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Investing 101 - Feb 13, 2006 - Printable Version
- The Circle of Greed: A Voice in the Wilderness
by Mark Faulk
What is a turning point in history? The dictionary defines it as “the point at which a very significant change occurs; a decisive moment.” In every battle, every cause, every war, there is a turning point. At the time, that turning point might be obvious to only a few involved individuals, but the significance of those moments in history are undeniable. Some turning points involve positive developments, while others are the result of negative forces going "too far."
Critical mass is the scale or volume at which processes become self-perpetuating. The minimum amount of people with shared understanding or needs to tip the balance and instigate change.
In the past few months, the Stockgate issue has reached it’s turning point, it has achieved critical mass. A call to arms of the North American Securities Administrators Association, a newfound ally in Overstock.com CEO Patrick Byrne, and continued efforts by advocates for stock market reform such as Dave Patch at investigatethesec.com, Bob O’Brien at the National Coalition Against Naked Short Selling, The Faulking Truth, and a few dedicated individuals have tipped the scales in the favor of those advocating stock market reform.
Today, critical mass found its voice in the unlikely form of the CEO of Eagletech Communications, Rod Young, who has battled to expose the fraud that has been allowed to run rampant on Wall Street for years. Young did what so many of us have wanted to do over the past years, he told the SEC, face to face, that they are complicit in defrauding America, and that the burden of reform rests squarely on their shoulders, and the shoulders of our Congressional leaders.
It was classic David vs. Goliath, and David won again. In fact, Goliath didn't even bother to fight back. The SEC ignored the larger issues, and tried to bury the evidence yet again, killing the companies who have been victimized instead of addressing the larger issue of stock counterfeiting, failed stock deliveries, and massive fraud perpetuated at all levels of our securities system.
While the SEC hid their collective faces in the sand, and continued their mission of attack and destroy, and cover the tracks with disinformation, Rod Young had this to say:
“I believe that the SEC, the DTCC, the Federal Reserve, and members of Congress all share responsibility for failing to respond to tens of thousands of complaints of wrongful conduct from victimized companies and their shareholders. Those failures have unwittingly facilitated an unlawful market manipulation on a scale unimagined by any previous experience.”
Young went on to describe an elaborate scheme that defrauded his company Eagletech Communications, and its shareholders, a scheme that implicates hedge funds, Smith Barney, Goldman Sachs and a aptly named company called “Flip Firm”, who helped to cover the trail of the naked short sellers by channeling the failed trades though their system. He described how these flip firms use the DTCC borrow system to hide their illegal practices, and to defraud American investors of their stock, their money, and their savings.
He also called the media to task for their own failures to report on this massive fraud, chastising NBC Dateline for whitewashing an expose' on Stockgate, and addressed the medie representatives in the audience, saying, “To the media in attendance there is an apocalyptic story to be told, if you have the conviction to write it, and your editors have the backbone to print it. The enemies of your story will be none other than your own Board of Directors, whose members are dominated by the securities firms who are responsible for the apocalypse.”
Young went on to say:
“The SEC, in suspending the settlement process, also suspends the duty of the Broker/Dealer to obtain a financial asset – the delivery of the shares. Grandfathering has just affected a taking of shareholders' property, and has given it to the naked short sellers who will never have to purchase shares to cover the sale."
“Most of the people in the auditorium today are investors whose property has been taken. They are here to protest their role as 'acceptable collateral damage' in a securities market where non-enforcement is customary, investor confidence is wounded, and lack of integrity is the norm. Also compelled to be here today is a 13-state North American Securities Administrators Association task force, whose existence is only necessitated by years of non-enforcement. The states’ issue is that they are the one who bear the expense of the social consequences of the by-product of unbridled securities fraud."
“Chairman Cox, and I realize Chairman Cox isn’t here today, I applaud the Commission in putting forth Regulation SHO. It’s too little, it’s too late, and it has left behind too many victims when you pardon the sins of the industry at the expense of the investors. Your predecessor Chairman Leavitt just came clean and pointed the finger of blame at members of Congress, yielding to lobbyists doing the bidding of Wall Street’s miscreants. Will you do the same, or will you choose to do nothing? You legacy, should you choose it, could be that of a master reformer. At long last, when will you stand up to the industry that you regulate and fulfill your mandate to protect America’s investors?"
The SEC, with a golden opportunity to actually address the very real issue of stock market manipulation and fraud, chose instead to ignore the issue altogether, and instead seemed only intent on killing one more victimized company and burying its shareholders.
Rod Young’s closing statement was short and to the point:
"I contend that if you had spent but a fraction of the resources that you spent on this proceeding on investigating just one complaint of manipulation, you would have saved some innocent shareholder the loss of his pension savings, or his child the loss of their education fund. I have just one question to ask you: when are you going to do your job?”
Once again.....the SEC had no answer.
To listen to Rod Young’s presentation at the SEC in its entirety, go to:
http://www.connectlive.com/events/secopenmeetings/
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