Letter to California Justice Dept

January 25, 2004

Robert Lytle
Director, Department of Justice
Division of Gambling Control
1435 River Park Drive, 2nd Floor
Sacramento CA 95815

Dear Mr. Lytle:

Asensio Exposed is a shareholder-initiated website that discusses the activities of Manuel Asensio, his hedge fund clients, and others engaged in what is commonly known as hostile-adversarial short-selling.

Recently, Mr. Asensio posted on his website a letter he sent to you regarding MultiMedia Games (MGAM).  We believe that you must ask yourself a very simple question about that letter.  It is whether Mr. Asensio wrote it himself.

We sincerely doubt that he did.  Mr. Asensio has a history of presenting work obviously written by his hedge fund clients as his own, to make it appear that the work represents an independent opinion when it is nothing of the kind.   You will find this tactic described on two pages of our website: Who's Writing the Script? and Advisor or Hedge Fund Flack?  Part Two.

You may also wish to compare a paragraph unquestionably written by Mr. Asensio to the letter sent under his signature.  The paragraph below is taken from his disciplinary file at the National Association of Securities Dealers, where, not incidentally, his registration as a stockbroker was terminated effective September 11, 2003.  It is his response to a customer complaint against him.

The client did not have any cause whatsoever for claim.  The claim was dismissed.  This occurred on or about June 27, 1988 or one week after I filed my reply to Mr. Murphy's claimant.  The NASD wrote me a letter inquiring about the event and requesting I write a reply and was told that Mr. Murphy's claim had been dismissed.  I was told to call two weeks after I filed my reply.  When I called I spoke to Cherl Soyak in New York, the author of the NASD inquire letter and recipient of my reply.  She informed me that Mr. Murphy's claimant would not be pursued by the NASD and that I had no further obligation to fulfill.

This rambling paragraph, complete with occasional malapropism, stands in stark contrast to the very well-written letter sent to you a few days ago.  It seems highly unlikely that the same individual wrote both.  Far more plausible is that the letter sent to you was written by a client who holds a position in MGAM.

Transcripts of MGAM conference calls available on the internet show that one Asensio client has been a regular participant.  The nature of his questions, as well as his prominence as a short-seller, suggest that his position is a short one. Moreover, the dramatic rise in the price of MGAM since his participation began almost certainly means that any short position his fund holds is seriously in the red.  Nonetheless, one can do no better than inference here, as short positions are not reported to the SEC. Mr. Asensio has also made no disclosure of his clients' short positions (1).  Accordingly, we suggest that you require Mr. Asensio and his clients to provide audited disclosures as to the nature of their positions in MGAM.   Mr. Asensio should also be required to disclose the compensation he is receiving for his commentaries.

For the record, this website has no financial interest of any kind in Multimedia Games.  Its stake is in a broader issue: preventing government from becoming  a chessboard upon which Mr. Asensio manipulates the regulatory process for financial gain without disclosing who he represents and why.   The Department of Justice cannot allow itself to be used as a pawn by Wall Street sophisticates eager to induce large declines in the price of MGAM or any other stock while concealing themselves and their self-interest from view.  You can be sure that if MGAM failed to disclose some material fact, Mr. Asensio and his clients would show its officers and directors no mercy whatsoever.

Thank you for your consideration of our concerns.

(1)  We believe Mr. Asensio's failure to disclose client positions in MGAM on his website may represent a violation of NASD Rule 2711 governing research reports.   Whether this is so depends on whether he is still obligated to observe NASD rules. This is difficult to determine as ownership of the firm previously known as Asensio Brokerage Services has been transferred to a private offshore trust and another individual.

The firm is now known as Integral Securities.  In the event that Asensio retains an ownership interest, applicable rules require full disclosure of all positions, short and long, that he holds in MGAM; all compensation he receives or expects to receive for his reports on MGAM; and any conflict of interest that he knows about regarding MGAM.  Positions held by his clients in the stock surely come under the definition of "conflict of interest."