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Janice, how about a comment on BoBo's forum from you?
Here's the site: http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/181/Default.aspx
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By x. trapnell on 3/26/2006
Great commentary: a nice blend of expert commentary and understated wit.
"Since I’ve never left a share of stock with a broker (once you’ve seen how the sausage is being made, you never eat it again), . . .
I've got a feeling we'll be seeing much more of Dr. Trimbath speaking on these issues in various public forums in the future.
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By jcline on 3/26/2006
Really...
and the DTCC says they do not have a problem....we do not know whereof we speak, we do not know how the system works....... we just want our stocks to go up!!!!....
well Houston...me thinks you do have a problem!
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By bobo on 3/26/2006
Note that Susanne didn't say that the ex-clearing mess is only 15% of the size of the overall FTD issue. She said the "by-the-rules" interpretation should limit it to 15%. And we all know how well Wall Street likes to follow the rules - take Refco for example...
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By golden1101 on 3/26/2006
Nuts . . . Thats all I can say . . . This is nuts. Thanks Susanne and thank you Mr. Bobo for getting this stuff out there.
Janice,
when B, C, ... sell, what are they selling?
B, C, D, E ... etc are PHANTOMS
Meaning set A is the only actual set that's real.
Janice ... you surprise me.
I didn't think you were that dense!
but they're still the same apples
Comments
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By jza4 on 3/26/2006
WOW!!! a real eye opener! Hope she is on the prosecutions side when this goes to court!! )) Keep up the good work Bobo. Can't wait for 60 Minutes!
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By mhelburn on 3/26/2006
In your examples, this trades could not happen without the stock borrow program.
The first example is for laundering money which one assumes is done to mask the origination of the funds.
The second example is a way to drive the price down by selling without maintaining a position that would be subject to a loss as the share price declines.
Right?
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By browntrout on 3/26/2006
Susanne- Thanks for elaborating about your background and your situation with the DTCC. Basically your answers about what the DTCC does and says confirms they are knowingly involved in a massive looting and misleading scam. I would like to see you give more information about the grandfathering of FTD's that gives you nightmares because it is also what I believe. I expect the DTCC will have to make another misleading statement next week attacking your credibility, background, etc. P.S.-Did you happen to talk to Sixty Minutes in the past few weeks?
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By bobo on 3/26/2006
The second is a way to drive the price down using the same pool of dollars. The first is a nice way for organized crime or terrorists to launder funds.
Nice system we have, huh?
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By some questions on 3/26/2006
Its probably too late, however I have some questions:
1. How many "accounts" should my broker need at the DTCC to ensure my IRA securities are not lent out?
2. Is it possible for the DTCC to lend out shares that are specifically identified as non lendable (i.e., IRA, 401K, cash accounts, etc.).
Wonderful explainations! - keep up the good work!!
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By smuopr8r on 3/26/2006
So example 2 is the game BS is playing? Piling up short sales they "might" eventually have to buy back, and all they need to show is enough money for their largest funds transfer transaction to do it, which the never actually spend? We need a court-ordered injunction, stat!
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By bobo on 3/26/2006
Somequestions:
The Stock Borrow Program operates on the honor system - there is no regulation to ensure that your broker isn't violating the rules and depositing your shares into the SBP, in violation of the rules. We just have to trust that he isn't.
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By tommytoyz on 3/26/2006
The requirement to link clearance and settlement is clear in the 1934 Securities Exchange Act :
Section 17A -- National System for Clearance and Settlement of Securities Transactions
1. The Congress finds that--
1. The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
4. The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
2.
The Commission (SEC) is directed, therefore, having due regard for the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers and dealers, clearing agencies, and transfer agents, to use its authority under this title--
1. to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of transactions in securities (other than exempted securities); and
2. to facilitate the establishment of linked or coordinated facilities for clearance and settlement of transactions in securities, securities options, contracts of sale for future delivery and options thereon, and commodity options;
Bob's belief is spot on. Once settlement and clearance are de linked, the broker dealer are free to manufacture security entitlements out of thin air. So we get it from all sides. The NSCC failing to deliver, and the broker dealers misrepresenting security entitlements.
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Re: First In The "Experts Speak Out" Series - Dr. Susanne Trimbath Knocks One Out Of The Park
By mhelburn on 3/26/2006
It is no wonder that the DTCC is anxious to discredit Dr. Trimbath. Are there legitimate reasons to use ex-clearing? What is the advantage of using ex-clearing?
read on gal ...
It’s a word game. The stock borrow program doesn’t track who lent the share (only who borrowed it).
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 3/26/2006
Here is the first in a series of interview questions posed by Bob O'Brien, and fielded by Dr. Susanne Trimbath - a noted and acknowledged authority on stock clearing and settlement. Dr. Trimbath's questions are in blue, and Bobo's questions are in bold:
1) Tell us a little about your background at the DTCC…
Being an economist is my second career. I have 20 years experience in financial services, from Prudential Insurance, through the Federal Reserve Bank and 3 different depositories. I was with the Pacific Clearing Corporation and the Pacific Securities Depository Trust Company the last 2 years before they shut down (1985-1987). I was in operations there both as an analyst and as a manager. After the shutdown, Depository Trust Company (DTC) moved me to New York as Director of Transfer Agent Services, an industry liaison position. Since the same companies that ran transfer agencies (Chase, US Trust, BoNY, etc.) were also broker/dealer Participants at DTC, I was frequently called on to help them with problems that extended beyond my job description into reorganizations, dividends, proxies and even settlement.
At DTC (now a subsidiary of DTCC), one of my more important accomplishments was to propose and then enhance a service for the direct mail of certificates by agents to shareholders at the request of participants. I also proposed, developed and tested automated direct withdrawals and deposits at custodians. Both programs are complementary services to Direct Registration offered by issuers, which the NYSE is trying to have made a listing requirement. After leaving DTC, and before entering the PhD program at NYU, I worked about a year in Russia helping them build clearing, settlement and depository operations.
2) Some have expressed the sentiment that you are a whistleblower, and that it is high time a whistleblower came forward.
Do you consider yourself a whistleblower? And, just for the record, are you being compensated for your statements about NSS?
Legal protection for whistleblowers is largely reserved for those who take on the government. Otherwise, you would at least be employed by the party you are decrying. I wouldn’t meet either of those qualifications. Since I’ve never left a share of stock with a broker (once you’ve seen how the sausage is being made, you never eat it again), I can’t claim to have been individually harmed by the activity. Of course, if DTCC attempts to withhold my pension because I talked about their role in this mess, then I might have a claim to “whistleblower.” We’ll have to wait an undisclosed number of years before I’m eligible to test the matter.
As I described earlier, I am on my second career, working full time as an independent researcher and consultant in economics and finance. Although capital markets and corporate finance are in my research portfolio, I first addressed the specific topic of NSS at the request of paying clients beginning in late 2003. Since that time, I have worked and will continue to work as an advisor and consultant on NSS for a variety of firms. What it comes down to is that someone pays me to give them direct advice on NSS; when I make public statements it’s usually not for hire but rather in the interest of civic education. Part of my marketing strategy is to be sure all the stakeholders in NSS know that I can help them. I apply a similar strategy to my other areas of specialization such as international finance and economic analysis of law.
3) Given your background there, what do you make of the current FTD issue – let’s start with, why does the DTCC keep all the data secret?
As the saying goes, “Macy’s doesn’t tell Gimble’s.” DTCC keeps certain data private so that Shearson won’t figure out Merrill’s business strategies. All the Participants compete with each other, so DTCC is careful about data that might reveal firm-specific holdings or transactions. That said, there is much aggregate data that the DTCC could release that would not reveal any trade secrets but that could reveal the real magnitude of the problem.
4) Some refer to the SBP as a “self-replenishing, anonymous lending pool.” Would you agree with this characterization?
Yes. It is definitely anonymous (unless rules are being broken). And since nothing prevents the buyer who receives a borrowed share for settlement from depositing shares into the lending pool at the Depository, it is self-replenishing.
5) The DTCC takes great pains to make it clear that the SBP doesn’t allow a broker to lend the same share twice via the SBP. My contention is that they certainly allow the same share to be lent by different brokers, thus their rhetoric is disingenuous. Do you agree, or disagree?
It’s a word game. The stock borrow program doesn’t track who lent the share (only who borrowed it). So the stock borrow program doesn’t allow ANY shares to be lent…only borrowed, get it? They play the same word game when they say they don’t make money on the stock borrow program.
They don’t.
What they DO make money on is the stock lending program.
By the way, they also make money on fails to deliver. OK, so the same shares aren’t lent twice by the same broker because the lender’s account is reduced by the number of loaned shares until the loan is repaid. Fine. What they aren’t saying is that the shares are a “fungible mass,” and no one keeps track of which share was used to settle which trade. So, a Participant who receives 100 shares of OSTK at settlement could be getting 50 borrowed shares. And it is those 50 shares that can be loaned a second time since all settlement is considered to be “final.”
6) I believe that most of the current FTD issue is caused by two things – the de-linking of clearing and settling, and the allowing of access to the proceeds from a failed delivery over and above collateralization requirements. Would you agree, or disagree, and care to comment on any other issues you feel are contributors to this?
It depends on what the meaning of “is” is…. No, wait, that was something else.
It depends on how you define “(T)he current FTD issue”. Regarding “the allowing of access to the proceeds from a failed delivery over and above collateralization requirements” this is a very convoluted statement. Are you referring to the release of collateral on borrowed stock as the price of shares is driven into the ground? Are you referring to the fact that the seller gets paid for a failed delivery because of net settlement and the ever present “fungible mass”? I see the FTD issue as additive to the NSS issue and the stock lending issue. In other words, I see the problem as being at least 3 times as big as any one observer is willing to admit.
The over-arching problem actually got much worse when clearing and settlement (in the form of NSCC and DTC) were connected under DTCC. Think blue-suited brokers at NSCC and grey-suited bankers at DTC. NSCC was run by the trading side where net settlement minimized the number of cash and share deliveries to one per day (basically). DTC on the other hand is like a bank for brokers; it’s where they keep the shares they need to effect settlement. DTC’s status as a quasi-bank provided more regulators and more oversight. Both NSCC and DTC had different Boards, populated from different sides of the houses, with different interests. When they brought them together, it appears that the blue suits won and their Wall Street Cowboy mentality is dominating the organization.
That said, I always believed that they should not have been separated at birth. It is my opinion that there were two dominant personalities at the time and each aggressively sought to have their own area of authority. After those guys retired, the door was open to reunite the two sides. Unfortunately, by then they had grown to be very different. Perhaps because of weak understanding on the part of the Federal Reserve and the SEC about what these two do, the clearing side was allowed to dominate and with that, “trust” was no longer the middle name.
7) Do you have any opinion as to how large the “ex-clearing” FTD situation is versus the “in-system” FTDs? A ratio?
The by-the-rules version of market infrastructure dictates that the ex-clearing portion should be very small, maybe 15% of the whole problem. In fact, since the clearing system enables NSS, FTD and stock loan, there’s no reason to go ex-clearing with the dirty deeds. Here’s a simple example of how to engage in money laundering and counterfeiting using the Stock Borrow Program and the “in-system” mechanisms.
In a future response, I’ll show a diagram where the entire operation can be accelerated if there is at least 1 ex-clearing transaction. It basically shows that things move much faster if you can get at least 1/3 of the transactions processed ex-DTCC.
8) Any opinion as to how large the total grandfathered position of FTDs was?
Big enough to give me nightmares
Copyright ©2006 Bob O'Brien
I notice you equate Etrade with crooked brokers Janice.
Is there something you know. Care to share?
... If the little guy won't call for his stock, the crooked brokers are sure as heck not going to volunteer to call for it for him.
"On the contrary. Etrade provided the certs for ALL of their clients who held CMKX, whether they'd requested certs or not."
If you think its already been proved, why are you hanging around this CMKX board?
What has to happen for you to go?
A C.E.O. Who Wouldn't Say 'I Settle'
Published March 19. 2006 6:01AM
By JENNY ANDERSON
New York Times
Sandy, Utah
GARY D. KENNEDY, a 52-year-old former chief executive of a software company, was sitting on a black leather chair in his home office here in Sandy, an affluent suburb of Salt Lake City, beneath a painted portrait of his family. It was 1:15 p.m. on Dec. 15, 2005: he remembers it vividly. His wife, Jane, was standing over the fax machine when she noticed a strange expression on her husband's face. "What is it?" she asked.
Mr. Kennedy hung up the phone, looked up, and told her that the government, which had pursued a securities fraud case against him for more than five years, had decided to drop the charges.
Jane Kennedy, usually a poised and determined woman, collapsed and wept. "It was the first time I'd let myself acknowledge what had happened to us, the hell we had been through," she said.
It was a remarkable moment, not just because Mr. Kennedy had fought the Securities and Exchange Commission for years, but because he had won, just weeks before his trial was set to begin in Salt Lake.
http://www.gadsdentimes.com/apps/pbcs.dll/article?AID=/20060319/ZNYT05/603190373/1011
Janice, do you expect to see a large naked short position in CMKX proved by the cert pull program?
Go Bud Go !!!
http://www.thesanitycheck.com/Blogs/BudBurrellsBlog/tabid/84/EntryID/159/Default.aspx
The number keeps building. There are just under 466 Billion shares in the box so far at the counsel to the owners group, with an estimated 28% of shareholders in. There are over 2500 faxes of additional shares yet to be processed in the current backlog. Conservatively, let's hear it for 1.5 Trillion shares in total on an outstanding issued number of 100 Billion!
Perhaps Madame LeFarge will handle the insatiable monster with one tooth if it can hopefully be brought back. Better yet, let's let the Red Mafiya handle the collections, backed up by the Mossad. We will get back more than was stolen if either unit handles the collections in their own inimitable fashion.
I was once questioned about the wisdom of getting familiar with the shareholders of CMKX. I was right and the questioners were wrong. One crime doesn't excuse another. There may have been really disreputable behavior by management, but that doesn't excuse the conduct of the criminal naked short sellers. If this short breaks the back of the entire situation, which it could by itself, then every person who has been victimized owes them a debt of gratitude.
The twit at the SEC who came up with the concept of using the shorts as "Unregulated Policemen" should go to the head of the future headless line. It is doubtful that person is still at the SEC. He/She sounds like a political appointment, not a career civil servant, most certainly an attorney. For the latter status, maybe we can figure out a way to execute them twice.
I hope the CMKX shareholders' Owner's Group holds a mass rally in DC when they get their settlement, right outside the Congress. Headings for the signs they should carry will be easy to come up with.
Global client Elgindy slammed by U.S. attorney
TSX Venture Exchange (:*TSX)
Friday March 03 2006 - Street Wire
Also U.S. Securities and Exchange Commission (:*SEC) Street Wire
by Lee M. Webb
Amr (Anthony) Elgindy, a short selling fraudster who conducted many of his trades through Vancouver-based Global Securities Corp., deserves "a very substantial term of imprisonment," according to Assistant United States Attorney John Nathanson. In fact, the U.S. government thinks Mr. Elgindy should be locked up for life.
Mr. Elgindy was arrested in May of 2002 and convicted on 11 counts of a 32-count indictment for racketeering, securities fraud and extortion last January. He is now scheduled to be sentenced on March 22.
As previously reported by Stockwatch, six other defendants have also been convicted in the case and are awaiting sentencing.
Jeffrey Royer, a former FBI agent who passed confidential law enforcement information on to the short seller, was tried along with Mr. Elgindy and convicted on nine of 15 counts including racketeering conspiracy, securities fraud and obstruction of justice.
Derrick Cleveland, a former broker and ex-convict who served time for drug trafficking, copped an early plea to racketeering and testified against co-accused Mr. Elgindy and Mr. Royer.
Robert Hansen, who operated a website for Mr. Elgindy, and trader Donald Kent Terrell both pled guilty to conspiracy to commit securities fraud and co-operated with the government.
Hedge fund manager Jonathan Daws also pled guilty to conspiracy to commit securities fraud.
Mr. Royer's girlfriend and former FBI agent Lynn Wingate pled guilty to obstruction of justice.
Mr. Elgindy, the central figure in the case, will also be sentenced on a separate conviction relating to his April 17, 2004, attempt to board an airplane using fake identification while on pretrial release.
In a 117-page sentencing memorandum filed on Dec. 23, 2005, defense lawyer Brian H. Berke of Kramer Levin Naftalis & Frankel argued that Mr. Elgindy should be sentenced to no more than 43 months in prison.
The prosecution filed its 88-page sentencing memorandum on Feb. 10. Not surprisingly, the government argues that Mr. Elgindy deserves a far heftier sentence than 43 months.
"Applying what the government believes to be the appropriate guidelines analysis, the guidelines imprisonment range for this defendant is life," the U.S. prosecutor claims.
Criminal enterprise
According to the U.S. prosecutor, Mr. Elgindy barely acknowledges that he was convicted of racketeering and conspiring to commit securities fraud and denies that he played any significant role in the eponymous "criminal Elgindy Enterprise."
Perhaps most tellingly, at least from the perspective of the prosecutor, Mr. Elgindy's sentencing memorandum "eschews any mention of the extraordinary scope of the corruption of governmental functions that lies at the heart of this case."
As the government sees it, Mr. Elgindy induced Mr. Royer to steal information about dozens of FBI and U.S. Securities and Exchange Commission (SEC) investigations, including investigations involving undercover agents and co-operating witnesses in cases involving organized crime and terrorism.
"Even had this defendant failed to earn a single dollar through his criminal enterprise, his role in this extraordinary breach of the public trust would warrant a lengthy sentence," Mr. Nathanson argues.
Offering an overview of Mr. Elgindy's criminal enterprise, the prosecution claims that the short seller led a group that traded on confidential law enforcement information in dozens of stocks and, using his AnthonyPacific.com and InsideTruth.com websites, manipulated the market in dozens of stocks through deceptive trading, timed release of information, exaggerated claims and other misrepresentations.
According to the government, Mr. Elgindy's racketeering enterprise revolved around and depended upon his AnthonyPacific.com website. The prosecution claims that Mr. Elgindy used the website for the controlled dissemination of confidential law enforcement information that he encouraged his members to trade upon.
The website was also something of a direct cash cow for Mr. Elgindy. Between December of 1999 and April of 2002, members paid between $200 per month and $600 per month to access the site, generating fees of more than $2.7-million over that period. (All amounts are in U.S. dollars.)
While Mr. Elgindy reportedly told members that all fees went to the maintenance of the site, in fact by early 2001 only 9 per cent of the fees were used to pay for site maintenance.
Personal FBI agent
The prosecution claims that Mr. Elgindy actively cultivated his relationship with Mr. Royer, who he referred to as "my personal FBI agent."
"In fact, it's clear that Royer essentially worked for the defendant well before he left the FBI at the end of December 2001," the prosecution claims, offering a July 12, 2001, e-mail from the FBI agent to Mr. Elgindy as a supporting example of the relationship.
"Laughed my ass off at GAHI today," Mr. Royer wrote, a reference to Global Asset Holdings Inc. "What a shit company. Take care of Derrick (Mr. Cleveland) on this one. He got some good info in my opinion."
Mr. Royer went on to offer some comments about a Dallas-based brokerage firm with a checkered reputation.
"Solomon Grey could potentially keep us in business for a long time," Mr. Royer remarked in his e-mail to Mr. Elgindy. "Meanwhile, we can drive them crazy by driving their dick in the dirt on all their turd deals."
Among other things, the prosecution notes that Mr. Royer attended a party for AnthonyPacific.com (AP) members in Las Vegas in the summer of 2001 and stayed in Mr. Elgindy's hotel room.
"As part of the Las Vegas festivities, the defendant and several AP site members were photographed with Royer's business card plastered to their foreheads," the prosecution notes, going on to add that Mr. Elgindy "partially reimbursed" Mr. Royer for his trip expenses.
The prosecution offers its assessment of what underpinned a letter that Mr. Royer wrote to Mr. Elgindy's probation officer to recommend early termination of his probation in connection with his conviction for insurance fraud in 2000.
"Royer was sufficiently in the defendant's pocket that Royer wrote a letter to the defendant's probation officer, recommending early probation-termination, in which Royer falsely claimed he was still an FBI agent," the prosecution says.
"As is clear from discussions about this letter, the defendant wanted to use Royer's position as an FBI agent in any way that satisfied the defendant's ends and Royer was willing to do anything to curry the defendant's favor," the government claims.
According to the prosecution, on Aug. 14, 2001, Mr. Elgindy told Mr. Royer that he would "need a letter saying how valuable I am to the U.S. government."
"Can I start with something like Tony is so cool he shits ice cubes or Tony is as valuable to the U.S. Government as two-ply is to toilet paper," Mr. Royer, then still with the FBI, replied. "Both of these statements are true to the best of my knowledge.
"I know I have to write a recommendation for you, but when, where and how.
"It would be great if I didn't have to due to some flunky finding out about it later and holding it against us, but whatever works, I know you don't want me to leave the bureau before it is written, all I want to know is if that will be in October, April or next October."
Mr. Royer left the FBI in December of 2001 and in January of 2002 both he and Mr. Cleveland "officially started working in the defendant's office in San Diego."
The scope of the scheme
According to the U.S. government, Mr. Elgindy traded in at least 23 stocks after receiving confidential law enforcement information from the FBI, courtesy of Mr. Royer.
"The defendant actively encouraged AP site members to do the same, in part to put downward price pressure on the stocks and thereby increase the value of the defendant's short positions," the prosecution claims.
The government also argues that Mr. Elgindy actively manipulated the share price of certain stocks, on occasion instructing members to either stop "hitting" a stock or telling them he wanted a stock at a certain price so that he could get a cheap block of stock to cover short positions.
By the prosecution's account, Mr. Elgindy was something of an information control freak.
"Indeed, the defendant closely controlled the information that was placed on the site, and would monitor and penalize members who acted in opposition to his wishes," the prosecution claims.
Mr. Elgindy's free public site, InsideTruth.com, also figured in his manipulation scheme.
"Rather than being a genuine research tool, InsideTruth's true purpose was to put out negative reports on stocks that the defendant, his co-conspirators and site members were shorting in order to cause those stocks to fall," the prosecution says.
According to the prosecution, Mr. Elgindy disseminated misappropriated information to his site members, told them how to trade on that information, reprimanded members who disobeyed him, exaggerated the significance of his research reports and lied to give the impression that he was a selfless crusader.
"Taken together, the defendant's actions artificially impacted the market prices of the shares of companies he targeted, putting the defendant's actions squarely within the definition of manipulative conduct," the government says.
The prosecution claims that Mr. Elgindy used a similar array of tactics to extort shares of Nuclear Solutions Inc. to cover a short position that he and other site members had accumulated in the stock.
Among other things, the prosecution also claims that Mr. Elgindy functioned as an investment adviser who "essentially told AP members what stocks to trade and when to trade them."
Moreover, the jury found Mr. Elgindy guilty of frontrunning and trading against advice with respect to some of his calls.
Another crime
The prosecution notes that Mr. Elgindy committed "yet another crime" while released on bail in 2004.
On April 17, 2004, two days earlier than a travel date he had given to his pretrial services supervising officer, Mr. Elgindy tried to board a plane from MacArthur Airport on Long Island using fake identification in the name of "Herbert Manny Velasco."
His destination was Phoenix, with a connecting flight to San Diego. He apparently purchased his ticket with a coupon issued in the name of yet another person, "Richard Hatch."
Among other things, Mr. Elgindy had approximately $25,000 in cash; $30,000 to $40,000 in jewelry; various prescription narcotics; a Montana identification card in the name of Herbert Manny Velasco; an expired California identification card in the name of Heriberto M. Velasco; blank cheques for a bank account belonging to his mother; and blank cheques for an account he had created showing himself as a resident of Lebanon.
Mr. Elgindy also carried a Costco card and Sam's Club card in the name of Herbert Velasco, had air flight coupons issued in a number of different names and cellphones subscribed in the name of Joseph Torelli and Hisham Sadek.
When Mr. Elgindy was questioned by airport security, he falsely maintained that he was a jewelry dealer named Manny Velasco.
"When asked the identity of Amr Elgindy, whose name appeared on various documents and prescriptions in the defendant's possession, the defendant claimed Elgindy was his lawyer," the prosecution notes. "It was not until officials discovered a California driver's license bearing the defendant's photograph that he belatedly admitted his true identity."
Mr. Elgindy's bail was revoked, he was tossed back in jail and he later pled guilty to lying to federal officials in connection with the peculiar airport incident.
Suspect crusader
In the defense's sentencing memorandum Mr. Elgindy was portrayed as something of a "crusader for propriety in the marketplace," helping the SEC and law enforcement officials bring securities fraudsters to justice. The prosecution paints a different picture.
According to the government, Mr. Elgindy boasted about having worked for boiler rooms and chop shops, including the notorious Blinder Robinson & Co., and marketed himself "as a reformed 'bad boy.'"
The prosecution apparently agrees with the "bad boy" history, but seems to doubt that Mr. Elgindy is at all reformed.
By the prosecution's account, Mr. Elgindy moved from Blinder Robinson to Thomas James & Associates where he spent just a short time before being fired for reportedly violating investment-related statutes and rules of industry standards and conduct.
Mr. Elgindy went on to run afoul of the National Association of Securities Dealers, which eventually revoked his registration.
"Additionally, before his broker license was revoked, the defendant had a history of customer complaints while at various brokerage firms, including one brought by the defendant's mother that he settled for $30,000," the government reports.
The prosecution also claims that on at least two occasions, with respect to Alco International Group Inc. and Conectisys Corp., Mr. Elgindy was an active participant in securities fraud conspiracies.
"Moreover, while the defendant touted at trial, and continues to tout his role as a 'crusader for propriety in the marketplace,' the details of his involvement with Alco and Conectisys make abundantly clear that he was, in fact, forced to help the authorities to avoid prosecution himself," the government claims.
As for Mr. Elgindy's purported more recent co-operation with the SEC, the prosecution suggests that he was of little or no assistance and, moreover, "never revealed to authorities with whom he claims he was 'working' that certain of the information he passed them was illicitly obtained from his personal rogue FBI agent."
Adding a few more brushstrokes, the prosecution points out that Mr. Elgindy committed insurance fraud and subsequently pled guilty to mail fraud in 2000 and was sentenced to four months in prison and three years supervised release.
"The defendant was arrested on at least four additional occasions and charged with crimes including 'Grand Theft Auto,' 'Assault with a Deadly Weapon,' 'Driving While Intoxicated' and 'False Report to a Peace Officer' between 1985 and 1997," the prosecution adds in a footnote. "On each of these occasions, the defendant was not prosecuted."
Coincidental concerns
As noted by the prosecution, Mr. Elgindy "relies heavily on his diagnosis of bipolar disorder as a mitigating sentencing factor."
According to the government, however, the defendant "has done little to mitigate the alleged effects of his disorder on himself and his family members."
Indeed, the prosecution seems to suggest that Mr. Elgindy's concern with his bipolar problems coincidentally surfaces when he is faced with legal problems.
The prosecution claims that Mr. Elgindy was diagnosed with bipolar disorder in 1993 but stopped seeing a therapist in 1995.
"He did not recommence therapy until after he was arrested in the instant case, seven years after he had ceased treatment, even though his disorder was addressed in connection with his sentencing on the insurance fraud conviction in 2000," the prosecution reports.
Mr. Elgindy's bipolar disorder along with claimed good works on behalf of Kosovar refugees and his concern for a son "with Tourette's Syndrome and Attention Deficit Hyperactivity Disorder" formed the basis for a downward departure motion at his 2000 sentencing for fraud.
"After hearing from several witnesses, some of whom vigorously disputed the defendant's narrative concerning his beneficence, the sentencing judge rejected the downward departure motion and pronounced the evidence regarding the defendant's humanitarian efforts 'murky,'" the prosecution claims.
"There is a reason why you have these people willing to come here and testify against you as they have," the judge in the 2000 insurance fraud case remarked. "I don't see that very often, especially in sentencing."
In any event, the prosecution suggests that Mr. Elgindy's actions are at odds with his claimed concerns.
"Despite his stated concern for his son and his other family members, immediately upon his release from jail in October 2000, the defendant -- rather than mending his ways for their sake -- became the leader of a criminal enterprise," the government claims.
Unreconstructed criminal
According to the prosecution, notwithstanding his conviction, Mr. Elgindy shows no remorse and does not accept responsibility for his crimes.
"Despite being convicted for racketeering, conspiracy to commit securities fraud, extortion and other crimes, the defendant accepts no responsibility for his conduct," the prosecution claims.
"Instead, he has smeared prosecutors and proclaimed his innocence on one of the very websites, Silicon Investor, where he found fame as an allegedly former -- but obviously unreconstructed -- criminal," the prosecution states.
Indeed, several messages from Mr. Elgindy regarding the trial -- some of them quite lengthy and, arguably, controversial -- have been posted to Silicon Investor.
The prosecution serves up some juicy excerpts from Mr. Elgindy's post-trial Internet messages.
"Witnesses were intimidated from day one," Mr. Elgindy wrote in part in a Nov. 2, 2005, message. "The search for justice took a back seat to a prosecutor's ambition, rabid zeal and refusal to concede the truth."
In a Dec. 2, 2005, post, Mr. Elgindy claimed that he "lost to hatred, prejudice and a 'convict at all cost' methodology."
On Dec. 11, 2005, Mr. Elgindy remarked that he had "publicly made allegations of serious misconduct by former AUSA Ken Breen and Seth Levine." He also suggested that prosecutors suborned perjury from Mr. Cleveland, the government claims.
"The real terrorist is out there, walking free, having used my life as a spring-board into the private sector, doing exactly what he found so distasteful by Royer", Mr. Elgindy wrote on Dec. 23, 2005, in reference to former Assistant U.S. Attorney Mr. Breen who joined a private firm as a white collar criminal defense lawyer after his prosecution of Mr. Elgindy.
"Isn't this all being done so they can finally lynch the nasty Arab guy?" Mr. Elgindy asked rhetorically in a Jan. 14, 2006, Silicon Investor post.
Evidently the prosecution did not think much of Mr. Elgindy's post-trial Silicon Investor commentaries.
"For this defendant, who finds it impossible to mind his own store, to lash out by impugning the government's integrity is unjust and irresponsible," the prosecution declares. "It is, however, sadly consistent with the defendant's need to wrongly castigate others while minimizing his own misdeeds, a theme that runs through his sentencing submission."
Major time
The prosecution devotes more than half of its 88-page sentencing memorandum to an analysis of the sentencing guidelines, insisting that Mr. Elgindy should be sent to prison for much longer than the 43 months suggested by the defense.
According to the prosecution, this case "encompasses one of the most egregious instances of corruption of governmental functions in recent history" and the "true nature of the criminal conduct would justify a sentence above the guidelines," which suggest a life sentence.
"This case involved a massive criminal enterprise dedicated to misappropriating information from the FBI, trading on that information, using it to manipulate stock prices and disseminating it to hundreds of investors who could further use it for their unjust advantage," the prosecution argues.
Among other things, the government claims that Mr. Elgindy is a repeat fraudster and liar "who routinely, over a period of many years, violated the law for personal gain."
"There is no reason to believe that this defendant has mended, or will mend, his ways," the prosecution claims. "There is, however, every reason to believe that, once released, the defendant will find a new means of taking advantage of the public."
The government evidently does not want Mr. Elgindy released any time soon.
"The defendant was the leader of a massive criminal enterprise that functioned by stealing confidential law enforcement information -- regardless of the costs to the FBI, the SEC, undercover agents, co-operating witnesses or the public -- in order to satisfy his and his co-conspirators' greed," the prosecution says.
"The defendant's punishment should fit this crime, not the unjustifiably limited, four-stock, small-profit securities fraud case that the defendant conjures up in his sentencing memorandum," the prosecution continues.
While the defense submission was quite precise in suggesting that Mr. Elgindy should be sentenced to no more than 43 months, the prosecution's concluding recommendation is vague.
"The government respectfully submits that, in keeping with the true nature of the defendant's crime, this court should sentence him to a very substantial term of imprisonment," the prosecution says in wrapping up its sentencing memorandum.
Mr. Elgindy, who reportedly already has a lawyer working on his appeal, was scheduled to be sentenced on March 6, a date "fixed in stone," according to an earlier government filing.
On March 1, however, Judge Raymond J. Dearie issued an amended notice of sentencing, setting the new date for March 22.
Intriguingly, the March 1 order contains an asterisked, bold, underlined, uppercase instruction:
"****GOVERNMENT COUNSEL IS DIRECTED TO SUBMIT A SIGNED COPY OF THE PLEA AGREEMENT, IF ANY, TO MS. MULQUEEN, FORTHWITH."
It is not clear what signed copy of a plea agreement, if any, the court is awaiting.
Stockwatch will continue to follow developments.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(More information regarding the Elgindy case is available in Stockwatch articles published under the symbol *TSX on May 22, 23, 24, 28 and 29; June 3, 4, 6 and 17; July 18, 2002; March 25, 2003; Oct. 3, 2005; and Jan. 26 and 27, 2006.)
© 2006 Canjex Publishing Ltd.
AS A MATTER OF INTEREST ...
Remember the Warren Buffett "connection" that was made quite a
while ago? Well here's one for all you specolaters ;)
CMKMtaskforce website show's Patrick Byrnes--<Patrick Byrnes father is Jack--<Jack's buddie is...Warren Buffett.
"The elder Byrne isn't chairman of his son's company for the sake of sonly nepotism. Jack is a legend in the insurance industry, at one time heading up GEICO for good friend Warren Buffett's Berkshire Hathaway (NYSE: BRK-A). "http://www.fool.com/news/mft/2006/mft06030304.htm
I hate all these rumours and BS but hey...I guess kills time until this is over.
Take care,
sb
Hilarious ... like ROTFLMAO
Bob O'Brien's Sanity Check Blog
Posted by: bobo 2/23/2006 10:34 PM
I just got an email as I was logging out of the little Internet café I’m at, and it contained a truly remarkable piece from our good friend Herb Greenberg, of Marketwatch.com.
Apparently he received a subpoena from the SEC in the Gradient/SEC matter, requesting all his correspondence about OSTK, and 4 other stocks.
You can read his somewhat rambling piece here (everyone's a critic). http://tinyurl.com/zsm3p
Now, when I was a kid, I had a dog that had a distasteful quality - he was fond of munching on his own little "treasures."
Some dogs are just like that - nobody knows what causes it, or how to stop them from doing it.
Anyway, whenever he would go into the yard and do his deed (he really was an inveterate poop eater), he would come back in, and have a certain look on his face.
I always thought of it as his “guilty dog look.”
It was unmistakable. Really. I never understood his fascination with his digested meals, but I digress.
It's the look that's important.
When I read Herb’s indignant piece, as he wraps himself in the flag, and apple pie, and the Constitution, etc. filled with anger over the SEC (How dare they!!! This is about free speech!!!) subpoenaing his records pertaining to Gradient, and presumably Rocker, and perhaps other newsworthy hedge funds, I just thought – and I know this doesn’t mean anything….I thought……
Guilty dog.
Don’t know why. But there it is.
Maybe it's the whole lapdog thing. Maybe it's just something that popped into my head, unbidden. Don't know.
Just tossing it out there.
On a more personal note, here's some advice for another scribbler - although I am mostly into writing non-fiction lately, whereas Herb, well...you know:
Herb. Sweety. Babe. Deep breaths. The reason they are coming at you is because they are investigating stock manipulation. That is illegal. Save the whiny, acrimonious, “I talk to all kinds of sources” BS for someone who cares. This isn't Nazi Germany or Stalin's Russia and you are not being persecuted. The SEC’s job is to investigate stock manipulation, the shit is hitting the fan, and the previously untouchable network of smug, self-congratulatory parasites are getting subpoenas left and right, and this is just the start. So save it for the courtroom (assuming that there’s anything to all this).
Oh, and Herb? It isn’t about free speech. It's about conduct. As I've said all along.
This is just the first step as they slowly, methodically roll this up, is my hunch.
And you don't want to be like the "underprivileged youths" in COPS, who invariably when they are pulled out of the car they just drove in a 100 mile chase through a school district, will proclaim, "I din't do it." If you haven't done anything wrong, you have nothing to hide, no reason to mewl like a kitty. Celebrate the opportunity to vindicate your ethical superiority. Revel in it. The glass is half full...
But here’s a question for the Lickspittle, as he is affectionately called by some. I think it's a great question. I would hope someone emails him this question, and reports back to me with the answer:
Did you shut down your newsletter before, or after, you got the subpoena?
It’s just a question. Nothing more. Consonants and vowels with a bit of punctuation. Not even iambic pentameter. Just words.
I'm curious as to the answer...and it won’t necessarily mean anything - we all understand that. But I’m curious.
(UPDATE: Several readers have sent me emails indicating that they asked Herb the question as to the timing of the subpoena and his abrupt closure of his newsletter, but the usually loquacious pundit suddenly clammed up. I'll keep everyone abreast of this should he find his tongue again...)
As to the brave-in-the-face-of-adversity façade, and trotting out 7 year old hits with Aremisoft, puhleese. Either you are a guilty dog, and have been dining on forbidden and distasteful fruit, or you aren’t. No need for 1200 words on why you should be untouchable.
So now everyone needs to ask themselves the same question - are you a guilty dog, or not?
I suppose time will tell. But do spare us all the “I’m a victim” stuff. It doesn’t play – lacks the ring of sincerity, so to speak…
And this time is different.
Any brave reporters feel like calling Rocker now to confirm the subpoena story?
No?
Why is that, do you think?
http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/102/Default.aspx
It seems you are using a TD account with a live broker Cliff.
Ask to be switched to their WebBroker account. It's a Discount brokerage account and commissions are around $30
Headlines ...
"SHORTY THE BENEVOLENT BENEFACTOR"
Are Your Stocks Bona Fide?
An adventure in Naked Shorting
www.TheStreetWire.com
(PRWEB) December 14, 2005 -- The biggest concern that investors have today isn't whether the stock they bought was overpriced or undervalued, but whether or not the stocks they have purchased on the open market actually exist. It's hard to believe, but it's true. There are millions of "counterfeit" shares floating around the market as we speak, in hundreds,
possibly thousands of publicly traded companies. You're probably thinking to yourself, "that's impossible" or "the government would never allow that", but they have. In fact very little has been done to get rid of these counterfeit shares, and the vast majority have been "legitimized" by the Securities and Exchange Commission.
So how does this happen? How did the counterfeit shares get here in the first place? It all has to do with the process in which stocks are purchased, and delivered. When you purchase shares of stock in the open market, they show up in your brokerage account immediately after the transaction as a marker or "place holder". The actual shares of stock aren't delivered to your broker's accounts until three days afterwards. So in other words the entity selling you the stock that you purchased has three days to deliver that stock and make good on their end of the deal. When the stock doesn't get delivered it results in a "failure to deliver" transaction.
Now you might be wondering "how did the seller of my shares sell them to me?" The answer to that question, is they were shorted to you. In a normal "short" transaction the seller borrows shares from a lender and sells them to you, and the seller promises the lender that he will buy them back at a
later date, hopefully for a cheaper price, and return them. When a failure to deliver occurs, the short seller never borrowed the stock from the lender, and thus was unable to deliver the stock to your broker's accounts.
The common name for this type of transaction is a "Naked Short" sale.
What this has created is a backlog of millions of failure to deliver "IOU's" floating around in people's brokerage accounts. In order to cleanse the market of these counterfeit shares the SEC adopted "Regulation SHO" which creates a threshold list of failure to deliver securities. Currently there are over 280 publicly traded companies on this list, some of which have been
listed with continuous fails for over 235 days. At the top of the list are Martha Stewart Living Omnimedia, Krispy Kreme Doughnuts, and Netflix. The CEO of Overstock.com, also on the threshold list has made fighting Naked Shorting a personal battle.
The lesser told story of Naked Shorting deals with the smaller start up companies, which makes up the majority of the threshold list. With these companies Naked Shorters flood the market with counterfeit shares, creating an imbalance of supply and demand which drives the stock's price to sub-penny levels. In these cases the aim of the Naked Shorters is to drive
the company out of business and into bankruptcy, due to lack of available financing. Thousands of small companies have fallen victim to this practice, and very few have the resources to fight back. However there is one small mining company, CMKM Diamonds Inc. which is trying to fight back against Naked Shorting, by proving to the world that a Naked Short position in their stock exists. The task of doing such is left to the shareholders of the company, which are being asked to fax in copies of their physical stock certificates to the "CMKM Task Force", which is headed by one time CIA Agent, and billionaire Howard Hughes right hand man, Mr. Robert Maheu. What the taskforce will prove, and what they are seeking to gain from this massive endeavor remains to be seen.
For more information about Naked Shorting you can visit the home pages of the Depository Trust and Clearing Corporation, or the National Coalition Against Naked Short Selling for two vastly different objectives.
This post from another forum is interesting.
Certificate pull notification responsibility...
Many are wondering where the responsibility will fall if someone is not notified of the certificate pull by the company.
IMHO (in my humble opinion) = This is all just my opinion and I ask that you treat it as such.
Reasonable attempt to notify shareholders by the company about the certificate pull should be acceptable. Mail, announcements, notify the brokerage firms, news release, etc...
The TA data can be used to send the notification to the true certificate holders. Those should be no problem. OBO – NOBO lists are unreliable and can’t be used as they are old unless there is one available since the revocation and halt of CMKX trading.
From what I can decipher the electronic shareholders notification is the responsibility of the broker. We need to remember that the company has no knowledge of the identity of the electronic shareholders as they are being held in Street Name under CEDE and Co. IMHO
Additionally, CEDE and Co along with the NSCC/DTCC as a whole are not willing to share that information with the company. So the demand by the company to pull certificates places responsibility on the brokers to notify the clients that are holding CMKX shares in their brokerage firm.
If a client’s shares are being held by a broker and the broker’s shares are being held at DTC in CEDE and company then they (Broker/CEDE & Co/DTC/NSCC) have a fiduciary responsibility to notify their clients (the electronic share holders) that there is a certificate pull underway by the company. IMHO
In short: All electronic shareholders should be notified by CEDE & Co. representative/broker/DTCC/NSCC. If not, then they are liable as they are the ones responsible for upkeep and possession of those shares. IMHO
Additionally, I would think that since CMKM Diamonds is no longer trading that the DTC/NSCC could no longer hide their trading data behind the guise of protecting clients trading strategies. We requested trading information for the administrative hearing and were denied access, but what would be the excuse now?
I too wanted to add this win by USXP over Shorty news from Oct 2005
An excerpt from a USXP announcement from Wednesday October 5, 9:35 am ET
They won their suit against naked shorters on the State level for over $500 million including punitive damages. $500 million to 703 billion cmkx shares would be .0007 per share. That would be a start. “Shorty” does lose. USXP was small scale compared to what we could be looking at with CMKX. JMHO
…"Universal Express has always been diligent in pursuing malefactors, private or governmental, who damage or attempt to damage our businesses or hard-working American businesses", continued Mr. Gunderson.
"We have been singularly successful in the past in pursuing our remedies. For example, Universal Express was successful in obtaining two separate state jury verdicts in Dade County, Florida against defrauders and 'naked shorters' totaling $389 Million and $137 Million, respectively, including punitive damages", noted Mr. Gunderson.
http://biz.yahoo.com/bw/051005/55480.html?.v=1
Be well
This is all just my opinion and I ask that you treat it as such.
Dr.D
I think "forwarded to the TA" is the phrase you're looking for Janice.