Brokers, Bagmen, & Moles TRANSCRIPTS

[00:00:00] Anjay Nagpal: Previously on Brokers, Bagmen, and Moles.

[00:00:05] Lewis Borsellino: These two traders showed up, and I think it was Peter Vogel and another guy, and I said, you guys can't stand here. Go over there. They were wiretapping bookies saying, Hey, how are you gonna pay for this? Don't worry about it. I'll just steal it off the deck. The question always came up.

Do you know Lewis Borsellino? Do you know Joey Borsellino? First five years that I worked at the Merc, the Organized Crime Strike Force pulled all my trading records. The reason was I must be laundering money for the mob.

[00:00:36] Boiler Room: Every one of these cards is an opportunity. All right, these are good leads. People on these cards buy stock. Your job is to call them and get them interested in the firm. You're not actually selling stock yet, but you're selling a dream.

[00:00:49] Anjay Nagpal: This week we're gonna talk about a new kind of white-collar crime.

[00:00:53] Boiler Room: Okay? Do you remember ABC? Yeah, always be closing. That's right. Always be closing. Telling's not selling. That's the attitude you want to have. Okay.

[00:01:02] Anjay Nagpal: They're called boiler rooms, and in the year 2000, they spawned a hit film of the same name starring Giovanni Ribisi, Ben Affleck, and Vin Diesel. Boiler room scams involved shady stockbrokers using high-pressure sales tactics, to shill the stocks of worthless companies.

[00:01:23] Boiler Room: This entire business revolves around the phone. Play the numbers. This is a contact sport, meaning the more people you contact, the better you'll do. I can close anyone, anytime, anywhere in the country. Just gimme a phone number.

[00:01:35] Anjay Nagpal: Most boiler room brokers don't even have a license to trade, and they sell something called penny stocks. The stocks of tiny unregulated companies. These sleazy, slick haired conmen often target the elderly or those down on their luck with a promise of a once in a lifetime opportunity. Most of the time they don't even make an investment. They just put the victim's money in their pockets and leave town. Once in a while though they stick around a little too long.

[00:02:13] Boiler Room: Chris, I got arrested last night. The FBI arrested me. The FBI! Why the fuck would the FBI arrest you? What? What the fuck did you tell 'em? No, no, no. They knew everything, man. No, they had, they had photographs. They had, they had, they had tape recorded conversations. They, they, Chris, there was nothing I could do.

What did you do? Chris? Chris, the FBI are gonna raid the place in 20 minutes.

[00:02:40] Anjay Nagpal: The FBI busted a lot of boiler room scams in the late-70s and early ‘80s. A few big ones in particular caught the attention of the higher ups at the FBI. They sold a new and exciting financial product called Futures.

And the futures boiler room guys, when they were getting arrested, they said to the FBI, Hey, if you think we're crooks, you should see what goes on in Chicago.

[00:03:09] Randy Janett: The guys would always complain when they were arrested. Why are you messing with us? We're small potatoes. Get the guys at the Board of Trade and the Mercantile Exchange.

Those are the real crooks.

[00:03:21] Anjay Nagpal: I'm Anjay Nagpal, and this is Brokers, Bagmen, and Moles.

[00:03:37] Randy Janett: It was chaos. It was, uh, not something that I ever thought could be pierced.

[00:03:42] Mike Basset: You know, with this much noise and with this much chaos, how can we possibly make, make criminal cases in here?

[00:03:50] Randy Janett: And I said, Bill, um, all these years I've been an FBI agent.

[00:03:57] Mike Basset: You could see the realization on her face. She was like, you fucker! She was angry.

[00:04:02] Randy Janett: They were gonna, uh, take Rick up to one of their cabins in Wisconsin. Nothing good could come of that.

[00:04:17] Anjay Nagpal: In the making of this podcast, we reached out to the undercover FBI agents several times and after many months, we finally heard back. I spoke to Dietrich Volk, aka Peter Vogel, first. He was the undercover agent in the Japanese yen pit. Then all four of the undercover agents, plus the case agent Jeff Frank, agreed to talk to us on a Zoom call.

They asked us what we wanted to know and why we cared about this case. They said they'd get back to us if they were willing to go on record. Then things went quiet, months went by. The pandemic was starting to ease, and my mind was drifting back towards making movies. I was ready to give up, but our producer Danielle wouldn't let me.

[00:05:11] Danielle Elliot: We gotta get one. Yeah, we gotta get some.

[00:05:13] Stretch: You gotta get one. It just blows the lid off this thing.

[00:05:15] Danielle Elliot: Yeah, if we need an FBI agent.

[00:05:19] Anjay Nagpal: While I sat around in my sweatpants and continued to immerse myself in research. Danielle took action and built a great rapport with Agent Mike Bassett. Months later, it paid off, and in October, 2021, we finally landed interviews with two agents, Mike Bassett, otherwise known as Mike McLaughlin, who was stationed in the bond pit.

And Randy Janett, who was known as Randy Jackson, and was in the Swiss Frank Pit. As I flew across the country to the east coast, I had some deep and reflective thoughts. It's easy to sit back and criticize the government or anyone for that matter while you're sitting behind a computer. It's kind of one of the problems of our age, if you ask me.

So here I was with the opportunity to interview accomplished FBI agents, face-to-face. I was really grateful for the opportunity.

[00:06:20] Randy Janett: My name is Randy Janett. I'm, um, a retired FBI agent and, uh, living in the DC area.

[00:06:28] Anjay Nagpal: This is Randy. His house is overflowing with St. Louis Cardinals memorabilia and family photos.

[00:06:36] Mike Basset: My name is Michael Basset and I was the undercover agent at the Bond Pit at Chicago Board of Trade.

[00:06:42] Anjay Nagpal: And this is Mike, who happens to be a devout Bruce Springsteen fan. My first impression of Mike and Randy, they were incredibly nice and welcoming. I was expecting them to have a, let's get this over with kind of attitude, but it was exactly the opposite.

[00:07:00] Randy Janett: I grew up in a very small town of about a thousand people. Never saw an FBI agent there because nothing ever happened there. All we knew about Chicago was a lot of crime, and they had those evil Chicago Cubs.

[00:07:14] Anjay Nagpal: And right off the bat, Randy badmouthed my beloved Cubs. Maybe he wasn't so nice after all. Maybe he was a wolf in sheep's clothing and maybe that made him great at his job.

[00:07:30] Randy Janett: All I knew about the FBI was what I had seen on TV and in the post office. You know, the bad guys. I came to the FBI with no law enforcement background.

[00:07:40] Anjay Nagpal: On the other hand, Mike always had his sights set on being an FBI agent.

[00:07:46] Mike Basset: I knew, was pretty young that I wanted to, that I wanted to get in the FBI. My second year in college started to tailor my, my coursework to qualify and to to be able to apply. So I knew as a pretty young.

[00:07:58] Anjay Nagpal: Mike and Randy arrived at a time when the agency was shifting its focus.

[00:08:04] Randy Janett: My first few years were in, uh, Houston, Texas. So I was exposed to a lot of white collar crime, much more than I would've received at a larger city because they didn't have the bodies.

So I was able to investigate an investment banking firm that went under due to fraud and, uh, really learned a lot in the four years I was there. Uh, from there I went to San Francisco and continued to work white collar crime.

[00:08:32] Anjay Nagpal: Like Randy, Mike was also getting a taste of white-collar crime.

[00:08:38] Mike Basset: When I came in, there was always, there was already an emphasis on white collar crime.

[00:08:42] Mike Basset: I'd been in Tampa for about four years and was due to, to rotate out of Tampa, and my boss got contacted by Chicago to, to be assessed for an undercover operation that they thought I'd fit. The first thing I found out was that it was related to, you know, the financial markets in some way.

[00:08:57] Anjay Nagpal: Mike and Randy learned that the FBI's Chicago office had already been looking into the Merc and the Board of Trade, and that's because an agent named Jeff Frank became interested in the exchanges while investigating a different white collar case.

One in which people in Florida were defrauding unknowing investors of millions of dollars. These were called boiler rooms.

[00:09:23] Randy Janett: They do a lot of fraud over the telephone. The guys would always complain when they were arrested, why are you messing with us? We're small potatoes. Get the guys in the, uh, at the Board of Trade and the Merc.

Those are the real crooks. So that's how it was started. I believe.

[00:09:39] Anjay Nagpal: Everyone believed an ADM complaint was what started this investigation. But in our previous episode, Lewis Borsellino said the FBI heard about illegal antics on the floor while wiretapping bookies and drug dealers. And now Randy is telling us that it was boiler room busts that led the FBI to the trading floor.

By now, I'm thinking the truth is in there somewhere. The boiler room guys sparked Jeff Frank's interest. So he went to the exchanges and requested their internal disciplinary reports. He did not like what he saw, that the exchanges were basically self-regulated and did very little to punish traders who broke the rules.

So he figured the only way to really know what was going on in the pits was to send agents undercover, but that was risky. It was one thing to bust individual investors for insider trading or shady boiler room operations, but our nation's financial markets, if they were found to be corrupt, it would cause a lack of confidence in the system and lead to a massive economic collapse.

The stakes couldn't be any higher, but agent Jeff Frank insisted the exchanges must be cleaned up.

[00:11:15] Mike Basset: Flew out for the assessment we're landing and the captain came on and, and announced that Chicago was in the process of getting every type of precipitation known to man.

[00:11:24] Randy Janett: I, uh, arrived in Chicago. Um, and I thought about this many times. The first time I drove downtown was the day after I had arrived and stayed in a hotel out in I think Wheaton or Naperville.

And I had left, you know, beautiful San Francisco. That was green year round, and it snowed on April Fool's Day as I was driving downtown just to look around. Yeah. April Fools.

[00:11:47] Anjay Nagpal: Welcome to Chicago, land of sideways freezing rain and April snowstorms. Despite the weather, Randy was pumped to begin this totally unique operation.

[00:12:03] Randy Janett: What we were told is this was something that had never been done. That we had had a lot of intelligence, that there was a tremendous amount of crime there. They knew a good amount of what was going on down in those pits because that was ultra-private. The pits are their own world.

[00:12:18] Anjay Nagpal: By the time Randy and Mike joined, another agent had already been undercover at the Board of Trade for more than six months.

That man was Rick Ostrom.

[00:12:32] Mike Basset: Rick Ostrom was selected first in a year before everyone else, just to kind of test the waters and see what was going on.

[00:12:38] Randy Janett: Um, actually when, when we arrived there, the other three undercovers, Rick Ostrom was almost like hugging us guys. It is so good to have somebody I can talk to and I can, I cannot imagine how low Rick must have been for that year and a half.

[00:12:53] Anjay Nagpal: Agent Ostrom was low. Why? Because Ostrom spent nine months training with ADM, the Food processing giant, led by Dwayne Andreas at ADM headquarters in Decatur, Illinois, not in Chicago, where the exchanges were. Eventually, agent Ostrom made it onto the floor in Chicago as a local trader, only a few ADM executives knew Ostrom's true identity.

[00:13:22] Anjay Nagpal: When Mike got to town, he joined Rick at the Board of Trade. Randy would be stationed at the Merc. They were ready to start bagging trades, but first they needed new identities.

[00:13:38] Mike Basset: It was fairly simple. It wasn't as hard as you might think. Keep in mind, there was no internet back then. There was no Google. You know, nobody could go online and look at Facebook and find out who you really were. So I went back to my college and met with a good friend of mine who was the director of security there, and we just made up a jacket for my actual file that was under the name of Michael McLaughlin and so that when anybody checked back there and he would be flagged on it if it happened, and it never happened. Nobody ever checked back.

[00:14:07] Anjay Nagpal: Randy's backstory was a little more interesting.

[00:14:11] Randy Janett: This was, uh, designed not by me, but another agent, um, known down there as Peter Vogel.

[00:14:18] Anjay Nagpal: Peter Vogel, real name, Dietrich Volk was Randy's colleague at the Merc, and he had quite the imagination.

[00:14:26] Randy Janett: He had an uncle who had married my aunt and lived in, uh, Uruguay, and he was a wealthy, uh, miner of bauxite.

All of this is false by the way, and, uh, wanted us to learn the markets he thought it would be of value for us and for him. That was a story we should probably, in retrospect now, we've learned what we learned have just gone in as local traders kept our mouths shut.

[00:14:52] Anjay Nagpal: The thing they learned is that many of the execs at the Merc were Jewish and they were pretty suspicious of a German man living in South America.

[00:15:03] Randy Janett: People at the Merc were afraid that, uh, the uncle had been a Nazi cuz he was said to be from Germany and then moving to South America. Well, that's suspicious.

[00:15:13] Anjay Nagpal: I guess in this case, it was better to be a suspected Nazi than an FBI agent because their membership was approved and less than a month after arriving in Chicago, Randy and Dietrich Volk stepped into the S&P 500 futures pit.

[00:15:51] Randy Janett: And I looked down and saw thousands of people doing things that I said, this is not something I am going to understand.

It was chaos. It was, uh, not something that I ever thought could be pierced. They assured me once you get in there, you're not trading with 3000 people. You're in the community you are in, and, uh, half the guys don't have any college down there. It's not a matter of brains. It's a matter of moxy more than that, and they were right.

[00:16:27] Anjay Nagpal: While Randy was trying to swim with the sharks in the S&P 500 pit at the Merc, Mike went to the equally enormous bond pit at the board of trade.

[00:16:37] Mike Basset: The bond pit was huge and back then it was loud and there was a lot of activity, um, tons of trades being executed. There was a lot of liquidity. It was a very efficient market moving, just the tick at time for the most part.

And my first impression was, how the hell are we gonna make a case in here? You know, with this much noise and with this much chaos, how can we possibly make, make criminal cases in here?

[00:17:06] Anjay Nagpal: Yep. That's the first thing I thought of when I heard about this investigation. To this day, I just don't understand how they thought their strategy would work. How did nobody tell the FBI that this was going to be difficult. It was too late now though, and on Randy's first day in the pit, he just kind of stood around and watched.

[00:17:31] Randy Janett: I think we were pretty low-key. We were just learning how it works and watching other traders, and it's fairly easy to pick up how to act, not to trade, but how to act.

[00:17:43] Mike Basset: It was an interesting day the first day cuz you recognize even as a runner, you can't walk into the pit as a new trader and walk to this top step of the bond pit.

[00:17:51] Anjay Nagpal: Here's longtime Merc Chairman Leo Melamed from an old interview describing the importance of pit space.

[00:17:59] Leo Melamed: Your spot in the pit is holy. It's your spot, and you'll fight for that, you'll protect that, because everybody wants their spot in the pit. Some people have better spots than others, but you gotta guard jealously. Where you stand and where you stand becomes sacred. That's yours.

[00:18:18] Mike Basset: I hadn't identified, uh, the particular broker group ahead of time when I was running. I just went over there and down the main step into the bond pit. You can go left or your right. I took a right. And, uh, within a week or so, settled in front of these guys, and that's who I traded with.

[00:18:32] Anjay Nagpal: Mike's only options were spots near the middle of the pit, far away from the action on the top step.

[00:18:39] Mike Basset: I mean, it would get physical, it was tight in there, and if you were perceived as standing in someone's spot, there'd be pushing and shoving.

[00:18:46] Anjay Nagpal: And he quickly picked up on how easy it was to make mistakes in that environment.

[00:18:52] Mike Basset: I could look across the pit at you and think I executed a trade with you and you're looking at someone else, and it'd be an out trade. So there'd be, you know, bad feelings about that.

[00:19:02] Anjay Nagpal: Mike was able to avoid any heated exchanges due to out trades because he rarely traded with brokers that were far from him. He played it safe.

[00:19:13] Mike Basset: I was never nervous trading down there because I was pretty established in my mind that I'm not a trader, I'm an FBI agent, posing as a trader. I'm not down here to make money. I'm down here to look like I'm, I'm trading, and I wasn't losing my own money. It was a unique opportunity to kind of observe from the outside people relied on that for a living.

[00:19:32] Anjay Nagpal: Even though he wasn't trading much, he still had a lot to think about.

[00:19:37] Mike Basset: You were kind of doing three things at once. You were trying to look like you were trading, but meanwhile you're listening what's going on with, with the brokers over here, if they were doing something and then maybe they're trying to put a trade into you at the same, so there's a lot of things going on that you had to kind of juggle.

[00:19:51] Anjay Nagpal: That was one of the things that made you a good trader, the ability to process lots of information simultaneously. You might be reading the lips of a broker across the pit while hand signaling to your clerk and listening to two or three conversations going on around you. And suddenly a big order comes into the pit that you want a piece of. So you have to react fast, faster than the guy next to you. The constant scanning and processing and doing quick math all day while standing on your feet with pushing against the people next to you. It was exhausting.

[00:20:26] Mike Basset: Rick and I both, I think, wanted to be in a position where we waited till it came to us. Our attitude from the beginning was if there's illegal conduct, if there's illegal activity going on, we'll capture it.

[00:20:36] Anjay Nagpal: In addition to all they had to do, I wondered how they'd stay in character and not blow their cover.

[00:20:43] Randy Janett: Be yourself. And that's an undercover, uh, trick. If they're around you any more than a week, they're gonna know who you are.

So, be yourself. Very good advice.

[00:20:54] Anjay Nagpal: Advice that Randy had no trouble following.

[00:20:58] Randy Janett: Trying to see if I can get into some other illegal activity and gain, you know, credibility with the guys. So I'm talking to someone, Hey Tony, I really like, uh, sports, especially college football. You know, I don't mind betting. He goes, Hey, you want a number to call to make a bet?

I go, yeah, that's what I want. He goes, all right, just ask. Don't you know, this is Chicago idiot, is what he was saying.

[00:21:21] Anjay Nagpal: That guy that he's talking about, the one who helped him gamble. That was none other than Tony T-Bun Bonjourno the trader, and bookie from episode two.

[00:21:32] T-Bun: I said, you can want some action outta football. You like betting football? Yeah. I say, here's a number. So then they started betting football and there were two nitwits to be honest with you.

[00:21:42] Randy Janett: His name was, I think Tony Bonjourno, and Tony was a likable young guy. A father. I think he had a kid or two, right? It was in the S&P pit where I met him.

[00:21:53] Anjay Nagpal: In our last episode, big time S&P 500, trader Lewis Borsellino told us that he was the number one target of the investigation because the FBI thought he was laundering money for the mob.

But Randy told us he thinks the investigation first started because the boiler room scammers said the exchanges were rotten. So I asked Randy why they went into the S&P pit to see if he would corroborate Borsellino's claim.

[00:22:26] Randy Janett: The fellow who helped us out. Um, the guy who had traded for most of his adult life and, uh, had created a, friendship first, and then a affiliation with the, uh, the FBI supervisor who helped conceptualize this case.

[00:22:42] Anjay Nagpal: That guy's name was Bill Todd.

[00:22:45] Randy Janett: He's the one who gave us all of this information about if you wanna get bagged trades, meaning illegal trades, you have to be near the broker and you have to be trusted by them, and you have to take losing trades. We were aware of that, how that worked, and the S&P pit was very active, you know, massive amounts of money going through it, and that's where they assigned us.

[00:23:08] Anjay Nagpal: So far, randy wasn't letting on that Lewis Borsellino had anything to do with this case, and we'll get back to that because the FBI were about to be steamrolled by a once in a lifetime financial disaster.

[00:23:30] News: The law of gravity hit Wall Street today and financial markets around the world. The Dow dropped more than 500 points. From the opening bell, the market was in free fall.

[00:23:41] Randy Janett: There was a massive selloff in stock, and of course the S&P pit was that and you know, leveraged to the tune of ten. It was crazy, crazy selling off.

And they told us, stay outta the pits. We didn't wanna get stuck with an out trade that would cost the government a half a million dollars. And um, then they decided this pit's in a lot of trouble. Let's move you guys on.

[00:24:08] Anjay Nagpal: That was news to me. Randy says he and Dieter we're not in the pits at all on Black Monday.

I guess all the rumors that I heard from traders who said the FBI lost money trading in the crash. They were probably just rumors. Despite not being in the pit though Mike remembers the crash vividly.

[00:24:32] Mike Basset: What I remember is there was one particular guy in our small section of the pit who'd gotten stuck in the wrong direction, the mark would open locked to the limit. He couldn't even get in to make, make a trade, and you're just watching this poor guy, you know, losing a significant amount of money and not be able to do anything about it.

[00:24:52] Anjay Nagpal: And that is why trading is such a stressful job. You could be consistently making money correctly reading the markets. Or filling orders for your customers. But if you get caught the wrong way during a crash like this, it could wipe out everything you've ever worked for, and there's nothing you can do about it.

[00:25:14] Mike Basset: Remember going back to the offsite with Rick and you know, the light just blinking on the phone, the FBI trying to get ahold of us saying, Hey, is everything okay? You know, you guys, uh, nobody lost a lot of money right.

No we're fine. We're we're flat when it happened. Both Rick and I.

[00:25:29] Anjay Nagpal: I believe him, but I'd still like to know how much money the agents made or lost while trading. After the crash, the FBI decided that Randy and Dieter would switch to smaller, less volatile pits where they might be able to get close to bigger brokers.

[00:25:49] Randy Janett: I was working in the Swiss franc pit and uh, uh, Peter Vogel was over in the Japanese pit next to me. The Swiss franc pit was tiny compared to the S&P 500, which probably had 300, 400 traders. Maybe it was much more personal in your trading. And in fact, one of the, the brokers, fairly good-sized broker told me early on, a guy I really got along well with, he goes, you know, we don't steal much in this pit.

[00:26:17] Anjay Nagpal: There's pros and cons to being in a smaller pit. On one hand, you can see more action and maybe get close to some of the bigger brokers. On the other hand, it's harder not to stick out like a sore thumb, but Randy was up to the task.

[00:26:34] Randy Janett: There were a lot of surprising things that happened down there, and our goal was not to be a, a part of any of those stories, but you know, I've seen physical fights down there, which were pretty brutal in one case,

[00:26:48] Anjay Nagpal: I had a feeling I knew exactly what Randy was talking about.

[00:26:52] Randy Janett: And to my left, two brokers, uh, were standing there and one hauled off and with a mighty punch. The person who did that, uh, was a very good boxer. Ray Pace was his name.

[00:27:10] Anjay Nagpal: He's talking about none other than former gold glove boxer Ray Pace. We met Ray in episode three.

[00:27:18] Ray Pace: It was a pretty rough neighborhood, so it lent itself to, different types of trouble, put it that way.

[00:27:24] Randy Janett: Knocked him off his feet and out of the pit. He was on the top and he just went back and hit the ground. That was amazing.

[00:27:33] Anjay Nagpal: This story is legendary. Randy was amazed and curious.

[00:27:39] Randy Janett: I wanted him to talk about what happened. Number one, I was curious, but number two, I suspected that he was not getting to steal from the deck. Deck, meaning, uh, an assemblage of outside orders, of third parties, the so-called victims, if you will, of, uh, what bad traders do.

[00:27:57] Anjay Nagpal: So Randy asked Ray...

[00:27:59] Randy Janett: What was going on that day? Why did you do that? He goes, That son of a bitch was stealing all the good trades. I couldn't steal a goddamn thing with him, and his girlfriend was helping him. I told him about it. I tried to talk to him and he wouldn't do it, so I hit him. I lost control and hit him.

[00:28:17] Anjay Nagpal: T-Bun told us that story too, by the way, but he tells it a little differently.

[00:28:23] T-Bun: I was standing right there, right in front. So I hear Ray say, Hey Ted, I told you before, man, this shit's gotta stop.

Yeah, yeah well. He goes, I'm telling you, I'm not gonna fucking tell you again.

Wasn't five minutes later, Teddy buys a thousand Ray buys three. I told you, motherfucker. He told Ray, Fuck you. Oh, boom. Off the ground into the air. He was laying on the ground. Ray went over him like a pit bull. This motherfucker wanted to kill him. We pulled him off him. Ray's foaming. I'll never forget. The broad goes, Teddy, are you right? He goes, yeah. Buy five hundred. No way!

[00:29:14] Anjay Nagpal: The way T-Bun describes it, an ABS clerk who routed orders into the pit was supposed to be giving those orders to Ray and to one of his colleagues. However, the clerk was dating the colleague and she was giving all the orders to him. Ray got mad because the boyfriend was earning commissions on those contracts and he was earning none.

T-Bun says this was a fight over earning commissions, not stealing from customers.

[00:29:45] Randy Janett: Ray left and went to a different pit after that and he was sanctioned by the Merc for, you know, probably got a few hours off.

[00:29:52] Anjay Nagpal: There's self-regulation for you. It says a lot about a workplace when you can punch a colleague's lights out and all they do is physically separate you.

[00:30:04] Randy Janett: Ray then moved over to the, uh, the pit next to me where the other undercover was, uh, the Yen pit, Japanese Yen, and he was convicted later for other things.

[00:30:16] Anjay Nagpal: As for Randy, he was becoming a trusted bagmen in the Swiss Frank pit. We'll hear how he did it after the break.

[00:30:39] Randy Janett: My friend Bill Walsh, he would say something like, Hey Jackson, uh, stick with me at the opening. I have something for you. He would sell me X number, 10, 15 contracts, and then buy 'em back.

[00:30:53] Anjay Nagpal: Randy is talking about a young broker in his pit named Bill Walsh. Walsh signaled to Randy that he had a lot of orders as the market was about to open for the day, and he needed an accomplice to help him rip off his customers.

[00:31:09] Randy Janett: He was matching customers who had opposing orders, no risk for him, there'd be no out trade, I'm doing it. No risk to me because he's selling me at the low and then buying it back the equal number at a higher price. The way the law was written is everybody has an equal chance and the customer, uh, is given the market responds to what they're asking, and that's how it's reached.

This was prearranged with Bill. One customer was gonna get screwed and then the other customer would get screwed in the middle I'm the one keeping all the money. So it's a small, uh, if you want to get to it, violation, not a lot. Um, but still illegal as you know, black and white, illegal.

[00:31:54] Anjay Nagpal: Big or small, randy was there to catch any wrongdoing, so he sprung into action.

[00:32:02] Randy Janett: Bill's mistake was he took a shine to me, we got along, but, but I was as a witness saying, oh, this is dirty, and you know, click the recorder on.

[00:32:12] Anjay Nagpal: Every agent wore a recording device. They only recorded when they knew something was going down. So they often missed the beginning of illegal trades, but they captured hours upon hours each week, and I've always wanted to know.

[00:32:29] Danielle Elliot: What did your recording devices look like?

[00:32:32] Randy Janett: They were small and they were never seen. They were, they're made in Switzerland by a company and they're very tiny and, uh, I don't really want to get into that because they may still be used and if the, uh, criminal element hears about that, they'll know what to look for.

But they did a great job of, they were never visible, they were sewn inside our garments. I've actually had traders, and this is the way it is on the floor. If they are getting a dry mouth, they will reach into a friend's pocket just looking for something to like a lozenge. And I've had friends reach in there and probably touch it, but it didn't stick out to them.

But the old throat gets a little tight when they're in your left pocket, which is where mine was.

[00:33:17] Anjay Nagpal: The undercover agents already had a lot on their minds and now, they had to guard against fellow traders putting their hands in their pockets and discovering tape recorders. They'd record on the floor during the day, and then when the markets closed, they'd go to their offsite office and listen to what they captured that day. Then they would write reports summarizing the day's action.

[00:33:44] Randy Janett: So there'd be a lot of recordings to listen to. We would go then to our, uh, office offsite. Take our tapes out, put them into a recording machine, listen to them and if there was criminal activity, hand transcribe what was being said and identify the parties who were talking. Then we would, uh, write what the FB calls uh FD 302. Uh, it's also called a report of investigation.

[00:34:14] Anjay Nagpal: Those tape recordings would go on to play a huge role in the outcome of the trials that came later. We played one of those tapes at the very beginning of this series. It goes like this.

The difficulty of the FBI's mission was clear and so was the amount of hard work they put in. I was gaining a lot of admiration for their efforts, but I still had some questions to ask. One group I wanted to ask about, cuz they come up a lot in the book and in the, in the trials. Um, at the Merc was a company called ABS Partners.

[00:35:02] Anjay Nagpal: Are you familiar with them?

[00:35:03] Randy Janett: ABS? No, I don't recall that. It's probably something I heard of. Who, who were the big brokers, if you know?

[00:35:10] Anjay Nagpal: It's Maury Kravitz and Jimmy Kaulentis were some of the guys who started it. Lewis Borsellino, even though he was a local owned part of it. And then Jack Sandner who was

[00:35:19] Randy Janett: Oh yeah, I knew who Jack Sandner was and I certainly knew who Lewis Borsellino was. Lew was in trouble too with the exchange for trading. I'm surprised he ever was allowed to get on something like that if I knew about it. I just had fleeting knowledge, nothing detailed.

[00:35:34] Anjay Nagpal: I'm starting to think Randy is a real genius. He says everything with such a nonchalant attitude and you're almost lulled into believing it instantly. But embarking on this investigation and not knowing who ABS Partners is, their owners were a who's who of the exchanges, and they were very well known for reasons both good and bad.

I'm just having a hard time believing Randy.

We started to pick up on some things as we're reading old articles. Um, and one of the threads that was mentioned was that, a potential additional reason that the FBI was on the floor was to monitor organized crime activity because there were certain, uh, traders on the floor that were related to

[00:36:21] Randy Janett: Well, yeah.

[00:36:22] Anjay Nagpal: Organized crime.

[00:36:22] Randy Janett: I mean, I don't think that was, um, a part of the justification for the case. Uh, There were certainly a lot of family members of, uh, organized crime figures down there. So, uh, that was not told to us, but you know, you wanna be cautious of that.

[00:36:41] Anjay Nagpal: Mike said he was also unaware of the mafia rumors.

[00:36:45] Mike Basset: I don't remember if it even appeared in the undercover proposal, but everybody was aware of that, that those allegations always threaten, people would talk about it on the floor of the exchanges about yeah, you know, people launder money in here, organized crime does is like, okay, where, so was the FBI aware of that?

[00:37:01] Mike Basset: Yes. Oh yeah. The Borsellinos they're, you know, they're mobbed up type thing and it's like, okay.

[00:37:07] Anjay Nagpal: Mike kind of danced around the question. So we played him a news clip from the time.

[00:37:13] News: Sources today said organized crime may be tied to what authorities believe is a multimillion-dollar fraud on Chicago's futures exchanges. The FBI reportedly is looking into charges that relatives of organized crime figures worked at the Chicago Mercantile Exchange in positions where they could launder illegal money. A spokesman for the exchange called the reporter, and I quote him, unfounded and irresponsible.

[00:37:37] Mike Basset: That's the first I've heard that. And um, I, I, I know where it came from and Randy could probably talk to you more specifically and Dieter about it. It's come from over the Merc, the Borsellinos. That's probably people talking at the exchanges that that's why we were down there. And I'm speculating here, but as far as tying what we were doing to organize crime there just, there just wasn't any of that. It was such an individual level with the individual.

[00:38:02] Anjay Nagpal: Mike denies that the operation had any targets other than individual traders. He and Randy had thrown cold water on a lot of Lewis Borsellinos claims from our last episode, and he says that if the FBI was after money laundering operations, they would approach it differently.

[00:38:22] Mike Basset: It would be a completely separate operation, probably to, you know, insinuate yourself into a position of where you were either taking advantage of their money laundering operation and gaining evidence on, on the backend of it, or on the front of it, rather, or on the backend where you're helping them execute that they're not gonna use us.

They got their own people that they're gonna, you know, trust and trade with. You know, so if you start nosing around, really you're, you're in danger of compromising the other things you're doing.

[00:38:49] Anjay Nagpal: What Mike is saying makes sense trading in the same pit as someone doesn't feel like the best way to catch money launderers. Mike acknowledged there were rumors of mafia and money laundering on the floor, but wrote them off as not being credible, as for Randy.

[00:39:07] Anjay Nagpal: But as far as you know, there was nobody on the floor specifically looking for organized crime activity, whether it was gambling or money laundering?

[00:39:16] Randy Janett: No, no, no, no, no.

[00:39:21] Anjay Nagpal: These guys are convincing. I can see how they made great undercover agents because it was impossible to tell if Randy was really good at playing dumb or if he was just simply being himself. My next question was, why did this investigation end so abruptly?

[00:39:40] Randy Janett: Well, you heard about Rick, right? What happened with him?

He was told, they were told the guys in the corn pit, he's an FBI agent, they were gonna, uh, take Rick up to a, uh, one of their cabins in Wisconsin and confront him. And the agent said, well, what were you gonna do then? We didn't know. Nothing good could come of that.

[00:40:08] Anjay Nagpal: Wow. I thought I heard it all, but this one was new to me and it's pretty shocking. Apparently Agent Rick Ostrom was almost the subject of an interrogation by a bunch of traders that was designed to intimidate him, but honestly could have left him on the receiving end of a beating or worse. Rick had been found out, but by who?

[00:40:33] Randy Janett: And we know where that leak came from. Came from a guy at ADM. Yeah, I would've indicted him. He was pretty high up in ADM too.

[00:40:49] Anjay Nagpal: Thinking back on the incident, really upset Randy. It's the most animated he got during the interview, and I understand why. ADM was supposed to be helping the FBI and now they had put the entire investigation at risk. That incident happened towards the end of 1988 and shortly thereafter, the agents took a much needed two week break to be with their families.

[00:41:20] Randy Janett: We were traveling away actually at a conference to determine how to deal with this case. We just checked in the hotel and there was a thing, you gotta come home, a leak.

[00:41:31] Anjay Nagpal: All that time and all that effort, and suddenly it was just over.

[00:41:39] Mike Basset: I know we had advanced warning because I had taken a break for the holidays, and like I said, my recollection was December of '88 I think it was. Well, that happened and, and you know, Jeff Frank came to us and said, Hey, we're gonna have to stop, we gotta wrap this thing up.

[00:41:55] Anjay Nagpal: Mike recalls the Tribune coming to the FBI sometime in the first weeks of January. That's a little bit different from what Tribune reporter Bill Crawford told us. Crawford said that the Tribune only gave the FBI a one day heads up. Mike says it was around then that the US attorney's office decided to call it quits.

[00:42:20] Mike Basset: Um, that's why it was brought down because the Tribune learned about the case and was gonna go public with it. And we needed an opportunity to approach people before they heard about it.

[00:42:28] Anjay Nagpal: By approach people, he means raid their houses late at night to scare them into confessing rather than, you know, handing them a subpoena and walking away.

[00:42:39] Mike Basset: I can't say I was disappointed, you know, I was ready, uh, I was ready to be done with, with things at that point. It was a long two years.

[00:42:49] Anjay Nagpal: It was Mike's turn to close up shop in the bond pit.

[00:42:54] Mike Basset: Were there three traders? So one was just a trader like me that was kind of bagging trades as well. And the two brokers decision was made early on as to who we were gonna approach first on the 17th. And obviously for me it was clear as to the, the two people that they wanted to approach right away.

[00:43:11] Anjay Nagpal: They, in this case, are federal prosecutors, and they were the ones who would decide how things would go from here on out. The prosecuting attorneys sent Agent Bassett to speak with a young female bond broker. She was the only woman indicted in any of the pits.

[00:43:32] Mike Basset: That particular broker wasn't believing that there had actually been an undercover agent on the floor.

So they said, we need you to come over, and they hadn't told her who it was yet. And so that was the next thing I did that night, went over to that broker's house, and as soon as I walked in, you know, you could see the realization on her face, she was like, you fucker. She was angry, immediately angry and understandably. So, she was a little tougher to deal with.

[00:43:57] Anjay Nagpal: Her name was Melanie Kosar, and we shared her story at the end of episode one. Melanie ultimately decided to cooperate with the investigation. It changed her life forever, and it made her persona non grata at the Board of Trade for life. Those confrontations could not have been fun for anyone.

[00:44:22] Anjay Nagpal: I asked Randy about his in-person meetings and he also had some tough ones.

[00:44:28] Randy Janett: The one I that really comes to mind was, uh, going to Bill Walsh's home. He lived. Again, he was 23, I wanna say, at the time, and he had bought a big home way south of Chicago. It was in the country, like no houses around, but we went and knocked on the door.

I liked Bill and he's like, Jackson, what are you doing here? You know, like shocked. It would be like if I came to your homes and knocked on the door, what? You don't belong here? And I said, I get gotta talk to you, Bill. It's really important. Okay. So we came in and I introduced the US attorney, the other FBI agent with me, and I said, Bill, um, All these years I've been an FBI agent and I've been trying to make a case against criminal activity down there.

[00:45:15] Randy Janett: And you and I did some of it, and now we want you to tell the truth and tell us all you know about it. And he was just sitting there. And Jim Davis, who was with us, a great big guy, six foot 10, was watching Bill's carotid artery. He said his heartbeat was, I wanna say 190. It probably wasn't that high, but he said he was freaking out. And Bill was very sharp. He just sat there and he said, all right um, I, I guess I need to see a lawyer.

[00:45:49] Randy Janett: So, you know, he got a lawyer and uh, that one I remember vividly. It was hard for me cuz I like Bill. It was not a fun thing to do.

[00:46:00] Anjay Nagpal: Randy sure does make his interrogations sound gentle. That's not how everyone else saw them.

[00:46:08] News: Following a two-year FBI sting where agents like Randy Jackson, an alias, posed his traitors in the pits. The Feds have used secrecy, shock tactics and pressure to scare traders suspects into turning government informers. I've been told of, of lawyers that have been offered to plead their clients guilty to accept jail time.

[00:46:32] Anjay Nagpal: Those pressure tactics got a couple of people to flip, but for the most part, the guys who grew up in the city and places like Cicero, they kept their mouth shut.

They figured, sure, they probably have some of us on tape bending the rules, but what's the worst that could happen?

The traders white-knuckled it through the next eight months until on August 2nd, 1989, US attorney Anton Valukas finally announced charges resulting from the investigation.

[00:47:10] News: Federal racketeering charges usually reserved for fighting the mob were brought today against alleged white-collar criminals at the nation's two largest futures exchanges.

[00:47:22] Anjay Nagpal: The US attorney charged traders with RICO. RICO stands for Racketeering Influenced and Corrupt Organizations. The traders in this case were charged with being part of an ongoing criminal organization. However, the exchanges, the actual organizations, they were not named. The government was basically saying that this is like a too big to fail or a too big to tarnish tactic that to this day, makes me kind of sick. Because, I know damn well that everyone from the clerks to the CEOs all knew what went down on the trading floor. If you think what you just heard was crazy, wait until you hear about the trials.

[00:48:15] Randy Janett: I always said the problem with jurors is they're the only ones sitting there that were too dumb to figure out how to get out of jury duty.

[00:48:21] Bill Crawford: In retrospect, it was chaos. In the middle of some of these trials, they would plead guilty, just pleaded out.

[00:48:27] T-Bun: But he really thought they were coming like, to party with him. And his wife said, you drunken bastard.

[00:48:33] Bill Crawford: And I'm sitting there with my mouth half on the floor.

[00:48:38] Anjay Nagpal: That's next week on Brokers, Bagmen, and Moles.

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.