Annabel McClellan, the San Francisco woman who faces prison time on insider trading charges, is emerging as one of the more intriguing characters in the recent history of insider trading.
Typically, the greed and arrogance that motivates insider trading is not hard to see in the aftermath of arrests. These cases often involve individuals who clearly aspire to a bigger things and bigger bank accounts. Dennis Levine, who was at the center of the 1980s scandals, is the prototype here: A younger man in a hurry to move up the food chain on Wall Street. Or these cases involve financiers so rich and full of themselves that they begin to imagine that the rules don't apply to them -- especially when the SEC seems to be filled with underpaid B-list lawyers who are no match for the legal talent that real money can buy. The billionaire Raj Rajaratnam will fall into this category if the government's pending charges against him for insider trading prove true.
Annabel McClellan, 38, fits none of the molds. She lives far away from Wall Street in the upscale Pacific Heights neighborhood. She is not in business and has a profile more typical of a smart San Francisco stay-at-home mom who is involved in a little of this and that (including developing a sexy "app" called Nookie that has gotten much attention since her arrest.) She went to yoga regularly and engaged in charity activities.
Now she's in deep trouble. She is accused of passing along tips to her London-based sister, Miranda Sanders, and brother-in-law, James Sanders, about mergers that her husband, Arnold McClellan was working on as a partner in the San Francisco office of Deloitte Tax LLP. According to the SEC, Annabel McClellan had a deal with James Sanders to share profits from the insider trading.
Just what, exactly, was Annabel McClellan thinking? And what does this case tell us about why the upper class breaks the law?
Well, one thing is for sure: Annabel McClellan was not just some ditsy Pacific Heights socialite, which is a picture that some news accounts have suggested. In fact, she had worked for Deloitte herself in the past. As the SEC complaint states:
Annabel McClellan was aware of Deloitte policies that prohibited her from trading in securities issued by any acquisition target and, during her employment at Deloitte, signed an annual certification acknowledging this restriction: "In keeping with the ethical standards of our profession, the policies of the Firm, federal and state laws, and rules of the Securities and Exchange Commission, we do not use information obtained in the course of performing client services for personal gain, such as through insider trading activities or other means."
So, no, this woman is no dummy who accidentally broke the law. She is part of today's business elite, not an outsider. She is also somebody who is part of the high-end culture of consumption that is typical of this world and which can be very expensive. The McClellans live in a multi-million dollar home that is nearly 6,000-square feet. Both their children go to private school.
Maybe, just maybe, even the big bucks that Arnold McClellan made as a partner as Deloitte Tax LLP were not enough to sustain this lifestyle -- or whatever additions to it that the McClellans fantasized about.
In other words, this may be old story. Wealthy people routinely destroy their careers in the pursuit of yet more wealth through illegal means. And it's easy to understand why they might be tempted to cut corners in a society where status is so closely linked to net worth, where competitive consumption is rampant on every rung of the income ladder, and where there is a general sense that white collar criminals often get away with their crimes. The sense of entitlement in the upper class can be off the charts in our era of virtual plutocracy. And that entitlement often works in tandem with feelings of anxiety as affluent people compare themselves to others who are worth even more.
Maybe the case of Annabel McClellan is not so mystifying after all.