“I said, ‘Well, let's just suppose a client purchases a quarter million dollars of Arncliffe National’—that was an average trade at LF Rothschild—‘Would my commission really be $125,000?’ I asked.

“ ‘Yeah, in theory,’ he answered, ‘but it doesn't really work that way, because no one puts that kind of money into penny stocks.’

“ ‘Why not?’ I asked.

“ ‘Well…’ he replied, not that confidently, ‘we… uh… we don't callpeople who have that kind of money. We call working-class people.’

“ ‘Really?’ I said. ‘Why call people who don't have money to invest in the stock market? It seems illogical.’

“ ‘Yeah, maybe so,’ he replied, ‘but rich people don't buy penny stocks.’

“ ‘Why not?’ I asked for the second time, to which he started hemming and hawing. He really hadno answer other than telling me just to trust him, which I did. In retrospect, I think I was too beaten down to argue, because under normal circumstances I would have debated him until I was blue in the face. In any case, I decided to take his words as gospel and go along with the program. I took a seat next to Chris Knight and then wrote a script for a cosmetics company called Arncliffe International.”

“Why'd you choose that one?” asked OCD.

I shrugged. “It seemed like the dog with the least fleas. I mean, they had no real sales to speak of and there were something like fifty million shares outstanding. But, on the positive side, they'd just landed Macy's as a customer, which I knew would sound good in a sales pitch. That, and the president of the company had once been a vice president at Revlon, and I knew that would sound good too.

“Anyway, when I finally was done with the script, I remember feeling very impressed with it. I'd made Arncliffe National sound like IBM or at least the next Revlon, and I hadn't even lied that much. Of course, I'd omitted some material facts—meaning, information that the client really deserved to know to make a decision— but all in all I hadn't really violated any securities laws.”

The Bastard shook his head gravely. “Material omissions areviolations of securities laws,” he snapped.

“Yeah, I'm aware of that now. In fact, I was aware of it then too, although I knew it would be difficult to prove. See, what's material and what's notmaterial is somewhat subjective. Don't kid yourself— on Wall Street, material omissions are the rule rather than the exception. And that's at big firms as well as small ones.”

A few moments of silence passed.

“In any event, as fabulous as my Arncliffe script was, Chris Knight hadn't grasped the true beauty of it. ‘You're wasting your time with that,’ he said, pointing to my script. ‘You don't need a script to sell stock. You just swear to the clients that the stock is going up and they buy from you.’

“ ‘Yeah, well, thanks for sharing,’ I said, and then I picked up the phone and started dialing. I was using leads George had given me, which were actually return postcards from people who'd responded to a mass mailing. On the front of the cards was some cheesy sales hype along the lines of Make a Fortune in Penny Stocks,and on the back there were people's names and phone numbers. They seemed like total dunk shots, these leads. I mean, what better lead was there than someone who'd filled out a postcard and dropped it in the mailbox?

“So when I got my first prospect on the phone—some friendly Southerner named Jim Campbell ^1*—I had reasonably high hopes. In a totally upbeat tone, I said, ‘Hey, Jim! Jordan Belfort calling from the Investors’ Center! How are you today?’

“‘Uh, I'm awe right!’ he answered. ‘How youdoin’?’

“ ‘Oh, I'm great. Thanks for asking. Now, Jim, if you recall, about a week ago you mailed me a three-by-five postcard, saying you were interested in investing in penny stocks. Does that ring a bell?’ And after a few seconds of silence, Jim finally said, ‘Uh, yeah, I guess I didthat. I mean, it sounds like sumthin’ I'd do!’

“I remember thinking, Good God!He was so eager! So incredibly receptive! It was mind-boggling. I maintained my composure and said, ‘Great, Jim. Now the reason for the call today is that something just came across my desk, and it's the best thing I've seen in the last six months. If you have sixty seconds, I'd like to share the idea with you. You got a minute?’ And Jim said, ‘Sure! Fire away!’ With that I rose from my chair and prepared to give Jim my shpil.I remember catching a glimpse of Chris, who was sitting in his chair, watching me, and sipping a bottle of Evian.

“Into the phone, I said, ‘Okay, Jim, now, the name of the company is Arncliffe National, and it's one of the fastest-growing companies in the cosmetics industry. All told, it's more than a thirty-billion-dollar industry, cosmetics, growing at twenty percent a year. And it's virtually recession-proof—yielding consistent growth in good times and bad. You follow me so far?’

“‘Yeah!’ said an impressed Jim. ‘I follow you.’

“ ‘Great,’ I said, and I went on about giving him some very loose facts about Arncliffe—the names of some of the products they sold, where the company was headquartered, and then, finally, I touched on the contract they'd just signed with Macy's. Then I said, ‘But as good as all that sounds, the most important thing in any company is management. Wouldn't you agree?’

“‘Yeah,’ answered Jim, ‘of course.’

“ ‘Good,’ I said shrewdly, ‘and in the case of Arncliffe National, management is blue chip all the way. The chairman of the board, a man named Clifford Seales, ^2*is one of the most astute minds in the cosmetics industry. He was a former VP of Revlon, a keyplayer over there. And, with himat the helm, Arncliffe can't go wrong.

“ ‘But the reason for the call today, Jim, is very specific: Clifford Seales is about to go down to Wall Street to tout his stock, and he's going on the heels of staggering sales growth and a major contract announcement. He'll be going to banks, insurance companies, pension funds—the institutionalplayers. And you know what they say, Jim: Institutional money is usually smartmoney, and even when it's not, it's not enough to fuel the market anyway. You follow me?’

“‘Oh, yeah!’ said Jim, ‘I sure as hell do!’

“ ‘Good, Jim. Now, the stock is trading at only fifty cents a share right now, which is ridiculously cheap, considering the company's future. And the key to making money here is to position yourself now, beforeSeales goes to Wall Street and meets with all the fund managers and pension managers, because once he does that, it's too late.’ I paused for effect. ‘So what I'd like you to do is this, Jim: Pick up a block of one million shares of Arncliffe National’—and splatwent a mouthful of water from Chris Knight's mouth. Then he started choking, and then he popped out of his chair—Evian in hand—and ran toward George's office. I shook my head in disbelief and continued with my sale, noticing for the first time that the other brokers were gathered around me. ‘It's a cash outlay of only half a million dollars,’ I said casually, ‘and it's not a question of funds today or tomorrow, Jim; you have a week to pay for the trade. But, believe me,’ I said, lowering my voice to just above a whisper, ‘if you position yourself now, beforeSeales comes down to Wall Street, the only problem you'll have is you didn't buy more. Sound fair enough?’”

“You asked the guy for half a million dollars?” asked OCD, chuckling.

“Yeah, I did. That's what they used to do at Rothschild, so it just sort of slipped out. But, meanwhile, as I was waiting for Jim to respond to my half-million-dollar request, George came running out of his office, with Chris Knight in tow. I heard George muttering, ‘Someone go get a tape recorder! Hurry up! Who's got a tape recorder?’ And then Jim said, ‘Uh, I'm sorry, Jordan, but I think you got the wrong guy. I work in a hat factory. I'm a machine operator. I only make thirty thousand a year.’” I paused for a moment. “Anyway, not to belabor the point, I ended up closing Jim for ten thousand shares, which was a five-thousand-dollar trade, which was one of the biggest trades in Investors’ Center history. I was about to learn that Investors’ Center was no small-time operation. They employed over three hundred brokers and had over thirty offices—all of them small, and all of them just as mismanaged as this one.