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Wall Street's Long and Sordid History With Cocaine

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Allegations against Jimmy Cayne and Bernie Madoff keep the connection alive.

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Forget Armani, highballs, and Beamers. For decades, cocaine has been a prevailing vice among day traders, bankers, and brokers -- becoming so ingrained with New York's financial district that the corner of Wall Street and Broad is said to be paved with white gold.

So it's perhaps not surprising that even today's bad boys of finance are finding themselves inextricably linked to the forbidden nose candy.

On top of the Ponzi scheme and death threats, Bernie Madoff was slammed with another lawsuit earlier this month while in the confines of his Butner, North Carolina, prison cell. Filed on October 20 in New York, the suit claims that Madoff orchestrated a den of cocaine-fueled iniquity beginning in the mid-'70s. According to the former investors linked to Madoff, the Pyramid King would often send certain employees to make a long distance pick-up from dealers in Harlem. Cocaine soon became so prevalent that the office earned the nickname "The North Pole."

Former Bear Stearns CEO Jimmy Cayne is also dealing with allegations of an illicit relationship with the white powder. Last year, the Wall Street Journal first reported his alleged marijuana habit, but it was Charlie Gasparino's book The Sellout, released last week, that first connected him to the hard stuff. Cayne's old friend Phil Cohen recounts:

After a couple minutes of small talk, Cohen says Cayne reached down into his desk and pulled out a blue Bromo Seltzer bottle. (Bromo Seltzer is a white powdery antacid.) "What do you think's in here?" Cayne said, according to Cohen's recollection. "Bromo Seltzer?" Cohen asked, slightly bewildered. "No, it's filled with cocaine," Cayne said with a smile.


Cayne denies the account.

Of course, using drugs to get through the trading day is nothing new. Cocaine use within the gilded walls of the New York Stock Exchange dates back to such a bygone era, Freud was advocating the drug then. Digitally archived copies of The New York Times detail 1915 drug raids of company heads with offices located a few blocks down from the trading floor. Numerous links between the drug and Wall Street have emerged through the years -- including a high-profile sting that resulted in the arrest of 19 brokers in 1967.

Cocaine grew in popularity within the bathroom stalls of Lower Manhattan's banks and brokerage offices in the 1970s -- Time magazine famously referred to the drug as a "chic refreshment" in a 1973 article -- and hit its towering stride during the mid-1980s.

With cocaine well along its comeback trail, it wouldn't be surprising to find tiny discarded baggies in a Lower East Side punk bar. But a T.G.I. Friday's a block and a half south from the Stock Exchange? A tad out of the ordinary.

A raid of the chain restaurant in March of this year busted a well-known drug hook-up among Wall Street employees. Exchanges would be made in plain view -- albeit surreptitiously inside Friday's napkins -- but allegedly with the knowledge of the restaurant's management and staff.

A July article in New York magazine detailed the financial woes of the cocaine dealer post-recession, but it will take more than a financial crisis to cripple the decadence in the land of financial bailouts and golden parachutes.

Along with Madoff's recent connection to the drug, cocaine seems to not only hit the highest of profiles, but also span the vast hierarchy of Wall Street employees -- from the 16 brokers arrested in 1987 to CNBC's Larry Kudlow, who entered rehab and found religion to combat the addiction.

But really, would anyone doubt it?

Despite all the grief that the public understandably dispenses toward bankers and stockbrokers, solely handling millions or billions of dollars per day takes a massive toll on the human condition. Drive and alertness might be innate abilities, but finding a dealer willing to travel 30 blocks downtown isn't. Cocaine will always be a major player on Wall Street -- as it has been for nearly 100 years.

No positions in stocks mentioned.
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