Morning Coffee: Are McKinsey & Co partners jealous of Goldman bankers? The extreme ways that Evercore MDs try to forget about work

It’s the case that’s got all of Wall Street saying “what on earth could he have been thinking of?”  Puneet Dikshit, a lead partner in McKinsey’s Manhattan practice covering the unsecured lending industry, is being sued by the SEC and facing criminal charges over alleged insider trading.  The authorities claim that, having been retained to advise Goldman Sachs on their planned acquisition of GreenSky, Mr Dikshit bought deep out-of-the-money stock options in his own and his wife’s name.

Sharp intakes of breath all round.  In fairness to Puneet Dikshit, these are charges rather than convictions, and his lawyers are at present not making any comment.  But the claims made in the SEC and Justice Department press releases describe a pattern of actions that’s hard to understand.  For one thing, for a senior financial professional not to know that the SEC habitually monitors options trading around M&A announcements, and that a sudden spike in volume is always investigated is hard to credit. According to the complaint, he even Googled “what happens to options when company is acquired” from his work computer.

Not only that, but it might have been thought that McKinsey’s compliance training would have warned partners not just about insider trading, but specifically about insider trading relating to Goldman Sachs, since one of their former managing partners did prison time for exactly that offence. What could have motivated anyone to take such a crazy risk, for a total return of less than $500k?

Well (and repeating the caveat that this is still an ongoing case), one factor might be that although $500k seems like a silly amount of money to risk a banking career, 20 years in prison, and a reputation over, it’s not such chicken feed to a McKinsey consultant.  Although “The Firm” has a blue-chip reputation, pay there has not kept in touch with banking.  McKinsey partners seem to be on mid-ranking investment bank VP money – between $250k and $300k salary and an average of $402k total comp.

That’s obviously enough to live on, even in Manhattan.  But if you were earning that kind of money, close to the top of your profession, and your social group included people who were responsible for making strategic acquisitions at Goldman Sachs, you might possibly feel that your skills were being undervalued.  It’s not just the money, it’s the prestige; we notice that in the press release announcing the deal, which later fell through, McKinsey doesn’t get a name check, although all the law firms do.

Looking over the history of financial scandals, it’s surprising how often people seem to be motivated not by anything as simple as greed, but by hunger for relative status.  The desire to maintain a self-image as being smarter than everyone else can occasionally make people lose not just a moral compass, but all concept of common sense.  Perhaps the most important proverb to bear in mind in this industry is that the quickest way to go crazy is to spend too much time thinking about other people’s lives instead of your own.

Elsewhere, if you have a high-pressure job in investment banking, you might find it takes more than a few gin and tonics and a mindfulness podcast to wind down and switch off at the end of the week.  You might decide that in order to drive thoughts of work out of your mind completely, you need something that’s going to take up your whole attention.  Like, for example, being in a boxing ring.  Or working with autistic children.  Or perhaps doing something with your mom.

Or, like Chuck McMullan, you might try all three at once.  By day, he’s head of debt advisory at Evercore, but on Saturday afternoons, he helps his mother as an instructor at the class she runs, The Spectrum Bout in Gleason’s Gym in Brooklyn.  Junior bankers can be reasonably sure that there’s a couple of hours a week when he won’t be able to email them slides with “pls fix”.

Meanwhile …

“We are really asking and more specifically incentivizing our staff to come back on premises” – BNP Paribas is now at 30% back in the office in New York, aiming for 40% by the end of the year and 60% early in 2022.  Apparently they are aiming to make the place “more attractive” in order to bring people in to welcome all the Credit Suisse prime brokerage clients they’re expecting. (Bloomberg)

More tales from the wirehouses – in the latest case, two brokers are accused of having “conspired against” their colleague by scraping his name off client documents and spreading rumors that he was “unethical”, in the hope that clients would follow them to a new employer. (Advisor Hub)

Just as Florida becomes Wall Street South, New York is becoming Silicon Valley East, as all the major VC firms are setting up offices there.  (Forbes)

If a holiday falls on a Saturday, the NYSE is usually closed on that Friday, unless the day happens to be a quarter end.  Consequently, US equity traders periodically have to work a full day on New Year’s Eve, something which always seems to surprise and appall them.  It’s happening this year. (Bloomberg)

One of the greatest Wall Street movies ever made (and one that’s famous for getting the mechanics of commodity futures exactly right) is going to be turned into a musical.  Trading Places will have its world premiere in Atlanta, hopefully with a big number called “Turn The Machines Back On”. (Broadway.com)

Sajid Javid (the Deutsche veteran and UK Health Minister) claims that he took a £150,000 a year post with JP Morgan after resigning from a previous ministerial post in order to get “real-world experience”.  It’s important for everyone to keep their resume current. (Huffington Post)

Steve Schwarzman of Blackstone always used to complain that shareholders never attributed fair value to the company’s performance fees.  Blue Owl Capital took a more pragmatic view and decided that if the shareholders only wanted management fees, they’d happily pay the carried interest to employees. (Bloomberg)

A “divisive glass penthouse” sounds like a euphemism for something – Bill Ackman’s neighbours appear to have been charmed into letting him renovate his super-apartment with the help of Lord Norman Foster (FT)

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