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One of the fonder traits of financial luminaries is their penchant for sharing. The more generous ones dole out huge sums to charities, but in 2003, the rage was sharing the hedonistic details of their lives -- on video, in emails, in boardroom documents -- virtually every place where you'd think these brains would know better.

While some of these "legends" aren't much for smarts, their desire to share with us how rich they truly are -- and how stupid -- makes for a colorful recounting of the five biggest financial scandals of 2003. If it weren't for all the party paraphernalia they left behind, we'd be left with only one catastrophe to recount: the mutual fund mess.

Hence, our count of the top five financial scandals, and all the brains that made them happen.

1. Dick Grasso: Such Big Bucks for Such a Little Man

Everybody knew

New York Stock Exchange

Chairman Grasso was a big man on Wall Street, but not until 2003 did we find out he was $140 million big.

When the NYSE released documentation surrounding Grasso's pay package on Sept. 10, swarms of financial journalists elbowed each other to get a quick read of a decade's worth of information that would ultimately explain how a financial regulator like Grasso earned $140 million over his 35 years at the NYSE.

The answer? Grasso was blessed. In fact, Grasso himself was the first person to admit this: Every time he returned to the boardroom after the compensation committee voted him a huge bonus, Grasso would say, "Thank you. I'm blessed." So who are we to argue with him?

Unfortunately (well, fortunately for Grasso), Committee Chairman Carl McCall didn't see the need to argue either. After bestowing upon Grasso huge bonuses, McCall said he didn't fully understand how large Grasso's entire pay package actually was. These are embarrassing words when stated by the former comptroller for the State of New York. And even more embarrassing when it was later revealed that Grasso was promised another $48 million for good measure.

So Grasso made a couple of bucks -- so what? Wasn't he the guy who single-handedly turned on the lights at the exchange after Sept. 11, 2001? Yes, Grasso helped trading resume after the terrorist attack, but so did the NYSE's employees, traders and specialists -- none of whom received a $5 million bonus for doing so. (Although the year in scandals also revealed that some specialists on the floor have been taking their bonuses whenever they please.)

The problem was that Grasso's paycheck was being signed by the firms he was being paid to regulate. So in a post-


world, Grasso had to go. He was an anachronism to a different time in corporate America, a time when backslapping substituted for corporate governance. But with $140 million, the nation's highest-paid regulator will be going away in style.

2. Martha Stewart: Phone On but Nobody Home?

For Stewart, it was the alleged alteration of a phone log back in January 2001 that kept her in the headlines in 2003.

At her court date next month, the government will try to prove that Stewart altered a telephone log about a Dec. 27, 2001, call from her Merrill Lynch broker Peter Bacanovic's assistant Douglas Faneuil.

It was during that call that Bacanovic conveyed to Stewart through Faneuil that Stewart's pal Sam Waksal, the founder of

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, was dumping his ImClone shares. Bad news from the Food and Drug Administration about ImClone's Erbitux was on its way, so Waksal told Baconovic, who allegedly told Faneuil to tell Stewart to sell. So she sold.

And who did Stewart tell? She told the government she can't recall that particular call. Perhaps she would have been better off telling the government she had a bad cell-phone connection. The calls were made during a trip via private jet from her home in Connecticut to a resort in San Jose Del Cabo, Mexico. And we all know how shaky cell-phone service can be on private jets, right?

Actually, it wasn't the private planes that did in Stewart. She partied through the bubble with the rest of us. What hurt Stewart was that she should have known better, and it's not just because the former stockbroker and member of the NYSE board of directors should be at least slightly familiar with laws concerning insider trading.

Stewart should have known better because anybody born before the Watergate scandal should have it branded into their brains that it's not the crime that sinks you, it's the coverup. And for a woman so detail-oriented, her coverup was sloppier than a frat house kitchen.

3. Frank Quattrone: E-Mail Loser

As with Stewart,

Credit Suisse First Boston

tech banker Quattrone's troubles in 2003 were the result of dubious exchanges that occurred years earlier. But while Stewart was allegedly fiddling with her phone logs, Quattrone was busy trying to eliminate emails.

On Dec. 3, 2000, Quattrone exchanged emails with the

Credit Suisse Group


unit's general counsel at the time, David Brodsky. In their email conversation, Brodsky alerted Quattrone that federal investigators were going to start looking into how initial public offering shares were allocated to Quattrone's clients.

As you may recall, Quattrone's clients, mostly tech executives referred to as the "friends of Frank," were said to have benefited greatly from the star tech banker's ability to "spin" hot IPO shares. Spinning is the practice of giving selected customers access to potentially profitable shares of companies as a reward for giving business to the firm. The

Securities and Exchange Commission

frowns upon spinners. And if you have ever seen Quattrone, you know that he is a man of smiles, not frowns.

So two days after receiving Brodsky's electronic tip-off, Quattrone forwarded an email to his employees telling them it was "time to clean up those files." The government says this was obstruction of justice. Quattrone says it was a simple endorsement of routine policy.

That was enough to stump the jury. In October of 2003, eight members of the jury sided with the government, and three members of the jury showed themselves to be Frank's truest friends by voting with Quattrone.

The hung jury gave Quattrone plenty to smile about, at least for a short while. In a letter to U.S. District Court Judge Richard Owen, who presided over the first trial, U.S. Attorney James Comey wrote, "The parties have advised the court that they intend to proceed with a retrial of this matter." The government is going to take another run at Quattrone. If Quattrone is found guilty, Quattrone faces a maximum penalty of 25 years in jail, though federal guidelines recommend a lighter sentence. That's nothing to smile about.

On the other hand, Quattrone pocketed an estimated $200 million between 1998 and 2000 alone. That's nothing to frown about.

4. The Kozlowski (and Paris) Videos

Mention "bubbles" to Paris Hilton and she probably thinks you are talking about champagne. But it was her bubbly videotape that made her not the brightest but the shiniest star of 2003. What makes her video a bigger scandal than the video of Kozlowski's June 2001 $2.1 million birthday bash in Sardinia?

Nothing. Hilton hasn't done anything to deserve her vault from hotel heiress to A-list late-night guest. At least Koz, the former CEO of



, did a little work before heading straight to video. Prior to his current role as courtroom defendant, Koz was a Wall Street superstar and a certifiable version of the American dream. He worked hard, rose through the ranks and eventually reached a point in his career where he felt justified in looting his company.

Kozlowski's Sardinia birthday party video, which came to light in 2003, screams nouveau riche so loudly that you almost feel sorry for him. An ice statue that urinates vodka? A birthday cake in the shape of a woman's torso with sparklers? Even our pal Martha never baked up anything that creative (yet).

Sorry Koz, we enjoyed the scenes from your Italian job, but when it comes to best video scandal of 2003, we will always be remembering Paris.

5. Eliot Spitzer's Sneak Attack

Unlike the rest of this year's scandals, the mutual fund imbroglio didn't spring from Internet-era profligacy, but it did come from greed, something our 2003 class of duds knows something about.

Nobody on Wall Street expected New York State Attorney General Eliot Spitzer's next target to be the mutual fund industry. And even Spitzer himself probably didn't realize the extent of the problem in September, when he announced a $40 million settlement with hedge fund

Canary Capital Partners

over allegations of late trading and market-timing.

Probably most shocked by the announcement was the SEC, but it wasn't the revelations of foul play in the mutual fund industry that caught the SEC off guard. What really shocked the SEC was that Spitzer upstaged it.

Since we are still waiting for the emails, phone logs and videotapes from the mutual fund scandal to be leaked, all we can do is ask the two most impolite questions imaginable:

(1) How much money was made? The cost to long-term mutual fund holders is truly immeasurable.

(2) Who was sleeping with whom? Everybody was sleeping with everybody. It was an orgy of brokers, hedge funds and mutual funds all getting together to take advantage of the unwitting mutual fund investor. And worst of all, the SEC was sleeping on the job.

Since Spitzer's September stunner, fund executives keep falling like dominos. Money keeps getting yanked from dirty funds and put into clean funds. And clean funds keep winding up dirty.









Bank of America

(BAC) - Get Bank of America Corp Report

and other household names have been implicated. The list will surely grow longer.

According to an SEC survey last month, half of the 88 largest mutual fund firms had market-timing agreements with favored clients. Market-timing is not technically illegal, but most funds have rules against it, since it hurts long-term investors. Even worse, the SEC survey found that late trading, which is very much illegal, may have occurred in as many as 10% of those mutual funds. The SEC also found that 25% of the major 34 brokerage firms it surveyed had permitted after-hours trading. Late trading is when customers submit a trade after the funds' 4 p.m. close but are blessed with the pre-4 p.m. price.

In horseracing terms, it's analogous to past-posting or betting after the race is over. In movie terms, it's similar to the plot of

The Sting

. In financial terms, Spitzer's "cesspool" characterization pretty much nails it in our book.

At least until we see the video.