Prosecutorial Discretion Is Misnomer
So what did Johnston do? His first action was to set up an illegal professional trading account at Spear Leeds and Kellogg. Was it illegal? Most assuredly.
[Policing Wall Street]
For those neophytes, who do not understand the corruption of the Department of Justice, prosecutorial discretion is what the United States Attorney uses to protect well-connected criminals. Explained simply the Manhattan District Attorney, United States Attorney, Securities and Exchange Commission, or any governmental agency cannot be compelled to prosecute a criminal. The United States Attorney can pick and choose whom he wishes to prosecute. (This is also true of the New York Stock Exchange, which for many years was permitted to regulate itself as a self-regulated entity.)
William Johnston, former partner in LaBranche and former President of the New York Stock Exchange, was one of those well-connected individuals, who flagrantly violated federal law and was protected from prosecution for his crimes. Johnston was a close friend of Dick Grasso, former Chairman of the NYSE, - he of the $190 million payday. (Much of this is public information and has been discussed in my lawsuit to obtain my FBI files and also has appeared previously on the internet.)
Until 1995 Johnston earned as much as $6 million per annum as a senior partner in LaBranche & Co., one of the largest NYSE specialist firms. Now most Americans would be happy to earn $6 million in a year. But not Johnston. No Johnston was not happy with $6 million per year. Johnston wanted more.
So what did Johnston do? His first action was to set up an illegal professional trading account at Spear Leeds and Kellogg. Was it illegal? Most assuredly. All members of a stock exchange must declare their brokerage accounts to the stock exchange to which they are a member and to the Securities and Exchange Commission so that the accounts can be monitored. This includes all accounts even pension accounts.
But Johnston did not declare this account. Johnston set up this account at Spear Leeds and Kellogg so that he could illegally trade the stock of AT&T- a stock in which Johnston served as the specialist. Now this was totally illegal. There was also the question of tax avoidance because these accounts were alphanumeric and the names did not appear on the account. This issue of tax avoidance and tax fraud was explained to me by Joseph Roffler, a former senior managing director in charge of professional margin at Spear Leeds. Also a clerk from Spear Leeds and Kellogg informed me of this arrangement.
In the 1990s there was a room called the QT (Questionable Trade) Room. This was a room where trades were trades, which did not match, were resolved.
So there was Billy Johnston, who was unhappy with his salary of $6 million per annum, illegally trading the stock of AT&T for his illegal personal account at Spear Leeds and Kellogg while simultaneously acting as the specialist in the account. And in the morning the untouchable Johnston would saunter into the QT Room to verify that his illegal trades had cleared.
This is totally proscribed by the Securities and Exchange Act, as quoted below:
Securities Exchange Act of 1934
(a)No member of a national securities exchange, while on the floor of such exchange, shall initiate, directly or indirectly, any transaction in any security admitted to trading on such exchange, for any account in which such member has an interest, or for any such account with respect to which such member has an interest, or for any such account with respect to which such member has discretion as to the time of execution, the choice of security to be bought or sold, or whether any such transitions shall be one of purchase or sale
It is even more onerous for specialists. And by the way no matter what the NYSE says there are no floor traders at the NYSE. There are specialists and floor brokers- but no traders since 1989. Any trading by a NYSE floor member for his personal account is illegal.
So with the law so airtight, how was Johnston able to trade illegally- especially if the NYSE and the United States Attorney knew of Johnston's illegal trading?
That question will be answered in subsequent columns.
Manfredonia, a former trader, was thrown out of Wall Street and shunned after he became a whistleblower.
"Speaking Truth To Empower."