'It's a crisis. Musically, [departing Speeding Lisa lead singer] Alex is our leader'
When Hugh Patton’s career as a budding rock star stalled, he decided to take up law. Littledid he know that more than a decade later his decision would eventually lead him to Speeding Lisa, the biggest ex-pat group in the biggest country in Europe.
It all began when Patton dropped out of college to devote himself full time to The Deal, a Charlottesville, Virginia, rock’n’roll group. The sound was not unlike the style popularized by another musician, Dave Matthews, who also got his start in Charlottesville.
It was the early 80s. The Deal had dreams of the big time. Initially, things looked promising for the small-town group. They managed to land famous New York manager Linda Stein, who had connections in all the right places. Soon they were signed by Bearsville Records, the label that produced Bob Dylan and Peter, Paul and Mary. All the gears seemed to be in place.
“We had a huge apparatus, including lawyers and whatnot,” Patton recalled. “But looking back, they were just locking us in – in case we made it big. And we thought we were half way to the cover of Rolling Stone.”
But after signing a contract, the group entered into a long period of waiting. They recorded some demos in a studio once used by the Rolling Stones, and The Deal even produced a record. The eager band soon realized that recording an album wasn’t the same as playing live.
The album, which was made without a decent producer, was shelved. And the band’s fate remained in limbo for three years. It would be another couple years before the world would became interested in Dave Matthews.
Eventually, Patton faced the decision of trying to make it big as a musician all his life or moving on to a more realistic goal. He chose the latter, spent a year travelling the world and then attended law school at the University of Virginia in Charlottesville. Another band member went on to play with Dave Matthews on his first album.
After law school, Patton did a stint working for a law firm and then moved on to the Securities and Exchange Commission (SEC), a federal watchdog agency that investigates securities fraud. That was in the early 1990s when insider trading – buying stocks and options with confidential knowledge about a company’s future – was the new buzzword of white-collar crime. Inside traders could turn secret information into millions knowing that stock values generally spike after mergers. Someone with insider knowledge would know to buy up a company’s stock before the news would go public.
“Such cases are very difficult to prove in court,” Patton said. “Often, all the evidence was circumstantial.”
But some cases were not that hard to prove, especially one of Patton’s biggest cases. It involved a ring of hapless Midwesterners who had no previous experience with the stock market.
It was during a takeover of defense contractor, Grumman, by a larger competitor, Northrop. The “ring” found out about the takeover through a relative of a Grumman executive. The executive absentmindedly told his cousin about the impending deal, and the cousin proceeded to tell everyone he knew to invest in the company before the buy-out date.
“A week before the official announcement, there was a huge spike in trading. When you see that, it means insider trading,” Patton said.
This case was fairly cut and dry, and the evidence conclusive: One family who had previously never played the market, dumped its life savings into high-risk options on a relatively obscure company. Clearly, they weren’t just acting on a hunch.
Ultimately, the settlement with all the involved parties was about $1.5 million. The SEC can ask for up to three times the gain, but as it was clearly just a bunch of small fry who had a chance to make an easy buck, Patton didn’t take the law to its extreme.
“I felt kind of bad, especially because the money was just returned to a professional investor,” he confessed. “But this type of work is all about deterrence. The case made the Wall Street Journal and the New York Times, and hopefully kept others from even trying.”
Soon after that, Patton got wind of a slew of opportunities abroad in the newly emerging markets of Eastern Europe and the NIS. He had never really considered working overseas before, as American lawyers usually specialize in American laws.
That point was irrelevant in Ukraine where modern laws were just beginning to emerge. He got a job at Financial Markets International, a USAID-funded project, and moved to Kyiv in 1995.
His project deals with securities, which means anything from stocks and bonds to the emerging futures market. The main client of FMI is the Securities and Stock Market State Commission, which oversees the development of Ukraine’s stock market. Most of his time is spent reiterating market principles familiar to most high school students in the West.
“The problems here are fundamental, like corporate governance,” he said. This concept means creating a culture that protects small investors and allows all investors free access to information. In short, transparency. FMI is active on three levels: lobbying for legislative reforms, drawing up model charters and by laws with investor protections, and working with companies to convince them that corporate governance ultimately helps profits and productivity.
The principles that Patton expounds are spelled out in the report “Financial Markets Development in Ukraine.” It is available in English and Ukrainian and is targeted at officials who drag their heels at reform.
Both the report and Patton point out that what is necessary now is the will to reform.
Patton can expound on reform and can speak at length about such serious topics of national import. But Ukraine’s financial straits are not the only worry on his mind.
Patton is involved in crisis management for another project, as well. Speeding Lisa’s Alex Medina, of Pink Dot fame, will be leaving this week to return to the States. The Al Capone gig on May 19 was his last.
Patton fears the group will be left without its musical heart.
“It’s a crisis,” Patton said in a remarkably calm voice. “Musically, Alex is our leader.”
The band will take a break this summer, as bassist Nick Morris will be out of town. In the fall, the band will regroup either as a foursome or maybe with a fifth member to replace Medina.
“Our only hook is that we’re all ex-pats,” said Patton of the group heavily influenced by classic rock. “And we want to keep it that way. Don’t worry, we will survive.”
When he speaks, Speeding Lisa’s future sounds secure.
