Signs of a multi-year bear market? When inmates become millionaires in the market, scratch your head...
February 6, 2001
The Stock Market Has Made Inmate 90T1282 a Rich Man
By TINA KELLEY
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Loren Callahan for The New York Times
Michael Mathie uses some trading profits to help fellow inmates.
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LMIRA, N.Y. — On his tax returns, Michael Mathie writes "investor" in the blank reserved for occupation. He claims to have traded upward of $8 million in securities since 1998. In 1999 his adjusted gross income was $899,969, all but a sliver in capital gains. He has also invested in a house for his family on Long Island and bought four cars, including a $97,000 Dodge Viper. Plus a garage to keep it in.
But here at the Elmira Correctional Facility, a maximum security prison where the guards call him "our resident millionaire," Mr. Mathie is formally known as Inmate 90T1282, who has completed almost 12 years of a 10- to 30-year sentence for manslaughter. He is also known for advising and helping pay for other inmates' legal efforts, as well as providing free legal advice to his fellow prisoners and stock tips to anyone who asks. Given his successes on Wall Street, people listen.
"It runs the whole gamut, from lawyers to inmates to everybody," he said in a recent interview.
Inmates cannot run their own business from prison, but as a state prison official said, they do not give up their right to free speech. Mr. Mathie's investing is not considered a business since he does not actually conduct the transactions. His father does, making this one of the odder tales of America's infatuation with the stock market.
Mr. Mathie, 33, has no Internet connection, no cell phone, not even a phone in his cell. He makes his trades by calling his father collect from a pay telephone — up to 10 times a day when the market was more vigorous. His father then places trades on the Internet.
"I could be paying a mortgage with what I pay MCI," he said, adding that he pays his father $500 to $1,200 a month for the calls.
He remembers investing in China Prosperity International Holdings, now China Converge, a foreign company that trades on Nasdaq, when China's proposed membership in the World Trade Organization was a hot topic.
"It went from $1 to $10, and the next day it was $18, so I threw $50,000 at it, and called back at 10:30 or 11, and it was at $70," he said. "So I cleared $150,000 and got my $50,000 back in two and a half hours."
He has also taken his lumps, mostly in paper losses, when tech stocks tanked. He gets chills when he recalls the market plunge of August 1998, when he lost $750,000 in market value in 20 minutes.
But he remains a true-believing bull, and predicts that the Nasdaq will top 6,500 by the end of 2002, up from its current 2,643.
"Definitely, we're not headed for no recession, and if we do go into a recession, it's because of the media," he said. "It's a self-fulfilling prophecy."
Mr. Mathie, a slight man who looks more like a clerk than a killer, was well acquainted with risk — but not the financial kind — when he landed in jail in 1989. He was 21, a high school dropout and former cocaine addict. He and three others were arrested in the murder of Paul Vincent Lamariana, 49, who was hit in the head with a tire iron, choked with an electrical cord, tied up, stuffed in plastic bags, wrapped in all-weather carpet, and dumped on the side of the road in Oak Beach, Suffolk County. Mr. Mathie admitted that he hit him with the tire iron and choked him.
Mr. Mathie said that he felt remorseful about the killing, and that the group of four friends believed that Mr. Lamariana was abusing the daughter of one of them. He has made inquiries about how he could help Mr. Lamariana's family.
"I just wish there was something else I could do other than time," Mr. Mathie said. "I have done a lot of self-improvement, made with Paul in mind. That's basically what drives me."
Contacted in California, Mr. Lamariana's mother declined to speak to a reporter.
Mr. Mathie pleaded guilty to manslaughter and conspiracy, but said he did so to get out of Suffolk County jail, where he said he was raped and repeatedly sexually abused by the chief of internal security, Roy Fries.
In 1996 Mr. Mathie won a $750,000 settlement in a federal civil suit, where the judge who tried the case ruled that the evidence was "overwhelming" and called Mr. Fries's acts "an outrageous abuse of power and authority." No criminal charges were filed in the case because the Suffolk County district attorney's office said there was insufficient evidence to prosecute it. (Mr. Fries is retired and did not return two phone messages left at his home in Lindenhurst.)
After an appeal, Mr. Mathie's award was later reduced to about $500,000. With $75,000 of that, he began trading stocks.
Jim Flateau, spokesman for the state's Department of Correctional Services, said inmates were not allowed to have computers or to run businesses from prisons.
"Certainly, since the transaction is occurring outside prison, it's not something over which we would exercise any control," he said. "Inmates have a First Amendment right to discuss whatever they want on the phone," so long as it is legal.
Such behind-bars business is very unusual, said Robert Gangi, executive director of the Correctional Association of New York, a nonprofit policy analysis group.
"Most inmates are poor people, and most inmates wouldn't know a stock exchange from a soccer ball," he said.
Under the "Son of Sam" law, prisoners are not allowed to profit financially from their crimes. An unsuccessful bill proposed by Gov. George E. Pataki in 2000 would have revised the law to allow crime victims to sue convicts for money and property from any source. That bill will be proposed again this year, said Caroline Quartararo, a spokeswoman for the state's Crime Victims Board.
In the meantime Mr. Mathie continues his daily routine, turning on the television in his cell at 4 a.m. to watch news of the European markets on ABC and PBS; there is no cable for convicts. He receives about a dozen publications that help him make his investment decisions, including The Wall Street Journal, Barron's, Investor's Business Daily, Value Line Investment Survey, and Individual Investor. The correction officers who deliver his mail complain that he gets too much.
"I compensate them," Mr. Mathie said. "They want to know what stock tips to go on, for their retirement portfolios and so forth."
He favors a diversified approach. Some of his favorite stocks? Corning, which he expects to double in price, Juniper Networks, JDS Uniphase, and AT&T, which is planning to split into four divisions.
"You can't beat that with a stick," he said. "It's a good long-term hold."
Tech stocks have been kind to him, and he said he considered their recent turn downward to be "a fabulous buying opportunity." He is particularly fond of Yahoo.
"Yahoo paid for the Viper," he said, referring to his new 450 horsepower convertible. "I had a picture of one on my wall for three years. I got |
