself, Regulation D would have rapidly expanded the tax shelter business on Wall Street. Combined with the Reagan tax changes, it served as a turbocharger. Almost any firm that wasn't already in the business launched its own tax shelter division. Those that already had them, from Hutton to Merrill to Bache, expanded their operations even faster.
Drexel
...an insider-trading scandal emanating from Nassau, the Bahamas, out of the modest offices of Bank Leu International Ltd., a subsidiary of Switzerland's oldest private bank. That morning, lawyers for the commission rushed into the courtroom of Federal District Judge Richard Owen in New York. They were seeking an injunction to prevent the transfer of $10 million out of a Bank Leu account controlled by Dennis B. Levine, an investment banker with Drexel.
Shortly after 7:30 that night, prosecutors with the U.S. attorney's office in Manhattan arrested Levine for insider trading. In hopes of cutting a deal, Levine offered the government information about his insider-trading accomplices. The names included one of Wall Street's biggest fish, Ivan Boesky, the wealthy arbitrageur. For the next five years, prosecutors and the SEC, starting with Levine's information, aggressively pursued a trail of evidence that led them to some of Wall Street's most powerful financiers. By the time they were done, a number of prominent executives, including Michael Milken, Drexel's junk-bond wizard, would go to jail. It would be one of the greatest successes in the history of securities law enforcement.
The huge investigations of Wall Street insider trading and market manipulations consumed the working days of almost every top official in the SEC enforcement division. With so much manpower delegated to pursuing the high-profile lawbreakers, few aggressive inquiries were made into whether Prudential-Bache was following the terms of the 1986 settlement. It would be seven years later, after the Boesky and Drexel investigations were finished, before the government finally learned that Prudential-Bache had ignored the strict compliance requirements of its settlement and engaged in a series of even more serious violations.
Gerald Ford did pardon someone with the last name Harrison.
According to the Department of Justice records, President Gerald Ford granted a pardon to Clifton Stone Harrison on October 9, 1974. This individual's district is listed as N/Tex.
... Harrison launched a drive to win a presidential pardon. A number of his high-profile investors wrote recommendations to the Justice Department. In later years, Harrison would brag to friends that Bob Strauss himself helped lobby for the pardon. With such high-profile support, Harrison pulled it off. President Gerald R. Ford signed Harrison's pardon on October 9, 1974, one month after the pardon of Richard Nixon. Everything was finally in place for Clifton Harrison to start his life over.
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