America, once the undisputed superpower, faces mounting trade and fiscal deficits… or so begins Gordon Gekko’s infamous “Greed is good” speech. This iconic opening from Oliver Stone’s “Wall Street” (1987) recently resurfaced in my mind, prompting a re-evaluation of the film. While many consider it a cinematic critique of 1980s excess and Wall Street corruption, I’ve always been intrigued by a different angle: were Gordon Gekko’s actions actually illegal at the time?
Far from offering a traditional film review, I want to delve into the legal complexities surrounding Gekko’s downfall. While “Wall Street” undoubtedly captures the zeitgeist of an era fueled by ambition and unchecked capitalism, it also raises a fascinating question: could Gordon Gekko have been acquitted on securities fraud charges, at least based on the laws of the late 1980s?
Before dissecting the specific accusations, three crucial points are necessary. Firstly, securities law has significantly evolved since the 1980s. My analysis hinges on the legal principles prevalent during that era, pre-dating many of the stricter regulations implemented in the wake of scandals like the Boesky affair. Secondly, while I’ve considered the nuances between UK and US law, some transatlantic legal interpretations might still linger. Lastly, Gekko faced charges of both securities and tax fraud in the film. As Oliver Stone provides scant details regarding his tax arrangements, I will focus solely on the securities fraud allegations.
The charges against Gordon Gekko can be broadly categorized into six key areas, mirroring the film’s narrative:
1. BlueStar Airlines: The Initial Trade
Bud Fox, eager to impress Gekko, seeks inside information. His father, Carl, a union representative at BlueStar Airlines, inadvertently reveals that the FAA is poised to rule favorably in a safety case, paving the way for lucrative new routes. Bud relays this information to Gekko, who promptly invests in 20,000 shares.
Potential Charge: Insider Trading. Trading on non-public, material information certainly sounds like insider trading, and in today’s legal landscape, it likely would be. However, the 1987 definition of “inside information” was narrower. It typically required the information to originate from a defined “insider.” Whether Carl Fox, a union representative, qualified as a legal insider was debatable at the time. Furthermore, Gekko could reasonably argue that Bud Fox, not being a BlueStar insider himself, couldn’t definitively confirm the information’s insider origin. Given that the information had already been divulged by at least two individuals (Carl Fox and the comptroller), Gekko could plausibly claim he believed it was already circulating within aviation circles, despite Bud’s insistence on secrecy. Establishing insider trading on this basis would have been a significant legal hurdle.
2. Anacott Steel: Following Sir Lawrence Wildman
Seeking further “hot tips,” Gekko instructs Bud to investigate Sir Lawrence Wildman. Bud tails Wildman, discovering he’s flying to Erie, Pennsylvania, Anacott Steel’s headquarters. Gekko, recognizing an opportunity for greenmail against his rival Wildman, directs Bud to accumulate Anacott stock and leak the coded message “Blue Horseshoe loves Anacott Steel” to the Wall Street Journal.
Potential Charges: Insider Trading and Market Manipulation. The insider trading charge appears even weaker here. Following someone, observing their destination, and deducing their potential target based on publicly available information (airline destinations) hardly constitutes illegal activity. Information becomes “inside information” when it’s specific and non-public. The fact that a corporate raider flies to a company’s headquarters is arguably neither sufficiently specific nor inherently non-public. This entire sequence, portrayed in the film as Bud’s moral descent, seems legally sound, or at least highly defensible, under the 1980s framework.
The market manipulation charge is more nuanced. Gekko’s calculated leak to the “Heard on the Street” column borders on “pump and dump” schemes, which are heavily regulated today, especially in the internet age. However, in the less regulated 1980s, feeding tips to financial journalists about major investors’ activities was a common, albeit ethically questionable, practice. Crucially, the information relayed – “Blue Horseshoe loves Anacott Steel” – wasn’t factually false. Blue Horseshoe was indeed Gekko’s trading company, and he genuinely held a substantial long position in Anacott Steel when the tip was disseminated. This action likely falls into a legal grey area, potentially warranting SEC scrutiny and disciplinary action, but less likely to result in criminal charges. Furthermore, the subsequent greenmail, while morally repugnant to figures like Sir Lawrence Wildman, was and remains a legal, if aggressive, business tactic. Buying stock with the intention of selling it back at a premium is not inherently illegal.
3. Fairchild Foods, Rorker Electronics, and Morningstar: The Burglary and Information Theft
The film depicts Bud bribing a cleaning service employee to gain after-hours access to his friend Roger’s law firm. He proceeds to photocopy confidential documents related to upcoming mergers and acquisitions, information he then uses to trade for Gekko.
Potential Charges: Conspiracy to Theft and Insider Trading. Bud Fox unequivocally crosses legal lines here, committing burglary and securities fraud. The critical question is Gekko’s culpability. Gekko, from his beach house, instructs Bud: “You done good, but you gotta keep doing good. I showed you how the game works, now school’s out […] You don’t understand. I want to be surprised …astonish me, sport, new info, don’t care where or how you get it, just get it […] This is your wake-up call. Go to work.” While the film intends this dialogue to imply Gekko’s encouragement of illegal activities, proving in court that “don’t care where or how you get it, just get it” explicitly translates to “commit felony burglary” would be an uphill battle.
Gekko’s request for Bud to trade through nominee accounts and act with limited power of attorney appears suspicious, seemingly designed to obscure a direct link to Fox. However, circumstantial evidence alone is insufficient for conviction. Gekko could plausibly argue these arrangements were intended to emphasize to Fox that he alone would bear the responsibility for any illegal actions, precisely to deter him from breaking the law. The crucial point is that Bud Fox never becomes a formal employee of Gordon Gekko; he remains employed by his brokerage firm throughout the film. This employer-employee distinction significantly weakens any supervisory duty Gekko might have had over Bud’s actions.
4. Teldar Paper: The “Greed is Good” Speech and Corporate Raiding
This pivotal scene showcases Gekko’s infamous “Greed is Good” speech during the Teldar Paper shareholders’ meeting. Gekko aims to take over Teldar, a company he deems mismanaged, with the intention of breaking it up.
Potential Charges: None. Corporate raiding, while often perceived negatively, is not illegal. Gekko’s acquisition of Teldar stock, even with the intention of restructuring the company, is within his legal rights. He began buying Teldar stock before even encountering Bud Fox and, by the shareholder meeting, had become the largest single shareholder. Gekko’s critique of Teldar as “leveraged up to the hilt like some piss-poor Latin American country” might be harsh, but it reflects his assessment of the company’s financial health, not illegal manipulation. Oliver Stone likely included this scene to underscore that much of what Gekko does, while ethically dubious to some, operates within the boundaries of the law. This mirrors the reality of figures like Ivan Boesky, upon whom Gekko is loosely based. Boesky’s imprisonment stemmed from relatively minor insider trading charges, while his substantial wealth and influence derived from perfectly legal, though sometimes recklessly speculative, junk bond deals.
5. BlueStar Airlines: The Second Takeover Attempt and Betrayal
Gekko sets his sights on BlueStar Airlines for a similar breakup strategy. He enlists Bud’s help, expecting union cooperation. During negotiations, Gekko makes promises to Bud, hinting at a turnaround and Bud’s potential presidency. However, Bud discovers Gekko’s true intentions: to raid the pension fund and dismantle the company. As Gekko accumulates stock, Bud and the unions publicly withdraw their support, causing the stock price to plummet. This allows Larry Wildman to swoop in and acquire BlueStar, outmaneuvering Gekko.
Potential Charges: Insider Trading, Market Manipulation, Breach of Takeover Regulations. Ironically, in this scenario, Bud Fox becomes the central figure engaging in potentially illegal activities. Conducting due diligence for a potential acquisition, including discussions with union representatives, is not illegal. Gekko’s intention to bid for BlueStar is privileged, not “inside information” in the legal sense. However, Bud Fox’s betrayal is where illegality enters the picture. Taking confidential information from Gekko and passing it to a rival like Wildman, knowing it’s privileged, and then Wildman acting upon it, constitutes a clear case of illegal insider trading. Wildman’s absence from indictment at the film’s end is a significant plot hole. Furthermore, Bud’s encouragement of Gekko to sell a block of stock at $17, knowing Wildman’s impending $18 tender offer, reeks of blatant fraud.
While pension fund raiding was a controversial tactic, it wasn’t necessarily illegal in itself. Acquiring a company with an overfunded pension fund and using surplus assets after providing “minimum annuities” to fund members was a legally permissible, though ethically questionable, practice at the time. However, this point becomes moot as Gekko never gains control of BlueStar. In today’s climate, finding a US regional airline with a significantly overfunded defined benefit pension fund ripe for plundering would be highly improbable.
6. Brant Resources, Transuniversal, and Fulham Oil: The Unspecified Companies
These companies are briefly mentioned by Gekko to Bud shortly before their physical altercation. Given the context and lack of further details in the film, it’s unlikely any charges related to these companies would have been legally sustainable.
Conclusion: A Legal Travesty or a Subtly Crafted Critique?
“Wall Street” culminates in Gordon Gekko’s indictment, seemingly for securities fraud. However, a closer examination of the film’s events through the lens of 1980s securities law suggests a different narrative. Gekko, portrayed as an aggressive financier operating largely within legal boundaries, becomes a victim of a dishonest stockbroker’s fraudulent actions. Bud Fox’s betrayal and potential collusion with Larry Wildman appear to be the more legally culpable offenses, yet Wildman escapes indictment. Gekko, in this interpretation, suffers a potential miscarriage of justice.
Oliver Stone, a director known for his nuanced social commentary, might be subtly conveying a profound message: the true exploitation on Wall Street doesn’t always stem from overt illegal acts. Instead, it can operate within the confines of the law, leveraging power and wealth to the detriment of the working class. As the saying goes, “money is power,” and those who wield it often have little need to break the rules when the rules themselves are already advantageous.
For further insights into the complexities of Wall Street and finance, Doug Henwood’s book, also titled “Wall Street“, offers an excellent exploration. It serves as both an accessible introduction to finance and a critical political analysis, earning its place on any discerning reader’s bookshelf, perhaps even alongside “Principles of Corporate Finance” by Brealey and Myers.
