KIDDER PEABODY GROUP
In the last years the financial market has been hit by many financial scandal the most recent in 2000s are Enron and Parmalat which has affected the entire market. This paper is going to take in consideration an old scandal the Kidder Peabody Group that first has been implicated in insider trading and later in a complicated method for which losses counted as huge profit.
In specific this paper will analyze the case study of Kidder Peabody Group starting with brief overview of the company, then analyze the motivations and synergies that GE and Kidder Peabody should have got and finally it will explain the strategy that the bond department especially Joseph Jett used ...view middle of the document...
GEFS (General Electric Financial Services), the financial subsidiary of GE to which Kidder Peabody Reported, at that time was one of the largest financial company in the US. The new financial strength of Kidder with its comprehension of the investment bank industry should create a very powerful institution.
In October 1986 problems for Kidder Peabody started, Ivan Boesky was arrested for insider trading and he implicated Mr. Siegel who had been head of Kidder M&A department. After that between December and February they decided a profound restructuring in Kidder’s management structure and organization. The reorganization counted the three main departments:
1) investment and merchant bank, asset finance and fixed income
2) equity operation
3) municipal security
During this period many profitable brokers and managers lest the company because they were unhappy for the decision taken by the parent company (GE) and the cost cutting, which reduced their bonuses. Following Mr. Wigton and Mr. Tabor a manager and a former employee of Kidder Peabody were arrested for insider trading. At that time the firm had $90 million profit in 1986; it made a deal with the authorities and the New York Stock Exchange (NYSE) fined Kidder Peabody $300.000 for alleged violations of capital and other rules. Also Mr. Roche, president of Kidder Peabody, was fined $25.000 to not have controlled what was happening in his company. Furthermore in May 1987 the...