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Few confessions

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					Few confessions
by Yvette Kantrow

13 February 2006

It's been nearly five years since "Analystgate" had us all atwitter about banking conflicts, crappy
stocks and New York nursery schools, but the alleged "tell-alls" keep coming. The latest to hit our
in-box is "Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in
the Stock Market," penned by former telecom watcher Dan Reingold and his niece, Jennifer
Reingold, a senior writer at Fast Company magazine. Like the analyst memoirs that came (way)
before it — Michael Culp's fictionalized "Conflicted" and Andy Kessler's "Wall Street Meat" —
"Confessions" purports to tell Joe Sixpack how The Street really works.

("What Eliot Spitzer Never Told You" promises a front-cover blurb.) What Joe Sixpack gets,
however, is yet another tour through the bubble-house for the usual gawking at its familiar
resident-villians: Institutional Investor magazine's influential analyst rankings; investment
bankers who routinely bring analysts over "the Wall"; and, mostly, the author's archrival, Jack
Grubman, who Reingold first clashes with in 1988, while working in investor relations for MCI Corp.

Grubman, then at PaineWebber, pens a negative report on MCI based partly on information
garnered from "an engineer friend at AT&T [Inc.]" Writes Reingold: " …What offended me the most
was the notion that Jack Grubman was more interested in making a splash than in really
understanding what he was writing about," he says. "I couldn't believe that he was willing to sign
his name to research so shoddy." Shocking perhaps in 1988, but, like much in this book, less so in
post-Spitzer 2006.

Grubman continues to haunt and even taunt Reingold as he leaves MCI for Wall Street, and
eventually becomes an II-ranked telecom analyst — often one slot behind No. 1-ranked Grubman —
at Morgan Stanley, Merrill Lynch & Co., and Credit Suisse First Boston. Reingold spends much of the
book convincingly detailing how differently the two men approached their jobs: Grubman whispered
details of confidential deals to favored clients and made outrageous calls for their "entertainment
value"; Reingold spent hours engaged in diligent analysis and truly believed that his job was to
recommend the best stocks he could to his clients.

And while that might have made Reingold an admirable analyst, especially in the heady days of the
bull run, we still can't help but train a critical eye on him. For one thing, he seems to truly enjoy his
rivalry with Grubman and the fame it brings, including a 1996 story in The New York Times
declaring the two "The Siskel and Ebert of Telecom Investing." Could he have gotten such publicity
on his own? And in September 2001, when Reingold regains the No. 1 slot in the II rankings among
telecom analysts, he says it's a "hollow" victory, given the terrorist attacks and the tanking of the
industry.

Still, he confesses, he experienced "one moment of personal satisfaction" when he runs into
Grubman at the II photo shoot. "Until that moment, [Grumban] clearly had no idea that he had lost
in the wireline category," Reingold writes. Fine, but wasn't that the least of Grubman's problems?

When he's not obsessing about Grubman or II, which excerpted his book in its January issue,
Reingold recounts other details about his life as analyst, including, most entertainingly, job
negotiations as he leaves one firm for another with compensation packages that exceed his wildest
dreams. Particularly interesting are his 1999 dealings with CSFB, which offered him, in writing,
2.5% of any telecom fees earned by the firm above $150 million a year — in other words, a piece of
the banking action. "If there ever was a way to codify a conflict of interest, this letter was it,"
Reingold writes. He has that scheme taken out of the contract and replaced with a 25% increase in
his fixed salary.
To be sure, Reingold deserves some credit for refusing to agree to CSFB's banking incentives at a
time when many analysts were embracing similar deals. But if he found CSFB's behavior so
reprehensible, why didn't he take the firm's letter to the Securities and Exchange Commission? The
Wall Street Journal? Or even Institutional Investor? As an II-ranked analyst covering a popular
sector, Reingold's voice would have been heard. But like other Wall Streeters (and regulators, and
the media) who knew what was going on, Reingold looked the other way and continued to be well
compensated.

Reingold does try to deal with his actions in a half-page mea culpa in the last chapter. "I should not
have played banker," he admits, adding, "Nor should I have had as much faith in the SEC as I did."
In retrospect, he says he should have reported the leaks of inside information he heard about or
analysts twisting stock calls for banking deals. "I was far too willing to keep my head down,
focusing narrowly on my research and ignoring what appeared to be going on around me," he
writes. For a book with the word "confessions" in the title, that particular admission arrives a bit too
late.

There's almost nothing the media likes more than writing about itself. So Carl Icahn's battle for
Time Warner Inc. is a doubly sexy story. Not only does it involve an iconic takeover artist from the
1980s, but it features a media behemoth that produces some of the most iconic magazines on the
newsstand. Throw in another media mogul — Icahn ally and Lazard head Bruce Wasserstein, owner
of New York magazine (and yes, chairman of The Deal LLC) — and you have a story that media
types can't stay away from, with sometimes weird results. (And no, Wasserstein did not put us up
to this.)

Columbia Journalism Review's CJR Daily was one of the first to weigh in on the coverage of the
battle. In a Feb. 2 piece, it declared that Icahn has New York financial journalists "swooning." Its
proof: Reports in outlets including USA Today and TheStreet.com on Icahn choosing Frank Biondi as
his CEO for Time Warner. "In nearly every case, reporters respectfully noted Biondi's credentials
and dutifully quoted the shadow CEO as he sat back and fired pot-shots at the company's current
leadership," CJR Daily moaned. With Time Warner remaining mum, it declared, it was up to these
news outlets "to roll up their sleeves, scour the nitty-gritty details of Time Warner's business plan
and … ah, never mind." (Emphasis CJR's.) And what? Decide who is right? Make Time Warner's
case? Tell readers what to think? CJR bemoans the media's lack of facts in covering Icahn's move.
But it left out a key fact, too. Time Warner shares fell 10% in 2005. Was that the media's fault, too?

Also jumping into the fray sans a few facts last week was Michael Wolff at Vanity Fair. Wolff, who
declares that Time Warner has no real reason to exist, seems baffled by Icahn. "He has no program,
no plan, no method, just moral virtue (a corporate raider claiming moral virtue at that)." What's
puzzling about this is that just as Wolff's piece was being posted on the Internet, investors were
gathering at a New York hotel to hear details of Icahn's much-publicized, long-awaited plan for Time
Warner, all 342 pages of it.

"He makes taking over a company seem so easy — so basic," Wolff writes. But dealmaking is harder
than it looks, even for a media pundit.

				
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