Wall Street: Retribution Time
Investors may vent their rage and anger inside and outside the courts, once they realize that the billions of dollars they lost on NASDAQ are never coming back. Alan Greenspan may not escape the rising tide of fury. While insisting that Wall Street was steady, he quietly sold his stocks and put the money in T-Bill and T-Notes without saying a word to the Senate committees. He may have some explaining to do.
Wall Street analysts gave rosy predictions about technology stocks when the bloom had long gone off them. Already the securities industry is facing a tidal wave of litigation. Aggrieved investors are banding together to file class action suits in state and federal courts. Some of the suits we have seen name individual stock analysts for their losses, others lay out a premise for prosecution based on conflict of interests. A major suit soon to be filed in federal court in New York alleges that a number of analysts were guilty of conflict of interest, receiving pay-offs from the companies whose stock they were recommending. Some of the biggest firms on Wall Street are named. And in spite of 94-year old federal Judge Milton Pollack throwing out a case against Morgan Stanley and their analyst Mary Meeker, that does not mean that aggrieved investors are discouraged. "On the contrary" the leader of one such group told us, "it only makes us madder than ever. My group intends to go all the way to the Supreme Court if necessary."
A second group planning a class action suit says it feels its members have a strong case. Their claim is that analysts of five major firms were publicly praising and recommending stocks even while they were getting rid of their own holding in these companies. In the case brought before Pollock, lawyers for Mary Meeker said they had never seen so much venom and invective directed toward any defendant before. Judge Pollock agreed, and ordered the lawyers for the plantiff to rewrite their brief...
While Pollock might not have liked the fiery attacks on the plantiffs, a lawyer close to the case told WIR: "What it shows is that the anger of the plantiffs is so great that they would not listen to their counsel's advice to exercise restraint and keep within the bounds of legal language. This is a departure that is having a marked effect on some of the big names on Wall Street. They feel that if stock prices continue to slide, investors are not only going to take legal action, but are likely to come banging on their doors. A siege mentality is beginning to creep in."...
While Judge Pollock is looking at the current situation from a strictly legal-practices point of view, other judges may not be inclined to go strictly by the book. When the rising tide of anger envelopes the courts with thousands of law suits, as we predicted in our reports...we believe that there will be a more flexible attitude from the bench. We predicted a rising tide of anger, and we predicted correctly. This is just the beginning. We also predicted that the summer rally would fizzle. That is happening. With it will come a tidal wave of extreme anger which legal propriety will not be able to hold back.
Wall Street brokerage houses are nervous as well they might be following the case against Merrill Lynch which was settled out of court for $400,000. Although much less than what plantiff Debasis Kamjilal sued for, the suit set a landmark because it accused Henry Blodgett, Wall Street's star turn, of wrongdoing. It is also the first such major case. We warned in our reports that this would be coming, and it is only just the beginning...
These are Rats that we're dealing with, and rats know when to swim for it.
Or Destroy the Evidence.