Latest / Follow the Lies: Fraud & Deceit Uncovered / Episode 7: Boesky & Milken’s Insider Trading Empire — How Greed Corrupted Wall Street
Transcript
- Kevin Barrows: It's the mid-1980s and America's throwing one giant party. Everybody wants their MTV. Neon colors, acid wash jeans, and shoulder pads dominate fashion. Yuppies are living large, and Cindy Lauper's telling everyone that girls, and pretty much everyone else, just want to have fun. But on Wall Street, they wanted everything. This glittering cutthroat universe is ruled by two men, Ivan Boskey and Michael Milken. Boske, the self-proclaimed king of arbitrage, Which is the high stakes practice of betting on corporate takeovers, is making tens of millions buying stock in companies rumored to be acquisition targets before the public even knows the deals exist. Milken, the junk bond king, is financing those takeovers with high yield junk bonds that old school bankers once dismissed as way too risky. Together, they're reshaping American business and quietly lining their own pockets with hundreds of millions of dollars. Then On november fourteenth, nineteen eighty six, federal agents arrest Ivan Bosky in his luxurious Manhattan office. He flips almost immediately. What follows is one of the biggest insider trading scandals in Wall Street history. A web of secret hotel room meetings, whispered tips, and illegal payoffs that expose how the richest players on Wall Street were bending and outright breaking every rule in the book. Today, we follow the lies from Greed is good to federal prison. Welcome to Follow the Lies, fraud and deceit uncovered. I'm Kevin Barrows. I'm a former FBI special agent and lead case agent on two of the largest white collar investigations in U.S. history. Today I'm a partner at Renaissance Associates, where I oversee complex fraud and misconduct investigations for corporations, institutions, law firms, and individuals. I was also the co host of the Smithsonian Channel docuseries Sports Detectives. I've spent decades investigating insider trading, market manipulation, and the kind of sophisticated financial deception that defined the nineteen eighties Wall Street boom. As an added bonus, right after college and before law school, I spent a year working as a low-level analyst at Solomon Brothers, one of the most aggressive and legendary investment banks on Wall Street at the time. I can still see the crowded smoke-filled trading floor. Young guys with power ties yelling into phones and high fiving, and me thinking, that'll be me someday. Every morning I'd catch the overcrowded 6 o'clock AM train from New Jersey. wearing a suit that felt a size too big, clip-on suspenders, and a folded Wall Street Journal under my arm. I'd ride into the city half asleep, surrounded by seasoned traders whispering about the next big stock. I was there in the thick of it. Ivan Bosky and Michael Milken weren't just names in the newspaper. They were larger than life figures. People spoke about their latest deals with a mix of awe and envy. To a young inexperienced kid like me, they represented the ultimate version of success. Sharp, Fearless and making obscene amounts of money at lightning speed. I was surrounded by guys who genuinely believed the rules didn't apply to them, but I was too naive to recognize it. I watched traders make more in a single bonus than my father made in five years. It was easy to get swept up in the current. I remember thinking this is the big time, this is what winning looks like. I had visions of limos, champagne, and living the high life. That dream lasted almost a year, until october nineteenth, nineteen eighty seven. Black Monday. The Dow Jones dropped over twenty two percent in a single day, the largest one day crash in history. I spent that night until two hundred thirty in the morning helping clean up the carnage. As I finally dragged myself home, exhausted, I took it as a sign. Becoming the next Gordon Gecko probably wasn't in the cards for me. Looking back now, the experience on Wall Street gave me a front row seat to the culture that made their crimes possible. It taught me how quickly ambition, Opportunity and ego can blur the lines between aggressive trading and outright fraud. That's why this episode feels especially meaningful to me. If you're enjoying these episodes, I'd really appreciate it if you'd hit subscribe, leave a rating and review, and tap the bell so you never miss an episode. And if you want a practical tool to help you cut through deception in business, investing, or everyday conversations, I created a free guide called Seven Proven Strategies to Spot Lies and Uncover the Truth in Any Interview. It's short, actionable, and based on real investigative experience. You can download it right now at Follow The Lives Podcast dot com. Now let's go back to the nineteen eighties, the decade when Wall Street learned that greed wasn't just good, it could also be very, very illegal. In the early nineteen eighties, corporate America was undergoing a revolution. Hostile takeovers, where aggressive outsiders swooped in and seized control of companies against the wishes of their management and board. became the new sport of kings. Companies that once seemed untouchable were suddenly vulnerable to raiders armed with massive amounts of debt. Enter Michael Milken and his junk bond machine at Drexel Burnham Lambert. Milken realized something most of Wall Street had missed. Even companies with shaky credit could raise enormous sums of money by issuing high-yield junk bonds. These are bonds that offered much higher interest rates to compensate investors for the greater risk of default. He turned those once shunned securities into rocket fuel for leveraged buyouts and hostile takeovers. In the process, he became one of the most powerful men on Wall Street, earning over $500 million in a single year at his peak, an almost unimaginable sum in the 1980s. The culture on Wall Street at the time was electric and excessive. Young brokers and designer suits roared through the streets in Porsche 9-11s and stretch limousines. Cocaine flowed freely in work bathrooms and at afterwork parties. Greed is good wasn't just a line from a movie. It was the unofficial motto of the decade. Lunch was for wimps. Success wasn't measured by building something lasting, but by how much money you could make, how fast, and how visibly. Here's how the illegal scheme worked in practice. Boski paid insiders for confidential non-public information about upcoming mergers and acquisitions. He maintained what prosecutors later called his Golden Rolodex, a private network of sources across investment banks, who fed him deal information in exchange for cash, favors, and lavish dinners. What looked like normal Wall Street networking on the surface was actually a sophisticated black market information economy operating in plain sight. Armed with that illegal edge, Boski would quietly buy massive stakes in the target companies before the deal was announced. Then sell for huge profits once the news broke and the stock price skyrocketed. A classic example was the nineteen eighty five takeover of Beatrice Foods. Boskey reportedly received advanced word about the deal, purchased a large amount of Beatrice stock, and made millions when the takeover was publicly announced and the price soared. In one notorious arrangement, he paid Dennis Levine, an investment banker, for advanced information on multiple deals. Levine, in turn, got his information from a network of insiders across Wall Street. The scheme was incredibly lucrative. Bosky reportedly made more than a hundred million dollars in illegal profits in just a few years. That's serious money even today. Back then, it was almost unimaginable. But the real story is how the moral compromises piled up. What started as just one tip slowly became a way of doing business. People who once prided themselves on being sharp traders began crossing lines they once would have considered unthinkable. The thrill of easy money, the fear of falling behind, and the intoxicating atmosphere of the 1980s Wall Street made it easier and easier to rationalize. Everyone's doing it. If I don't, somebody else will. The culture encouraged this kind of thinking. For years it worked. Boskey and Milken operated at the center of a web that moved. Billions. But the lives were unsustainable. In the fall of nineteen eighty six, both men pleaded guilty, paid massive fines, and served time in prison. Drexel Burnham Lambert soon collapsed under the weight of the scandal. The investigation at the Bosky and Milken became one of the most aggressive and far reaching Wall Street probes of its time, a slow burning thriller that exposed the dark underbelly of 1980's finance. It started with Dennis Levine, a rising investment banker at Drexel Burnham Lambert, who was living the high life. Expensive cars, a luxurious Manhattan apartment, and a growing reputation on the street. In early nineteen eighty six, the SEC began noticing suspicious trading patterns around several major corporate deals. When they dug deeper, they discovered that Levine had been systematically trading on inside information. Facing the very real possibility of prison time, Levine made a deal. He would cooperate fully in exchange for leniency. Now let's go inside the investigation where I pull back the curtain on how these cases actually get made. In most major white-collar investigations, the case doesn't break because of a raid or a smoking gun document. It breaks because someone flips and decides to cooperate. And that process is more structured and more calculated than most people realize. It usually starts with a proffer session, sometimes called a queen for a day. The witness sits down with prosecutors and agents. And basically auditions for a cooperation agreement. Everything they say during that meeting is protected. It can't be used directly against them. But it gives the government a roadmap. If the witness lies during that proffer, all bets are off and everything can be used against them. So there's an enormous incentive to tell the truth. If the proffer goes well and the information is valuable, the government may offer a full cooperation agreement. The witness pleads guilty, agrees to testify. Wear a wire, record phone calls, and do whatever the government asks. In return, the prosecutors file what's known as a 5K motion, asking the judge for a reduced sentence based on the defendant's substantial assistance. That's exactly what happened with Dennis Levine. He flipped, gave up Ivan Bosky, and the dominoes started falling. Levine's cooperation was a bombshell. He gave up Bosky. The man everyone on Wall Street had whispered about for years as the ultimate inside trader. Bosky, realizing there was no way out, quickly decided to flip as well. In a dramatic move, he agreed to wear a wire and help the government build its case against Milken and others in the network. For months, Boskey secretly recorded conversations with Milken and other key players in discrete hotel rooms, upscale restaurants, and even during late night phone calls, knowing that one wrong word could end everything. Bosky recorded Milken on three separate occasions October first, October 9th, and November 6, 1986. The final recording was made just eight days before Bosky's cooperation deal with the government became public. Those tapes became some of the most important evidence in the entire investigation, capturing cold, calculated discussions about upcoming deals, payoffs, and how to stay one step ahead of the regulators, evidence that would later prove devastating in court. The FBI and SEC worked together with surgical precision, a rare and highly effective collaboration between the two agencies. The SEC focused on securities violations and painstaking analysis of trading records, while the FBI handled the criminal conspiracy side with wiretap, surveillance, and undercover work. Together they poured over thousands of trading logs, phone records, and brokerage statements. They mapped out an elaborate web of illegal information sharing. How nonpublic details about upcoming mergers and takeovers were bought and sold like commodities on a black market. The tension was high as the pressure mounted. Boskey knew he was risking everything by wearing the wire. One wrong word, one suspicious glance from Milken, or one misplaced comment could have blown the entire operation. Meanwhile, Milken and his team at Drexel continued operating as if nothing was wrong, completely unaware that their own colleague was now working for the government. Leading the charge from the government side was Rudolf Giuliani, then the U.S. Attorney for the Southern District of New York. Giuliani made the Boski and Milking cases a top priority and used aggressive, high-profile tactics. He turned arrests into public spectacles, complete with the now famous perp walks in front of television cameras. His office's relentless approach sent a clear message across Wall Street. Even the most powerful players were no longer untouchable. One piece of financial evidence proved particularly damaging. A key element in the case against Milken was a $5.3 million payment from Boskey to Drexel Burnham Lambert. Prosecutors argued this was not a legitimate business expense, but a settlement for illegal profits generated through stock parking schemes. That's a tactic where traders hid the true ownership of large stock positions to avoid disclosure rules. The single payment became one of the central pillars of the government's case against Milken. In a July 1986 meeting, Bosky and Milken actually sat down to discuss how to disguise the true nature of that $5.3 million payment. Milken warned Boske they needed to be more careful because of the quote, new environment. A clear reference to the Dennis Levine case that was then unfolding. They agreed to create paperwork claiming the money was for legitimate consulting services. After his arrest in 1986, Ivan Bosky eventually pleaded guilty to insider trading and paid a record $100 million fine. Milken later pleaded guilty to six felony counts and paid a staggering six hundred million dollar fine. Both men served twenty two months in federal prison. Ivan Bosky and Michael Milken didn't just break the law, they helped define an entire era. Dear downfall showed how quickly ambition and opportunity can corrupt even the brightest minds on Wall Street. What started as a bold philosophy quickly became a dangerous justification for crossing every ethical and legal line. For a few years, it felt like the rules had been rewritten. If you were smart enough and bold enough, you could bend the market to your will and walk away richer than anyone imagined. On the deception spectrum, this case sits very high. Systemic market manipulation built on stolen information and hidden deals that affected millions of investors. Thousands of investors lost money when the schemes unraveled. Public trust in the financial system took a major hit. People began to question whether the game was rigged for those at the top. The fallout forced real change. Congress passed the Insider Trading and Securities Fraud Enforcement Act of nineteen eighty eight, which dramatically strengthened penalties and gave the SEC broader power to pursue not just tippers, but also the tippees, the people who received and traded on illegal information. Monitoring of trading patterns improved, compliance departments grew. For a while there was a genuine cultural shift towards greater accountability. At least on paper. Michael Milken later reflected on a scandal in interviews, saying, I made mistakes. I violated the law. I accept responsibility for that. And the years after his release from prison, he focused heavily on philanthropy and often spoke about how the experience changed his perspective on what truly matters. After his release from prison, Ivan Bosky largely disappeared from public view. In one of his rare interviews, he expressed regret for his actions. Acknowledging that the culture of the time had clouded his judgment. He has since lived a very private life, rarely speaking about the scandal that once made him one of the most notorious figures on Wall Street. So what can we actually learn from all this? Each episode, I'll share a lie detector tip, a practical field-tested piece of advice drawn from real investigations to help you spot deception or protect yourself from situations where it becomes far more likely. Today's lie detector tip is about the danger of easy money and inside information. When something feels like a sure thing, when someone offers you an edge that others don't have, pause and ask yourself, why am I being told this? What's the real reason they're sharing it? In the Boski and Milken cases, the entire scheme was built on stolen non-public information. Tips about upcoming mergers were treated like valuable commodities in secret hotel rooms and late night phone calls. What looked like genius trading was actually cheating. And once people started bending the rules for quick profits, it became easier and easier to justify bigger and bigger violations. My advice is straightforward. If a deal Tip or opportunity feels too good to be true, or if someone is giving you information they shouldn't have and certainly shouldn't share, don't act on it. Walk away. Real opportunities rarely need to be whispered in secret. Real success is built on hard work and public information, not shortcuts that ignore ethical or legal lines. The moment you start rationalizing just this once, or everyone's doing it, you're already on dangerous ground. I once worked a case where a longtime employee had been embezzling from his company for over ten years. He rationalized every dollar he took by telling himself it was just the bonus he deserved and never received. He convinced himself that he was justified. That kind of self-deception is incredibly common among people committing fraud. If you ever find yourself justifying behavior you know deep down is wrong, stop, take a breath, and reevaluate. You'll sleep much better at night. From greed is good to federal prison, the Boski in Milk and Saga remains one of the defining stories of 1980s Wall Street Excess. A time when ambition and opportunity collided with temptation on a massive scale. Has an investment or business deal ever felt too good to be true? Send it to Kevin at Follow The Lives Podcast.com. Your story might become a future episode. And if you want a practical tool to help you cut through deception in your own life, whether you're evaluating an investment, Listening to a sales pitch or just trying to get to the truth in a conversation. I created a free guide for exactly that. It's called seven proven strategies to spot lies and uncover the truth in any interview. Short, actionable, and drawn from real investigative experience. You can download it right now at Follow The Lies Podcast dot com. No cost and no sign up hassle. While you're there, I'd love to have you join our growing community on Substack at follow the lies dot substack dot com. That's where I send out regular notes, deeper dives, and extra lie detector tips you won't find in the episodes. If you're enjoying these deep dives, please hit subscribe, leave a rating and review, and tap the bell so you never miss an episode. Thanks for listening. Until next time, follow the lies.