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Exposed

Exposed

The road to securities fraud is paved with good intentions.

by

My morning began just like any other. I awoke at 8:00, showered, shaved, dressed in one of my $2,000 suits and with breakfast in hand I rushed out to start my day. Twenty minutes later, my Porsche convertible eased into my private parking spot directly outside the entrance of one of the largest brokerage firms of its kind. As I clutched my Alligator briefcase, I strutted through the front door.

I was startled when a frazzled and shaken broker immediately rushed me. “Larry, you’ve got to get out of here! Go home -- leave!” he yelled, pushing me back out the door. "The FBI are all over the office!”

"Larry, you’ve got to get out of here! The FBI are all over the office!”

Without thinking, I spun around to leave. Then I stopped when my mantra popped into my head: I’m not doing anything wrong. And with that maxim in place, I turned back, marched past several shocked brokers and walked into the brokerage firm that I had built from scratch.

Once inside, my surreal day officially began. Dozens of federal agents were doing what one might expect when raiding a brokerage firm without warning. Snapping pictures, interviewing employees, photocopying reams of paper, and carrying out cartons upon cartons of what they deemed as evidence in what I soon learned was a securities fraud case. The 25,000 square feet office that was home to 200 employees would never be the same.

Nothing Wrong

I stayed the entire day trying to be as cooperative as possible. Since I didn’t do anything wrong, why cause trouble? Why leave and look guilty?

When the market closed, I hopped into my car and drove across town to watch the Los Angeles Lakers. I replayed the entire day's events over and over and became more and more certain that this would pass like every other bump in the road I encountered over the years. I would have been much calmer if it wasn't for the sheet of paper I was handed by one of the agents as I left the office.

As I sat courtside watching the game, I kept staring at this paper trying to decipher every word and understand each nuance. After analyzing it for two hours, I was convinced that although it asked for my testimony, it was clearly not regarding my conduct. The present day's events -- while troubling -- weren’t about me. No, the grand jury subpoena I was holding must be related to someone else's misdeeds, not mine. Relieved, I exhaled, smiled and shoved the paper back in my suit pocket. As the horn sounded to end the game, the crowd rose to their feet. I stood for the first time all night and with 20,000 other fans cheered on my hometown team.

Not believing I was ever doing anything unlawful, I didn’t have a defense attorney to call. I had to find someone who could adequately explain what needed explaining.

After finding a very good and understanding lawyer, we spent the next several weeks talking about all that had happened that led up to this investigation. I explained as forcibly as I could that I didn’t do any thing wrong. Furthermore, even if anything I did do was wrong, it wasn't criminal and deserved no more than the customary, regulatory wrist slap. More importantly, others were openly engaged in the identical conduct for decades and were still in business. He had to just make this all go away.

“Do you know what the hardest part of being a white collar defense lawyer is? Convincing their client that they actually did something wrong.”

There are times in a person’s life when hearing a seemingly simple phrase can affect them forever. After endless back and forth dialog with my lawyer, he uttered my life-changer: “Do you know what the hardest part of being a white collar defense lawyer is?” he asked me. Without missing a beat, he answered his own question. “Convincing their client that they actually did something wrong.”

End of Denial

No one -- no matter how cynical or sinister -- wakes up in the morning to “rip off old ladies.” They would vomit if that were the reality. So as a defense mechanism they gradually come to believe their behavior is not only justified, but acceptable.

My unshakeable belief was that my firm was successful because it employed talented investment bankers who recommended undervalued stocks which had the potential for a big return.

In reality, we made all the money we did because the firm hired hundreds of inexperienced stockbrokers who were trained to repeatedly use high-pressure sales tactics to convince unsuspecting customers to lose millions of dollars by buying junk stocks that had little chance of increasing in value. This is the unvarnished truth -- but because I had been defending my actions (both in public and private) for years, I simply could not compute that what I was doing was wrong.

Such is the awesome power of denial. Since I was someone who always felt he was doing the right thing, treated everyone with respect, and never let success go to my head, I was sure that any behavior I engaged in wasn’t wrong. But the reality of what was happening began to finally seep in. The sad and obvious truth was now abundantly clear: The subpoena was indeed about my unlawful conduct and there was no hiding from it. What I did was absolutely wrong.

For the first time, I was able to view my behavior without the veneer of rationalization -- and I felt absolutely and totally disgusted by what I had done. I decided then and there to make things right, which started by openly admitting my wrongdoing. I then agreed to give up my securities license, close the brokerage firm down, make restitution to the customers, and most significantly plead guilty to securities fraud -- which I was eventually sentenced to a year in prison at a minimum security facility.

Jail Time

The notion that "minimum security" is likened to a "country club environment" is laughable. Yes, there are athletic fields. No, there aren't any guard towers. But you're in prison and not an upscale social setting. The expression the warden used was “prison is for punishment not as punishment." Being in prison is punishment enough, no matter what type it might be.

My year in prison was the hardest thing I ever had to go through.

It was the hardest thing I ever had to go through. The loss of freedom -- not the set meal and sleep times -- but a loss of freedom from not watching my daughter giggle when she took her first step, or comforting her through her first fever, or seeing my wife's face light up from an unexpected gift. There's no amount of fame, money, or power that's ever worth the chance of being separated from the people you care most about. There's simply nothing worse than the lack of connection to those you love.

Months after I began my sentence, I was extremely fortunate to be granted a furlough to go home for the Passover holiday. This meant I would be permitted to leave prison with the agreement to return ten days later. Of all the lessons I learned since this saga began, nothing changed me as radically as this furlough.

People sometimes hypothesize what they would do if they know they only had six months to live. While clearly not as dramatic, I had a chance to live for ten days knowing that my freedom would soon end.

Just like those supermarket contests where the winner races down the aisle for two minutes loading their cart with anything and everything, I had ten days to do all the things I longed for while incarcerated. I kissed with my daughter for hours. I had countless first dates with my wife. I even looked at the tree in my front yard differently.

Today, years later, I still don’t take for granted that cuddling with my kids tomorrow is a given. For better or worse, I walk around like I'm on a furlough. I never leave the house without telling everyone that I love them. I make sure to never go to sleep with being even the slightest bit upset with anyone. While I pray for a great and healthy tomorrow, I am blessed to be someone who truly lives for today. I refuse to look back many years from now and have any regrets on how I spoke to my wife, treated my parents, or the amount of time I spent with my children. I want to reflect on my life with a deep and satisfying smile -- and not like many who'll sadly numerate all the things they should have done differently.

Crimes and Misdemeanors

Everyone's life journey encounters forks in the road. If they choose the wrong path, the next fork in the road will become that much less of a struggle. And several forks later, it’s no longer a thoughtful decision between two choices, but just a mindless stroll down the wrong path.

A day usually doesn't go by without the news media highlighting someone who's accused of some type of wrong doing, either in his business or personal life. None of them simply woke up one day and started doing what's written about them in the newspaper.

Before this ever happened, he did something that was just a little wrong, something slightly unethical, a minor transgression.

And since no one views himself as a bad person, his behavior quickly becomes the norm and requires no more justification. And then a very dangerous thing happens. A person slowly moves his or her "mental bar" higher and higher as to what they feel is acceptable to do. With each small step, his behavior gets worse and worse, and gets easily rationalized because compared to their previous actions, it's only a small difference. But to an objective observer, pretty soon his actions become shockingly reprehensible.

This is why the Torah has strict guidelines regarding a man touching a woman other than his wife. Today it's giving his co-worker a meaningless peck on the cheek, tomorrow it's a peck and a hug, the next week it's innocent flirting, then it's a drink with the whole office after work, then it's just a quiet drink to unwind from the long day they shared at the office, and then... What was previously unthinkable now becomes possible. After all, the next step isn't such a big deal, is it? Suddenly he's so far removed from where he started, it's scary.

And then one day, it's all exposed.

It's extremely difficult for a person to be objective regarding his own behavior, and that makes it very hard to change one's ways.

God knows this, and that's why the Torah says that in order to make the best decisions, seek out advice and opinions from someone other than yourself -- specifically a rabbi, teacher or friend.

But this scares many people because they're simply too afraid of the answers they'll get.

Admitting that you've been doing something wrong and immoral is hard. It takes brutal honesty. But by doing so, you'll be able to prevent utter disaster from happening because you'll stop your glide towards worse and worse behavior -- and a life gone by of deep regret.

I sometimes reflect on the lifestyle I had during the height of my "success" and that of my current routine. I think about the exotic cars I drove, the private jets I flew, the monthly $15,000 credit card bills I paid with such ease -- and compare it all to sipping my morning coffee while watching my kids play with their toy trains, convincing my son to let me change his diaper, and soaking in my wife's deep content as she nurses our newborn baby.

Like a lot of people, especially in today's economy, we sometimes struggle financially. There are more days than I care to admit when I have to nervously look at our bank balance to make sure all checks will clear.

But because I can contrast my two vastly different lifestyles, I can make this statement with abundant clarity: As I sit here today, I have never been wealthier.

Published: November 14, 2009


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Visitor Comments: 20

(20) Anonymous, November 22, 2009 5:31 PM

No compassion for those he hurt.

Larry gives us unending platitudes, but what about all of those who suffered because of him? What are his efforts in that area. His story is all about Larry as his entire life has been. Prayer is not enough.

(19) Anonymous, November 18, 2009 12:32 PM

In Larry's case and in our own we can choose to focus on his wrong doings and condemn him or we can focus on his Teshuvah. Personally I choose life. I choose hope. I choose healing. I choose Torah. Congratulations on facing your life and choosing to change.

(18) Ayalah Haas, November 17, 2009 5:40 PM

Yasher Ko'ach on Your Sobering and Inspiring Article

Thank you Larry for being honest about your experiences and life lessons. As for those who are commenting about the unfortunate people who were swindled, Larry did write, "... I then agreed to give up my securities license, close the brokerage firm down, make restitution to the customers, and most significantly plead guilty to securities fraud..." Clearly, Larry didn't cheat customers out of the record-setting $50 billion of Madoff et al; it could very well be he owed his customers far less was able to pay them back straight away. Let's give the benefit of the doubt that Larry indeed made financial resititution as he wrote he agreed to do. I believe Larry and his posek have worked through this, and clearly Larry has made - and continues to make - Teshuva.

(17) Anonymous, November 17, 2009 4:48 PM

response to other comments

Larry definitely did make things right, "For the first time, I was able to view my behavior without the veneer of rationalization -- and I felt absolutely and totally disgusted by what I had done. I decided then and there to make things right, which started by openly admitting my wrongdoing. I then agreed to give up my securities license, close the brokerage firm down, make restitution to the customers, and most significantly plead guilty to securities fraud -- which I was eventually sentenced to a year in prison at a minimum security facility."

(16) Anonymous, November 17, 2009 1:17 PM

you knew what you were doing was wrong--you thought it was not punishable

Larry, It is an insult to our intelligence to claim that you were running a "pump and dump" operation and "didn't realize that you were doing anything wrong". Either you are criminally insane or so self righteous that you have made YOURSELF into the victim. You knew darn well that you were bankrupting your victims and riding high on their losses. They were nobodies to you. You thought you would get away with it forever. You should be embarrassed to act so innocent. Are you writing this to avoid further prosecution and having to compensate your true victiims??

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