How the Game Works

The rich get richer the old-fashioned way: They cut insider, scratch-my-back deals with each other.

Another example of such corruption cropped up in the trial of Frank Quattrone, the former hotshot banker to the high-tech industry. Frank, a banking "superstar" for Credit Suisse First Boston, has been accused by federal prosecutors of illegally working the system to get his bank to give favorable reviews of the performance of various corporations, thus artificially inflating the value of the corporate stock and deceiving investors.

During the trial, the feds produced an email exchange between Frank and Michael Dell, the high-flying honcho of Dell Computers. Frank notified Michael that the stock of a privately-held company was about to go public and that a block of the stock could be allocated to him two days before the rest of the public knew about the stock offering. Frank wrote to Michael: "My team has gotten word to me that you are personally interested in [receiving] a meaningful allocation of [the stock]."

This kind of insider scheme virtually guarantees that the Michael Dells of the world make a fat, effortless profit. Sure enough, Michael snapped up shares in the presale at $36 each, and two days later, when the stock went public, his shares almost tripled in value.

But the emails show that this stock gimme was just an opener by Frank to try to get Michael to throw Dell's banking business to Credit Suisse. The bank was about to hire a stock analyst who would be reporting on Michael's business, and Frank asked if the analyst they had in mind was OK with Dell. No, was the answer: "You might be better off with a fresh new talent," Michael wrote to Frank.

If the stock market strikes you as a rigged game, these emails show you're right. Back-scratching deals and handpicked "analysts" are the way the game is played. And now, the Powers That Be want you and me to put our social security money in the hands of these corrupt players!


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