Nests Along
Wall Street

~ PART I ~

 


 

Sightings from The Catbird Seat

~ o ~

“Capital is only the fruit of labor, and could never have existed
if labor had not first existed.”

– Abraham Lincoln, Dec. 3, 1861

*********

Enter The Vulture

In ordinary market times,
Bulls and bears define the culture;
But when panic grips The Street,
There appears the hungry vulture.

Fear calls vultures from their nest,
Loss of faith keeps them aloft,
Past excess suits this beasty best,
And makes its victims fat and soft.

As sales slow, as profits droop,
As corporations bleed red ink,
The vulture sets itself to swoop
And eyes weak players on the brink.

The bankruptcies that others flee,
The companies whose reps are soiled,
Enron, WorldCom, Global Crossing,
The vulture likes its meals spoiled.

It feeds on stocks, it feeds on bonds,
It thrives on busts in real estate,
While others weep, it licks its lips,
There’s nothing that this bird ain’t ate.

But don’t malign these scavengers,
Begrudge them their gone rotten picking;
The losers that they feed upon
Left unpicked would the healthy sicken.

For ugly though a vulture be,
Even esthetes must confess,
In any sound ecology,
Something’s gotta clean the mess.

– Michael Silverstein, The Wall Street Poet

**********
http://www.wallstreetpoet.com/New%20Pages/pages/pg4.html


 

December 20, 2006

Goldman CEO’s $53.4M
Bonus Breaks Record

By Vinnee Tong, AP Business Writer

Goldman Sachs Breaks Wall Street CEO Bonus Record,
Pays Blankfein $53.4M

NEW YORK (AP) — John Mack’s record for the biggest bonus ever paid to a Wall Street CEO didn’t last even a week. It was smashed by the $53.4 million that Goldman Sachs gave its chief executive, Lloyd Blankfein.

The bonanza for Blankfein included a cash bonus of $27.3 million, with the rest paid in stock and options. He took the helm of the investment bank in June [not bad for half-a-year’s work] after President Bush nominated Henry Paulson to be Treasury secretary.

The record payday, disclosed by Goldman Sachs Group Inc. in a filing with the Securities and Exchange Commission on Tuesday, breaks the one set just last Thursday when Morgan Stanley disclosed that it paid CEO Mack $40 million in stock and options. Mack, who is 62, rejoined Morgan Stanley 18 months ago to turn around the company after the ouster of Philip Purcell. Mack’s short-lived record bested one set in 2005 by Goldman’s Paulson, who was given $38.3 million.

Other than Blankfein, 11 other senior Goldman executives as a group were granted slightly more than $150 million in shares and stock options. The highest paid among those were Gary Cohn and Jon Winkelried, who both hold the titles of president and chief operating officer. They each received $25.6 million in shares and options in 2006.

Any cash bonuses for the other executives were not mentioned in the filings.

The bonuses come after Goldman reported last week that it had earned the highest yearly profit in the history of Wall Street. Net profit rose 70 percent to $9.4 billion on revenue of $37.67 billion. Goldman and other firms have benefitted from a surging market for takeovers and a strong stock market.

Goldman said last week it had set aside a total of $16.5 billion this year for salaries, bonuses and benefits. On average, this would translate to $622,000 per employee.

The bonuses come in a year in which Goldman shareholders have benefitted from a rise of about 58 percent in the company’s share price, the strongest returns of any Wall Street investment house.

Lehman Brothers Holdings Inc. and Bear Stearns Cos. have said they would pay about $12 billion in compensation each. Lehman said last week it paid its chief executive, Richard Fuld, $10.9 million in stock this year…

Yahoo Finance

For more on Goldman Sachs, AIG, Coral Re, Marsh McLennan, Henry Kissinger, the SEC, etc. …GO TO > > > Axis of Evil, Cooking the Insurance Books; Nests of the Insurance Vampires; Vultures in the Nature Conservancy


 

December 28, 2006

Merger activity to get even hotter
in 2007, analysts predict

Hot takeover market is expected to get even hotter in 2007

By Dana Cimilluca and Julia Werdigier, Bloomberg News

NEW YORK: As hot as the mergers market is now, it is about to get hotter.

All the variables are in place for acquisitions in 2007 to surpass the record $3.6 trillion this year. U.S. stocks are trading close to their lowest price/ earnings levels in a decade, data compiled by Bloomberg show.

Yields on the junk bonds used to finance takeovers also are near 10-year lows, according to Merrill Lynch. Leveraged buyout firms have $1.6 trillion to spend, Morgan Stanley estimates.

“There hasn’t been a period I’ve seen in my career when all of those factors that influence M&A activity have been as strong,” said Stefan Selig, the global head of mergers and acquisitions at the securities unit of Bank of America.

The conditions have never been even close to what they are now, said Felix Rohatyn, a longtime investment banker who spent half a century at Lazard Frères and now works as an adviser to the chief executive of Lehman Brothers Holdings, Richard Fuld.

Bank of America, Morgan Stanley, Deutsche Bank and J.P. Morgan Chase all forecast that takeovers may climb at least 10 percent next year. An increase of that magnitude would raise fees from advising companies and buyout groups to a record $24 billion, according to estimates based on Bloomberg data.

Goldman Sachs Group, Morgan Stanley, Lehman and Bear Stearns may need the extra fees to keep profits growing after they earned a record $23 billion in 2006. Merrill, which rounds out the top five, is to report its financial results next month.

In the United States, more than $170 billion of deals were announced this month. Vodafone Group, Barclays and Air Liquide are among the European companies whose shares gained this year on speculation that they might be takeover targets.

Anglo American, a mining company with a market value of £36.5 billion, or $71.5 billion, also may be bought, UBS analysts wrote in a note to clients Dec. 15.

The last time the backdrop for mergers and acquisitions was anywhere near as favorable was in the late 1980s, when the former junk bond chief at Drexel Burnham Lambert, Michael Milken, was helping finance hostile takeovers, and U.S. stocks lost $500 billion of market value in the crash of October 1987.

Even then, 10-year U.S. Treasury yields were about twice the current level of 4.59 percent, making it more expensive to pay for deals. Only five buyout firms had investment funds of more than $1 billion, Morgan Stanley research shows. Now, 115 have at least that much to spend.

“The financing markets today are much more robust,” said Frank Yeary, global head of mergers and acquisitions at Citigroup, which advised on eight of the 10 biggest deals this year, including AT&T’s $83 billion takeover of BellSouth. “There are many more, and larger and deeper pockets of money.”

Private equity firms are driving the increase in deals to heights never before seen. Blackstone Group, Carlyle Group and Kohlberg Kravis led leveraged buyout firms in announcing $735 billion of purchases this year, almost triple the amount announced in 2005.

The companies have about $409 billion of combined equity to invest and can raise $1.2 trillion in non-investment grade bonds and loans, according to Morgan Stanley. David Rubenstein, co-founder of Carlyle, this month predicted a $100 billion leveraged buyout in the next two years.

Demand for high-yield debt is making it easier for buyout firms to finance acquisitions. About $473 billion of leveraged loans were issued this year, up 60 percent from 2005, Standard & Poor’s estimates. Sales of junk bonds increased 50 percent to $199 billion, Bloomberg data show.

“If you look at the state of the credit markets, the increase in corporate earnings and the buying power in private equity hands, it could well be another record year,” said Dennis Hersch, chairman of mergers at J.P. Morgan.

Companies in the S&P 500-stock index have increased profits by at least 10 percent for 13 straight quarters, the longest stretch since the 1950s, according to data from Thomson Financial.

Because stock market gains have not kept up with earnings growth, the average P/E multiple for companies in the S&P 500 fell to 16.5 in July, the lowest in 11 years.

Goldman was the No.1 mergers and acquisitions adviser for a sixth straight year in 2006, working on more than $1 trillion of deals, according to Bloomberg data.

Citigroup ranked second, followed by Morgan Stanley, J.P. Morgan and Merrill. UBS is sixth, Credit Suisse is seventh and Lehman is eighth.

In 2007, the biggest increase in merger volumes will probably be in Europe and emerging markets, said Paulo Pereira, a London-based partner at Perella Weinberg Partners.

European mergers increased 49 percent this year to $1.69 trillion, outstripping growth in the United States for the third consecutive year, Bloomberg data show. In the United States, the biggest market with $1.7 trillion of deals, the volume of takeovers rose by 37 percent.

“Europe still has some adjustments to do as part of the process of liberalization of the European economy,” Pereira said. “The corporate landscape is adjusting to trends that other areas like the U.S. have already adjusted to.”

In Asia, takeovers probably will be driven by leveraged buyouts and bank mergers in Taiwan, said Angus Barker of UBS.

“The drive of strong corporate balance sheets and supportive equity market valuations will remain intact going into 2007, so we anticipate another strong year for M&A in the region,” Barker said.

The pace of buyouts in Australia and Japan may “spill over” into other parts of Asia, he said.

www.iht.com/articles/2006/12/27/bloomberg/bxmerge.php?page=1

~ ~ ~

For more, GO TO > > > Vultures in the Merger Market


 

November 9, 2005

Bank of New York Settles U.S. Inquiry Into Money Laundering

By Timothy L. O’Brien, New York Times

Federal prosecutors said yesterday that the Bank of New York agreed to pay $38 million in penalties and victim compensation in a deal stemming from a six-year investigation of fraud and money laundering involving suspect Russian and American bank accounts and other fraudulent transactions.

Prosecutors said the bank, one of the nation’s oldest, did not adequately monitor and report suspect accounts at the bank.

The bank agreed to make what prosecutors described as “sweeping internal reforms to ensure compliance with its antifraud and money laundering obligations.”

Authorities sad that the bank has “accepted responsibility for its criminal conduct” and that it will not be prosecuted as long as it complies with the terms of the deal for three years.

Bank of New York also agreed to allow an independent examiner to monitor its operations.

The investigation, which began in 1998 and ended last year, first became publicly known in the summer of 1999 when Russia’s pell-mell rush to privatize formerly state-owned assets resulted in widespread criticism of insider deals and possible corruption among Russia’s business elite and officials of the Kremlin.

The fine, which is among the largest ever assessed against an American bank for money laundering violations, consisted of $14 million for failing to supervise suspect Russian accounts and $24 million for a separate series of fraudulent activities involving a branch on Long Island.

Riggs Bank, a subsidiary of the Riggs National Corporation, paid $41 million in federal penalties this year and last to settle a high-profile investigation of money laundering problems at that institution.

Prosecutors withe the United States attorneys’ offices in Manhattan and Brooklyn noted that the money laundering scheme at the Bank of New York involved unlicensed transmissions of about $u billion that originated in Russia, passed through American accounts, and then moved into other accounts worldwide.

Authorities said that at least nine individuals, including a former Bank of New York vice president, had been convicted for their roles in the two cases.

The Bank of New York acknowledged in the settlement that it had failed to adequately police and intentionally failed to report suspect accounts at the bank. Moreover, according to the settlement, the bank’s general counsel, managing counsel, and other senior executives repeatedly ignored requirements to report illicit transactions until authorities began arresting suspects in its investigations.

The agreement also said that the Bank of New York subsequently provided incomplete reports about suspect activities and failed to report separate transactions that resulted in the defrauding of other banks – even though the Bank of New York had already reached an agreement with regulators to overhaul its troubled monitoring operations.

“We are satisfied that reaching this agreement is in the best interest of our company and all of our constituents,” the bank’s chief executive, Thomas A. Renyl, wrote in a statement. “We are taking the right steps in today’s environment to ensure sound business practices.”

Two Russian emigres – Lucy Edwards, a former vice president at the bank, and her husband, Peter Berlin – originally opened the suspect accounts at the bank in 1996. The couple pleaded guilty to fraud charges in early 2000, conceding that they helped two Moscow banks conduct illegal operations through Bank of New York accounts….

In 1999. the Bank of New York suspended Natasha Gurfinkle Kagalovsky, a senior executive who oversaw Ms. Edwards. Federal investigators were exploring Ms. Kagalovsky’s possible role in the money laundering scheme at the time and she subsequently resigned from the bank and moved to London. she has never been charged with wrongdoing in connection with the investigation….

Ms. Kagalovsky’s husband, Konstantin Kagalovsky, served in secure government and corporate posts in Russia. He once worked for two large companies, Menatep and Yukos, which the Russian billionaire Mikhail Khodorkovsky formerly controlled. Mr. Khodorkovsky, once one of Russia’s most prominent and powerful figures, was convicted in Moscow in May on fraud and tax evasion charges in a highly disputed case pitting him against the Kremlin.

J. Michael Shepherd, who was general counsel at the Bank of New York during the money laundering investigation, left the bank last year to become general counsel of the BancWest Corporation.

He did not return a telephone call seeking comment.

For more, GO TO > > > Confessions of a Whistleblower; Dirty Money, Dirty Politics & Bishop Estate; First Hawaiian Bank


 

June 27, 2003

300 Tech Firms To Pay $1B
In Fraud Case

Suits Against Investment Banks Ongoing

By MEG RICHARDS

New York— More than 300 companies that staged hot initial public offerings during the tech boom agreed to pay investors $1 billion to settle allegations they were complicit in schemes by investment banks to rig stock sales to benefit themselves and favored customers.

Under the tentative settlement announced Thursday, the 309 companies also agreed to cooperate in the continuing case against 55 brokerages accused of making secret deals for coveted shares and artificially inflating the prices.

The massive case involves hundreds of lawsuits filed by investors over IPOs between 1998 and 2000, issued by such former high-flyers as theglobe.com, Global Crossing, MP3.com, Ask Jeeves and Red Hat.

The proposed settlement guarantees that plaintiffs will receive at least $1 billion from the tech companies’ insurers, said Melvyn I. Weiss, chairman of a committee of attorneys representing the investors. The class, which has not been formally defined, will cover any investor who bought shares at the time of the IPOs or in the aftermarket, up until Dec. 6, 2000, he said.

“This covers everybody who lost money. Most of our lead plaintiffs are just ordinary people who are investors,” he said.

Settling with the companies — who plaintiffs say knew or should have known about the alleged misconduct — will strengthen the investors’ position as they negotiate with the banks, Weiss said.

“We have always been of the mind that the primary target in this case is the underwriting community,” Weiss said. “This gives us a huge booster shot in our case against them.”

The plaintiffs are looking to recover “many billions” of dollars from the investment banks, Weiss said. The firms, including J.P. Morgan, Credit Suisse First Boston, Merrill Lynch and Smith Barney, are accused of plotting to artificially inflate the value of IPO stocks through a practice called “laddering,” which involves doling out shares to investors based on their commitments to buy additional stock after trading begins.

In addition, some customers who invested in IPOs were compelled to give extra compensation to the banks, sometimes through inflated commissions on other trades. Later, after the so-called “quiet period” that follows IPOs, analysts who worked for the banks issued favorable research to fluff up the stocks, whether they were worthy or not.

As part of the settlement, the tech companies have agreed that any claims they might have against the investment banks will be assigned to the plaintiffs’ class. Their cooperation may also help speed the discovery process, Weiss said.

“They participated in road shows, they had conversations with the underwriters,” Weiss said. “They may have been misled as to what compensation the underwriters were receiving. … all of this is important to us.”

Most of those involved have approved the settlement, Weiss said, which also must be approved by the court.

No funds will be paid to investors until the case against the banks is resolved, however. If more than $1 billion is recovered from the banks, the tech companies’ will not have to pay anything, the lawyers said. If the award is more than $5 billion dollars, the tech companies and their insurers will be able to recover expenses.

The settlement was reached after more than a year and a half of negotiation between lawyers for the investors, the tech companies and at least 42 primary insurers. Attorneys involved agree it is among the most complicated cases in U.S. history.

“This is by far the most complex securities litigation that has ever been brought, and the settlement process is equally complex,” said Jack Auspitz, a lawyer with Morrison & Forester, who represents 30 to 40 of the internet companies.

© The Day Publishing Co., 2003


 

November 26, 2002

Wall St firms facing fines
up to $500 million

NEW YORK, Nov 26 (Reuters) – Regulators are telling Wall Street firms that they face fines as high as $500 million in order to resolve analyst conflict of interest probes, a source familiar with the matter said on Tuesday.

Regulators expect to tell Citigroup (C) that it will have to pay $500 million to end a probe into whether its analysts misled investors with tainted research in order to please investment banking clients, the source said.

Regulators have told Credit Suisse First Boston that it will have to pay $250 million to settle the probes.

Bear Stearns Cos. Inc. (BSC), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM), and UBS Warburg are to be told or have been told that will have to pay $75 million each, the source said.

Regulators will tell Thomas Weisel Partners that it must pay $60 million and Morgan Stanley (MWD) that it must pay $50 million, the source said.

Regulators will not require Merrill Lynch & Co. Inc. (MER) to pay any amounts in addition to the $100 million it has already agreed to pay as the result of a settlement with regulators earlier this year, the source said.

© 2002 Reuters

$ $ $

November 18, 2002

Securities firms pay fines
for unsaved emails

Wall Street Journal

NEW YORK, Nov 18 (Reuters) – Five securities firms have tentatively agreed to pay $8.3 million in fines for allegedly failing to keep emails and produce them in regulatory investigations, the Wall Street Journal reported in its online edition on Monday, citing people familiar with the matter.

Goldman Sachs Group Inc, Morgan Stanley, the Salomon Smith Barney unit of Citigroup Inc, the U.S. Bancorp Piper Jaffray unit of US Bancorp, and the securities unit of Deutsche Bank AG — each plan to pay about $1.65 million to settle the expected civil charges without admitting or denying wrongdoing, the newspaper said.

A regulatory group led by the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange had warned the firms of the possible fines at a meeting at the SEC in late July, the Journal said.

The formal filing of the case alleging books-and-records violations could come as early as next week, people familiar with the matter said, according to the newspaper report. . . .

© 2002 Reuters

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October 20, 2002

Take the money and RUN

www.aflcio.org/paywatch

K-Mart is closing 284 stores and laying off 22,000 workers without severance pay – and yet in 2001, K-Mart Chief Executive Officer Chuck Conaway walked away with a golden parachute worth at least $9.5 million – on top of total 2000 compensation that topped $29 million.

K-Mart is not an isolated example. While a typical company’s corporate profits declined by 35 percent in 2001, corporate chiefs pocketed 7 percent more in median salaries than the previous year. At the same time, CEO’s have risk-proofed their own retirement and job security, while workers are more vulnerable than ever.

Here are some other stories of CEO’s and what they did to their companies and their workers.

>> GE has not contributed to it’s workers’ pension plan since 1987 – and the plan added $1.5 billion back to GE’s earnings in 2001. In addition to 2001 compensation of $16,246,772, former CEO John Welch, Jr. stands to receive a pension benefit of nearly $10 million every year for the rest of his life!

>> Coca-Cola cut 5,200 jobs and the value of Coke workers’ 401(k) plan has fallen in half. CEO Douglas Daft got the earnings targets on his restricted stock grant reduced after he failed to meet is promised performance goals. His total 2001 compensation was $105,186,644.

>> By the end of 2002, if it spins off its recently acquired cable business, AT&T is expected to employ 75% fewer workers than it did in 1984. CEO C. Michael Armstrong will get a new employment contract and has a $10 million floor on his restricted stock. His 2000 compensation totaled $27,730,943.

>> Tyco International has eliminated 11,000 jobs as it closed or consolidated more than 300 plants. CEO Dennis Kozlowski and his chief financial officer have chased out half-a-billion dollars in shares and stock options on top of salaries and bonuses totaling almost $22 million over the past three years.

>> Hewlett-Packard will cut 15,000 jobs as the result of its merger with Compaq. CEO Carly Fiornia Forina took home nearly $15 million in 2001 compensation and gets a new employment contract….

$ $ $

September 20, 2002

NASD probes
bank loan ‘‘tying’’

Practice forces borrowers to sign up for investment banking

By Jathon Sapsford, THE WALL STREET JOURNAL

Sept. 20 —— The National Association of Securities Dealers said it is investigating a widespread but controversial banking practice in which loans to companies are made only if the borrowers agree to give the lender lucrative, fee-generating investment-banking business.

WHILE LAWS formally prevent banks from initiating such an arrangement, known as tying, many banks have found loopholes to the laws. During the soaring stock market of the 1990s, when investment-banking was generating huge commissions for banks that underwrote securities or advised on enormous mergers, such quid-pro-quo arrangements were widespread….

The multipronged investigation is likely to focus on one of the most routine ways big lenders get around existing laws against tying. The Bank Holding Company Act Amendments of 1970 forbids a bank from tying loans to other businesses. But banks often side-step this rule by booking loans at an affiliate, such as a securities unit or a bank-holding company.

In the past, tying has been extremely difficult to prove, and banking regulators and private sector regulatory lawyers say they can’t recall a single instance of a tying case brought by bank regulators…

“We are receiving reports and hearing concerns from some of our members that the practice of tying commercial credit to investment banking is becoming more widespread,” said Robert Glauber, chairman of the NASD.

“As underwriting and [initial public stock offering] business remains low, the temptation to generate business by tying increases.”

The NASD declined to identify the institutions it is looking into. But the institutions likely to come under scrutiny include three of the nation’s largest lenders — J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America Corp. — that also have large and aggressive investment-banking businesses….

The NASD said its investigation indicated that the tying of commercial-bank loans to investment-banking services occurs most commonly in scenarios involving so-called bridge loans, which are short-term loans companies rely on while they are awaiting the proceeds of bond sales; backup credit facilities that support a company’s issuance of commercial paper; and syndicated loans.

“Access to these types of credit at commercial rates is critical to many companies and may provide a bank with the opportunity to require a company to purchase additional investment-banking services, such as investment-grade debt underwriting,” the NASD said.

The NASD said it is also concerned that tying may occur with other services, such as pension management.

Tying is the latest point of contention for a financial-services industry under scrutiny for a number of conflicts, including the close ties that bank and brokerage analysts have with the companies they cover. The tying issue surfaced in recent months as the economy slowed and credit became scarce, giving lenders leverage over the cash-starved corporations who need loans.

Bankers, defending their lending practices, counter that it is often borrowers who ask that bankers provide loans in exchange for the fat fees they pay when hiring their banks to underwrite securities or provide merger advisory. There are no laws baring banking clients for demanding that banks provide one service at the expense of another.

Whoever is driving the practice, banks like Citigroup and J.P. Morgan have made strides in stealing some of the investment-banking business from their Wall Street rivals, by many accounts because they offer loans as well as investment-banking services.

But that has come at a cost for some banks. J.P. Morgan said earlier this week that its third-quarter earnings would suffer from $1.4 billion in losses related to loans that had gone bad. Most of those loans were extended to companies in the telecommunications and cable industries, once considered high-growth prospects promising to yield their bankers lucrative investment-banking fees as they expanded their businesses.

The fact that lending and investment banking are becoming increasingly linked has captured the attention of legislators only three years after Congress repealed the Glass-Steagall Act, the last vestige of Depression-era laws that formally separated banking, brokerage activity and insurance.

Rep. John Dingell, a Michigan Democrat, questioned regulators’ grasp on potential tying violations in a July letter to Federal Reserve Board Chairman Alan Greenspan and Comptroller of the Currency John D. Hawke Jr. In an Aug. 13 response, Messrs. Greenspan and Hawke said their staffs are conducting a “special targeted review of the tying issue at several of the country’s largest banks” and will take “appropriate supervisory action” if necessary.

– Copyright © 2002 Dow Jones & Company, Inc.

$ $ $

September 13, 2002

Charges filed against
former Tyco executives

By Samuel Maull, Associated Press

NEW YORK – Three former Tyco International executives were charged yesterday with looting the conglomerate of hundreds of millions of dollars. The charges were the latest move by prosecutors against alleged thievery in America’s boardrooms.

Manhattan District Attorney Robert Morgenthau said former chief executive L. Dennis Kozlowski, and former, chief financial officer Mark H. Swartz directly stole more than $170 million from the company and obtained $430 million through fraudulent securities sales.

Kozlowski, 55, and Swartz, 42, were charged criminally with enterprise corruption and grand larcency. Former general counsel Mark Belnick, 55, was charged with falsifying business records to cover up $14 million in improper loans from Tyco….

For more, GO TO > > > Tracking Tyco

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June 28, 2002

Xerox improperly booked revenue

Copier firm reverses $1.9 billion in sales

THE WALL STREET JOURNAL 

STAMFORD, Conn. — Xerox Corp. said it reversed about $1.9 billion of revenue that it recognized over previous years, a move that will reduce revenue 2% to $91 billion for the 1997-2001 period. 

THE COMPANY said it reversed $6.4 billion of previously recorded equipment-sale revenue, which was offset by $5.1 billion of revenue that it recognized and reported during the same period as service, rental, document outsourcing and financing revenue. Also, Xerox reversed $600 million in lease revenue that it received before 1997, a company spokeswoman said.

Shares of Xerox slid 17%, or $1.39, to $6.61 in morning trading on the New York Stock Exchange. . . .

The SEC’s April complaint had accused Xerox of having “misled and betrayed investors” with a wide-ranging scheme to manipulate its earnings and enrich top executives.

Most of the charges revolved around Xerox practices that improperly accelerated revenue from long-term leases of its copiers and other office equipment.

At that time, the SEC had estimated that Xerox’s accounting tricks accounted for as much as 37% of pretax earnings during certain quarters.

The agency said the accounting scheme helped keep Xerox’s stock price artificially high in the late 1990s, with the result that executives could cash in more than $5 million in performance-based compensation and more than $30 million from stock sales….

For more, GO TO > > > The Xerox Conspiracy

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April 24, 2002

Research probe could cost Merrill
$2 billion-analyst

NEW YORK, April 24 (Reuters) – Merrill Lynch & Co. Inc. (MER), under fire for allegedly biased stock research, could wind up with a tab of $2 billion in a worst-case scenario outcome of a regulatory investigation, a Prudential Securities analyst said on Wednesday.

“We estimate that the (New York) State Attorney General investigation could ultimately cost Merrill Lynch as much as $2 billion,” analyst Dave Trone said in a research note. “A caveat is that our estimates for three of the four consequences are ‘worst case’.”

New York State Attorney General Eliot Spitzer earlier this month accused Merrill of tailoring its research to woo investment banking business, after he dug up e-mails passed around by former star analyst Henry Blodget’s Internet group, showing that analysts privately disparaged stocks they publicly touted.

Merrill agreed to disclose potential conflicts of interest on its stock reports, but it is still negotiating with Spitzer on the size of a possible settlement payment and changes it will make in the operation of its research department.

Following New York’s lead, other investigative bodies became involved in the Wall Street research probe on Tuesday.

Securities regulators from several states said they formed a multi-state task force to investigate Wall Street firms for possible securities law violations in issuing misleading stock research. Spitzer is co-chair of the national task force, along with the New Jersey and California state attorneys general.

Merrill has enlisted former New York City Mayor Rudy Giuliani, who initially gained public attention through his investigations of securities traders and racketeering, to help deal with Spitzer’s charges.

Merrill Lynch has hired Giuliani Partners to advise on all aspects of a resolution,” a Merrill spokesman said. “The issues presented in this matter are complex and require a complex understanding of the market system.”

Spitzer has also subpoenaed most of Wall Street’s biggest firms, including Morgan Stanley (MWD) and reportedly Goldman Sachs Group Inc. (GS) and Credit Suisse First Boston, which have declined to comment on the matter.

FOUR POTENTIAL CONSEQUENCES

There are four potential consequences of Spitzer’s 10-month probe, Trone said. These include a nationwide financial settlement, which, he said, could cost as much as $1 billion. The Changes to Merrill’s research procedures, which Trone said could cost $30 million, and $500 million in lost profits from client defections are two other consequences in addition to the settlement costs.

Civil lawsuits that result from the regulatory findings could cost $420 million, Trone said, calculating there is a 1 percent chance Merrill would lose such a case and multiplying that percentage by Merrill’s total market value.

“We believe Merrill has virtually no chance of losing to plaintiff suits in court,” Trone said. It will be too hard for plaintiffs to prove they relied solely on Merrill’s research to make the investment decisions that lost them money, he said.

A total of $2 billion is steep, but Trone noted that Merrill lost $4.4 billion in market value in the 10 trading days after April 8, when Spitzer announced the charges.

Despite the potential costs, Trone maintains his market rating of buy on Merrill shares. . . .

© 2002 Reuters

For more on Merrill Lynch, GO TO > > > BEWARE! This Bull is for the Birds!

For more on Prudential Securities, GO TO: A Nest on Shaky Ground

For more on Goldman Sachs, GO TO > > > Dirty Gold in Goldman Sachs?

$ $ $

April 8, 2002

Enron Shareholders’ Suit to
List Banks, Brokerages

Class-Action Filing Seeks to Take Aim at Wall Street Tactics
With Potential Conflicts of Interest

By David S. Hilzenrath and Peter Behr, Washington Post

Several of Wall Street’s most prominent banks and brokerages played a crucial and deliberate role in Enron Corp.’s fraud on investors, lawyers for Enron shareholders allege in an expanded class-action lawsuit they plan to file today.

The lawsuit seeks to put Wall Street practices on trial, including the potential conflicts that investment banks face in recommending the stocks of companies that pay them fees.

Enron’s “house of cards” would have collapsed much earlier if it had not been propped up by investment banks and brokerages, the suit alleges. Enron in December sought Chapter 11 protection in the nation’s largest-ever bankruptcy filing.

Financial institutions named as defendants in the lawsuit include J.P. Morgan Chase & Co., Citigroup Inc., Credit Suisse First Boston USA Inc., Bank of America Corp., Merrill Lynch & Co. and Lehman Brothers Holding Inc. . . .

The lawsuit also targets two law firms that worked for Enron or a related partnership: Vinson & Elkins LLP and Kirkland & Ellis. In statements, the law firms said they did their jobs properly.

The suit reflects the Enron shareholders’ quest for deep pockets to cover the billions of dollars they lost when the Houston energy trader collapsed. In November, Enron disclosed that, since 1997, it had overstated profits and understated debts.

Initial lawsuits aimed at Enron executives and directors and the company’s longtime auditor, Arthur Andersen LLP, which put its stamp of approval on the company’s false financial statements. Andersen’s ability to pay damages, however, appears to have been reduced by an exodus of clients. The accounting firm is fighting for survival and defending itself against a federal indictment for destroying Enron-related records.

Andersen’s negotiations with Enron shareholders continued over the weekend, past a midnight Friday deadline, and sources close to the litigation said some progress was made.

The amended suit alleges that, with inside knowledge of Enron’s vulnerable financial condition, major financial institutions issued analyst recommendations that encouraged investors to buy Enron stock, provided loans that propped up the company, helped Enron hide the extent of its borrowing, and underwrote Enron securities offerings through which the investing public paid down corporate debts.

Attorney William S. Lerach of the firm Milberg Weiss Bershad Hynes & Lerach LLP, lead counsel for the shareholders, briefed reporters yesterday on the suit after providing draft copies of the document.

Banks “structured and/or financed” Enron’s off-the-books partnerships, at times helping them carry out bogus transactions, the suit says.

Banks also “played an indispensable role in helping to inflate and support Enron’s stock price,” the suit says.

As a reward, “banks and/or their top executives” were allowed to invest in one of Enron’s key partnerships, where they stood to profit from self-dealing transactions with Enron, the suit says.

“Secret or disguised transactions by J.P. Morgan, Citigroup and CS First Boston also concealed billions of dollars of loans to Enron,” the suit says.

For example, the suit alleges that J.P. Morgan used an entity it controlled in the Channel Islands, Mahonia Ltd., to issue loans to Enron that were disguised as trades of natural gas futures contracts. The transactions concealed more than $3.9 billion of debt that should have been reported on Enron’s balance sheet, the suit says.

Recognizing the risk that Enron would default, the suit says, J.P. Morgan took out insurance on the contracts. Since Enron’s bankruptcy, the insurance carriers have refused to pay, arguing that the trades were fraudulent.

A federal judge last month refused to compel the insurers to pay, ruling that “these arrangements now appear to be nothing but a disguised loan.”. . .

© 2002 The Washington Post Company

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February 28, 2002

Wall Street Analysts Deny
Role in Enron Fall

Senate committee points to possible
conflict of interest

by Marcy Gordon, Associated Press

WASHINGTON – Wall Street analysts who recommended Enron stock as the company slid toward bankruptcy testified yesterday they were not influenced by their own firms’ investments and had seen no signs of serious trouble.

It was the first time financial analysts, whose advice is heeded by investors nationwide and whose firms give millions in campaign donations to lawmakers, were called to account for their role in the Enron debacle.

“It now seems clear that too many analysts failed to ask ‘why?’ before they said ‘buy.’”

Sen. Joseph Lieberman, D-Conn., chairman of the Senate Governmental Affairs Committee, said at a hearing at which four analysts from big investment firms appeared.

Ten of 15 analysts who followed Enron were still rating it as a “buy” or “strong buy” as late as Nov. 8, two weeks after the Securities and Exchange Commission announced it had opened an inquiry into the energy-trading company’s accounting.

“It appears we were misled” about Enron’s financial condition, testified Anatol Feygin, a senior analyst at J.P. Morgan Securities Inc.

After Enron chief executive Jeffrey Skilling resigned abruptly last August, analysts were told in a conference call that nothing negative was happening or was anticipated, said Curt Launer, managing director of stock research at Credit Suisse First Boston.

And independent analyst, Howard Schilit, told the senators his review of Enron’s financial statements found numerous problems that should have been noted by analysts covering the company.

Federal Reserve Chairman Alan Greenspan said yesterday that when investigators collect all the evidence they will find that Enron’s collapse was triggered by financial markets’ sudden loss of confidence in the company.

“Enron is a classic case of a company whose market value is very significantly dependent on the reputation of the firm,” he told the House Financial Services Committee in response to questions . . .

Although analysts’ compensation may not have been linked to their stock recommendations, several senators said a potential conflict of interest exists because of the investment firms’ profitable business ties with companies their analysts follow.

Analysts, who earn an average of about $200,000 yearly, often receive bonuses based on overall profits of their firms, which depend in turn on the ties with the companies the analysts follow. The four appearing at yesterday’s hearing said they get bonuses on that basis.

Some of the analysts also went briefly “over the wall” from the research to the investment-business side of their firms to work on projects.

“You have an appearance problem,” Sen. George Voinovich, R-Ohio, told the analysts from Wall Street powerhouses J.P. Morgan, Lehman Brothers, Credit Suisse First Boston and Citigroup Salomon Smith Barney.

Several big investment firms lent money to Enron, invested in its partnerships, bought Enron stock and recommended it to investors. Now they face hundreds of millions of dollars in losses on the loans. . . .

For more, GO TO > > > The Story of Enron

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Wall Street Greed

Fight back against anti-competitive corporate mergers, unfettered free trade, downsizing, declining wages and corporate greed!

From http://www.gnp.org

Downsizing & Corporate Relocations

According to outplacement firm Challenger Gray & Christmas, companies cut more jobs in July 2001 than in any month since they started keeping track of layoffs in 1993.

Corporations announced a record 205,975 job cuts for July 2001 alone, bringing the total number of lost jobs for the first seven months of the year to just under 1 million.

What newspaper articles are not saying is that it is unregulated corporate actions that has caused the economy to go into the dumpster. But maybe even the media titans are starting to worry. The New York Post ran a photograph of “unemployed men on a soup line during the depression of 1934”, with the bold type asking “Is this the future?” [New York Post, 8/7/01, page 30]

* * *

Tyco International Ltd., a diversified conglomerate employing 220,000 people, purchased 7 firms for a total of $17 billion during the 9 month period ending June 30th. As a result of these acquisitions, they closed 58 facilities and cut 6,400 jobs — presumably because they were “redundant” workers. Tyco plans to eliminate an additional 2,000 workers. Although the company is managed from Exeter, New Hampshire, their “official” headquarters is in Bermuda. [Wall Street Journal, 8/14/01, page A6]

* * *

Companies are closing customer service centers in the United States and moving the jobs to India, where the workers are paid about $2,400 US per year. The customer service reps don’t tell their American callers that they are really located in India. “Companies that outsource to India would prefer to keep that under wraps”, reports S. Mitra Kalita in Newsday [7/15/01, pages F1, F6-F7].

* * *

It isn’t just customer service jobs being moved to India, either. Computer programmers are being laid off by the thousands in the United States with the work being moved to India. Programmers in India are paid about $5,000 US per year, and receive almost no benefits. Comparable programmers in the United States earn at least $50,000 US per year. According to Clive Thompson in Newsday, “database giant Oracle has announced that it would be investing $50 million to expand its Indian offices.” He also reported that Hewlett Packard is boosting its staff in India from 1,500 to 5,000.

As Mr. Thompson so eloquently stated, “Eventually the United States won’t make any hard goods, won’t do the cerebral stuff and won’t fulfill the orders. Then, what’s left? Brand building? Business development? Shopping? Would you like fries with that, sir?” [Newsday, 7/15/01, page B15]

* * *

The American flag flies high outside the corporate headquarters of Symbol Technologies, Inc. in Holtsville, NY. But even though the sales of their products are booming, as many as 700 jobs are being eliminated in the United States. An increasing amount of production is going to be handled at the company’s plant in Reynosa, Mexico. [Newsday, 5/4/01]

Then, less than 3 months later, Symbol Technologies announced that it was laying off an additional 1,000 workers and closing 9 distribution facilities to consolidate them all in the cultural wasteland of McAllen, Texas. It also reiterated its decision to move all high-volume manufacturing to Mexico and the Far East. [Newsday, 7/27/01, page A51]

* * *

The USX-U.S. Steel Group is closing the Fairless Works steel mill near Philadelphia, with 600 people losing their jobs as a result of “an increase in foreign imports”, according to the Wall Street Journal. These job loses were “permanent”, said a USX spokesman. [Wall Street Journal, 8/15/01, page A2]

* * *

United Services Automobile Association (USAA), an insurance and financial services firm, just announced that it would be cutting 1,370 jobs (almost 6% of its workforce). Most of the jobs cut will be at USAA’s San Antonio, Texas headquarters. [New York Times, 8/9/01, page C4]

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June 24, 2003

West Virginia sues Wall St. firms, seeks $300 mln

By Kristin Roberts

MIAMI, June 24 (Reuters) – West Virginia’s attorney general said on Tuesday he filed suit against 10 Wall Street firms, claiming relationships between banking and research departments represented an illegal conflict of interest under state law.

The complaint filed by Attorney General Darrell McGraw comes two months after a record $1.4 billion global settlement with those same firms following New York Attorney General Eliot Spitzer’s probes of stock research by Wall Street analysts.

West Virginia seeks more than $300 million in damages based on its Consumer Credit and Protection Act. The state is suing on behalf of residents who may have made investment decisions based on what it said could be biased research issued by the firms’ analysts.

The firms are Bear Stearns Cos. Inc. (BSC), Credit Suisse unit Credit Suisse First Boston, Goldman Sachs Group Inc. (GS), Lehman Bros. Holdings Inc. (LEH), Citigroup’s (C) Citigroup Global Markets, J.P. Morgan Chase & Co. (JPM), Morgan Stanley (MWD), Merrill Lynch Cos. Inc. (MER), UBS unit UBS Warburg, and the Piper Jaffray unit of U.S. Bancorp (USB).

Seven of the firms reached on Tuesday said they had no comment on the case. The others were not available.

Fran Hughes, deputy attorney general, said West Virginia was not asking the court in this case to force the firms to eliminate or alter any of their practices. Rather, West Virginia was seeking only monetary penalties.

“We just want them to pay for all the losses that they’ve intentionally caused,” Hughes said.

The state also claims two of the 10 Wall Street firms engaged in “spinning,” the practice of giving top corporate clients access to hot initial public offerings of stocks.

Under the West Virginia law, any unfair, deceptive or dishonest act directed at or affecting a state resident is punishable by a fine of up to $5,000 per offense. The attorney general said there could be “hundreds of thousands” of violations in this case….


 

May 31, 2002

Why Is Washington Ignoring
The Warning Signs Of Economic Devastation?

By Arianna Huffington, AlterNet

Hindsight — it’s all the rage in Washington. But though the story of the missed terror warning signals is eating up all the headlines, there is another story of warning signs being ignored by our elected officials that’s getting hardly any ink at all, even though these signs are multiplying at an alarming rate.

Here are a few of them:

In the last two years, 433 public companies — including Enron, Global Crossing, and Kmart — have declared bankruptcy.

Two million Americans have lost their jobs.

Four trillion dollars in market value has been lost on Wall Street.

And each day brings a fresh, stomach-turning revelation of the rampant corruption infecting corporate America. Despite these ominous flashing red lights, it now appears almost certain that no real reform legislation will come out of Congress before the November elections.

Think of that. After the outrage generated by Enron, Arthur Andersen, Merrill Lynch, and all the other corporate scumbags undermining the modern private enterprise system, the end result will be a continuation of the rotten status quo. And that means fresh disasters down the road. Yet we have the information to, as the phrase of the moment goes, “to connect the dots” right now.

It’s a textbook case of special interests triumphing over the public interest. In other words, unless you’re reading this in your executive boardroom, you’ve lost again. In this case, the biggest winners are those veteran Washington arm-twisters, the powerful — and very well-funded — accounting and financial services lobbies.

That’s right, the same folks who helped bring us this mess by relentlessly chipping away at the rules and regulations governing their industries are now ensuring that any efforts to clean things up will be thwarted. And lest we forget, the problem is that much of what is being done isn’t illegal but should be. Otherwise, the manic appetite for profits will continue to inspire Wall Street’s rats to squeeze through every loophole.

The latest example of their sinister handiwork is the sudden shelving of Sen. Paul Sarbanes’ accounting reform bill, a muscular measure that would strengthen the SEC, restrict accounting firms’ ability to double-dip as consultants and auditors for the same client, and impose stringent conflict of interest rules on the investment banking world.

Instead, the bill is in a deep coma and not expected to survive, having been pummeled within an inch of its legislative life by a goon squad made up of finance lobbyists and their No. 1 Senate enforcer, Phil Gramm.

First, the lobbyists brought out the rhetorical brass knuckles, issuing an “Action Alert” that Sarbanes’ bill would result in a “de facto government takeover” of the accounting profession and “serious, harmful consequences for capital markets and American business.”

The warning on a pack of cigarettes is less alarmist. Then Gramm pulled out his copy of Robert’s Rules of Parliamentary Obstruction and went to work, pressing Chairman Sarbanes to hold more hearings on the bill — even though the Banking Committee had already held 10 hearings on the matter since Feb. 12 — and offering 41 last minute amendments. Fellow Republican committee members added another 82 amendments for good measure — a few extra kicks in the gut of the lifeless bill.

It was democracy at its worst. The full court pressure worked. Sarbanes put the bill on ice and retreated to lick his wounds. When I called for his reaction, I was told he wasn’t talking to the press. Why not? He should be speaking out to anyone who will listen and hitting the talk shows with his condemnation of those knee-capping his efforts. Where is his indignation over Gramm’s bullyboy tactics?

It should come as no surprise that, according to the Center for Responsive Politics, the accounting industry has already doled out $5.2 million in 2002 campaign contributions — with $293,196 of that going to 16 of the 21 members of the Senate Banking Committee, including $37,500 to Gramm, and another $52,497 to Mike Enzi, who have cosponsored a highly diluted, industry-approved, next-to-useless alternative to the Sarbanes bill.

It was this generous spreading of financial manure that doomed an earlier effort, led by then SEC Chairman Arthur Levitt, to bar accounting firms from serving as both incorruptible auditor and smarmy sales help for the same company. Had Levitt’s measure passed, it very well could have removed the tempting apple that Enron used to corrupt Arthur Andersen.

And by the way, it’s not just Republicans dancing to the accountants’ tune. Sen. Chuck Schumer, the senior Democratic senator from New York, and among those who spearheaded the opposition to Levitt’s proposal, has received $438,431 from accounting firms since 1989.

It was this financial industry lobbying muscle that over the last decade pushed through legislation gutting so many of the regulations designed to bring accountability to our complex free market system: the Private Securities Litigation Reform Act, which made it much harder for investors to win lawsuits against corporations; the Financial Modernization Act, which demolished the barriers that had kept investment banks out of commercial banking since the Great Depression; and the Commodity Futures Modernization Act, which gave us unregulated trading of derivatives and made the Enron debacle possible.

Meanwhile the White House seems less than eager to put a reform bill on the president’s desk. Apparently, the post-Enron panic that inspired the president to propose a 10-point plan that included a reform of accounting standards has subsided. Or maybe the administration’s current do-nothing posture has something to do with the embarrassing revelation this week that the SEC has begun an investigation into whether Halliburton, under Dick Cheney, used questionable accounting practices to pump up its bottom line.

“Once the excitement and the glares fade,” accounting industry lobbyist John Hunnicutt said of reform efforts on the Hill, “people really start to think about it.” Translation: he and his friends are keeping all their fingers and toes crossed that, “once the excitement and the glares fade,” people will forget about the lies, the fraud, the cooked books, the document shredding and just lose interest. . . .

It looks like they just might get their wish. “It is unlikely,” Sen. Jon Corzine, a Banking Committee member championing reform, said this week, “that we will get strong reform unless there is a new event that captures the public imagination.” You mean the largest corporate bankruptcy in history and the parade of corruption that has followed weren’t big enough?

That’s like saying that Sept. 11 wasn’t enough — that we have to wait for the next horrific attack before we get serious about taking on terrorism (which, unfortunately, seems also to be the case).

Do we have to wait for another 433 companies to go belly up, and two million more Americans to lose their jobs, before our leaders heed the warning signals and make passing the post-Enron reforms a top priority?

How about a little foresight to go along with the heaping helping of hindsight Washington is serving up?

© 2001 Independent Media Institute. All rights reserved.

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June 10, 2002

In Search Of ‘Clean’ Stock

 by Jane Bryant Quinn, Newsweek

Alas, the guidelines for ‘social investing’ ignore a thing or
two. Last year they’d have led you to Enron,
as a ‘good energy’ company. Oops
.Socially responsible investors — both you and your mutual fund — have a new issue to confront. How do you handle the ethical swamp that’s turning up at the heart of some of America’s “cleanest” stocks? As a matter of principle, social investors buy only progressive companies that respect the community, treat workers fairly and conserve the environment.

ALAS, THESE GUIDELINES ignore a thing or two. Last year they’d have led you to Enron, as a “good energy” company. Oops.

Anyone can be taken in by fraud, but the problem for white-hat investors turned out to be larger than that. A stock may pass the traditional social-responsibility tests and still outrage one’s moral sense. You don’t want to own a company willing to cook its books or manipulate energy prices, no matter how nice it is to its employees. . . .

Social investing emerged from the stew of civil-rights marches and protests against the Vietnam War. The movement’s first mutual fund, Pax World, debuted in 1970—promising no defense, nuclear power or “sin” stocks (gambling, alcohol, tobacco). It sought environmentally savvy firms that hired women and minorities.

Next came the fight against South African apartheid and social investing caught on. Today, Morningstar counts 119 social funds, managing more than $13 billion (see socialinvest.org, for some names). If you add institutional and private money, social investors may control more than 12 percent of the managed assets in the United States. . . .

When I spoke with fund managers last week, I found them thinking about this problem but not sure how to quantify it. … How do you recognize the risk of duplicity in a company whose social report card shows gold stars?

One hard fact some funds are considering is CEO pay and perks. Over-the-moon compensation seems linked with companies that inflate their earnings. . . .

Funds are also looking what the company pays its auditing firm… That raises a question about how independent the auditors are, when their firms have that much money at risk….

The big question about social funds has always been how they perform. As usual, some shine while others don’t.

The former Citizens Index Fund leaned heavily toward tech stocks and got killed when the bubble burst. It remade itself as a big-cap growth fund and is trying again. Ariel, on the other hand, has been doing fine.

The entire social-investing group does as well as the market. Now they have to get better at finding truly white-hat stocks.

Reporter Associate: Temma Ehrenfeld, © 2002 Newsweek, Inc.

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June 17, 2002

Goldman unit insists it met
Japan tax obligations

TOKYO, June 17 (Reuters) – The Japanese unit of Goldman Sachs Group Inc (GS) said on Monday it had met all tax obligations in Japan and declined to comment on media reports that said it had failed to report some income by transferring funds overseas.

Japanese media reports said on Sunday that seven Japanese affiliates of the U.S. securities giant failed to report a total of five billion yen ($40.24 million) in income in Japan….

Jiji news agency and the Mainichi Shimbun newspaper on Sunday quoted unidentified sources as saying that the tax authority imposed an additional tax of some 1.5 billion yen, including penalty taxes, on the Goldman Sachs group firms after searching their premises for evidence.

The seven firms purchased bad loans, along with real estate assets put up as collateral, from Japanese banks at low prices, and transferred some of those assets to a dummy company in the Cayman Islands, a tax haven, Jiji said.

The Japanese affiliates also transferred the proceeds from related transactions to a Goldman Sachs group company in the Netherlands, effectively evading tax payments in Japan, Jiji quoted sources as saying.

“There are structures that have money going outside of Japan. But there was no wrongdoing and we complied with Japan’s tax regulations,” Camargo said.

There were similar reports last month about top investment bank Morgan Stanley (MWD).

Japanese media reports said the U.S.-based property fund run by Morgan avoided paying tax in Japan on 18 billion yen in income by funnelling money through Dutch “paper” firms.

Morgan said it believed it had met all tax obligations in Japan and that it had no current dispute with Japanese tax authorities.

The reports said the Tokyo Regional Taxation Bureau had concluded that the Morgan’s fund had used a loophole to reduce its profits on transactions involving Japanese real estate by using “dummy” companies in the Netherlands.

© 2002 Reuters

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December 12, 2001

Asbestos on the Brain

Strike three for Halliburton came this week when a third asbestos case in as many months went against the oil giant. Funny thing is, Halliburton does not, nor did it ever produce asbestos. Those who did have largely gone bankrupt, leaving the plaintiff’s bar to look for deep pockets that have even tangential connection to the cancer-causing agent. Investors are going to continue to have difficulties accurately pricing in this risk for companies like Halliburton and Sealed Air.

By Bill Mann (TMF Otter)

It’s been a tough couple of months for Texas.

First, Houston’s economy gets shelled due to the collapse of Enron (NYSE: ENE), replete with layoffs by the thousands, suddenly unneeded “in-process” real estate, and a loss of paper wealth among its citizens in the billions of dollars. Then Dallas-based oil services giant Halliburton (NYSE: HAL) suffered a 40% drop in share price after it disclosed that its asbestos litigation liability may be “materially more than previously expected.” That 40% represented about $5 billion in market value.

Plus, the Houston Astros flailed in the baseball playoffs, the Dallas Cowboys can’t beat anyone whose name doesn’t rhyme with “Mashington Wedskins,” and the University of Texas biffed a chance to play for the national championship in college football. When the fortunes in oil and football are going the wrong way in Texas, you know a lot of people there are not at all pleased.

Halliburton’s woes are not, however, related to either oil or football. They are from litigation from asbestos, a flame retardant material that, as it turns out, causes amongst other things, mesothlioma, a deadly form of cancer. Asbestos use peaked in the U.S. in the 1970s, though some experts say deaths from asbestos-related illnesses are not expected to crest until 2010. Therein lies the beginning of the problem for Halliburton and other companies with asbestos litigation risk: With diseases that can take more than 20 years to develop after exposure, no one has any idea how much the eventual claims will be, or when they will stop.

Here’s where it gets strange. As it turns out, Halliburton, which has in the last three months lost three court verdicts with liabilities at about $125 million, isn’t and has never been involved in asbestos. Instead, Halliburton merged with a company, Dresser Industries, in 1998, more than a dozen years after Dresser had been involved with asbestos. However, Halliburton’s merger with Dresser came with the assurance that Dresser’s liability for claims was insured. But since the insurer has no means to cover claims, the responsibility to pay goes right back to Halliburton, which has money and assets to spare.

That’s right. Halliburton is on the hook for potential asbestos litigation for being in the wrong place, and having a whole lot of money. It doesn’t really seem fair, but then again, neither is it fair to the victims of nasty diseases brought upon by exposure to asbestos fibers. Aristotle called the law “reason free from passion,” so really whether or not treatment of Halliburton is deemed fair by the general public matters not at all.

Why not sue the companies who produced the asbestos in the first place, you say? Well, for one thing, more than 25 companies, including USG (NYSE: USG), W.R. Grace, (NYSE: GRA), and Owens Corning (NYSE: OWC) have already filed for bankruptcy due to massive asbestos-related liabilities.

Other companies have some unknown asbestos liabilities as well. Sealed Air (NYSE: SEE) held a conference call to comfort investors that its asbestos liability has not changed and were inconsequential and that all cases against the company “are inactive pending the disposition of the Grace bankruptcy.”

Sealed Air, like Halliburton, has never had any asbestos operations. In Sealed Air’s case, it purchased a division of W. R. Grace. When Grace filed for Chapter 11, two committees representing asbestos-related claimants filed motions with courts to pursue Sealed Air as being successively liable. The company believes that the chances of this happening are slim, but admits that quantification of claims against it should its defense fail is impossible.

There are a couple of lessons here. First of which is that no one is safe from the plaintiff’s bar, but that is not so much an investment issue as it is a reality of living in these United States.

The second issue is that uncertainty can murder stocks. Do you think that Halliburton’s 42% drop had to do with the potential payout of $30 million? The company might have $30 million in its petty cash drawer. Halliburton has had done to it what Philip Morris (NYSE: MO) was feeling in 1999 (and may still be today): when investors cannot quantify a known and realized threat, they will assume the worst. . . .

For more on Halliburton, GO TO > > > Nests in the Pentagon; The Sinking of the Ehime Maru

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July 25, 2001

When the fix was in

How Wall Street’s storied
Chinese wall failed investors

By Richard J. Newman and Peter Basso, U.S. News & World Report (www.usnews.com)

On Wall Street, there are bulls and bears. And now––well, now there are bloodhounds.

With the collapse of the tech sector and the nose dive in the Dow, regulators, shareholders, and lawyers are baying for blood. Investigators from the Securities and Exchange Commission and the Department of Justice are examining whether questionable––and maybe criminal––behavior occurred at some of the top-tier underwriting firms that fueled the white-hot market for initial public offerings from 1998 to 2000.

“I am deeply troubled by evidence of Wall Street’s erosion of the bedrock of ethical conduct,” said Republican Rep. Richard Baker of Louisiana last week at congressional hearings. “Our first goal . . . is to begin a process of rebuilding confidence in the market.”

That’s why the Securities Industry Association unveiled a new code of ethics for Wall Street stock pickers last week. The new rules are designed to prevent analysts from thinking of self-gain or their bosses’ approval when they make “buy” or “hold” calls. But for many investors, the push for “integrity” comes way too late. Some of the same folks who once sued for access to IPOs are now joining class action suits, claiming they were swindled by Wall Street analysts working both sides of the Chinese wall that once separated brokers from their counterparts on the research side.

Through May, 105 such lawsuits had been filed, according to Stanford Law School data.

Scandals about hot new issues are nothing new on Wall Street, of course. For over 40 years, regulators have tried to tame the misconduct that inevitably follows speculative surges in the market for new offerings. It’s not quite like clockwork, but roughly once a decade for the past 40 years there’s been a nasty round robin of IPO bubbles, scandal, investigation, and efforts at reform. Here we go again.

IPO markets –– the quickest way to get rich on Wall Street -– can spawn the seediest kinds of white-collar crime:

Picture boiler rooms where fast-talking sharpies dump artificially inflated shares on widows and orphans. Testimony in a stock-fraud case portrayed Steve Madden, the renowned shoe designer, forking over $80,000 in a brown paper bag at a country club in Roslyn, N.Y., to a partner in a scheme to manipulate IPOs and share the trading profits.

But the latest kerfuffle constitutes the biggest IPO investigation yet, an ugly coda to the most highflying new-issues market in history. At the epicenter is Credit Suisse First Boston, the firm that underwrote more IPOs than any other over the past two years. Under fire, CSFB has put three brokers on leave. At least six other employees are under investigation by regulators. The firm says it’s cooperating with investigators but insists its practices are in line with others in the industry.

Other underwriters under the microscope: Goldman Sachs, Bear Stearns, Merrill Lynch, Morgan Stanley Dean Witter, and Salomon Smith Barney. All are defendants in shareholder lawsuits.

Writ large, the issue is basically one of conflict of interest. Did professional investors investing on behalf of wealthy clients pay kickbacks in the form of abnormally high commissions to get in on the hottest offerings?

The motivation would have been strong: At the height of the boom, IPOs were soaring far above their offering prices, allowing those first in line to reap huge windfalls by selling shares quickly after the offering. To initiates, the practice is known as “flipping.”

In the Nasdaq’s heyday, a good flip could yield millions of dollars––overnight. Evidence? Total profits earned on the difference between the offering price and the first day’s closing price for IPOs in 1999 totaled some $35 billion, says finance Prof. Jay Ritter at the University of Florida. That’s more than in all prior years––combined. And everyone, it seems, was in on the action. Last week, the Wall Street Journal reported that six members of Congress flipped IPO stocks, claiming one-day profits as high as 414 percent.

Insiders.

The line between reasonable business practices and illegal deals is murky, say experts. Unless you’ve paid a bribe for the privilege, flipping is not only legal; it’s also great for a money manager’s investors. “By and large, we take the allocations we get and make money on flipping,” says the general counsel of one giant mutual fund company. “I tell my managers it’s their duty to the client.” Likewise, commissions are negotiated and might be higher than usual for valid reasons. “It doesn’t smell like a criminal case,” says a former criminal prosecutor. “There’s a sophisticated buyer, a sophisticated seller, and no poor victim.” Says Baker, who chaired last week’s congressional hearings: “It is one thing for one shark to eat another. It is quite another thing for the shark to eat the minnows.”

Meet minnow Bruce Gavin.

“I’m not in this because I’m whining and I lost a few dollars in the market,” the 50-year-old computer engineer from Sacramento, Calif., says. Gavin, a plaintiff in a lawsuit filed against PlanetRx.com and six of its IPO underwriters, says he lost $10,000 on shares of the failed online drugstore. “I’m in this,” he says, “because there’s been serious trading based on news that’s only available on the inside or to preferred customers.” The minnows, in other words, didn’t get a shot at flipping––and wound up buying at inflated prices.

Dozens of class action suits have been filed by shareholders alleging violations of both securities and antitrust laws. In a suit against MarketWatch.com and six of its IPO underwriters, lead plaintiff Phillip Walsky of Wayne, N.J., claims the firm issued “false and misleading” information in its prospectus to pump up the stock price. The suit also accuses Credit Suisse and other underwriters of seeking to “surreptitiously extract inflated commissions.” When the first 2.75 million MarketWatch shares sold on Jan. 14, 1999, they rocketed from $17 to as high as $130, ending the day at $97.50. The shares now trade near $3. Other suits make similar claims against a list of former Internet darlings, such as Marimba, Red Hat, and VA Linux.

Sell high. The firms insist the suits are without merit. And there are legitimate questions about whether the entrepreneurs who sought IPOs for their young companies are the victims of IPO abuses––or the perpetrators. Entrepreneurs selling coveted shares to the market wouldn’t necessarily want underwriters to pass so much money to outsiders, when that money might instead go to the company’s coffers.

“Issuers bought into the mantra of the IPO as a marketing event,” explains Ritter. “They were choosing underwriters based on the fact that a well-known analyst would be touting their stock.” The reason? Months after the IPO –– when restrictions on corporate sales expired –– corporate officers could then cash in their own shares at steep profits.

Pressure on investment bank analysts to issue upbeat ratings on the stock of client firms is often intense, recalls one analyst who used to cover natural gas firms for a major Wall Street house. “We had seven people covering 55 companies, and we were expected to have buys on every one of them,” he says.

Resurrecting a Chinese wall between the research and investment banking departments now tops the agenda in Washington and on Wall Street (box). The guidelines issued by the Securities Industry Association last week call for more safeguards against touting suspect stocks. Further reforms are likely to require investment banking firms to disclose how they dole out IPO shares and ban kickbacks or tie-in arrangements.

Until then, Wall Street’s IPO machine is humming away quite nicely, thank you. Last week, investors scarfed up 280 million shares in the Philip Morris spinoff of Kraft, netting $8.68 billion for the parent company and its underwriters. CSFB managed the offering, and together with Goldman Sachs it will lead the $3 billion-plus IPO later this year for AT&T Wireless Services.

Business as usual.

< < < FLASHBACK < < <

June 5, 1997

Hong Kong –– Growing Economic Fears

From Pacific Rim, Managing Editor: Antonio Tambunan

Hong Kong people’s fears about the future escalated as they gave the Government’s economic stimulus plan the thumbs down, sending the stock market tumbling more than 3% on Monday of this week. . . .

The bureau said the regional turmoil was making things worse: tourism numbers, down sharply since the handover, hit the retail sector; and unemployment was at its highest in 14 years.

”Locally, our situation was not helped by the dismissal of staff by some established companies amidst warnings of more lay-offs and the collapse of some businesses,” the bureau said in its report on the survey, which was carried out between May 11 and 15.

Financial Secretary Donald Tsang Yam-kuen said on Friday that the Government’s 1998 growth forecast of 3.5% was ”unattainable”, but gave no revised GDP estimates, saying the situation was too uncertain to predict.

In response to the slump, the government scrapped anti-speculation measures in the property market, acted to improve bank liquidity and moved to boost tourist numbers. But stock brokers said the market felt the plans were too little, too late.

… And the Merger Mania Continues …

Travelers Group will buy a 25% stake in Nikko Securities for 220 billion yen (about US$1.59 billion), the biggest foreign investment to date in Japan’s rapidly opening securities industry. Travelers will buy 70 billion yen worth of Nikko shares and 150 billion yen of convertible bonds, the companies said in a joint statement on Monday. Nikko will buy an unspecified number of Travelers shares. Nikko, in a separate release, said it would issue 154.2 million new shares at 436 yen per share to be sold to Travelers on August 28.

Travelers will also form a joint venture in Japan with Nikko to be called Nikko Salomon Smith Barney. Nikko will own 51% and a Nikko executive, Yuji Shirakawa, will be the chairman. Travelers’ investment banking unit, Salomon Smith Barney, will own 49%, and its head in Tokyo, Toshiharu Kojima, will be the chief executive officer. The new company will start with 140 billion yen in capital.

Nikko Salomon Smith Barney will open in January. It will underwrite stocks and bonds, do large-lot securities trading, advise on mergers and acquisitions, produce economic research and develop derivatives and other financial products. Through the deal, Travelers will gain better access to 1,200 trillion yen of financial assets held by Japan’s avid savers. It could lure some of that from individuals, who keep 60% of their financial assets in bank deposits yielding less than 1%.

Travelers, which agreed in April to merge with Citicorp to form the world’s biggest financial company, will become Nikko’s largest shareholder and the first major foreign investor in Japan’s top three brokerages.

The purchase is the latest in a string of foreign forays into Japan’s newly deregulated financial industry. Industry leaders are encouraging the infusion to help them overcome a seven-year economic slump and a series of scandals.

In March, Merrill Lynch & Co took over branches and hired thousands of employees from Yamaichi Securities after the firm, Japan’s fourth-largest brokerage, went bankrupt.

Goldman, Sachs & Co, Fidelity Investments, and HSBC Holdings also forged alliances with Japanese banks last month.

Indonesia –– First Family Fortune Probed

Attorney-General Sujono Atmonegoro yesterday announced he was investigating the wealth accumulated by ousted president Suharto’s family. . . ..

Pressure by prominent government critics to probe the wealth accumulated by relatives of Mr Suharto has mounted since he resigned on May 21. Mr Suharto’s half-brother Probosutejo said recently that the former first family would reveal their assets if formally requested by the attorney-general’s office. . . .

The attorney-general declined to comment on the size of the fortune believed to have been amassed by the former first family, estimated by some media reports at about US$40 billion.

Meanwhile, the Indonesian military has set a schedule for the court-martial of 19 soldiers suspected of opening fire on a peaceful student protest at Trisakti University in Jakarta on May 12, killing four students. . . .

The finding followed a probe into the shooting by a military team set up by armed forces chief General Wiranto after Mr Suharto stepped down May 21.

The shootings triggered widespread riots which left 500 dead in Jakarta. . . .

For more on Suharto, GO TO >>> The Indonesian Connection

Thailand –– Crackdown on
Illegal Immigrants

Hoping to free up jobs for Thai workers, police yesterday launched a crackdown on 200,000 illegal workers believed to be living in and around the capital. Immigration authorities said they hoped workers would voluntarily leave the country, as required by a June 1 deadline set by the Government, but threatened to arrest and deport those who refused.

The majority of the illegals come from Burma to work on construction sites. Others are from equally poor neighbours Cambodia and Laos. A random check of four police stations revealed only a few arrests.

The action in Bangkok comes a month after a crackdown began in the provinces, spurred by Labor Ministry expectations that sending the illegal workers home would create jobs for Thais.

But employers in several industries – among them fishing and construction – said Thais would not perform dirty or poorly paid jobs. Border and fishing provinces that depend on cheap foreign workers have successfully lobbied for exemptions from the drive. . . .

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When it comes to right-on, Texas-style, tell-it-like-it-is plain talk, nobody is better at it than Jim Hightower. The following take on Wall Street is from his book, If the Gods Had Meant Us to Vote, They Would Have Given Us Candidates:

THE FLO CHART

Flo is a waitress at the Dine & Go Diner, where she works an early breakfast shift, six to nine.

Then she goes downtown to the law offices of Meager, Wages & Miser, where she’s a “legal aide” … doing grunt work ten to four for a bevy of insurance company lawyers. Ironically, Flo doesn’t have insurance.

She does have a couple of great kids, though … and she considers them her real job, though she’s stretched mighty thin on time and energy and wishes she was with them more frequently.

She’s also taking a couple of night courses at the community college, trying to get ahead. To know how the nation’s economy is doing, we don’t need to consult some trumped-up confidence index or the ethereal Dow Jones average but the Flo Chart.

How’s Flo doing?

Hers is the heartbeat of America’s majority— the 80% of folks who are paid less than $50,000 a year, the 60% who don’t own any stocks and bonds, the 75% who don’t have a university sheepskin hanging on the office wall . . . and the two-thirds who aren’t voting because neither party is fighting for Flo.

The economic elites try to fool Flo by pointing to the glittering stock market; the media elites try to fool Flo by pointing to their smiley-faced consumer reports; the political elites try to fool Flo by pointing to the 20 million jobs created in the nineties. So why isn’t Flo fooled? Because, to determine her economic situation, she analyzes data that the elites ignore. . . .

Flo’s leading economic indicator is called “Income.”

When you’re alone at your kitchen table doing calculations like that, it’s hard to be fooled by a distant chorus telling you that you’re doing great. … With important exceptions like [Ohio Rep. Jim] Traficant, politicians of both parties gloat about America’s amazing “job-creating machine,” and the media cheerfully parrots industry’s claim that so many people are now at work that they can’t find applicant’s for all kinds of jobs, from low-tech hamburger flippers to high-tech computer code writers.

For employees and job seekers, however, the issue is not getting a job (Flo has two), but getting a job that offers middle-class basics— decent income, health care, vacation time, and pension….

You want statistics? . . . In real dollars, average hourly wages in 1973 were $13.61. Today they average $12.77. Far from gaining from the “Boom,” American workers are paid less today than when Richard Nixon was president! . . .

The 25-year decline in the Flo Chart almost exactly tracks the 25-year rise in the Democratic Party’s fealty to Wall Street money. As the party’s congressional, White House, and campaign officials bonded tighter and tighter with the corporate and financial elites, they distanced themselves further and further from Flo . . .

The fact that Flo is being pounded economically is not a case of benign neglect but of the Democrats joining the Republicans to support policies that mug her, stealing her middle-class aspirations by aggressively holding down her income.

Let me be blunt: Low wages are the official policy of the U.S. government.

If you’re a manufacturer wanting to hold down wages here at home, the government will book you on a trade delegation to Asia, hook you up with a contractor that provides workers for as cheap as fifteen cents an hour, underwrite your foreign investment, suspend tariffs and quotas so you can ship your cheap-labor products to stores back here, and put out a press release saluting you for joining in a private-public partnership to foster “global competitiveness.”

If you’re a minimum-wage employer, don’t worry about any rabble-rousing populism from Democrats— they’ll give you a wink as they hold any increases to a level way below poverty. Even at the higher wage levels, if you’re a Microsoft, IBM, or Silicon Valley giant and want to put a drag on the salaries of your engineers, programmers, and other high-tech workers, count on the Democrats to join Republicans in helping you import an extra 50,000 or so of these workers each year from Pakistan, Russia, and elsewhere, letting you pay them a third to a half less than U.S. workers, thus busting the American salary scale.

And if wages do show any sign of creeping up, count on Uncle Alan to step in and stomp on them.

Alan Greenspan, as chairman of the Federal Reserve Board, is the ruling authority over our nation’s monetary policy, and he hates wage increases. You see, if wages rise, they might possibly pinch corporate profits ever so slightly, and this might spook your big Wall Street investors, causing the high-flying stock prices of corporations to slip a notch.

Since today’s upper-class prosperity is built almost entirely on the bloated prices of those corporate stocks, both parties are determined that nothing should spook these investors, even if this means keeping Flo down. . . .

Both parties have made the same choice— Greenspan, first appointed by President Reagan and reappointed by Presidents Bush and Clinton, has been their bipartisan hit man on Flo. There’s no relief in sight for the poor lady, either, since both Democrat Gore and Republican Bush have signaled that they want Uncle Alan back for yet another term. . . .

Greenspan uses the Fed’s power over interest rates to hammer Flo, much like some clod might use a sledgehammer to swat a fly. At the slightest hint that it’s possible sometime in the future for wages somewhere to rise … Greenspan pounces. . . .

Last summer the cold-eyed, pursed-lipped Greenspan openly urged Congress to bring in more immigrants, using them as wage-busters: “I have always thought … we should be carefully focused on [what] skilled people from abroad and unskilled people from abroad … can contribute to this country. . . . If we can open up our immigration rolls significantly, that will clearly make [wage inflation] less and less of a potential problem.”

Add to Washington’s wage-busting policies, that delight that Wall Street takes in corporate downsizing, and you have a surefire formula for holding wages (and people) down. The politicians who talk so loud and lovingly about America’s job-creating machine go mute on the topic of America’s job-destroying machine . . .

Challenger, Gray & Christmas is a highly regarded employment firm that tracks job cuts daily, and it reports that companies have been eliminating some 64,000 jobs a month, most of which are the higher-paying jobs that come with health care, pensions, and vacation time.

It gets little media coverage, but downsizing in the late nineties has been more rampant than it was in the 80s and early 90s, when it was a major media story and led to Clinton’s ‘92 presidential victory.

Remember his slogan, “It’s the economy, stupid,” and his pledge to create “good jobs at good wages?”

Instead, he learned that if he just laid low, like Brer Fox, while corporations punted those jobs, Wall Street investors would cheer lustily and run up the stock price for the companies doing this “streamlining,” then the media would focus on the lightning flash of the Dow Jones average, and he would get credit for presiding over a thunderous, stock-driven boom. . . .

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INSIDERS DON’T SWEAT COLLAPSE

by Michael Perkins and Celia Nunez

“LONG BEFORE THE STOCK MARKET WENT INTO THE TOILET, THE BIG BOYS GOT OUT.”

Last March, the tech-heavy Nasdaq index reached a staggering 5048, prompting venture capitalist John Doerr to claim that we were witnessing “the greatest-ever legal creation of wealth in the history of the world.”

This week, the Nasdaq fell below 2000. Someone is out a lot of money, and that someone is primarily the small retail investor. Why? Because the insiders– entrepreneurs, venture capital firms, investment banks and large institutional investors– pulled out their capital long before the fall, leaving mom-and-pop investors holding the bag.

Instead of the greatest-ever legal creation of wealth, the high-tech financial bubble represented the greatest-ever legal transfer of wealth– from retail investors to insiders.

For example, between November 1998 and July 2000, Goldman Sachs, Morgan Stanley Dean Witter and Credit Suisse First Boston each pocketed more than $500 million in underwriting fees from Internet companies. And over the past two years, technology underwriting as a whole brought in close to $1 billion for each bank. . . .

Some insiders would argue they, too, have been hurt by the market’s decline. And in fairness, it should be noted that not eery insider pulled out early. … But the fact is, not all stock losses are the same, because the insiders get their stock for pennies a share, if that.

Thus, while an insider may have seen his portfolio slip from $50 million to $5 million, he probably paid only $100,000 for his stock, so he’s still ahead in terms of real money.

But when individual investors see their stock portfolios plummet, it’s real.

The TRUTH is, little investors never stood a chance, because they simply don’t have the same access, both to key information and to early deals, as big investors.

One reason is the “quiet period” mandated by the Securities and Exchange Commission, which requires a startup company to shun any publicity regarding its finances for at least three months before its initial public offering. The law was intended to keep a company from hyping its stock, but in reality its main effect is to keep small investors in the dark.

Big institutional investors such as Fidelity and Vanguard are never in the dark. They’re treated to what’s known as a “road show” just days before an IPO. In this private meeting with company executives, they are updated on the startup’s financial situation.

Thus, the big investors know if a stock has recently become more risky and can pass on it. Or they may decide to buy it anyway, knowing they can resell the stock on the first day of trading before any bad news about the company is reported. This practice, known as “flipping,” became common in an era when Internet stocks were routinely tripling in value on their first day of trading.

Institutional investors weren’t the only ones flipping stock during the hot market. Individual insiders did it too. During the Nasdaq bubble, investment banks would routinely give hot new IPO stocks – FREE – to corporate executives, venture capitalists and other decision-makers sitting on the boards of companies whose business the banks wanted.

These privileged decision-makers would then flip their shares on the first day of the IPO for quick profits.

While the investment banks were giving out free stock to their favored clients, they were also giving out bad advice to their mom-and-pop customers.

In a study of high-tech stocks, Roni Michaely of Cornell University and Kent Womack of Dartmouth College found that investment banks rarely downgrade a company’s stock to a “sell” rating if they have a business relationship with the company.

Despite these shenanigans, the savvy retail investor could at least take comfort in Rule 144, the SEC regulation that bars a company’s owners from selling their stock for 180 days after an IPO. (This type of stock is sometimes referred to as “locked stock.”) So if the stock did tank three months after it was issued, at least the small investor could find solace in the fact that the entrepreneur and his venture capital backers had taken a loss on their stock as well.

Or did they?

Actually, during the high-flying days of the tech bubble, few insiders were required to take risks. The investment banks devised a new financial service: They would promise to buy a venture capitalist’s or tech executive’s locked stock as soon as the 180 days were up – but at the stock’s higher early issue price.

This special service for favored customers didn’t cost the banks a thing, since they would then use a combination of sophisticated financial instruments to “short” the stock. That is, the banks would make money if the stock dropped in value, which it almost always eventually did.

The technology stock bubble is already being compared to previous financial manias” Dutch tulips in the 1600s, U.S. railroads in the late 1800s, etc. But what sets this most recent mania apart is its Ponzi scheme quality.

Never before has so much wealth been transferred from one group of people to another in such a short time.

Maybe if the Securities and Exchange Commission steps in to restore fairness, it never will again.

(Michael C. Perkins is a founding editor of Red Herring magazine and co-author of “The Internet Bubble.” He and Celia Nunez are authors of A Cool Billion,” a novel about Silicon Valley.)

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December 2001

The Man Who Loves to Sue Wall Street

Veteran New York attorney Mel Weiss has filed scores of lawsuits against investment banks,
seeking billions for what he calls ‘corrupt’ IPO practices
.

By Edward Robinson – Bloomberg Markets Magazine

Mel Weiss says he knows the reason behind the boom and bust of the initial-public-offering market during the late 1990s—and it’s not irrational exuberance. Weiss, a New York plaintiffs lawyer who specializes in stockholder lawsuits, says the IPO rise and fall was the result of the largest case of market manipulation and fraud ever to beset the investing public.

“This process was absolutely corrupt,” Weiss says, “and it’s vicious in its impact because people were taking their life savings and putting it into this market as if it was never going to end.”

Since February, Weiss, 66, has filed more than 180 class-action lawsuits against Wall Street investment firms on behalf of hundreds of investors. Among the firms named in the suits are Credit Suisse First Boston; Goldman, Sachs & Co.; Merrill Lynch & Co.; Morgan Stanley Dean Witter & Co.; Robertson Stephens Inc.; Lehman Brothers Holdings Inc.; and Salomon Smith Barney Inc., as well as the Internet technology companies they took public.

Weiss vows to prove that the banks used kickback schemes, secret profit-sharing agreements with selected clients and price fixing to inflate the value of IPOs. Individual investors who bought these companies’ stocks paid hidden premiums and should, in effect, receive refunds, he says.

Many of the cases center on the activities of Frank Quattrone, head of CSFB’s technology investment banking group in Palo Alto, California, and his staff.

Victoria Harmon, a spokeswoman at CSFB, denies Weiss’s charges. “We refute the allegations in these suits and will defend ourselves vigorously,” she says. Harmon’s counterparts at Goldman Sachs, Morgan Stanley and the other banks decline to comment. . . .

As in most securities cases that Weiss has tried, his ultimate aim will likely be to seek a cash settlement for his clients. In these cases, the banks may have to spend $1 billon-$6 billion to settle the litigation, according to James Newman, executive director of Securities Class Action Services, a research firm. Newman estimates that losses attributable to the alleged fraud are $10 billion-$60 billion; securities class actions are typically settled at about 10 percent of losses. . . .

Dozens of other plaintiffs’ firms have filed similar claims against investment banks and Internet companies. In total, 860 class actions, the largest collection of such cases in financial history, have piled up in U.S. District Court in lower Manhattan in connection with almost 200 IPOs launched from 1998 through 2000. . . .

“The last time we saw a feeding frenzy like this was the savings and loan crisis,” says Daniel Dooley, head of PricewaterhouseCoopers’s securities litigation consulting practice, referring to the failure of more than 880 S&Ls from 1988 to 1993.

 In addition, the U.S. Securities and Exchange Commission and the National Association of Securities Dealers (NASD) are each investigating Wall Street’s IPO allocation practices, and the U.S. Attorney’s Office in New York has impaneled a grand jury that is pursuing a criminal probe….

In Weiss, the investment banks face a foe who has stung them before. In 1998, Weiss’s firm, which he co-founded in 1965, roiled Wall Street when more than 30 market makers——including Merrill Lynch, CSFB, Goldman Sachs and A. G. Edwards & Sons——paid an unprecedented $1.02 billion to settle an antitrust suit alleging that they had fixed the prices and spreads of stocks traded on the Nasdaq Stock Market….

Now the stakes are even higher. Resolving these cases could eclipse the largest securities-class-action settlement so far: $2.8 billion, paid out by Cendant Corp. in an accounting fraud case in 1999.

Securities class actions are usually settled before they go to trial, because companies fear backbreaking jury verdicts, says Joseph Monteleone, a senior vice president at Kemper Insurance Cos., which writes policies for corporate officers and directors.

“I don’t think anyone foresees any of these cases ever making it to trial,” he says….

At the heart of the cases are two sets of allegations:

First, claims Weiss, underwriters demanded that some investors pay secret, excessive brokerage commissions to get allocations of shares in the IPOs of hot Internet companies.

Weiss says those payments, by which investors agreed to share up to 33 percent of the profits made in an IPO, were nothing more than kickbacks. He argues that company officers and underwriters violated the Securities Act of 1933 by failing to disclose such commissions in prospectuses and registration statements.

Second, Weiss alleges that underwriters entered into “tie-in” arrangements with investors——transactions in which investors secretly agreed with underwriters to purchase shares at preset prices in the days after the offering, known as the “aftermarket.” Also called laddering,” this practice can artificially boost share prices and is illegal.

For example, Red Hat Inc., a Durham, North Carolina-based software maker, went public on Aug. 11, 1999, at $14 per share. Weiss says lead underwriter Goldman Sachs used tie-ins to jack up the price following the offering, and within 30 days, the price had soared eightfold. Goldman; CSFB, a co-underwriter; and Red Hat all decline to comment….

Locker, the lawyer representing companies named in the suits, says Weiss’s tie-in allegations don’t make sense. “Why would underwriters, given the extreme demand for IPO allocations and expectations that such stocks would skyrocket, need commitments from investors in the aftermarket to boost the stock?” she asks.

Weiss replies that the motive was simple: “The greed factor on Wall Street became acute.”…

Milberg Weiss’s scorecard includes settlements in some of the biggest financial fiascoes of the past 15 years.

In 1988, Weiss, representing a class of bondholders, helped reach a $775 million settlement in litigation regarding the financial meltdown of the Washington Public Power Supply System, the largest municipal bond default ever.

In 1992, Milberg Weiss—representing stockholders and bondholders in American Continental Corp., the parent of Charles Keating Jr.’s Lincoln Savings & Loan——helped recover $240 million in a racketeering suit connected to Drexel Burnham Lambert and Michael Milken….

Weiss says he savors challenging powerful opponents. In February 1999, he stood before more than a hundred German executives, ministers and other dignitaries in Bonn as the lawyer for thousands of slave labor victims suing German industry for human rights crimes during World War II.

Weiss cut right to the heart of the matter, asking the defendants if they were prepared to get the aging victims some cash before they died. As part of a larger settlement involving all victims of the Holocaust, he resolved the class actions with the German government and several companies—including DaimlerChrysler AG, Siemens AG and Degussa AG—in 2000 for $5.2 billion….

Weiss’s lawsuit against VA Linux, a Fremont, California-based company that makes workstations supporting the Linux operating system, and CSFB, the lead underwriter in its IPO, is likely to be the primary test case because it was filed first, says Steven Schulman, a Milberg Weiss partner working on the litigation.

Under Frank Quattrone’s direction, CSFB became the No. 1 underwriter of IPOs in the computer, software, Internet and semiconductor industries in 1999 and 2000, garnering 24 percent of the market, according to Bloomberg data. CSFB is named in 66 of the class actions filed.

The suit charges that CSFB entered into secret arrangements with hedge funds to allocate blocks of the 4 million shares VA Linux offered in its IPO on Dec. 9, 1999, in exchange for payments made in the form of excessive commissions.

VA Linux went public at $30 per share and skyrocketed to $239.25 that day, the largest single-day gain in history for an IPO.

On Nov. 9, 2001 it traded at $1.75.

The suit names two hedge funds—— GLG Partners LP, based in London, and Chelsey Capital, based in New York——as having obtained “suspiciously large allocations.”…

Weiss says the CSFB commissions constituted a kickback scheme in which investors agreed to share IPO profits with CSFB and other co-underwriters. The profits were allegedly paid back to the bank in the form of extra brokerage commissions dispensed on trading that got executed in unrelated stocks in the weeks and months following the offering.

By adding 20 cents-$1 per share in commissions in trades of, say, General Electric Co. or AT&T Corp. or any other stock, the investors, the suits charge, kicked back profits from their earnings on the IPO of VA Linux, a process known as a “wash transaction.”

Weiss is not accusing CSFB of violating securities laws with the transactions themselves. He says VA Linux and CSFB broke the law by failing to disclose extra commissions in the IPO prospectus and registration statement.

As a result, Weiss says, the prospectuses were “false and misleading” and shareholders should be entitled to recover their investments.

Nicki Locker, VA Linux’s lawyer, says her client was not obligated to disclose the payment of excessive commissions under the Securities Act of 1933….

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August 22, 2001

Editorials

 Asian Times Online

Speaking of corruption …

There are as many opinions on what exactly caused the 1997-98 Asian crisis as there are analysts of it. But four years after speculative attacks on and forced devaluation of the Thai baht kicked loose the mudslide, the International Monetary Fund, the World Bank, and most – Western, at any rate – analysts seem to be agreed that lack of transparency in financial transactions, political loans and lending to family members without due diligence or project evaluation, and other questionable or corrupt practices grouped under the catch-all terms of “moral hazard” and “crony capitalism” played a major role in making the East Asian economies vulnerable to taking a great fall.

The drop in East Asian asset prices, of course, was dramatic. Just prior to the onset of the crisis in July 1997, the combined stock market capitalization of the exchanges of the principal crisis economies of Indonesia, Korea, Malaysia and Thailand was around US$520 billion.

By January of 1998, it had dropped to about $280 billion, and – some intermediary rallies notwithstanding – now stands at $260 billion, cut in half over the past four years.

These are ugly numbers.

Consequences of the East Asian asset price collapse, unhappily, have not been limited to the rather small number of asset holders, but have affected hundreds of millions of victims of collateral damage.

Ugly practices equally responsible for the financial and social disaster of the past several years must be stamped out. . . .

For every greedy and unscrupulous East Asian borrower there were not only greedy Asian, but as many equally greedy and “moral-hazard”-afflicted Western and multilateral lenders. At the World Bank, there was a whole team that “analyzed” and touted the “East Asian Miracle” only a couple of years before the crisis hit, and it was “Asian values”, not “moral hazard” the fabled report highlighted. The combination of venom and glee to which Asia and its economic woes have been treated since 1997 represent a disgusting bit of hypocrisy.

In this context, we take note of a prescient Wall Street Journal article. In part it read:

“Last year banks boosted credit [at] … the fastest pace in 10 years. More financial institutions eased their lending standards than raised them, and many lowered rates for the dicier deals.

According to a prominent banker, ‘Credit standards are the weakest of any time during [his] nearly four decades of banking.’

A leading businessman said,There’s too much money chasing too few deals … As long as the economy stays hot, the impact of slipping credit quality will remain muted. But when the downturn hits – and someday it will hit – the recession will be exacerbated by defaults on loans that never should have been made.”

And, no, the article was not in shrewd anticipation of the Asian crisis. It was published on April 20, 1998 and it was about the US economy. The banker quoted was John Medlin, chairman of Wachovia Bank, and the businessman GE’s Jack Welch. Two years later, US technology stocks collapsed. Six months after that the US economy went into steep decline. Moral hazard? Corrupt practices? We’ll let US regulators, bankers, analysts and financial journalists figure that out.

And US regulators, specifically the Securities and Exchange Commission, and New York prosecutors at present have another little problem to cope with. It appears that during the late 1990s Internet IPO boom a cozy little relationship between analysts, investment bankers and preferred investors developed.

“You write a nice report on the prospects of a company about to go public and you’ll be rewarded,” analysts were told. And paid they were. “We’ll make sure you’ll get all the stock allotments you want, but you’ll kick back some of your profits,” investors were told.

And kick back they did.

And who were the ones doing the telling? Not some fly-by-night brokerage outfits, but Wall Street’s big boys: Credit Suisse First Boston in the lead, followed by Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers, Salomon Smith Barney.

CSFB’s tech team boss Frank Quattrone raked in hundreds of millions, personally; the bank billions.

Cronyism? C’mon now.

But our favorite – ah, so transparent – recent deal is a transcontinental, transcultural one.

A few months back, Deutsche Telekom, one of the world’s largest (and most heavily indebted – in the order of magnitude of the foreign debt of Thailand) telecommunications companies acquired US mobile phone service provider VoiceStream. As the result of the acquisition, Hong Kong’s Hutchison Whampoa, a VoiceStream shareholder, found itself with tens of millions of Deutsche Telekom shares it apparently didn’t want.

But there was a problem: a lock-up period terminating September 1, 2001, during which no shares could be sold. So, on August 3, Hutchison officials met in Hong Kong with Deutsche Bank officials and a deal was struck: Hutchison would “lend” its Deutsche Telekom shares to Deutsche Bank for a year (some call options included), and the bank would sell the shares in private transactions.

Quite coincidentally, also on August 3, a Deutsche Bank telecom analyst, Stuart Birdt, issued a “Buy” recommendation for the Telekom stock. Then, on August 7, the bank put 44 million Telekom shares on the market – and shortly thereafter the Telekom share price in Frankfurt crashed, losing 30 percent in value within 48 hours and imparting losses of well over US$10 billion to shareholders caught unawares.

Shady deal?

Not so, says Deutsche Bank which stands to collect hefty commissions. Not so, also appears to be the verdict of the German securities watchdog (whose teeth seem to have been pulled and eyes blinded).

Yes, Dear Reader, we know: Two wrongs don’t make a right. Shady Asian deals don’t become acceptable because of shady American and European ones.

We just thought we’d inform you on the marvelous progress of globalization.

(c)2001 Asia Times Online Co, Ltd.

For more on globalization, GO TO > > > The World Trade Organization

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From Den of Thieves, by Pulitzer Prize winner, James B. Stewart:

ABOVE THE LAW

In April 1986, a ripple of anticipation washed over the more than 2,000 participants crammed into the main ballroom of the Beverly Hilton as curtains drew back for a screening of one of Drexel’s “commercials,” now a popular fixture of the Predators’ Ball. As the strains of the “Dallas” theme song filled the room, Larry Hagman strode onto the screen, flashing a “Drexel Express titanium card.” The card has “a ten-billion-dollar line of credit,” J.R. drawled. “Don’t go hunting without it.”

Then came a spoof of the popular Madonna video, “Material Girl.” A voice like Madonna’s lip-synched “I’m a Double-B girl living in a material world,” a double entendre referring to low-grade bond ratings and bra size. Madonna danced on the video screen and the chorus sang, “Drexel, Drexel.” The crowd roared with delight. When the spotlight fell on the conference’s surprise entertainer, it was Dolly Parton.

Drexel, proud of its own new star, wanted Martin Siegel front and center throughout the affair, but Siegel demurred. He’d only been at the firm a month and a half, and he didn’t want to upstage veteran Drexel officials. Siegel declined the opportunity to host the M&A (Mergers & Acquisitions) department breakfast, leaving that role to Dennis Levine, who boasted of Drexel’s growing strategic prowess. But [Frederick] Joseph did persuade him to moderate a panel featuring takeover lawyer Joseph Flom and other lawyers discussing legal developments in the takeover field.

“You know me as a staunch defender of targets,” Siegel began, reaching under the table and donning a white cowboy hat, symbolizing the blue-chip Kidder, Peabody. “Just because I’ve come to Drexel doesn’t mean I’ve changed my views,” he said with a twinkle in his eye as he reached under the table again and substituted a black hat for the white one.

Everyone laughed, even Siegel’s establishment clients. Several of them, including the chairmen of Lear Siegler and Pan American, gave presentations at the conference. The corporate lambs were lying down with the lions.

And so were the politicians. Drexel had had no Washington office or registered lobbyists before 1985. Then, however, Congress had begun rumbling about hostile takeovers.

During the Unocal raid, Representative Timothy Wirth, the powerful Colorado Democrat who chaired the Subcomittee on Telecommunications, Consumer Protection and Finance, introduced a bill outlawing green-mail.

Drexel, opposed to the measure, hired a former White House aide and opened an office in Washington. It retained Robert Strauss, former Democratic National Committee chairman, and John Evans, a former SEC commissioner, as lobbyists. Contributions from Drexel’s political action committee rose from $20,550 in the 1984 elections to $177,800 in the 1986 elections.

At the 1986 Drexel bond conference, the once-critical Wirth was a featured speaker. Drexel executives gave $23,900 to his successful Senate campaign, and Wirth became a defender of junk bonds. His earlier attempt to prohibit greenmail went nowhere, and he didn’t reintroduce it.

Drexel invited other influential politicians to speak, including Senators Bill Bradley, Alan Cranston (the recipient of $41,750 in Drexel money that year), Edward Kennedy, Frank Lautenberg, and Howard Metzenbaum. Most of them seemed as dazzled by the aura of megamoney as the lowliest pension-fund manager.

For good measure, Drexel executives contributed $56, 750 to Senator Alfonse D’amato of New York, then chairman of the securities subcommittee. . . .

During the early and mid-1980s, Milken’s highly leveraged clients seemed to show an amazing ability to stave off default, even when operating results were disappointing. In those cases, Milken simply “restructured,” piling on a new and dazzling array of high-yield securities to replace the debt that was on the verge of default. The new tiers invariably pushed payments further into the future, giving the company more time to revive, and forestalling any rise in default rates.

That Milken could sell such restructurings – many of which, to anyone who studied the numbers, appeared obviously doomed – was not merely a tribute to the pervasiveness of his myth. It was a measure of the pliability of his captive clients, especially the savings and loans and insurance companies.

By mid-1986, Milken’s friend Tom Spiegel had loaded Columbia Savings and Loan with $3 billion of Drexel-generated junk; his crony Fred Carr’s First Executive had a whopping $7 billion. More astoundingly, Milken himself would sit down at the end of the day and move chunks of securities in and out of their portfolios. No one minded as long as profits kept mounting.

Milken had other captive buyers. David Solomon ran his own money management firm, Solomon Asset Management, with over $2 billion in assets, most of it from employee welfare and pension plans.

He had become one of Milken’s earliest converts, and invested heavily in Milken’s high-yield products. Milken rewarded Solomon by making him a manager of a junk-bonk mutual fund, the Finsbury Fund.

Finsbury’s purchases of Milken products generated enormous commissions for Milken’s high-yield department, some of which were owed to the Drexel salesmen who induced clients to buy into Finsbury. But Milken wanted all the commissions he had to pay other Drexel salesmen. When Solomon refused, Milken threatened to have Solomon removed from his lucrative position as Finsbury’s manager. Solomon capitulated.

Milken and Solomon, to recoup the commissions, simply inflated the price paid by Finsbury for junk bonds, and Milken pocketed the difference. Sometimes Milken helped generate phony tax losses for Solomon’s personal trading account. Solomon evaded paying taxes on about $800,000 of income in 1985 alone. And Milken bestowed some equity from the Storer buyout on Solomon. Much of this scheme was illegal; ultimately, it was Finsbury shareholders and U.S. taxpayers who were being cheated. . . .

~ ~ ~

Thus, in ways large and small, legal and illegal, the ordinary discipline of a free market of arm’s-length buyers and sellers was undermined. The high-yield market’s growth was limited only by Milken’s ability to generate product – not by market discipline or independent decision-making on the part of buyers. In 1976, before Milken moved to Beverly Hills, junk-bonk issues had totaled $15 billion.

Now, in 1986, it was $125 billion . . .

As for Milken’s own personal wealth, public and private estimates at the time tended to hover around the $1 billion mark . . . Yet this was very far from the truth. Milken made $550 million from Drexel in 1986. In addition, he (and the funds he controlled in the names of family members) probably earned at least that much from the Beatrice warrants alone. Milken and other partners received a distribution of $437.4 million from Otter Creek, the Milken-created partnership that had traded so presciently in National Can stock.

Beatrice was only one of dozens of transactions in which Milken and his family gained valuable warrants and other equity interests, and Otter Creek was only one of more than 500 Milken-created partnerships. While such assets shift in value and are difficult to measure in any event, a closer and still conservative estimate of Milken’s and his family’s net worth by the end of 1986 would be $3 billion.

In all likelihood, Milken had made himself one of the ten richest men in America.

No wonder Milken seemed so in command at the 1986 junk-bond conference. . . . Drexel was now truly a rival to Goldman, Sachs and Morgan Stanley. At this rate, those firms would inevitably be eclipsed. . . .

That year’s guest list was practically a who’s-who of self-made multimillionaires of the 80s: Merv Adelson, Norman Alexander, Henry Kravis, George Roberts, Boone Pickens, John Kluge, Fred Carr, Marvin Davis, Barry Diller, William Farley, Harold Geneen, Rupert Murdoch, Steve Ross, Ron Perelman, Peter Grace, Sam Heyman, Carl Icahn, Ralph Ingersoll, Irwin Jacobs, William McGowan, David Mahoney, Martin Davis, John Malone, Peter Ueberroth, David Murdock, Jay and Robert Pritzker, Samuel and Mark Belzberg, Carl Lindner, Nelson Peltz, Saul Steinberg, Craig McCaw, Frank Lorenzo, Peter May, Steve Wynn, James Wolfensohn, Oscar Wyatt, Gerald Tsai, Roger Stone, Harold Simmons, Sir James Goldsmith, Mel Simon, Henry Gluck, Ray Irani, Peter Magowan, Alan Bond, Ted Turner, Robert Maxwell, Kirk Kerkorian. Mingling with them were key Drexel corporate finance and bond salesmen, such as Siegel, Ackerman, and Dahl. . . .

Boesky arrived, accompanied by two bodyguards. Siegel hadn’t seen Boesky since March 1985, more than a year ago. He noticed Boesky was carrying his small purse, and then he noticed how tired and drawn Boesky seemed.

There were no women at Bungalow 8 this year. Siegel had told Joseph that he wouldn’t participate in anything that involved procuring women, whether they were out-and-out prostitutes or not. Joseph himself had tried to ban the women after the 1984 conference, but Milken and Engel had opposed him. Milken, despite his own professed family values, insisted that “men like this sort of thing.” This year Joseph had put his foot down. He assured Siegel and Schneiderman that he had ordered Engel not to invite any women to the bungalow, and Engel had reluctantly complied. But he made sure there would be beautiful women at the dinner afterward at Chasen’s, even if wives also attended. . . .

Joseph looked over the crowd, and felt, for the first time, an almost palpable sense of the power that Drexel had unleashed. He turned to Schneiderman. “We can’t let this go hog-wild,” he said, struggling to be heard over the din of the party. “No one is going to let every company in America get taken over.”

~ ~ ~

Boesky, his trademark black three-piece suit and watch chain concealed under cap and gown, looked out of sorts as he waited impatiently in the wings of Berkeley’s Greek theater, the outdoor amphitheater that serves as an open-air setting for the University of California’s commencement ceremonies.

Rows of students filed into their seats, eagerly anticipating Boesky’s address. The students of the university’s business school, Milken’s own alma mater, had chosen Boesky, by popular vote, to be their 1986 commencement speaker. The famous arbitrageur, lacking even a college degree, had flown to California that day, May 18, 1986, in a private jet. He was typically late, arriving halfway through the traditional dean’s banquet that precedes the ceremony. . .

After welcoming remarks by the dean, Boesky stepped to the podium, greeted by enthusiastic applause. He quickly demonstrated that he could be an excruciatingly dull speaker. He dwelled on platitudes about America as a land of opportunity and told of his own rise, a highly edited story of how the Detroit-raised son of immigrant parents had conquered Wall Street. Then, when it seemed as though he would lose his audience permanently, he galvanized the crowd with just a few sentences

“Greed is all right, by the way,” he said, raising his eyes from his text and continuing with what seemed like genuinely extemporaneous remarks.

“I want you to know that I think greed is healthy. You can be greedy and still feel good about yourself.”

The crowd burst into spontaneous applause as students laughed and looked at each other knowingly. . . .

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PART IIPART III

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APOLLO ADVISORS

BEWARE! THIS BULL IS FOR THE BIRDS!

BIRDS IN THE LOBBY

BIRDS THAT DRINK FROM CESSPOOLS

THE BLACKSTONE GROUP

BOEING, BOEING, BONG

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

DIRTY GOLD IN GOLDMAN SACHS

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

INVESTIGATING INVESTCORP

NESTS IN THE PENTAGON

PARADISE PAVED

PRUDENTIAL: A NEST ON SHAKY GROUND

P-S-S-T, WANNA BUY A GOOD AUDIT?

THE ACCOUNTANTS’ HOEDOWN

THE GREAT NEST EGG ROBBERIES

THE STORY OF ENRON

TRACKING THE TYCO FLOCK

VAMPIRES IN THE CITY

VULTURES IN THE MERGER MARKET

WHAT PRICE WATERHOUSE?

THE XEROX CONSPIRACY

YAKUZA DOODLE DANDIES

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Last Updated December 29, 2006, by The Catbird

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