Orlando Joseph Jett (born 1958)[1] is an American former securities trader, known for his role in the Kidder Peabody trading loss in 1994.
Jett's primary strategy was to exploit a flaw in Kidder's computer systems that made unprofitable trades appear profitable.
- Floyd Norris in the New York Times[6] The trades used in constructing the phony profits were forward reconstitutions of US Treasury bonds.
The transaction is executed when a trader buys a set of Treasury STRIPS sufficient to re-create the original bond from which they were derived.
[2] Jett, who was previously a marginally profitable trader, started earning large bonuses once he began executing the trades that exploited the system flaw.
[4] Later, in his autobiography Straight from the Gut, longtime GE chairman Jack Welch would lament not following his normal practice of personally looking into how one of his employees could become so successful so quickly.
He also recalled GE business leaders were so shaken by the size of the loss that they were willing to dip into the coffers of their own divisions to close the gap.
[8] As the scandal first came to light, Kidder Peabody hired lawyer Gary G. Lynch from the law firm of Davis, Polk & Wardwell, the former enforcement chief of the Securities and Exchange Commission, to conduct an internal investigation.
The report was released in August 1994 and concluded that Jett acted alone, but also blamed the losses on a complete breakdown of the system of supervision at Kidder, particularly with regard to Ed Cerullo and Melvin Mullin.
In March 2004 the SEC finally ruled on the appeal, and concluded that, in addition to upholding the record-keeping violation, Jett had also committed securities fraud.
The Commission re-affirmed the penalty that Jett forfeit $8.2 million in fraudulently-obtained bonuses, plus the fine of $200,000 and a lifetime ban from the securities industry.
The District Court rejected this when they found that Jett had been quoted in a New York Times article shortly after the 2004 decision was announced, saying that he was unconcerned with the SEC action since he was still legal to trade securities offshore.
[22] According to its website, the firm offers asset management, advisory, and private equity services, though it is unclear how Jett is able to perform these functions while being permanently barred from the securities industry.
In it, Jett said that because of legal costs he has no money left to pay the SEC fines, and that he was living in the basement of an ex-girlfriend's house in Princeton, New Jersey.
The France24 reporter said that Jett is running a financial consultancy domiciled offshore, which conducts its business from hired conference suites in New Jersey.
At the conclusion of the report, the commentator said she believed that Jett was trying to use the France 24 program to show the SEC that he has no money to pay the fines due.