A Silent Lynch Mob - An Open Letter From Rod Young
by Rodney Young
I am requesting the presence of all who have the ability to attend Oral Arguments in front of the SEC commissioners on 10:00AM Monday February 13, 2006, at 100 F Street, NE, Washington DC (The SEC‚s Main Headquarters) in the Auditorium on the Lower Level (Room L-002), where I will argue Pro-Se Eagletech Communications, Inc.’s affirmative defense that the SEC has violated the Constitutional 5th Amendment property rights of shareholders by Regulation SHO’s ‘Grandfathering’ of pre-Regulation SHO delivery failures. The SEC has ruled the Company’s publicly traded shares shall be De-Registered for not filing timely reports. That ruling is stayed pending appeal to the full Commission and pending further appeal to the U.S. Federal District Court and its appeal processes.
An astonishing sequence of events has presented us with this unprecedented opportunity! Fifteen minutes eyeball to eyeball with the five Commissioners appointed by the President of the United States to send any message we wish. This isn’t about whether Eagletech Communications filed its reports and everybody knows it! This opportunity to stand before the Commissioners in my opinion may be the first, last, and only that most of us may ever have. Let’s together figure out a way to use it to our greatest advantage!
This is a public meeting in a 300 person auditorium. Documentary film maker Hugo Cancio has agreed to film this meeting and the Secretary’s office has confirmed that filming such meetings is a common occurrence. The Commission will supply a court reporter; the transcript will be available for purchase the next day. Enforcement division attorney and my opponent Anthony Byrne has told me that Oral Argument hearings are typically available as real time streaming audio on the Commission’s website at www.sec.gov.
Eagletech has alleged in its affirmative defenses that the SEC has illegally taken the property of shareholder’s in violation of the 5th amendment to the U.S. Constitution. By ‘Grandfathering’ pre-regulation SHO delivery failures this agency of our Federal Government has conducted an ‘inverse taking’ of shareholder’s property without due process and without compensation when ‘Grandfathering’ suspended the settlement process which they are mandated to maintain in the Securities Exchange Act of 1934. By Grandfathering and then by De-registering Eagletech shares the SEC has taken shareholder’s property and given it to the criminal perpetrators who have sold counterfeit shares to the public with no intention of, and now no requirement to ever deliver them.
To everyone’s astonishment Administrative Law Judge Kelly gave leave to appeal his decision on this theory (see pages 4 and 5 of his opinion attached to this email).
The SEC’s Enforcement Division has chosen to blatantly ignore evidence of criminal Naked Short Selling misconduct and instead has chosen to sweep the crimes under the rug by De-Registering the Company’s stock. Eagletech has provided to the SEC the following evidence of criminal misconduct:
1 A toxic PIPE financing was organized by five managing directors of Salomon Smith Barney.
2 Ten days after the initial meeting at Salomon’s World Trade Center offices the now convicted Anthony Elgindy and his Short Selling Cartel appeared on chat boards claiming that Eagletech’s was a scam and that its press releases announcing its patent were false. The patent was issued 30 days later as well as a second patent a year later. Within the year Eagletech successfully deployed its technology in the three largest telecommunications markets in the Southeast U.S., making its “Eagle1Call” product available to 9.5 million people who could purchase provision and maintain the product from the Internet in a matter of minutes.
3 Elgindy associate Peter Michaelson testified in the Elgindy trial that he and others routinely contacted the SEC with tips of “Scam Companies” his organization had targeted.
4 Within a few months SEC enforcement attorney Justin Arnold issued a subpoena for information parroting nearly word for word Michaelson’s false allegations.
5 In an article published by author James Cummins, former 15 year former SEC Enforcement Attorney Brent Baker was quoted “For years the SEC was unable to control the infamous ‘pump-and-dump’ schemes of stock market criminals across the country, and actually developed a culture that believed that illegal naked short selling may be a counterbalancing force to the pump-and-dump.” A stunning admission!
6 On July 10, 2002 Forbes Magazine published the first national ‘expose’ of the ‘Naked Short Selling/Toxic Financing’ problem wherein Rod Young and Eagletech Communications were the lead subjects of the article. Three days later Washington DC lobbyist Jack Wynn told me that Steve Forbes was contacted by someone asking him to back off the story. A year later an unconfirmed source identified that someone as then SEC chairman Harvey Pitt. Wynn would later be drafted to author a position paper on the Naked Short Selling scandal for the Busch re-election campaign. They know!
7 Two Licensed Broker/Dealers at the CBOE (Their money ended up in the same escrow account with the five managing directors at Salomon Smith Barney) who didn’t disclose that they were Broker/Dealers invested in the PIPE financing, and began short selling Eagletech stock prior to the closing of the funding (Insider Trading).
8 The New York State Supreme Court granted Eagletech its DTC and NSCC trading records. The unprecedented ruling denied the DTCC’s request for a protective order. NSCC CNS (Continuous Net Settlement) Reports confirm that those short sales failed delivery for 252 trading days (one calendar year), making them illegal Naked Short Sales.
9 DTC participant 5099 reportedly a secret account at the CDS (Canadian Depository for Securities, the CDS is a subsidiary of the DTCC) failed delivery for 212 days. DTC Participant account 5099 is reportedly a special account that clear(s)(ed) through Euroclear for seven Canadian brokerages: Thompson Kernaghan, Wolverton Securities, Global Securities, Pacific International, Canacord Capital, Yorkton Securities, Research Capital, with now defunct TK being replaced by TD Waterhouse.
10 Forensic Economist and former Undersecretary of State Robert Schapiro analyzed three years of Eagletech’s CNS reports. He concluded that 37 DTC Participant firms used the NSCC ‘Stock Borrow Program’ to fail delivery of Eagletech stock in excess of the three day delivery rule and to continue delivery failures for up to 252 trading days. In light of DTCC Deputy General Counsel Larry Thompson’s revelation that the NSCC ‘Stock Borrow Program’ is used to cure only 18% of daily aggregate fails, it could be reasonably concluded that these 37 DTC Participants manipulating Eagletech’s stock represent only the tip of the iceberg, while the other 82% of daily aggregate fails promulgate through the Ex-clearing system.
11 The SEC produced discovery evidence to Eagletech in it’s De-Registration action, 49,489 pages and an electronic trade journal of 43,723 Eagletech trades over a 17 month period. The trading documents chronicle nearly half of the trades during that period were for the proprietary accounts of the Broker/Dealers (Market Makers) presumably using the ‘Bona Fide Market Maker’ exemption. For example: the metrics of a single days trading, May 12, 2000 revealed: 110 persons bought Eagletech stock, 3 persons sold Eagletech Stock totaling 81,934 shares. 18 Broker/Dealers bought or sold Eagletech stock for their own account totaling 300,778 shares. The marketplace reported 176,300 share Volume that day. Assuming there were Zero shares available for sale and those 18 Broker/Dealers used their ‘Bona Fide Market Maker exemption’ to fill the orders there is still a discrepancy of 206,412 shares. Where did they come from? Why weren’t they reported to the Marketplace? How’s that possible? The Metrics for May 15, 2000 are similar. So are the Metrics for May 16, 2000 and on and on and on… This data was supplied by the SEC as discovery in Eagletech’s De-Registration action. When it is put back in their face they won’t even acknowledge it let alone explain it! (See the attached Excel spreadsheet - Note that the workbook file contains 21 separate sheets)
12 In 2002 Eagletech made three official complaints to the SEC that it was being manipulated by illegal Naked Short Selling. The second of those complaints resulted in a meeting with Enforcement Division attorney Justin Arnold at the SEC’s Miami office where Eagletech’s attorneys gave him a three inch binder of evidence showing the manipulation of 200 companies. The third complaint was made by U.S. Congressman Peter Deutsch on behalf of the Company. From the SEC, even being a U.S. Congressman doesn’t get you the courtesy of a response.
13 In January 2004 FBI agents came knocking explaining that a New Jersey labor racketeering investigation turned up manipulation of Eagletech by its first Investment Banker Bryn Mawr Investment who had contracted Colombo family mobster Frank Persico’s Staten Island brokerage firm to sell Eagletech shares. Eagletech’s civil suit had been successful in procuring trading records from Bryn Mawr subsidiary brokerage firm Lloyds Bahamas Securities where the FBI had no jurisdiction. Eagletech’s attorneys freely shared the records with the FBI. Immediately the FBI brought in the SEC, and Enforcement Division attorney Justin Arnold into its now joint investigation.
14 In June of 2004 the SEC announced proposed Regulation SHO to take effect six months later in January 2005. A threshold list of company’s failing 3 day delivery would be established. Non Reporting issues would not appear on the threshold list (Pink Sheet stocks), not a mention of Grandfathering. In July 2004 the SEC announced to the media that they were “preemptively targeting shell companies ripe for manipulation for de-registration” (1300 now Pink Sheet companies almost all manipulated by illegal Naked Short Selling from the OTCBB or NASDAQ). How convenient, the most abused companies in history exempted from the new rule purported to stop such abuse, not because of the lack of transparency cited but because it sweeps the SEC’s culpability in using their own words “delivery failures greater than a company’s total public float” under the rug forever!
15 In an August of 2004 luncheon meeting with a potential witness in Eagletech’s civil case a member of the CIA showed up un-announced to me wanting details of the involvement of Jonathan Curshen and his Costa Rican Offshore asset protection company Red Sea Management in the demise of Eagletech. I was encouraged to write a criminal referral to the U.S. Secret Service who is charged with investigating counterfeiting of corporate securities under 18-USC-514. I authored 15 pages with 100 pages of evidence implicating the SEC and the DTCC as accessories to the crime. That referral was hand delivered to the Secret Service in Washington DC as a courtesy by the agent.
16 The NBC Dateline Debacle. Does anyone doubt the power of the wealthiest entity on earth the DTCC, the real owner of most all of the shares of every company in America, and held for your benefit. OK when they are benevolent, but what about when they manipulate the media, and threaten their detractors. The public doesn’t know it but at least half of the B-roll footage of me was shot after the cancellation of the April 10th scheduled airing. The story you saw on July 31st wasn’t the story ready for broadcast on April 10th. Producer Sharon Hoffman who should have resigned in protest was rewarded with a promotion to senior producer at NBC News a week later. Between 2:48 PM on July 6, 2005 and 7:22 PM on July 31, 2005 I received 11 threatening phone calls, the final one just about five minutes after the conclusion of the Dateline broadcast. You can be sure it wasn’t GE’s attorneys doing due diligence on the story.
17 Grandfathering! The SEC didn’t have the courage to make it a part of regulation SHO. Even they know how much it smells! They leaked it to the press in late December 2004 to an uproar of detractors, many of them still calling for a Constitutional test of their authority to suspend the settlement portion of their Congressional mandate to oversee the maintenance of an efficient clearing and settlement system. To the SEC and the DTCC efficient means de-materialization. De-materialization without transparency (access to short sale data) would be the final step in the perfect crime. I don’t know who to quote, reportedly somebody at NASAA said “Over my Dead Body.” Boo-Yaa!
18 Which brings us back to the subject of this appeal before the Commission; every shareholder of any Company in America who purchased shares and can not get delivery has a cause of action against the SEC as an agency of the U.S. Federal Government for violation of their 5th Amendment Constitutional property rights. An action brought as a Constitutional Tort under the ‘Federal Tort Claims Act’ in multiple Federal District Courts across the country is governed by the State eminent domain law where the shareholder’s property was taken (your home state). There is a multitude of case law in every state in the Union covering illegal inverse taking of property by Governments and their agencies. The governments successful defense using the discretionary exemption from Tort Claims in most cases since the 1947 case ‘Elizabeth Dalehite, et al. v. United States’ does not apply here. The SEC does not have discretion to suspend the settlement process (Grandfathering), even temporarily as they claim. The bottom line is they are vulnerable here. An agency with a strained budget, 1,500 mostly inexperienced attorneys, that brings 500 new enforcement actions per year would crack under the burden of 50 or 100 or 500 Constitutional Tort cases brought against it. The real benefit of such cases would be court ordered discovery of the short selling data that the SEC routinely denies shareholders, issuers and the media, under FOIA (Freedom of Information Act). The first survival of a motion to dismiss could alter the landscape.
In a perfect world: the SEC’s auditorium on February 13th would be filled with a silent lynch mob of aggrieved shareholders (CMKX shareholders welcome), the 13 State Securities Regulators who I would introduce as dignitaries one by one to the Commissioners, CEO’s of other victim companies, the media, congressional staff assistants, and our rock star advocates Byrne, Burell, Patch, Obrien (with or without the rabbit suit), Faulk, DeWayne, and Ferrara. My apologies if I missed somebody. My well rehearsed presentation would have had input from attorneys, State Regulators, and others and would have been released to the media ahead of time. I would have paper hand outs and a CD’s of evidence documents for media and congressional staffers to take away with them. The 13 State NASAA Consortium would be holding a press conference at a nearby hotel at Noon that day announcing their Joint Initiative and possibly the filing of a few cases against the miscreants in a few states. Finally the SEC would admit they are outgunned beg the Senate Banking Committee for help, we get our hearings, new clearing and settlement and Hedge Fund legislation, and a workout plan to settle the trades once and for all.
In the real world: I’ll take what I can get and I’ll soldier on! I encourage and welcome your comments and your help. This is our fight! The future for our children may depend on what we do here today!
Sincerely,
Rodney E. (Rod) Young
Eagletech Communications, Inc.
AI
