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Fri 16 May 2014 10:45 AM

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The life and crimes of Jordan Belfort

Jordan Belfort will be appearing at the Arabian Business Forum at the JW Marriott Marquis in Dubai on May 19

The life and crimes of Jordan Belfort
The Wolf of Wall Street: The story of Jordan Belfort’s rise and fall was told in the Hollywood film of the same name.

Jordan Belfort had it all. The success, the money and the lifestyle. He built up America’s biggest over-the-counter brokerage house, Stratton Oakmont, in the 1980s and 1990s — which employed over a thousand brokers — and made himself a fortune in the process.

That was the fantasy. In reality, Stratton Oakmont was a boiler room operation that marketed penny stocks and defrauded investors. After an investigation, Belfort was indicted in 1998 for securities fraud and money laundering, spending 22 months in a federal prison after cutting a deal with the FBI.

It was while Belfort was in jail that he wrote ‘The Wolf of Wall Street’ a bestselling memoir that lifted the lid on his former life of excess, complete with monster yachts, orgies - midget-tossing. The film rights to the memoir were won by Warner Brothers, and ‘The Wolf of Wall Street’, which starred Leonardo DiCaprio in the title role, was released last year, to critical acclaim.

Since leaving jail, 51-year-old Belfort has started a new career as a motivational speaker and author, and has said he is in the process of paying back $100m to defrauded investors. But what was it that initially drove him to make money? What pushed him to break the law? And what does he say to his critics?

Hello, Jordan. What was the initial motivation behind your desire to make money? Was it the lifestyle, the cars, the yachts?

Women, women, women. [Laughs]. That was what it was. When I was 21 years old, I loved beautiful women and I wanted to make a lot of money so I could have beautiful women, like a lot of guys, if they’re being honest with themselves. And it worked out pretty well. I’ve done pretty well in the women department, I’m fortunate in that. I’ve had some great women when I was rich.

Okay, I’m being a little bit cheeky here — that was one of my motivations. It was a bit more complicated than that. Once I got a little bit older, I have children, I want to ensure my children’s future and so on. But originally I wanted to get the beautiful girls and be a man of power, all these things a young kid that wants, if they want to be a success and have the admiration of your peers. So it’s a bit more complex, but like many men before me I love beautiful women.

Can you remember a specific period when you realised you had gone too far and that it would be impossible to go back?

Yes, there was. I’m trying to think where it was in the book. It’s an interesting question. Somewhere in late 1991, I wasn’t breaking any laws yet, but things were starting to happen. The firm had grown and I invented the straight line system and that was the game-changer. It allowed me to train all these young kids and turn them into sales powerhouses.

And that caused my firm to grow so fast that what happened was that I ran out of products to sell. I ran out of good product and I had to start selling product that was not, like, as developed yet. It was never about selling companies that weren’t real because you make more money on better companies. We just ran out of product to sell, so I sacrificed quality.

So it was like in the global financial crisis where you sell the good loans first and when you run out of them you sell the A- loans and when you run out of them you sell worse ones and before you know it, if you’ve got a pulse and a social security number, you’ve got a loan. They ran out of loans. The same thing happened to me, because I couldn’t sell so much stock, and I realised that I’d grown too fast and then I had a trade I wanted to do, where I had to take a bag of money from somebody [instead of making a paper trade]. I wasn’t going to do it, but then I did it and then I thought I won’t do it anymore, but once you take that first step over the line, that’s it.

I remember getting called in by the SEC [US financial regulator the Securities and Exchange Commission] and getting subpoenaed and testifying, and I just lied under oath. The guy said ‘did you take a bag of cash’ and I just said ‘no’ and at that point I knew that was it, I had gone over the line.

So it was one particular moment, not a series of events?

It was that bag of money — just that one step. Even after I took the bag of money, I was still doing everything legal. It was just one little blip. But then that opened up the door, that was the first step. And then after that you take a bigger step and then a bigger step and before you know it, you’re doing things you never thought you would and it all seems perfectly okay.

You’ve said previously that 95 percent of what you were doing was legal. Do you ever wonder what would have happened if you hadn’t broken the law?

Oh my God, I’d be worth $10-20bn by now. I was so stupid. I screwed up everything. One company alone, Steve Madden, is worth $3.5bn and I owned 50 percent of it when it went public. But because of what I had done, I had to get rid of my stock. I would have picked the whole internet boom. The irony of it was that the criminal aspect of what I did allowed me to make a little bit more money quicker. So instead of making $50m I would have made $30m. What’s the difference? I would have lasted forever; it was so stupid, so stupid.

Do you think there’s any difference between what you were doing and the bankers who sold junk mortgage-backed securities ahead of the credit crunch?

No — there’s no difference. The parallel is unbelievable in the sense that they were recommending **** to their clients. It wasn’t that they didn’t exist, it existed — it wasn’t like there weren’t real houses behind it — but the quality just got worse and worse.

At the end of the day what I really did wrong was a breach of fiduciary duty. What I’m saying is I did not put my clients first. And I was selling them things that I had marked up, the exact same thing that happened with these big collateralised bond obligations, these credit default swaps. It’s exactly the same thing — those are junk mortgages. I was selling junk stocks. And that’s not to say that some of the mortgages weren’t good — and some of my stocks were good. But overall, the prices were not up to the quality. And that was the problem, for sure.

And at the same time, there was sort of… a complete betrayal of trust from the client. You could sell your client anything. If you look at… the public hearings, the rating agencies were laughing: ‘yeah, this piece of ****, let’s rate this AAA, this piece of ****’. And that’s ******* Standard & Poor’s saying that! No-one cared, you know? It was crazy. It’s very similar  like that, and also the way that what I did wrong was that I was getting stuff, and friends were holding it and buying it back and that’s exactly what the firms were doing with the hedge funds, they would hold it and sell it back cheaply and it was very, very similar. But no-one went to jail there.

But you went to jail, while the banks got bailed out by the US government…

I deserved to go to jail. Listen, I deserved to go to jail.

But isn’t that a source of frustration?

I know, I don’t think it’s going to happen [bankers going to jail] though, yeah? I know it’s frustrating for people.

So obviously the film has been a big success. When did you first get to see it?

I saw a special screening before it came out in theatres. And I saw it twice, once with my fiancé, once with my ex-wife and my son, to make sure they saw it with us.

What made you most uncomfortable when you watched the film for the first time?

The drug-taking was pretty intense. When you watch the character go through the whole drug thing, that was pretty intense.

Were there any parts of the film that you thought misrepresented reality?

Yeah, there was some stuff. There were some aspects of it that were heavily fictionalised that I thought made me look a lot worse than I was — and I was bad enough. There was certain business stuff that was very inaccurate, and there was also some personal stuff. On the business side, they made an emphasis on selling phony companies that didn’t exist — that was not true. You would never have been able to get away with that for very long. You could do that for a month and then it would be over — you’d be put out of business.

The irony is that I’m not saying that what I was doing was any better or worse, it just wasn’t that. It was stock manipulation, and I guess I understand why Martin Scorsese did that, because it’s very difficult to understand that for an audience. And rather than trying to educate the audience in the movie, they just made it ‘oh the company didn’t exist’ — which is very easy and visceral for people to understand. But that wasn’t at all what was going on.

What about the timeline of the film?

The stocks issue took place much later in the game. I started off with good intentions for the first year and a half. It started to spiral out of control in about 1991, in early 1991. Before that, we were really trying to make… but again I understand they only have three hours in the movie.

Those were the only issues I had with the movie in the sense that it was like, you know, first we’ll sell them the good stocks, then we’ll sell them the dog ****. Right, well in a million years I would never have said that, for a lot of reasons. One was that it wasn’t true, and two, if I’m trying to motivate salespeople, the last thing you want to tell them is ‘you’re selling garbage’. They want to believe they’re selling good things, so I’d never say something like that.

I think some people like didn’t understand that, and that something seemed a bit off with the character, in the sense that, you know, I’m a good kid, I go down to Wall Street, and I make the clients money… and then all of a sudden it’s the next scene and I’m with strippers snorting coke. And it didn’t happen that way, there was more of a gap, you know what I mean? It took a long time to reach that stage. But that being said, I loved the movie. I thought it was amazing, given the limitations that he had in three hours.

So it was really a case of the filmmakers changing some of what happened in the book to make the film more watchable?

Yeah. There’s a particular scene — the most fictionalised aspect of the movie is when I’m giving my farewell speech and as I’m about to say I’m leaving, I say ‘forget it, I changed my mind’. Well, in reality, if you read the book, that’s not actually true, I left the firm and went and ran Steve Madden shoes. So that totally departs from any semblance of what happened, but again I understand that the firm was just an exciting, fun place to watch, they didn’t want me to leave the firm, if you know what I mean.

Leonardo DiCaprio played your character in the film. How did the relationship between the two of you develop?

What happened was that originally there was a bidding war between him and Brad Pitt [DiCaprio, with Warner Bros, beat Pitt/Paramount Pictures for the rights to Belfort’s memoir in 2007]. So he approached me. He got his hands on the book very early on and then as soon as he bought the rights, we met for lunch and once the movie got produced we spent a lot of time together. Sometimes we’d just hang out together for a while so he could observe me. Other times we looked at specific things, aspects of my personality, he asked me about things that weren’t in the book, that sort of stuff.

Do you still keep in touch or was this purely a professional relationship?

No, no — I still speak to him, I speak to him about once a week. He’s a really nice guy.

Is there likely to be any more film or TV work?

I can’t speak for the producers, but I’m sure they’re thinking about a TV series, right, and maybe a sequel. But everything moves very slowly in Hollywood. It was almost six years ago that the idea for the film came up. I’m working on a book right now — I’ve almost finished — on the straight line system.

Since the film came out, how has your life changed?

Well, it’s obviously helped me to expand my business. So many people have seen the movie and the movie ends with my seminar where I go around and give talks about wealth creation and sales, so it’s certainly increased that aspect of my business. Maybe I’m more publicly visible. Then again, that always has its good points and bad points.

Obviously, I used to go out and not get stopped, but now I have to deal with people recognising me. That used to be a lot of fun in the beginning, but after a while it becomes more difficult. You’re like ‘oh wow’ in the first few weeks and then you’re like ‘I just want to have dinner’. But I really appreciate the people, I love the fans and everything. They’re great. I’m grateful about the whole experience, is all I can say.

What sort of reaction do you get from people on the street?

Oh, it’s wildly positive, wildly positive. I never get any negative comments ever. But then again, I’m sure there are negative people out there, but they’re just not the ones who approach me. So only positive people come up to me.

When did you first realise you could make a living by being a salesperson?

There’s a difference between being a hard worker and a salesman. I realised that I was a really hard working, motivated kid when I was like eight or nine years old, on my paper rounds and stuff. But I got my first taste of selling when I was 21 years old, and I started selling seafood door-to-door.

It was my first real sales job. And as soon as I went out there, I broke all the records, like on my first day. It just happened, as soon as I opened up my mouth. It was weird. I somehow knew exactly what to say and how to say it and that was that. So the first week I shattered the company record, and then I started training salesmen a few weeks later and then I opened my own business and I never looked back. I always was a good talker, a good communicator since I was very young, but that was really the first time I sold anything.

Can you remember your first pitch?

There was a moment — the first door I knocked on, and a woman opened up the door. All of a sudden I started to give her my sales pitch — for the whole 12 boxes of meat I had on me, it was the biggest sale ever. I don’t know what happened, as soon as I looked her in the eye, the words just started to come out. It was effortless, it was a God-given talent, no doubt about that. And then I honed it over years and years and years, and all the stuff I did when I was a young kid — I was knocking on doors... but really it was more about hard work.

You say you had a God-given talent — does that mean it’s tough to teach people how to sell?

Oh no, 100 percent it can be taught — that’s why I’m teaching it around the world. But the thing is that most people don’t have that talent, they’re not given that talent and it’s such a valuable skill-set to have that, like anything else. Most people aren’t Mozart, they’re not born knowing how to play the piano, yet tens of millions of people know how to play the piano and sound beautiful because they’ve taken lessons. You can, of course, learn by learning the strategy.

What I had was an unconscious strategy — I was automatically doing it right. There are a bunch of people out there who are natural-born salespeople but most people aren’t like that. So the idea is how do you take an average person and impart those skills? That’s why I created the straight line system, to be able to break down my strategies and teach them to everybody else.

So how does the straight line system work?

Well, it’s based on the fact that there are certain core elements that need to line up, in the sense that… it doesn’t matter whether it’s over the phone or in person, before someone makes a yes decision, there are certain things that have to line up in that person. And it’s really based on something called certainty, the emotion of certainty.

The client has to be certain that the product is going to fulfil their needs, remove whatever pain they have, they’re certain they can trust the salesperson. They feel certain that the company behind the salesperson is going to be there and give them good customer service. So those three elements line up.

Think if you’re going to buy a car. Let’s say you love the car but you don’t trust and connect with the salesperson, the chances are that no matter how much you love the car, you also have to be connected to the influencer and also the company that stands behind them. Then there’s two types of certainty — there’s logical certainty and emotional certainty. They mean different things and you really need both to really close.

Logical certainty is based on all the future benefits adding up and making sense and emotional certainty is based on someone imagining themselves in the future, having already made the decision and feeling good. They picture themselves using the product and are feeling good. They are very different types of certainty and one without the other, and you’re struggling. What the straight line system is is creating certainty… tonality, body language, what words you use, it’s really a turnkey solution to sell anything to anybody.

Who are your clients?

Everyone from big Fortune 500 companies send people to my talks, I get hired by them directly, I get lots of salesperson, brokers and agents, insurance and stocks and commodities and real estate, anything, you name it. Anybody who is looking to become more successful, and make a bit more money, so I get a really broad array of people.

There’s a sequence at the end of the film in which your character is teaching salespeople how to sell pens. So how would you sell me a pen?

Well, I wouldn’t just start telling you how great the pen was. If I was like’ it’s so great, Ed you’ve gotta buy this pen, it writes upside down, it never runs out of ink, it’s the cheapest pen out there,’ I wouldn’t start doing that. It’s sort of like a trick question — that’s what the average salesperson would do if you tell them to sell you a pen — they’ll actually try to sell you a pen.

However, the first thing I would say to you would be ‘Ed, how long have you been looking for a pen for?’ Because I’d first want to see if there’s a need there. And if you say ‘I’m not looking for a pen’, in which case I’d say ‘Ok — well, great, have a nice day’. I don’t want to sell people a pen when they don’t want a pen.

Or, if you say ‘well, six months’, I’ll say ‘great, now what kind of pen were you using in the past? Ballpoint pen, felt-tip pen — give me an idea of what you used in the past’ and I’d get the prospect telling me what they like. I’d then say ‘great, do you use the pen for personal or business use’ and then say ‘ah, yeah, ok, got it’ and try to build a personal rapport with them, giving them feedback on their answers.

I’m taking control of the conversation. The key to the straight line scheme is taking control of the conversation. The mistake that most people make is that controlling the conversation means that you speak and the client listens. It’s the opposite. You want the client speaking, and you listen. You identify their needs, their beliefs, their values, and once they have answered all the questions you can say ‘hey, based on what  you’ve said to me, this pen here is a perfect fit for you — let me tell you why’ and then I’ll tailor my products to your need. That’s how you sell a pen. You get it? The average salesperson will just try to hard-sell you a pen, which is crazy.

Is it a case of trying to monetise the exposure you have at the moment for your business?

Obviously for me, it’s not as much about how quick I can be because I’ve been doing this for the last six years. So I’ve worked really, really hard for many years to try and develop the brand that I have and really to define my message and everything. It appears that I’m doing so well because of the movie but it’s deceptive, because it’s a lot of hard work and it represents everything I’ve done since I was 21 years old.

The movie has opened up certainly more opportunities around the world because it was widely viewed, but it’s not a sprint for me, it’s more of a long marathon. Obviously demand is so high right now that there’s a six-12 month period that I’m committed to going out there and giving a lot of talks and stuff like that.

You spent 22 months in a federal prison in Taft, California. Your cellmate Tommy Chong [who was serving a nine-month sentence for selling drug paraphernalia] has previously said it was relatively easy time. What did you make of it?

I mean, it wasn’t a terrible maximum security prison where I was in fear of my life. But Tommy Chong, who I love, well, he’s a comedian and he’s very funny when he talks about it. But it’s still jail. You’re still locked up, you’re still away. My kids had to come see me in jail.

Time moves very slowly. It certainly wasn’t the worst place in the world, but it’s still jail, you know? For me, it was chance to really… I used the time wisely, I taught myself to write. For me it was a blessing, because I chose to make it that way.

And what do you say to people who say that the film glorifies that lifestyle of excess that you were leading 20 odd years ago?

Well, it’s an interesting question, because here’s the thing; a lot of it is glamorous. It’s not really glamourised, it’s glamour. It just portrayed what was going on, and if you watch some of the things I did, with the yachts and the excess — that’s just fun to watch, ok? However, when people are young and they make a lot of money and they want to live a little wild for a while, there’s nothing wrong with that, there’s nothing terrible about that.

But the part that was bad was the fact that clients were losing money. If you take away the fact that people lost money, all of a sudden you’d say ‘well, ok, he self-destructed, certainly he should have treated women better than he did’. But the part that I find most troubling is that people lost money. I liked to party, I self-destructed — I’ve been sober for 15 years now, and I don’t live like that any more — but the self-destructive  behaviour is not what I find to be troubling at all — it’s the fact that people lost money.

So is there any part of that life that you miss?

We were growing and everything was going good, and then came the fall, and I wouldn’t go back to that.

Thanks for your time, Jordan. Thank you.

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JohnA 6 years ago

His story is old and hes frankly no longer relevant. The movie came out last year, more than five months ago. If Mr Belfort is seeking redemption hes wasting his time. Just tell his story over and over is pointless.

How much of that picture of him has been photoshopped?