U.S. STUDIES PLAN TO LINK ARMS CUTS AND ATOM TESTING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88B00443R002004480038-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: June 28, 2011
• Sequence Number: 38
• Publication Date: September 12, 1986
• Content Type: MEMO

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THE NEW YORK TIMES, THURSDAY. IDLY 17, 1986
U.S. STUDiES PLAN
TO LINK ARMS CUTS
AND ATOM TESTING
REAGAN LETTER DRAFTED
Some State Dept. Aides Favor
Reducing Nuclear Tests
as Part of an Accord
Debate Continues . misrepresented the purpose of ate Another issue is how to amend tree
Administration officials cautioned Geneva arms meeting. American position on strategic arms.
Mr Shevardnadze said the meeting State Department officials have ad-
Vi tu
suggested reducing a nu The White House sa i it opposes that idea.
t. te nadze. in his remarks in London, had
p
dale, ? ? President Reagan and Mikhail S. Gor
The Administration has never before bachev. (Page A8.]
ber of id Mr Shevard
chev, the Soviet leader, and has real professional knowledge."
su rted by State Department of fl-
Po
But supporters of the idea said that
the United States could reducl its test-
Ing without hurting Its security and
that the proposal could slow Soviet
weapons development. They also said
that the Soviet proposal for a ban on
i testing had increased public interest in
i the issue and that the proposal might
be a way of addressing those concerns.
The Soviet Union has imposed a
yearlong moratorium on its under-
ground tests that is due to end on Aug.
6. On Tuesday. Mr. Gorbachev said the
Soviet Union might extend its more-
l corium. depending on American posi-
tions on arms control issues.
news reports that the United States had
agreed to a Soviet suggestion to con-
vene another arms control meeting
later this month, when the Standing
Consultative Commission begins a spe-
cial session "on or about July 22." The
commission was established by the
1972 anti-ballistic missile treaty.
Edward P. Djerejian, a White House i
spokesman, said the United States
would be prepared to respond at the
meeting to Soviet concerns about
President Reagan's decision to repudi-
ate the 1979 strategic arms limitation
Reagan Decision May Change
"Time remains for the Soviet Union
to alter the situation which led the
President to his May 27 decision." Mr.
Djerejlan said in a statement. "If the
Soviet Union does, the President will
take this into account."
The draft letter covers a broad range
of arms Issues, including strategic
By MICHAEL R. GORDON
Spedsl N TM neo Ywk Timers
WASHINGTON. July 16 - The Rea-
a
gan Administration in calls simulta-
Proposal that
neously reducing the number of under-
neously
ground nuclear tests by the United
States and Soviet Union and the num-
ber of strategic weapons on each side. -
The idea of a link between reductions
in strategic weapons and in testing is
contained in a draft of a letter from
President Reagan to Mikhail S. Go~
ay
o
bid not been worked out. intended to discuss ways to improve' Danger, a conservative group, issued ti
Excluded 1970's verification of two size from thereport on arms-control issues that
Some Weapons 1970's that limit the size of if nuclear ex- sharply assailed the Administration'*
Some critics of the. proposal within -plosions; those treaties have been proposed ban on long-range mobile
the Government said there was no di- signed but not ratified. missiles. It said that "the most dis-
rect correlation between the number of The Reagan Admininstration has tressing aspect of the latest U.S. cur-
weapons that each side has and the said it will not ratify the treaties until -rent arms-control proposal is the call
number of tests they need to conduct. yerification is improved. The officials for a ban" on such missiles.
They said, for eitample, that some nu- I said the Utilted States was not inter-
clear tests. such as those carried out to sated in resuming talks on a total test
develop tactical nuclear weapons. are ban, which it insists is an objective for
conducted for weapons that would not the distant future.
be covered by a new strategic arms The White House also confirmed
treaty.
According to the idea, the number of
I tests that each side could carry out
each year would be tied to reductions in
strategic arms. If both sides agreed to.
cut strategic weapons by 30 percent,
for example, they might reduce the'
number of underground tests by a simi-
lar percentage. -
But some officials said the fine points
that there was still debate within the
Admltristration over the Idea.
e
The tae p
favors a political commitment to con-
tinue to abide by the treaty for a period
of five years or so while reductions are
carried out. But the Pentagon has said
treaty.
He also said American representa-
tives would go to the meeting with the
expectation that the Soviet Union
White House Confirms Meeting would address American concerns
The white House today confirmed re- i about purported Soviet arms-control
violations.
ports that American and Soviet experts
would discuss verification issues on nu-
clear testing. Officials said they ex-
pected the meeting to take place later'
this month in Geneva.
in London. Foreign Minister Eduard
A. Shevardnadze of the Soviet Union
,also said Soviet experts were engaged
in "very serious, substantive prepara-
~
tions for a second meeting between weapons and the 1972 antiballistic mis-
whether Mrs. Thatcher had dropped sile treaty.
her opposition to Mr. Gorbachev's Administration officials said there
peace initiatives. The key arms control were major differences over how to re-
issues are highly technical and have to spored to recent Soviet arms control the 'be negotiated by specialists, Mr. She. Proposals'
Incl di nU'batlisti proposalc
ddd
sn
varnaze sai. "What is needed is not treaty
laymen's talk," he commented, **but S t D
rtment has said It
a
would focus efforts offegoti taia. vocated that the Administration aban-
total test Nan 4, don its ban on long-range mobile mis-
that there were no preconditions for th4pi sites and, instead, set a limit on the
meeting, and that-it would deal with) number of warehads on such long-
H i ludin those with
nc
i
verification Isstes on testing.
Verification Discussion Expected
Qtffcials said the United States ex-
pected the Soviet Union to discuss v'ri-
fication measures for a total test ban.
But they added that American officials
g
ss es,
range m
multiple warheads. .
Liberal and conservative arms ex-
perts have criticized the mobile ban.
which they say would prevent the
United Staes for fielding a less vulner-
able force.
the Committee on the Present
d
T
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WHY WASN'T
$1 MILLION A YEAR ENOUGH?.
. 'T'RADING SCANDAL
A 1.0'T' MORE 'T7 IAN GREED LED I O T I I1. INSIDER-TRADING
B. Levine, who fell further
at 33 than most of us will ever
is an enigma. A million dol-
climb
,
htrs a year and $10 million in the bank
weren't enough. Even when he knew
federal investigators were closing in, he
kept testing the limits.
And there are others like him, a dozen
in all so far this summer. Sometimes it
has seemed they were everywhere on
Wall Street: young men of advantage
busily turning opportunity into misfor-
tune. There is Ilan K. Reich, 31, the bril-
liant young takeover lawyer who,
sources say, never bothered to collect
anything from the insider-trading
scheme that ruined his career. There is
Ira B. Sokolow, 32, who lived quietly in
the suburbs with his schoolteacher wife
and young daughter and collected
$120,000 in cash for information he
learned at the investment bank where he
earned $400 000 a year. There is Marcel
ing, or corporate law, it is show busi-
ness, complete with celebrities and eager
understudies. It moves fast and pays off
big. Risk is glorified. Ambition and drive
are prerequisites.
Is this necessarily a blueprint for
criminality? No. But psychologists say
some of those attracted by the M&A
glamour may have a predisposition to
cut corners. Such people succeed in high-
pressure jobs, the experts say, precisely
because they have psychological prob-
lems that result in compulsive drives.
They often become workaholics. In the
business of dealmaking especially, says
psychologist Martin Haydon of New
York University, employers want their
go-getters to be insatiable. "They pay
them for it," he says.
Relentless ambition, the experts say,
can be a device to satisfy a deep-seated
craving for recognition. Nothing is more
important than being seen as smarter,
quicker, and more creative than the next
guy. Even financial success becomes ir-
relevant. Money matters only as a score-
card, says psychiatrist Samuel C. Klags-
brun, medical director of Four Winds
Hospital, a psychiatric care center in Ka-
tonah, N. Y. For a while, the legitimate
victories satisfy the appetite for recogni-
tion. But then success itself revives the
craving. After every deal, there is de-
pression, says Klagsbrun. "The high is
over, and they desperately want to reach
for the next high."
To recapture the high, many move
closer to the edge of acceptable behav-
ior. A new and separate life begins. A
banker who knew Sokolow remembers
WALL STREET: CLASS OF '86
Katz, 23, the Lazard Freres & Co. junior
analyst who told his father about one of
hazard's biggest deals.
RELENTLESS AMBITION. Beaming at us
from their university yearbook pictures,
they look as we do in our memories:
fresh and quick, impatient for success.
But they stole their firms' secrets and
tried to turn that betrayal into stock
market profits. How did so many go so
wrong so fast? Why did they do it?
There are no definitive answers, and
the insiders themselves aren't talking.
Interviews with Wall Street dealmakers,
academics, and psychologists, however,
suggest a strong behavioral pattern.
Partly the problem lies in the ambiguous
mores and frenzied pace of the mergers
and acquisitions business. And partly
the problem lies in the psychological
makeup of the individuals themselves.
It's simplistic to say the insiders were
motivated by greed alone. The risks
some of them took so far exceeded any
possible gains that their actions seem
irrational. And the claim that these were
just a few rotten apples is naive.
h
at
To begin with, it is no accident t
these scandals have hit the mergers and
acquisitions specialists. M&A is the alche-
my of the 1980s, transforming once-pro-
saic business deals into front-page news.
Whether in arbitrage, investment bank-
ROBERT M. WILKIS, 37
Intellectual and conservative
by nature, Wilkis was drawn
to Wall Street because he
thought work in international
finance would let him see the
world. By the time he
resigned as a first vice-
president at E. F. Hutton on
June 7, he was disillusioned
with the business. "Ile thinks
IRA B. SOKOLOW, 32
A Wharton undergraduate
with a Harvard MBA, he was
one of the most promising of
the young investment bank-
ers in Shearson Lehman's
M&A department. Remem-
bered by another banker as "a
sweet kid," Sokolow learned
the dark side of Wall Street
early. As a summer associate
at Smith Barney in 1980,
of himself now," says one
who knows him, "as
somebody who never should
have gotten involved in
investment banking. It didn't
have enough intellectual
content" Wilkis told the SEC
he made $3.3 million from
illegal stock trades. He is
cooperating with the
government.
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Sokolow met Dennis Levine,
who, according to a source,
said that the way to succeed
on Wall Street was to dig out
information and use it. "This
is how you get ahead," the
source says Levine explained.
On July 1, Sokolow settled a
civil suit in which the SEC
charged that he got $120,000
for giving Levine more than a
dozen "inside" tips.
LEGAL AFFAIRS
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giving him an expensive cigar to cele-
brate a deal. Sokolow seemed over-
whelmed, saying he would never have
bought such a gift for himself. Today
the banker wonders how Sokolow could
summon that apparently genuine emo-
tion when, as only Sokolow then knew,
he had enough money to buy a cigar
store.
LEAVING TRACKS Psychologist Haydon
says such incidents pose few problems
for those involved. They keep their se-
cret lives so separate from their normal
activities that for a time the two do not
intersect. One expert says the behavior
is akin to having an affair on the road. It
has nothing to do with life at home. Or
so it seems.
This compartmentalized life, too, even-
tually fails to satisfy. Secret triumphs
bring no recognition. Thus begins a pat-
tern that often leads to discovery. In
Levine's case, it may have been a need
to show the world how ingenious he had
been that led him to new excesses. His
stock trades accelerated after he had
been questioned by the Securities & Ex- -
change Commission in 1984. And even
when he knew the SEC was closing in, he
wanted to continue trading. If recogni-
tion was what Levine subconsciously
wanted, he got his way. He will be
remembered.
Even those who enter Wall Street free
DENNIS B. LEVINE, 33
A colleague remembers that
Levine was "a bubbly,
friendly, talkative kind of
guy." But that was on the
surface. Levine could be
calculating and manipulative.
He had, one source claims, a
Svengali-like effect on some
of the young men who fed him
illegal tips. "Everybody does
of psychological problems may be sub-
ject to unusual pressures. Experts in in-
dustrial psychology say workers often
expose themselves to a certain amount
of danger because it is stimulating.
White-collar crime such as computer
"hacking," many authorities believe, is
simply an extension of that kind of be-
havior. Typically, says psychologist Law-
rence R. Zeitlin of the City University of
New York, a few employees seek to add
excitement to their jobs so they can use
intellectual potential that may be un-
tapped in standard chores. Insider Rob-
ert M. Wilkis is now said to feel invest-
ment banking "didn't have enough
intellectual content."
Whether the predisposition toward
rule-breaking has its roots in pathology
or job stress, environment plays a major
role. Studies have shown, for example,
that most people say they don't commit
crimes at work because they believe
they will get caught. The M&A environ-
ment obviously hasn't succeeded in con-
. veying that kind of message. In recent
years there have been a score of insider-
trading cases involving leaks from top
law firms and financial institutions.
Youth has been a factor in several
major business scandals, says M. David
Ermann of the University of Delaware,
an authority on corporate crime. Young
professionals, he says, "know that the
ILAN K. REICH, 31
His mind is so sharp that
sometimes Reich was a
problem at Wachtell, Upton.
Rosen & Katz, one of the top
takeover law firms in the U. S.
He could be arrogant. "It was
a tendency to be short with
people," says one M&A
specialist. Until he became a
partner in 1984, sources say,
he would sometimes tell
it," the source says Levine
told a young investment
banker. Levine's most
perplexing trait, however,
was that the greater the risk,
the more willing he seemed to
be to take it. On June 5,
Levine pleaded guilty to four
felony charges. He is now
telling his story to
government investigators.:
Levine about the plans of
Wachtell Lipton's takeover
clients. In a peculiar twist,
Levine is said to be telling
investigators that Reich
nevgr got a penny for his
information. Reich resigned
his $450,000-a-year position
on July 14 after Wachtell
Upton received a subpoena
from the SEC. There are no
formal charges against him.
rules in business are different than in
everyday life, but they don't know exact-
ly how they differ. If you give them too
much play too soon, they won't adapt."
The result, he says, is that they may
develop their own set of rules based on
misperceptions of accepted behavior.
While Dennis Levine was assembling
one of the largest insider-trading rings
ever uncovered, one source says that Le-
vine explained his understanding of the
rules of insider trading: "Everybody
does it."
The takeover business that has bred
the current scandal is young, too. Sociol-
ogists say institutions on their way to
maturity have the problems of anyone
growing up. Control can break down
when there is rapid change. Ilan Reich's
law firm, takeover powerhouse Wach-
tell, Upton, Rosen & Katz, is only 20
years old. Drexel Burnham Lambert Inc.
thrives by financing hostile takeovers
that little more than a decade ago were
scorned by most investment houses as
ungentlemanly.
The M&A. world concerns itself with
money 24 hours a day. "The premium is
$15." "The fee was $6 million." "It's a $2
billion deal." If you are 27, or 31, or 33,
those numbers can be dizzying. Perhaps
money simply stops having any meaning
at all. "One builds a climate through the
salaries and the size of the deals so that
money and the way it changes hands
doesn't seem as important in-house as it
does on the outside," says William R.
Dill, president of Babson College in
Wellesley, Mass., and a former dean of
NYU's business school.
MIXED SIGNALS. If in that world of youth
and big money, there is confusion about
the ethics of insider trading, there are
plenty of reasons for it. Insider trading
is the archetypal white-collar crime. The
profit can be huge, and it's hard to find
a victim. There are even respected critics
who argue that insider trading should be
legal. That ethical ambiguity is critical,
says Gilbert Geis, an authority on white-
collar crime at the University of Califor-
nia at Irvine. "The one thing that is key
in white-collar crime," says Geis, "is the
ability of the criminals to say to them-
selves - that they didn't do anything
wrong. They see themselves as respect-
able people."
Wall Street institutions, meanwhile,
send out decidedly mixed signals on the
respectability of insider trading. All of
them have strict rules forbidding infor-
mation abuse.-But do they do as much
as they might to enforce them? True,
the firms regularly tighten procedures
and issue reminders about behavior. But
in many cases, clerks and messengers
have had easy access to valuable and
coveted secrets.
Young MBA professionals must try to
make sense of the ambiguous messages
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they get about insider trading. While the
insiders of this summer's scandals were
figuring out how to fit in, there were
many puzzling incidents. They saw edito-
rial writers deriding the SEC's insider-
trading enforcement efforts as threaten-
ing to the free flow of information. They
saw Paul Thayer, a former corporate
chairman and Deputy Defense Secre-
tary, caught in a blatant insider scheme.
And they saw the man who was the
most vocal insider-trading prosecutor
ever, John M. Fedders, driven out of
office in it scandal that suggested a fun-
damental hypocrisy. The chief financial
enforcement officer in the U. S. had a
different standard when it came to abid-
ing by the law himself. He beat his wife.
SCANT REMORSE. How seriously, in
short, were these young professionals to
take the trading guidelines? In a search
for the answer, they may have had to
determine what behavior to imitate. For
years criminologists have held that anti-
social behavior is learned from peers.
Today, say some experts, there has been
a change. The achievers of the 1980s
define themselves so completely in
terms of their jobs, says Purdue Univer-
sity sociologist Richard L. Hogan, that
they begin to imitate the behavior not of
their peers but of the companies they
work for. "They come to view them-
selves not just as corporate actors," he
says, "but as corporations themselves."
That is a chilling notion. However well
meaning their managements may be,
corporations do not have consciences:
They exist to profit and nowhere more
aggressively than on Wall Street. Adopt-
ing a corporate character, then, becomes
especially dangerous for the young stars
of M&A. Price, as any good M&A man will
tell you, is what matters in the end.
When the M&A kids equate themselves
with the law firms or investment banks
they work for, morality is irrelevant.
They deal in strategic advantage and
risk evaluation. They exist to fight.
Levine and Wilkis, the insiders who
profited most, actually conducted their
schemes through corporations they cre-
ated. In them, perhaps, the metamorpho-
sis was complete. Despite statements to
the contrary, the experts say there isn't
likely to be much remorse. "When I've
seen people like this in my office," says
Klagsbrun, "I have a great sense of sad-
ness. But that feeling is only on one side
of the room. For them, this is just one of
the deals that didn't work out."
For the rest of us, it is an unsolved
puzzle. But the search for an answer is
essential if the scandal of 1986 is to
mean more than ruin for a handful of
young men who wouldn't be satisfied-
even with a fast trip to the top.
By Willia?r. B. Glaberson in New York
BUSINESS WEEK/HARRIS POLL:
INSIDER TRADING ISN'T A SCANDAL
The insider-trading scandal on Wall Street hasn't upset Americans. Indeed, a majority would
buy stock based on an Insider's tip-and more than a third of those who would not said
thoy'd be afraid the tip was wrong. As for ethical standard!'. Wall Streeters do well, coming In
ahead of politicians and lawyers and roughly tied with executives, doctors-and reporters.
Q A number of people in their 20s and 30s
who work on Wall Street have been
accused of insider trading--Illegally
trading stocks on information they knew,
but the general public and other
stockholders did not. Why do you think
they engaged In such illegal acts?
A Pure greed .......................................... 56%
They were criminal by nature ............... 6%
Many others on Wall Street
were doing it ........................................21 %
They made too much money
at an early age .................................... 11%
None 'x not sure ................................. 6%
Q Since everyone Implicated so far has
been relatively young, some people have
argued that this Indicates that the
younger generation, especially Yuppies,
has lower moral standards than their
elders. Do you think that's true, or don't
you see much difference?
A Is true . ............................................. 44%
Not much difference ........................... 50%
Not sure ................................................ 6%
Q How common do you think It is for people A Very or somewhat common ............... 63%
on Wall Street to engage in Insider Not common ........................................26%
trading?
Q Some people argue that insider trading A Should be illegal ................................. 52%
shouldn't be illegal. They say that nobody Just that they know more ....................41%
gets hurt, since no one loses money, just, Not sure ................................................ 7%
that some people make more money
than others. Do you think that insider
trading should be Illegal, or is it just a case
of people making money because they
know more than other people?
Q Suppose someone got a tip from a friend A Would buy ........................................... 82%
that the company he or she works for was Would not buy ..................................... 14%
going to be purchased for a lot more Not sure ................................................ 4%
money than its current stock price. Would
most people, if they had the money, buy
stock in that company or not?
Q Now, suppose you got a tip from a friend -A Would buy ........................................... 53%
that the company he or she works for was Would not buy ....................................:42%
going to be purchased for a lot more Not sure .............................................. 5%
money than its current stock price. If you
had some spare cash, would you buy
stock in that company or not?
Q You say you would not buy stock based A It would be Illegal ................................ 17%
on such a tip. It you had to pick one The government might find out............ 3%
reason, which would it be? The tip might not be any good ........... 37%
It's just plain wrong to do It ..................37%
Not sure ................................................ 6%
Q Have the stories about Insider trading
changed your opinion about the ethics of
people who work on Wall Street for the
worse, for the better, or haven't they
made much difference?
A For the worse ..................................... 11%
For the better ........................................ 4%
Not made much difference ................ 80%
Not sure .................................................5%
Q Finally, I'd like to ask you to compare the
ethical standards of people who work on
Wall Street with those In other lines of
work. If you had to choose, which one of
these groups do you think has the lowest
ethical standards?
A Those who work on Wall Street............ 7%
Politicians ............................................ 43%
Doctors ................................................. 5%
Reporters ............................................ 10%
Lawyers ............................................... 16%
Corporate executives ............................8%
Nome and not sure .............................. 11%
Edited by Stuart Jackson
Survey of 1.248 adults conducted Aug. 4-11 by Louis Harris & Associates for BUSINESS WEEK. ovwal results should be
accurate to within three percentage points either way.
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