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Article: How CIBC Cashed In on Mutual Fund Fraud

Article - Media, Publications

How CIBC Cashed In on Mutual Fund Fraud

MATTHEW GOLDSTEIN, 20 July 2005

One of the darkest realms of the mutual-fund trading scandal was laid bare Wednesday as state and federal prosecutors detailed how a Toronto financial company served as broker, banker and back office in a hedge fund scheme that victimized thousands of retail investors. The Canadian Imperial Bank of Commerce agreed to pay $125 million to settle the charges, which included fraud and deceptive business acts. The allegations cover a five-year period in which dozens of hedge funds used the bank’s money and connections to make abusive trades that resulted in huge profits to them but diluted other investors’ overall returns. From 1998 to 2003, regulators say, CIBC lent up to $2 billion to such traders, generating more than $75 million in fees. The bank neither admitted nor denied guilt in the settlement.
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Article: Faulty Regulator

Article - Media

Faulty Regulator

Christopher Byron

New York Post cited by RGM Communications via Wayback, 27 June 2005

On Thursday the Securities and Exchange Commission’s departing chairman, William Donaldson, will step down from his two-and-a-half year stint as Wall Street’s top regulator, vacating the most thankless and difficult job in the administration to make way for President Bush’s third nominee.

Though Donaldson is widely credited with having been an effective and activist-oriented SEC chairman who — among other things — pursued more high-profile corporate-fraud cases than any chairman before him, he actually initiated only one major SEC fraud probe that has led to litigation against a defendant.

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Release: Former FBI Agent Pleads Guilty to Obstruction of Justice

Article - Media

Former FBI Agent Pleads Guilty to Obstruction of Justice

Robert Nardoza

United States Attorney’s Office, 23 June 2005

ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and JOHN A. KLOCHAN, Acting Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, announced that LYNN WINGATE, a former Special Agent of Federal Bureau of Investigation, pleaded guilty this afternoon to obstruction of justice in connection with her role in interfering with a grand jury’s investigation relating to Amr “Anthony” Elgindy and former FBI Agent Jeffrey A. Royer by accessing the FBI’s confidential law enforcement computer system and then relaying pertinent confidential information to Royer, who was one of the subjects of the investigation.

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Release: NASD Charges Pennsylvania’s Scott W. Ryan, Ryan & Company with Impermissible Short Selling Scheme for Hedge Fund Clients

Release

NASD Charges Pennsylvania’s Scott W. Ryan, Ryan & Company with Impermissible Short Selling Scheme for Hedge Fund Clients

13 June 2005

NASD announced today that it has charged Scott W. Ryan of Bryn Mawr, PA, and Ryan & Company, LP (RYCO) of West Conshohocken, PA, with engaging in a long-term, widespread scheme of impermissible short selling activity on behalf of three hedge fund clients.

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Article: Short Selling, Death Spiral Convertibles, and the Profitability of Stock Manipulation

Article - Academic

Short Selling, Death Spiral Convertibles, and the Profitability of Stock Manipulation

John D. Finnerty

Fordham University, 31 March 2005

The SEC recently adopted Regulation SHO to tighten restrictions on short selling and curb abusive short sales, including naked shorting masquerading as routine fails to deliver. This paper models market equilibrium when short selling is permitted and contrasts the equilibrium with and without manipulators among the short sellers. I explain how naked short selling can routinely occur within the securities clearing system in the United States and characterize its potentially severe market impact. I show how a recent securities innovation called floating-price convertible securities can resolve the unraveling problem and enable manipulative short selling to intensify.

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Release: DTCC Announces Effort to Correct Record on Its Stock Borrow Program & Naked Short Selling

Release

DTCC Announces Effort to Correct Record on Its Stock Borrow Program & Naked Short Selling

Business Wire, 30 March 2005

The Depository Trust & Clearing Corporation (DTCC) has provided its bank and broker customers with a detailed explanation of its Stock Borrow program and the issue of naked short selling in an effort counter a widespread campaign of distortions and misleading information.

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Article: Who’s Behind Naked Shorting?

Article - Media

Who’s Behind Naked Shorting?

Karl Thiel

The Motley Fool, 30 March 2005

The subject of naked short selling has gained some momentum with the introduction of Reg SHO early this year and a rising tide of complaint from companies like Overstock.com (NASDAQ:OSTK) and others. But in addition to this general attention, 12 separate lawsuits have accused the DTCC itself of engineering naked short-selling schemes. Nine of these, according to Thompson, have been dismissed or withdrawn, while three are still pending.

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Article: Naked shorting: The curious incident of the shares that didn’t exist

Article - Media

Naked shorting: The curious incident of the shares that didn’t exist

Peter Koh, Helen Avery

EuroMoney, 27 March 2005

Shareholders and executives in some of the US’s smallest listed companies believe their share prices have been forced down by illegal naked shorting. This has led to a number of lawsuits, claiming unscrupulous behaviour by brokers and market-makers exploiting loopholes in the central clearing system. Those implicated dismiss the allegations as rubbish. What’s going on?

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Article: The Naked Truth on Illegal Shorting

Article - Media

The Naked Truth on Illegal Shorting

Karl Thiel

The Motley Fool cited  by RGM Communications via Wayback, 24 March 2005

It’s amazing how the word “naked” can liven up a discussion. Take naked short selling, for instance. The addition of this saucy little word turns the mundane act of borrowing and selling shares of stock in hopes of buying them back later at a lower price into a raging controversy fraught with conspiracy, secret identities, public recriminations, foreign intrigue, sports team owners, and now some of the top regulators in the land.

How can one word cause so much trouble? While legal short sellers must borrow the shares they sell, naked short sellers sell shares of stock they haven’t borrowed, have no intention of borrowing, and that may not even exist. Not surprisingly, this activity is illegal and has been since the Securities and Exchange Act of 1934. But for a number of reasons, regulators have overlooked it in the past.

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Filing: SEC v Tonino Labella, et al.

Filing

SEC v Tonino Labella, et al.

United States District Court for the District of New Jersey, 15 February 2005

This securities law enforcement action concerns a fraudulent scheme that Labella and Serubo orchestrated to sell more than $16.8 million of unregistered Eagletech Communications, Inc. (“Eagletech”) and Select Media Communications, Inc. (“Select Media”) stock through unregistered offerings to the investing public.

PDF (26 pages: SEC v Tonino Labella, et al.

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Article: U.S. Stock Market Commentary by Samex Capital

Article - Media

U.S. Stock Market Commentary by Samex Capital

Samex Capital via RGM Communications via Wayback, 7 February 2005

It seems the U.S. Chamber of Commerce’s Institute For Legal Reform has publicly stated their petition of William Donaldson, the chairman of the SEC, asking for an investigation into whether short sellers and the law firm of Milberg Weiss (“MW”) had engaged in securities fraud. MW represented a class action suit led by an investment company that was also shorting the stock of the company targeted by the class action. MW is best known for their role in pursuing class action suits against publicly traded companies.

PDF (2 pages): U.S. Stock Market Commentary by Samex Capital

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Article: Shame on the SEC

Article - Media

Shame on the SEC

Christopher Byron

New York Post cited by RGM Communications via Wayback, 10 January 2005

Investors with money in the large and well- capitalized companies of the Dow Jones industrial average certainly felt blue last week, as the first five trading days of the new year brought a 180-point, or 2 percent, drop on well-placed fears that the Federal Reserve intends to keep raising interest rates until the economy stalls out.

But to any of the growing legions of investors lucky, nervy, or foolish enough to have been slumming instead last week in the investing world’s seediest dive of them all – the penny stock market – Wall Street definitely looked pretty in pink.

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