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Abelow Row Over NJ Treasurer Position Sparks Showdown

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Posted by:   bobo 2/22/2006 9:00 AM

A great article came out today about tomorrow's hearing for Abelow in NJ - and it looks as though the bombs are going to go off there tomorrow.

The article speaks for itself.

You can read it here.

Rather than a long-winded commentary (as I have been wont to do on occasion) I would suggest that we all read the article, and then regroup here for comments.

Astounding that a local paper gets more of the story correct than the WSJ or the NY Times, huh?

Or maybe not.

Read it, and then come back and comment.
Copyright ©2006 Bob O'Brien
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Comments (21)
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Patchie on 2/22/2006 9:22 AM
"We are not police, we are not regulators, our job is to settle trades," said Steven Letzler, a spokesman for the firm. "We have no clue about naked shorting. Buys and sells -- that's all we see."

Letzler said that opening up the company's files to the public in the hope of rooting out naked short sellers would not only be a massive violation of investors' privacy, but would promote other forms of stock manipulation.

"If we exposed everybody's investments it would move markets, there would be chaos," Letzler said.

My Response:

The DTCC is considered a Self-Regulatory Agency without the powers of Enforcement. The DTCC does have the right to create laws and have done so recently restricting issuers from the self-help measures of custody only trading. Thus, they can equally create laws to control the duration of lending in a stock borrow initiative and they have the authority to execute buy-ins based on a Notice from an Institution. Therefore, they can create laws to allow them to initiate buy-ins on their own behalf for the SBP they manage..

Furthermore, Letzler claims that opening up company files to the public would be a violation of investors' privacy and promote other forms of stock manipulation.

1. The DTCC files are not in the name of individual investors but in the "street name" of the Institutions. The DTCC has no record of Beneficial Holders and thus there is no violation of Privacy in turning over DTCC records regarding stock trades.

2. Is Mr. Letzler insinuating that stock manipulation is taking place and that by disclosing this problem it may create another form of manipulation even if it corrected the one that was in existence today?

3. If the job of the DTCC is to settle trades than they must do so INCLUDING those trades that fail initial settlement criteria. They are failing in their duties as evidenced by the FOIA data gathered and the SHO lists published. Further regulatory actions confirm that the DTCC is allowing stock manipulation to take place using the acceptance to settlement failures.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By bobo on 2/22/2006 9:33 AM
Have you ever heard such happy horseshit in your life? Where do I start? How about, you are chartered with regulating your members (SRO - the R is regulate) and yet you can't police the ex-clearing as that is contractual agreements, you can't restrict the time duration of a borrow, you won't allow buy-ins without giving everyone a crack at the SBP a second time around....

I want to be a broker, whose regulation entity is owned by me, and who claims it is powerless to regulate me. Sounds peachy.

This is SUCH BS. Jeff, are you listening? We can't be transparent or the markets would implode and it would be chaos. Oh, well maybe we could, but still, it would be pandemonium.

How about we can't tell anyone what is actually going on as they would hold a lynching party?
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Jeff Mitchell on 2/22/2006 9:58 AM
I've posted your agenda for the DTC on my SI thread: http://www.siliconinvestor.com/readmsg.aspx?msgid=22193430

Perhaps we should next figure out how to get the DTC to answer your questions. As you know, I'm coming from the side of "Please Shut These Guys Up" and you are coming from "Tell the World and Tell Them Loudly". Surely the DTC can't refuse when hit from both sides? When you think about it, your insulting only serves to polarize people to the point that whatever you want they, by definition, don't want. In other words, wouldn't it be in your best interest to have the financial media also telling the DTC to put a stake into your hearts by presenting a compelling case using real (but name-redacted) data? Think about it.

- Jeff
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By dave on 2/22/2006 10:00 AM
"Stuart Z. Goldstein, a managing director of the firm, pointed out that the DTCC is already one of the most heavily regulated companies on Wall Street, answering to the SEC and New York State regulators."

I don't think that is factually correct. The DTCC is a holding company - I doubt they report to anyone. The NSCC does not answer NY state regulators.

Who regulates the trust assets of Cede & Co.? It's the elephant in the room. The DTCC annual report doesn't even mention these assets.

http://www.bis.org/publ/cpss20r3.htm

"DTC and its activities are regulated by the SEC, the Board of Governors
of the Federal Reserve System (the “Fed”), and the New York State Banking
Department."

http://www.bis.org/publ/cpss20_usnscc.pdf

"NSCC is subject to regulation and examination by the SEC."
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By tbs_theman on 2/22/2006 10:15 AM
If they can't enforce buy-ins, there should be at least a paper trail of documents where they report the abusive practices. I'm sure there is no trail. Of course, they'll have the same answer - the buyer broker never complained so we thought it was okay.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Chasity on 2/22/2006 10:47 AM
Write your congressman in NJ. Tell them NCANS represented well:


U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19407 / September 29, 2005
Securities and Exchange Commission v. Gary L. Valinoti, Civil Action No. 1:05CV01922 (D.D.C.) (JR)
SEC Sues Former CEO and President of Jag Media Holdings, Inc. for Making Unregistered Sales and Transfers of Securities
On September 29, 2005, the Commission filed a civil injunctive action in the United States District Court for the District of Columbia against Gary L. Valinoti, the former CEO, president and chairman of the board of directors of Jag Media Holdings, Inc. ("Jag Media"), for making unregistered sales and transfers of securities of the company in violation of Section 5 of the Securities Act of 1933 ("Securities Act").
The Commission's complaint alleges that a privately-held company, of which Valinoti was an officer, reverse merged with a publicly-traded shell company in March 1999 to become JagNotes.com (subsequently renamed Jag Media). The complaint further alleges that an officer of the publicly-traded shell company arranged for 250,000 shares of the shell company to be sold to Valinoti in connection with the merger. According to the complaint, the sale of 250,000 shares to Valinoti was not registered with the Commission, as required under Section 5 of the Securities Act.
The Commission's complaint further alleges that Valinoti improperly realized $1.83 million by selling 130,000 of his 250,000 shares on the Nasdaq over-the-counter bulletin board ("OTCBB") between March and April 1999. The complaint also alleges that, between April and June 1999, Valinoti: (i) transferred 112,000 of his 250,000 shares as consideration for an ownership interest in another company; and (ii) transferred an additional 6000 shares to a public relations firm as compensation for services rendered to JagNotes.com. The sales and transfers for value, the complaint alleges, were not registered with the Commission, as required under Section 5 of the Securities Act. According to the complaint, within one year of having received the 118,000 shares from Valinoti, the transferees subsequently sold them on the OTCBB for approximately $1.1 million.
Without admitting or denying the allegations of the complaint, Valinoti agreed to settle the Commission's charges by consenting to the entry of a final judgment that would permanently enjoin him from violating Section 5 of the Securities Act and hold him liable to disgorge approximately $2.9 million in illicit gains and to pay $1.39 million in pre-judgment interest thereon. In partial discharge of approximately $571,700 of Valinoti's $2.9 million disgorgement obligation, the final judgment would also order Valinoti to: (i) pay $50,000 in cash; (ii) direct the cancellation of his existing holdings of Jag Media securities, valued at approximately $421,700 for settlement purposes; and (iii) relinquish his existing options to purchase shares of the company, which were granted to him by Jag Media and are valued at approximately $100,000 for settlement purposes.
SEC Complaint in this matter


http://www.sec.gov/litigation/litreleases/lr19407.htm

--------------------------------------------------------------------------------
Home | Previous Page Modified: 09/29/2005

Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Patchie on 2/22/2006 11:31 AM
Good Call Chasity...

And those on the flip side _Morgan Stanley, Merrill Lynch, Bear Stearns, Goldman Sachs, UBS, etc.....

Should we do a little research into the BILLIONS in fines imposed against these firms for fraud in recent years? That is BILLIONS with a "B".

The issue is trade settlement and what Letzler admitted is that the DTCC's job is to settle trades. Apparently they missed that in the Elgindy, Pollet, Shane, Mangan, FBR, Tradenation, Rhino, etc...cases.

And before you go too far on Elgindy, it may have been legal to naked short in Canada but a fail in the states (Buy Side) is still a fail that must be settled according to US Laws under 17A, 15c6-1, 15c3-3.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By bobo on 2/22/2006 12:01 PM
Jeff: However the data gets known, is fine by me. I think you are about to get a lesson in how the industry protects its secrets.

As to my style, I have been told that my confrontational style - the antithesis of PC - is not useful. I also note that very little else has been useful, so I don't feel like I have much to lose. Hey, you frigging creep, you are robbing me blind and are lying about it seems to me much more candid than, "transparency in the system is necessary to ensure a level playing field and dissuade unfair advantage." Having said that, much of it is for impact - the market reform movement is somewhat galvanized, for whatever reason, and my take-no-prisoners style is a part of that, for better or for worse.

Here's my point: The DTCC isn't going to refuse the request because there wasn't enough fawning or pretty pleases included. It is going to refuse the request because to divulge what has been going on would subject them to the sort of public outcry reserved for war criminals and losing football teams. So if a softer, gentler bunny is what is required to get the job done, super, I hereby apologize for being a complete asshole, and promise never to be one ever again. If not, and if my suspicions are correct, you will fare no better than I, and will, over time, either give up, or become an asshole too.

There is no anti-NSS or pro-NSS lobby. There are people that make money by the practice continuing, and those whose money is being taken due to the practice. Simple.

Again, I will support your effort as much as I can. Folks, note, this is not a personality-polarized issue. Short sellers are not evil. I would dearly love to have shorted a few dogs I knew about during the dot com years, and would have done so with completely clear eyes had I known how to do so effectively back then. The issue is not a short sellers versus whining pissy losers issue. It is a market manipulation versus fair markets issue. Everyone can make plenty of money in fair markets - it's just harder for the crooks, who then have to compete on a level playing field based on their own merits and acumen, rather than breaking laws and cheating to gain advantage.

And crooks are typically cowards and bullies, and not as bright as most, which is why they have to cheat in the first place...
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By MajorIssure on 2/22/2006 12:34 PM
Bobo, Could you please clarify what you mean by "galvanized." Previously you'd said the movement was falling on deaf ears. Also, why do you think the market reform movement would be aided if the DTCC were to publicize its top-secret files. Everybody who matters konws what's in those files, and my guess is that the shorts views much of it with pride. It's not just investors. Sone brokers got screwed, though they were protected. It's not the DTCC that matters. The SEC has done no poking into the fates of American firms that seem to have been shorted. Look there and find plenty of illegalities--moles, etc.

All this talk about secret files exposed is getting us nowhwere. And the "theman" thread is an abomination. Documents would only lead to mayhem the deaths o perfectly decent companies, including some mom and pop shops. I hope that's not what you mean by "galvanize."

I think we're working towards the same ends. By the way, what are those ends again? I hope this isn't all about protecting rich people.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By bobo on 2/22/2006 1:11 PM
I'm not sure that I understand what you mean by "everyone who matters knows what's in those files."

What I mean by galvanized is that this movement has gone from a few lone voices in the wilderness to a cohesive, motivated force that is raising the visibility of the problem, and that we are seeing important steps toward action - the DTCC subpoenas, the SEC actions, the NASD probes, the OSTK suit - the naked short selling/market reform movement is now discussed on BBs with regularity, and information is increasingly available to investors on how the system works. I happen to believe that knowledge is power.

Our "cause" would be aided because we are beset on all sides by apologists claiming that there isn't really a problem - EXACTLY like in the S&L crisis. And this is really just a battle for transparency. Nothing more. If the actions of one and all were transparent, then egregious violations would be obvious, real time, and our regulators would be forced to act, and the class action attorneys would be handing the miscreants their heads. It is a sort of transparency natural selection mechanism, if you will. The reason we don't have it is because transparency would kill the profitability of a large number of the most venerated houses on Wall Street - whose profits are a one to one ratio of investor losses, in the case of NSS.

So what am I for? Market reform, reform meaning transparency.

As to illegal market tactics - moles, etc. - that is trading on inside info. Seattle Times just did a big piece on hedge funds and biotech, wherein the hedges were paying for advance info on clinical trial results. That is a different problem, and much more straightforward.

The SEC isn't in the business of pursuing participants. It is just that simple. And given that there likely isn't one staffer there that has ever actually run a business, they have no knowledge base on what goes into doing so. But usually single businesses don't have the resources that multi-billion dollar networks of larcenous hedge funds do, so at the end of the day of selecting the low hanging fruit to go after, companies are easier.

And there are plenty of dishonest companies, to be sure.

I would actually think that a great gig would be to be in the business of discovering legitimate fraud and then exposing it. One thing that is obvious to me is that there is no shortage of crooks in business, or on Wall Street, thus any career that is dependent upon larcenous miscreants will likely be a long and fruitful one. The problem is that it is a whole lot easier to use the tactics of someone exposing larceny to destroy companies, whether they are legit or not. It really has become a cottage industry - cynical, destructive, supported by big money, and completely sociopathic.

So much money is trying so hard to find a way to outperform the market that it is inevitable that a certain segment will be driven to larceny - it's human nature. A bright crook correctly looks at the systemic flaws and sees a playground filled with opportunity. Can't blame them - there will always be crooks. But the flaws which are systemic are not being corrected, as there is an embedded tendency from the industry side to want to preserve unfair advantages - which has culminated in the DTCC - an effective monopoly owned by the brokers and the banks. What are the odds that entity is going to heal itself? What examples do you have of monopolies that didn't degrade into self-serving oligopolies more concerned with maintaining their grip on power than on being fair and honest? Absolute power.

We have given the smartest crooks on the planet the keys to the clearing and settling system, much as we did with our Thrift industry. That didn't end well.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By flopsy on 2/22/2006 2:30 PM
Are You Ready For This

http://biz.yahoo.com/bw/060222/20060222005964.html?.v=1
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By cynabear on 2/22/2006 5:10 PM
might want to thank Jeff for the well written and easy to understand article...need to acknowledge the good guys.


from: pillets@northjersey.com
thanks for reading. this is truly an amazing story, although a tough one to tell. good luck. jeff///
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By MajorIssuer on 2/22/2006 5:08 PM
No doubt, it would be nice to see the insides of that clearing and settling system. Obviously, there's much we don't know or understand about the scope and dimensions of this fraud. Hopefully the holes will fill themselves. Meanwhile, I have to get back to work.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By robelita on 2/22/2006 2:39 PM
What we want is transparency and a level playing field and the DTCC fosters neither. I propose that each person ask their prospective congressional candidates where they stand on the issue and vote accordingly. We may have to clear out Congress before we see attention given to this by our elected officials but I ask you-would this be a bad thing?
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By InTheKnow on 2/22/2006 5:11 PM
Chastity,

AD HOMINEM! AD HOMINEM! AD HOMINEM!

and what was your point... REMOND?
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Patchie on 2/22/2006 3:28 PM
According to Letzler the DTCC is not police and they are not regulators yet...

Go to the SEC website under proposed rules - SRO's and see what comes up:

In 2005 the NSCC proposed 16 Separate Rule Changes.
In 2004 the NCSS proposed 14 rule Changes
In 2003 the NSCC proposed 7 rule changes.

They are listed in the SEC’s section on SRO rule Proposals http://www.sec.gov/rules/sro/nscc.shtml


Likewise, the DTC

In 2005 proposed 21 rule changes
In 2004 proposed 13 rule changes
In 2003 proposed 5 rule changes



They are listed in the SEC’s section on SRO rule Proposals http://www.sec.gov/rules/sro/dtc.shtml



These were all under the tenure of Bradley Abelow. NONE of these proposals addressed issues with settlement failures or settlement abuses.
The NSCC's proposed rule change By tommytoyz on 2/22/2006 5:12 PM
Notice of Filing of Proposed Rule Change Relating To Buy-Ins in Its Continuous Net Settlement System

http://www.sec.gov/rules/sro/nscc/34-52976.pdf
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Jeremiah 9:24 on 2/23/2006 1:15 PM
What is great about this little flap is that the face people at DTCC, the Directors, people whose names are publicly known and who have other business and interests besides the illegal activities at DTCC (though many of them have no doubt gotten rich or richer by utilizing the DTCC's manipulation aiding and abetting schemes) are going to see that they themselves have some issues with what the scum hiding in the back offices of DTCC are doing. Sort of like the Board members of public companies, that find themselves sued and made to look bad when said public companies stumble.

Maybe a few Banking committee members of the Senate and Financial Services members in the House will take note as well. Hey guys, an election is coming and you'd better be ready with some answers, because the word is getting out what you are covering up.

I can't believe this story got out there, but am thankful it did. I suspect other State securities guys will be getting on this bandwagon. And soon.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By Patchie on 2/23/2006 2:57 PM
http://www.njleg.state.nj.us/media/archive_audio2.asp?KEY=SJU&SESSION=2006

Go to Feb 23, 2006 Archive and move to time spot 1:24 and listen carefully. Abelow admits to much and avoids much.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By eager on 2/23/2006 6:31 PM
I listened Patchie to it and it sounded like he was a deer caught in headlights to me and just didnt know how to answer.
Re: Abelow Row Over NJ Treasurer Position Sparks Showdown By PhantomCertificates on 2/24/2006 5:00 PM
Patch, listen from about 1:46:30 on for about 15 minutes and you'll see where the message never got through. Calling this transaction naked short selling once again just either confuses these guys or they just make light of it. Then Abelow actually goes into detail about what he was actually in charge of and his responsibilities included making sure that securities that you paid for actually show up in your account at Goldman Sachs.

Hmmm, that sure sounds like the whole issue about naked shorting (or maybe we should refer to it as failure to deliver as not to confuse our governmental officials).

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