Journalism in the Public Interest

For One Whistle-Blower, No Good Deed Goes Unpunished

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It has been noted repeatedly that almost no top bankers have faced serious consequences for their actions in the financial crisis. But there is a Wall Street corollary that might be even more pernicious: Good guys are punished.

Whistle-blowers, truth-tellers and fraud-spotters pay a miserable price on Wall Street. They are vilified. They are fired. Sometimes they are even sued. Instead of being sought after, they become persona non grata.

Recently, I caught up with David Maris, a one-time star pharmaceutical analyst for Bank of America who became embroiled in one of the most notorious bull/bear battles of the last decade. His story encapsulates just how broken Wall Street culture is.

In 2003, Mr. Maris put out a sell report on Biovail, a Canadian drug company. He fixed on the company's bizarre explanation of why it had missed its earnings estimates: A truck carrying a supposedly huge amount of medicine crashed at the very end of the quarter. Mr. Maris detailed why this was wildly implausible.

Desperate to deflect the attention, Biovail took the offensive. It sued Mr. Maris and Bank of America in early 2006. It also sued SAC Capital Advisors, the hedge fund, and Gradient Analytics, an independent research firm, claiming a giant conspiracy to drive down its stock price with false reports.

For a time, Bank of America stood by Mr. Maris. But it eventually caved and fired him—two weeks before the end of 2006, enabling it to not pay his bonus. Mr. Maris is now in arbitration, seeking $21 million in back pay.

"For the first few days, there were high-fives and a lot of media attention," Mr. Maris said. "People said this is what research should be. But then reality strikes the bank." Lawsuits and media coverage are unpleasant and unwanted.

Bank of America said: "Mr. Maris's departure was not connected to Biovail issues or to his research regarding that company. Bank of America values the independence of its research and has a longstanding practice of protecting that independence."

It turns out there was a fraud and a stock-manipulation scheme all along. But regulators said that it had been perpetrated by Biovail, not the analysts and hedge funds.

In March, Biovail settled with the Securities and Exchange Commission, which had accused the company and four current and former officers, including its former chief executive, Eugene Melnyk, of accounting fraud. Mr. Melnyk, who at one time was reported to be a billionaire, left in 2007.

Only this year, he settled with the SEC and the Canadian securities regulators, paying paltry fines. Biovail didn't admit or deny wrongdoing. (Biovail settled with the regulators over other, unrelated charges in 2008. The company merged last year with Valeant Pharmaceuticals International, losing the Biovail name.)

In recent years, Biovail retreated from virtually every allegation it made in its lawsuit. It dropped its claims against Mr. Maris and Bank of America in 2007. As part of a settlement, Mr. Maris agreed not to countersue.

The company also paid $10 million to SAC and forked over $138 million to settle a shareholder lawsuit.

So, here's the final Biovail vs. Maris scorecard: Mr. Maris was right on the facts. He was right on the stock. He was right with the law.

For his success, he was sued, fired and stripped of compensation. He also lost access to the world of bulge-bracket Wall Street, was shunned by some institutional investors, and because of the settlement that he said he felt he had no choice but to enter, he couldn't sue Biovail to seek vindication.

It's well known that analysts rarely put sell ratings on the stocks they cover. Typically, the explanation for this is that banks don't want to jeopardize their investment banking business.

The reality is much more complicated. Skeptics and whistle-blowers risk huge career costs that go beyond conflicts of interest. Investors think they want unvarnished advice, but many don't truly appreciate it. Most banks don't want employees to play detective. Regulators abandon whistle-blowers, acting tardily and ineffectually.

After he was fired, Mr. Maris found that other big banks didn't want to hire him for research jobs. Even some institutional investors and hedge funds, which one might imagine would appreciate a skeptical voice, wanted no part of him. Many investors think an analyst who is picking fights with companies is a glory hound, and the last thing they want is publicity. No matter how frivolous, a lawsuit tars both sides. This is the "Tonya and Nancy" problem, after Tonya Harding and Nancy Kerrigan. One was linked to the perpetrators, and one was the victim. But now they are forever linked, and the difference between the two almost becomes blurred.

I don't want to create the impression that Mr. Maris is suffering. He isn't. He works at CLSA, a relatively unknown but important research shop, owned by a French bank that encourages its analysts to pursue independent lines of inquiry. Another analyst who has long been a truth-teller on banks, Mike Mayo, has also landed there.

But because Mr. Maris is willing to be publicly negative on stocks, he continues to face obstacles. He is prevented from asking questions on conference calls. Companies don't allow him to bring clients on visits. Some clients seem concerned about the lawsuits in his past.

"If you asked me what's my advice for a young analyst who wants to be in business for a long time, I wouldn't tell them to follow the path I went," he says. On Wall Street, "everyone knows you play ball or live with the consequences."

“...Tonya Harding and Nancy Kerrigan. One was linked to the perpetrators and one was the victim. But now they are forever linked, and the difference between the two almost becomes blurred.”

Really? I don’t know anyone who considers that anywhere near “blurred”.

It’s not surprising that on Wall Street and withon the regulatory agencies the liars are rewarded and the truth-tellers are punished. Harry Markopolos told the Bernie Madoff scam tale to the SEC for more than five years and he was summarily ignored. When it comes to government and Wall Street, the George Orwell quote “Truth is treason in the empire of lies.” rings true.

“good guys are punished.”  Not just on Wall Street.

Being an adult means coming to an acceptance of the fact that the world is cruel and unjust. 

Your choices:  (1) fight it; (2) accept it.

The young sometimes choose 1… adults come ‘round to 2.

“adults come ‘round to 2”. Right. Doing nothing and simply accepting that criminals run the banking sector and the regulatory agencies is adult-like? I hope I never reach that stage in my life! The political class know that millions of “adults” will simply accept the destruction of middle class America and so they can continue their destructive ways unimpeded. I hope you relax enjoy the show, but I’ll try and make a little difference.

James B Storer

June 1, 2011, 7:41 p.m.

Mike:  Good comments.  Your “Adults come round to 2”  is, sadly, true to the extreme.  At 78 I am still a “1.”  I simply find it philosophically impossible to change.  I work at the bottom end of the economic ladder, and your statement is at least as true there as at the upper end.
  I have always refused to use the four words “Right-Left-Conservative-Liberal” when writing or engaging in political discourse.  In this comment I use them in the basic meaning of the words.  Your “1” I assign Liberal, and “2” is Conservative.  In no way do I automatically assign them to Republican or Democrat.  I see the conservative as one who is self serving almost to the exclusion of the stranger who is never apt to influence his life.  The liberal cannot fully sever his thinking into two compartments:  “self” and “others.”
  At my low economic end I find that whistleblowers are often merely those who go secretly to their superiors to knife a fellow worker in the back.  In upper government and corporate situations “whistle blowing” is the act of one who is truly concerned about corruption and other wrongdoing.  Of course, they put themselves at the mercy of the culprits who are the object of the whistle blowing.
  There seems to be no protection for the flagellation of the whistleblower, no matter how true his allegation is proven to be.  Perhaps something on the order of the witness protection program could be devised, with teeth, to require safeguarding his or her reputation and job, etc..      Skartishu, Granby MO

First rule of organized crime is you don’t rat.

Wait…are we still pretending high finance in America isn’t organized crime?

Carolyn Thomasc

June 1, 2011, 8:20 p.m.

Jesse, thanks for bringing us this story of David Maris. It’s a sad fact that whistleblowing is a lonely and dangerous calling. For example, an Australian study called “Whistleblowing: A Health Issue“ examined the responses of organizations to whistleblowing employees, as well as the personal effect on individual whistleblowers themselves.

The study’s grim conclusion:

“Although whistleblowing is important in protecting society, the typical organizational response causes severe and long lasting health,  financial, and personal problems for whistleblowers and their families.”

More at “Whistleblowing is Dangerous To Your Health” -

I’ve always said “The Soprano’s, the television show,  was meant to be a metaphor for American Corporate Culture”.  How true that rings here.

Steve Withers

June 1, 2011, 11:14 p.m.

It’s easy to see how corruption takes root when otherwise people are happy to go along to get along.

It’s a long slide, but eventually you’re a banana republic run by crooks and nowhere is safe.

America isn’t far off that now. Way too close.

James B Storer

June 2, 2011, 7:55 a.m.

Steve Withers (comment):  “Banana republic run by crooks” (?).  “America isn’t far off that now” (?).
Well, Steve, we certainly have funded and incorporated enough of them to know how it is accomplished.
Skartishu, Granby MO

THis is why things are not changing.

V.L. Robinson

June 2, 2011, 10:06 a.m.

Saw a great interview with Gretchen Morgenson and Joshua Rosner on Democracy Now! today. They discussed their new book “Reckless Endangerment,” and also the issue of one set of rules for the powerful (Golman Sachs) and another set for the rest of us. Here’s a link:


June 2, 2011, 1:18 p.m.

Consider the case of Harry Markopolous, the nerdy, socially inept Greek-American accountant who nailed Bernie Madoff six YEARS before the scandal went public.  My advice to a future Harry?  Find a way to make money off the implosion of the next Ponzi scheme.There should be a way to “go short” on a Ponzi scheme if you are creative enough.  If you cannot make money off it, don’t even BOTHER telling anyone about it. Just forget it and let the victims suffer; it is NOT YOUR PROBLEM.
    Almost everyone who invested with Bernie Madoff knew perfectly well it was a Ponzi scheme. Madoff’s spiel was that he would make sure THEY got out with a profit before it all blew up. Madoff was going to make THEM big money and screw someone else, maybe the poor folks, right?  Of course it doesn’t make any sense, but his victims swallowed it and the SEC did not care.

I have been in business as a sole proprietor for 30 years and I find that honesty is the best policy.  I have not made a lot of money however I can look myself in the mirror without cringing at myself.  Trust and Integrity is worth more than money can ever buy.  The economy has collapsed because of criminal activity and lack of oversite by our supposed regulators.  Yes, even the very very wealthy will fall….they may go broke later than many of us….but they cannot escape the economic collapse no matter how much money they steal…Their wealth was built on the basis of trust and they have failed.  Best Wishes, Doug

I’m sure it is all just coincidence that SAC and Gradient are the explicit targets of Patrick Byrne’s corruption exposing blog

The naked short sellers need to go to jail. Eugene Melnyk pissed off the wrong group of thugs and they tried to destroy his company with their bogus scam of shorting him into the ground…the indentical MO Byrne has exposed them on for years…policed by the same Keystone Kops who keep both eyes on the revolving door to the best gigs in private equity, post “investor protection” racket.

Robert Haraldsson

June 3, 2011, 1:13 p.m.

Is this a case of whistle-blowing? A fraud-spotter, yes; but hardly a whistle-blower in the full-blown ethical sense of that term.

Joseph Robertson

June 4, 2011, 3:05 a.m.

I can sympathize with Mr. Maris , but on a different level and reason.  He was in the high income bracket, and is being shunned for telling the truth.  I was on a much lower income level, only around 60k a year, and I have been shunned because I was injured at work, left partially disabled, and sued when the company fired me and tried to not pay worker comp and medical bills.  Ive all been blacklisted in the industry i worked for 18 years, and even though I have a great job record, have an degree from a notable school,  and have never been committed of any crime beyond a speeding ticket, no one in the industry I worked will even talk to me.  I sued, I’m a bad employee.  It doesn’t matter, corporations do not care about the people, just the profits.  So except for having a multi million dollar nest egg, and being in good health ( I assume Mr Maris is)  Mr. Maris and people like myself are pretty much in the same boat.  Black listed for life, for doing nothing wrong.

Joseph Robertson

June 4, 2011, 3:16 a.m.

Mike,  reading you post about wall street reminded me of an old book that just about sums it all up about Wall Street. 

Where are the Customers Yachts ?

All on wall street and banks are making millions, and billions. But the people they say they are working for, the customers, are losing money hand over fist.  Like the saying goes,  Wall Street is the only place where you can make a killing whether the customer makes money or not. Customer wins, you win. Customers loses, you still win.  And people are silly enough to do this because of the desire for the quick riches. Its Vegas on steroids. and the Mafia mentality runs rampid .

another very eye opening book about how wall street works, is another old book called

The Match King
the story of Ivar Kreuger, who pretty much set the pace on wall street for profit at all cost. No matter who you destroy.  He was setting the baseline for all the shenanigans we see today on wall street.

Jesse Eisinger

About The Trade

In this column, co-published with New York Times' DealBook, I monitor the financial markets to hold companies, executives and government officials accountable for their actions. Tips? Praise? Contact me at .(JavaScript must be enabled to view this email address)