In a matter of weeks, the class of 1999 will show up for its first day
in the analyst training program at Morgan Stanley Dean Witter &
Company. Oh, what a lucky–or is that fortunate ?–bunch they
will be. There, in the Times Square headquarters of the bluest of the
blue-chip investment banks, they will be trained in the art of making
money, for their clients and themselves. They will learn to keep their
dealings secret and their relationships lucrative and warm. They will learn
how to work hard, perform menial tasks, keep grueling hours. But if they
are any good, they will learn quickly enough that there is a dividend. If
you work hard, remain discreet, nurture those connections–the world is
yours.
In other words, they will have to be everything that Christian Curry was
not. A little over a year ago, Mr. Curry, then a 24-year-old renegade
analyst from a good school and a better family, got fired for his workplace
indiscretions: namely, allegedly padding his corporate expense account with
purchases like $300 worth of designer shoes (if not for appearing naked and
aroused in a gay pornographic magazine).
No sooner had Mr. Curry’s cubicle been cleared than an old
frat-house acquaintance, a student of big-business etiquette with a knack
for finding stuff out, began burrowing his way into Morgan Stanley’s
inner circles. The burrower was Charles Joseph Luethke, a 29-year-old man
with an uncertain past and a penchant for scandal. By ingratiating himself
with business associates, police and even Mr. Curry, Mr. Luethke scored
himself $10,000 for getting his old friend arrested on charges of computer
hacking. The Manhattan District Attorney’s office has dropped the
charges, and Mr. Curry has filed a $1.35 billion wrongful-termination suit
against his former employer, charging discrimination.
And, in an ironic twist, it’s Mr. Luethke and Morgan Stanley who
are now being investigated by the District Attorney. And, The
Observer has learned, the New York Police Department has launched an
internal probe into its dealings with Mr. Curry and Mr. Luethke, too.
It’s a tale of manners, really. Morgan Stanley is all about
discretion and connection. Mr. Luethke mastered the art of making–or
pretending to make–connections. He got in. Mr. Curry, on the other
hand, either did not know how to be, or chose not to be, discreet, both in
his expense account filings and in his appearance in the gay porn magazine.
He got kicked out. He violated the code: In exchange for money and power,
you protect that of others. You don’t embarrass the firm, even
inadvertently. You don’t talk to the press about the firm. (Remember
Phil Potter, the Yalie who got himself fired in 1997, and upbraided by
Morgan Stanley president John Mack, for telling The New York Times
what he was buying with his bonus.) And you don’t try to steal from
the firm.
Of course, everyone bends the rules a little bit. In the training
program at Morgan Stanley, analysts often take liberties in their expenses.
According to several former Morgan Stanley trainees, the analysts are often
forced to cover expenses on business trips for their superiors. Sometimes
the analysts, who are making, say, $70,000, have to carry tens of thousands
of dollars on their credit card, paying the interest on the float until the
back-office bureaucrats reimburse them months later. So maybe you charge a
couple more bucks for a cab, or take a friend out to dinner and write it
off. It’s a way to keep things fair, in an old prep-school
honor-system kind of way.
But if Morgan Stanley’s reply to Mr. Curry’s suit is to be
believed, Mr. Curry went much further than that. According to Morgan
Stanley’s answering court papers, filed in Manhattan’s U.S.
District Court for the Southern District on June 7, he filed more than 150
fraudulent expense claims, seeking “hundreds of dollars of
reimbursements” for such personal purchases as Cole-Hahn shoes, liquor
and car washes. They also allege that he fabricated expenses on a stolen
pad of receipts and offered a Morgan Stanley employee a $100,000 bribe to
plant racist e-mails.
Mr. Curry’s attorney, Benedict P. Morelli, scoffs at Morgan
Stanley’s explanation. “I think it’s ridiculous to say that
there were 150 abuses of the expense account … But let’s assume
for a moment that there’s 150 of these, and in their own answer, they
say there’s 150 and it amounts to hundreds of dollars! … So each
one was what, a buck? Maybe down there in the ivory tower where they sit,
these things sound plausible. But to a jury, these sound
ridiculous.”
Ridiculous or not, the point Morgan Stanley is trying to make is, it
wasn’t race. The firm says 20 percent of its U.S.-based employees are
minorities, including some managing directors like Bill Lewis, who helped
Mr. Curry get his job, according to Morgan Stanley’s papers. But when
asked how many people have been fired for expense account abuse, a
spokesman for Morgan Stanley said he couldn’t comment.
In fact, in the eyes of many observers, it had nothing to do with
expenses or race. Before the response was filed on June 7, people all over
Wall Street were snickering at Morgan Stanley’s response to the suit.
Expenses? Yeah, right. It was the cock shots! But now that
they’ve seen Morgan’s explanation for the expense account
violations, they get it. They’re buying the allegations, and what the
firm says this guy was doing you just don’t do. He wouldn’t
play the game.
The Blue-Chip Thing
Despite Mr. Curry’s allegations of racial
discrimination–and his depiction of a plantation atmosphere at
Morgan–some say the fallout of the District Attorney’s
investigation is part of a larger picture, that of Morgan Stanley’s
1997 merger with Dean Witter Discover & Company. “There is sort of
an internal battle at Morgan Stanley between [their] people and the Dean
Witter people,” said a source familiar with the firm’s inner
workings. “You can imagine the two different cultures, I suppose:
Morgan Stanley, being this old-line investment bank, and Dean Witter up
until recently being Sears–a retail investment service.”
Of the Morgan Stanley Dean Witter in-house lawyers who were involved
with Mr. Luethke, the two who have been suspended with pay, Monroe
Sonnenborn and Carol Bernheim, hail from the Morgan Stanley side of the
bank. Christine Edwards, the general counsel whose roots are strictly Dean
Witter, has not yet been censured for her dealing with Mr. Luethke, which,
according to the firm, consisted of not disapproving the $10,000 payment
when she learned of it just before it was wired.
But some of the shrapnel is beginning to clip Ms. Edwards, a University
of Maryland at Baltimore law graduate and former Sears Roebuck clerk, who
lacks the blue-chip corporate-law-firm pedigree typical of a general
counsel at a bulge bracket investment bank. When news accounts reported
that she approved the payment, people inside Morgan Stanley have grumbled
among themselves and to The Observer about how she came to be
general counsel. After the merger, she beat out Jonathan Clark, Morgan
Stanley’s general counsel and an accomplished corporate lawyer from
Davis Polk & Wardwell (and, of course, Yale). A Davis Polk guy,
the grumbling goes, would not have allowed this kind of thing to happen.
He’d have known how to handle it. He was one of us .
Now the whole Curry affair shows signs of becoming a cudgel that can be
wielded by the Morgan Stanley and Dean Witter factions in their continuing
but very quiet battle for turf at the merged firm. When it comes to company
politics, any leverage will do, even if exercising it hurts the firm
publicly.”People on the Morgan side have been waiting for someone on
the Dean Witter side to make a mistake,” said one banker familiar with
the firm. “So now the shitstorm is bigger than the kid who started it
[Mr. Curry].”
In a cryptic statement given to The Observer on June 7 and
apparently in response to Morgan Stanley’s court papers, Mr. Luethke
alluded to such an intrafirm dispute. “Obviously this issue is now
being used to oust the Dean Witter people and has nothing to do with
me,” he said.
Wesley McDade, a spokesman for the firm, would only say, “Morgan
Stanley’s answer, as filed in Federal court, speaks for
itself.”
It’s Who You Know
But even amid the turmoil, some things never change. The oldest game
in town, making connections and dropping names, still gets you places.
That’s how Mr. Luethke managed to work simultaneously with Morgan
Stanley, the Police Department and Mr. Curry, without tipping his hand
significantly to any of the parties–and in the process make a $10,000
profit. To set up Mr. Curry in the sting last August, Mr. Luethke played
the name game. Through a series of personal acquaintances, ranging from Mr.
Curry to partners at one of the city’s largest employment law firms,
Mr. Luethke schmoozed his way into the confidence of top in-house lawyers
at Morgan Stanley.
Mr. Luethke did not return calls for this story by press time and did
not appear for a scheduled June 8 meeting.
One of Mr. Luethke’s key conduits into the firm was his
acquaintance with a number of attorneys at Epstein, Becker & Green, the
employment-law firm where Carol Bernheim, one of the suspended Morgan
Stanley lawyers, was a partner until 1997. A source close to the firm said
that Mr. Luethke met George Sape, a partner at Epstein Becker, and several
other firm attorneys at a Manhattan cigar bar, sometime before Mr.
Curry’s arrest last year. The source said Mr. Luethke approached the
lawyers in a friendly way, using his knowledge of fine wine–an
interest shared by Mr. Sape–to make conversation. “Luethke seemed
quite normal,” said the source. “There was nothing unusual about
him.”
At some point, Mr. Luethke began playing softball for the firm’s
team–an informal collection of lawyers and their friends–and may
have been introduced to founding partner Ronald Green in that way. (Neither
Mr. Sape nor Mr. Green has publicly admitted knowing Mr. Luethke.)
A spokesman for Epstein Becker confirmed Mr. Luethke’s acquaintance
with the firm’s lawyers. “Luethke was known to many attorneys at
the firm, just through social acquaintance,” said the spokesman.
“At some point, he came to an attorney at the firm with information
that was potentially damaging to a client of the firm, Morgan Stanley, and
Epstein Becker transmitted that information to Morgan Stanley, as I believe
is their professional responsibility to a client when that information
comes forward.”
Meanwhile, Mr. Luethke had been making some calls of his own to the
legal department of Morgan Stanley, ostensibly to warn officials directly
about Mr. Curry’s alleged plan. Sources close to the investigation
said that in so doing, Mr. Luethke presented himself as a patriot and a
good Samaritan, someone who had stumbled upon a situation potentially
damaging to Morgan Stanley who wanted to set things right. But officials
soon became suspicious of his motives.
Court documents say that at the time of Mr. Curry’s arrest, Morgan
Stanley’s in-house lawyers were unaware that Mr. Luethke was a witness
being interviewed by the District Attorney’s office–thus making a
so-called reward payment of $10,000 “entirely legal.” The papers
add, “The payment was a token of [Morgan Stanley’s] appreciation
for what Morgan Stanley then perceived as a valuable service of providing
information that prevented the perpetration of a fraud on the
firm.”
Mr. Morelli, Mr. Curry’s lawyer, said that explanation is
“preposterous … If they thought it was so prim and proper, why
did they keep it from the D.A.? … All this stuff doesn’t
wash.”
In fact, it wasn’t long after Mr. Curry’s successful setup and
ensuing arrest that Mr. Luethke attempted to extort money from the firm,
according to court papers. “[A]fter that payment, the informant made
vigorous and extensive efforts to extort larger sums from Morgan
Stanley,” reads Morgan Stanley’s June 7 answer. “That
extortion campaign has involved threatening telephone calls, an extensive
letter-writing campaign to numerous executives of the firm … [and]
extensive efforts to promote and encourage press attention to the
informant’s gross mischaracterization of the $10,000 payment.”
According to a police source with knowledge of the District
Attorney’s current investigation, the criminal charges against Mr.
Curry were dropped largely because of prosecutors’ frustration with
Morgan Stanley and its initial failure to inform them about the $10,000.
Daniel Castleman, the District Attorney’s chief of investigations, did
not return calls for comment.
Still, another source close to the investigation countered that the
firm’s officials had come clean shortly after Mr. Curry’s arrest.
“They said at the time of the arrest, the D.A. did not know about the
payment,” said the source, “but in early October, they were told
about it.” That was about the time Mr. Luethke was turning up the heat
on his demands for compensation, according to Morgan Stanley’s court
papers.
The police source added that the Police Department is conducting an
internal investigation based on allegations in Mr. Curry’s civil
complaint that at least two detectives or officers received bribes for
setting him up. Police Department spokesman Marilyn Mode confirmed the
investigation.
A Youthful Indiscretion
In an industry where a trip with clients to a strip joint is often
described in expense reports as “the ballet,” the alleged padding
of Mr. Curry’s expense account may seem a rather innocuous
transgression. But Mr. Curry’s 10 months at Morgan
Stanley–indeed, his years as an undergraduate at Columbia–paint a
picture of a hotheaded young man who continually made enemies among peers
and superiors alike.
Case in point: his nude, eight-page photo spread in Playguy , a
pornographic men’s magazine. Though identified in the magazine only as
“Leigh,” Mr. Curry’s middle name, one picture after another
displays the former banker in a state of arousal, cupping his genitals as
he mugs for the camera–not the sort of exposure one would expect for a
young man whose parents, a respected surgeon and his wife, were the first
black members of Southampton’s exclusive Shinnecock Hills Country
Club. In past conversations with The Observer , even Mr. Curry
has described the photographs as humiliating. His explanation has been that
it was a youthful indiscretion done to save him the $1,000 cost of a shoot
for his fledgling modeling career, launched years before his employment at
Morgan Stanley. He admits to signing a waiver for the pictures’ use,
but never thought they would come back to haunt him in this manner.
In fact, Mr. Curry was so concerned about the photos, he claimed, that
his initial contact with Mr. Luethke during the summer after his firing was
motivated by fear that Mr. Luethke would show the Playguy pictures
to Mr. Curry’s family.
Why would Mr. Luethke do that? The relationship between the two has been
confusing, varying between outright hostile and downright friendly. That
they are friends at all is testimony to Mr. Luethke’s social skills
and a mutual fear based on bizarre and convoluted allegations they have
made against each other.
Despite hailing from the upper-middle-class suburb of Haworth, N.J., it
is unclear whether Mr. Luethke, whose parents teach at the local high
school, was to the manner born. (Called for comment, his stepmother, Penny
Luethke, said, “There’s really nothing I can tell you.”) But
his machinations reveal a savvy when it comes to schmoozing that suggests
years of careful study.
“Luethke is a prime character in this entire enterprise,” said
Milton Allimadi, editor of the weekly Black Star News , which has
covered Morgan Stanley’s involvement in Mr. Curry’s arrest.
“He seems to know a lot of information, or have a lot of information
on everyone: the D.A.’s office, the N.Y.P.D., Morgan Stanley and
Christian Curry. He talks in riddles, and sometimes grand fantasies. But if
you listen carefully, he has a lot of solid information and facts and,
apparently, tape-recordings. And that’s why Morgan Stanley and the
D.A., Curry and the N.Y.P.D. listened to him originally.”
With additional reporting by Christopher R. Tennant and Sam
Charap.
