Politicians And CEOs Gorge At The IPO Feast

The Loch Ness Monster. Papal infallibility. Angelina and Billy Bob's endless love.

To this collection of shattered modern myths we can now add the heavily hyped notion that, with roughly half of Americans currently invested in the stock market, Wall Street has been "democratized" -- that all of us are equally free to travel its level road to riches.

The truth is less egalitarian utopia and more rich man's Shangri-la. The vast majority of American shareholders -- 80 percent of us -- actually control just four percent of the entire market, while the richest one percent of shareholders' portfolios are brimming with a whopping 47.7 percent of the market's total value.

The latest example of how the financial deck is stacked against the average investor is the revelation that banking behemoths like Citigroup, Credit Suisse First Boston, and Goldman Sachs regularly doled out hard-to-get shares in hot IPOs to favored customers, among them corporate big shots and politicians.

Given the very cozy connection between Wall Street and Washington -- "you scratch my back, and I'll scratch my name on the front of a big, fat campaign check with your name on it" -- it should come as no surprise that political insiders, some of them currently on Congressional committees investigating these IPO practices, have been getting in on the ground floor of these fast-rising IPO elevators for years.

Sens. Barbara Boxer, Judd Gregg, Robert Torricelli, Jeff Bingaman and Fred Thompson, Reps. Nancy Pelosi and John LaFalce, along with former Sen. Al D'Amato and former Speaker of the House Tom Foley, are among the prominent politicians who were moved to the front of the line at the IPO feast. This special access only reinforces the indubitable contention that corporate America and official Washington have grown far too close for the comfort of the rest of us.

The allocation of these plum goodies was no small perk. At the height of the tech bubble, when every day seemed to bring another cash-gushing IPO (initial shares of Priceline.com, for instance, skyrocketed over 300 percent in value on its first day of trading) being cut in on a hot IPO was like being handed the combination to Bill Gates' wall safe, a stable boy's pick in the featured race at Aqueduct, and a map to the fountain of youth. All in the same day.

Among those who were able to quickly cash in -- or, in the parlance of the game, "flip" --their IPO shares for big bucks was former WorldCom CEO Bernie Ebbers, who earned over $11 million from shares in 21 separate IPOs allocated to him by brokers at Citigroup subsidiary Salomon Smith Barney, who were after WorldCom's business.

Ebbers' fellow WorldCom slimeball Scott Sullivan and former Qwest CEO Joe Nacchio also made it on to the VIP list at the very exclusive Club IPO. As did W's Dad, George I, whose $80,000 pre-IPO stake in now bankrupt Global Crossing ballooned to $14 million after the company went public. Democratic National Committee chairman Terry McAuliffe even did ol' 41 one better, flipping his $100,000 pre-IPO Global shares into an $18 million windfall.

The IPO outrage is just another in a long list of examples proving that the work of cleaning up the corporate stench that has been filling the air and the headlines for close to a year still remains to be done.

Instead of worrying about their investments, here's what our leaders should be doing. Not after the election. Not after regime change in Iraq. Let's start by closing the loopholes that allow IPO favoritism to imbalance the financial playing field. And then let's move on to treat stock options as the expense that they are, strengthen whistleblower protections, institute real pension and lobbying reform measures, and make bridging the Chinese Wall between stock analysts and their investment banker cohorts illegal.

During the wild times of the late 90s, IPOs were hailed as a modern manifestation of the American Dream: Build a better mousetrap and the world will make you a market millionaire as soon as your company goes public. But now they have been revealed for what they really are -- just one more way of trapping small investor mice for the fat cats.

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