Goldman Sachs, as an example, rarely ever makes a huge mistake in a long term trading position.
A former hedge fund staffer says he has detailed Goldman Sachs' involvement in IPO "laddering" schemes to regulators looking into alleged illegal practices in the IPO market during the tech boom, The Post has learned.
Nicholas Maier, a former executive at loud-mouth television commentator Jim Cramer's hedge fund during the go-go late '90s, had a ringside seat to the goings-on. He told The Post he spoke for six hours with investigators from the Securities and Exchange Commission.
He told the SEC that while he was at Cramer & Co., now known as Cramer Berkowitz & Co., Goldman Sachs repeatedly made the allocation of coveted initial public offering shares a condition of his buying additional shares at a price to be determined later by Goldman Sachs.
"The more I promised to buy in the aftermarket, the more shares I could expect to get," Maier said he was told by a Goldman Sachs broker. "If I reneged on my aftermarket order, I could expect to feel the consequences, or be docked on future allocations," Maier alleged.
Maier told lead SEC investigator for the IPO investigations Tammy Stark on April 29 that Goldman kept a "book" on each deal that recorded the price at which Maier should buy more stock.
Maier said that after the three-hour interview, the SEC showed him one of those books, for Marvell Technology Group, which went public in June 2000 in an offering led by Goldman Sachs.
"It has a column for aftermarket orders, and in it was listed an order for the stock from Cramer & Co. for 35 percent above the opening price," Maier said. "This is the smoking gun," Maier said he thought at the time.
Goldman Sachs officials declined comment.
"Jim's firm did not do anything improper with regard to IPOs," said Cramer's lawyer Eric Seiler. Seiler said the SEC has not contacted Cramer.
Soliciting orders to buy additional shares - at an inflated price - after the IPO stock begins trading in the open market is known as "laddering" or "tie-in agreements."
Legal experts say it can be illegal to tie the allocations of shares to additional purchases. The practice, which Maier says was widespread on Wall Street, served to jack up stock prices artificially.
Additional buying gave the impression, to the uninitiated, that demand for that stock was skyrocketing. It fed the appetite for tech stocks and the IPO boom that later went bust, wiping out $4 trillion in market value.
The SEC's probe into illegal laddering practices by Wall Street's elite brokerages is a continuation of the successful investigation into how IPOs were allocated by Credit Suisse First Boston.
In January, CSFB settled charges that the firm extorted high commissions from clients before giving them big chunks of hot IPO stocks. CSFB paid a $100 million fine to the SEC without admitting or denying guilt. But the investigation led to the dismissal of three employees and the resignation of top exec Allen Wheat.
Meanwhile, there are hundreds of lawsuits from angry investors seeking millions in compensation.
Maier's damaging testimony and that of others could bring bigger troubles for Goldman Sachs and other Wall Street firms at the center of the SEC's laddering probe.
Morgan Stanley, Robertson Stephens and J.P. Morgan Chase are also reportedly subjects of the probe.
Maier wrote a book published in March called "Trading with the Enemy," about his former employer and controversial CNBC on-air personality and co-founder of financial news Web site TheStreet.com - Jim Cramer. A chapter in that book entitled "House of Cards" triggered the SEC to invite Maier to testify, Maier said.
Cramer, no longer affiliated with the hedge fund, has dismissed the allegations in Maier's book.
The above from NY Post...this from Forbes
• How Much Do Futures Brokers Have to Hide?
In early April, a square-jawed reformer named Eliot Spitzer shook with Poseidon-like force at Merrill Lynch's rickety reputation for research and left it in shambles. The New York State attorney general unearthed now-infamous e-mails in which Merrill analysts derided stocks they touted to small investors as "dogs" and "pieces of junk." Within days Merrill switched from outrage to surrender: At its annual meeting in late April, CEO David Komansky abjectly apologized to his clients.
With one thrust, Spitzer is accomplishing what the SEC and the U.S. Attorney's office have failed to do: force radical reform on Wall Street research. "The markets depend on integrity and honesty of information," says Saul Cohen, a lawyer at Proskauer Rose in New York. "The SEC failed to ensure that honesty. Spitzer stepped into the vacuum."
But the Spitzer investigation will do far more than, say, separate analysts' pay from investment banking deals; it could also vastly increase the financial damages Wall Street faces. That has investors worried: Since Spitzer released the damning e-mails on April 8, Merrill Lynch stock has tumbled 23%. The six leading U.S. banks have since shed $48 billion, one-tenth of their market capitalization.
The threats against Wall Street lurk in two corners. First, the settlements with New York and other states over corrupt research will be costly, especially for Merrill. Spitzer is demanding around $100 million in fines. But dozens of other states and their chagrined Merrill clients will likely win lesser amounts. David Trone of Prudential Securities reckons that Merrill will have to pay between $500 million and $1 billion. Spitzer is now examining Salomon Smith Barney, Goldman Sachs, and other firms. If e-mails show that their analysts purposely misled investors, they may face Merrill-sized payments too.
As for your rant on GOLD....8 of the top 10 funds with returns of 60% or better over the past 12 months are all GOLD FUNDS....PLUS Bullion is up 17% since Jan.....at last check Dow and Nasduck still in the red.......
Rob it looks like we got another "genius" here that has never seen a bear market and thinks that things are always going to be the way he's experienced it. Sure, hard-asset people have hurt their case by being doom and gloom even while the economy (and stocks) were doing good but the arrogance that the anti-gold people project is even more despicable.
How can "gotdanggenius" expect people to respect his position when his posts show no respect for anyone else's?