Jett Portrayed As Trader Who Would Stop At Nothing To Succeed
NEW YORK (AP) _ Attacking Joseph Jett’s credibility, federal prosecutors portrayed the former Kidder Peabody trader as a man obsessed by ego and fear of losing his job _ spurred by the combination to concoct a scheme to produce $350 million in phony bond profits.
To back up their contention, the prosecution Thursday played a video tape of Jett making a speech to Kidder, Peabody & Co. management in Jan. 1994 _ just months before he was fired for the alleged scheme to mask bond-trading losses and inflate his bonus.
Jett, who was accepting an award as Kidder’s employee of the year for his highly profitable trades, extolled the virtues of stopping at nothing to attain needed goals.
The video came after Jett’s first courtroom testimony in the Securities and Exchange Commission’s civil fraud case against him, which began this week.
``When you truly begin to live is when your wants and your desires become subservient to what needs to be done,″ Jett told the group of executives.
Jett’s appearance as a hostile witness for the prosecution was the latest turn in a scandal that shook Wall Street and contributed to huge losses at Kidder in 1994 and eventually its demise later that year.
Grilled earlier in the day by prosecutors, Jett testified that thousands of his trades produced only temporary profits. However, Jett insisted he did nothing wrong, saying he intentionally executed separate trades to offset the short-lived gains.
Jett added that his bosses and the company’s auditors were fully aware of his trading strategy.
The testimony goes to the heart of the case against Jett. Both sides agree that Jett’s trades could have produced illusory gains on the government bond-trading desk that Jett headed.
However, Jett claims the offsetting trades were part of a prudent strategy to hedge risk. The SEC’s view is that the countervailing trades were part of an elaborate cover-up.
``I felt what I was doing was right,″ Jett said.
Petra Tasheff, lead attorney for the SEC’s case against Jett, repeatedly tried to show that Jett, driven to succeed by fear of losing his job, hid his complex trading strategy from his superiors. She cited statements from top Kidder executives who said Jett told them several weeks before he was fired that he had kept the strategy to himself.
However, Jett lawyer Kenneth Warner had his client read aloud from diary excerpts in afternoon testimony, trying to show that Jett told co-workers about the nature of his trades.
As Kidder’s chief government bond trader, Jett was involved in exchanging Treasury securities known as government strips, or bond interest payments, for whole bonds and vice versa.
Jett entered trading contracts that involved the future exchange of strips for bonds. But the SEC alleges that instead of completing these transactions, known as forward contracts, Jett extended them again and recorded phantom profits.
Jett denies any wrongdoing and has vowed to exonerate himself, contending he is being made a scapegoat by his former Kidder managers trying to explain away huge bond market losses.
SEC Administrative Law Judge Carol Fox Foelak will deliver a verdict sometime after both sides present their cases over the next five to six weeks.
If she rules against him, Jett could be forced to surrender ill-gotten gains, pay civil fines of millions of dollars, and be barred from the securities industry for life.
Jett has tried to get access to his multi-million dollar personal Kidder account, which has been frozen. Jett says he is broke without it and has been forced to work odd jobs such as moving furniture.