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Interview with the wolf

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by Peter Switzer

When a money story is so big that legendary film director Martin Scorsese and actor Leonardo DiCaprio want to make a movie about it, you know it’s a gripping yarn. This is what has happened to the Jordan Belfort story — a Wall Street brokerage, sex, drugs and jail!

But the tale does not end there. Belfort, who is coming to Australia in early September on a speaking tour, has penned two best-selling books with the biggie being the The Wolf of Wall Street.

Sinking money

I had the challenge of interviewing this guy on my Sky News Business program — SWITZER — and it was an eye-opening experience.

In the US, it has become a part of Wall Street folklore that the brash 31-year old stockbroker, who by the time he was 25 was a multimillionaire, had such an issue with his own success and drugs that he flew his helicopter onto his backyard with only one-eye open (he was so off his face he says he had double vision).

He also had the distinction of sinking his 50-metre motor yacht, which came with seaplane and helicopter, in the Mediterranean after ignoring his captain’s warnings about a brewing storm.

He was out there and some of his clients ended up out of money. He told me 90 per cent of business was ‘legit’ but the other 10 per cent was the reason why he was eventually jailed for two years. Clearly, he was no Bernie Madoff who was simply a criminal operating a Ponzi scheme, pretending to be investors’ money but using new contributions to pay out dividends from supposed investments.

Just like the movies

Belfort believes he was influenced by the values and role models that came out of the movie Wall Street. He points to one of the early scenes in the movie where Bud Fox gets into a big, black limo, snorts coke and then has his way with a ‘high-class’ hooker — a present from Gordon Gekko.

The Gekko influence was powerful in his brokerage, which came from nowhere to be a major player on Wall Street, pushed along by young men who not only were taught how to sell stocks on the phone, but were ‘helped’ along by drugs.

“Drugs and prostitutes were an important part of our business,” Belfort told me, though he admits to being embarrassed about it now. “Gekko said ‘greed is good’ but it isn’t — it’s ambition that is good but greed definitely isn’t.”

Give it back

Belfort says he’s a new guy now and is trying to give back to make up for all that he has taken. And he took a lot. Investors kissed goodbye to US$200 million in a shares fraud and that’s why he did time.

But that’s not the end of the story. According to the London Telegraph, “50 per cent of everything he earns is going to the investors he defrauded. In five years, he has paid back $14 million of the $110 million he owes”.

Given how big his crime was, how come he only served 22 months of a four-year sentence? The Telegraph says it was because he sung and dobbed in his former colleagues. He says without coming clean he would have done 30 years!

Learn from mistakes

This shabby story, which is now being righted by repayments to investors, and Belfort’s speaking tours where he preaches the importance of giving back while living your dream, needs to be learnt by investors and our regulators.

Investors have to be careful of those who promise big returns. The old line that goes if something seems too good to be true then it probably is should be your guiding light.

And it’s time that our regulators started saving poorly-educated investors and kicking corporate criminals a lot harder than they are right now.

In recent years, we have seen companies go broke, but their founders, executives and directors swan around the world while the investors who lost their retirement nest eggs have been left in the lurch. It’s time that the Rudd Government, ASIC, the ASX and the ACCC get themselves the biggest book they can find and start throwing it to penalise the crooks in our corporate midst.

It’s also high time that ASIC was given the resources and instructions to go after bad behaviour before investors end up broke. Belfort’s business was quite extraordinary with office sex between workers encouraged, midget-throwing competitions put on for staff amusement, and market manipulation along with cash kickbacks, all a part of everyday life.

This might not be common in Australia, but it’s time for regulators to be more active in trying to smell smoke before fire burns a hole in our retirement lump sums.

(Belfort has public speeches in Melbourne on September 9 and Sydney on September 10. Find further details here.

For advice you can trust contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Tuesday, July 14, 2009