EDIG was not sued and is NOT part of the scam!
Calpers, the biggest U.S. public pension fund, filed a lawsuit on Tuesday against the New York Stock Exchange (news - web sites) and its specialist trading firms, claiming that widespread fraud and lax oversight cost investors millions of dollars.
The lawsuit, filed in the U.S. District Court, Southern District of New York, comes three months after Calpers' protests helped push out former NYSE Chairman Richard Grasso following the disclosure of his $188 million compensation package.
The pension fund alleged that specialists, in conjunction with the NYSE, routinely engaged in "wide-ranging manipulative, self-dealing, deceptive and misleading conduct" that hurt public investors seeking to trade stocks.
This lawsuit detailed three types of improper trades allegedly conducted by the NYSE specialist firms, including "freezing" the display of prices on a given stock so a firm could trade for its own account before executing investor orders.
It also claimed "front-running," when a firm uses its knowledge of pending orders to trade ahead of their completion, and "inter-positioning," when a firm fails to match buy and sell orders in order to get a better price on a stock itself.
Calpers' president Sean Harrigan at the news conference to announce the lawsuit said that the NYSE had "looked the other way" when trading rules were violated. "We intend to seek recovery of every single dollar lost (news - Y! TV)," he said.
The firms named in the suit include LaBranche & Co. Inc. (NYSE:LAB - news); Van der Moolen (NYSE:VDM - news) (VDMN.AS); Spear Leeds & Kellogg, which is owned by Goldman Sachs Group (NYSE:GS - news); Fleet Specialist Inc., a division of FleetBoston Financial Corp. (NYSE:FBF - news); Bear Wagner Specialists, partly owned by Bear Stearns & Co. (NYSE:BSC - news); Susquehanna Specialists Inc. and Susquehanna International Group LLC; and Performance Specialist Group.
A spokesman for Goldman Sachs had no comment while a spokesman for Susquehanna said the two companies should not have been named in the lawsuit.
"We believe that there is no factual basis for our inclusion in this lawsuit," said Todd Silverberg, general counsel for Susquehanna International Group.
A NYSE spokesman had no comment.
Calpers is one of Wall Street's largest customers, with a $154 billion portfolio managed on behalf of the state (news - Y! TV)'s public work force.
Calpers, known formally as the California Public Employees' Retirement System, said it would seek to expand its lawsuit into a class-action (news - Y! TV) case involving potentially millions of investors who bought or sold shares in NYSE-listed companies during the past five years.
Calpers is represented by Milberg Weiss Bershad Hynes & Lerach, the leading U.S. class-action law firm.
"Wherever you see Bill Lerach involved as lead counsel, you're talking about real money," said Patrick McGurn, special counsel for Institutional Shareholder Services, which advises large institutional investors, including Calpers, on corporate governance matters.
McGurn noted that many large investors, including mutual fund giant Fidelity Investments, are dissatisfied with efforts at the NYSE to reform itself.
"California and some other states feel their concerns are not being addressed with this reform effort," McGurn said. "A lot of mainstream investors question the current trading structure at the Big Board."
A BAD YEAR
In April, the NYSE launched its own investigation into whether at least two of its specialists may have engaged in trading shares ahead of clients in a possible abuse of the exchange's trading system.
California State Controller Steve Westly said the exchange needs a better trading system. "Our patience has run out," Westly said. "The NYSE must take responsibility for its failure to govern itself."
The lawsuit comes at a particularly tricky time for the exchange. On Wednesday, the Securities and Exchange Commission (news - web sites) is slated to vote on new Chairman John Reed's governance proposals.
While passage of the reforms is expected, the measures have come under fire for Reed's refusal to specifically ask for the NYSE chairman and CEO jobs to be split. The SEC had no comment on the Calpers lawsuit.
News of the suit dragged down shares of publicly traded specialist firms. LaBranche shares fell 7.1 percent to close at $9.32 on the New York Stock Exchange, and Van der Moolen's NYSE-listed shares closed down 6.7 percent at $8.12. (Additional reporting by Nicole Maestri, Jake Keaveny and Chris Sanders in New York, Kevin Drawbaugh in Washington)
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Live long and prosper
AI
