“Thus, it should be understood that when pro-US figures use the term, 'rules-based international order,' they are not referring to anything analogous to the rule of law. Quite the opposite, they are using Orwellian language to describe a system in which essentially no rules can be established and/or observed, given that the dominant state has the prerogative to violate and/or rewrite “rules” at its whim.” Aaron Good, American Exception
Highlights:
Yes. The only thing that was surprising how long the SEC took to do it.
The complaint does not go quite far enough. It was a blatant fraud, more than just a failure to disclose information.
And this may be the beginning of a lot of questions about a lot of investment banks. It has massive implications IF the SEC does its job right, which they have not done in the past.
As gold and silver trading in the states moves into another futures option expiration and the rollover from the April contract with first delivery notice time approaching, the paper gold market deviates once again from the world market for bullion.
As John Brimelow notes:
Intriguingly, so also may be China. Mitsui-HK today explicitly says:
“While euro tried to pull the yellow metal lower, Chinese buying wanted to push it higher”
More concretely, the Shanghai market closed at a $6.08 premium to world gold of $1,091.98, the second day of unusually high premiums. At the equivalent of 8,469 NY lots, volume actually exceeded TOCOM for the first time I can remember. Andy Smith of Bache suggested the other day that China might resort to buying gold to groom its foreign trade statistics, which he pointed out was done by Japan in the 80s and Taiwan in the 90s. Official action would not show in Shanghai, of course, but maybe the hive mind is at work.
Local Vietnam gold stood at a $27.89 premium to world gold of $1,087.20 early today (Wednesday $24.41/$1,104.20).
While on day session volume equivalent to 7,804 NY contracts TOCOM open interest slipped 2.9 tonnes (900 NY), the public added 3.67 tonnes (6.8%) to their long. The active contract added 15 yen and world gold rose $1.25 during the session to go out $3 above NY’s depressed Wednesday 4PM level.
Gold in Euros rallied fairly smoothly from the end of yesterdays’ NY aftermarket until the European open, then moved approximately sideways until 10AM NY. $US gold did the same, but more erratically. At its intraday high around 7-30 AM it was up $6.80. A raid seems now to be underway. Estimated volume at 9AM is reported to be an eye-popping 206,132 lots which if not an error will need some explaining; the CME website indicates volume at 10 AM was roughly 87,000 of which about half was done before the floor session.
With the option expiry still pending price resistance in NY is to be expected, which will greatly please the now clearly activated Eastern physical buyers.
Breaking news...
Bank of America has agreed to pay a $150 million fine to settle a case with the SEC that it failed to disclose bonuses and other relevant information regarding the acquisition of Merrill Lynch.
Apparently there will be charges under the Martin Act against Mr. Ken Lewis, compliments of Mr. Andrew Cuomo.
The Martin Act, New York General Business Law article 23-A, sections 352-353, is a 1921 piece of legislation in New York that gives extraordinary powers and discretion to an attorney general fighting financial fraud. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. The act's powers exceed those given any regulator in any other U.S. state.
With a couple of his lieutenants, Mr. Blankfein could cover that bank fine suggested by the SEC with out of pocket money. But some banks are more equal than others, and GS would probably not condescend to subject itself to an SEC inquiry in the first place.
Mr. Lewis is an outsider, a non-NY banker. He could be food for the wolves, or the career of an ambitious AG.
If the Martin Act carries such power to safeguard the system, as Senator Bob Corker referenced yesterday in his critique of the Volker Rule, why don't they use it to probe the AIG scandal?
This looks like it might be an interesting case.
If he is guilty, the conversation between Mark Cuban and the CEO of Momma.com will be absolutely pivotal, especially the source of the record of it. Secondly, the nature of the large sale of stock that Mr. Cuban made will be equally important. Was it previously planned and committed to without question? (and something more than altered notations on scrap paper as in the case of Martha Stewart).
Another issue is whether or not this was polticial payback for Mr. Cuban's participation in criticism of the Bush Administration and his involvement in the movie "Loose Change." Is the 'enemies list' another of the artifacts of the Nixon Administration that turned up in Bush II? There were many.
It will take a 'smoking gun' and a witness such as John Dean to bring that level of government misdeeds to light. That requires a confluence of events that cannot be predicted in advance. But the elements of secrecy, contempt for the laws, hubris, and a willingness to do 'whatever it takes' were all there.
This is a sideshow for now, and we cannot help but believe that Mr. Cuban's attorneys are urging him to shut up, take the fine, and settle. Judging from this he has not yet internalized their advice.
Let's see what happens.
The SEC
Mark Cuban's Blog
Nov 17th 2008 1:20PM
I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
November 17, 2008
RE: SEC Civil Action in the United States District
for the Northern District of Texas, Dallas Division
Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.
This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.
Mr. Cuban stated, “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”
If this is accurate the evidence seems damning against Mark Cuban, who only says "stay tuned."
The question is all about the source of the record of the call between Cuban and the Momma.com CEO. Was it a recollection, a transcription, or a recording? It seems very detailed and incriminating. Was the sale already in the works, and did Mark go ahead with it on advice on counsel? Stay tuned indeed.
Bloomberg
Mavericks' Cuban Sued by SEC for 2004 Insider Trading
By David Scheer
Nov. 17 - Billionaire Mark Cuban, the owner of the Dallas Mavericks basketball team, was sued by U.S. regulators over claims he made illegal insider trades four years ago in shares of Internet search company Mamma.com Inc.
Cuban, 50, an investor in Mamma.com for four months, became ``very upset and angry'' in 2004 after the company told him in confidence it planned to sell stock below its trading price, the Securities and Exchange Commission said in a civil suit today at federal court in Dallas. Less than four hours later, he sold his 6.3 percent stake, avoiding more than $750,000 in losses after the company's share sale was announced, the SEC said.
``It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market,'' Scott Friestad, the SEC enforcement official overseeing the case, said in a statement.
Cuban was at the American Airlines Center in Dallas, home of the Mavericks, in late June 2004 when he got an e-mail from Mamma.com's chief executive officer, asking that he call as soon as possible, the SEC said. During an almost nine-minute call, Cuban promised to keep the information secret before learning the company planned a private investment in public equity offering, known as a PIPE.
``Cuban became very upset and angry during the conversation, and said, among other things, that he did not like PIPEs because they dilute the existing shareholders,'' driving down the value of their stock, the SEC wrote in its complaint. At the end of the call, Cuban told the CEO, ``Well, now I'm screwed. I can't sell,'' the SEC said.
Fines, Confiscate Gains
The agency's suit seeks to impose unspecified fines and confiscate gains from the trades.
Reached via e-mail for comment, Cuban responded ``stay tuned.'' His attorneys, Ralph Ferrara of Dewey & LeBoeuf LLP and Paul Coggins of Fish & Richardson LLP, didn't return calls.
Montreal-based Mamma.com changed its name to Copernic Inc. in 2007, according to the SEC. Copernic Chief Executive Officer Marc Ferland also didn't return a call seeking comment.
Cuban, owner of the HDNet high-definition television channel and the Landmark Theater chain, is among initial bidders this year for Major League Baseball's Chicago Cubs, the team's Wrigley Field home and a stake in a TV network. Sam Zell's Tribune Co. is trying to sell the assets by year-end to help pay off $11.8 billion of debt. A deal requires MLB owners' approval.
The SEC's suit ``will put a cloud'' over whether Cuban will buy the team, said sports banker Robert Tilliss of Inner Circle Sports in New York, who isn't involved in the sale. ``This will definitely put some doubts in people's minds about him being an approvable bidder.''
Broadcast.com
Baseball spokesman Pat Courtney declined to immediately comment. Tribune spokesman Gary Weitman didn't return an e-mail for comment. Zell's spokeswoman Terry Holt didn't return voice- mail or e-mail messages for comment.
Cuban made his fortune through the sale of Broadcast.com, the multimedia Web service he co-founded and which Yahoo! Inc. bought for $4.7 billion in 1999.
The next year Cuban purchased the Mavericks from Ross Perot Jr. for $280 million, a record at the time for a National Basketball Association team. The Mavericks became a championship contender under Cuban's control, ending a 10-year drought in his first full season by reaching the NBA playoffs in 2006.
Cuban, who often watches the Mavericks from courtside wearing a T-shirt and jeans, has racked up more than $1.3 million in fines for his criticism of basketball officials.
