Madoff
Posted: Wed Sep 09, 2009 1:14 pm
I thought you might enjoy this story about the SEC that relates to what you posted John
Which still leaves open the question of what the SEC was doing when it should have been making Madoff do the perp walk. We have the answer: the SEC was harassing us.
Yes, hard to believe that they would target your poor, innocent editor. And they didn’t, not directly anyway. Instead, they targeted one of our colleagues. This was a couple of years ago…when Bernie Madoff was at the top of his game.
We haven’t mentioned it in this space…on the advice of our lawyer. Judges don’t like it when you “try a case in public.” And the case still isn’t settled.
But we won’t discuss the merits of the case…only the circumstances around it.
This will help us understand what the SEC is really up to…and why the hope of regulating fraud out of existence is as vain and futile as trying to clear out a bar by using foul language.
Here’s what happened. One of our researchers discovered what he thought was a great investment opportunity. He called the target company and spoke to a VP in charge of public relations. What he heard convinced him that he was on to something, so he published a recommendation, sending a copy of it immediately to the company.
He got no response from the company. But a few months later, the SEC knocked on our door. What was their beef? That we had misled investors. How so? In our report, we told readers what the VP had told us. We carefully called it “insider” information…putting the word in quotes to let readers know it wasn’t the same as the forbidden ‘inside information.’ Anyone could have found out the same thing if he had just called the company, read the published reports, and put two and two together.
Our caution was lost on the SEC. They didn’t see the difference between “insider” information and inside information. What’s more, the fellow at the target company denied he had said what he had said. Curiously, he made no objection when the report was published; the objection came after the SEC started snooping around.
The SEC wanted blood. They thought they could get an easy win against a little guy in Baltimore. They wanted us to turn on our own associate…to stop defending him and cop a plea. Obviously, we couldn’t do that. We stood behind our man.
Then came a quirky turn of events. Both the researcher and your editor’s company were charged with what was effectively a new crime – a federal case, no less. The SEC, remember, is supposed to be protecting investors from stock fraud, manipulation, and ‘insider trading.’ But there was never any allegation of manipulating a stock or insider trading. Instead, the agency charged us with NOT having inside information. We never traded in the stock at all…or manipulated it in any way. So the feds alleged that we did not have any inside information to trade on…and that therefore our representation – of having “insider” information (in quotes!) – was a kind of fraud.
And the whole case turned on a telephone conversation between a stock market analyst and a public relations guy in a company. One said one thing; the other said another thing. Reporters make mistakes all the time; so do their sources. But this was the first time the government made a federal case out of it.
We believe our analyst. The SEC believed the other guy and spent millions trying to prove that our fellow lied. No one who bought the research report on the stock complained, let alone threatened a lawsuit. Prior to any SEC probe, refunds were issued to anyone who asked (most did not). Yet the SEC, protector of the public interest, spent years…and millions…on the case – while Bernie Madoff was stealing billions from his clients.
http://dailyreckoning.com/this-recovery-is-an-imposter/
I see someone questioned the Xers being involved in this. The SEC works like this. You get a job there as a lawyer and do investigation. You are careful to only investigate and prosecute those that you have no benefit in the future of being employed there. Clearly the ones doing the investigation are the Indians and not the chiefs. Madoff had connections all over the place and I am sure that there were plenty of outfits out there calling off any dogs that might bite him, as he was woven through the fabric of the entire industry. The posted article is merely one example of the SEC's selective enforcement. The current stock market is nothing more than wall street firms tossing stock back and forth as the trusts did in the 1920's to manipulate perceptions the market is going up. The Xers in this case were looking for the next job to get them ahead. Goldman pays $1 million a year, not $100K plus benefits.
Which still leaves open the question of what the SEC was doing when it should have been making Madoff do the perp walk. We have the answer: the SEC was harassing us.
Yes, hard to believe that they would target your poor, innocent editor. And they didn’t, not directly anyway. Instead, they targeted one of our colleagues. This was a couple of years ago…when Bernie Madoff was at the top of his game.
We haven’t mentioned it in this space…on the advice of our lawyer. Judges don’t like it when you “try a case in public.” And the case still isn’t settled.
But we won’t discuss the merits of the case…only the circumstances around it.
This will help us understand what the SEC is really up to…and why the hope of regulating fraud out of existence is as vain and futile as trying to clear out a bar by using foul language.
Here’s what happened. One of our researchers discovered what he thought was a great investment opportunity. He called the target company and spoke to a VP in charge of public relations. What he heard convinced him that he was on to something, so he published a recommendation, sending a copy of it immediately to the company.
He got no response from the company. But a few months later, the SEC knocked on our door. What was their beef? That we had misled investors. How so? In our report, we told readers what the VP had told us. We carefully called it “insider” information…putting the word in quotes to let readers know it wasn’t the same as the forbidden ‘inside information.’ Anyone could have found out the same thing if he had just called the company, read the published reports, and put two and two together.
Our caution was lost on the SEC. They didn’t see the difference between “insider” information and inside information. What’s more, the fellow at the target company denied he had said what he had said. Curiously, he made no objection when the report was published; the objection came after the SEC started snooping around.
The SEC wanted blood. They thought they could get an easy win against a little guy in Baltimore. They wanted us to turn on our own associate…to stop defending him and cop a plea. Obviously, we couldn’t do that. We stood behind our man.
Then came a quirky turn of events. Both the researcher and your editor’s company were charged with what was effectively a new crime – a federal case, no less. The SEC, remember, is supposed to be protecting investors from stock fraud, manipulation, and ‘insider trading.’ But there was never any allegation of manipulating a stock or insider trading. Instead, the agency charged us with NOT having inside information. We never traded in the stock at all…or manipulated it in any way. So the feds alleged that we did not have any inside information to trade on…and that therefore our representation – of having “insider” information (in quotes!) – was a kind of fraud.
And the whole case turned on a telephone conversation between a stock market analyst and a public relations guy in a company. One said one thing; the other said another thing. Reporters make mistakes all the time; so do their sources. But this was the first time the government made a federal case out of it.
We believe our analyst. The SEC believed the other guy and spent millions trying to prove that our fellow lied. No one who bought the research report on the stock complained, let alone threatened a lawsuit. Prior to any SEC probe, refunds were issued to anyone who asked (most did not). Yet the SEC, protector of the public interest, spent years…and millions…on the case – while Bernie Madoff was stealing billions from his clients.
http://dailyreckoning.com/this-recovery-is-an-imposter/
I see someone questioned the Xers being involved in this. The SEC works like this. You get a job there as a lawyer and do investigation. You are careful to only investigate and prosecute those that you have no benefit in the future of being employed there. Clearly the ones doing the investigation are the Indians and not the chiefs. Madoff had connections all over the place and I am sure that there were plenty of outfits out there calling off any dogs that might bite him, as he was woven through the fabric of the entire industry. The posted article is merely one example of the SEC's selective enforcement. The current stock market is nothing more than wall street firms tossing stock back and forth as the trusts did in the 1920's to manipulate perceptions the market is going up. The Xers in this case were looking for the next job to get them ahead. Goldman pays $1 million a year, not $100K plus benefits.