SEC and Other Investigations of Illegal Trading

Top 61. Jan 5, 2003 9:23 AM

» Kirk - NASD Prepares to Take Action Against Henry Blodget

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NASD Prepares to Take Action Against Henry Blodget

January 3, 2003
By Charles Gasparino
The Wall Street Journal

NEW YORK -- The regulatory arm of the National Association of Securities Dealers is preparing to take formal regulatory action against former Merrill Lynch & Co. (MER) analyst Henry Blodget for some of his research calls during the stock-market bubble that initially made him one of Wall Street's most popular analysts, according to people close to the matter.

The NASD recently disclosed its intentions to Blodget through a so-called Wells Notice, which gives the analyst the chance to refute the claims before the self-regulatory agency decides to take action.

The move marks the second major crackdown against a securities analyst during the NASD's recent investigation of conflicts of interest involving Wall Street research. In July, the NASD notified former Salomon Smith Barney analyst Jack Grubman that he could be facing charges for his research involving a small telecommunications company, Winstar Communications Inc., a former Wall Street darling that filed for bankruptcy protection in April 2001. Grubman kept a buy rating on the company and a $50 price target on the stock almost until the company filed for bankruptcy protection.

Grubman recently settled with securities regulators investigating his research calls, agreeing to a deal that includes a $15 million fine and a bar from the securities industry.

Blodget, who declined to comment about the NASD's action, also faces action over some of his research calls, these people say. At issue: Whether Blodget skewed his research with overly optimistic ratings to help his firm win banking deals.

In May New York Attorney General Eliot Spitzer reached a $100 million settlement with Merrill over charges that analysts like Blodget, who ran the firm's Internet research group, hyped stocks to win banking assignments. The settlement covered any action against Blodget by Spitzer's office.

But the settlement didn't cover action from the NASD, the securities industry's front-line regulatory agency. For the past six months or so regulators have been looking at evidence involving Blodget, and other analysts, and they are likely to announce any charges sometime before the end of the month. Last month, after regulators including the NASD reached a global settlement with top Wall Street firms over research conflicts, they turned their full attention to individual analysts at the center of their probes.

The most pressing case involves Blodget, who left Merrill in late 2001, just a few months after Spitzer launched his investigation. The attorney general ultimately uncovered damaging e-mails in which Blodget denigrated stocks, often in graphic terms, that the firm publicly was recommending to investors. As reported in The Wall Street Journal, the NASD is nearing the conclusion of its investigation into whether Blodget misled small investors with faulty research, according to people close to the inquiry. The NASD investigation also centers on e-mails, and investigators are seeking evidence that would show conflicts involving his research, the people say. Among the penalties available to the NASD would be suspensions and bans from the securities business.

A spokeswoman for the NASD declined to comment on the matter

-- posted by Kirk

Top 62. Jan 10, 2003 6:37 PM

» Sinewave - Six Months Later, Audit Board Holds First Talk

New York Times
By STEPHEN LABATON

WASHINGTON, Jan. 9 — Six months after it was created by Congress, the new board overseeing the accounting profession — the centerpiece of reform legislation after a year of corporate scandal — held its first formal meeting today without a permanent chairman, a senior staff or a final budget.

During the meeting, the new board members voted themselves annual salaries of $452,000, or $52,000 more than the pay of the president. (Once it has a chairman, the board said, it plans to pay that official $560,000.) They also ratified a lease to put their Washington headquarters in the K Street space that was vacated by the accounting firm Arthur Andersen after it collapsed last year.

Their first decision was to reject a symbolic proposal by one board member, Kayla J. Gillan, to rotate the organization's own auditors every five years to assure their independence. Ms. Gillan, a former general counsel of a large California pension program, said she raised the issue to try to make the new organization a model for public companies.

But two other board members — its acting chairman, Charles D. Niemeier, the former chief accountant for the Securities and Exchange Commission's enforcement division, and Daniel L. Goelzer, a former general counsel of the S.E.C. — strongly objected and said the issue required further study.

The board was formally introduced today by Harvey L. Pitt, who remains the chairman of the S.E.C. despite resigning two months ago because of criticism over the selection of the new oversight agency. He continues to serve during one of the commission's busiest rule-making periods in history and plans to remain until the confirmation of William H. Donaldson, who has been selected to succeed him. That process could take months.

Mr. Pitt had chosen William H. Webster, the former director of the F.B.I. and central intelligence, to lead the oversight board, over the objections of the two Democrats on the commission, who questioned his qualifications.

Mr. Pitt resigned after failing to tell the other commissioners that Mr. Webster had led the audit committee of a troubled company. Mr. Webster also resigned after the disclosure of his former ties to the company.

Without a new leader, the board has had serious difficulty recruiting senior staff members even though it is offering some of the best salaries for public service jobs in town, including $425,000 to be the general counsel, $250,000 to be the director of external communications, and $300,000 to be the deputy director in charge of registration.

The board has been assigned the job of inspecting the auditors of the nation's publicly traded companies, in effect serving as the auditors of the auditors, as one member put it. It is supposed to write and enforce ethics rules and set standards for the profession.

The bumpy opening of the Public Company Accounting Oversight Board, as it is formally known, was largely unaddressed today, except for a brief comment by one member, Willis D. Gradison Jr., a retired member of Congress and a former lobbyist for the health care industry, who tried to put the organization's difficulties in a positive light.

"While some pundits have described us as a star-crossed agency, I don't see it that way," Mr. Gradison said. "If anything, our rocky beginning has brought us closer together."

The founding of the board came as some Republicans vowed to provide the S.E.C. with a substantially greater budget for the remaining months of this fiscal year than the White House had sought.

Representative Frank R. Wolf, the Virginia Republican who heads the subcommittee that oversees the agency's finances, said late Wednesday that he had introduced legislation this week to provide $776 million for the commission, $208 million more than the White House had sought and the same amount that Congress promised the agency last year in the legislation that created the new accounting board.

"There is strong bipartisan support to give the S.E.C. everything it needs to fight corporate corruption," said John D. Scofield, the communications director of the House Appropriations Committee.

A Senate committee last year approved an appropriation for the agency of $755 million, although it is unclear whether the Senate would now approve that figure. Republicans in the Senate facing competing budget priorities have been discussing a budget figure for the agency of about $650 million.

The House of Representatives on Wednesday adopted a governmentwide budget that included $540 million for the S.E.C. But Congressional aides described the figure as a place holder and said the House would propose closer to $776 million.

For years, the commission has suffered from an inadequate budget that has led to low pay, high turnover, small staffs and outdated computer technology. In response to those problems, lawmakers last July authorized a budget this year of $776 million, 77 percent more than its budget in the previous year. But the agency never received the increase, and the White House backtracked on its commitment for the raise.

President Bush signed with great fanfare the legislation calling for the $776 million budget last July. Less than three months later, his administration said it supported an appropriation of $568 million for the agency. After the administration was criticized for supporting the scaled-back budget, officials said they would be willing to seek more but never said how much.

In announcing his selection of Mr. Donaldson to succeed Mr. Pitt, President Bush vowed last month to seek a substantial increase in the S.E.C.'s budget for the 2004 fiscal year. Critics say that proposal, while helpful, would defer necessary increases in the agency's staff and improvements in its outdated technology for more than a year after the passage of the law that both identified the shortfall in the agency's resources and increased its mission.

The members of the accounting oversight board, which will ultimately be financed through assessments on accounting firms and their corporate clients, showed no signs of being financially pinched.

After approving their annual pay of $452,000, or more than double the $171,900 pay of cabinet members like the secretaries of state and defense, and the attorney general, the new board ratified a request to borrow $1.9 million from the government to meet its expenses for this month.

The new chairman of the accounting board, who will be named once the S.E.C. has a new chairman, will receive an annual paycheck of $560,000, more than triple the $142,500 pay of the chairman of the S.E.C. and nearly three times the $192,600 salary of the chief justice of the United States.

Commission and board officials said the salaries were justified to attract the most talented people and to compete with the private sector and organizations like the Financial Accounting Standards Board, which sets accounting rules in the United States, and the industry-sponsored regulators of the major stock markets. The law creating the board instructs it to set the compensation for members and their staffs "at a level that is comparable to private sector self-regulatory, accounting, technical, supervisor, or other staff or management positions."

But some lawmakers said the decision to set such pay was excessive and sent the wrong message just as the new board was hobbling toward its creation and the S.E.C. was facing its own financial problems.

"It's way too high and really discouraging," said Representative Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee. "It's a grave mistake."

In an effort to retain top employess quickly, the board ratified an agreement to retain Korn/Ferry International, an executive search company, to help find people to fill the seven top staff jobs. The company will be paid $60,000 for each position it helps fill.

[...LOL...I want one of those Gum-mint jobs...teeheehee...]

-- posted by Sinewave

Top 63. Jan 17, 2003 8:27 AM

» Kirk - Regulate Hubris?

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An interesting idea...

Recommend this Post - This post has 5 recommendations

Re: Imus on Brinker
by: bobscoverup 01/17/03 08:04 am

"Newsletters need to be regulated to protect inexperienced investors from sharks like Brinker. "

I think Brimelow alluded to this. In fact in that CBS marketwatch article I think he came to these conclusions. He said .

"Don't bet the rent money, much less RETIREMENT MONEY on a MARKETIMER recommendation. Trust a MARKETIMER recommendation only with money you can afford to lose. Such fiascos like Brinker's QQQ debacle will bring back 1930's style push for regulation"

[Kirk Comment: Brimelow: The Bob Brinker brawl: Round 2: http://t%69nyurl.com/4kaw ]

I honestly think it is a great demonstration of why guys like Brinker do need to be CLOSELY MONITORED. Not monitored for quality of advice, but monitored to be sure that ALL PERFORMANCE is refected.

With a myriad of portfolios, many "off the books" stock picks and "mentions", some "recommended funds for up to 5% of a portfolio"-that disappear. When you have a special bulletin that says to use 1/2 of the money you took out of the market on one recomendation that "counts" and tells you to place those funds into QQQs, then when they go down weeks later you find out they are "off the books" but still a "buy", there is mischief afoot.

If it goes up in Brinker's world, it's used for advertising. If it goes down, it doesn't count, it "never happened".

Brinker's accountability and deception is no different to the potential consumer of his advice than someone purchasing a mutual fund who counts his winning stock picks and leaves out the bad ones under a "that didn't count" and we won't mention that again, disclaimer.

Totally bogus and is indeed deceptive. I think it's time such "HUBRIS" is regulated.

As a newsletter writer myself who does all he can to report ALL my advice in my performance numbers, this is a good idea just to level the playing field.

-- posted by Kirk

Top 64. Jan 17, 2003 1:26 PM

» SteveT - Re: Regulate Hubris?

In response to message posted by Kirk:

Kirk I can't believe YOU would like more regulation? What next? Regulations and a license to sell used cars? Next thing you know it won't be legal to turn back odometers! smile

-- posted by SteveT

Top 65. Jan 23, 2003 7:35 AM

» KLR - Oh My....

KPMG: SEC may charge partners
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 7:25 PM ET Jan. 22, 2003

NEW YORK (CBS.MW) - KPMG LLP said late Wednesday that the Securities and Exchange Commission might file a complaint against three current partners and one former partner for its audit work of Xerox Corp.

"Unfortunately, today's charged regulatory environment has resulted in inappropriate actions being taken," KPMG Chairman and Chief Executive Eugene O'Kelly said in a statement. "In this case, the result is a great injustice to KPMG and the four partners involved."

KPMG was fired as Xerox's (XRX: news, chart, profile) auditor in 2001. Last April, the SEC fined Xerox $10 million for allegedly using fuzzy accounting accelerate the company's recognition of equipment revenue.

Last year, CEO Kelly came under scrutiny for meeting with SEC Chairman Harvey Pitt and mentioning a proceeding against the accounting firm.

"KPMG is confident that, when all the facts are in through the appropriate legal processes, our position will be vindicated," Kelly said in the statement.

KPMG said it does not know when the SEC filing will take place. The Wall Street Journal said the civil fraud charges could come as early as next week.

Shares of Xerox gained 22 cents on Wednesday to close at $8.78.

Luisa Beltran is a reporter for CBS.MarketWatch.com in New York

-- posted by KLR

http://www.wnbc.com/money/1960058/detail...

Top 66. Feb 6, 2003 12:49 PM

» Fred2000 - Enough Evidence To Arrest Stewart

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Exclusive: DOJ Has Enough Evidence To Arrest Stewart
Official Says They Have 'Solid Criminal Case'
POSTED: 8:41 p.m. EST February 5, 2003
UPDATED: 3:21 p.m. EST February 6, 2003

NEW YORK -- NewsChannel 4 has learned officials at the Justice Department now believe they have enough evidence to arrest and charge Martha Stewart.

"We have a solid criminal case against Martha Stewart," one Justice Department official tells NewsChannel 4.

We're told that case includes evidence of insider trading and obstruction of justice. James Comey is the federal prosecutor in charge of the overall ImClone investigation.

"In terms of what we're looking at or who we're looking at ... I just can't comment," he said.

-- posted by Fred2000

http://reuters.com/financeNewsArticle.jh...

Top 67. Feb 12, 2003 9:34 AM

» Kirk - Alan Bond sentenced to 12 years

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This bastard should serve a time in jail equal to the amount he stole divided by the average armed robbery of a 7/11 or bank amount times the average time in jail given to those "smaller crimes". Those folks get 10 years or more for a few thousand dollars. This bastard stole millions from people who went to him for help. The armed robbers usually needed money for a drug habit. Bond just wanted money.

Former money manager Alan Bond sentenced to 12 years

Tue February 11, 2003 02:58 PM ET
By Ilaina Jonas

NEW YORK, Feb 11 (Reuters) - Former money manager Alan Bond was sentenced to more than 12 years in prison on Tuesday for cheating pension funds out of millions of dollars and taking kickbacks, as the judge condemned his "greed."

U.S. District Judge Leonard Sand also ordered Bond, 41, the former president and chief investment office of Albriond Capital Management, to pay $6.6 million in restitution and a $36,000 fine.

"This is unquestionably a tragedy where the defendant was motivated not by need, not by duress, not by any other circumstance but greed and ego," he said as he rejected Bond's request for a sentence below the minimum 12 years and seven months.

He was convicted in June of defrauding clients by sending unprofitable securities trades to their accounts while directing most of the profitable ones to himself. He subsequently pleaded guilty to charges relating to receiving kickbacks from brokerages.

Prosecutors charged that Bond's "cherry-picking" scheme ran between March 2000 and July 2001 while Bond was out on bail awaiting trial on 1999 charges of taking more than $6 million in kickbacks from brokerage firms.

They said Bond made $6.3 million from the cherry-picking scheme while his clients lost more than $56 million.

The victims of the scheme were Birmingham Amalgamated Transit Authority Local 725, a union pension fund; Chapman Capital Management, an investment advisor; and the Old Dominion Disability & Retirement Allowance Plan.

PLEAS FOR LENIENCY

The sentencing marked the bottom of a precipitous fall for Bond, a Dartmouth College and Harvard Business School graduate, as well as one of a small number of African-Americans to rise to a top position in the lucrative world of money management. He had once made regular appearances on television's "Wall Street Week with Louis Rukeyser."

Bond, who quoted the New Testament throughout his 15-minute plea to the court said his life now had taken a "different path" and that he had applied for divinity school during his past nine months in the Metropolitan Correctional Center in New York.

"It is now my lifelong commitment to prevent this type of actions (by) ... others in the investment community," Bond said.

[Kirk Comment: Say anything you want you dirty worm! You are so dishonest to the core that you will say ANYTHING to get an edge. I hope you rot in your cell for what you did to good, working people who trusted YOU with their retirement savings. ]

During Bond's trial, prosecutors argued that the pension funds lost two-thirds of their value, while Bond received a 5,000 percent return on his own investments in a little over a year.

Attorneys for Birmingham Amalgamated said that the bus drivers and mechanics this year were forced to kick in more this year for their pension funds because of Bond's actions and that pensioners had to forego a cost of living increase.

[Kirk Comment: The bastard was not even robbing rich folks but the blue collar working people who work damned hard for their honest gains. ]

Prior to the sentencing, Bond's wife, Dr. Sheila Bond, a plastic surgeon who often treats cancer victims made an gripping statement to the judge, often comparing his work in the court to her own.

"Judge Sand, please don't destroy the good patient along with the cancer," she said.

Bond, who wore a dark blue suit and red tie, wiped his eyes often during his wife's statements. The couple has three children, two boys and a girl, ranging in age from four to 10.

With good behavior, Assistant U.S. Attorney Steve Peikin said, Bond may serve only 85 percent of his sentence.

-- posted by Kirk

Top 68. Feb 12, 2003 2:54 PM

» Jas_Jain - Isn't Billing Company for False Expenses Fraud?

Isn't Billing Company for False Expenses Fraud?

From company website:

"NEW YORK, Feb 10, 2003 /via COMTEX/ -- IMPATH Inc. (Nasdaq: IMPH) today announced that its Board of Directors has appointed Carter H. Eckert as Chairman and Chief Executive Officer, effective immediately, to replace Anu D. Saad, Ph.D., who has resigned following a review of expenses submitted by Dr. Saad over the last three years.

"Following this review, which was led by IMPATH's Audit Committee, Dr. Saad and the Board agreed the resignation was in the best interests of the Company, and she has agreed to reimburse the Company in the amount of $250,000."

I am sure that no charges will be filed against this woman and she will receive all the "benefits" that the top executives receive when they leave. You need proof that Corporate America is run by a NETWORK OF CROOKS?

During the mania, this sort of employee fraud was rather common at Cisco. In most cases, no real action was taken and in some cases people were let go without returning the money. One woman charged a whole wedding to the company! For some reasons, there were more women than men engaging in false charges or over billing hours; it might have been merely a coincidence.

There are too many risks of owning a stock!

Jas

-- posted by Jas_Jain

Top 69. Feb 12, 2003 3:38 PM

» SteveT - Re: Alan Bond sentenced to 12 years

In response to message posted by Kirk:

I wonder if Lou will bring it up this week?

-- posted by SteveT