It's a sad but familiar story on Wall Street - a former top dog hauled away in handcuffs after crossing a legal line. Yet the arrest of former Deutsche Bank structured finance co-head Kevin Ingram on June 12 will certainly pass into Wall Street legend as the first time a Street executive was nabbed for alleged involvement in an arms sales scheme that included the sale of hand-held missiles to an unknown country.

The strangeness of the arrest left many Wall Street veterans mumbling to themselves last week, as Ingram had been a high-profile figure in the 1990s structured finance markets. "It's a complete shock," said one longtime mortgage professional who had worked with Ingram for years.

Associates who knew Ingram said they were saddened and mystified by the news last week that someone so talented had seemingly gone so far astray. One mortgage research head who remembered Ingram speculated that the recent collapse of TruMarkets Inc., a bond trading Web site Ingram co-founded in 2000, might have been the trigger for Ingram's alleged involvement in the scheme, as Ingram was rumored to have much of his capital wrapped up in the troubled venture.

Yet according to press reports, Ingram's involvement with the scheme stretches back to at least 1999. He is charged with planning to launder $2.2 million this month from the proposed sale of a variety of weapons in a sting operation run by undercover federal agents. Ingram is reportedly planning to plead not guilty at his arraignment next month. Ingram's lawyer, Richard Lubin of Lubin & Gano, of West Palm Beach, Fla., did not return calls for comment by press time Thursday.

Ingram's story contains elements of Aeschylean tragedy. Five years ago, he landed a fat contract with the then-named Deutsche Morgan Grenfell to head its mortgage-backed securities business after years of building a reputation at Goldman Sachs, and was named one of the top 25 African-American "movers and shakers on Wall Street" by Black Enterprise magazine.

After a year or so of great promise and expansion at Deutsche, things went downhill. Over the next few years Ingram was allegedly forced to resign from Deutsche after racking up trading losses, then launched a Web site that did not get off the ground, and ultimately on June 12 was arrested at the Fort Lauderdale airport by federal agents after reportedly accepting a bag of cash tied to the sale of Stinger missiles.

Ingram joined Goldman Sachs in 1987 after having graduated from the Massachusetts Institute of Technology, and soon earned a reputation for being a driven, ambitious young rising star at the firm, said sources who served with him during that time. Over the next nine years at Goldman, he headed trading of investment-grade structured bonds, derivatives, collateralized mortgage obligations, commercial mortgage-backeds and, in a strange irony, ARMs (adjustable-rate mortgages).

His big break came in April 1996, when Deutsche lured him over with what sources said was a very lucrative contract and a mandate to shake up the company's stagnant mortgage business. Howard Hill, who was running Deutsche's securitized products division at the time, soon resigned, reportedly bitter about having to share power with Ingram.

Deutsche had developed a reputation for trafficking in more esoteric mortgage securities and was missing the broader market where the major shops were making most of their profits. In an interview with IDD's sister newsletter Mortgage-Backed Securities Letter in August 1996, Ingram said his goal was to expand Deutsche's role in the market.

"We are going to try to address the greatest customer needs," he told the newsletter, adding that he wanted his MBS group to be "visible and different from everyone else" and provide "a level of sophistication equivalent to anyone on the Street."

Ingram went on a hiring spree, nabbing a number of former Goldman colleagues including Eric Bruskin and Prudential Securities' former research head Charles Huang. In early 1997, Ingram pushed Deutsche into the commercial mortgage market by poaching several Goldman real estate finance veterans, including top CMBS officials Mike Offit, Roger Wittlin, and Steve Stuart. By the end of that year, Deutsche was underwriting billion-dollar CMBS deals and making a name for itself in the structured finance markets.

Ingram's power was growing as well. By mid 1997 he was co-heading a staff of 120 and reportedly earning a multi-million dollar salary. Veterans from the period said that Ingram was known to have expensive tastes in luxury automobiles, including Ferraris, one associate recalled. Also during this period, Ingram became involved with a number of outside projects, such as the proposed renovation of several New York nightclubs and restaurants.

However, as the fixed-income markets began falling apart in mid-1998, Deutsche's top officials had growing qualms about its involvement in structured finance, especially as trading losses mounted from Ingram's group. One strategy that Ingram's group pursued to build business was to take riskier lending opportunities in a bid to win bond underwriting business. In flush times the strategy worked, but as the market constricted and issuer losses mounted, Deutsche was reportedly losing "a boatload of money," said one source at Deutsche.

By November of that year, Ingram was essentially forced out and the MBS group underwent severe layoffs, with at least a third of the group given pink slips. The turnover was so great that today very few people at Deutsche hail from the Ingram period, and a number had never heard of him when news of his arrest broke.

"Deutsche was always falling in and out of love with structured finance" in the 1990s, said one official familiar with the company. "I don't think it was necessarily a bad month or quarter that did him in. Rather, some bean-counter in Frankfurt said that the group's ROE was less than its target, and it was - bang, you're dead."

Ingram seemed to land quickly on his feet, founding TruMarkets in mid-2000 with a former Deutsche colleague, Peter McCarthy. The site was designed to trade a variety of securities electronically, including derivatives and mortgage bonds.

The project seemed to have great promise, as the hype about Internet bond trading was reaching its zenith, and Ingram lured some heavy hitters to stock the board of directors, including Herbert Allison, a former Merrill Lynch & Co. president known for his intellect, and Ronald Readmond, former CEO of Charles Schwab & Co.

One mortgage veteran who saw a presentation of the TruMarkets platform said he was impressed by the proposal, and even more impressed by the list of investors in the project, which he said included a number of top names in fixed-income and even some politicians.

Yet the project stalled during development, and wound up filing for bankruptcy in March of this year. TruMarkets was purchased by MortgageSight Holdings LLC, a joint venture owned by Salomon Smith Barney, Lehman Brothers Inc., Bear, Stearns & Co. and Credit Suisse First Boston for the assumption of $2 million in debt.

While TruMarkets was unraveling, the government's two-and-a-half-year sting against a pair of arms dealers operating out of Jersey City was nearing its denouement, and Ingram was caught up in the web.

The apparent leaders of the arms smuggling operation were Diaa Moshen and Mohammed Rajaa Malik, a.k.a. Mike Malik, who according to press reports held multiple meetings with federal agents posing as arms dealers in the last few years. The sting began in 1999, when Moshen and Malik told the agents they were working on behalf of a foreign country and were shown M-16 rifles, explosives and Stinger missiles.

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