Feds Indict 15 Wall Street Traders To 'Instill Fear and Confidence'

[Robbien]

NEW YORK (AP) Fifteen specialists who managed trades on the floor of the New York Stock Exchange were indicted Tuesday, charged with using their inside positions to earn an estimated $20 million in illicit profits for themselves and their firms.

The Securities and Exchange Commission also filed civil charges against 20 specialists, including the 15 charged in the criminal indictment, and the NYSE as well.

The defendants cheated the market "by putting their own interests and the interests of their firms before the interests of the unwitting investors,'' U.S. Attorney David Kelley told a Manhattan news conference. Federal authorities said that between 1999 and mid-2003, specialists at five firms put their firms' orders ahead of customers' orders, causing those customers to get inferior prices. "Over time, these small thefts accumulate into large profits that translate into higher compensation and bonuses for specialists who execute the trades,'' Kelley said.

. . .

The firms' profits come from fees on each transaction as well as their own stock trading. Critics of the specialist system claim this is an inherent conflict of interest, while the NYSE has noted that the specialist firms gained $155 million in illegal profits over five years, a time when the exchange handled $50 trillion in trades.

http://cbsnewyork.com/topstories/topstoriesny_story_102133459.html

and these are the guys which BushCo wants you to hand over your retirement funds.

[raccoon]

1. thanks for posting that

and your comment is SO on target.

[Oreo]

2. I'm sure they'll get less time than Martha Stewart

[TahitiNut]

3. Yep. About $250,000/year ... not a bad 'salary'.

:puke:

[DulceDecorum]

4. About $120 an hour if spead over 40 hrs a week.

Nice work if you can get it,
and if you get it,
won't you tell JeffJames GannonGuckert how, already.

[leesa]

5. Bush also did insider trading. Why is he not indicted?

[Demeter]

6. Fear in the Public, Confidence in the Minds of Those NOT Indicted

wonder if these boys neglected their political contributions?

[AnneD]

7. So my questions is......

Who are they trying to instill with fear and who are they trying to instill with confidence.....Hummmm. This is kinda well known (wink wink nudge nudge)news that has been rumoured for a while in Wall Street circles. It is likened to the story that Gore really did have the votes to win Fla posted on A22 in tiny print 3 mos after Bushe's inaguration. I call them the KY reports (don't ask-it's a nurse thang)

[UpInArms]

8. related: NYSE Specialists Indicted for Fraud, Improper Trading

http://www.bloomberg.com/apps/news?pid=10000103&sid=a9og1uee97Mc&refer=us

April 12 (Bloomberg) -- The U.S. government charged 15 New York Stock Exchange specialists with fraud in the biggest crackdown on illegal trading at the Big Board, saying they manipulated orders for four years to pocket $19 million for their firms at clients' expense.

The NYSE itself was censured for self-regulatory failures and will submit to outside monitoring for the first time in its 213-year history as part of a $20 million settlement with the U.S. Securities and Exchange Commission today. The SEC also accused 20 specialists, including two former top officials at Spear Leeds & Kellogg, of filling orders for their own firms' accounts instead of executing trades for customers.

``To see criminal activity on the floor is really astounding,'' said Jacob Zamansky, a New York lawyer who represents investors in arbitrations against brokers. ``This occurred under the watch of the NYSE. It raises questions about whether the NYSE can properly supervise the people there.''

<snip>

The indicted specialists are current and former employees of LaBranche & Co., Van der Moolen NV, Bear Wagner Specialists, Goldman Sachs Group Inc.'s Spear Leeds unit and Banc of America Specialist, five of the NYSE's seven specialist firms.

<snip>

The specialists were charged with abusing their positions as referees by seizing opportunities to profit instead of matching up compatible buy and sell orders. For example, when stock prices were falling, the specialists would first sell shares they owned and then execute customer sell orders at lower prices, according to the indictments.

As a specialist with Fleet Specialist Inc., David Finnerty, 38, handled NYSE trading of General Electric Co. shares.

...lots more worth reading...

[natrat]

9. `To see criminal activity on the floor is really astounding,'' said Jacob

astounding---after all the scams with analysts this is hardly astounding-more like expected,,,american way at this point

[Robbien]

10. I suppose since there is so much "fraud on the floor"

everyone there begins to think it is SOP and does not report it. That is probably why it has gone on so long and probably still goes on.

This is probably just the tip of the ice berg.

[UpInArms]

11. this was from the market spew this am

http://biz.yahoo.com/mu/update.html

excerpt:

11:00AM : Sellers show some resolve as news of indictments worsens overall nervousness... Within the last half hour, US attorneys have held a news conference stating that 15 current and former NYSE specialists have been charged with fraudulent and improper trading... While the criminal probe, which initially grew out of a civil case against the seven specialist firms, has been widely known amongst the investment community, the negativity surrounding the details of such an issue on a day with little in the way of any positive news, has arguably added to market uncertainty...NYSE Adv/Dec 801/2158, Nasdaq Adv/Dec 733/1953

and from the Bloomberg article this interesting tidbit:

excerpt:

The SEC's suit names the same 15 specialists, as well as five more not criminally charged. The five include Todd Christie, 40, and Robert Luckow, 57, both former CEOs of Spear Leeds, the specialist firm that Goldman acquired for more than $6.1 billion in 2000.

[Moderator]

12. kick to combine

[emad]

13. US traders on fraud charges

David Teather in New York
Wednesday April 13, 2005
The Guardian

The clean-up of Wall Street continued yesterday when criminal and civil fraud charges were filed against 20 former "specialists" who trade for clients on the floor of the New York Stock Exchange.

The individuals, who oversee the buying and selling of shares at the exchange, were accused of trading on their own accounts for a quick profit when they should have been executing orders from clients. The charges could further undermine confidence in the traditional "open-outcry" form of trading and move the exchange further towards electronic trading.

The charges stem from a two-year investigation into allegedly illegal behaviour on the floor of the world's biggest stock market between 1999 and 2003.

The United States attorney's office in Manhattan has filed criminal charges against 15 of the individuals.

http://www.guardian.co.uk/usa/story/0,12271,1458221,00.html