How Does Wall Street Deal with Major Frauds? It Points the Finger at Mid-Level Employees


William D. Cohan, who worked on Wall Street as a senior mergers and acquisitions banker for 15 years, has a theory on why no Wall senior executives have been sued by regulators or prosecuted for their roles in the waves of fraud and malfeasance we have witnessed in the last decade. The senior executives blame their subordinate junior bankers for the wrongdoing (“Wall Street’s Great Scapegoat Hunt,” Bloomberg).

Mr. Cohan does not believe that the junior bankers act alone without the knowledge of their superiors. Nor does Mr. Cohan believe that there is truly any such thing as a “rogue trader” on Wall Street. People who go to work on Wall Street know there is no future in being “rogue,” and that the path to financial riches is following orders, like the officers in the military. Anyone who says the general officers on Wall Street are unaware of high-risk and possibly unlawful behavior is perpetuating a myth, according to Mr. Cohan.

As an example, Mr. Cohan points to Fabrice Tourre. Mr. Cohan does not believe that the buck should stop with Fabrice Tourre for wrongdoing associated with the Abacus CDO that Goldman Sachs paid $550 million to settle for its own account. Tourre has so far not settled and faces a civil trial next year.

Nor does Mr. Cohan appear to believe that Goldman Sachs trader Matthew Marshall Taylor really concealed $8.3 billion in trading positions that resulted in a loss of $119 million, or that Goldman is a faultless victim as it apparently claims to be.

These traders are not necessarily innocent, Mr. Cohan says, but pretending that they acted alone, without the approval of higher-ups, “defies the way the industry works.” Mr. Cohan certainly appears to have the background and experience to know how the industry works.

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.