What Tolstoy Teaches Us About Insider Trading (2024)

Last month, a 39-year-old Manhattan hedge fund manager and former altar boy named Anthony Chiasson was slapped with a six-and-a-half year prison term and a $5 million fine for crimes connected to insider trading. It was a very stiff sentence—prosecutors said it was meant to discourage others in the hedge fund “criminal club”—and the judge who delivered the punishment, U.S. District Judge Richard J. Sullivan, scolded Chiasson as he sentenced him. The defendant, he noted disapprovingly, had been “fabulously wealthy”— making $10 to $23 million a year— at the time he used tech-stock tips to make $68 million for his hedge fund, Legal Global. “That’s just staggering,” Sullivan said. “It’s hard to imagine why someone would risk all that to engage in a crime such as this.”

But are Chiasson’s actions—or those of the scores of rogue portfolio managers and traders hauled to court in recent years—all that incomprehensible? Is it so hard to understand that a wealthy man might want to be wealthier; or that a person might be tempted to push his luck too far? The subject has not defied the imaginations of the world’s great authors. Whole libraries could be filled with books and stories devoted to the subject of men and women with unwholesome attitudes toward money—beginning, perhaps, with the Parable of the Talents in the Bible, in which a man is punished for failing to invest money profitably and is cast out “into the outer darkness, where there will be weeping and gnashing of teeth.” But more recently—that is, a hundred years ago, in 1906, Leo Tolstoy wrote a cautionary tale about a man very much like Chiasson who had much, but wanted more, and whose covetousness and cleverness betrayed him.

In Tolstoy’s story, “How Much Land Does a Man Need?” a humble peasant named Pahom works his land contentedly until, one day, it occurs to him that he might be happier if he were richer. “If I had plenty of land, I shouldn’t fear the Devil himself!” he says. The Devil, overhearing, puts him to the test. As Pahom’s acreage increases, his heart fills with joy. But the pleasure soon palls; he wants more. Hearing that land is cheap along the Volga, he uproots his family and expands his holdings. Even after he becomes prosperous, Pahom hungers for more land. When a trader tells him he bought 13,000 acres from naïve Bashkir herdsmen “simple as sheep” for only 1,000 roubles, Pahom hurries to try his luck.

Arriving among the herdsmen, Pahom learns that the trader did not lie. The Bashkirs will indeed give him, for 1,000 roubles, as much land as he can mark off on foot. But there’s a catch: he can only stake his territory from dawn to dusk; if he returns a moment after sunset, he will forfeit his money and the land. Optimistic—Tolstoy knew that clever businessmen always think they’ll squeak by—Pahom walks too far in his greed, pacing the notional borders of his property. Realizing too late—“I have grasped too much, and ruined the whole affair”—he rushes to return to the Bashkir tents before sundown, straining his heart so badly that he dies as he reaches his goal. Tolstoy writes: “His servant picked up the spade and dug a grave long enough for Pahom to lie in, and buried him in it. Six feet from his head to his heels was all he needed.”

What—minus the Devil’s convenient temptation—pushes a fortunate man like Pahom, or Chiasson, to risk all in the hope of more? D.H. Lawrence wrestled with the discontent of well-off people in his dark fable, “The Rocking-Horse Winner.” Published in 1926, three years before the stock market crash, the story tells of a boy growing up in torment despite his comfortable surroundings, plagued by his mother’s financial aspirations. “The house came to be haunted by the unspoken phrase: There must be more money! There must be more money!” Lawrence writes. Why isn’t there? Luck, the mother tells the boy, is “what causes you to have money,” and her husband doesn’t have any. Her son resolves to be lucky, whatever it takes. He discovers that if he maniacally rides a rocking horse in the nursery, the names of winning ponies at the races will come to him as epiphany. The results are profitable; the end catastrophic.

While the rocking-horse winner’s tips were supernatural, Chiasson’s were illegal. But both speculators relied too much on luck. The judge who sentenced Chiasson chided him that “anyone who engages in this kind of conduct for this kind of money” ought to realize “what to expect if you get caught.” But novelists understand a fact that obtains outside of jurisprudence: people who think they’re smart and lucky don’t expect to get caught, and don’t necessarily think it’s wrong to monetize their talent. They tell themselves that anyone who could do what they can, would; and rationalize that it can’t be too blamable to indulge a universal inclination.

A child can see the defect in this reasoning; at least, a child who studies the law. One of American fiction’s best-loved children, Tom D. Fitzgerald— the sneaky anti-hero of the “Great Brain” books, was shocked when the other boys in Adenville, Utah, put him on trial at the age of 12 for being a “crook.” Although Tom had tricked all of them out of allowance money, basketballs, baseball mitts, BB guns and so on over the years, he didn’t think of himself as a bad guy—he just thought he was smarter than the other kids. He used his intelligence for good causes, he told the jury, in his own defense. Just as Anthony Chiasson had used his assets to rescue his Catholic high school in Portland, Maine, Tom had used his brain to save the adults in Adenville from a con man who nearly fleeced them all with a get-rich quick scheme. Besides, “You can’t be guilty of cheating somebody,” Tom told his kid brother J.D., “If that person is trying to cheat you.” At the trial, wily as ever, Tom gets a confused witness to concede that he’d thought he was fooling Tom when Tom duped him. An older boy, serving as judge, instantly sees through his self-serving logic. “The witness only thought that he had a sure thing,” the judge says sternly. “The defendant knew that he had a sure thing. So the court rules the witness was swindled.’”

An illegal stock tip is not the same thing as a swindle; but $68 million buys a lot of basketballs and BB guns. There’s no excuse for Chiasson’s unethical behavior at Level Global. But it’s not hard, it turns out, to imagine why he did it; and why he might have thought he’d get away with it. The explanations already exist in literature—prefigured and pre-explained by writers whose life’s work was not to dispense justice, but to show the contradictions of human nature.

To understand what might have motivated Michael Milken, or Anthony Chiasson, or for that matter, Martha Stewart, you don’t have to go back to Tolstoy, or D.H. Lawrence, or John D. Fitzgerald—or to Anthony Trollope, whose 1,000-page novel, “The Way We Live Now,” anticipated the Bernie Madoff scandal (in most of its details) by more than 130 years. Only three years ago, Adam Haslett published a novel about a rogue trader who takes advantage of a lazy Congress and unscrupulous financial system to inflate his bank’s worth (and his own), until the bubble bursts. That novel, “Union Atlantic,” was named for a fictional investment bank. The week Haslett finished the manuscript, in September 2008, Lehman Brothers declared bankruptcy. In the aftermath of the ensuing collapse of the global economy, that novel did more than any news analysis to explain what had happened in human terms.

The way we live now, wrong and right, echoes the way we lived once and long ago; it’s all recorded in the literature of the past, where today’s headlines live in the pages of yesterday’s fiction.