By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
It was at E.F. Hutton where Lewellyn first ran afoul of the securities-industry watchdogs--and, he says, lost his innocence. In 1979, the New York Stock Exchange suspended his license for 90 days when it discovered Lewellyn had fabricated trade reports to conceal a series of losing options transactions.
Resigning from E.F. Hutton after that episode, Lewellyn bounced back and formed his own brokerage company in 1980, calling it G.V. Lewellyn & Company. "I was working in a vacuum," Lewellyn recalls. "No one really knew what I was doing."
Lewellyn became a leading member of the business community and an active Republican Party member developing connections to some of the most powerful men in Iowa. It was also about this time that he found he had an appetite for gambling. He began making regular trips to Las Vegas, where he sometimes lost tens of thousands at the tables. And Humboldt's native son, a loving husband and father of two, also took a mistress.
His big downfall came, he says, as the result of one big win--not at the casinos, but on Wall Street. On a Friday afternoon in 1980, Lewellyn made $1 million by going long on 1,000 Treasury-bond contracts, which went up or down, at the time, when the Federal Reserve Bank made its weekly announcement about the shift in the nation's money supply. (The Fed no longer issues that information in the same manner.) Still, the visceral effect on him was little different than winning big at the casino.
"Making over a million on one piece of information was a horrible thing to happen," Lewellyn says. "You begin to think it wasn't luck; it was skill. All of sudden you begin to almost have a sense of invincibility. Everything that you touch is going to be OK. You almost get lured into a sense of fantasyland, and then reality strikes and you suffer some significant setbacks. Once you suffer those, I guess the question is how you deal with those setbacks. Frankly, I didn't deal with them in the proper manner."
As the weeks passed, Lewellyn says he continued to trade on the Treasury-bond contracts but kept losing in nightmarish proportions to what he had won. He dug himself into a "hole," Lewellyn recalls. "My sole purpose became to dig out from under this hole. I really couldn't get a handle on it."
Lewellyn, who was also managing the assets for his father's bank, began embezzling. "The first time I ever--I'll use this expression, 'dipped into the till'--to cover a mistake, just intuitively I felt absolutely horrible," he says. "It was like this little voice standing on my shoulders saying, 'Do not do this.' You hear a lot of people talking about intuition or your inner self. But I can remember like it happened a few minutes ago. It was a very burning sensation. When you have a voice, you should listen because the second and the third time it gets easier."
But Lewellyn didn't listen that first time or the many times that followed. When the SEC finally discovered what had happened, Lewellyn was accused of taking $16.7 million from his father's bank and combining it with credit from several brokerage houses into an elaborate--and not entirely rational--scheme to buy up 58 percent of the shares of a Pennsylvania-based company. His purchases at first drove up the price of the company, Safeguard Securities, but then the company collapsed and the NYSE suspended trading of the stock.
"When all this broke, the most difficult part was for myself and my father," Lewellyn recalls. "I had lost it, but I really couldn't say how I lost it or when I lost it."
To this day, Lewellyn cannot explain how he expected to make money off the deal. "You believe you're going to dig out of the hole," Lewellyn says. "I always saw it in essence as borrowing to dig out of the hole, and then when I dug out of the hole I would go back and return it. But then the hole kept getting deeper and deeper. And the risks kept getting larger and larger in order to get out of the hole."
Panicked, Lewellyn rushed to Las Vegas when he realized he had been discovered, desperately hoping to win back some of the money. During the three weeks before he turned himself in, Lewellyn's life became fodder for national news reporters. His mistress told reporters he had always treated her well and expensively. His wife and mother of his 4- and 7-year-olds said she didn't know where he had gone.
Now all that seems like another man's life, Lewellyn says. He and his wife divorced while he was incarcerated, but they have gotten along congenially, he says, cooperating to raise both kids, who have now graduated from high school. He has seen the mistress only once since he left prison.
F ive years in prison is something that sticks with you, Lewellyn says. "You're forced to learn to accept and tolerate some very unpleasant things."
For the small-town son of a prominent banker, even a federal minimum-security prison was a disorienting culture shock. Lewellyn recalls that in 1981 he had lunch in a private dining room with President Ronald Reagan. Some 12 months later, he was in transit in the federal penal system, "locked in a cage with a bunch of screaming Cuban refugees," he says. "I don't know that there is a wider variance."