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Misplaced Trust in Institutions Snags NFL Player for Insider Trades

Misplaced Trust in Institutions Snags NFL Player for Insider Trades

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Tuesday, 04 September 2018 12:49 PM Current | Bio | Archive

The professional football career of Marvin Mychal Kendricks, the Cleveland Browns linebacker, is over for the foreseeable future after he was charged last week with the federal crime of securities fraud.

He doesn’t appear to have much of a career ahead of him in the financial industry, either, despite his profits trading stock options based on merger tips that prosecutors say came as illegal inside information from an investment banker who was working on the deals.

As a social commentator, though, Kendricks shows some real promise, at least to judge by the statement he released after charges were announced.

He cast blame on the investment banker tipster who also faced criminal charges, Damilare Sonoiki. "His background as a Harvard graduate and an employee of Goldman Sachs gave me a false sense of confidence," Kendricks said.

Write it off, partially, perhaps, as one of two people facing criminal charges trying to deflect blame onto the other one. Even after that discount, though, there sure seems something potentially profound in Kendricks’s painfully late realization that the Harvard brand and the Goldman Sachs brand, even in combination, are no failsafe guarantee of integrity.

One might read the case as a crime for the Trump era — a symbol of the corruption of the globalist coastal elites, and, relatedly, of the erosion of trust in institutions. The Wall Street Journal reported that lawyers for Sonoiki and Kendricks said they expected to plead guilty.

Sure, Harvard and Goldman have faced prior embarrassments, having figured in, or at least been blamed for, the Vietnam War ("The Best And The Brightest") and the financial crisis ("vampire squid"). And for all Trump’s anti-globalist bluster, his administration is populated with plenty of Harvard and Goldman men and women.

Jared Kushner is a Harvard graduate. Supreme Court nominee Brett Kavanaugh teaches at Harvard Law School, from which Neil Gorsuch graduated.

As for Goldman Sachs, its alumni include Trump administration Treasury Secretary Steven Mnuchin; Gary Cohn, a White House economic aide who has since left the Trump administration, and Stephen Bannon, Trump’s campaign CEO and early White House strategist. Bannon also went to Harvard Business School.

One can understand why Kendricks might have had that initial sense of confidence in Harvard and in Goldman Sachs. They are both highly selective institutions that attract far more applicants than they accept. They both are self-styled meritocracies that attract ambitious, intelligent, and hard-working young people. They both try not to name drop — "I went to school in Boston," "I work in finance" — in a way that can risk crossing the line from self-effacement into a humble-brag.

They are both increasingly diverse and global institutions trying to become even more so.

Talent flows back and forth between Cambridge, Mass. and Lower Manhattan.

Goldman CEO Lloyd Blankfein went to Harvard College and Harvard Law School and has stayed involved with the university. Goldman co-chairman-turned-Treasury secretary Robert Rubin did a long stint on one of Harvard’s governing boards.

Historian Drew Faust joined Goldman’s board of directors on July 2, two days after retiring as president of Harvard. Even Matt Levine, the Bloomberg writer whose indispensible daily newsletter would have covered the Kendricks situation if it hadn’t been mostly off for August, has the joint Harvard College-Goldman Sachs pedigree.

As in any large institution, though, there are some bad apples, or ordinary apples who get tempted into bad behavior. In this case the behavior raises doubts not only about integrity but even about intelligence.

Sonoiki seems somehow to have emerged from Harvard and from Goldman’s training programs without grasping that the Securities and Exchange Commission has computer programs set up to catch people who open brand new brokerage accounts and who in a matter of six months make more than $1 million in profits by trading options on companies who announce they are to be acquired.

Maybe Hillary Clinton could pull off options trading this successful back as a novice betting on cattle futures back in 1978. But it is not something anyone can do any more without attracting considerable scrutiny from regulatory and law enforcement authorities.

A statement from Goldman Sachs reported by Bloomberg News said the firm condemned Sonoiki’s "alleged behavior" and said Sonoiki "left Goldman Sachs over three years ago." At least Goldman didn’t say the firm had a false sense of confidence in the fellow because of his Harvard background.

When Sonoiki spoke at Harvard Commencement in 2013, he was introduced as "the guy from humble beginnings who now has his dream job on Wall Street." Sonoiki began his talk by joking, "I look forward to crashing world economies" and lamenting, "our endowment is a mere $36 billion."

Said Sonoiki, "I’m impressed when I think about the wide range of things our classmates will be doing next year, like working at Goldman Sachs in New York or working at Goldman Sachs in Boston."

The talk had a serious side, too, though — Sonoiki held up a shirt with two bullet holes that he said he had been wearing at age 16 when he was shot accidentally by a friend.

"One thing I’ve learned at Harvard is to be wary of absolutes," Sonoiki said, concluding by expressing the hope that his fellow graduates spend their lives doing "something that makes us happy, gives us purpose, excites us, and does good."

Ira Stoll is author of "J.F.K. Conservative," and "Samuel Adams: A Life." Read more reports from Ira Stoll — Click Here Now.

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As in any large institution, though, there are some bad apples, or ordinary apples who get tempted into bad behavior. In the case of Goldman-Sachs, behavior raises doubts not only about integrity but even about intelligence.
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Tuesday, 04 September 2018 12:49 PM
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