Web: How Have Brokers, Custodians and Some Exchanges Decided to Compete with their Clients for Investment Returns?

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How Have Brokers, Custodians and Some Exchanges Decided to Compete with their Clients for Investment Returns?

Bud Burrell

Sanity Check via Wayback, 20 March 2006

In the original concept of our brokerage, exchange, custody and settlement systems, there was never any confusion about whose assets were the basis of their activities as agents. The assets were those of the clients, who came to the broker and related parties necessary to the transaction to act as an “honest agent” in the purchase and sale of securities. Today, this entire relationship is blurred by conflicts of interest, and outright conversion of assets.

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Web: Hedge Fund Shells Out in Shorting Probe

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Hedge Fund Shells Out in Shorting Probe

Bud Burrell, Matthew Goldstein

TheStreet cited by Sanity Check via Wayback, 14 March 2006

A New York hedge fund manager will pay $16 million to settle allegations arising out of a two-year-old investigation into manipulative trading in the market for private placements by small-cap companies.

The penalty agreed to by Jeffrey Thorp is the largest settlement assessed to date by the Securities and Exchange Commission in the investigation into trading abuses in the $18 billion-a-year market for PIPEs, or private investment in public equity.

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Web: The Golden Rule of Professional Shorting: Never Short a Company Without an Inside Rat

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The Golden Rule of Professional Shorting: Never Short a Company Without an Inside Rat

Bud  Burrell

Sanity Check via Wayback, 9 March  2006

There is one genuinely “Golden Rule” for professional short seller/raiders.

You never short a stock without an insider to leak manageable information to you. That insider might be an officer, director, control person, investor, analyst, inside legal counsel, outside legal counsel, or even a lowly disgruntled non-executive employee.

In working on some hundred plus companies directly since 1995, I have never once seen this rule broken. Many times the CEO’s of these companies have resisted this idea, but in NO INSTANCE have I seen even one exception to this rule when they were finally forced to look in on their own operations.

There is a process for looking for raider attacks on companies, but many are flawed strategically, because they are only looking out, and not in. I have been challenged by a number of clients on this, but when they would spend the money to use competent investigators, they always found the connection of an insider to the raiders. Moreover, they found the miscreant in ways admissable in Court, in phone records, emails, and more. This is not dissimilar to what Overstock’s investigator found outside the Company.

If you want a broadly known example, simply look at the Nabisco deal and KKR. The number three operating guy at RJR/Nabisco told them where all the bodies were buried, and ended up running the operations of the Company for them when they won the takeover battle.

Officers and Directors have a duty to insure that sensitive inside information about their company is not being leaked to anyone, unless it is someone doing so for ethical reasons. I have seen more than once the use of such informants by the SEC, NASD, and others. This is a more complex issue if discovered. No matter what, such a person must be quarantined until appropriate third party investigation can determine the foundation for such actions. Many times it is based on weak premises, but not always. You only have to look at Enron, Worldcomm, Global Crossing and more to see good outcomes from such behavior.

For your consideration.

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Web: Global Client Elgindy Slammed by US Attorney

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Global Client Elgindy Slammed by US Attorney

Bud Burrell, Lee M. Webb

Street Wire cited by Sanity Check via Wayback, 4 March 2006

Amr (Anthony) Elgindy, a short selling fraudster who conducted many of his trades through Vancouver-based Global Securities Corp., deserves “a very substantial term of imprisonment,” according to Assistant United States Attorney John Nathanson. In fact, the U.S. government thinks Mr. Elgindy should be locked up for life.

Mr. Elgindy was arrested in May of 2002 and convicted on 11 counts of a 32-count indictment for racketeering, securities fraud and extortion last January. He is now scheduled to be sentenced on March 22.

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Web: Are Financial Journalists Nazi’s/Socialists/Communists in Drag? Remember Dan Dorfman?

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Are Financial Journalists Nazi’s/Socialists/Communists in Drag? Remember Dan Dorfman?

Bud Burrell

Sanity Check via Wayback, 1 March 2006

I witnessed some of the most unprofessional broadcast journalism in my life history yesterday and today, in the treatment of Dr. Patrick Byrne on Kudlow and Co, where a gang of jounalists literally shouted over his voice, and this morning on CNBC, where the same tactics were tried again, only to have Patrick hold up a sign sending every viewer to go to www.thesanitycheck.com for more information.

These tactics I witnessed were similar to those used by the left against Ann Coulter recently, and are mirrored in the conduct of the Brown Shirts supporting Hitler in Germany in the 1920’s and 1930’s, and the Communists throughout their history. The hard left has used these tactics for decades, because they didn’t and don’t have an intelligent response to or plan for the issues at hand. Ditto here.

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Web: Stockgate Report – Investrend Article on Targeting of DTCC by NASAA members for Subpoenas

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Stockgate Report: Investrend Article on Targeting of DTCC by NASAA members for Subpoenas

Bud Burrell

FinancialWire cited by Sanity Check via Wayback, 14 February 2006

FinancialWire has learned from a highly-placed informed source that the Depository Trust and Clearing Corp. appears to be a target of an enforcement action by the multi-state task force formed by the North American Securities Administrators Association.

If so, this would explain a recent flurry of posts and press releases by the DTCC denying any complicity in the exploding national illegal manipulative trading scandal known as StockGate, embroiling Netflix (NASDAQ: NFLX), Overstock (NASDAQ: OSTK), Krispy Kreme Donuts (NYSE: KKD) and Martha Stewart OmniLiving (NYSE: MSO), as well as provide a measure of validation to rampant rumors that the clearing house, jointly owned by the NASD and the New York Stock Exchange has received subpoenas.

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Web: Who Caused the SEC to Enter an Amicus Brief on behalf of DTCC in the Nanopierce Case?

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Who Caused the SEC to Enter an Amicus Brief on behalf of DTCC in the Nanopierce Case?

Bud Burrell

Sanity Check via Wayback, 5 February 2006

It was my understanding, and that of many I know, that the SEC had told Counsel for the victims a year ago in a special purpose meeting, that they would NOT be filing an Amicus brief for DTCC in the matter of Nanopierce.

So what happened to change that position, and Why? Who got to the SEC on this issue, causing a change of mind and position? The only units able to put this kind of pressure on the SEC is either our Congress, or the Senate. So which was it.

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Web: The Death of a Thousand Cuts

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The Death of a Thousand Cuts

Bud Burrell

Sanity Check via Wayback, 2 February 2006

During my undergraduate studies, I read of an historical method of execution known as the Death of a Thousand Cuts. I have come to see that as a metaphor for how guerrilla wars (like ours) are won and lost.

Whether any of us have fully realized it or not, we have been engaged by an insidious enemy whose sole desire was to steal what was not theirs from others they viewed as their inferiors, rather than earn it legitimately. When a person was executed by the infliction of a thousand small cuts, the pain was enormous, eventually killing the subject by shock and loss of blood, but very, very slowly.

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Article: DTCC Chief Spokesperson Denies Existence of Lawsuit

Article - Media

DTCC Chief Spokesperson Denies Existence of Lawsuit

Financial Wire cited by RGM Communications via Wayback, 11 May 2004

FinancialWire received a confidential email between a reporter and Stuart Z. Goldstein, Managing Director of Corporate Communications for the Depository Trust and Clearing Corp. in which Goldstein was represented as denying that a lawsuit filed by Nanopierce Technologies (OTCBB: NPCT) exists.

The chief spokesperson for the DTCC, whose board of directors represent a who’s who of financial entities, including Lehman Brothers (NYSE: LEH), Citigroup / Solomon Smith Barney’s Corporate Investment Bank (NYSE: C), and Morgan Stanley (NYSE: MWD), was quoted as stating that the “lawsuit” did not exist and was simply “charges being leveled by internet crackpots.”

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THE DOLLAR HAS NO INTRINSIC VALUE : DO YOUR ASSETS?