Michael Lissack, a former investment banker for Smith Barney, was represented by Phillips & Cohen attorneys in a qui tam lawsuit he filed against more than 20 Wall Street banking firms.
He alleged in his qui tam case that the firms were engaged in a fraudulent practice known as “yield burning” – selling securities at prices above their fair market value to municipalities and state and local agencies then pocketing profits that should have gone to the federal government. His qui tam lawsuit has resulted in the firms paying more than $200 million to the U.S. Treasury. Below is an excerpt from a New York Times story by Michael Quint published March 3, 1995.
Accuser in the Muni Bond Industry
In 14 years at Smith Barney, Michael R. Lissack earned millions of dollars. He advised local government on bond issues worth tens of billions. And, he contends, he helped Wall Street line its pockets at the expense of taxpayers.
Last month, according to Mr. Lissack, he told his bosses at Smith Barney that he would no longer remain silent in grand jury testimony about what he considered the firm’s misdeeds. He was dismissed.
Mr. Lissack contends that Smith Barney – along with other securities firms – often charged artificially high and potentially illegal prices for securities that they sold to local governments in complex bond deals. The extra markups were a big profit generator for many firms’ municipal bond departments in the early 1990s, he says. But, he adds, those profits resulted in losses to the Treasury of hundreds of millions of dollars.
. . . “I’m doing a Samson – blowing out of the industry and pulling down the walls as I leave,” he said, mocking his baldness and imagining the turmoil his actions could cause. He readily admits that he feels wronged by Smith Barney, which reduced his bonus last year to $60,000 from $465,000 in 1993 and cut back on his duties “so that there would be no way I could perform and maintain my earnings.”
“I might as well help clean up the industry on my way out the door,” he said . . . .
To read the entire story, which provides more details about the fraud, contact The New York Times.
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