THE INSIDE STORY OF AN INSIDE TRADER The author's arrest set off a series that toppled Wall Streeters like dominoes, from Boesky to Milken. Here's how he slipped into crime -- and what it did to his life.
By Dennis B. Levine REPORTER ASSOCIATE Sandra L. Kirsch

(FORTUNE Magazine) – DENNIS LEVINE made history. The disclosure of his misdeeds exposed those of Ivan Boesky, his illicit partner, and Boesky in turn led the government to Michael Milken and Drexel Burnham Lambert. The stocks Levine bought and sold through offshore bank accounts were mainly of target companies in soon-to-be- announced mergers. According to the Securities and Exchange Commission, he made his largest single insider-trading profit on securities of Nabisco Brands. The SEC alleges that he bought 150,000 Nabisco shares some three weeks before the company announced merger talks with R.J. Reynolds in 1985. When the stock's price rose, Levine sold for a $2.7 million profit. Here, for the first time, Levine tells his inside story, a personal odyssey to the heights of Wall Street and then down to its criminal depths. Boesky and others involved in these felonies differ with some aspects of Levine's story, but they are not telling their tales. A notable success as an investment banker on Wall Street, Levine was undone by ambition so intense it drove him over the line. Thereafter he found himself in a quagmire of deceit and betrayal.

WAKING EARLY in my Park Avenue apartment on May 12, 1986, I read the morning papers, checked on the European securities markets, and ate breakfast with my wife, Laurie, then six weeks pregnant, and my son, Adam, who was 4. By 8 A.M. I was in downtown Manhattan, meeting with my staff at Drexel Burnham Lambert. At 33, I was a leading merger specialist and a partner in one of the most powerful investment banks on Wall Street. Among the many appointments on my calendar that day were meetings with two CEOs, including Revlon's Ronald Perelman, to discuss multibillion-dollar takeovers. I was a happy man. In midafternoon two strangers, one tall and one short, came looking for me at Drexel. They didn't identify themselves, but the receptionist said they weren't dressed like clients. For ten months, I knew, the Securities and Exchange Commission had been investigating the Bahamian subsidiary of Bank Leu, the Swiss bank that had executed insider stock trades for me since 1980. That very morning I had spoken on the phone with one of the bank's employees, who reassured me that everything was under control. Still, I knew something was wrong, and I fled. While the authorities searched for me, I drove around New York in my BMW, making anxious calls on the car phone to my wife, my father, my boss. Before leaving the car, I hired a legal team headed by superstar lawyer Arthur Liman, who went on to serve as chief Senate counsel in the Iran-contra investigation and is now representing Michael Milken. By the time I had hired Liman, my darkest secret was being broadcast by TV stations across the country. Early in the evening, I drove alone to the U.S. Attorney's office in lower Manhattan, expecting only to be served with a subpoena. The federal officers read me my rights instead. At the nearby Metropolitan Correctional Center, they locked me up with a bunch of drug dealers in a cell whose odor I won't soon forget. It was like an out-of-body experience. As I ate cornflakes at the prison cafeteria the next morning, I watched the story of my arrest on a TV wake-up show. My carefully orchestrated career, years of planning and sacrifice, thousands of hours of work that had lifted me from Bayside, Queens, to the pinnacle of Wall Street -- all reduced to nothing. Just like that. I have had four years to reflect on the events leading up to my arrest. Part of that time -- 15 months and two days -- I spent in Lewisburg federal prison camp in Pennsylvania. Getting your comeuppance is painful, and I have tried to take it on the chin. Unfortunately, my family also had to endure the trauma of humiliation, disgrace, and loss of privacy -- and they did nothing to deserve it. I will regret my mistakes forever. I blame only myself for my actions and accept full responsibility for what I have done. No one led me down the garden path. I've gained an abiding respect for the fairness of our system of justice: For the hard work and creativity I brought to my investment banking career, I was well rewarded. When I broke the law, I was punished. The system works. People always ask, Why would somebody who's making over $1 million a year start trading on inside information? That's the wrong question. Here's what I thought at the time, misguided as I was: When I started trading on nonpublic information in 1978, I wasn't making a million. I was a 25-year-old trainee at Citibank with a $19,000 annual salary. I was wet behind the ears, impatient, burning with ambition. In those days people didn't think about insider trading the way they do now: You'd call it ''a hot stock tip.'' The first U.S. criminal prosecution for insider trading wasn't until around that time, and it was not highly publicized. In the early years I regarded the practice as just a way to make some fast money. Of course I soon realized what I was doing was wrong, but I rationalized it as harmless. I told myself that the frequent run- ups in target-company stock prices before merger announcements proved others were doing it too. Eventually insider trading became an addiction for me. It was just so easy. In seven years I built $39,750 into $11.5 million, and all it took was a 20- second phone call to my offshore bank a couple of times a month -- maybe 200 calls total. My account was growing at 125% a year, compounded. Believe me, I felt a rush when I would check the price of one of my stocks on the office Quotron and learn I'd just made several hundred thousand dollars. I was confident that the elaborate veils of secrecy I had created -- plus overseas bank-privacy laws -- would protect me. And Wall Street was crazy in those days. These were the 1980s, remember, the decade of excess, greed, and materialism. I became a go-go guy, consumed by the high-pressure, ultracompetitive world of investment banking. I was helping my clients make tens and even hundreds of millions of dollars. I served as the lead banker on Perelman's nearly $2 billion takeover of Revlon, four months of work that enabled Drexel to earn $60 million in fees. The daily exposure to such deals, the pursuit of larger and larger transactions, and the numbing effect of 60- to 100-hour workweeks helped erode my values and distort my judgment. In this unbelievable world of billions and billions of dollars, the millions I made by trading on nonpublic information seemed almost insignificant. AT THE ROOT of my compulsive trading was an inability to set limits. Perhaps it's worth noting that my legitimate success stemmed from the same root. My ambition was so strong it went beyond rationality, and I gradually lost sight of what constitutes ethical behavior. At each new level of success I set higher goals, imprisoning myself in a cycle from which I saw no escape. When I became a senior vice president, I wanted to be a managing director, and when I became a managing director, I wanted to be a client. If I was making $100,000 a year, I thought, I can make $200,000. And if I made $1 million, I can make $3 million. And so it went. Competitive jealousy is normal in business. Everybody wants to make more than the guy down the hall. It is the same in investment banking, but the numbers have more zeroes. Only a small percentage of the people these firms hire at the entry level of associate go on to make partner, and as the pyramid narrows, the competition grows ever more intense. By the time I made partner at Drexel, I was out of control. My parents always encouraged me to play straight. I come from a strong, old- fashioned family; I was the youngest of three boys. My mother, Selma, was shortchanged by life: She died of a stroke at 53, when I was 23. I'm still very close to my brothers, Larry and Robert, and my father, Philip; we talk often and meet for dinner and backyard barbecues. Until he retired in 1983, my father worked long hours running his own business. His home-remodeling company finished basements, installed siding, added dormers, and so on. He taught me to work hard, believe in myself, and persevere. Off and on, from my early teens, he hired me to canvass door to door for new customers. Those cold calls were hard, but they showed me how to sell. I tried to overcome objections, never taking no for an answer. As a kid I always worked. I would be shoveling snow or delivering newspapers. My folks gave me piano lessons from the time I was 7, and during my early teens I started making money as a musician, playing keyboards at parties and dances. By the end of high school I was in a band that sometimes opened local concerts by touring rock groups, including the Association and the Turtles. I wasn't a particularly dedicated student in those days, but I had a lot of friends. I began studying the stock market when I was 13, reading books and investing part of my earnings -- a few hundred dollars at first -- in over-the-counter securities. In eighth grade I became a regular reader of the Wall Street Journal. By the time I enrolled at City University of New York's Bernard M. Baruch College in Manhattan, I was heading for a career in finance. Soon I narrowed my focus to investment banking, which seemed a great way to make money. Laurie and I met at a wedding during my junior year at Baruch. Two years younger than I, she was smart, attractive -- blonde, blue-eyed, and athletic -- and shared my goals of raising a traditional family while I built a lucrative career. We began thinking about marriage. Upon graduation I entered Baruch's MBA program, going to school at night and working during the day. Baruch offered no special courses in investment banking, so I taught myself. I wrote my thesis on the factors that influence underwriting profits. At first, given my lack of experience, no investment bank would hire me. So I took a job in the corporate counseling department at Citibank, hoping that a stint in commercial banking would provide a springboard to Wall Street. Initially I analyzed client companies' foreign currency exposures and helped develop hedging strategies to offset potential losses. By the end of the year that I worked at Citibank I was advising corporate clients myself. Laurie and I finally got married and moved into a $379-a-month apartment in Forest Hills, Queens. It was 1977 and mergers and acquisitions was starting to boom. When I began my career, it was rare for people with backgrounds like mine -- middle-class, non-Ivy League, without useful social connections -- to surmount the barriers surrounding the patrician business of investment banking. But over time those barriers were relaxed. Combined with deregulation, the growth of acquisition activity forced the old-line investment firms into harsh competition, leading them to hire and promote people on merit. Seeing my chance, I began studying the M&A business in my spare time, reading books and following deals in the press. It was at Citibank that I met Robert Wilkis. A fit, balding junior officer a few years older than I, Bob struck me as terribly urbane when he introduced himself at a meeting for new employees. He was a Harvard grad with a Stanford MBA who spoke five languages. Bob shared my love of the stock market, and we became close friends. We would meet at the fourth-floor stock-quote terminal, where he monitored his personal portfolio while I tracked the latest M&A deals. As a lending officer in the world corporate group, Bob had routine access to sensitive information about mergers Citibank might finance. Early in 1978 he told me he had identified a major U.S. company -- let's call it ChemCorp -- as a takeover target. He said he had bought its shares and recommended I do the same. I did: Borrowing on margin, I purchased $4,000 of ChemCorp stock. The merger never materialized and I sold the stock for about what I paid for it. To this day I'm not sure the transaction was illegal; Bob never told me he had inside information about ChemCorp. But it was well over a year before I dared make another such trade. Meanwhile I landed the investment banking job I had coveted. Smith Barney Harris Upham & Co. hired me in 1978 as an associate at $23,000 a year. Investment bankers usually work on deals in teams of four or five, with the associates at the bottom doing the grunt work while the partner makes the strategic decisions. I tried hard to distinguish myself. If I was analyzing potential buyers for a business a client was selling, I would tell the partner which one struck me as the best fit. Some hard-nosed partners would say, You're not paid to think, but most appreciated the effort. THE FIRM SENT ME to Paris for a year. Laurie and I had never been abroad -- now we were living in Smith Barney's comfortable apartment on Avenue Foch. I ran into many senior European executives who scoffed at American tax and securities laws. Insider trading was legal in most European countries, and some executives I met seemed to view it as a perk of office. A few said they kept money in Switzerland or Liechtenstein or Luxembourg, where bank-secrecy laws are strictly enforced. During that year Bob Wilkis and I kept in touch by telephone, and in the spring of 1979 he visited Paris on business. Bob had also moved into investment banking by then, as an associate in international finance at Blyth Eastman Dillon. We talked at length about trading on the inside information we came across at work. By nature, investment banking requires that even junior people encounter nonpublic information as they work on prospective deals; both Bob and I learned of transactions long before they were announced. When Bob was in Paris we decided to open accounts at Swiss banks. I borrowed as much as I could from my Ready Credit account and my family, telling them only that I had found some promising investment opportunities. With the $39,750 I raised, I opened a numbered account at Pictet & Cie in Geneva; Bob's was at Credit Suisse. I didn't really begin buying stocks until Smith Barney moved me back to its New York office a few months later. I went to great lengths to avoid creating a paper trail for investigators to follow. Accustomed to confidential arrangements, Pictet's bankers suggested I use the code name Milky Way. When you call, they said, why don't you just say it's Mr. Way? They sent me no bank statements. I called in my trades from public phones -- collect. (The bank extracted a service charge of about $20 per call.) BOB AND I tried to avoid linking our trading activities or creating noticeable patterns. That way, if one of us was found out, the other would be safe. We agreed to pool our information but to avoid any financial relationship. According to our pact, we would keep our trading secret, never share our stock tips with anyone else, and never trade in the U.S. Bob came up with the code name Alan Darby, which each of us used when calling the other at work. The procedure was simple. In the normal course of business Bob might learn that Blyth -- or his next employer, Lazard Freres -- was representing one company in a prospective takeover of another. Let's call the target Flounder Corp. Bob would phone me at work, identifying himself as Darby if anyone other than I answered. We would set up a meeting, often a quick lunch of pizza or Chinese food. Between bites, he would tell me the inside dope on Flounder. We would also chat about work, family, movies -- we were friends, remember -- then say goodbye. Before buying any shares, I would do enough research on Flounder to assure myself that its stock was worth buying at current prices even if the takeover never materialized. (Inside information is not always a sure thing: I lost as much as $250,000 on some trades.) If Flounder's fundamentals looked good enough, I would find a moment to step out to a pay phone and call my bank with a buy order. Once the public got wind of the takeover and bid up the stock, I would telephone again with a sell order. It was that simple. As often as not, of course, I'd provide information and Bob would trade. My initial uneasiness gradually ebbed -- there were no inquiries, and all of a sudden the balance in my account was over $125,000. As my trading grew, so did my circle of sources: With Bob's knowledge, I began exchanging information with another junior banker and a law-firm associate. I never told Bob their names; Bob later did the same with a young colleague. Then, during one of my calls, a Pictet banker told me the conservative firm was uncomfortable with my aggressive trading style, which included short-selling securities and trading options. He politely suggested I change tactics or take my business elsewhere. I simply shifted to the Bahamian subsidiary of Bank Leu, Switzerland's oldest. I was developing confidence about my career as well. Along with the other associates in Smith Barney's M&A bullpen, I read annual reports and labored over financial analysis. We all regularly put in time on weekends and after 7 or 8 P.M., when the partners usually knocked off for the evening. The hours were so obscene that my family ribbed me about being a wage slave. But I loved my work. I realized, Hey, I'm doing this, and I'm doing it well. ONE OF MY ASSIGNMENTS was as breaking-news coordinator. I closely monitored market developments -- partly by watching the Dow Jones news ticker, partly by listening to Wall Street gossip -- and alerted the firm to opportunities. I became an idea man, finding reasons Smith Barney should get involved in a transaction, suggesting why one company should merge with another. At first the opportunities I spotted were small. I heard a rumor that a big block of Koehring Co., a producer of excavators and other heavy machinery, might be up for sale, making the company vulnerable to takeover. I told my superiors, and they approached Koehring. Ultimately a bidder did surface, and Koehring hired us to render a fairness opinion for a $250,000 fee. As I rose on Wall Street the fees my ideas generated got bigger, and people kept patting me on the back for being so well plugged in. I spent my career trying to keep abreast of every major M&A transaction, knowing who was representing whom, who was buying whom. I kept a log. People think you have to be brilliant to be an investment banker, but it's not rocket science. If a consumer products company comes up for sale, you have a list of likely acquirers. You do your homework, call them up, and if you're the first with the right idea, odds are you'll get the business. The essence of high-level investment banking is the ability to close deals. What clients pay for is negotiating skill and judgment that transcends anything they teach in business school. Making a deal happen requires as much psychoanalysis as financial analysis. The people in this high-stakes arena have enormous egos; it's the banker's job to retain objectivity even when others can't. You also must balance the interests of everyone on both sides -- the managers, the directors, the major shareholders, the banks, the lawyers, the other investment bankers -- and somehow stay three moves ahead of them all. Do it long enough, it becomes an instinct. Smith Barney promoted me to second vice president, but by 1981 I felt I had learned as much there as I could. I moved to Lehman Brothers Kuhn Loeb, then a private partnership and a major force in dealmaking. Starting as a vice president, in three years I rose to senior vice president. Gradually I was becoming an experienced dealmaker. In June 1984, for instance, I read that Avon Corp. was considering purchase offers for its Tiffany subsidiary. Boom! Click! I immediately called Bill Chaney, Tiffany's CEO, and successfully proposed a $135 million management LBO instead. Not the biggest deal I've ever done, but very profitable for everyone involved -- including Lehman, which invested in the LBO. Part of what attracted me to Lehman had been the hope of becoming a partner in a private firm. When Shearson/American Express acquired the bank in 1984, Lehman lost that appeal. A few months later, when Drexel offered me a position as a managing director -- the equivalent of partner -- I jumped. Drexel was starting to translate its clout in junk bond financings into M&A deals. The firm had a stable of acquisitive clients, and in case after case I was assigned to get their deals done. Within months I built a string of successes: Carl Icahn's proxy fight against Phillips Petroleum, which forced a restructuring to the benefit of shareholders; Coastal Corp.'s unsolicited $2.5 billion acquisition of American Natural Resources; Sir James Goldsmith's hostile takeover of Crown Zellerbach, completed despite a poison pill; and the Revlon deal, the high point of my career. Winning a battle like the one pitting Perelman against Michel Bergerac of Revlon offers excitement far more intoxicating than insider trading. At the outset Perelman proposed a friendly acquisition. Revlon responded by creating a poison pill defense, beginning a ferocious battle during which Revlon tried almost every weapon in the anti-takeover arsenal. The odds were against us, in part because Perelman's company, Pantry Pride, was one-eighth the size of Revlon, and it was still uncommon for small companies to swallow large ones. In the end our side prevailed because our proposals served the shareholders' interest better than management's. To put pressure on Revlon, we kept issuing all-cash tender offers at higher and higher prices. Revlon's board spurned those offers, agreeing instead to an LBO by a group that included Bergerac and other Revlon managers. We topped that group's offer, and kept topping their subsequent offers until, in a historic decision, the Delaware chancery court ruled that once a company puts itself up for sale, it must maximize shareholder value. Perelman's final offer was 75 cents a share higher than Bergerac's. In 1985 my first bonus at Drexel came to well over $1 million in cash. In addition I was offered securities, including Drexel stock; had I held the securities longer, this part of my compensation might have been worth millions. Instead the securities were liquidated and then turned over to the government as part of my settlement. My relationship with Ivan Boesky began innocently enough. Having learned to listen to the market's tom-toms as part of my legitimate career, I developed a network of sources that eventually included the man considered America's boldest and most influential stock speculator. Like the CIA, Ivan seemed to have sources everywhere: His intelligence was extremely valuable. And he was an important Drexel client. We met in March 1985 at my first Drexel high-yield bond conference. This was a glamorous annual affair in Beverly Hills -- dubbed the Predators' Ball -- that drew people, from pension fund managers to corporate raiders, controlling untold billions of dollars. When it was over, Ivan offered me a ride back to New York on a private jet. Since I had already made plans to visit one of my brothers who lives nearby, I declined. But once back in New York we began talking regularly, mostly about pending deals. IVAN'S ATTENTIONS were flattering. He invited me to lunch at ''21.'' He would telephone me at home, at work, even when I was on business trips or vacations, seeking information about deals. My home phone would ring well before 6 A.M.; Laurie would answer and hand me the receiver, saying, It's Ivan, rolling her eyes. He had such an insatiable desire for information that he would call me up to a dozen times a day. With Bob's knowledge, I began giving him tips in exchange for access to the vast store of market information in Ivan's head. I wasn't telling Ivan anything very specific -- it was more a matter of suggesting that, say, his investment in XYZ Corp. seemed worth holding on to. I never told him my oblique suggestions were based on nonpublic information, but over time he evidently learned their value. Then Ivan drastically changed the nature of our relationship by offering to pay for the information I was giving him, based on a percentage of his trading profits. He said something like, You seem to have very, very good information. You should be compensated for it. Despite my own illicit activities, I was flabbergasted. I couldn't believe he would risk exposing himself so blatantly, by proposing something clearly illegal on its face. I already had a secret life, and it was not something I was anxious to expand: My safety depended on keeping the number of people who knew of my insider trading to a minimum. Besides, by then I had millions in my account at Bank Leu. I turned Ivan down and resisted his overtures for weeks. I'm not quite sure why I finally accepted. Stupidity, I guess. And I don't know why Ivan engaged in illegal activities when he had a fortune estimated at over $200 million. I'm sure he derived much of his wealth from legitimate enterprise: He was skilled at arbitrage and obsessed with his work. He must have been driven by something beyond rational behavior. In any case, I never received a penny from him, though I was due $2.4 million under our formula when I was arrested. WHEN MY SCHEME fell apart, it did so quickly. In the summer of 1985, Merrill Lynch received an anonymous letter accusing two of its brokers in Caracas, Venezuela, of insider trading; only one was subsequently charged. Unbeknownst to me, for years several Bank Leu executives had been making trades that mimicked mine, for their own accounts or for others' -- apparently, the bank's policies condoned this. Disregarding my instructions to spread my orders among several brokers, they had funneled much of the business through Merrill Lynch. At least one trader there, in Caracas, apparently piggybacked on my trades ! too. Somebody blew the whistle, perhaps out of jealousy. Merrill Lynch, it seems, then informed the SEC, and just as my legitimate career was reaching its peak, the government began its ten-month investigation of Bank Leu. I thrive on stress, but those months were tough. The Revlon deal was in progress, Laurie's father was dying of cancer, and I was flying to the Bahamas every few weeks to discuss the SEC's investigation with my bankers. Ultimately, despite the Bahamian and Swiss laws in which I had placed so much faith, Bank Leu handed my head to the SEC in return for immunity from U.S. prosecution, agreeing to testify against me. The day the government came looking for me, I was petrified about Laurie's reaction. Laurie is wonderful. Tutoring our daughter, Sarah, with flashcards or playing softball with Adam, she shows the patience of a grade school teacher, a career she gave up to raise our children. She is also assertive: She lets you know exactly what she thinks. Certain that she wouldn't approve and meaning to shield her from any legal consequences of my actions, I had never told her about my insider trading. It was a secret big enough to strain any marriage: Some spouses use drugs, others have extramarital affairs, I secretly traded stocks. Laurie had no reason to suspect: We had always lived within my means. We stayed in a cramped one-bedroom apartment for almost three years after Adam was born, though I could have paid for almost any apartment in Manhattan with my offshore trading profits. Though I called my wife from the car phone before I was arrested, I couldn't bring myself to tell her what the problem was. I asked my father and brother to stay with Laurie at the apartment, and they told her. By then my crimes had become public knowledge. I didn't sleep that night in jail. Instead, I spoke with Laurie on the phone, and her initial reaction was disbelief. She was ashamed of me and beyond anger -- furious. We had been living this American dream, and now she didn't know how much of it was real. Was it all a dream? I tried to reassure her, but inside I was an emotional wreck. She told me that a mob of reporters had gathered at the entrance to our apartment building. I feared the stress might cause her a miscarriage. The pressure on us only increased after I was released on $5 million bail the next day. When I went to my local cash machine to get money, my bank account was empty. The IRS had seized most of my assets to protect its claim < to back taxes. Then I learned that a grand jury had been impaneled and the government might use the harsh RICO statutes -- designed to fight mobsters -- against me. That would have allowed them to seize all my assets, down to the food in the fridge -- and the maximum penalty for each RICO violation is 20 years in jail. The death blow came when Bob Wilkis asked to meet with me. To my amazement, he told me that he had tipped others, including a member of his family, and had been executing trades in the U.S. all along. That had created an easily detected trading pattern nearly identical to mine -- more than enough to nail me. I knew I was finished, and in the end my attorneys advised me that I had no choice but to settle with the government and tell the truth about everything and everybody involved in my case. I pleaded guilty to four criminal charges related to my insider trading and settled civil charges with the SEC. Turning over cash and other assets, I made full restitution of my $11.5 million in trading profits. Everyone else involved in the case also entered guilty pleas and cooperated. Ivan Boesky turned himself in, pleading guilty to one criminal count and turning over $100 million. At that point I assumed the investigation was closed, but apparently Ivan's illicit activities extended far beyond his involvement with me. I had no inkling of his secret relationship with Marty Siegel, whose office was right next to mine at Drexel. The revelations of Ivan's paying Siegel off for inside information with suitcases of cash surprised me as much as anyone. So did Drexel's collapse and Michael Milken's settlement with the government. I don't think the firm's ethics were materially different from any other investment bank's. ON FEBRUARY 20, 1987, I pulled up to the federal courthouse in White Plains, New York, with my wife and lawyers. As our car approached I noticed dozens of reporters and camera crews standing outside. It reminded me of a lynch mob. Once inside, I learned that few experiences are more humbling than standing before a federal judge, publicly acknowledging guilt and being sentenced to jail. Less than four months after Sarah's birth, I began serving my sentence. Saying goodbye to your family is painful enough, but imagine having to explain to your 5-year-old son why his father is going to prison.

ALTHOUGH minimum-security prison camps have no walls, you are constantly reminded of your separation from family and society. I had no privacy, my ! moves were monitored, and my daily routine was controlled by others. I went from never having enough time to a place where everyone kills time. I mopped floors and mowed grass and spent hours just thinking. At first I could not come to grips with the turbulent changes in my life; I was burning with anger at myself. Eventually I decided to change my priorities and try to regain control over my life. I had entered prison grossly overweight, at 241 pounds. One outward sign of my new resolve: I lost 67 pounds in prison. I got along all right with the other prisoners, many of them drug offenders with no convictions for violence; nobody bothered me. They loved TV shows like Wiseguy and Miami Vice -- and the inmates always rooted for the crook. Having experienced prison, I'm saddened that most Americans apparently believe we can solve our drug problems by building more jails and locking more people up. From what I've seen, prisons don't solve social problems. The other prisoners called me ''Mr. Wall Street'' and asked me for market advice. I always said no. Money had little value, but there was a lively barter economy: If you were long cigarettes, you could often buy a plate of linguini with clam sauce, heated in an aluminum pie tin over an electric iron. As one of the few nonsmokers in an institution that rationed cigarettes, I was a wealthy man. Laurie sent me a copy of Bonfire of the Vanities, Tom Wolfe's novel about a Wall Streeter who gets thrown in jail. I never felt quite like a Master of the Universe, but I saw parallels. On weekends and holidays, I was allowed visits. I have painful memories of Sarah learning to walk in a prison visiting room, and of Adam pleading with a guard who wouldn't let him bring in a Mickey Mouse coloring book. Toward the end of my sentence I urged them not to come. It hurt to be reminded of what I was missing. Until I got out I didn't understand the ordeal Laurie was going through. She had lost her father to cancer, given birth to a new baby, and become a single parent, all in a few months. While I was in Lewisburg she kept her feelings to herself, to spare me worry. And we couldn't talk intimately with guards monitoring our visits and recording our calls. When I was released, I was so overjoyed to be free that I didn't realize I was coming home to a woman whose anger had been growing since the day of my arrest. Instead of celebrating my return, Laurie forced me to confront the misery I'd caused her. Now that we've * had it out, our marriage is stronger than it was when we were divided by secrets. I am rebuilding my life. I still feel the consequences of my mistakes and doubtless will forever. But I've been granted a precious second chance. This time around, I'm spending far more time at home with my family than ever before. I love the investment-banking business -- it's in my blood -- but as part of my settlement I agreed never to work for a securities firm again. I can still advise companies about raising money or doing deals, so I have started my own New York advisory firm, named Adasar Group after my children. My clients are smaller than they used to be, but much to my surprise, most people have treated my reentry into business with fairness and compassion. I also have been addressing students at Columbia, Wharton, New York University, and other schools, hoping to steer them away from the mistakes I made. They are conscious of ethical issues -- all the way from misappropriating office supplies to out-and-out felonies like insider trading or illegal dumping of toxic wastes. The enthusiasm of their response encouraged me to write this article. My former life was destroyed because I figured the odds were 1,000 to 1 against my getting caught. It would comfort me if I could help even one person avoid throwing away a lifetime on a foolish gamble like that.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: LEVINE'S TRADING PROFITS Growing at a 125% annual rate, Levine's tiny investment took off for the skies.