I always thought that accountants were pretty smart folks. Sure, there are a few here and there who aren't - but that is true for all professions, including lawyers.
Today's announcement of the indictment of former KPMG partners therefore brought a little surprise. While the indictment for tax fraud and obstruction, was not a surprise - the criminal investigation has been going on for over a year, one of the allegations was interesting.
According to the NYT article, one of the partners sent an email which discussed upcoming testimony, and which said that the best strategy was 'the less said the better.' As a result, the e-mail message continued, the record will reflect repeated 'I don't knows,' 'I don't recalls,' and 'I was out of the loops' - the rope-a-dope/Enron defense."
Can someone explain what presumably bright, intelligent and business-savy individuals do not get about obstruction of justice and lying to investigators? Where these guys in a cave when Martha Stewart was being prosecuted for lying to federal investigators?
And why don't prospective defendants understand that their email is retrievable?
Tuesday, August 30, 2005
Monday, August 29, 2005
States Squander Stock Research Settlement Funds?
We all know that the Spitzer Research Settlement funds were not going to go to investors. Although $400 million is supposed to go to investors, that has not happened yet. While the sum is not significant when compared to the losses suffered by investors, they have not even seen that money, despite the passage of nearly three years.
Spitzer also did not get an admission of wrongdoing, or anything that investors could use against the firms in their individual arbitrations. He left investors on their own in their arbitrations, leaving them to prove the fraud on their own, over and over again in each individual arbitration. No admission of wrongdoing, no court order that found fraud; nothing.
What Spitzer did get was great press, a ton of headlines, and tons of money for his office and the other Attorneys General. The states all split the other $1 billion dollar settlement among themselves.
That money was supposed to be used for investor education and to address the fraud that occurred, but that simply is not happening.
The reason? Give a politician money, and he will do what he does best - he will spend it. Whether is it is a tax dollar or a settlement dollar, they can't seem to help themselves - they just spend it.
Sure, $52 million is tied up in court, but the rest is gone, according to Forbes. You see, the politicians decided that the money, 1 BILLION dollars was not enough to make meaningful restitution to investors, and it was "too hard" to figure out who should get what, so they just spent the money.
California used its $43 million to plug a budget gap, using just $3 million for investor education (whatever that means). Virginia politicians tried to get its $8.9 million in to the general fund, but state law prevented them from doing that, and the money is going to a special fund for building schools. (Not exactly investor education, but at least it is something).
While the entire concept of giving the money to the States, rather than the SEC for distribution to investors, was foolhardy, it appears that some politicians actually figured out a good use for some of the money. Some states created programs to teach high school students about the market, and money, but in large part it appears that this money was simply used by the states to plug budget gaps.
Some of the money has been placed in a pool waiting for worthwhile projects. What happened to that pool of money? The administrator of the pool invested it, AND LOST $75 MILLION IN THE MARKET!
This is simply an outrage. The underlying analyst fraud was bad enough. Investors lost millions and millions of dollars in the market crash in 2000, a large part of which was caused by the research analysts. The firms ponied up significant bucks $1.4 billion dollars in penalties and settlements, and the states are simply squandering it, filling in their own budget gaps, and hoping to keep the politicians in office.
Speaking of which, according to Forbes, the Georgia Secretary of State used half of its settlement funds on an advertising campaign promoting investor awareness - featuring the Georgia Secretary of State, who just happens to be running for Governor. Never mind the fact that no reasonable person could believe that running TV commercials is meaningful or lasting investor education, the Secretary of State featured herself in the commercials!
We need another investigation - this time of the politicians't they have a fiduciary duty to us? Isn't this a clear breach of that duty?
Spitzer also did not get an admission of wrongdoing, or anything that investors could use against the firms in their individual arbitrations. He left investors on their own in their arbitrations, leaving them to prove the fraud on their own, over and over again in each individual arbitration. No admission of wrongdoing, no court order that found fraud; nothing.
What Spitzer did get was great press, a ton of headlines, and tons of money for his office and the other Attorneys General. The states all split the other $1 billion dollar settlement among themselves.
That money was supposed to be used for investor education and to address the fraud that occurred, but that simply is not happening.
The reason? Give a politician money, and he will do what he does best - he will spend it. Whether is it is a tax dollar or a settlement dollar, they can't seem to help themselves - they just spend it.
Sure, $52 million is tied up in court, but the rest is gone, according to Forbes. You see, the politicians decided that the money, 1 BILLION dollars was not enough to make meaningful restitution to investors, and it was "too hard" to figure out who should get what, so they just spent the money.
California used its $43 million to plug a budget gap, using just $3 million for investor education (whatever that means). Virginia politicians tried to get its $8.9 million in to the general fund, but state law prevented them from doing that, and the money is going to a special fund for building schools. (Not exactly investor education, but at least it is something).
While the entire concept of giving the money to the States, rather than the SEC for distribution to investors, was foolhardy, it appears that some politicians actually figured out a good use for some of the money. Some states created programs to teach high school students about the market, and money, but in large part it appears that this money was simply used by the states to plug budget gaps.
Some of the money has been placed in a pool waiting for worthwhile projects. What happened to that pool of money? The administrator of the pool invested it, AND LOST $75 MILLION IN THE MARKET!
This is simply an outrage. The underlying analyst fraud was bad enough. Investors lost millions and millions of dollars in the market crash in 2000, a large part of which was caused by the research analysts. The firms ponied up significant bucks $1.4 billion dollars in penalties and settlements, and the states are simply squandering it, filling in their own budget gaps, and hoping to keep the politicians in office.
Speaking of which, according to Forbes, the Georgia Secretary of State used half of its settlement funds on an advertising campaign promoting investor awareness - featuring the Georgia Secretary of State, who just happens to be running for Governor. Never mind the fact that no reasonable person could believe that running TV commercials is meaningful or lasting investor education, the Secretary of State featured herself in the commercials!
We need another investigation - this time of the politicians't they have a fiduciary duty to us? Isn't this a clear breach of that duty?
Sunday, August 7, 2005
SEC Files Emergency Action to Freeze Proceeds of Alleged Insider Trading in Reebok Securities
While most insider trading cases involve sums of money that are in the tens of thousands of dollars, the SEC has announced the filing of a case involving trades in out of the money call options on Reebok, where the Commission alleges that the defendant has over $2 million dollars in profits.
The case is interesting since the options were purchased on August 1 and 2, with the take over announcement coming on the 3rd. The options were sold, and over $800,000 was transfered out of the account to a bank account maintained in Austria.
The case is interesting since the options were purchased on August 1 and 2, with the take over announcement coming on the 3rd. The options were sold, and over $800,000 was transfered out of the account to a bank account maintained in Austria.
Saturday, August 6, 2005
Big Board Seat Sells for a Record $3 Million
The previous record sale was $2.65 million in August 1999, when the stock market was booming. Recent prices were $975,000 and 1.6 million.
That 1.6 million sale was after the Archipelago announcement. Since then the price of a seat has risen 85 percent and Archipelago's stock has shot up 138 percent.
While John Thain is calling the merger a "win-win", and it might very well be, one can't help but wonder what happened to that allegation last year that Thain's friend was buying up seats before the merger?
That 1.6 million sale was after the Archipelago announcement. Since then the price of a seat has risen 85 percent and Archipelago's stock has shot up 138 percent.
While John Thain is calling the merger a "win-win", and it might very well be, one can't help but wonder what happened to that allegation last year that Thain's friend was buying up seats before the merger?
Wednesday, August 3, 2005
NASD Fines Morgan Stanley $1.5 Million for Fee Based Accounts
With a 1.5 million dollar fine, and 4.6 million dollars in restitution, Morgan Stanley puts the fee based account controversy behind it.
The problem with fee based accounts is demonstrated by this case. with well over 100,000 small accounts in the fee based programs, MS was apparently not monitoring whether those accounts *should* be in the program.
The NASD said that Morgan Stanley allowed 3,549 of its customers to continue using Choice accounts without adequately reassessing whether the accounts remained appropriate for them.
These customers, who either conducted no trades in their Choice accounts for at least two consecutive years or had Choice accounts whose assets averaged below $25,000 for at least one full year, or both, will be receiving restitution under the settlement announced today.
The NASD is continuing to focus on fee based accounts. Brokers and firms are cautioned to insure that their use of these accounts is consistent with the needs of the clients.
In April, NASD fined Raymond James & Associates Inc. $750,000 and ordered the firm to pay $138,000 in restitution for fee-based account violations.
The problem with fee based accounts is demonstrated by this case. with well over 100,000 small accounts in the fee based programs, MS was apparently not monitoring whether those accounts *should* be in the program.
The NASD said that Morgan Stanley allowed 3,549 of its customers to continue using Choice accounts without adequately reassessing whether the accounts remained appropriate for them.
These customers, who either conducted no trades in their Choice accounts for at least two consecutive years or had Choice accounts whose assets averaged below $25,000 for at least one full year, or both, will be receiving restitution under the settlement announced today.
The NASD is continuing to focus on fee based accounts. Brokers and firms are cautioned to insure that their use of these accounts is consistent with the needs of the clients.
In April, NASD fined Raymond James & Associates Inc. $750,000 and ordered the firm to pay $138,000 in restitution for fee-based account violations.
CIBC to pay $2.4B in Enron case - Settlements total 7.1 Billion
Canadian Imperial Bank of Commerce agreed Tuesday to pay $2.4 billion to Enron investors who claimed the financial services company took part in a massive accounting fraud that led to the collapse of the energy giant.
The settlement with CIBC is the largest single action so far on behalf of Enron stock and bond holders, and brings the total payments in the case to $7.1 billion, making this the biggest class-action recovery ever.
The settlement with CIBC is the largest single action so far on behalf of Enron stock and bond holders, and brings the total payments in the case to $7.1 billion, making this the biggest class-action recovery ever.
Monday, August 1, 2005
Christopher Cox Approved by Senate as SEC Chairman
With a relatively painless approval process, Representative Cox was confirmed as the Chairman of the SEC on Friday, and says that he will not be going back into politics.
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