Contributor Candidate or PAC Amount Date FEC Filing
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L. MADOFF INVEST.-SEC./CHAI
DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (D) $25,000
primary 09/12/08
Madoff, Bernard L. Mr.
New York, NY 10021
Bernard L. Madoff Investment Securi
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION POLITICAL ACTION COMMITTEE $5,000
primary 08/20/08
MADOFF, BERNARD
NEW YORK, NY 10022
SELF EMPLOYED/INVESTOR MERKLEY, JEFFREY ALAN (D)
Senate – OR
JEFF MERKLEY FOR OREGON $2,300
primary 04/24/08
Madoff, Bernard L.
New York, NY 10021 SAUL, ANDREW MARSHALL (R)
House (NY 19)
SAUL FOR CONGRESS INC $-2,300
primary 12/05/07
Madoff, Bernard L
New York, NY 10021
Bernard Madoff Investment/Chairman LAUTENBERG, FRANK R (D)
Senate – NJ
LAUTENBERG NJ VICTORY COMMITTEE $5,000
primary 07/20/07
Madoff, Bernard L
New York, NY 10021
Bernard Madoff Investment/Chairman LAUTENBERG, FRANK R (D)
Senate – NJ
LAUTENBERG NJ VICTORY COMMITTEE $2,300
primary 07/20/07
Madoff, Bernard L
New York, NY 10021
Bernard Madoff Investment/Chairman LAUTENBERG, FRANK R (D)
Senate – NJ
LAUTENBERG NJ VICTORY COMMITTEE $300
primary 07/20/07
Madoff, Bernard L.
New York, NY 10021
Bernard L. Madoff Investment/Chairm SAUL, ANDREW MARSHALL (R)
House (NY 19)
SAUL FOR CONGRESS INC $2,300
primary 07/10/07
Madoff, Bernard L Mr.
New York, NY 10021
Bernard L. Madoff Investment Securi
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION POLITICAL ACTION COMMITTEE $5,000
primary 05/24/07
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L. MADOFF INVEST.-SEC./CHAI
DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (D) $25,000
primary 05/04/07
Madoff, Bernard L Mr.
New York, NY 10021
Bernard L. Madoff Investment Securi
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $5,000
primary 10/17/06
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L. MADOFF INVEST. SEC./CHAI
DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (D) $25,000
primary 09/30/06
Madoff, Bernard L Mr.
New York, NY 10021
Bernard L. Madoff Investment Securi
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $5,000
primary 09/22/05
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVEST SEC
DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (D) $25,000
primary 05/09/05
Madoff, Bernard
New York, NY 10021
Madoff Investments/Chairman MATHESON, JAMES (D)
House (UT 02)
MATHESON FOR CONGRESS $250
general 10/18/04
Madoff, Bernard
New York, NY 10021
Self-employed/Banker HOOLEY, DARLENE (D)
House (OR 05)
HOOLEY FOR CONGRESS $250
general 10/15/04
Madoff, Bernard L
New York, NY 10021 FROST, MARTIN (D)
House (TX 32)
MARTIN FROST CAMPAIGN COMMITTEE $250
general 10/15/04
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVESTMENTS SCHUMER, CHARLES E (D)
Senate – NY
FRIENDS OF SCHUMER $1,000
general 08/18/04
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVESTMENTS SCHUMER, CHARLES E (D)
Senate – NY
FRIENDS OF SCHUMER $1,000
primary 08/18/04
Madoff, Bernard L Mr.
New York, NY 10021
Madoff (Bernard L.) Investment Secu
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $5,000
primary 07/08/04
Madoff, Bernard L
New York, NY 10021
Madoff Investments/Chairman MARKEY, EDWARD J MR. (D)
House (MA 07)
MARKEY COMMITTEE, THE $2,000
primary 06/17/04
Madoff, Bernard L
New York, NY 10021
Madoff Investments/Chairman MARKEY, EDWARD J MR. (D)
House (MA 07)
MARKEY COMMITTEE, THE $2,000
general 06/17/04
MADOFF, BERNARD
NEW YORK, NY 10021
BERNARD MADOFF INVESTMENTS LAUTENBERG, FRANK R (D)
Senate – NJ
LAUTENBERG FOR SENATE $1,000 02/18/04
Madoff, Bernard L
New York, NY 10021
Bernard L Madoff/Chairman GEPHARDT, RICHARD A (D)
President
GEPHARDT FOR PRESIDENT INC. $2,000
primary 09/23/03
MADOFF, BERNARD
NEW YORK, NY 10021
BERNARD MADOFF INVESTMENTS WYDEN, RONALD LEE (D)
Senate – OR
WYDEN FOR SENATE $2,000
primary 03/25/03
MADOFF, BERNARD
NEW YORK, NY 10021
BERNARD MADOFF INVESTMENTS WYDEN, RONALD LEE (D)
Senate – OR
WYDEN FOR SENATE $2,000
general 03/25/03
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVESTMENTS SCHUMER, CHARLES E (D)
Senate – NY
FRIENDS OF SCHUMER $1,000
general 04/08/02
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVESTMENTS SCHUMER, CHARLES E (D)
Senate – NY
FRIENDS OF SCHUMER $1,000
primary 04/08/02
Madoff, Bernard L.
New York, NY 10022
Bernard L. Madoff P.C./Chairman RANGEL, CHARLES B (D)
House (NY 15)
RANGEL FOR CONGRESS $1,000
primary 08/30/01
MADOFF, BERNARD
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $2,000
primary 11/03/00
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD MADOFF INVESTMENT SEC FOSSELLA, VITO (R)
House (NY 13)
COMMITTEE TO RE-ELECT VITO FOSSELLA $1,000
primary 04/20/00
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD MADOFF INC OBEY, DAVID R (D)
House (WI 07)
A LOT OF PEOPLE FOR DAVE OBEY $1,000
primary 03/10/00
MADOFF, BERNARD
NEW YORK, NY 10022
CHAIRMAN CLINTON, HILLARY RODHAM (D)
Senate – NY
HILLARY RODHAM CLINTON FOR US SENATE COMMITTEE INC $1,000
primary 01/13/00
MADOFF, BERNARD
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $2,000
primary 12/20/99
MADOFF, BERNARD
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FUND A $2,000
primary 12/20/99
MADOFF, BERNARD
NEW YORK, NY 10021
MADOFF SECURITIES CORZINE, JON S (D)
Senate – NJ
CORZINE 2000 INC $1,000
primary 08/24/99
Madoff, Bernard Mr.
New York, NY 10021
Bernard Madoff Investment Securitie BRADLEY, BILL (D)
President
BILL BRADLEY FOR PRESIDENT INC $1,000
primary 04/26/99
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF INVESTMENT SECURIT SCHUMER, CHARLES E (D)
Senate – NY
VICTORY IN NEW YORK $1,000
primary 10/30/98
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L MADOFF PC RANGEL, CHARLES B (D)
House (NY 15)
RANGEL FOR CONGRESS $1,000
general 10/23/98
MADOFF, BERNARD L
NEW YORK, NY 10021
SELF-EMPLOYED D’AMATO, ALFONSE M (R)
Senate – NY
FRIENDS OF SENATOR D’AMATO (1998 COMMITTEE) $1,000
general 09/21/98
MADOFF, BERNARD
NEW YORK, NY 10022 CROWLEY, JOSEPH (D)
House (NY 07)
CROWLEY FOR CONGRESS $-500
primary 08/26/98
MADOFF, BERNARD
NEW YORK, NY 10022
BOND BROKER CROWLEY, JOSEPH (D)
House (NY 07)
CROWLEY FOR CONGRESS $500
primary 08/04/98
MADOFF, BERNARD
NEW YORK, NY 10021 SCHUMER, CHARLES E (D)
Senate – NY
SCHUMER ‘98 $-300
primary 06/29/98
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT SCHUMER, CHARLES E (D)
Senate – NY
SCHUMER ‘98 $1,000
primary 05/22/98
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT SCHUMER, CHARLES E (D)
Senate – NY
SCHUMER ‘98 $1,000
general 05/22/98
MADOFF, BERNARD L
NEW YORK, NY 10021
MADOFF INVESTMENTS MARKEY, EDWARD J MR. (D)
House (MA 07)
MARKEY COMMITTEE, THE $1,000
primary 05/15/98
MADOFF, BERNARD L
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT TAUZIN, WILBERT J II (R)
House (LA 03)
BILLY TAUZIN CONGRESSIONAL COMMITTEE THE $1,000
primary 05/05/98
MADOFF, BERNARD
NEW YORK, NY 10022
BERNARD L MADOFF INVESTMENT SECURIT SCHUMER, CHARLES E (D)
Senate – NY
SCHUMER ‘98 $300
primary 03/31/98
MADOFF, BERNARD L
NEW YORK, NY 10021
BERNARD L MADOFF CO FRISA, DANIEL (R)
House (NY 04)
DAN FRISA FOR CONGRESS $1,000
general 09/17/96
MADOFF, BERNARD L
NEW YORK, NY 10021
MADOFF SECURITIES MARKEY, EDWARD J MR. (D)
House (MA 07)
MARKEY COMMITTEE, THE $1,000
primary 08/04/96

Every counterfeiter of U.S. $100 bills can claim that they are increasing the liquidity of U.S. currency – there is more money to spend!

So the counterfeiting hedge funds and their supporting cast claim they are increasing the liquidity of the U.S. Stock Market – there are more shares to sell.

But in both cases, the reason both counterfeit is to increase the liquidity of THEIR bank accounts.

So the counterfeiting hedge funds play the corrupt system knowing that when they want to short any company, the corrupt system will “magically” produce any amount of counterfeit shares they want or need. And the corrupt system will claim it has no control over delivery of real shares.

maybe this “cascade of corruption” analogy will help clarify that concept you asked about.

THE SELF-PROPAGATING “CASCADE OF CORRUPTION” ACCESSIBLE IN A CLEARANCE AND SETTLEMENT SYSTEM FOUNDED UPON “COLLATERALIZATION VERSUS PAYMENT” (CVP)

When a party sells shares they can either deliver them or fail to deliver them. If delivery “in good form” is made then the trade legally “settles”. This is referred to as “delivery versus payment” or “DVP”.

In a clearance and settlement system illegally utilizing a foundation based upon mere “collateralization versus payment” or “CVP” the FTD resulting from a failed delivery obligation can become the top pool of a “cascade of corruption”.

Flowing down from this FTD pool will be the readily sellable “securities entitlements” that all FTDs procreate. Since “securities entitlements” are readily sellable then from their accumulation in the share structure of a corporation will flow lower share prices by definition. Flowing down from lower share prices pool will be a bifurcation of the flow. To one side will be the flow of the investor’s money to the party refusing delivery. This flow goes into a pool with a pump in it that allows the parties refusing to deliver that which they sold to take these ill-gotten profits and pump them back up to the top where they can make yet more short sales leading to yet more FTD to occupy the top “FTD pool” of the cascade to augment the overall flow. The greater the flow generated results in the greater the profits at the bifurcation the next time around.

To the other side of the bifurcation will flow the “extra” shares needing to be issued by a yet to be positive cash flow corporation forced to sell more “shares” to fund its fixed monthly burn rate than it otherwise would have had to in the absence of the prior share price manipulation downwards. These flow into a pool without a pump. From this pool overflow yet lower share prices associated with this “extra” dilution. This time, however, the dilution is cause by “extra” legitimate “shares” instead of mere “securities entitlements” resulting from FTDs.

These lower share prices results in yet another bifurcation involving the flow of ill-gotten profits associated with decreased collateralization requirements (associated with mere CVP) into another pool with a pump in it that leads back to the pool of FTDs at the top of the cascade. Once again the other side of the bifurcation leads to yet lower share prices which leads to yet another bifurcation.

As you can see this cascade is self-propagating and continues until the corporation under attack is dead from the dilutional effects of both the “extra” real shares and the readily sellable “securities entitlements”. The ability to use the money “stolen” from investors to establish and collateralize yet more FTDs represents a form of “self-generated” leverage leading to augmented flow rates.

Small investors do not have the resources to pay the price of admission into the area on Wall Street featuring this self-leveraging “cascade of corruption”. The price of admission includes massive amounts of “order flow” to the DTCC “participants” that built and service the “cascade”. But once invited all one must do is simply refuse to deliver that which you sell and place your FTDs into the top “FTD pool” and you can take advantage of all of this free flowing of investor money.

As one can see every time the share price drops there is a bifurcation in the water flow which creates a pay day to those that refuse to deliver that which they sell. Those invited to this cascade can take these profits at each bifurcation or simply let the profits roll and allow them to be pumped back to the top which augments the flow of the cascade.

Participants often invite co-conspirators to take part in the festivities which serves to augment the flow rate for all concerned.

In a clearance and settlement system based on CVP invited guests need only collateralize the monetary value of the failed delivery obligation in a daily marked to market manner and as the share price drops so too do the collateralization requirements.

In a clearance and settlement system based upon “delivery versus payment” or “DVP” there is no special area with “cascades of corruption” as FTDs are either not allowed or quickly bought-in shortly after their creation.

What are the structural components of this “cascade”? First of all you need a clearance and settlement system based on CVP? This may take a while to construct because you need to get a lot of corrupt practices incorporated into the rules and regulation of your particular “registered clearing agency”. You need to sneak through any new corrupt rules at a time when the SEC is napping or in a manner wherein you baffle them with complexity that they don’t understand. Once these corrupt rules are in place you have it made in the shade because the SEC is not allowed to add to or delete from the rules and regulations of any “registered clearing agency”/”sacred cow”. Why? I have no idea because the 7 “Securities Acts” expressly forbid any “registered clearing agency” from having any rules that are not in alignment with the tenets of these 7 Acts.

What other components can serve to fortify these “cascades”? Self-replenishing “stock borrow programs” are very helpful as are policies allowing the brokerage firms not getting delivery of that which their clients sold to sit around and wait for the “eventual” delivery of the missing shares. The “anonymous pooling” of shares is helpful as is having the “registered clearing agency” involved acting as the legal “custodian” of shares, the “qualified control location” of choice, the “legal/nominal/record” owner of all shares, the “central counter party” to all trades that is mysteriously subject to bouts of “powerlessness” when the financial interests of the owners of the “RCA” are jeopardized, etc.

Is this “cascade of corruption” available only to powerful Wall Street players? Oh no. It is available to any financial terrorist that wants to take down any U.S. corporation that it looks upon as a threat or impediment to its own ideologies.

How does one combat these “cascades of corruption”? You reconvert your clearance and settlement system back to DVP as mandated by Section 17 A of the ’34 Exchange Act that mandates the “prompt settlement” of all securities transactions.

When the NSCC has the audacity to plead to be “powerless” to buy-in delivery failures despite 15 separate reasons why they have all of the power in the world to do so then FTDs need to be forbidden. If the seller of securities hints that delivery of that which he is selling is just a day or two behind schedule then let’s just wait that day or two before those securities arrive and are in place for being delivered by T+3. If the seller was lying then you just prevented a fraud and provided “investor protection and market integrity” which is the congressional mandate of the SEC.

What do we do when those that are accustomed to accessing this “cascade of corruption” cry out that we won’t be able to inject all of this wonderful liquidity that we are used to injecting? You tell them that U.S. citizens are tired of having their investments drown in all of this theoretically beneficial “liquidity” they provide.

The books at the NSCC look semi-clean to a corporation that orders an SPL list but those don’t address SBP abuses and the shares that purchasong b/ds are patiently “waiting for”.

The books at the clearing firm NSCC participants use anonymous pooling and look confusing because of the existence of gazillions of different “introducing” or “correspondent” b/ds. These books reflect ex-clearing abuses as “undelivered securities” although they should be listed as “contingent liabilities”. Ex-clearing involves 2 co-conspiring clearing firms saying to each other you don’t have to deliver the $1 billion worth of shares of corporations “A”, “B” and “C” if you don’t force me to deliver the $1 billion worth of shares of corporations “X”, “Y” and “Z”. This way the PPS of all 6 corporations can expect top crash from all of these FTDs that procreate “securities entitlements”. Notice the similarity between the NSCC saying that you have the option to patiently wait for the “eventual” delivery of your client’s shares and what occurs in “ex-clearing” where there is an implicit guarantee not to buy-in (wink, wink) on the table. The abusive DTCC participants will argue that at least there is still a FTD that is generated and “eventually” must be taken care of but what happened to T+3 as the previously contracted for delivery date? By the time “eventual” comes around those incredibly damaging “securities entitlements” may have killed the company. The average lifespan of the “securities entitlement” is the killer because the authors of UCC Article unfortunately made them readily sellable because they presumed that they would never get over 3 or 4 days in age because the NSCC had the congressional mandate to “promptly settle” all transactions.

When you add these “ex-clearing” FTDs to the ones generated and covered up by the SBP plus the ones associated with buying b/ds being bribed to patiently wait for their securities to deliver plus those sitting at trading desks associated with “desking” you wonder how any corporation can survive.

Throughout the history of the DTCC, the DTC, the NSCC and their predecessors “BASIC”, etc. we see a nonstop quest for “enhanced efficiencies”. The problem is that each one of these theoretical “enhanced efficiencies” results in the DTCC participants that refuse to ACT IN GOOD FAITH gaining “enhanced leverage” over the U.S. investors that they act as an SRO (Self-Regulatory Organization) for and for whom they act as a “gatekeeper” to our markets. You cannot enter our markets without going through one of these DTCC participating “gatekeepers” similar to how in the old days you couldn’t enter into a college fraternity system without going through a little “hazing”.

For instance, at the DTCC and at all “registered clearing agencies” (RCAs) the shares of investors are held in an “anonymously pooled” format. This greatly reduces the amount of paperwork needed when shares change hands. The same is true when you have a centralized “legal/nominal/record” owner of all shares held in “street name” as the DTCC’s nominee “CEDE and Co.” does. The problem in the case of both “anonymous pooling” and a centralized “legal owner” is that investors cannot trace the particular parcel of shares that they purchased. They first of all cannot tell if what they paid for ever even got delivered on or near T+3 as promised. Nor can they tell if they have been illegally loaned out to short sellers without their permission. The shares they purchased become part of an enormous amorphous blob of shares held as electronic book entries at the DTCC and nobody would ever notice if one tiny “lobule” of that blob was missing. These two policies are “efficient” but begging to be abused.

This is acceptable in a clearance and settlement system with a rigorous set of policies that would diagnose and treat any counterfeiting improprieties that might represent untoward side effects of these “enhanced efficiencies” but the DTCC does not have any of these instead they have other “efficiency enhancers” that obfuscate the existence of blatant acts of counterfeiting. Take their self-replenishing lending pool sponsored by their “Automated Stock Borrow Program” or “SBP”. When a failure to deliver (FTD) occurs at the NSCC Addendum “C” to the rules and regulations of the NSCC allows NSCC management to dip their hand into that “lending pool” and take out an unidentifiable (due to “anonymous pooling”) parcel of shares and send those shares via an electronic book entry transmission to the “participants shares account” of the buying firm that didn’t get delivery of the shares purchased.

Upon receipt of that unidentifiable and untraceable parcel of shares this purchasing broker is then allowed to unconscionably place that very same “parcel” of shares right back into that very same lending pool as if it never left in the first place. There it sits ready to “cure” yet another FTD. As mentioned before soon there may be a dozen different U.S. investors that “co-beneficially own” that one parcel of shares. The problem is that 11 of those 12 transactions resulted in the genesis of incredibly damaging “securities entitlements” that the DTCC treats as being readily sellable and which the unknowing investors see referenced on their monthly brokerage statement as “securities held long”. The share price of the corporation, by definition, has to go down as the “supply” of readily sellable legitimate shares plus the “supply” of readily sellable but mere “securities entitlements” interacts to the “demand” variable to determine a price well below the price would have been without all of those extra readily sellable “securities entitlements”.

This predictable drop in price represents a financial windfall to those that have established massive naked short positions by simply refusing to deliver that which they sell because in a clearance and settlement system illegally converted to a foundation based on mere “collateralization versus payment” all a DTCC “participant” is asked to do is to collateralize the monetary value of his failed delivery obligation which results in the unknowing investor’s funds flowing to the sellers of nonexistent shares that absolutely refuse to deliver that which they sell. Why would they when they don’t have to? Yet the DTCC has the audacity to say that their SBP is an “efficiency enhancing” measure that serves to “increase the likelihood that the purchaser of shares will receive that which he purchased on “settlement date”. Wait a minute. Of those 12 purchasers of the same parcel of shares only one of them got delivery of legitimate “shares” of a corporation and the other 11 got a readily sellable IOU that in and of itself decreased the prognosis for the investment made. Again we see the theme of “enhanced efficiencies” procreating “enhanced leverage”. The problem is that fraud is not an efficient way of doing business except from the purview of the fraudster.

If all of these theoretical “enhanced efficiencies” (and there are dozens) were revenue neutral then that is one thing but when every single one of them serves to reroute the investment proceeds of unknowing investors to those that designed the “enhanced efficiencies” then we’ve got some issues that arise.

Having the DTC act as the “legal custodian” of all shares held in “street name” seems like an “efficiency enhancing” policy at first glance but what kind of a “legal custodian” would administer a self-replenishing SBP serving to blatantly counterfeit that being held in its “legal custody”?

Having the NSCC act as a “qualified control location” also seems at first glance to be an “efficiency enhancing” procedure but what kind of “qualified control location” mandated to take possession of all fully paid for shares on behalf of the “participants” that use it to attain compliance with Rule 15c3-3 would have a policy in effect that allows their “participants” that buy shares for their clients to sit around and wait for delivery while earning interest off of its own client’s funds without being forced to buy-in the delivery obligation when it becomes obvious that the seller of the securities had no intention whatsoever to deliver that which it sold. Again, why would ANY seller with access to all of these corrupt and self-serving policies deliver that which it sells when it can still gain access to the unknowing investor’s funds without delivering anything at all?

What we’re left with is an “us verses them” scenario wherein the average U.S. citizen, perhaps a “baby boomer” that has labored his entire life is merely trying to invest wisely in order to retire at a certain age is pitted against DTCC participants with a far superior knowledge of, access to and visibility of the clearance and settlement system that is grossly “rigged” in favor of the financial interests of those able to establish massive naked short positions by merely refusing to deliver that which they sell.

What does it take to participate in these frauds? You need to have enough critical mass to provide “juice” to the DTCC participating market intermediaries like market makers, clearing firms and prime brokers. What does this “juice” consist of? It consists of being able to provide massive levels of “order flow” to these market intermediaries which will indirectly provide them with cash flow as opposed to bribes which directly provide cash flow. Although not all hedge funds are corrupt an unregulated hedge fund fits the bill quite well.

People have a tough time envisioning how all of these corrupt policies came into being when these markets are supposedly so “highly regulated”. The NSCC acts in the capacity of a “registered clearing agency” that is in turn regulated by the SEC. In the ‘34 Exchange Act there is a curious stipulation that the SEC cannot add to or abrogate (delete from) the rules and regulations of a “Registered Clearance Agency”. In fact in the “Comment period” associated with Reg SHO the DTCC made a comment that basically said to the SEC (paraphrased) as you know well you can’t amend our rulebook but in the spirit of cooperation we at the DTCC will do our best to follow the tenets of Reg SHO. Wow, what a slap in the face!

The end game for abusive DTCC participants appears to have been to get as many self-serving corrupt policies incorporated into their book of rules and regulations while the SEC is dozing and then they can turn Wall Street into their own little fiefdom. The SEC did have a shot at shooting down corrupt DTCC policies but they indeed dozed off from time to time. Historically the bad guys have had a superior knowledge of the intricacies of Wall Street over the SEC. The SEC was constantly using Bernie Madoff as a reference source. To this day the SEC allows the trading of derivative securities like CDOs and CDSs that they don’t understand fully and they have no clue as to the associated systemic risks involved.

The moral of the story is that all of these theoretical “enhanced efficiencies” have associated fiduciary duties of care and responsibilities attached. This gives rise to the need for the parties enacting these theoretical “enhanced efficiencies” (the NSCC management) to ACT IN GOOD FAITH while doing so. Being that those around the DTCC do indeed have a superior working knowledge of the intricacies of our clearance and settlement system they, as a “securities cop” known as an SRO, would be theoretically entrusted to also ACT IN GOOD FAITH with this superior “inside view” that they are entrusted with. The problem arises when some of these “market intermediaries” with this superior working knowledge find themselves amongst trillions of dollars belonging to relatively unsophisticated U.S. citizens aren’t quite up to this presumption to ACT IN GOOD FAITH. Other “market intermediaries” are overwhelmed by the amount of money they can “earn” by prostituting their access to abusive NSCC policies to unregulated hedge funds seeking access to this rather curious and untouchable “rulebook”.

Dr. DeCosta,

From your example above where you address “TWO SETS OF BOOKS?”, it does appear that the DTCC keeps two set of books, as your example indicates.

Now I am wondering about the counterfeiting hedge funds:

>> Do you think they keep “TWO SETS OF BOOKS?”

>> Or do they keep only ONE SET OF BOOK, which does NOT even show that they are have FAILED TO DELIVER WHAT THEY SOLD?

Either way, it looks to me that the counterfeiting hedge funds are guilty of some type of crime for Not Revealing to its investors that they routinely FAIL TO DELIVER WHAT THEY SELL.

If the counterfeiting hedge funds are purposefully not revealing material financial facts to its investors, which could cause the fund to collapse, it seem that they have legal problems.

What he means is that instead of requiring the delivery of the actual stock before the seller receives payment, the seller only has to provide collateral before receiving payment.

So, for example, if a market maker has to put up 102% collateral, they can short $10 million worth of penny stock and put up $10,200,000 instead of share certs. (That’s the collateral.)

In exchange, they receive back $10,000,000 (that’s the payment). They are only out of pocket $200,000.

A year later, the penny stock is death spiraled into oblivion and is only worth $100,000 and their new “marked to market” collateral is $2,000. They still have the $10,000,000 proceeds from the original sale, but they can reduce their collateral to $2,000, wiring $9,998,000 to some offshore account before closing shop, declaring bankruptcy and letting the taxpayer figure it out. They aren’t out of pocket a dime, and have squirreled away the bulk of the sale proceeds.

Can you imagine if any other asset was sold that way?

Imagine I purchase a car for $100,000 and the dealer hands me an envelope. I’m expecting the keys to be inside, but instead, I find 70 one hundred dollar bills neatly stacked inside. I ask the dealer for an explanation and he explains, oh when you purchase a new car, it depreciated 30%, so the $70,000 is what you get for your purchase.

I demand delivery of the car and the dealer explains, that under the current system, you get collateral rather than delivery.

I sue and five years later I win and the dealer explains to the judge that now the car is only worth $25,000 and the judge asks me to give $50,000 from the original $75,000 back to the dealer. I still don’t have my car.

It’s idiotic and doesn’t pass common sense, but much of what goes on at the DTC is exposed as utter nonsense when the light of day is shined on their gobbledy gook acronyms, rules and procedures that are only there to obfuscate their plain day theft of your money.

If the broker has a “call” on stock, it is treated as a long position, when it should be treated as an undated derivative.

In my mind, the DTCC is potentially liable for fraud for claiming a call is a long position, but they’ve been smart enough to spread the responsibility among the DTCC holding company, the NSCC, DTC, Cede & Co., the clearing participants and the broker dealers with these entities spread in different jurisdictions, so no one regulator can see the whole picture.

Dr. Jim DeCosta,

What does >> b/d << mean in this sentence:

The buyer’s b/d will be given a “long” position in these shares and these shares will be correctly debited from the “participant’s shares account” of the “donor” firm at the NSCC.

Thank again for explaining how crimes are being committed against the American People!

Acronyms:
NSS Naked Shorting (Selling without owning or borrowing)
DVP Delivery versus payment
CVP Collateralization versus payment
DTCC Depository Trust & Clearing Corporation
DTC Depository Trust Company
NSCC National Securities Clearing Corporation
FTD Fail to deliver
FTR Fail to receive
RTD Refusal to deliver
T + “x” X business days hence from time of transaction
SEC Securities and Exchange Commission
CCP Central counterparty
CPR Customer protection rule
SBP Stock Borrow Program
SRO Self-Regulatory Organization

Frauds wherein the CCP pleads to be “powerless” to “execute” on the delivery obligation that it just “assumed” are called “straw man” frauds because of the sudden paralysis that seems to have occurred in between the “discharging” and “assuming” phases of “novation”.

“B” the other party with the right to buy-in “S” says heck no I’d rather have the use of my client’s funds to earn interest and count towards my net capital reserves which have an anti-fraud purpose behind their existence. Nobody’s left with the power to order the buy-in.

The NSCC gives “B” the CHOICE to wait for the “eventual” delivery and take the client’s money or to file an “intent to buy-in “S”. They obviously will choose the money and from then on aim their buy orders at a party likely to naked short sell into the buy order.

How can the NSCC with the congressional mandate to “promptly settle” all transactions be allowed to bribe the buying firm into not ordering a buy-in? Worse yet the bribe is paid with the investor’s money. Why doesn’t the investor make interest off of his own money UNTIL delivery occurs? Whatever happened to the T+3 “settlement date” originally contracted for? Whatever happened to the fiduciary duty of care of the buying firm taking a commission to make sure that his client got what he paid for? Instead of fulfilling his duty of care he gets the use of the money of a guy that just paid him a commission as his “agent”.

How can the NSCC be POWERFUL enough to “discharge” the original delivery obligation and then turn around and plead to be “powerless” to do what is needed to execute on the obligation it just assumed. Kryptonite?

with conditions….

▸ noun: (law) the replacement of one obligation by another by mutual agreement of both parties; usually the replacement of one of the original parties to a contract with the consent of the remaining party

As mentioned, hedge funds spend approximately $11.2 billion annually on commissions, fees, loans, etc. They are naturally going to aim these payments and “order flow” to market makers, prime brokers and clearing firms willing to be the most “accommodative” (bend or break the greatest number of securities laws) to the needs of the hedge fund manager making his “2 and 20”. Unfortunately this leads to a natural selection process involving “survival of the corruptest” market intermediaries and the culling out of the clean players.

The question arises as to how can regulators reverse this phenomenon to become “survival of the cleanest”. The answer is by “buying-in” the failures to deliver (FTDs) of the corrupt market intermediaries. Mandated “buy-ins” work specifically on the corrupt market intermediaries sitting on massive amounts of FTDs while selectively avoiding the clean market intermediaries that don’t commit these crimes.

I’ve always wondered how frustrating it must be for the relatively clean DTCC participants to watch their relatively dirty counterparts thrive and prosper. You might wonder if this results in the clean players going over to the dark side in an “if you can’t beat ‘em join ‘em” fashion wherein the clean players’ mindset becomes the investors are going to get taken advantage of by one of us and it might as well be me or I may go extinct.

We’ve pretty much established how easy it is for abusive DTCC participants and their co-conspiring hedge fund “guests” to establish massive naked short positions by simply refusing to deliver that which they sell. What could be easier? We’ve reviewed how a clearance and settlement system illegally incorporating a foundation of “collateralization versus payment” (CVP) instead of the congressionally mandated “delivery versus payment” (DVP) foundation which incorporates the “prompt settlement” of all securities transactions will result in the ability for those refusing to deliver that which they sell to still gain access to the funds of the investors they are stealing from.

After all, all they’re asked to do is to collateralize the monetary value of the resultant failed delivery obligation on a daily marked to market basis. As the share price of the corporation under attack predictably “tanks” from the amassing of readily sellable “securities entitlements” procreated by these intentional “failures to deliver” (FTDs) then lo and behold the unknowing investor’s money unconscionably flows to those refusing to deliver that which they sold. This stolen money can they be redeployed to assume and collateralize that much higher of a naked short position. The result is that the corporation targeted for attack is going down and bringing the investments made therein and the jobs that it used to provide with it. From the targeting phase onwards there is a self-fulfilling prophecy that can be easily accessed by merely refusing to deliver that which you sell.

With that in mind the obvious solution becomes to “buy-in” these intentional “refusals to deliver” (RTDs) or “failures to deliver” (FTDs) at a point in time when it becomes obvious that the seller of bogus shares has no intention whatsoever to deliver that which it is selling. Since some delays in delivery are legitimate then these must be provided for which results in the appropriate buy-in timeframe being somewhere around perhaps T+6 or T+7.

Now the question becomes which “market intermediary” to the transaction should be responsible for “executing” the buy-in. Make a mental note about the term “executing” as it will come up many more times again. Let’s once again review the DTCC’s now famous 1/27/06 press release:

”DTCC subsidiaries clear and settle trades. Short selling and naked short selling are trading strategies regulated by the marketplaces and the SEC. DTCC is involved after a trade is completed at the marketplace. DTCC does not have regulatory powers or regulatory responsibility over trading or to forcing the completion of trades that fail. As the SEC has stated, fails can be the result of a wide range of factors.”

As you can see the gist of this statement is that the DTCC is certainly not the party that should be executing these “buy-ins”. I beg to differ. Let’s take a look at the various roles that the DTCC and its DTC and NSCC subdivisions have volunteered to perform or have been mandated to play in our clearance and settlement system.

1) They act as the all-important “central counterparty” (“CCP”) to all trades by injecting themselves in between the buyer and the seller for reasons associated with enhanced efficiencies and the ability to provide a “trade guarantee” informing the world of how safe our markets are.
2) As the CCP they have accepted the incredibly tempting to abuse power to “discharge” the delivery obligations of any of their “participants” that fail to deliver that which they sell.
3) As the CCP they are then forced to “assume” these failed delivery obligations onto their own shoulders.
4) After “assuming” these delivery obligations they are then mandated to “execute” (here’s that word again) on these obligations so that the purchaser of the shares involved in the trade receives that which she or he paid for. Our clearance and settlement system is based upon the tricky legal concept of “novation” which means “to create anew”. Utilizing the legal concept of “novation” the original contract between the buying and selling party is “discharged” by the CCP and two new contracts are created or “novated”. The first involves the CCP’s “assumption” of the contract to receive the funds of the buyer and forward them onto the seller and the second one involves the “assumption” of the contract to receive the shares from the seller and then to forward them onto the buyer. What was the presumption involved here in this ultra-risky approval of allowing the CCP to “discharge” delivery obligations? It was that the CCP would ACT IN GOOD FAITH and “execute” on the delivery obligations that it just “assumed” especially keeping in mind that the original delivery obligation has already been “discharged”. IN ESSENCE THE PRESUMPTION MADE WAS THAT THIS CCP (THE NSCC) WOULD NOT HAVE THE AUDACTITY TO PLEAD TO BE “POWERLESS” TO BUY-IN THE DELIVERY FAILURE OF THE ORIGINAL SELLER IF HE ABSOLUTELY REFUSED TO DELIVER TO THE NSCC THAT WHICH IT SOLD. If the original seller refused to deliver that which it now owes to the NSCC as the CCP then how else can the NSCC forward the missing shares on to the buyer unless he plays “hard ball” with any participant refusing to deliver to this intermediary (the NSCC) that which it sold especially keeping in mind that the original delivery obligation has been “discharged”. In other words what might happen if the NSCC management would refuse to act in good faith by failing to “execute” on the delivery obligations it just “assumed” on behalf of the financial interests of its employers which include the abusive “participant” that refuses to deliver that which it sold. After all, acting contrary to the financial interests of your bosses presents a rather slippery slope.
5) The nominee of the DTCC (“CEDE and Co.”) has volunteered to act as the surrogate “legal/nominal/record” owner of all shares held in “street name”. Why does the clearance and settlement system need a centralized “legal/nominal/record” owner to act in this surrogate capacity? It is because it circumvents the tremendous amount of paperwork that would otherwise be involved in executing “deedlike” instruments every time a trade is executed. What was the assumption made in placing a “surrogate” owner in this capacity? The presumption made was that the “participants” making up this surrogate owner would ACT IN GOOD FAITH in this incredibly powerful and easily abusable role that could easily be “leveraged” against the investors for whom the surrogate owner now represents. After all, in our legal system the “legal owners” of any form of private property can pretty much do anything they want with their “possession”. There was a gigantic leap of faith taken in this regard. Can you imagine the cataclysm for investors if this party assuming these delivery obligations and responsibilities associated with acting as the surrogate owner of all shares held in “street name” refused to act in good faith in order to further the financial interests of the owners of the DTCC their bosses?

6) Acme’s transfer agent, registrar, management team and shareholders have also “entrusted” the DTC subdivision of the DTCC to act as both the legal “custodian” of their shares held in “street name” and to administer the “depository” for these securities to have rigorous checks and balances in place to thwart any efforts to “counterfeit” these securities. The legal “custodian” of these shares cannot administer a self-replenishing SBP which openly counterfeits that being held in its “custody”. The analogy would be to keep the vault unlocked and allow their abusive participants to gain access and photocopy the stock certificates that they act as “custodian” for. Anti-counterfeiting efforts are usually the purview of a company’s transfer agent and registrar but when almost all shares are held in “street name” by “CEDE and Co.” these professionals are literally blinded in their effort to detect and address any efforts to counterfeit what is held in “street name”. The shareholders of a corporation have “entrusted” the DTC to perform in this regard since their transfer agent has been blinded. Once again the presumption was made that the DTC would ACT IN GOOD FAITH in this incredibly powerful and easy to abuse role.
7) The NSCC subdivision of the DTCC has volunteered to act as the “qualified control location” mandated by Rule 15c3-3 of the ’34 Exchange Act to “take physical possession or obtain control of all fully paid for securities” on behalf of investors. This law is appropriately referred to as the “CPR” or “Customer Protection Rule”. Brokerage firms that purchase shares are mandated to EITHER “take physical possession OR obtain control of all fully paid for securities”. They can comply with this critical rule by holding shares in 1 of 12 “qualified control locations” on Wall Street. The spirit of the law is that the buying brokerage firm will either “take physical possession” or keep it at a “qualified control location” THAT WILL TAKE PHYSICAL POSSESSION OF ALL FULLY PAID FOR SECURITIES ON THEIR BEHALF. The presumption here is that any “qualified control location” like the NSCC which grants compliance to about 98% of all purchasing brokerage firms will ACT IN GOOD FAITH with this fiduciary duty. As we now know the NSCC acts 180-degrees antipodal to the spirit of this law when they administer a self-replenishing “Stock Borrow Program” (SBP) and when they discourage their participants that don’t get delivery of what their clients purchased by buying-in these failed delivery obligations via allowing them the use of the proceeds of that purchase (their own client’s money) to earn interest and count towards that firms net capital reserves.
The DTCC runs a clearance and settlement system based on CVP that discourages the delivery of that being purchased via only mandating that the failed delivery obligations be collateralized on a daily marked to market basis with the results cited above.
9) The DTCC acts as an “SRO” or “Self-Regulatory Organization” in our securities regulatory apparatus. An SRO is defined as “An entity, such as the NASD, responsible for regulating its members through the adoption and enforcement of rules and regulations governing the “business conduct” of its members.

An SRO is theoretically “the first line of defense against fraudulent behavior on Wall Street”. The question arises: wouldn’t the refusal to deliver that which it is selling qualify as the “business conduct” of an abusive DTCC participant that the DTCC as an SRO is “responsible for regulating…through the adoption and enforcement of rules and regulations”. When an abusive DTCC participants absolutely refuses to deliver that which it sells what options are there besides buying-in that fail? Isn’t this true especially when this CCP is not the nominal “creditor” of that debt? Recall that the brokerage firm of the purchasing client has been essentially “bribed” not to buy-in that fail. If the NSCC as the surrogate creditor due to its role as a CCP in a system based on “novation” won’t buy it in then who would? Again the presumption is that any securities cop known as an SRO would ACT IN GOOD FAITH in this role even when the financial interests of its bosses conflict with those of the investors it is supposed to be providing “investor protection” for.

There are about 8 other roles that the DTCC has volunteered to play or are mandated to play that also EMPOWER it to buy-in the delivery failures of its abusive participants when they absolutely refuse to deliver that which they sell. I won’t bore you with them now. Each of these 15 or so roles being played individually EMPOWER the DTCC to execute buy-ins. The NSCC management chooses to not perform these buy-ins because they are clearly not in the financial interests of their bosses.

With these thoughts in mind let’s take another look at that comment and ponder whether or not the DTCC is ACTING IN GOOD FAITH in their plea of essentially being “powerless” to ACT IN GOOD FAITH.

”DTCC subsidiaries clear and settle trades. Short selling and naked short selling are trading strategies regulated by the marketplaces and the SEC. DTCC is involved after a trade is completed at the marketplace. DTCC does not have regulatory powers or regulatory responsibility over trading or to forcing the completion of trades that fail. As the SEC has stated, fails can be the result of a wide range of factors.”

The questions arise does the DTCC have the “regulatory power…to force the completion of trades that fail” (execute buy-ins). Of course they do. Do they have the “regulatory authority…to force the completion of trades that fail”. Of course they do. Do they have the power to ACT IN GOOD FAITH? Of course they do. Do they have the will to act in good faith? We’ll know soon enough.

At the beginning of this paper the question being considered was which “market intermediary” should be performing the obvious task of buying-in FTDs when it becomes obvious that the seller is refusing to do so. Clearly, the party that should be executing these buy-ins is the DTCC. However, due to the obvious conflicts of interest between the DTCC and the investors that they are supposed to be providing “investor protection” for an UNCONFLICTED party perhaps working out of the DTCC should be appointed by the new SEC Chairperson Ms. Schapiro when she takes over at the SEC soon.

Report: Over 8 in 10 corporations have tax havens
By KEN THOMAS, Associated Press Writer Ken Thomas, Associated Press Writer – Fri Jan 16, 6:28 pm ET

WASHINGTON – Eighty-three of the nation’s 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.

The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.

Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money.

Sens. Carl Levin, D-Mich., and Byron Dorgan, D-N.D., who requested the report, have pushed for tougher laws to fight offshore tax havens around the globe. Levin, who leads the Senate Permanent Subcommittee on Investigations, has estimated abusive tax havens and offshore accounts cost the U.S. government at least $100 billion a year in lost taxes.

“I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that,” Dorgan said.

General Motors Corp., which received $13.4 billion from the federal rescue package, had 11 offshore subsidiaries while GM’s financing arm, GMAC LLC, had two offshore units. GMAC, whose majority owner is private equity firm Cerberus Capital Management LP, received $5 billion from the Treasury Department in late December.

Citigroup said in a statement that it has more than 4,000 subsidiaries around the globe “which enables us to serve hundreds of millions of individuals and institutions in more than 100 countries.” A News Corp. spokeswoman declined comment. Messages were left with several of the companies identified in the report.

Separately, the GAO said 63 of the 100 largest federal contractors maintain subsidiaries in 50 tax havens.

Levin noted that many competitors use the tax havens to varying degrees. PepsiCo Inc. has 70 subsidiaries while the Coca-Cola Co. has eight units. Caterpillar Inc. had 49 while Deere & Co. had three.

“We need to put an end to the use of offshore secrecy jurisdictions as tax havens,” Levin said.

The GAO said the subsidiaries could be established in the countries “for a variety of nontax business reasons” and said having a business unit in one of the countries “does not signify that a corporation or federal contractor established that subsidiary for the purpose of reducing its tax burden.”

Citigroup had 427 units in 23 countries, including 91 subsidiaries in Luxembourg and 90 in the Cayman Islands. Morgan Stanley had 273 units, News Corp. had 152 and Bank of America had 115. Procter & Gamble Co. had 83 subsidiaries and Pfizer Inc. had 80 in the jurisdictions.

Several major corporations have announced plans to leave Bermuda, a leading offshore business center, amid the global financial crisis and fears of tighter tax rules. Tyco Electronics Ltd., which makes electronic components, and Foster Wheeler Ltd., an engineering and construction company, are reincorporating in Switzerland — which has a tax treaty with the U.S. — for tax and other reasons. Covidien Ltd., a health care products company, is heading to Ireland.

___

On the Net:

U.S. Government Accountability Office: http://www.gao.gov/

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http://www.thedailyshow.com/video/index.jhtml?videoId=215930

You should gather up your latest posts and put them in your blog at thesanitycheck. That way we can retrieve them without having to search here in the blogs.

Diane, look at Deutche Bank’s involvement in the failure of MJK Clearing in 2001 re: a daisy chain of shares bought and relent.

http://www.sipc.org/pdf/SIPC_dt.PDF

It’s should be a made for TV movie:

- Adnan Khasshogi, friend of president’s and international arms dealer behind it

- Valerie Redhorse, Michael Milken’s office manager and now up and coming actress behind it

- fails on September 11th, but not one mention on major news networks. Shares in 175,000 investor accounts at risk, bailed out by SIPF.

http://www.madcowprod.com/MC6812004.html

There is a certain element of “two sets of books” accounting between the DTCC, its “participants” and the investors they serve as “market intermediaries”. Let’s assume that “Acme” has 100 million shares issued and outstanding and that all are held in “street name” at the DTCC.

The “legal/nominal/record” owner of all of these shares is therefore “CEDE and Co. which is the “nominee” of the DTC subdivision of the DTCC (a holding company). Let’s also assume that 10 “participating” clearing firms (participants “A” through “J”) of the NSCC each hold 10 million Acme shares in their “participants shares account”.

Let’s further assume that there are 80 million shares being held in a “failure to deliver” (FTD) status with 8 million of these being held by each of the 10 participating clearing firms. These 80 million incredibly damaging “securities entitlements” are allowed to exist as “long” positions in what are referred to as “C” sub accounts at the NSCC. These 80 million delivery failures result in the procreation of 80 million “securities entitlements” and are referenced on the shareholders of Acme’s monthly brokerage statements as “securities held long”.

For the sake of simplicity let’s assume that there are no delivery failures held outside of the NSCC in an “ex-clearing” arrangement. Let’s further assume that these FTDs were associated with abuses within the NSCC’s “Automated Stock Borrow Program” which we’ve reviewed in depth earlier.

The 10 participating clearing firms will each represent to its clients that it is “holding long” 18 million “securities” related to “Acme” (not necessarily “shares” of Acme) even though they only have 10 million legitimate “shares” of Acme in a paper-certificated form being held in a DTC vault. The 100 million legitimate “shares” of Acme are indeed held in a paper-certificated format. They are not held in the names of the 10 participating clearing firms. Instead they are held in an “omnibus” or “fungible bulk” format giving rise legally to these 10 clearing firms owning a “proportionate interest” in this “fungible bulk”.

“CEDE and Co.” technically “owns” these shares. The transfer agent and registrar of “Acme” which play the critical role of detecting any “counterfeiting” issues in the shares of “Acme” only can see that “CEDE and Co.” owns all of Acme’s shares. They are flying totally blind as far as the detection of any “counterfeiting” issues within the share structure of Acme. Acme’s transfer agent, registrar, shareholders and management team have “entrusted” this prevention of counterfeiting role to the NSCC assuming that there are rigorous checks and balances in place to detect and address any issues related to “counterfeiting”.

When a management team of a corporation under an ANSS attack orders an “SPL” (securities position listing) from the DTCC it will receive a document that lists the 10 clearing firms as holding 10 million shares each. Management will confirm with its transfer agent that there are indeed 100 million “shares” legally outstanding and management will be hoodwinked into thinking that everything is hunky-dory at the DTCC.

They will be wrong and victims of misrepresentation as the DTCC will not inform management of the 80 million delivery failures it holds in its “C” sub accounts as “long positions” which are granted to participants that “donate” shares to the NSCC’s “Automated Stock Borrow Program” or “SBP”. That’s obviously the information being sought but instead the management team receives an intentional misrepresentation of the information being sought after. This is a cover up fraud that needs to be perpetrated in order to hide the existence of the underlying fraud involving 80 million incredibly damaging “securities entitlements” (within full sight of the NSCC) actively forcing the share price of Acme downwards.

There is a curious accounting mechanism involved in the NSCC’s SBP. If a participant donates shares to the SBP and they are chosen to “cure” a delivery failure then the borrowed shares will be sent to the buyer of shares in the trade involving a delivery failure. The buyer’s b/d will be given a “long” position in these shares and these shares will be correctly debited from the “participant’s shares account” of the “donor” firm at the NSCC. This all makes sense. Curiously though the donor of shares is awarded a “long” position in a newly established NSCC C sub account in that donating firm’s name. Curiously these accounts are kept out of the investing public’s or management team’s view. The question arises as to how a management team or BOD can manage a U.S. corporation when they aren’t allowed to see how many readily sellable “shares and/or “securities entitlements” their corporation has “outstanding”. For instance, wouldn’t a corporation with cash in hand and the knowledge that they have a gazillion bogus securities entitlements floating around damaging their share structure opt to buy back their shares out of the open market instead of building a new factory?

The DTCC informs us that this “long” position credited to the donating firm’s C sub account signifies that the donor of the borrowed shares has the right to demand the loaned shares back at any time. Thus one particular parcel of shares has procreated two “long” positions and each of the two buyers of that particular parcel of shares will receive a monthly brokerage statement indicating that that particular parcel of shares is being “held long” for them.

The b/d of the new purchaser of the shares needing a borrow from the SBP for his purchase transaction now has all of the right in the world to place that very same parcel of recently borrowed shares right into the very same lending pool at the SBP as if they never left in the first place. When that parcel of shares is chosen to “cure” another FTD on the next day there will now be three investors receiving monthly statements indicating that their b/d is holding this parcel of shares “long” for them. (Note that technically you can’t identify particular parcels of shares due to “anonymous pooling”. There are now 3 “co-beneficial owners” of that one parcel of shares.

But wait a minute since “CEDE and Co.” technically is the “legal/nominal/record” owner of all of those shares then it would be pretty tough for the 3 “co-beneficial owners” of that parcel of shares to ever learn these facts and then make a case for corruption at the DTCC. Remember that shares are held in an “anonymously pooled” or “fungible bulk” format at the DTC and the various DTCC participating technically own a “proportionate interest” in the shares that the DTC holds.

Imagine the abuses possible in a clearance and settlement system utilizing a self-replenishing SBP. Imagine also the responsibilities of the administrator of such a system to make sure that it doesn’t have any abusive participants selling nonexistent shares in an effort to access the self-fulfilling prophecy aspect of ANSS involving merely collateralizing the monetary value of a failed delivery obligation. If not monitored for abusive NSCC participants could easily place the share price of the corporation under attack into a “death spiral” which lessens the collateralization requirements which in turn allows an investor’s funds to flow to the party absolutely refusing to deliver that which it sold. Note that there are two issues here. Firstly, how in the world can a system like this be the system of choice unless somebody was looking after the financial interests of those that own and run the system? Secondly, if by some miracle this is the best design available then where is the rigorous program to detect and address abuses?

Can you imagine the cataclysm that could befall the investors in a clearance and settlement system if the administrator of such an SBP refused to monitor for these obvious abuses in order to further the financial interests of their bosses that own the NSCC? Picture for a moment the abuses available to securities fraudsters if the administrators of this SBP were to unconscionably proffer that they can’t do anything about this SBP “because it’s automated and they have no discretion in the matter”. That quote is from the NSCC’s contribution to an amicus brief filed by the SEC in a lawsuit filed by a corporation allegedly being attacked in an ANSS “bear raid”. The argument being proffered that the SBP is some form of automaton that admittedly shunts investor funds to the owners and administrators of the SBP that cannot do anything about this unfortunate circumstance is rather unique.

Is the NSCC aware of this “two sets of books” aspect to their clearance and settlement system? Of course they are; they’re the party administering the SBP and they’re also the CCP that is now acting as the surrogate creditor of the failed delivery obligation. Shouldn’t a prospective investor be made aware of the identity of certain corporations that have so many incredibly damaging “securities entitlements” resulting from SBP abuses that the invested in company has basically been preordained to an early death? Could any fact be of more of a “material” nature than this?

Some questions that arise might include the following. How can one parcel of shares give rise to so many “long” positions that are theoretically being “held” somewhere? In reality the securities being “held long” by a DTCC participant and as referenced on a monthly brokerage statement can refer to either real shares being held in a vault or mere IOUs being held on the books of a participant as a failure to deliver or failure to receive. In the example cited above with the 3 “co-beneficial owners” of the same parcel of shares which of the 3 gets to vote them at the next annual meeting?

The student of abusive naked short selling must recognize the “Ponzi” scheme aspect of the NSCC-administered SBP. In essence it “undoes” yesterday’s “delivery” of shares in order to “cure” today’s failure to deliver. Since “good form delivery” is needed to achieve the legal “settlement” of a trade the SBP basically “undoes” the settlement of yesterday’s trade in order to present the illusion that today’s trade settled. Recall that “good form delivery” cannot be achieved by borrowing shares out of a self-replenishing lending pool and thus none of these trades legally “settle”.

I’m not 100% sure if this “two sets of books” aspect of the DTCC and its participants is technically “illegal” or if the refusal to monitor for and address the abuses being encouraged is what’s “illegal”. Since the perpetration of these frauds is definitely “illegal” as per 10b-5 and the new 10b-21 of the “34 Exchange Act then perhaps it doesn’t matter. The intentional handcuffing of management from accessing the information regarding share structure that it needs to properly fulfill its fiduciary duties of care to its shareholders is definitely illegal.

Note that the above scenario was made under the assumption that there were no FTDs held in an “ex-clearing” format. The NSCC might have a slightly more valid excuse as to why they don’t monitor for abuses in FTDs held in “ex-clearing” arrangements. In reality however they, as an SRO or “self-regulatory organization”, are mandated to regulate the “business conduct” of its participants and it is their participants’ “business conduct” that is involved in these “arrangements” to procreate and later hide FTDs. In fact SROs are to play the role of the “first line of defense” against fraudulent behavior on Wall Street. Unfortunately for American investors the patchwork nature of our securities regulatory apparatus has enforcement gaps that amount to a “regulatory vacuum” and foremost amongst those is the one pertaining to abusive naked short selling (“ANSS) frauds.

R101

dean parisian

I found Dc while researching a hunch that Deutche Bank was behind the global economic failure with their Fund of Funds scam. What I have learned here has activated me to cause others to become informed. I have challenged congress members, writers,working people with 401k losses, foreigners and retirees to read DC and to vote for DC so that others would come here and join the conversation. It is my goal to get 10k people here. I own no stocks. I voted once.
Either take the information that is given freely here and learn, or do nothing and suffer the consequence that awaits us as Americans if we do not take action. It is ours to lose. Do not attempt to derail the conversation. We need all the help we can get.

NEW YORK (Reuters) – Bank of America Corp (BAC.N), posted its first quarterly loss in 17 years on Friday and slashed its dividend, hours after winning a multibillion-dollar lifeline from the U.S. government to help absorb Merrill Lynch, which lost a record $15.31 billion in the quarter.

The dismal results came as the largest U.S. bank faced mounting pressure from investors who questioned how well it will absorb a tidal wave of soured loans in an economy showing no signs of escaping a deep recession.

Bank of America cut its quarterly dividend to a penny from 32 cents, and Chief Executive Kenneth Lewis said net losses may be at or above the fourth-quarter level for several quarters.

“It is difficult to focus on what is going right at this time,” a clearly downbeat Lewis said on a conference call.

But, he added, the “severe” recession and credit crisis “will end some day, and people will remember that our company was there for them in hard times.”

Hours after it won $20 billion in new capital from the government’s $700 billion Troubled Asset Relief Program (TARP), the bank reported a quarterly loss of $1.79 billion, or 48 cents per share, compared with a year-earlier profit of $268 million, or 5 cents.

Lewis sought government help after it became clear that Merrill’s credit losses were far higher than expected, and had threatened last month to scrap the $19.4 billion takeover without government help.

Lewis said the government worried that scuttling the merger could create “serious systemic harm.” He said the Federal Reserve and Treasury Department gave assurances that they would provide necessary help if the merger closed.

Bank of America’s purchase of Merrill Lynch and its July acquisition of Countrywide Financial Corp gave the bank significant exposure to several major areas of the financial system, just as the economy’s decline was accelerating.

“They were probably one of the best banks out there, balance sheet-wise, until they did the Merrill deal,” said Cassandra Toroian, chief investment officer at Bell Rock Capital in Paoli, Pennsylvania, which owns the bank’s shares.

CREDIT LOSSES SKYROCKET

Excluding merger costs, the loss was 44 cents per share. Net revenue rose 22 percent to $15.68 billion.

Analysts, on average, expected profit of 2 cents per share, according to Reuters Estimates.

The bank set aside $8.54 billion for bad loans, up from $6.45 billion in the third quarter and $3.31 billion a year earlier. Net charge-offs nearly tripled from a year earlier to $5.54 billion, or 2.36 percent of average loans and leases.

At Merrill, the loss was $9.62 per share, driven by significant writedowns. Bank of America said it expects the purchase to reduce earnings per share for two years, and still expects $7 billion of cost savings.

With the latest capital infusion, Bank of America has taken $45 billion in TARP money, the same amount as Citigroup Inc (C.N), which won its own rescue package in November.

Citigroup also reported fourth-quarter results on Friday, posting a $8.29 billion loss, and said it plans to separate into two units after its own massive credit losses.

Shares of Bank of America rose 14 cents to $8.46 in premarket trading. Through Thursday, they had fallen more than 81 percent from their 52-week high last February.

GOVERNMENT SHARES IN LOSSES

The rescue package for Bank of America calls for the government to share in losses on $118 billion in residential and commercial mortgages, derivatives and corporate debt. The bank will absorb the first $10 billion of losses, the government the next $10 billion, and the government 90 percent of the rest.

Lewis said the rescue package will help it operate as normally as possible. The bank said it had extended more than $115 billion in new loans in the quarter and was adding mortgage staff to accommodate more refinancings.

“This company will generate huge amounts of profit” when the economy returns to normal, Lewis said.

Bank of America is also struggling with defections of top Merrill executives, including brokerage chief Robert McCann and Greg Fleming, who was expected to run the combined investment bank.

Lewis said he is “happy” that former Merrill Chief Executive John Thain is taking a major role at the bank as head of global banking, securities and wealth management.

Bank of America has said it expects to cut 30,000 to 35,000 jobs over three years following the Merrill merger, on top of 7,500 job losses following the Countrywide acquisition.

(Reporting by Jonathan Stempel and Elinor Comlay; editing by Lisa Von Ahn and Jeffrey Benkoe)

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Officials at the Financial Industry Regulatory Authority, known as FINRA, told The Post that after examining more than 40 years’ worth of financial records from Madoff’s now-defunct broker dealer, there are no signs that Bernard L. Madoff Investment Securities ever traded shares on behalf of the investment-advisory business at the center of the scandal.

“Our investigations of Bernard Madoff’s broker dealership showed no evidence that any shares were ever traded on behalf of his investment advisory business,” a FINRA spokesman said, adding that the regulator has looked at Madoff’s books going back to 1960.