By: Chris Neill
“My name is Jordan Belfort. The year I turned 26, I made $49 million, which really pissed me off because it was three shy of a million a week. Was all this legal? Absolutely not!”
This December, Martin Scorsese brought former stockbroker and felon Jordan Belfort’s story to the big screen in “The Wolf of Wall Street.” The movie, based on Belfort’s book, spares no expense in depicting the depths of his moral depravity.He is unfazed as his helicopter falls off the top of his 170-foot yacht, as he cheats on his successive wives without second-thought, or as he crashes his car while driving the one-mile trip home from the country club, high on super-potent, years-expired Quaaludes.
When he returns to the Long Island offices of his brokerage firm, Stratton Oakmont, Belfort is practically worshiped – scratch that, he is worshipped. In the office, Belfort only minimally reduces his drug consumption so that he may be a functioning businessman before he laughs in the face of his accountant (and father) while justifying the $26,000 client dinners that made up this month’s company American Express bill.
Sure the story does not have a happy ending: Belfort overdoses and spends time in rehab to address his drug addiction, his (second) marriage falls apart, and oh yeah, I guess he runs into a little trouble with the law as well. Still, after such graphic glorification of Belfort’s lifestyle, could every reader or viewer reasonably be expected to walk away fully comprehending the error(s) of Belfort’s ways? Or will people throw “Wolf of Wall Street parties,” drawing parallels with the misplaced idolization and misunderstanding of the condemnation in another Leonardo DiCaprio portrayal of wealth and decadence? While F. Scott Fitzgerald’s critique is, or at least should be, quite obvious, the message is lost on the debauchery in “Wolf’s” debauchery. Christina McDowell, the daughter of one of Belfort’s associates, calls the film “a reckless attempt at continuing to pretend that these sorts of schemes are entertaining, even as the country is reeling from yet another round of Wall Street scandals.”
It is certainly less entertaining to consider the criminal nature of their ill-gotten gains. Belfort spent 22 months in prison for securities fraud and money laundering. He was ordered to pay $110 million in restitution for the money he swindled from his victims. To date, he has only paid back a mere $11.6 million. On top of the roughly $10 million from property forfeitures, the terms of the deal required Belfort to pay back half of his annual gross income. His lawyers contend, however, that deal expired with the end of his supervised release in 2009.
Particularly noteworthy in Belfort’s income are royalties from the “Wolf” book and movie deals. He received over $700,000 for his book deal and over $900,000 for the movie rights. In his defense, he offered 100 percent of those royalties to the victims’ restitution but the government has not taken him up on this offer. Whatever financial restitution could come from the rights to his story, nothing could undo the emotional damage inflicted on his victims. Investment adviser and financial commentator Josh Brown harshly observes that he is “not sure how anyone consulting on a biopic of their own life starring and directed by Oscar winners could even be capable of remorse.”
Stratton victim Steve Orton, an Alpharetta, Ga., insurance agent, says “the publicity for the movie has brought back the old pain.”
Ken Minor, a real estate appraiser from Gilroy, Calif., who took out of the equity in his home to buy stocks from Stratton says he was hurt badly from the fraud, and has been paying ever since. He has no desire to see the film unless it is for free.
Peter Springsteel, an architect from Mystic, Conn., lost half of his life savings as a result of a cold call he received from a Stratton broker in the early 1990s.
Interestingly enough, Orton, Minor, and Springsteel are entirely absent from the book and movie. In fact, their appearance would contradict Belfort’s claim that he was only dealing with wealthy businessmen and not swindling unsuspecting mom-and-pop investors.
To those unfamiliar with the world of finance, the title of the story can be misleading. Stratton Oakmont is not representative of all of Wall Street. Stratton was a brokerage firm, meaning that their business was selling stocks to customers. What they do is entirely different than the work done by investment bankers (advising corporate clients on matters such as mergers and acquisitions) or portfolio managers (making investment decisions with clients’ money under their management).
Furthermore, Stratton was an example of a “boiler room.” Most brokerage firms conduct legitimate business buying and selling stocks, and even making appropriate recommendations. Boiler rooms like Stratton, however, engage in high-pressure sales tactics to coerce clients into terrible investments. They often sell penny stocks, or shares in very small companies that trade for very low prices. When companies this small have so few shares outstanding, the stock price is very sensitive to even lower trading volumes. This might encourage shadier brokers to engage in a “pump-and-dump” scheme, a type of securities fraud where the broker holds a lot of stock himself, drives up the price by persuading clients to buy the stock with deceptive and misleading sales tactics, then unloads his shares at a profit and leaves the client stuck with their shares of the worthless company. Belfort in fact owned a lot of stock in the companies his firm was manipulating, either directly or indirectly through backdoor deals. These glaring (and illegal) conflicts of interest were one of the main sources of profit for Belfort and Stratton.
The film ultimately falls short in sending a clear and cautionary message to investors. Learn the differences between the types of financial institutions that make up Wall Street to understand who is most inclined to act in your best interest. Conduct careful research before you invest your money. Otherwise, you risk sacrificing your life savings and retirement to fund the decadence and depravity of the next Wolf of Wall Street.
