Two new books describe the decline and fall of Bear Stearns, one of Wall Street's most profitable, if not the most moral, investment banks. The books, House of Cards and Street Fighters, describe the culture of arrogance and greed that prevailed at Bear and the contempt with which they treated so many of their clients, not to mention each other. The two dominating personalities at Bear that play larger-than-life roles in both narratives are its legendary chairman, Ace Greenberg and its bridge-playing CEO, Jimmy Cayne.
One would have thought that given the colossal humiliation of having imploded and and been sold for $2 a share in March of 2008 and having served as the first collapse in the deck of cards that nearly brought down all US banking, the greedy sharks at Bear would have learned some sort of lesson. Surely they would have shown a modicum of humility.
Fuuggeetaboutit. I am a witness that Bear has, if anything, grown more arrogant, more contemptuous of its customer base, and more greedy than ever.
I have been a customer of Bear for about seven years. My wife and I have all our retirement savings in two IRA's in the bank. Our accounts were being personally managed by Ace Greenberg. I respected Ace because of his record of philanthropy and devotion to the Jewish community. Unfortunately, this never translated into caring much for our accounts. Ace was always friendly to me. He just never had time for me. With about two hundred thousand dollars in both accounts, I was a minnow in a sea of Ace's whales. So I didn't expect much and was grateful for whatever tiny morsels of attention I could pry out of Ace.
Our accounts never performed particularly well under Ace, but I bore with it because I was honored that a legend of his stature looked after our accounts.
But when Wall Street began to decline, our accounts dropped catastrophically. Ace had invested nearly all our money in large cap stocks which were battered the hardest on the street. I called Ace several times to discuss moving the money into other stocks, as usual I got about thirty seconds of his time on the phone. Growing increasingly worried at our dwindling portfolio, I suddenly bumped into another Bear trader, Matt Zimmerman, at a children's party. For the next few months he made a play to get our accounts. He emailed me, called my wife and did everything possible to convince us that Ace was wrong for us and although he was a very junior trader he had the time to really take an interest in our accounts. He told us that Ace was hurting our money by concentrating everything in large caps. He promised us the world. He was going to diversify, he worked with people in Europe, he had partners in every strata of financial investment. We were going to be a lot better off with him.
By April 2009 my wife and I had lost approximately forty percent of all our money with Ace Greenberg. Matt continued to press us to move to him. He told me to inform Ace that we were making a change and he would take it from there. I informed Ace that given the catastrophic losses we were suffering we thought it best to make a change. Matt got in touch with Ace, moved our accounts, and that's when the fun began.
We thought that having lost nearly half our money with Bear was bad enough. We were about to discover the greed of a bank that will do anything to milk whatever you have left. Matt, after promoting himself to us as a portofolio manager who did the same with Ace, only with far better connections and much more time, arranged to speak with us on the phone. He began to say that we had to liquidate our positions and move our money to funds he would be looking after. I listened as he went through all the stocks that he suggested we sell. We trusted him and agreed. The next day he called and said that he was moving our money into mutual funds. I was confused. Mutual funds? If I wanted that, I told him, I would have gone to Fidelity, where we once had our money (and did quite well). No, we wanted the personal relatioship of someone who would individually look after our investments, like Ace did and the way he promised us he would. No he said, he doesn't do that. He is going to give our money to someone else to manage. It was at this point that I got suspicious. What were the fees involved in having someone else look after our money? And it was then that I discovered that I had been had. That I was in the hands of a Wall Street con whose only desire was to milk me for as many fees that he could gouge out of me. He informed me that first there would be a 1.5% fee on all the money managed. Then, there was a fee of $75 per transaction from all the stocks we had sold the day before. Then, there would be an approximately 2% fee for the mutual funds. I finally got it. I was the mark. I was the sucker who was in this guy's clutches.
I protested. If you're not managing my money, then why are you charging me a management fee in addition to the mutual funds fee? In fact, I added, 'This is exactly the reason that NY Attorney General Andrew Cuomo was suing Ezra Mirken. It was not because Mirken had given his funds to Bernie Madoff who had promptly stolen them, but rather that Mirken charged his clients management fees when he never managed the money but simply passed it to Madoff.' Matt started getting flustered. I told him I was being gouged, that he was triple charging us on fees and that it was scandalous that he had liquidated our portfolio to make as many fees as possible without informing us. I demanded to speak to his superior.
The next day Matt called me with Ivan Alfaro on the line. Rarely in my life have I spoken to someone as contemptuous and arrogant as Mr. Alfaro turned out to be. He basically made me feel like an ignorant bumpkin who knew nothing of Wall Street. He justified all the fees, except for the transaction selling fees admitting that Matt should never have charged us since he was liquidating the position to put somewhere else. With the exception of that admission, he interrupted me, talked down to me, and spoke in an abusive tone. He told me that I ought to simply get another manager if we weren't happy with Matt. I was beside myself and demanded that I speak to someone else. He gave me the name of Gary Munowitz but with no phone number.
I called Bear's general number and after much obstuction got through to Mr. Munowtiz, the Senior Managing Director . He treated me just as contemptuously, told me he had no time to speak to me, and said I should call him after the weekend. I made it clear to him that it was his job to investigate and get back to me.
A few days later Mr. Munowitz called me with Mr. Longo, VP, Associate General Counsel at JP Morgan Chase. They told me that Matt had done nothing wrong. Bear would take off the selling transaction fee but would do nothing else. I told them that what I wanted was to restore the account to the exact position before Mr. Zimmerman had sold my shares, especially now that there had been a market rally that we had missed out on. They refused.
I made it clear that if forced to, I would take legal action to defend my rights.
It was at this point that something so surreal happened that you will find it incredulous to read. Ace Greenberg himself called me up. We had been friends for seven years. I had never complained to him even as he lost tens of thousands of dollars and had barely a minute to speak to me. He growled at me, "Shmuley, I am going to tell everyone in this bank that you're an extortionist. That's what you are. An extortionist. You better stop the pressure on the bank to restore your position. I am telling everyone here that you're an extortionist." I was in shock. So that's the way Bear Stearns works. They will lie to you and cheat you. And once you catch them in the act, in their unrequited arrogance they will threaten to detroy you unless you back off and go away.
I told Ace that I could not believe the way he had spoken to me. I told him that his accusation was deeply libelous. How could he threaten a friend and a well-known religious figure with spreading lies in order to silence him? I told him he was being misled by Mr. Zimmerman who had worked behind his back for a year to get him replaced.
A few hours later he called me back and said, "I had Mr. Zimmerman in my office. He denied everything you said. He never contacted you. He never lied to you. You're an extortionist and everyone here will be told."
I quickly got off the phone, had my office compile all of Mr. Zimmerman's emails to me, dating back to June, 2008, and had them sent to Ace, Mr. Munowitz, and Mr. Longo. The emails, which I include as an applendix, clearly demonstrated that Zimmerman had lied through his teeth to Ace. Ace then wrote back to me that he is no longer dealing with this. There was no apology and there was no retraction of the unbelievable libel against my name.
A short while later, Mr. Longo got in touch. He informed me that the bank would indeed restore the position. Based on their calucluation they owed me $3900. This was a pittance of the tens of thousands of dollars I had lost. Still, because I am not a fighter and simply wanted to put the episode behind me, I told them I would accept the settlement. I wanted to get away from Bear Stearns as quickly as possible.
Just when they were supposed to send the check and I was to move my accounts, I suddenly received a phone call from Mr. Longo. Bear Stearns would require me to sign a release. It was emailed to me, the most onerous release I had ever seen and a clear indication that Bear was terrified that the story of their greed, lies, and libel would leak. The release was not limited to Mr. Zimmerman's actions but encompassed all my years at Bear Stearns. Although I am a public figure who writes on values-based issue, it demanded that I essentially never tell a soul about what had happened. It gagged me from ever divulging Mr. Zimmerman or Ace's actions.
I wrote back saying the release was preposterous. I asked them to please amicably settle this, that I would sign the release for Mr. Zimmerman's actions but would not be gagged. I told him it was a gift that I was prepared to go away for $3900 and that they should not be so stupid as to provoke me further. They insisted on the gag. I refused.
So, I was given no choice but to sue Bear Stearns.
I believe fervently that if we who are not investors, we who are simple people who simply want to put away money for ourselves and our families, must take action to stop the greed and corruption on Wall Street.