Brokers, Bagmen, & Moles TRANSCRIPTS

[00:00:00] Tim: You go through the turnstiles and there's six banks of doors. And there were like tinted doors, and you, you open the door and you just... it just hits you. The noise, the clicking, the screaming, the energy—just everything—just hit me all at once.

[00:00:39] Anjay: This is Tim Hendricks. He's in his fifties now. He destroyed his vocal chords years ago, as tends to happen when you make your living shouting on the floor of the Chicago Mercantile Exchange.

[00:00:51] Tim: I was overwhelmed, just like, and my first thought was, what'd I get myself into?

It's like nothing I had ever seen before in my life.

[00:01:01] Stretch: It is the most intimidating fucking arena you could ever walk into in your life.

[00:01:07] Anjay: That's Stretch. Tim's best friend. In the ‘80s, Stretch, worked on Chicago's other famous trading floor, the Chicago Board of Trade.

[00:01:15] Stretch: It was like this crescendo of fucking energy and people and fucking madness and just, you cannot fucking describe it. So if you're new and at your first day, you're literally gonna shit in your fucking pants the second you walk onto the floor like that.

[00:01:29] Tim: It was just organized chaos that I wanted to be a part of. I was like, I might be over my head. But this is gonna be unbelievable. I just couldn't wait to get started.

[00:01:44] Anjay: Sounds exciting. Sure. But what the heck did Tim and Stretch actually do at these exchanges?

[00:01:49] Trading Game: Trade in wheat, corn, oats, soybeans, tevon, silver, gold, and more. At the Merc, we trade futures on cattle, hogs, pork bellies, lumber, foreign currency, interest rates, and stocks.

[00:02:03] Anjay: Don't worry if that all sounds confusing because it is, and we will learn a lot about these exchanges over the course of the season.

For now though, understanding how they traded those products is more important. The process was called open outcry.

[00:02:21] Trading Game: The trading is done using a system known as open outcry, the type of freeform auction, where their most important commodity is their voice. Trading can become quite physical. Getting pushed, shoved, kicked, and stepped on is all part of the game.

[00:02:39] Anjay: Open outcry is as chaotic as it sounds, and the craziest thing is, it worked. Open outcry drove trading markets around the world for centuries. Chicago in the eighties was no different. Traders were making money hand over fist. And they thought it was their own little secret, but what they didn't know is that someone was in their midst watching listening. And recording.

What you just listened to was a never before heard tape recording from an FBI agent standing in a Chicago trading pit.

Cornerstone evidence in a daring undercover sting designed to root out mass corruption in our financial markets.

At the time, it was the most expensive and elaborate investigation in the history of the FBI, and it was a massive victory.

[00:03:53] CBS: The FBI used extraordinary means to detect extraordinary fraud.

[00:03:58] Anjay: Or a failure of epic proportions.

[00:04:03] John Ryan: They were down there to expose a big cheating scandal. Did they? I don't think they did.

[00:04:09] Anjay: It all depends who you ask.

I’m Anjay Nagpal, and you are listening to Brokers, Bagmen, and Moles.

[00:04:28] Stretch: There was always just cocaine residue on every single dispenser in every stall, in every bathroom.

[00:04:34] MacNeil Leher News Hour: Four FBI men wearing wires infiltrated the Board of Trade and the Mercantile Exchange.

[00:04:41] Tim: There were some brokers that were making so much money that it was fuck you money.

[00:04:47] USA: The FBI used extraordinary means to detect extraordinary fraud.

[00:04:52] John Ryan: Are you kidding me? You gotta be kidding me.

[00:05:02] Anjay: Chicago in the ‘80s was a universe unto itself. We had our own foods like deep dish pizza, Chicago style hotdogs, and my favorite, the Italian beef sandwich.

[00:05:14] Italian Beef: Most people like it real juicy, so that's why I go from the pen to the sandwich fast.

[00:05:22] Anjay: We had our own epic political battles.

[00:05:25] Chicago: When will you recognize us? You're outta order. When will you recognize this whole procedure? Order! The way you're conducting that chair?

[00:05:32] Anjay: And of course, our teams brought the city together in a way that nothing else could.

[00:05:38] Chicago: Cubs win! Good Lord wants the Cubs to win. Here's Michael at the foul line. A shot on Ehlo. Good! Bulls win!

[00:05:48] Anjay: Put it all together and it felt like a small town, the biggest small town in the world.

But as Sean Connery notes and Brian De Palma's legendary 1987 film, the Untouchables, there was another side to the city.

[00:06:04] The Untouchables: Welcome to Chicago. This town stinks like a whorehouse at low tide.

[00:06:10] Anjay: Chicago's always been known for being a corrupt town, and the ‘80s were no exception.

[00:06:17] News: One of the Chicago mob's most colorful gambling bosses. Charged with a variety of federal crimes. He ran an outfit, gambling racket. The FBI began a secret investigation.

[00:06:31] Anjay: There was just so much happening in Chicago in the ‘80s. It's no wonder the Board of Trade and the Mercantile Exchange didn't get a ton of press—but they should have, because these sleepy agricultural exchanges quadrupled in size, bringing untold wealth to the city and its residents.

[00:06:49] Lewis Borsellino: It was like an ATM machine for traders, right?

[00:06:52] Jack Sandner: We're a trillion dollar market.

[00:06:54] Tim Ryan: No one knows that people are printing money here legally.

[00:06:58] Anjay: Along with that growth came a lot of jobs. Those jobs were often filled by hardworking and sometimes aimless guys like Tim and stretch.

[00:07:08] Stretch: My ma's cousin was a trader, so at Easter that one year, he's like, you should, you got the personality, you should work down on the trading floor.

And I was like, Oh yeah. Great, great. Anyway, I did that junior year and then when I went to college, I kind of always felt like I had that in the back of my mind. The trading floor.

[00:07:24] Anjay: Stretch and Tim grew up together. After high school, they went to college together, but it didn't go too well.

[00:07:31] Tim: It's the summer of ‘86 and he was trying to meet the mailman for his report card from college. He wanted to be the one to get it one day. Uh, he hears his mom walk in and just scream. Kevin!

[00:07:47] Anjay: Stretch's real name is Kevin Huff, but only his mom called him that. And only when she was really mad.

[00:07:55] Tim: Grade point average was a 0.60 or some crazy ass low number. He was kicked outta Western Illinois. You gotta be a real special person to be kicked outta Western Illinois.

[00:08:06] Anjay: Stretch called his mom's cousin and he was on the floor in no time. For Tim, it started with a friend's cousin.

[00:08:14] Tim: These two beautiful cars pull up and I know that one was like a Mercedes convertible and another was like a brand new Cadillac and they hop out. And it's his two cousins. And Louie, where, what do they do for a living?

Like they work at the, the Exchange. They work somewhere. It's like the CME or something?

[00:08:33] Anjay: The CME, the Chicago Mercantile Exchange. Also called the Merc.

[00:08:41] Tim: This had to have been January ‘86, so it wasn't a month later that Louie comes up to me and says, Hey, my dad headed in and he's got me down there. I'm like, no way.

And so I wanted to say, well, Louie, can you ask your cousins to get me down there? Cuz I didn't, didn't think I had an in, but within the next few days I went to my dad's and he's like, oh, I know. Uh, your Aunt Rosa's best friend is down there. Let me see if she can help.

[00:09:10] Anjay: Aunt Rosa's friend, she did help, and Tim got an entry level job on the trading floor.

These stories are typical of how people broke into the business. Unlike most Wall Street jobs in education and finance wasn't required. Once Tim stepped onto the trading floor, he couldn't believe his eyes.

[00:09:30] Tim: There were some brokers that were making so much money that they, you know, it was, it was Fuck You money.

Ebert, was this guy's badge. I just remember he had this brand new, you know, big ass Mercedes, and his garage wouldn't work—and being late for work would cost him more than driving through the garage. So he just blew through the garage door, shattered it, fucked his whole car up and got into work.

Just that story, I was like, Holy shit. Then I found out that the guy fills like, you know, $50,000 a day in business. I was like, oh, all right. I’d drive through my garage too. I guess.

[00:10:19] Anjay: Someone wrote a book about Chicago's traders around that time they called it, The New Gatsbys. But I gotta tell you, this was no high society.

[00:10:32] Stretch: I always felt a rite of passage of working on a trading floor with shitting in your pants. But what does that even mean? Shitting in your pants on the trading floor like you're a grown man. Well, basically the markets are so fucking busy sometimes you literally cannot leave the pit.

[00:10:48] Anjay: I don't know about you, but that doesn't sound like Jay Gatsby or even Nick Carraway.

[00:10:55] Stretch: The toilet paper dispenser was always just cocaine residue on every single dispenser in every stall, in every bathroom, and probably half the times you were taking a shit, you would hear somebody do a line in one of the stalls. It was just nobody even blinked. It was just part of the fucking workday.

[00:11:11] Anjay: The most unconventional workday in the world.

And after it ended, you had to blow off some steam.

[00:11:20] Tim: Average bar tab was easily $300 to $500 a night. Easy. We're talking, we're out five times a week for eight dudes. And mind you, we were not ladies men, we weren't trying to woo any women. We were just drinking. It's pretty sad now that I look back on it.

[00:11:43] Anjay: Adjusted for inflation. That's the equivalent of about $28,000 a month today. But for Tim, it was pocket change.

[00:11:54] Tim: I would guess. I made $300,000 to $400,000 in '89.

[00:11:59] Anjay: Tim was only 23 years old.

[00:12:02] Tim: Probably making $30,000 a month, for the son of a beer man. You know, I bought an Lincoln LSE, I got an Amex Gold card, and I'm making enough money where I can't spend it. Even with the boys, I can't spend it.

[00:12:22] Anjay: And while the traders were making Fuck You money, much of the rest of the country was struggling.

For much of the decade, unemployment was high and so was inflation. The ‘80s are known today as being the decade of greed in excess, but eventually the greed had its comeuppance.

[00:12:42] MacNeil Leher News Hour: Ivan Bosky, a leading Wall Street takeover specialist, agreed to pay a record $100 million penalty for insider trading abuses.

Former junk bond dealer, Michael Milken, was sentenced to ten years in prison today for violating federal securities and tax laws.

[00:13:00] Anjay: I was just a kid back then and I watched my poor immigrant parents break their backs to give us a better life.

So white collar crime has always been a mystery to me. Because when you have nothing, just getting a legitimate job in finance seemed like a home run. So why on earth would you want to throw it all away by cheating or stealing. That kind of greed, it was beyond my comprehension.

So I was completely floored years later when Stretch told me about another big financial scandal, one that, as it turns out, took place in my own backyard.

[00:13:37] Stretch: So in the late ‘80s, there was an FBI sting on the trading floor and they eventually indicted 46 traders for various trading offenses.

[00:13:47] Anjay: Another reason I'm so interested in the story is that for a few years after I graduated college, I was a trader at the Merc.

I traded there for several years before I decided it wasn't for me. So when I heard this story, I was in a state of disbelief. How is it possible that I never heard of it?

Stretch said the FBI suspected that brokers were ripping off customers on a massive scale. So they sent four FBI agents into the trading pits, wearing tape recorders to catch them in the act.

But after two years, the FBI agents couldn't grasp the fast-paced world of floor trading, and the operation came away empty handed.

My first reaction was laughter. I couldn't picture a clean-cut federal agent trying to mix in with a bunch of rough and rowdy Chicago traders who screamed at each other all day in the pits.

Plus, this was Chicago. Everyone knew everyone, especially in the clubby atmosphere of these exchanges. But it turns out that Stretch wasn't done telling me the story. In fact, he saved the best for last.

[00:15:00] Stretch: These guys had to lose millions of dollars along those couple years pretending to be a trader when they really didn't have any idea what they were doing. Probably, you know, adding to the cost of the investigation. What'd you get out of it? They just settled for these guys. 300 bucks. A hundred bucks, 600 bucks. They settled for the scraps.

[00:15:19] Anjay: According to Stretch, not only did the FBI fail to uncover any significant corruption, they also lost millions of taxpayer dollars trading in the markets.

Since I know traders have a propensity to exaggerate, I had to get the facts for myself. What I found made this investigation sound very different than the way I heard it from Stretch.

[00:15:44] ABC: 46 traders at Chicago's Mercantile Exchange and the Board of Trade were charged with hundreds of counts of racketeering and tax fraud.

[00:15:52] CBS: The government says this is the most wide-ranging use to date of the Racketeer Influenced and Corrupt Organization, or RICO Law against white collar crime.

[00:16:00] News: The activities uncovered at these exchanges simply cannot and will not be tolerated.

[00:16:07] CBS: The FBI used extraordinary means to detect extraordinary fraud.

[00:16:15] Anjay: At first, the press and the FBI made this out to be a massive criminal conspiracy, but over time it just seemed to fade from the headlines and there was no big picture assessment that told you who the winners and losers were. Did the FBI really botch this expensive, high stakes operation. I needed to talk to someone who was there.

Tim and Stretch were just starting out at that time, and they weren't in the same pits as any of the FBI agents, but they were able to put me in touch with someone who is there, someone whose life was completely upended by the investigation.

[00:17:21] Mrs. Ryan: Can I get anybody a cup of coffee or a Coke? Ice water?

[00:17:25] Stretch: We're fine.

I'm fine. Thank you. Nothing.

[00:17:30] Mrs. Ryan: You've all heard about my cooking.

[00:17:33] Stretch: She's a damn good cook. Believe me.

[00:17:36] Mrs. Ryan: I cook a great Coke.

[00:17:37] Anjay: In June, 2020, Stretch, and I flew out to Chicago and drove to suburban Glenview to see a former trader named John Ryan.

John was a local trader in the soybean pit at the Board of Trade. I'd never interviewed someone before, so I was nervous. But I was also really excited to talk to someone who actually traded with the undercover agents because they might be able to help me solve some of the questions I've been asking in this episode.

[00:18:04] John Ryan: I'm John Ryan. I'm, uh, 80 years old. Grew up in Oak Park, was at the Board of Trade from 1974 until they turned the lights out in 2016. So, uh, you just went down and you learned yourself, developed your own style and went from there. So, years went by pretty quickly.

[00:18:28] Anjay: So Stretch told me to ask about Whitey King.

[00:18:30] John Ryan: Who's that? Whitey King. He was a broker in the Corn Pit, and those days we worked from 9:30 to 1:15 and from 1:15 until about 8:30, 9:00 at night, he hit the saloon across the street and then went out and probably drank until uh 10:00 or 10:30.

[00:18:51] Anjay: A four-hour workday followed by nine hours at the bar. I wonder who made more money, the traders or the bartenders who served them?

[00:19:00] John Ryan: And usually a lot of times on his way home, he had an automobile accident. But he was always back at the exchange the next day at 8:00 or 8:30. So I mean, everybody knew Whitey King. Mostly because of his exploits after the exchange closed.

[00:19:16] Anjay: What about yourself? Did you indulge as well?

[00:19:19] John Ryan: Once in a while, but I had four kids at home and it wasn't a good idea to stay down there.

[00:19:27] Anjay: There were plenty of guys like John, family guys who came to work, made a good living and went home. When the markets closed, they stayed away from the coke in the bathrooms and didn't close the bar with Stretch every night. John just kept his head down and did his job.

The interview is going okay. So I decided to ask John about his interactions with the FBI moles.

So then in the eighties, FBI came down on the floor. And when did you first know that there was, you know, this investigation going on? When did you first hear about it?

[00:19:59] John Ryan: Oh, I think, uh, when they started visiting homes and interviewing people.

[00:20:05] Anjay: Did anyone ever come here, come here?

[00:20:08] John Ryan: No. I didn't live here then.

[00:20:10] Anjay: Well, sorry. Did anyone come to your house? To your house where you're living?

[00:20:14] John Ryan: Yeah.

[00:20:15] Anjay: Um, can you, can you tell us about it?

[00:20:17] John Ryan: I'd rather not.

[00:20:21] Anjay: I was not expecting that answer. Stretch told me John couldn't wait to tell the real story behind the investigation, so I was expecting some sort of revelation. I wasn't expecting to be completely stonewalled.

In retrospect, his refusal to tell me about the FBI coming to his house was a clear sign. The incident caused him a lot of pain and suffering, and that over thirty years later, he still hadn't come to grips with that ordeal.

But I wasn't ready to give up on learning more about the FBI agents, so I decided to reframe my approach.

Did you, is that someone you, you traded with? Did you get to know him at all?

[00:21:01] John Ryan: I know him a little bit, yeah. Yeah, yeah.

[00:21:05] Anjay: And, uh, what did, what did you think of him as, you know, as first impressions?

[00:21:09] John Ryan: I didn't have any impression of him.

[00:21:12] Anjay: Okay. And yeah, anything you don't feel comfortable with, obviously just, you know, that's fine.

[00:21:19] John Ryan: I don't think you want my opinion of it, so.

[00:21:23] Anjay: Oh, I absolutely do.

[00:21:25] John Ryan: Pardon me?

[00:21:25] Anjay: I said I absolutely do. I, I'd love to get your opinion.

[00:21:29] John Ryan: Well, I don't think it'd be beneficial for me. There are a lot of people that built their careers as a result in the government side as a result of, of that investigation, so.

[00:21:43] Anjay: Hmm

Hmm.

That was the only thing I could come up with. Pretty brilliant. Huh? I don't think 60 Minutes is gonna be calling anytime soon. Things went on like that for a while and then, suddenly, John just started to open up.

[00:22:00] John Ryan: The judge in the trial would sit there and draw circles, and his only reaction to anything was, We'll let the jury figure that out. And the jury was half asleep most of the time.

And I spent a four and a half months in court, and I don't want to tell you what it cost me to go through that both financially and mentally.

I ended up with two felony counts where my net profit was from filling an order. That I was to receive $1.25 for.

It was not a good, uh, situation, so it wasn't a good experience.

[00:22:44] Anjay: And then John answered one of my key questions. Did the FBI take the time to try to understand the trading floor or did they just show up totally unprepared?

[00:22:56] John Ryan: Things that were going on, they couldn't, they missed, they weren't prepared to do it, and they couldn't figure it out. They didn't, they didn't have the expertise. They had no idea. They just went around and tried to see if they could catch some people trading after the close or something like that.

[00:23:19] Anjay: Would you say there were guys that did kind of take advantage of, of the open outcry system?

[00:23:24] John Ryan: What do you think?

[00:23:26] Anjay: I would think there were a few.

[00:23:27] John Ryan: I think it's a, yeah, there were a lot.

Yeah, there were a lot.

[00:23:32] Anjay: That was the revelation I was hoping for. John just admitted that there really were a lot of traders taking advantage of the easily manipulatable, open outcry system. I needed to get a sense of the scale and the scope of a theft committed by the brokers in the trading pits.

Because if they were pocketing a few dollars or a few hundred dollars off of trades worth millions and millions, it's still wrong. But is it really worthy of mounting such a huge and elaborate investigation?

What do you think they were really down there for? Because this was an expensive operation their ultimate goal wasn't to, you know, to bust guys for these small amounts of money.

[00:24:13] John Ryan: Are you kidding me? You gotta be kidding. They were down there to get anybody, anybody they could.

They got what they wanted. They got indictments.

[00:24:26] Anjay: The interview didn't last too much longer.

Is there anything else you wanna say about that matter?

[00:24:33] John Ryan: About what?

[00:24:35] Anjay: About the FBI investigation?

[00:24:36] John Ryan: No. No.

[00:24:38] Anjay: But at least there was one thing John and I agreed on.

[00:24:41] John Ryan: They were down there to expose a big cheating scandal. Did they? I don't think they did.

[00:24:49] Stretch: Thanks, John. That's a wrap. That's a wrap on John as we say in Hollywood.

[00:24:55] Anjay: As we're packing up our stuff, Mrs. Ryan walked back into the room.

[00:24:59] Mrs. Ryan: I've learned a lot. I used to think the FBI was this great big thing. They're human like everybody.

[00:25:07] Anjay: She said, I used to think that the FBI was this great big thing, but they're human like everybody.

I think she was implying that like all humans, the FBI makes mistakes and that what they did to her husband was a mistake, and maybe that the whole investigation was a big mistake.

But this is the mighty FBI. They take down dangerous terrorists and mobsters and outsmart Wall Street's sharpest white collar criminals. So when they go all out with this extravagant and exhaustive investigation, I'm supposed to believe that they just made a mistake?

I see where Mrs. Ryan is coming from, but over the course of this series, we'll learn there's a lot more to unravel.

As we drove away from John's house, something he said really stuck out to me.

[00:26:03] John Ryan: There are a lot of people that built their careers as a result of that investigation.

[00:26:10] Anjay: I was too busy stumbling through my first interview to absorb that statement, but by the end of the season, we'll learn that this story doesn't just involve traders and FBI agents.

It's just as much about the powerful lawyers, politicians, and CEOs that were really running the show from behind the scenes. But like they say, hindsight is 20/20.

So I kept digging and I found a book about the operation. It's called—you guessed it—Brokers, Bagmen and Moles. It was a good overview of the investigation and it gave me some leads to follow up on.

One of the stories is about a young female bond broker. She was the only woman indicted in this case. When the FBI knocked on her door, she was in a bathrobe about to go to sleep. They told her if she didn't cooperate, she would go to jail for a long time and they'd take all her money and her belongings.

Well, she did cooperate and because she did, she was banned from trading for life. With no other options, she went to work at her dad's suburban dry cleaning shop until she got back on her feet and thirty years later, that's where we found her. Still working at the dry cleaners.

She wouldn't talk on the record, but she did tell us she thought this investigation was bullshit. Like John Ryan and many other traders we talked to for this podcast, she didn't understand why small time traders like her took the fall when there were so many worse offenders in a system that many say was broken.

Her story was heartbreaking and it motivated me to keep going. The interviews, they get better, I promise.

[00:28:05] T-Bun: My heart went right to my feet. They're G, they're the FBI.

[00:28:09] Ray Pace: Yeah. I didn't do anything wrong. You know, I mean, you, you're gonna shake your head and go, you're gonna think I'm lying, but it's, it's the truth.

[00:28:15] Vinny Provenzano: I think they were going after my boss and trying to get the guys up top, and they never got that far.

He came up to one of the moles in the yen pit and said, If you're a fucking mole, we're gonna fucking put a bullet in your head.

[00:28:28] Anjay: In the next episode of Brokers, Bagmen, and Moles, we're back in Chicago and we moved from the Board of Trade over to the Mercantile Exchange. It was just a few blocks away, but the traders there were a different kind of animal.

[00:28:45] T-Bun: I open the door. He says, you're going to jail. You normally down there, you know what goes on, you talk. We'll spare you jail. As how about this? Go fuck yourself.

[00:28:56] Anjay: Before you go. If you or someone you know might have a hot tip or just a funny story related to our show, we have a hotline for you. Call us at (646) 820-1452.

That's 646 820 1452. And please follow us on social media. Our handle is @entropymediaco. That's at Entropy Media Co where we'll be posting additional information about the case and awesome behind the scenes action.

This has been a production of Entropy Media in association with Stretch Productions.

This is Entropy's very first show, so if you've enjoyed it, please follow wherever you listen to podcasts and rate us there too. Every follow rating or even a personal recommendation to a friend or family member really helps.

I'm your host, Anjay Nagpal. Our showrunner and senior producer is Danielle Elliot.

Our producer is Jenn Swan.

Our executive producers are Tim Hendricks, Kevin "Stretch" Huff, and Dennis Stratton. Original music, sound design, and editing by Gerard Bauer.

Music clearances by Deborah Mannis-Gardner from DMG Clearances.

Production legal by Bruns, Brennan, and Berry.

Legal clearance/Fair use by Rachel Strom at Davis Wright Tremaine.

Fact checking by Delilah Friedler.

Show art by Rebecca Hendin.

And from Entropy Media, our in-house executive producer is Josh Fjelstad. Our head of operations is Nuna Eboe. Our project manager is Sebastian Perry. Our associate producer is Heidi Roodvoets. Our development coordinator is Simona Kessler.

And I wanna send a very special thanks to Laurie Morse and David Griesing.