What Dennis Levine wanted, no one could really say.
When he was arrested here last week in the biggest insider stock trading case ever -- accused by the Securities and Exchange Commission of reaping $12.6 million in illegal profits over six years, a charge Levine has denied -- his friends and colleagues trotted out the usual suspects: greed, blind ambition, lust for power. They talked about his modest origins in Bayside, Queens, and they wondered whether he had been prepared for the seductions of success. They talked about Wall Street, where he worked, a place that has become in recent years a maelstrom of takeovers and speculative trading -- a place where America's best and brightest have gleefully rediscovered how to get rich quick.
Still, at 33, Dennis Levine had so much of everything, it was difficult for anyone to imagine what else he might wish for. At the time of his arrest, he was earning more than $1 million annually in salary and bonuses. He lived in a luxurious Park Avenue apartment on Manhattan's Upper East Side. He drove an $80,000 red Ferrari. He was married to his college sweetheart. He had a son. His wife was pregnant with their second child.
All this, according to the SEC, was not enough.
Levine's arrest threw Wall Street into panic, not merely because of the case's size and gravity, but because the SEC's charges raised a plethora of unanswered -- and frightening -- questions. Was Levine acting alone or did he have accomplices? Would Levine testify against his brethren? Was his arrest only the beginning of a major financial scandal? The questions came easy because in recent months, suspicions about insider trading on the Street have run deep.
As for Levine himself, there was another question no one could really answer: If indeed he had engaged in a years-long pattern of insider trading, what was he planning to do with all the money?
Dennis Levine was not idly rich. He was an investment banker, at the top of a profession that tempers its rewards with overwhelming demands. At the time of his arrest, Levine had risen to the rank of managing director at Drexel Burnham Lambert Inc., one of Wall Street's most aggressive investment houses. He played matchmaker to the country's largest corporations, flying from coast to coast at the behest of his clients. He worked relentlessly -- 60- and 80-hour weeks one upon the other, often under deadline pressure and with billions of dollars at stake.
Levine declined several requests for an interview; his attorneys denied that he traded on inside information, and they also argued in court papers filed this week that the stock trades linked to their client were not based on inside knowledge of impending merger deals. The SEC conceded in court filings that Levine never touched almost $10 million of the money he allegedly earned illegally, leaving it unmolested in a secret bank account in the Bahamas.
So in six years of immensely profitable insider trading, if the SEC's allegations are correct, Dennis Levine couldn't find the time to withdraw his cash and spend it.
To the memory of my beautiful mother.
-- Dedication of Dennis Levine's master's thesis on investment banking, June 1976
For the first 23 years of his life, Dennis Levine lived with his parents in a small, one-story red-brick house on 208th Street, Bayside, Queens.
The houses on his block all looked alike: squat, rectangular, well-tended, as if they had roots. Azaleas, hemlocks and rose bushes flourished along their walls; young oak and elm trees lined the street. It was the kind of block where a house might be sold once a decade. In fact, by the time Dennis Levine got married and moved to an apartment in Manhattan, most of his neighbors had lived on the street for more than 25 years.
They knew each other well, these neighbors, but not so well that they tried to interfere with one another's lives. They kept an eye on strangers and children in the street, they said hello and chatted in their driveways, and they volunteered to help when someone became sick. But they were fearful, too, and kept their doors locked, even in the daytime. "It's the kind of block where people are friendly, but they also live behind closed doors," one of them said.
Dennis Levine was the youngest of three sons. His father, Philip, ran his own small business selling aluminum and vinyl siding to homeowners in Queens and on Long Island. Philip Levine was a persuasive salesman, and he had to be -- his business depended primarily on his ability to find new customers.
By the accounts of their friends and neighbors, the Levine boys and their father got along exceptionally well. Dennis' brother Robert worked full time in the family business. They were alike in many ways, father and sons -- outgoing, ebullient, captivating. "If anything, Dennis was the least charming of them," said Jack Francis, one of his teachers and a friend of the family. "They [Robert and Philip] could charm the socks off anyone."
Philip and Robert Levine both declined to be interviewed for this story on advice from their attorney. On Monday, both were subpoenaed by the SEC in connection with its insider-trading allegations against Dennis -- the SEC is investigating whether Levine's family also profited from his alleged misuse of inside information. In brief conversations, however, both father and brother expressed unwavering faith in Dennis Levine's character.
"My brother's an ace -- has been since day one," Robert Levine said.
To their neighbors, the Levine family seemed blissfully "close-knit and loving." Philip Levine and his wife, Selma, Dennis' mother, seemed to care for each other so much, one neighbor said, "it was almost unreal -- you would see them holding hands all through their marriage."
Similarly attached were Dennis and his mother. Selma Levine was a short, well-rounded, dark-haired woman, "a very devoted 'Jewish mother' in every sense of the word," according to one of her friends on the block. "Her family and children were her whole life. And Dennis was exceptionally devoted to her. I can remember many times when she would rush home from the pool to make Dennis dinner before he went out for the evening."
Selma Levine kept her house immaculate, friends and neighbors said. When guests were invited to dinner, there was fine crystal and china. Downstairs, in the finished basement, Philip Levine built his own wet bar and recreation room.
As Dennis Levine grew into adolescence, he acquired a new nickname on 208th Street: Dennis the Menace. There was nothing unusual for a boy his age, his neighbors said -- just a fondness for mischief and fast cars and loud motorcycles. A classmate at P.S. 74, the public junior high school Levine attended in Bayside, remembered that "Dennis hung out with a very rough bunch -- the Fonzie sort of streak. He was a follower of them . . . He used to surround himself with the slicker type of people." Another friend from high school recalled him as "a flashy type of guy. He was always heavyset, but he had a way with the girls. I don't know if he himself had the success with girls, or that he was always around the people who had success."
At Bayside High, a mammoth white-brick building in a quiet block not far from the Levine home, Dennis was one of more than 4,000 students. His academic career there was undistinguished, and he participated in few extracurricular activities. In his senior yearbook, the listings by his name are limited to "hall patrol, service aide, tutoring."
In 1970, when Dennis Levine graduated, four out of five Bayside students went on to attend college full time, according to the school's current principal, Al Zachter. But Dennis was not one of them -- for two years, he drifted around Queens, helping with his father's aluminum siding business, riding his motorcycle, taking some courses at the local community college. Higher education was not a tradition in the Levine family; it was salesmanship that put bread on the table.
I think he felt embarrassed that he wasn't from an Ivy League school . . . He told me, "I realize I've just got to work harder."
-- Jack Francis, professor of finance and economics, Baruch College
He was a sharp dresser; not garish, but punctilious. When he entered Baruch College, a branch of the City University of New York near Gramercy Park in Manhattan, it was in the midst of sweeping cultural and political rebellion on American college campuses. But Levine did not grow his hair long or march in antiwar demonstrations. He lived at home and rode into the city on his motorcycle to attend classes. And he began to study, with seriousness and purpose, the business of investment banking.
From the beginning, he knew he was an outsider to the profession he aspired to join. Shrouded in a mystique made more powerful by the huge sums of money they manage, investment bankers primarily raise debt and equity financing for corporations, arrange mergers and acquisitions, and buy and sell stocks and bonds. Exclusive, patrician and dominated by some of the Northeast's oldest families, investment banking houses recruit their young associates mainly from schools like Harvard, Yale and Penn.
It would be difficult, Levine thought, though hardly impossible, for a boy from Queens to land a job at a prestigious investment house -- even a candidate with the proper cultural and academic credentials could not be assured a position. Everyone wanted to be an investment banker; that's where the money and excitement lay. By the mid-1970s, the profession had become one of the country's most competitive -- a trend that accelerated through the 1980s. Last year, according to a published report, more than a third of Yale University's graduates applied for jobs at First Boston Corp., a leading Wall Street investment house.
"The investment banker's reputation [is] an essential part of his business," Levine wrote in his master's thesis. "The leaders, for many years, were referred to as a 'closed club' based on long-established family ties. What may appear to be snobbishness among leading investment bankers is essentially nothing more than an attempt to maintain a reputation for quality."
His professors at Baruch recall Levine as a forceful personality -- slightly above-average as a student, friendly, talkative. "He was 100 percent sure that he wanted to go into investment banking," said Ashok Vora, who taught Levine in several corporate finance classes and supervised his master's thesis. "He had a persuasive style . . . He came on strong." Levine was not a "bootlicker," his teachers said, but he befriended his professors and eagerly sought their help and advice.
While he was attending Baruch, the seamless home life described by Levine's neighbors began to fray. His mother died suddenly of a cerebral hemorrhage. One neighbor recalled that it was Dennis who came home from college one day to find her lying unconscious on the basement floor, in front of the washing machine. Another remembered that it was Philip who discovered Selma's body. Either way, Dennis was visibly affected by his mother's unexpected death, his teachers and neighbors said. For months, he seemed deeply depressed.
Even when his outlook brightened, there were new complications. According to Francis, Dennis had trouble adjusting when, after months of mourning, his father eventually began to date again (Philip Levine remarried several years later). It seemed to make him miss his mother even more.
Around the same time, Dennis himself fell in love -- with Laurie, who was attending college near New York City. Her family, like Levine's, was Jewish and entrepreneurial, according to Francis. Laurie's father, a first-generation European immigrant, owned several service stations near Manhattan.
On weekends in the summer, Dennis and Laurie would ride the back roads of Long Island on his motorcycle. They made plans to marry as soon as Dennis finished his master's degree in business administration; until then, Dennis continued to live at home.
"Laurie is very warm and friendly," Francis said. "She never wanted to be a career girl. Dennis didn't want a wife who would be a career girl. He wanted a wife who would be just a housewife. He wanted a wife who would have dinner ready for him when he came home."
In the meantime, Laurie took a job as a dental technician, and Dennis devoted himself to writing his thesis on investment banking. In June 1976, in a ceremony at Carnegie Hall, Levine was awarded his degree.
He prepared his re'sume' and set out to find a position -- any position -- in investment banking.
Something went wrong when he went to Wall Street.
-- Ashok Vora, professor of corporate finance, Baruch College
He tried, he hustled. He shopped for new suits. He mailed out his re'sume's and asked his professors if they had any contacts on Wall Street. He attended interviews and reported to his teachers that they had gone well. But he could not find a job in investment banking. He told his professors that he thought it was because he lacked an Ivy League credential.
Citibank offered him a job in its currency exchange department. Levine accepted; he told Francis that he would stay in the job for as long as it took him to get a notable promotion. Then he would rewrite his re'sume' and make the rounds of the investment houses once again.
The promotion took 13 months. He had gained valuable experience at Citibank working with large corporations involved in currency deals. This time, when his re'sume' arrived at Smith Barney, Harris Upham & Co., an investment house on Sixth Avenue that dated back to the 19th century, the bankers were intrigued, and they called him in for an interview.
"He made a good first impression," said a Smith Barney investment banker. "He came across as a very vivacious, personable, friendly kind of guy . . . [although] we were much more concerned about the quantitative side [of his work]."
Levine wanted above all to work in the field of mergers and acquisitions -- the richest and most glamorous side of investment banking -- but Smith Barney offered him a different, more clerical job in its Paris office. Reluctantly, Levine accepted, after receiving assurances that he could come back to the New York mergers division if all went well in France.
By May 27, 1980, the day the SEC alleges that he traveled to the Bahamas to open a secret bank account under the code name "Mr. Diamond," Levine had realized his longstanding ambition: He had finally become an investment banker. His stint in Paris had been successful, and in June 1978, Levine began work in Smith Barney's mergers division. He was earning an exceptional salary now, and he and Laurie moved into an apartment on East 55th Street in Manhattan.
On June 1, 1980, according to SEC court papers, Levine transfered $125,000 from a Swiss bank into his Bahamian account. And he began at a furious pace, the SEC alleges, to use his knowledge of pending mergers to buy and sell stocks.
In the days following Levine's arrest, a great deal was revealed about the elaborate methods he allegedly employed to shield his inside trades from his employers, his colleagues and even his wife. According to the SEC, Levine made collect calls from Manhattan pay phones during lunch hours to instruct his Bahamian broker which stocks to buy and sell. To the employes of the bank where his account was held, he identified himself only by his code name, Mr. Diamond. When he flew to the Bahamas to deposit or withdraw money -- the SEC alleges that between 1980 and 1986, Levine withdrew $1.9 million from his account in $100 bills -- he tried to fly down and back the same day, changing planes frequently and traveling under an assumed name. According to the SEC, he never told his wife about his trips.
If the SEC's charges are true, the more Levine traded, the faster he rose in his profession. Indeed, his progress on two fronts may have been related. According to his colleagues at Smith Barney and later at Lehman Brothers Kuhn Loeb Inc. (now Shearson Lehman Brothers), Levine's strength as a Wall Street dealmaker lay in his aggressive, charming personality -- especially his talent for acquiring information about contemplated or ongoing corporate mergers.
Levine talked frequently with a network of New York arbitrageurs -- traders who buy and sell immense blocks of stock, speculating on the outcome of announced and unannounced mergers. Some of these "arbs," as they are known, pursue information about mergers with a kind of blood lust -- an hour's jump on a news-making announcement can mean millions in profits. Since many of the stocks Levine allegedly bought and sold on the basis of inside information involved companies not associated with the investment houses where he worked -- Smith Barney; Lehman Brothers beginning in 1981; and finally, starting in 1985, Drexel Burnham -- investigators wonder where Levine got his information.
In papers filed Tuesday, Levine's lawyers argue that their client was not trading on the basis of inside information because some trades in the Bahamian account linked to Levine resulted in losses of more than $2 million. But one prominent Wall Street takeover lawyer, who asked not to be identified, pointed out that "so many of these [merger] deals fall apart, it would be hard, even if you were close to a deal, to know whether it was a good bet."
In all, the SEC says, Levine was right 54 different times, some in cases where his investment house was employed in the merger deal from which Levine profited. Having posted bail, Levine today faces potential civil penalties of more than $20 million -- all of his illegal profits, plus triple damages on the money earned after passage of a recent federal law aimed at cracking down on insider trades. He also faces criminal obstruction of justice charges, stemming from his alleged attempts to thwart the SEC's investigation by destroying documents and testifying falsely in a November 1984 SEC deposition. The SEC has referred Levine's case to the Justice Department, which is investigating other possible criminal charges.
He had real star quality. He has real star quality.
-- David Kay, Dennis Levine's supervisor at Drexel Burnham, two days after Levine's arrest
There is a guard stationed outside the door to Dennis Levine's old office at Drexel Burnham these days. Executives at Drexel expressed surprise when Levine was arrested last week; they are now cooperating with the SEC's investigation, and they want to protect whatever evidence about the case the firm may possess.
But the guard, and the tomblike emptiness of the office behind him, is also a symbol to Drexel's young investment bankers of the eerie chill that Levine's arrest has cast over Wall Street. Exuberance over the past year's tidal wave of merger deals and record bull market has yielded to fear and confusion. Speculation about where the Levine investigation will lead next has infected the Street's optimism with uneasy foreboding.
"I wouldn't say the party's over," one investment banker reflected yesterday. "It's more like a time out to sober up. No one can say what will happen next. You'd like to think it Levine's arrest is an aberration, but I guess we'll find that out."
Other investment bankers talked warily about selling all their personal stock holdings and investing the money in real estate to avoid even the appearance of impropriety.
As for Levine himself, his battery of New York lawyers, led by renowned white-collar crime specialist Arthur Liman, seems determined to vigorously defend him against the government's allegations.
Still, even if he is totally exonerated of the SEC's charges, Dennis Levine's meteoric Wall Street career has likely crashed. Whatever it is he wanted, he will have to start over again to find it.
"I'm sure right now he's going through utter hell," said Jack Francis. "But I'll make a forecast. I'll bet when this is over, he goes into the family construction business . . .
"And he'll spend the rest of his life selling siding in Queens."