New York State Attorney General Elliot Spitzer may be still investigating alleged Wall Street schemes to artificially inflate stock prices, but some people are sure it existed - because they engaged in it. Two ex-Wall Street workers tell correspondent Scott Pelley how widespread the practice was among some of the biggest brokerages in a report to be broadcast on 60 Minutes II, Wednesday, Nov. 13.
According to the insiders, one way the price of a stock rises artificially is with a practice known as laddering, a method of rigging the market.
"I think that agreement is tantamount to commercial fraud," says Arthur Levitt, former chairman of the Securities and Exchange Commission. "It's manipulative, it distorts the market for that stock, it misleads investors and, in my judgment, it's [a] manipulative practice that is a violation of United States securities laws."
Former Cramer and Company employee Nicholas Maier says manipulating stocks was widespread and he was asked to participate in it by most of the major brokerages.
"I know for a fact that it became such a commonplace activity that I did the same thing with most of the major investment banks," says Maier.
"It's total market manipulation. I never would have bought that stock…without that direct kickback…" As the prices climbed, the players that manipulated them began to sell the stock, says Maier. "We [sold the shares] as soon as we could. We knew the stocks had been manipulated higher…We knew that at some point this façade was going to crumble," Maier tells Pelley.
"I think that there will be criminal actions…," says Spitzer, whose investigation into the fraudulent analysis, spinning, and laddering of IPOs is ongoing. "We are examining documents…at various investment houses that lead us to believe that there are these agreements," he says.
Copyright 2002 CBS. All rights reserved.