Chris Byron, the syndicated columnist points out, as we did a few days ago, that if there was illegal trading in HCA in June of this year there were a whole lot of others who were trading - including the insiders and a bunch of mutual funds who, according to Mr. Byron, were also dumping the stock.
Chris reaches the wrong conclusion IMHO when he states that " If Frist is guilty of insider selling, then so are all the others who sold at the same time. If they aren't guilty, then neither is he" since it is entirely possible that Senator Frist is NOT guilty of insider trading but that others who sold before him are guilty.
But the gist of the piece is on target, and worth the minute that it takes to register at the site.
Monday, October 3, 2005
Langone: Spitzer has a "Boondoggle of a Case"
Ken Langone, the former head of the NYSE compensation committee, has published an Op-Ed piece in the Wall Street Journal blasting Spitzer. You will need to register with wsj.com, but the piece is worth reading, since we rarely get to see the defense side of a public case, and if Langone is right, Spitzer does not have a case.
Langone claims that depositions in the case have established that he did nothing wrong, and that the case should be dropped. He also repeats earlier comments and questions, asking why the NYS Attorney General is using public funds to prosecute a case to benefit a private entity. (If Spitzer wins the case, the money recovered goes to the NYSE, not the taxpayers of New York)("while his office recently said it is low on funds to pursue Medicaid fraud, he is devoting multiple lawyers to this case -- which will benefit the state not one nickel").
Some other quotes:
"New Yorkers know when their tax dollars are being squandered. They also know what a bully looks like and how to treat one. Mr. Spitzer may be a little lightheaded from all the puff-and-fluff coverage the media give him, but voters could soon deliver a reality check at the ballot box."
"The reliability of Mr. Spitzer's judgment, especially in light of the facts in this case, should be an issue of prime concern when those votes are cast. But he also has a troubling method of making loud legal threats, strong-arming witnesses, and intimidating boards and companies into destructive concessions. Of course, my confidence rests mainly in an impartial court where a fair judge will let the facts stand on their own. Coercing settlements through fear, as anyone can see, is far different from delivering justice."
Langone has had some choice words regarding this suit in the past. Earlier this year Fortune quoted him as saying "I'm nuts, I'm rich, and boy, do I love a fight. I'm going to make them sh*t in their pants. When I get through with these f**king captains of industry, they're going to wish they were in a Cuisinart at high speed."
[explicative deleted].
Langone claims that depositions in the case have established that he did nothing wrong, and that the case should be dropped. He also repeats earlier comments and questions, asking why the NYS Attorney General is using public funds to prosecute a case to benefit a private entity. (If Spitzer wins the case, the money recovered goes to the NYSE, not the taxpayers of New York)("while his office recently said it is low on funds to pursue Medicaid fraud, he is devoting multiple lawyers to this case -- which will benefit the state not one nickel").
Some other quotes:
"New Yorkers know when their tax dollars are being squandered. They also know what a bully looks like and how to treat one. Mr. Spitzer may be a little lightheaded from all the puff-and-fluff coverage the media give him, but voters could soon deliver a reality check at the ballot box."
"The reliability of Mr. Spitzer's judgment, especially in light of the facts in this case, should be an issue of prime concern when those votes are cast. But he also has a troubling method of making loud legal threats, strong-arming witnesses, and intimidating boards and companies into destructive concessions. Of course, my confidence rests mainly in an impartial court where a fair judge will let the facts stand on their own. Coercing settlements through fear, as anyone can see, is far different from delivering justice."
Langone has had some choice words regarding this suit in the past. Earlier this year Fortune quoted him as saying "I'm nuts, I'm rich, and boy, do I love a fight. I'm going to make them sh*t in their pants. When I get through with these f**king captains of industry, they're going to wish they were in a Cuisinart at high speed."
[explicative deleted].
Friday, September 30, 2005
No Private Right to Sue Under SOX; Only SEC May Enforce
US District Judge Steward Dalzel has ruled ruled that Section 304 of the Sarbanes-Oxley Act -- which provides for disgorgement of profits and bonuses from top corporate executives -- does not provide a private right of action for shareholders to file a derivative suit.
Thursday, September 29, 2005
HCA Trading Analysis and a Different Insider Scandal?
Having handled a number of insider trading cases, and being a fan of a trading strategy that involves following insiders, the Frist and HCA story is interesting to me, and I did some research.
There may be a different story here.
First, Frist. He should be able to make a compelling argument that his sales were based on public information - the sales by insiders in late May, early June. If his version of the events at his web site is correct, he sought approval to direct the sale in April, received the approval sometime in April, and sent the letter directing the sale in "mid-June." The sell off by insiders was in early June.
Watching insiders is an accepted investment strategy, one that I employ myself. Having been a securities attorney and stock market afficiando for over 20 years, I know that insiders know more than I know. I also know that watching what insiders do with their own money can give significant insight into the prospects for a company.
Reading between the lines, and looking at the trading, it appears that this is exactly what he did. Tigerhawk has a pretty good analysis of the timing of the trades.
Some have called the insider sells "shovelling stock out the door" and a massive selloff, but that is not truly the case. Those sales were not pure sells, they were option excerises. Pretty routine stuff. You get an option with a strike price of $26, you wait a few years, the stock goes up to $55, you excerise the option, sell the stock, and pocket a $29 a share profit. No problem, perfectly legal.
But the question becomes why did all of those insiders decide to excerise their options in the first week of June? Most of their options were good for another 2 years. Obviously I don't know why they excerised during those days, but I am sure that the SEC and the DOJ are asking that question. Why then? What happened, and what did they know about the upcoming quarterly earnings report?
There may be a different story here.
First, Frist. He should be able to make a compelling argument that his sales were based on public information - the sales by insiders in late May, early June. If his version of the events at his web site is correct, he sought approval to direct the sale in April, received the approval sometime in April, and sent the letter directing the sale in "mid-June." The sell off by insiders was in early June.
Watching insiders is an accepted investment strategy, one that I employ myself. Having been a securities attorney and stock market afficiando for over 20 years, I know that insiders know more than I know. I also know that watching what insiders do with their own money can give significant insight into the prospects for a company.
Reading between the lines, and looking at the trading, it appears that this is exactly what he did. Tigerhawk has a pretty good analysis of the timing of the trades.
Some have called the insider sells "shovelling stock out the door" and a massive selloff, but that is not truly the case. Those sales were not pure sells, they were option excerises. Pretty routine stuff. You get an option with a strike price of $26, you wait a few years, the stock goes up to $55, you excerise the option, sell the stock, and pocket a $29 a share profit. No problem, perfectly legal.
But the question becomes why did all of those insiders decide to excerise their options in the first week of June? Most of their options were good for another 2 years. Obviously I don't know why they excerised during those days, but I am sure that the SEC and the DOJ are asking that question. Why then? What happened, and what did they know about the upcoming quarterly earnings report?
Wednesday, September 28, 2005
DeLay indicted in campaign finance probe
DeLay indicted in campaign finance probe - Politics - MSNBC.com: "DeLay indicted in campaign finance probe"
While not a securities law issue, and not intended to turn this into a political blog, given the securities law problems of the Senate Majority Leader, the indictment of the House Majority Leader seemed like a relevant item.
The leaders of both Houses of Congress under criminal scrunity?
While not a securities law issue, and not intended to turn this into a political blog, given the securities law problems of the Senate Majority Leader, the indictment of the House Majority Leader seemed like a relevant item.
The leaders of both Houses of Congress under criminal scrunity?
Sunday, September 25, 2005
Frist Knew About Blind Trust Investments
Uh Oh. Senator Frist has in the past denied that he was aware of the investments in his blind trust. That should be obvious, since it is a BLIND trust.
But the AP is reporting that he was actually updated several times during 2002 about his investments in the trust.
From the story:
-----------
Frist, asked in a television interview in January 2003 whether he should sell his HCA stock, responded: "Well, I think really for our viewers it should be understood that I put this into a blind trust. So as far as I know, I own no HCA stock"
Frist, referring to his trust and those of his family, also said in the interview, "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea."
Documents filed with the Senate showed that just two weeks before those comments, the trustee of the senator's trust, M. Kirk Scobey Jr., wrote to Frist that HCA stock was contributed to the trust. It was valued at $15,000 and $50,000.
----------
But the AP is reporting that he was actually updated several times during 2002 about his investments in the trust.
From the story:
-----------
Frist, asked in a television interview in January 2003 whether he should sell his HCA stock, responded: "Well, I think really for our viewers it should be understood that I put this into a blind trust. So as far as I know, I own no HCA stock"
Frist, referring to his trust and those of his family, also said in the interview, "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea."
Documents filed with the Senate showed that just two weeks before those comments, the trustee of the senator's trust, M. Kirk Scobey Jr., wrote to Frist that HCA stock was contributed to the trust. It was valued at $15,000 and $50,000.
----------
Friday, September 23, 2005
HCA subpoenaed over Sen. Frist's shares
Here it comes. Reuters is reporting that a "federal investigation" is ongoing into Senate Majority Leader Bill Frist's sale of HCA Inc. One would assume that the reference is to the SEC, but the article says that "[t]he sale has also drawn the attention of the Securities and Exchange Commission, which has sought information from Frist." Key word being "also."
Frist is maintaining that he sold the stock in order to avoid the appearance of impropriety, and to avoid criticism of a potential conflict of interest. What he has not explained is why he sold the stock in July of this year, rather than years ago when he took office. If appearances or conflicts were the reason, we would have expected to see the sale when he took office, or when he was criticized for the conflict, not now.
According to the article a Frist spokesman said that Frist "will provide the SEC any information that it needs with respect to this matter." That sounds promising, although he is a politician. That sentence could actually mean that he will provide information that HE thinks the SEC needs.
Frist is maintaining that he sold the stock in order to avoid the appearance of impropriety, and to avoid criticism of a potential conflict of interest. What he has not explained is why he sold the stock in July of this year, rather than years ago when he took office. If appearances or conflicts were the reason, we would have expected to see the sale when he took office, or when he was criticized for the conflict, not now.
According to the article a Frist spokesman said that Frist "will provide the SEC any information that it needs with respect to this matter." That sounds promising, although he is a politician. That sentence could actually mean that he will provide information that HE thinks the SEC needs.
Senate Majority Leader Frist In Insider Trading Scandal?
This securities law news story first broke with an AP story, and was picked up on the political blogs. According to the AP, Senate Majority Leader Bill Frist asked the trustee of his BLIND trust to sell all of his stock in his family's hospital corporation, HCA, Inc.
In what may simply be an incredible coincidence, the shares of the company were near a 52 week high when Frist and other insiders sold their stock. It tanked a month later.
The sales were nothing to sneeze at, over 700,000 shares were sold which were worth $42 million.
Insider trading? It might be, and it might not be, given the 52 week high, it could really be a coincidence. But the SEC needs to look into this.
And someone needs to look into Frist's "blind" trust. How is a politician and an insider directing sales of stock that is in a blind trust? Incredibly, Frist has apparently deflected criticism of the inherent conflict was criticized for holding stock in the nation's largest for-profit hospital chain while directing legislation on Medicare reform and patient issues, by relying on the blind trust.
Apparently the trust wasn't so blind, since he was able to reach in and sell the stock just before it dropped.
In what may simply be an incredible coincidence, the shares of the company were near a 52 week high when Frist and other insiders sold their stock. It tanked a month later.
The sales were nothing to sneeze at, over 700,000 shares were sold which were worth $42 million.
Insider trading? It might be, and it might not be, given the 52 week high, it could really be a coincidence. But the SEC needs to look into this.
And someone needs to look into Frist's "blind" trust. How is a politician and an insider directing sales of stock that is in a blind trust? Incredibly, Frist has apparently deflected criticism of the inherent conflict was criticized for holding stock in the nation's largest for-profit hospital chain while directing legislation on Medicare reform and patient issues, by relying on the blind trust.
Apparently the trust wasn't so blind, since he was able to reach in and sell the stock just before it dropped.
Wednesday, September 14, 2005
Monday, September 5, 2005
SEC halts alleged Ponzi scheme in Boca Raton - 2005-09-05
The SEC has alleged that a Boca Raton company sold $8 million in unregistered securities to at least 120 investors since November 2003 in a Ponzi scheme. In a Ponzi scheme, funds from new investors are used to pay interest to earlier investors. Ponzi schemes ultimately collapse under their own weight as the promoter is unable to find enough new investments to continue to pay earlier investors their interest.
The SEC alleges that the "investors" purchased nine-month "accounts receivable purchase notes" and were promosed 2 percent guaranteed monthly interest. Some larger investors received promises of 3 percent or 4 percent monthly returns, and were also offered a monthly ½ percent referral fee on any new investments.
The SECo claims that the defendants made undisclosed payments to sales agents and misappropriated investor funds to purchase a yacht, automobiles, jewelry and real estate, as well as diverting newly invested funds to pay interest.
This is simply amazing. In this information age, how can anyone make an investment which promises 24 percent a YEAR, without realizing that the investment has an excellent chance of being a scam? The interest rate at a bank is less than 3%, and these guys are offering 24%. Does anyone not know that this is either the riskiest investment on the face of the earth or a scam?
It is one thing to be in an investment and to have a 24% return. That certainly does happen, and can happen with a savy securities professional managing the money or with some luck. But to invest based on a representation of 24% a year in the future is simply foolishness.
The SEC alleges that the "investors" purchased nine-month "accounts receivable purchase notes" and were promosed 2 percent guaranteed monthly interest. Some larger investors received promises of 3 percent or 4 percent monthly returns, and were also offered a monthly ½ percent referral fee on any new investments.
The SECo claims that the defendants made undisclosed payments to sales agents and misappropriated investor funds to purchase a yacht, automobiles, jewelry and real estate, as well as diverting newly invested funds to pay interest.
This is simply amazing. In this information age, how can anyone make an investment which promises 24 percent a YEAR, without realizing that the investment has an excellent chance of being a scam? The interest rate at a bank is less than 3%, and these guys are offering 24%. Does anyone not know that this is either the riskiest investment on the face of the earth or a scam?
It is one thing to be in an investment and to have a 24% return. That certainly does happen, and can happen with a savy securities professional managing the money or with some luck. But to invest based on a representation of 24% a year in the future is simply foolishness.
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