Monday, March 27, 2006

2006 Dumb Ass Securities Regulator of the Year


"I have two companies that actually went bankrupt
because -- that’s a reason I’m a regulator now and not an investor.
"
RALPH LAMBIASE
Securities Director for the State of Connecticut

WINNER - 2006
Dumb Ass Securities Regulator of the Year


The "Naked Short Selling" lie relies upon a number of techniques and people to maintain the ruse. The most important task for these scammers is to enlist people in positions of authority to say or do something, no matter how inane, to advance their cause. There may be no better example of this task than the episode that took place with Senator Bob Bennett of Utah who got tricked into making a fuss over Global Links. While Senator Bennett will NEVER breath another word about Global Links again, the usual suspects in this scam will continue to tout the fact that, once, in a misinformed moment, they tricked the good senator from Utah into bringing the topic of "naked short selling" into the public arena.

There have been others in positions of influence who've been inadvertently tricked into lending credence to this scam movement. Financial journalists Felicia Taylor and Ron Insana have both been caught up in the scam and humiliated themselves in front of the investment community. However, as astute investors, it doesn't surprise us to see such occurrences. Obviously, we EXPECT to see the "naked short selling" lie trumpeted by the likes of a Mark Faulk or "Bob O'Brien" or any of the other players who directly or indirectly benefit from advancing this lie. And, of course, the handful of crooked corporate executives like Gary Valinoti and Rodney Young who have benefitted from this diversion as they raped their investors and ran their companies into the ground will be out there making a lot of noise, too.

So it's not shocking when a politician gets caught up in this trap. It's not even a big surprise when a financial journalist or two picks up the banner. They could just as easily be the weathergirl or covering sports, given their educational backgrounds.

But when a securities regulator, and not just ANY securities regulator, but the DIRECTOR of a state level securities division gets hornswoggled, we take notice. This dude isn't just some desk jockey making xerox copies of his face in some back office in Hartford. This dimwit is the public face of securities regulation for an entire state. In part, we have to admire the guile of these scammers to enlist the aid of such a regulator. But even more, we stand in awe of the dumbassedness displayed by Mr. Ralph Lambiase, Securities Director for the State of Connecticut, and the 2006 Recipient of the Dumb Ass Securities Regulator of the Year Award.

Mr. Lambiase earns his reward largely for his display of ineptitude as he chaired the NASAA Conference on "Naked Short Selling" on November 30, 2005. A transcript of this conference is available at a number of different locations on the internet. You should be able to Google it in about 20 seconds.

While most of this conference focused on the minutae of securities processing, settlements, and securities margin policies, there were a number of striking admissions and statements made. Consider this quote from the Securities Director for the State of Connecticut: "And I’m not going to talk about a company because I don’t think companies -- companies are not the issue to us. I need to make that clear. Companies are not the issue." Now, as any reader of this blog or any other responsible, financial website would know, investing is always and everywhere about THE COMPANY. The COMPANY is the ISSUE, Mr. Lambiase. Your task is to PROTECT investors, Mr. Lambiase. And investing, like it or not, starts with learning about companies. When you eschew "the company", Mr. Lambiase, you reinforce a pattern of behavior that has harmed tens, if not hundreds, of thousands of investors. If a company blasts through all of their working capital and has nothing to show for it besides a shell to be reverse merged yet again into the next scam coming down the road, then the subsequent fall of their share price is not a consequence of "naked short selling". It is a consequence of company management running her shareholders' equity into the ground. Your failure to place the focus where it rightfully belongs does not help investors, Mr. Lambiase. You've simply conditioned a fresh group of prospects to be financially plundered by the next Rodney Young or Robert Simpson to come down the pike.

A reader of the NASAA Conference transcript just has to ask themselves, "Has Ralph Lambiase never heard of a 'pump and dump'?" Because he's clearly been victimized by at least one of them.

Remember the key factors necessary for a successful "Pump and Dump". (1) A company with dismal fundamentals; and, (2) A relatively low public float compared to the number of total shares outstanding. Mr. Lambiase is clearly a good target for anyone running a "Pump and Dump" as he will not focus on "the company". Later in the transcript, we read this: "
I own one stock. It’s less than a couple of thousand dollars. And believe me, I’d give it to you if you want the darn thing, which is why I’m still working today, okay? Okay, in one instance there was one company had about 20 million… I actually had one of my staff look at this issue and if he’s listening, thank you Sal and Mark for doing all this for me. But they said there’s one company that had about let’s say 20 million shares outstanding,just about, ballpark number, outstanding. And they looked at it, they looked at the stock statistics and they go, 'Okay, 80 percent of it was shown held by insiders.' Now being relatively smart, you go, 'Okay, that’s got to give you about a four million share float if insiders are locking up 80 percent of 20 million.' Right? So that’s four million -- it kind of stands out -- in the float, yet when they looked at the statistics on NASDAQ Trader, whatever it’s referred to, they showed that the total shares shorted was 6.5 million. So the question I have and I don’t know if there’s inaccuracies in the reports, but that would mean if you only have 4 million shares but yet there is 6.5 million shorted, how does that happen?"

[If you're a taxpayer to the State of Connecticut, you have my condolences. You should be outraged that a public official, earning a salary on your back, is wasting his staff's time on what is clearly a textbook example of a "Pump and Dump".]

And here's a hint for you, Mr. Lambiase, if you really want to know "How does that happen?" Do some research on the non-recourse, stock loan market.

Meanwhile, the rest of you should immediately e-mail Mr. Lambiase at
ralph.lambiase@ct.gov with whatever resources you might have at your disposal to help this poor, misinformed regulator find, download, read, and understand the 10-K's and 10-Q's that get issued by public corporations.

Trust me, that dumb ass needs all the help he can get.

9 Comments:

Blogger john lichtenstein said...

So Lambiase's argument is that insiders never lend shares out and other shares can be expected to be lent out less than 1.625 times. Is it possible to test those ideas?

11:24 PM  
Blogger Jimmy B said...

I don't think Ralph has an argument. I think Ralph, like so many other investors, got his head handed to him after being victimized by a number of "Pump and Dump" scams. Afterwards, like any other victimized investor, Ralph wondered, "Wha' 'appened?"

And then someone fed him the bullshit story of the "naked short seller".

4:21 AM  
Blogger settlements said...

James,

So nice to see that you have spoken out so intelligently and with such authority. But as you do, have you never understood the concept of a short and distort? I guess the Elgindy, Union Securities, Shane, Mangan, FBR, Pollet, Rhino, Refco, Oak Securities, RYCO, etc...were all figments of some regulators imagination.

I hear you will see more examples of these figments soon. But fo now, just look back into history and understand what the new person to be in charge of the NASD (Mary Shapiro) had to say at the end of last year as published in the WSJ - "Naked shorting abuses will be a top focus for 2006". Apparently Mary and the NASD are just as confused as ralph. They must not have spoken to you yet. I am sure you have all the evidence and background to turn them around. NOT!

4:48 PM  
Blogger Jimmy B said...

"settlements",

Do you ever wonder why there aren't places where you can buy a U.S. one-dollar bill for 85 cents? No "short and distort" ever lasted for more than a trading day or two, [yes, there were fake stories planted on the net back in the '90's] because it is so easy for a company with genuine prospects to refute a lie. It's those companies on shaky footing who are susceptible to nagging questions about their viability.

There are short sellers of all flavors who violate the rules against trading on material, non-public information. There is no shortage of such crooks on the long side, but let's be absolutely clear about the charges that have been leveled against the parties you've named.

None of them are being charged for "naked short selling". Short selling just happens to be one of the tools they've used in their violations of the securities laws. Most securities violations occur on the long side, but no one would suggest that those violations therefore mean that buying a stock results in the commission of a criminal act.

Ralph Lambiase is not the only idiot in a regulatory position in our securities industry. The SEC and the states are chock full of regulators who don't know the first thing about corporate finance. It is an unfortunate consequence of civil service pay scales. It's not social work or sanitation, where pay scales between the private sector and the public sector are roughly equivalent.

In the securities world, anyone with even a middling of financial acumen can go into the private sector and make a half a million dollars a year. Who in their right mind would hang around with a pant-load like Ralph Lambiase, making $50,000 a year, if they could be in the real world making ten times more?

As for Mary, don't be too surprised if you catch her picture on this website over the next 12 months. We'll she how she handles this issue, but if she turns out to be an idiot as well, we won't hesitate to call her on it.

6:46 PM  
Blogger Unpronounceable Cymbal said...

I saw this just today on a blog dedicated to this very topic. What a load of BS that byrne is.
Byrne is Insane
Check out the guy on the left. Tell me he's not in on it. HA!

9:31 PM  
Anonymous Anonymous said...

Bravo! You are one of the few that understand what a farse this whole "naked short selling bs" really is.

I just wonder what the next excuse these scammers will use?

Hopefully, Pat Byrne from Overstock will end up sinking this thing once and for all.

9:54 AM  
Anonymous Anonymous said...

Unfortunately as their is very little data publicly available it is very hard to argue about the issue. Pump and Dumps would be a naked shortsellers dream come true. I do not know of any other type of market where you can legally sell something that you do not own (or have on order). The very structure of the market place is open to abuse.

11:12 PM  
Blogger Jimmy B said...

There is plenty of data with which we can begin to analyze these companies that have claimed to be harmed by "naked short sellers" when, in fact, the managements of the companies themselves have done nothing to create value for their shareholders.

In fact, I've enumerated quite a list of them here. Where else would you like to begin? I'm certainly game to add more companies to the list.

On one point, you are absolutely right. The structure of them arket place is open to abuse. The artificial restraints against short selling have repeatedly lent cover to those unscrupulous promoters who have managed to hatch their Pump and Dump schemes against naive investors.

Sadly, that's not a situation that is going to be corrected any time soon.

2:18 PM  
Anonymous Anonymous said...

JimmyB says: "Do you ever wonder why there aren't places where you can buy a U.S. one-dollar bill for 85 cents? "

The reason is that the pennies get devalued along with the dollar. However, you can buy a US on-dollar bill for 97 Canadian cents

10:09 AM  

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