Asensio Exposed!           
    
Warning: may contain loud, rattling skeletons


  

 
  It's Asensiogate Now: NASD Corruption At Nixonian Proportions (1/20/06)

   Asensiogate Part Two: NASD's Sordid & Corrupt Saga Continues (2/22/06)
    
   NASD "Bars"Asensio, Then Returns Brokerage to His Name (1/20/06) 

    04/24/06 Naked Shorting Lawsuit  (Electronic Trading Group v. Big Brokerages)
 
  03/18/06 The Elgindy Files (new items 2/07/06; 3/19/06; 3/22/06)
   02/20/06  Elgindy Sentencing Memos from Govt and Defense See
Reading Room             
   01/25/05 
NASD: Unfit to Regulate (Part One)  Unfit Part Two                                                                                        
   
09/30/04   Plot Thickens in NASD-Asensio Scandal             
 
  05/03/04  Is NASD Corrupt? Part 1   Part 2 Asensio De-licensed or not?
   
 05/05/04  Appeals Court Upholds Fraud Verdict Against Asensio
   04/04/04  Asensio Charged Again
  
 01/11/04  Bill Wexler Update
 
 12/24/03  How Asensio Duped Regulators
     
  
 
    
                                      
                
                                                                                                                                                                                                                     

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November 30, 2002

Hedge Fund Investigations

Hedge funds are on the hot seat--and the industry knows it.   The news media, SEC, Congress, and New York Attorney General Eliot Spitzer are all looking critically at industry practices or activities of particular funds.

As a service to readers, the site has compiled a collection of key articles about fund practices and the investigations that are underway.   The collection is divided into three broad categories:  commentary,  specific fund practices, and the SEC inquiry.  A final section includes information about the activities of the Washington Legal Foundation.

Each listing includes the article title; the opening lines of the article as written by the author(s); and source information. Please check back regularly to see if new items have been added.   The site will note the date of any additions at the very bottom of this page.

Incidentally, readers new to the concept of hedge funds can read a concise explanation of how hedge funds differ from mutual funds at the SEC website.

Commentary

New!  The SEC's Top Cop Means Business . . .  The SEC isn't Bill Donaldson's retirement home. When the former Wall Streeter and lifelong friend of the Bush family took over on Feb. 18, the betting was that he'd be a caretaker, put in to clean up the mess left by former Chairman Harvey L. Pitt and get corporate scandals off the front page long before the 2004 elections. Instead, Donaldson has turned up the heat on wrongdoers, increased penalties for financial fraud, and named a hard-line critic to police accountants.  -- Amy Borrus, Mike McNamee, and Paula Dwyer, Business Week Online, June 23, 2003.


Be Wary of Vile Al-Qaeda of Money World. 
There's a poison circulating around the globe that could wind up hurting more people than terrorists ever could. This unseen enemy doesn't blow up skyscrapers; it saps the life out of foreign markets, certain American and foreign companies, and even some pension funds. It doesn't stock up on poison gas or biological weapons; its tools of mass deterioration include fraud, deception and manipulative secrecy.  It's the greedy gremlins in pinstriped suits who squirt speculative capital, like hedge funds and large-scale short-selling, at financially vulnerable targets.   --Tom Plate, Straits Times Interactive, February 25, 2003.                                                       
                                                       

Beware the Hedgehogs.   In the course of writing a Nixon speech imposing wage and price controls, Arthur Burns reminded me that it was Bernard Baruch who startled Congressional investigators in 1917 by asserting coolly, "I am a speculator." Arbitrageurs, speculators and short-sellers, Baruch and later Burns explained, all help spread risk and make markets more liquid. That was then; now it's gotten out of hand. The hidden hands of speculators, profiting from bad-news rumormongering, good-news insidership and no-news accounting, made markets unsafe for ordinary investors.  --William Safire , The New York Times, September 5, 2002.

Hedge Fund Hijinks.  Visitors to this space know there have been few topics we've nagged about more incessantly in the last year than the need to crack down on abuses in the hedge fund industry.  --Christopher ByronNew York Post, April 14, 2003.
 

Fund Tactics

Just Added!  Short sellers trash, then sue, Santa Clara tech firm.  There was something curious about the securities fraud case against Terayon Communications Co. Shareholders sued the Santa Clara firm on April 13, 2000, one day after Terayon stock plummeted more than 25 percent. But the 58-page complaint was much too detailed for a last-minute lawsuit. It was certified for filing a full day before the stock's precipitous fall. And the shareholders leading the San Francisco class-action included a fund run by Dallas investor Edward "Rusty" Rose III. . . With Terayon, he was playing both sides of the fence. --Reynolds Holding, San Francisco Chronicle, November 9, 2003

New! Congress Talking with SEC on Analysts, Hedge funds. Concerns about possible collusion between Wall Street research analysts and hedge funds were raised on Thursday at a U.S. congressional hearing on the market role of the loosely regulated investment pools.  In the hearing, Rep. Michael Oxley asked Securities and Exchange Commission Chairman William Donaldson about reports that brokerage firm stock analysts may have skewed their research "to curry favor with short-selling hedge funds." -- Kevin Drawbaugh, Reuters, May 22, 2003


New! Testimony of Terry Lenzner.  (House Financial Services Committee hearing).   I first want to congratulate the Chairman , this committee, and its staff for the initiative they have taken in reviewing activities of short sellers and their relationship to the plaintiff s bar. For too long, their activities have flown below the regulatory radar screen.  These include abusive tactics of the short sellers, lack of timely information on their activities and their unholy alliance with the plaintiff s bar. The result has been, in numerous cases, the manipulation of a stock downward and consequent loss by the affected company of access to capital markets, reduction in employment and shareholder value and a reduction in the Gross National Product.
 

New York Examines Research By Gotham Partners on MBIA.  The New York Attorney General's office is looking into allegations that Gotham Partners Management Co., a once-highflying hedge fund, acted improperly in connection with a bearish position in bond-guarantee firm MBIA Inc., say people familiar with the matter.  --Henny Sender and Gregory Zuckerman, Wall Street Journal, January 16, 2003.
 

Some Ugly Short Stories:  SEC Pledges to Look into Dirty Deeds as Firms Fight Back.  Chattem Inc. President Alec Taylor figured something was wrong in January when he heard investors fret about rumors of financial woes at the consumer products company and watched its share price plummet 25 percent.  But it wasn't until almost Valentine's Day that he discovered the problem. A long-time investor forwarded an email to Taylor of a report that San Francisco-based hedge fund Barbary Coast Capital had sent out to its limited partners . . . . --Leticia Williams, CBS.MarketWatch.com, April 10, 2003.
 

Suit Batters Penney Shares, But Serves Short-Sellers Well.   Shirley Minsky was observing the seven-day Jewish mourning period for her husband last January when a family friend called, not to offer his condolences, but to get information. . .  A week later, a civil lawsuit accused Eckerd Drug Stores of widespread overcharging for prescription drugs. . . It had one named plaintiff: Mrs. Minsky. She says she never talked to any of the lawyers who filed the litigation. . . . "They made up the whole damn story," Mrs. Minsky says of the plaintiffs' lawyers.  --David Armstrong and Ann Zimmerman, Wall Street Journal, January 10, 2003.

A Whisper Can Sink a Stock.  People have to remember what it was like during some other bad periods. They have to remember how easy it was to knock stocks down in 1987 and again in 1990. Stocks can lose value in a minute when hedge funds circulate negative rumors about companies. Yes, they do that.  --James J. Cramer, Thestreet.com, July 19, 2002.


SEC Regulation

NEW: SEC Chief Reiterates Hedge Fund Concerns.  The  head of the Securities and Exchange Commission on Wednesday reiterated concern about hedge funds, traditionally an investment outlet for the wealthy that are increasingly luring small investors.  "I believe the time has come for us ... to review hedge funds and how they are operated, managed and regulated. We are looking to ensure investor protection," SEC Chairman William Donaldson said at the start of a two-day conference on hedge funds. -- Associated Press, May 14, 2003.
 

Managers Offering Mutual and Hedge Funds Probed.   Money managers branching into hedge funds to woo new customers are facing scrutiny from regulators who fear that traditional mutual fund investors could be harmed as the two different types of funds are offered under one roof, lawyers said on Monday.  -- Svea Herbst-Bayliss, Reuters, March 31, 2003.


Oversight Backed For Hedge Funds. Securities and Exchange Committee Chairman William H. Donaldson said yesterday that he thinks the $600 billion hedge fund industry needs more oversight to protect investors from potential conflicts of interest that could lead to fraud. --Kathleen Day, Washington Post, April 11, 2003.


SEC Hedge Fund Hearings May Hint at Rules to Follow. The Securities and Exchange Commission on Wednesday set dates for hearings on hedge funds, a move lawyers and managers said may signal plans to rein in the loosely regulated and fast-growing $600 billion industry.  --Svea Herbst-Bayliss, Reuters, March 26, 2003.


SEC Probing Hedge Funds' Short Sales.  The Securities and Exchange Commission is investigating allegations of manipulative short selling by hedge funds, SEC Chairman William Donaldson said Thursday. . . .  "The commission will consider amendments to existing short-sale regulation, as necessary, to curb potential manipulation by all market participants, including hedge funds, without necessarily restricting liquidity," Donaldson said.  --Matt Andrejczak, CBS.MarketWatch.com, April 10, 2003
 

Testimony Before Senate Banking Committee.  Written remarks submitted by SEC Chairman William Donaldson at Committee hearing on April 10, 2003.  Also, statements by Senators Shelby, Dole, Corzine, and Sarbanes prepared for the hearing. 
 

Washington Legal Foundation

Announcement of Complaint to SEC. On January 21, 2003, WLF filed a complaint with the Securities and Exchange Commission (SEC), asking the agency to investigate circumstances surrounding the filing of a class action lawsuit in Florida against Eckard Drug Stores. The complaint alleges that the lawyers who filed the suit may have been part of a scheme to manipulate the stock price of Eckard's parent corporation, for the purpose of making money from selling the stock "short" prior to filing suit. WLF, which filed the complaint as part of its Investor Protection Program, argued that such manipulation appears to be rampant among some members of the plaintiffs' bar.  Read Full Complaint.   Read Freedom of Information Request for Related Documents.
 

New! The Relationship Between Shortsellers and Trial Attorneys (Testimony presented to U.S. House of Representatives Committee on Financial Services.)    Evidence suggests that trial attorneys who file class action lawsuits may be selectively providing short sellers and others with information as to when the lawsuit against a publicly traded company will be filed with the court. The stock in the company is sold short before the suit is filed, and profits are realized when the price of the stock falls after the suit is filed and made public. Other questionable devices have been used by trial attorneys, such as encouraging analysts to downgrade the stock of a targeted company to spur the company to quickly settle the underlying suit, regardless of its merits.  WLF believes that this issue has been overlooked or ignored in the post-Enron regulatory,  enforcement, and legislative environment designed to restore investor confidence and integrity in the securities markets.

 

Page Created 4/26/03    Updated 5/14/03    Updated 6/20/03    Updated 6/22/03    Updated 10/13/03