Nixon, Colson and another growth spurt

An Election, Another Explosion

When Nixon was elected in November of 1968, things really began to heat up at Gadsby & Hannah. Colson’s work on Nixon’s behalf had been very much appreciated by Nixon (even if it wasn’t by some of his men), and the opportunities for recompense at the firm were going to be substantial and numerous. In the midst of the burst of publicity and business development following Nixon’s election, Colson thought he would repay his old friend Joe Tauro with a favor.

Tauro’s boss, Governor Volpe, had just been appointed Nixon’s Secretary of Transportation, but Tauro had declined to follow him to Washington as his general counsel. He had a growing family and needed to get into private practice and make some money. Thinking he could help, Colson suggested to Morin that they include Tauro in a story that the Wall Street Journal was working on that identified Gadsby & Hannah as a firm that would have great influence with the new administration. With Morin’s enthusiastic agreement, Colson called Tauro and asked him if it would be alright if they included his name as one of the Boston lawyers who would be a factor with the new administration.

“Well I am a member of the D.C. bar, but I don’t have a Washington office,” Tauro told him.

“That’s okay Joe, I talked it over with Charlie, and we’ve agreed that you can use our office here at Gadsby & Hannah. As long as you tell him you’re coming to Washington, it’ll be okay.”

The Journal reporter called Tauro, he stuck to the script, and his name appeared in the article alongside Colson and Morin as one of the Boston lawyers who would be a big influence with the new administration.

And Tauro did, in fact, spend time in that office, working on a multitude of legal matters that resulted from that news article. He later became the U. S. Attorney for the Massachusetts district in 1972, and that same year was appointed to the U.S. District Court in Boston, where he still presides.

Morin’s Boston-based securities work on behalf of Cantella & Co. and the Boston Stock Exchange had ballooned significantly by the Spring of 1968 – and Morin needed help to get it all done. He turned to a young lawyer from South Carolina to help him. A genuine son of the confederacy, James Treadway was a product of Rollins College (where he was a high-ranking member of the nationally-ranked tennis team) and Washington & Lee University Law School. After two years in Atlanta, he decided to live among the New England Yankees, and was looking for a firm in Boston. He had an exceptional resume, and received offers from all of the top white shoe firms, including Ropes & Gray, Herrick & Smith, Gaston Snow & Ely Bartlett, and Hale& Dorr. But after an hour of talking with Morin, Treadway decided to pass up the big firms to work as Morin’s principal corporate securities man. By this time, Freddie Moss was ensconsed in the Boston Stock Exchange, Cantella & Co. was the 800 pound gorilla on the regional exchanges, Federated’s head-butting with the SEC continued apace, and Germany’s largest bank, Dresdner Bank, had retained Morin to represent its interests in trading on the U. S. regional exchanges. Here was an opportunity for Treadway to jump into deep water and work hand-in-glove with a man who had already proven himself a formidable presence in the corporate securities field.

In the summer 1968, Dresdner wanted to get into the US securities markets. Originally, it wanted to be a member of the NYSE, but they had a rule forbidding foreign members. The regional exchanges –especially Chicago and Boston, allowed–or did not forbid–foreign members.

So Dresdner was engaged in discussions with both Chicago and Boston. They were leaning toward Chicago because it was slightly larger and geographically central, when someone on the CSE floated the rumor that Dresdner had been the major bank for Hitler during WWII. The Dresdner executives went berserk, furious at the CSE for this unfounded slander. Thus, Dresdner Bank bought a membership on the Boston Stock Exchange, and, on the advice of Moss and BSE’s largest trader, Cantella, Dresdner retained Morin to represent its varied and substantial legal interests.

Becoming a member of the Boston Stock Exchange allowed Dresdner to trade stocks listed on the New York Stock Exchange under what were called “unlisted trading privileges”— but not all the NYSE stocks. Dresdner had to apply to BSE for these privileges, but the companies sometimes objected. They had no legal basis to object, but the BSE did not want to have a war with the NYSE or the listed companies, for political reasons. So initially, Morin was asked on occasion to clear the politics so that Dresdner could involve itself in the market for particular securities. He and Treadway would soon have their hands full with Dresdner’s interests when more European banks got into the act and the NYSE began to appreciate how much trading business was being siphoned off to the regional exchanges by foreign banks. These issues, which involved the arcane and complex Glass-Steagall Act and even the German laws regulating banks and securities firms, would eventually come to a boil, and Morin and Treadway would be at the forefront of a frontier

After the successful 1968 campaign against Hubert Humphrey, Colson was asked by Nixon to stay in the White House as counsel to the President, an offer he found impossible to resist. As had been amply demonstrated by his work for Saltonstall and Brad Morse, his political instincts were meticulous and they would lead him to achieve things for Nixon that were highly improbable – such as getting the Teamsters to support Nixon in 1972, and getting James Roosevelt to head the “Democrats for Nixon” organization. Much has been written about the impact of that career decision on Colson’s life, but there would be resulting events in Morin’s life as well.

Colson’s move to the White House in 1969 left Morin to manage the Washington office. For that reason, as well as Treadway’s insistence that there was major securities deal business that could be developed out of D.C., Morin and his wife made the decision to move from Boston to Washington. He had been going back and forth every week for years, spending a good deal of time in airports and trains. In 1963 they had moved their three boys out to a beautiful 18th century colonial in Wayland, but by 1970, Charles, their oldest son, was at Boston University, and James and Peter were at boarding school. Betty had been spending more and more time in Washington – they had taken an elegant apartment at the Sheraton Park Hotel, two floors above Spiro Agnew, in what had come to be called “the Republican Wing.” They kept the house in Wayland another year or two, for holidays and summers, but by 1973 Betty and Charlie considered themselves true Washingtonians –like everybody, from somewhere else. They sold the Wayland home and bought a stately home on Rockwood Parkway, in the elite Spring Valley neighborhood of Washington.

The Boston Stock Exchange

Morin wasted no time in developing a niche securities practice that brought him and the firm significant success. It began inconspicuously enough in the relatively small-time world of the Boston Stock Exchange, where small regional securities firms fought for a small number of small-issue public offerings that small New England companies could not afford to bring to the Big Board, equity “private offerings” that had been made possible through the newly adopted “Regulation D,” and small-block trades in public stock. One of the principal underwriters on the Boston exchange was Cantella & Co., Inc., a family-owned trading firm run by Vincent Cantella.

Cantella was a virtual caricature of the ethnic Italian. Tall and slim, the devout Catholic had dark, deep-set eyes, and a vulture-like posture. He could have been a walk-on in any Mario Puzo movie. In the 1960’s in Boston, such a figure did not attract the interest of the white shoe corporate law firms. They were not interested in his type. Cantella and Morin found affinity in their antipathy toward the Brahmin elite, and Morin began representing Cantella & Co. when no “reputable” (i.e., white shoe) Boston firm would do so. And the niche he found with Cantella became substantial and formidable.

At the time, the SEC required that all commissions charged by registered broker-dealers for public securities trades to be “fixed.” In other words, every trade made on a regulated exchange could charge a fixed fee, no matter how many shares were involved in the trade. This rule worked to the significant advantage of the major Wall Street firms (not coincidentally), which could afford to trade in huge blocks involving tens of thousands of shares, thus cutting the per-share cost of the commission to a pennies-per-share level. In addition, the NYSE member firms had devised ways of structuring “discount” commissions to their preferred customers, a practice that neither the NYSE nor the SEC was willing to police.

This left the regional exchanges in a weak competitive position, scrapping over the trades and issues that were too small to interest the large broker-dealers. And none of the regional exchanges were aggressive or inventive enough to devise a means of competing for larger trades – until Cantella and Morin got together. With Cantella’s enthusiastic backing, Morin devised a number of methods by which regional exchanges and their members could pool their trading business in a particular transaction, enabling them to compete with the big firms. These schemes, all perfectly legal, were given obscure names such as “customer-directed give-ups,” the “two-way ticket,” the “three-way ticket,” the “mirror trade,” and something called the “aunt minnie trade,” which was named after Morin’s aunt, Margaret “Minnie” Sullivan. These methods would allow member firms of the regional exchanges to increase their volume of trading in a competitive manner – but none more that Cantella & Co., which by 1966 was the dominant trader on all of the regional exchanges, but especially on the Boston Stock Exchange.

In time, when the successes of Cantella & Co. were learned by the white shoe firms in Boston, some of them decided that Vinnie’s ethnicity and religion could be overlooked, and they came calling for his business. Vinnie Cantella responded to them in his own fashion. “Go fuck yourself,” he said. “Charlie Morin’s my lawyer.”

In 1966, the Boston Stock Exchange was in need of a new chairman. Some of the old-line bokerage firms wanted hand-pick their man, but Cantella was too important to the order-flow of the Exchange, so he held a virtual veto on anyone who did not meet his needs. Calling around one day seeking names, Morin spoke with Jim Dowd, who was the SEC regional administrator in the Boston office. Dowd told Morin about a fellow named Freddie Moss, who was a member of the SEC’s Washington office staff and had worked on the ground-breaking two-year special study of the securities market from 1963-65.

Moss was the right guy for both Morin and Cantella – he was from Brooklyn, was Jewish (although not “too Jewish”), smart, tough, and definitely not white shoe. They approached him, and talked him into leaving the SEC to come to Boston to be the chairman of the Boston Stock Exchange.

With this move, Morin now had the Boston Stock Exchange locked up as a client. Moss was its head, he owed his job to Cantella and Morin, and he understood loyalty.

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