Charles Gasparino, the CNBC reporter, published an op-ed in The New York Post yesterday.
Here’s the interesting bit
Earlier this year, high-flying hedge fund Paulson & Co. retained [former Federal Reserve chief Alan Greenspan] for its “advisory board.” The firm is a noted “short seller” of banks and financial stocks – meaning it makes money when these companies’ shares fall.
The thing is, Greenspan is making public comments that inevitably influence public policy and the markets – and some of those comments may well have led to his clients making a nice profit.
In a recent speech to the Economic Club of New York, Greenspan said the recession would likely “be the longest and deepest” since the Great Depression and that Congress might have to allocate more money to save the beleaguered banking system on top of the billions already gone for the Troubled Asset Recovery Program.
Then he told the Financial Times: “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring” of their troubled balance sheets.
Such a move would wipe out stockholders, sending shares of banks even lower – thus likely benefiting Paulson. It would also protect bondholders, helping another Greenspan client, the large bond-firm Pimco.
The question is: Why didn’t Gasparino, or anybody else, say this on CNBC? Hedge fund crony Paul Kedrosky appeared on the network to criticize Greenspan’s relationship with Pimco, but there was no mention of the former Fed chairman spewing negativity for Paulson’s short selling operation.
More importantly, no proper journalist at CNBC has reported that short sellers use many other tactics (such as planting false stories on CNBC and manufacturing phantom stock) to demolish public companies and crush the markets.
At our nation’s leading business network, only Jim Cramer reports on this scandal. Only Jim Cramer tells America about one of the most important causes of the worst financial crisis since the 1930s.
He does so with funny sound effects while prancing around the Romper Room set of a program that is called “Mad Money.”
It is surreal, to say the least.
OUR ENTIRE CAPITAL MARKET SYSTEM IS CORRUPT AND A SCAM OR PONZI SCHEME AND NO ONE CAN TELL ME DIFFERENT!!! And there is nothing that we can do about it!! (Sorry about the caps I am just mad as hell!!!)
Sean,
We keep pluggin and pluggin until we make the masses understand just what is happening. The first step is to understand BOTH political parties are to blame. That has to be realized so the separation does not exist. As long as we are divided, we fall. As long as we keep showing this is A Political and more about the redistribution of wealth by the haves against the have nots. There is a reason the haves acquire their wealth, by inacting laws against the have nots while we are robbed blind right under our noses. Secondly, we need to keep exposing how the law only applies to the have nots. Then continue to educate ourselves while trying to educate to the masses. With the computer, the chance of reaching the masses is greater unless of course our freedom as Americans continue to be violated and lost along the way and then there will be no more CPU. Don’t think that can’t happen. The CPU was instrumental for the Crooks to get richer, as it was for the ordinary citizens to get educated. Time will tell what hard work accomplishes. I NEVER say can’t…neither should you.
NO YOU DON’T “HAVE TO” STEAL INVESTOR FUNDS
Do you remember the “CRA” or “Community Reinvestment Act”? Wikipedia summarizes it thusly: “The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from different areas or neighborhoods and mandates that all banking institutions that receive FDIC insurance be evaluated by the relevant banking regulatory agencies to determine if the institution has met the credit needs of its entire community in a manner consistent with safe and sound operations.”
Opportunistic mortgage market intermediaries took this “legal backstop” and converted it into untold wealth and even greater systemic risk ramifications by allowing U.S. citizens to get way over their heads financially on houses they knew they couldn’t afford. The systemic risk implications didn’t seem to be of concern to these mortgage market intermediaries whose “earnings” were privatized as the predictable losses associated with the inevitable defaults became socialized. Why did they do it? They (theoretically) “had to” do it because of the CRA!
Unfortunately the same “legal backstop” approach seems to be in evidence in the abusive naked short selling (ANSS) community. Several years ago a small U.S. corporation known as “Nanopierce” filed suit against the DTCC for abusive naked short selling crimes. As is their tendency when ANSS frauds are in danger of being revealed through the legal “discovery” process the SEC ran to the aid of the DTCC by filing an “amicus brief” in defense of the DTCC’s actions. In the brief the SEC lawyers made some rather interesting comments to the appellate court judge involved in the case. They include:
“The fact that a broker-dealer that is an NSCC member fails to receive
securities that it purchased on behalf of a retail customer does not mean that the customer’s purchase is not completed until the member’s failure to receive is cured. Under Article 8 of the Uniform Commercial Code, a securities broker-dealer may credit a customer’s account with a security even though that security has not yet been delivered to the broker-dealer’s account by NSCC. In that event, the customer receives what is defined under the Uniform Commercial Code as a “securities entitlement,” which requires the broker-dealer to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the security. See UCC Sections 8-104, 8-501.”
There’s your (theoretical) “legal backstop” for abusive broker/dealers: “We (theoretically) HAVE TO treat the person for whom the account is maintained as entitled to exercise the rights that comprise the security”. This is just like how the mortgage brokers (theoretically) “HAD TO” place systemic risk implications beyond imagination on the shoulders of the public by putting people into houses they obviously couldn’t afford.
The mindset that the above misrepresentation of the truth gives rise to is since we DTCC “participants” are generously entitling the buyers of these mere “securities entitlements”/IOUs to exercise all of the rights that comprise the security THEN WHAT’S THE BIG RUSH IN GETTING THE SECURITIES DELIVERED ON TIME IF AT ALL.
ANSWER TO QUESTION: IT’S BECAUSE THE ACCUMULATION OF ALL OF THESE “SECURITIES ENTITLEMENTS” PUTS THE SHARE PRICE OF THE CORPORATION UNDER ATTACK INTO A “DEATH SPIRAL” AND IN A CLEARANCE AND SETTLEMENT SYSTEM ILLEGALLY CONVERTED TO A FOUNDATION OF MERE “COLLATERALIZATION VERSUS PAYMENT” OR “CVP” THIS RESULTS IN THE PURCHASER’S FUNDS UNCONSCIONABLY FLOWING INTO THE WALLETS OF THOSE CONTINUALLY REFUSING TO DELIVER THAT WHICH THEY SOLD. THAT’S WHAT THE “BIG RUSH” IS ALL ABOUT!
The only problem in regards to abusive naked short selling frauds is that UCC Sections 8-104 and 8-501 say nothing of the sort cited. We’ll discuss that aspect later. The take away is that the mindset of some of the SROs and regulators as well as crooks is this: SINCE the buyers of failed to be delivered securities are allowed to exercise the associated rights comprising that security THEN failing to deliver the securities sold in a timely manner if at all is no big deal because after all this abusive naked short selling injects all of this wonderful “liquidity”.
By the way there is no such legal entity as a “customer’s purchase being completed”. The trade either legally “settled” or it didn’t. “Settlement” necessitates the “good form delivery” of that which the buyer thought he was purchasing in exchange for the buyer’s funds. The DTCC’s congressional mandate is to “promptly settle” all securities transactions as per Section 17 A of the ‘34 Act. The “prompt completion of a customer’s purchase by sandbagging him with a monthly brokerage statement “implying” that what he bought got delivered” isn’t part of any of the 7 securities acts to my knowledge but I’ll keep looking.
Dr. Jim DeCosta,
You need to hook up with a few Washington elites who are willing to listen and have less blood on their hands. Know any ? You could truly enlighten Congress/Senate on what the Hell has been going on. Perhaps this is over their heads and they are guilty by association? I want to see you in Washington….
The trouble with UCC-Article 8 which permitted the granting of “securities entitlements” to the purchasers of yet to be delivered shares is that it was done in an open-ended fashion. It should have specified that these “securities entitlements” officially expire perhaps 3 days after the previously agreed to “settlement date” (T+3). Upon expiration the party with the congressional mandate to “promptly settle” all securities transactions (NSCC management) will then buy-in the yet to be delivered shares and promptly forward them to the purchaser.
Congress’s intent for the timeframe of “prompt settlement” would then match with the lifespan allotted to a “securities entitlement” before a buy-in is mandated.
The trouble is that the financial beneficiaries of these thefts are the NSCC “participants” which are the bosses of the NSCC management. The authors of UCC-8 did, to their credit, add UCC 8-104 which says that it’s OK to grant “securities entitlements” but don’t you dare grant so many that the number of mere “securities entitlements” plus the number of “shares outstanding” exceeds the # of shares that the corporation involved has “authorized” per its “Charter” or “articles of incorporation”. But nobody is allowed to keep a tally of “securities entitlements” already in existence because it would give away the “rigged” nature of our markets and nobody with an IQ greater than their shoe size would participate in our markets.
‘There will be blood’
Harvard economic historian Niall Ferguson predicts prolonged financial hardship, even civil war, before the ‘Great Recession’ ends
http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/home
http://annewhitfield.blogspot.com/2007/12/london-times-obituary-of-late-mr-common.html
Now I woud ike to see this ind of outrage against UBS in the U.S. since they have been a significant player in the Naked Shorting debacle!!
Luxembourg attacks UBS over Madoff fund
http://www.ft.com/cms/s/0/ed034050-0378-11de-b405-000077b07658.html?nclick_check=1
Luxembourg attacks UBS over Madoff fund
By Stanley Pignal in Brussels and Brooke Masters in London
Published: February 25 2009 20:37 | Last updated: February 25 2009 20:37
UBS, the Swiss bank, was accused of “serious failure” by Luxembourg’s financial regulator over its custodianship of a $1.4bn fund that funnelled money into Bernard Madoff’s alleged $50bn “Ponzi” scheme.
The regulator ordered the bank to pay compensation, saying the “poor execution of its due-diligence obligations constitute a serious failure of its surveillance role as a depositary bank.”
The Commission de Surveillance du Secteur Financier gave the Swiss bank’s local arm three months to pay compensation for its failures and improve procedures and structures.
The CSSF has already moved to shut down the fund, Luxalpha, but Wednesday’s public denunciation UBS was highly unusual, legal experts said.
It comes as the Grand Duchy fights charges that investors in Luxembourg are less protected than in other EU countries. Many Luxalpha investors were French.
UBS said it was “unfair” to blame the bank. An official said: “The investors in Luxalpha were sophisticated and explicitly agreed that the safekeeping of the securities was Madoff’s responsibility and not UBS’s.”
However she added that UBS remained “keen to continue to co-operate with the authorities.”
People familiar with CSSF’s negotiations with the Swiss bank said the regulator had been pushing hard for compensation.
UBS officials have sought to minimise the bank’s role in the Luxalpha feeder fund, saying the bank never actively marketed or recommended the fund.
Luxalpha was set up in 2004 at the request of a group of investors who already had money with Mr Madoff and wanted to hold their investments through a Luxembourg fund.
As custodian, it earned fees of less than one hundredth of one per cent, said officials familiar with the arrangement.
Luxalpha’s Direct investors were required to sign a subscription form that said “the risk of loss of the assets following a default (even if unlikely) of the US registered broker-dealer is borne entirely by the shareholders.”
Since Mr Madoff’s arrest in December, Luxembourg has been forced to rebuff suggestions that lax regulation has underpinned the success of its financial centre.
Christine Lagarde, the French finance minister, pointed the finger at Luxembourg last month for its application of EU rules designed to protect investors by placing a regulatory duty on the fund’s depositary bank.
In a letter to the European Commission, copied to Luxembourg’s prime minister, she argued that “the protection of investors varies from one country to another”, a suggestion Luxembourg’s authorities were quick to rebut.
A lawyer close to the matter said: “Basically, the blame will either fall on UBS as the depositary bank, or it will fall on the regulator for not doing their jobs.
“The only way for [Luxembourg] to rebuff French claims is for UBS to take at least a portion of the blame.”
They just keep piling on!!
http://www.businessinsider.com/feds-say-hedge-funder-made-up-returns-used-phony-auditor-2009-2
Here is message I put together to respond to those online who seek to discredit anyone who speaks about the WALL STREET COUNTERFEIT MACHINE….
Everyone should feel FREE to use it as is or modify it…. Also feel free to offer suggestions for improving it…..
—————————————–
You need to educate yourself about the WALL STREET COUNTERFEIT MACHINE that has been stealing our money for many years and continues to do so.
Here is a letter to the SEC by an Expert on Abusive Naked Shorting (Counterfeiting) that is entitled,
THE “SELF-GENERATED LEVERAGE” (SGL) ACCESSIBLE IN A CLEARANCE AND SYSTEM SYSTEM ILLEGALLY BASED UPON MERE COLLATERALIZATION VERSUS PAYMENT (CVP):
( http://www.sec.gov/comments/s7-30-08/s73008-77.pdf )
This same expert, Dr. Jim DeCosta, explains HOW the SEC PROTECTS the WALL STREET COUNTERFEIT MACHINE:
“You sue the DTCC and NSCC for running their totally corrupt “Automated stock borrow program” (SBP) which serves to facilitate NSS attacks. Recall that the SBP allows the same “parcel” of shares which are unfortunately held in an untraceable “anonymously pooled” format at the DTCC to be replicated dozens of times over and simultaneously rented out to dozens of different short sellers.
The SEC comes along and sends in an amicus brief stating that the SBP is just fine and dandy and that they, the SEC, approved of it many years ago. The SEC pleads with the judge not to let the case proceed into the discovery process. The judge swallows the argument and throws out the case because the “cop on the beat” even says that this obvious “counterfeiting” was OK.
The DTCC then tells the plaintiffs to go after the clearing firms which are by the way NSCC “participants”. They’ll mention that they, the DTCC, are not responsible for any hanky-panky their participants are involved in via the ex-clearing world. We’re not cops for crying out loud; we are the administrators of a clearance and settlement system
Then you sue the clearing firms involved for facilitating the attack on the corporation. The clearing firm says that we’re just a dumb clearing firm and that we’re not responsible for the crimes being committed by our “introducing” or “correspondent” broker/dealers. We’re not cops for crying out loud; we’re merely a clearing firm.
Then you sue the broker/dealer pulling the trigger on the naked short sales. They claim that they’re not cops for crying out loud; go talk to the unregulated hedge funds that placed the sell orders. Besides, our clearing firm never even informed us that our client’s sell orders were resulting in delivery failures. Shame on those nasty hedge funds for using us as a conduit for their crimes.
Then you go after the hedge funds who are operating out of banking secrecy tax havens only to find out that there is a daisy chain of nominee corporations that TECHNICALLY own that hedge fund. Tracing out the ownership would cost several million dollars so you drop the case.
What’s reprehensible is that the reason you filed suit in the first place is because the SEC didn’t do its job as the head cop in addressing abusive naked short selling frauds as a means to provide their mandated “investor protection and market integrity”. Then once you do file your suit against the DTCC et. al. the SEC is there to shoot down your only other means to seek justice. It’s one issue not to provide the “investor protection” that Congress mandated you to provide but quite another to block off other efforts to seek justice that need to be made due to the “regulatory vacuum” you are responsible for. THESE ARE the only “securities cops” that can’t deny their being cops that are acting like this for crying out loud. Just think of what the really “bad guys” are up to if the cops are acting like this.”
(Dr. Jim DeCosta Says:
February 25th, 2009 at 12:26 pm )
( http://www.deepcapture.com/would-cnbc-le... )
And here is second letter to the SEC which on page 13-22 is a description of,
>>> THE ANATOMY OF A TRILLION DOLLAR HEIST <<<
( http://www.sec.gov/comments/s7-30-08/s73008-75.pdf )
Dr. Jim DeCosta,
Thank you so very much for your continuing efforts to expose the WALL STREET COUNTERFEIT MACHINE, and for offering specific suggestions for shutting down this COUNTERFEIT MACHINE!!
The time has come for me to starting creating an educational piece for the American public with our help and everyone else’s help.
First, I need to get a better handle on two important terms:
> CVP – COLLATERALIZATION VERSUS PAYMENT
> DVP – Delivery VERSUS PAYMENT
DVP is as I understand it means:
In exchange for PAYMENT of purchased stock shares, I would receive DELIVERY of the stock shares………
CVP is still fuzzy in my mind…. but I think it means:
In exchange for PAYMENT of purchased stock shares, Wall Street takes my money and converts it into a monetary LOAN, which they can use for any purpose they want.
Dr. DeCosta, please comment and correct any misunderstanding I have here.
Thanks again for you continuing help.
For CVP, I should have added a few more words at the end….
CVP is still fuzzy in my mind…. but I think it means:
In exchange for PAYMENT of purchased stock shares, Wall Street takes my money and converts it into a monetary LOAN, which they can use for any purpose they want…
—-vvv— ADD the Following —vvv—
AND promise to DELIVER my purchased shares sometimes in an indeterminate FUTURE.
iStandUp, you’re basically right.
Buyer sends purchase price to clearing house.
Seller delivers 2% of the cost of the trade to the clearing house.
The proceeds of the trade and the 2% of the cost of the trade (102%) sit there to collateralize the purchase and your brokerage gets interest on the money for not demanding that you get delivery.
This collateral is marked to market each day, so as the share price declines, the seller is able to withdraw the money you paid for the purchase and spend it.
Example:
Stock is $1, collateral on 1000 shares is $1020 ($20 from the seller, $1000 from the purchaser).
Stock falls to $.50, collateral is now only $510, seller gets to withdraw $510 even though he hasn’t delivered anything except the original $20 collateral.
Davidn,
Is there a list of the clearing houses available?
Can we find out from our brokerage company, who sends us a monthly brokerage statement, if they have demanded delivery or NOT?
Here’s the list:
http://www.dtcc.com/customer/directories/dtc/dtc.php
So, to follow the trail, shares are registered to Cede & Co., a private partnership dating back to at least 1971. It appears at that time it was probably owned by the privately owned NYSE. Who knows who owns it now that NYSE is public.
Cede & Co. is the nominee for the DTC who keeps track of the beneficial owners. From its point of view, those owners are the ones on the list in the link above.
These owners holds claims on these shares in trust for your brokerage and your brokerage holds claims on these shares in trust for you.
The failure can be at any one of these steps in this long chain of custody.
Imagine a shareholder in Europe. Then the chain is:
cede owes foreign depository owes foreign clearing house owes brokerage owes shareholders.
Smart naked shorters do it from Europe or Asia, outside of regulators reach, but still pushing extra supply into the American market.
Here’s where it is confusing. Your brokerage wouldn’t really demand delivery.
It’s accepted practice for a brokerage to own less shares than their clients think they own. Looking for upstream fails, as long as your brokerage’s statement at the clearinghouse shows the shares are there, they believe they are there.
They are in the same position as you. Who knows if the statement is valid or not?
Davidn,
You stated above:
“The proceeds of the trade and the 2% of the cost of the trade (102%) sit there to collateralize the purchase and your brokerage gets interest on the money for not demanding that you get delivery.”
My brokerage is getting INTEREST on my money sitting in a Clearing House Bank?
Does my Brokerage, who sends me monthly brokerage statements, KNOW if they are receiving INTEREST on my money?
What I find amazing is when you try to get physical delivery of your shares in a stock. Since they are suppose to be there, I though maybe it would take a week. Well, 9 weeks later…funny thing is, each time they ALWAYS blamed the TRANSFER AGENT……They let me know real quick in the eyes of the DTCC, the Broker was the owner (held in street name) and that you can not speak to anyone from the DTCC. The brokers are customers of the DTCC, and you are customers of the broker,..in other words, you spend 90% of your time on the phone with the broker who blames the transfer agent religiously, who blames the broker religiously.
Physical delivery via certificate form…..should be included in post 119.
Luxembourg regulator censures UBS over Bernard Madoff
From The Times
February 26, 2009
Christine Seib in New York and Susan Thompson
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5805583.ece
UBS was accused of “serious failure” yesterday by Luxembourg’s financial watchdog as part of its investigation into investments that funds based in the country made in Bernard Madoff’s alleged $50 billion Ponzi scheme.
Commission de Surveillance du Secteur Financier in particular emphasised the weak execution of the bank’s due diligence obligations over its custodianship of a $1.4 billion fund, Luxalpha, that invested in Mr Madoff’s scheme. The regulator deemed this a serious failing in the bank’s duties. It has given the bank three months to show it has put in place the infrastructure necessary to improve its procedures and structures and to pay compensation.
UBS disagreed with the accusations and said it will defend itself vigorously. The Swiss banking giant added in a statement: “Documentation for the fund made it very clear the company was not expected to be responsible for the safekeeping of the assets. The fund documentation contained an explicit waiver to that effect. UBS does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal.”
————
American regulators charged four men with fraud yesterday over three separate alleged investment scams worth a total of nearly $700 million. It was the latest flurry of moves by the FBI and the Securities and Exchange Commission (SEC) after high-profile actions against Bernard Madoff and Allen Stanford, the Texan billionaire.
More frauds are expected to come to light as the recession forces investors to withdraw money from funds, making it impossible for fraudsters to meet redemptions.
John Pistole, the FBI’s deputy director-general, told Congress this month that the agency was investigating 38 possible corporate frauds directly related to the financial crisis.
The US Attorney’s office in New York filed criminal charges yesterday against Paul Greenwood and Stephen Walsh, two New York fund managers. It is alleged that between 1996 and this month the men misappropriated about $554 million invested in their company, WG Trading Investors (WGTI).
Anonymous,
FEBRUARY 24, 2009
By SUSAN SCHMIDT, STEVE STECKLOW and JOHN R. EMSHWILLER
http://online.wsj.com/article/SB123543815326954907.html#
“A fund of hedge funds run by two members of Vice President Joe Biden’s family was marketed exclusively by companies controlled by Texas financier R. Allen Stanford, who is facing Securities and Exchange Commission accusations of engaging in an $8 billion fraud.
The $50 million fund was jointly branded between the Bidens’ Paradigm Global Advisors LLC and a Stanford Financial Group entity and was known as the Paradigm Stanford Capital Management Core Alternative Fund. Stanford-related companies marketed the fund to investors and also invested about $2.7 million of their own money in the fund, according to a lawyer for Paradigm. …”
QUESTION?????????????
How many members of congress have personal money in Hedge Funds?
Or Hedge Fund type investments?
Does anyone know if this type of information is in the public domain?
Or do members of congress have their money in trust funds, which can hide where the money is invested?
Here is a more detailed story about Biden’s Family connnections to Stanford:
“Biden’s son, brother had business ties to Stanford empire
By Carol Eisenberg
February 25, 2009 at 8:55am
Just when you thought R. Hunter Biden’s retirement as a lobbyist had removed the possibility his business dealings might embarrass his father, comes a report that he and his uncle had business ties with Texas financier R. Allen Stanford.
The Wall Street Journal reported Tuesday that a fund of hedge funds run by Vice President Joseph Biden’s son and his brother, James, through New York-based Paradigm Global Advisers was marketed exclusively by companies controlled by Stanford….
……”
( http://news.muckety.com/2009/02/25/bidens-son-and-brother-had-business-links-to-stanford-empire/12061 )
Go to this link and SEE an Interactive MAP of the connections… The story is also continued there…
iStandUp,
I am most interested in how many members of the elite ( congress or not) have money over seas dodging taxes. I would think this $1.4 billion fund, Luxalpha, that invested in Mr Madoff’s scheme hold the name of some of the 52,000. I am of the opinion if people continue to pull their money out of the funds for the elite, inside or outside the USA, what we will see is more financial corruption than imaginable. Hopefully, the light will blind these crooks as their corruption opens up for the world to see. The only good thing about the economy crashing is the exposure of the crooks who managed to massively transfer wealth. There are a few more I am anxious to see unfold. A few who have been called out here.
KEEP TAKING OUT YOUR MONEY SO THE WHITE COLLAR CROOKS ARE IDENTIFIED !!!
I am also interested in how much of the first TARP 350Billion went to some of our hedge fund guest that went largely without regulation. Think about it. You prop them up so the elite who has money with them does not LOSE their many millions. You can bet the MONEY the BIG BANKERS got was used to stabilize/aid and abet funds for our untouchables. Hide the crime by injecting tax payers dollars in these funds to protect the wealthy who are the only ones who can afford money in these funds. Time will tell who got what. Each dime is under scrutiny by the TAX Payers of America and better be accounted for.
SHARE SWAP ACQUISITIONS “NSCC STYLE”
To illustrate just how corrupt our DTCC-administered clearance and settlement system is take the case of “acquiringco” (“Aco”) a U.S. corporation that is taking over “beingacquiredco” (“Bco”) via a 1-for-1 share swap acquisition. Assume that both corporations have 100 million shares issued and “outstanding”. Let’s assume further that “Bco” currently has 80 million invisible “securities entitlements” in its share structure resulting from 80 million shares being in a failed to be delivered status that the NSCC has refused to buy-in. This means that the current shareholders of “Bco” have bought and paid for 180 million shares of “Bco”.
All of these investors will receive monthly brokerage statements “implying” that the clearing firm of their broker/dealer (assuming that they are not “self-clearing”) is “holding long” the securities they purchased. They will have obviously been misled as there are only 100 million legitimate shares of “Bco” in existence.
Once the transaction is approved by the vote of shareholders the transfer agent of “Aco” will send to the NSCC a certificate for 100 million shares of “Aco” to be distributed to the shareholders of “Bco”. This obviously will not be enough to pay off all of the investors in “Bco”. To address this disparity the NSCC management will allow their clearing firm “participants” to credit the accounts of their investors in “Bco” with 180 million “securities entitlements” in “Aco”.
After the amalgamation the board of directors of “Aco” will think that there are now 200 million readily sellable shares of “Aco” in existence. They will be wrong as there are now 280 million readily sellable shares and/or readily sellable “securities entitlements” weighing down on the share price of “Aco”.
Why didn’t the NSCC management or its participants warn the board of directors of “Aco” that there was quite a bit of invisible toxic waste in the shares structure of “Bco” that should have been brought to their attention? During the voting procedure why weren’t the shareholders of “Aco” allowed to learn the whole truth about this acquisition? Neither the NSCC management nor its participants could tell the truth because it would have exposed this entire “industry within an industry” on Wall Street involving the selling of nonexistent shares and refusing to deliver that which you sold in order to invisibly reroute the funds of U.S. investors into their own wallets
Let’s go a step further, why were the shares of “Bco” sensed by “Aco” to be such a bargain. It’s because of the share price depressant effect of all of those readily sellable “securities entitlements” hidden in the share structure of “Bco”. Shares with massive amounts of unaddressed FTDs will be seen as wonderful bargains and acquired much more often than corporations without any. How many thousands of acquisitions being made by U.S. corporations have resulted in the acquiring company becoming severely but invisibly damaged because the NSCC management refused to buy-in the delivery failures of its abusive participants when it became perfectly obvious that they never had any intent whatsoever in delivering the shares they were selling. All U.S. investors and acquiring corporations have been relegated to be basically buying a “pig in a poke” in our markets due to this refusal to either promptly buy-in the FTDs or at least warn investors of their existence.
Suprise, suprise the SEC was informed as early as 2003 by a whistleblower and NASD or FINRA ignored the warnings!! Now where have we heard this before? If there were only a pattern..
SEC alerted about Stanford in 2003
SEC alerted about Stanford in 2003
By Robert Cookson and Michael Peel in London and Joanna Chung in New York
Published: February 26 2009 19:30 | Last updated: February 26 2009 19:30
A whistleblower contacted US regulators more than five years ago with allegations that Sir Allen Stanford’s businesses were involved in an “illegal Ponzi scheme”, the Financial Times has learnt, raising new questions about why authorities waited until last week to shut down the alleged $8bn fraud.
Leyla Basagoitia, a former Stanford employee, raised a series of red flags about the tycoon’s empire in a 2003 employment dispute with her company at a tribunal run by the finance industry’s self-regulatory body. Ms Basagoitia also alerted the US Securities and Exchange Commission at about the same time, her lawyer said, echoing criticisms the agency ignored early warnings about the alleged $50bn Ponzi scheme run by Bernard Madoff.
Ms Basagoitia told an arbitration panel at the National Association of Securities Dealers in October 2003 that she suspected that Stanford Group Company, one of Sir Allen’s key businesses, was “engaged in a Ponzi scheme to defraud its clients”, according to case documents seen by the FT. In 2007, the NASD became the Financial Industry Regulatory Authority, which has come under scrutiny since the Stanford allegations emerged.
In a nine-point critique, Ms Basagoitia pointed to many concerns cited last week by the SEC in its charges against Sir Allen’s businesses, including allegations about the lack of a credible auditor, misselling of investment products and the promise of consistently high returns that did not “correspond to the reality of the markets”.
Ms Basagoitia’s allegations were denied by Stanford and subsequently dismissed by the dispute resolution panel. In addition, she was ordered to pay Stanford $107,782 in damages, in repayment of a loan advanced to her while an employee of the company.
Michael Falick, the lawyer who acted for Ms Basagoitia, described the outcome of the case as “very, very sad”. He added his client contacted the SEC with details of the alleged fraud in tandem with her NASD complaint.
Mr Falick said: “It was really troubling, because the NASD was meant to be a regulatory body.”
The SEC declined to comment on Ms Basagoitia’s case, although it said that it had begun investigating the Stanford empire in spring 2005, well over a year earlier than officials had indicated previously. Finra did not return a call requesting comment, while Ms Basagoitia could not be reached.
The revelation marks another blow to US securities regulators, who have been hit with an avalanche of criticism since missing the alleged scheme perpetrated by Mr Madoff.
http://www.ft.com/cms/s/0/148817be-043b-11de-845b-000077b07658.html?ncli...
Just wanted to post that the NY Times just printed an article in the business section
“Elie Wiesel Levels Scorn at Madoff”
By STEPHANIE STROM
two of the panelists were Jim Chanos and Harvey Pitt (former chairman of the sec).
Have they no shame
“Elie Wiesel Levels Scorn at Madoff”
http://www.nytimes.com/2009/02/27/business/27madoff.html
http://online.wsj.com/article/SB123575572935295811.html
Why’s buffet sleeping with the enemy? Buying Goldman and naked shorting treasuries?
“But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”
In late September, he agreed to buy $5 billion of perpetual preferred stock with a 10% yield from Goldman Sachs, which was reeling after the collapse of Lehman Brothers Holdings Inc. Berkshire also received warrants to purchase Goldman common stock at $115 a share. While the vote of confidence in Goldman by the savvy investor temporarily helped stabilize the bank’s share price at around $120, since then Goldman’s stock has wilted to well below $100.
REDEMPTION!!! Congratulations Patrick Byrne!
http://www.cnbc.com/id/15840232?video=1237183961&play=1
Hopefully this catches on like wild fire.
Jason,
Excellent!!
Someone on CNBC said that “Patrick Byrne was right all along”!!
Times and perceptions must be changing!