Naked Shorting hits 60 Minutes, Congress to Hold Hearings on Hedge Funds, and Unbiased Journalism? – March 24, 2006
David Patch
Fifteen Minutes of What NBC’s Dateline left in the Cutting Room Floor
To think, it has now been an eternity since NBC’s Dateline chocked on their exclusive story regarding a Wall Street scandal they once considered calling “Financial Terrorism in the US.” The reported multi-part series on illegal shorting and securities fraud that Dateline spent better than a year preparing for was reduced to a 15-minute fluff piece that was hardly worth the effort. Many believe the trimming down stemmed from self-preservation on behalf of NBC parent General Electric (NYSE: GE) fearing Wall Street retaliation.
That story of financial terrorism will reportedly unfold before your eyes but this time through a direct competitor to NBC. CBS’ 60 Minutes will air this Sunday March 26 with their own version of what lies in hiding within our securities markets. The stories the financial press have so far shied away from coverage on or covered from a singular side. The 60 Minutes storyline:
BETTING ON A FALL – Investment pools for the very rich are known as hedge funds. One of the major ones is being accused of spreading negative information about a major company and then betting on its falling stock price. Lesley Stahl reports. Janet Klein is the producer.
This is must see TV (isn’t that an NBC line) for anybody that doubts the reality of market abuses leveraged off unscrupulous Hedge Funds willing to go to great lengths to turn a profit.
Recall earlier this month the SEC fined Bear Stearns $250 Million for aiding Hedge Funds (prime brokerage customers) in illegal trading strategies. Excerpts from the SEC Complaint include:
Linda Chatman Thomsen, SEC Enforcement Division Director, said, "For years, Bear Stearns helped favored hedge fund customers evade the systems and rules designed to protect long-term mutual fund investors from the harm of market timing and late trading.”
“On the clearing side, BSSC gave introducing brokers and prime brokerage customers with mutual fund trading business direct access to its mutual fund order entry system. This system permitted users to enter orders until 5:45 p.m. and processed all trades, regardless of when they were actually received, as if they had been received before 4:00 p.m.”
In layman’s terms, Bear Stearns gave their preferred clients the combination to the vault and then walked away. It was a conspiracy aimed at cheating the investing public while insuring the Hedge Funds maintained profitable returns to their wealthy clients.
Those producers at NBC and CNBC should watch and learn what financial journalism is all about. CNBC’s coverage to date has been to vilify any and all that dare challenge the Hedge Fund Community. Now why is that?
Hedge Funds to meet with Senate Banking Committee
The Senate Banking Committee has announced that on March 28, 2006 public hearings will be held with members of the Hedge Fund Community as well as market regulators to discuss the impacts Hedge Funds have on the global financial community. Is this more politicking or is it more of the too little too late syndrome we have seen comes before us by this committee?
Members of the Senate Banking Committee have been lobbied for years to investigate the Hedge Fund Community and how they have abused the short sale process to profit at the expense of small business leaders, local communities, and investors across the globe. The lobbyists seeking the hearings were the under-funded US people of this nation some representing the constituency of the Senate Committee Members. As a result of the lack of lobbying funds, rumored hearings were continually being squashed by Committee Chair Richard Shelby (R: AL) as the financial community lobbied against such hearings.
Concern over the effectiveness of this hearing is based on the attendees who will be represented and the agenda.
According to a report out of the Financial Times, It is believed that the hearings will aim to improve communications between hedge funds and legislators. In attendance will be John Gaine, president of the Managed Funds Association and Jim Chanos, head of the Coalition of Private Investment Companies and founder of Kynikos Associates, $3 billion hedge fund. Also reportedly included in attendance will be Emil Henry, the assistant Treasury secretary for Financial Institutions.
The hearings will be a bust, in my opinion, if the Hedge Funds are merely afforded the opportunity to come in and explain how they are good for our markets. Without significant counter-parties available to challenge the Hedge Funds the Committee will not see the overall market picture and thus act out change with only a portion of the facts.
Recent SEC and NASD enforcement activities have centered on the special privileges afforded these Hedge Funds by the Financial Institutions. From Bear Stearns handing over the combination to the vault in order to illegally trade, to Market Makers illegally shorting on behalf of Hedge Funds, and now possible Hedge Fund collusion with market Analysts involving “hatchet job” reports aimed at collapsing security valuations the Hedge Fund Community appears to have an inside track on how to effectively move markets for personal profiteering.
It could be a bad day on Capital Hill if the Banking Committee simply allows those that are possibly destroying our markets to speak freely about how they believe they are the best thing our markets have ever seen.
Out of an article in InvestorsOffshore.com pertaining to this hearing “Jochen Sanio, head of German financial supervisor BaFin, has revealed that he is ‘scared as hell’ of the influence that hedge funds now exert over the financial markets, and cited them as the number one threat to global financial stability with their risky and often highly leveraged positions.”
Let’s just hope our Congress Men and Women on this side of the Ocean take this threat just as seriously.
An Inside Look at your Typical Journalism Conference?
Finally, from the world of unbiased Journalism,
One of the major critics in the SEC Subpoena on financial journalists SABEW (Society of American Business Editors and Writers) will host their annual conference on May 1. SABEW has identified that Chairman Chris Cox will be a guest of the Conference to address the subpoena issue as well as corporate malfeasance and other issues when he speaks at the SABEW conference.
SABEW has gone on record as criticizing the San Francisco Office of the SEC while patting Chairman Cox on the back for backing off the subpoenas for the time being. Not understood is whether Chairman Cox first approved these subpoenas as part of normal course of business and then backed off due to “political pressures.” Maybe the financial press in attendance at the Conference can spawn an answer from the Chairman on that particular open issue.
Leading the headlines in the press release SABEW claimed that Chairman Cox rebuked his enforcement staff for not consulting him before sending out the subpoenas. But reports out of Chairman Cox himself have not supported these allegations and comments by Commissioner Campos in his March 3 speech during the “SEC Speaks Conference” further identify that the media has misrepresented the facts in drawing to their own conclusions.
Campos’s comments on this matter included a rebuke of his own: “In my view these statements have been incorrectly interpreted in the media and in the public to indicate that our Enforcement Staff did something wrong.” Campos concluding his remarks by stating, “Finally, it goes without saying, no one is above the law. If in any matter it is important for the integrity of the investigation to enforce a subpoena, it will be done through appropriate legal process of the federal court system, without hesitation.”
Whether Chairman Cox addressees the realities of the issue or plays the politician to the end must be decided after his speech on May 1.
Also listed as speaking is Herb Greenberg. In the press release by SABEW, Herb Greenberg, a MarketWatch columnist and one of the reporters subpoenaed by the SEC, will discuss the subpoenas and other tactics to intimidate investigative reporters in a panel discussion. He'll be joined by Joseph Nocera, a New York Times columnist, and Dan Colarusso, business editor of the New York Post. Dave Beal, columnist for the St. Paul Pioneer Press, will moderate the panel.
What we know of this panel is that Herb Greenberg has received a subpoena by the SEC in which it is yet to be decided whether Greenberg is a target in the SEC’s case or not. Herb will be a panelist nonetheless to tout his own personal agenda.
Also on this panel is Joe Nocera of the NY Times and Dan Colarusso of the NY Post. Nocera drafted an article that blasted the SEC for their actions, as did the business writers for the NY Post. Are you getting the picture of this panel?
So unless I am missing something a Panel all committed to one side of the pendulum is not really a panel after all. The panel will be nothing short of self-serving rhetoric that can be presented as fact without the hindrance of a challenge. It should be a hoot to hear in Herb’s own words how Herb Greenberg has been victimized one more time.
I wonder if anywhere in this conference somebody within the crowd will have the courage to step up and address the financial presses stronghold on what is being disclosed to the mainstream public. Clearly Commissioner Campos was not impressed with their latest coverage and so it was left unreported. Also left unreported, Commissioner Atkins comments on March 3 when he stated “Fraud in this market manifests itself through old-fashioned boiler-rooms with hard-sell cold-calling; new tactics such as cyber-smear or the infamous voicemail that was supposedly incorrectly left on machines giving a bogus stock "tip; and bear raids composed of an unholy alliance of abusive short sellers, stock promoters, class-action lawyers, and others.”
Cyber-smear can easily fall into journalism and bear raids composed of an unholy alliance of abusive short selling goes right to the heart of the 60 Minutes program and the reason behind the subpoenas served to members of the financial press.
So why has most of the investing population never heard these comments? Could it be that the financial press is not as unbiased as they present themselves to be? Maybe the better question would be, what else have the financial press refused to present to the general population and why?
AI
