Jake Zamansky's Blog

• WexTrust Capital Investigation Eerily Similar to Peter Dawson’s Long Island Fraud

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  For as sophisticated as today's financial gurus claim to be, the old-fashion Ponzi scheme is still alive and well. Indeed, the SEC filed a major case against WexTrust Capital (a Chicago-based private equity firm), its partners and various investment affiliates, that allegedly ripped off an estimated 1,200' [...]
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  Posted: August 15, 2008, 2:00pm EDT
  by Jacob H. Zamansky

• What the Auction Rate Securities Settlement Doesn’t Do

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  The New York State Attorney General and the other regulators participating in the auction rate securities (ARS) settlement talks are surely to be commended for their action and diplomacy. Auction rate securities clearly were fraudulently marketed to investors and without the regulatory pressure and investigations; there would be no light [...]
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  Posted: August 14, 2008, 11:56am EDT
  by Jacob H. Zamansky

• Hedge Fund Losses Could Lead to Fraud

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  Reuters reports on key indexes pointing to large losses by hedge funds in the month of July - and likely for the foreseeable future. The reasons are that many hedge funds that were highly leveraged are receiving margin calls. And a great many firms are being hammered by [...]
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  Posted: August 13, 2008, 3:03pm EDT
  by Jacob H. Zamansky

• The Decision to Sue a Financial Advisor is not so Cut and Dry

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  A recent Money Magazine columnist, who carries the nom de plume of “The Mole” and is an undercover financial planner, wrote a column entitled “Should I sue my advisor?”
  
  “The Mole” relates a common situation where a broker is asked to review another broker’s performance and finds [...]
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  Posted: August 07, 2008, 8:02am EDT
  by Jacob H. Zamansky

• Merril Lynch's Microwave Ovens

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  The focus on Merrill Lynch these days is on its tattered balance sheet, namely the more than $30 billion in mortgage-related assets it wrote down last week for some 22 cents on the dollar. Given that Merrill valued these toxic assets at 36 cents on the dollar just weeks ago [...]
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  Posted: August 04, 2008, 11:48am EDT
  by Jacob H. Zamansky

• Banks Stocks the Next Tech-Bubble?

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  It comes as no surprise that the subprime/credit crunch crisis has led to an increased level of securities class action filings. Research firm Cornerstone just released a report which shows the financial sector was the target of the most filings with 63 in the first half of 2008 alone. The [...]
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  Posted: July 29, 2008, 12:55pm EDT
  by Jacob H. Zamansky

• FINRA Pilot Arbitration Program is a Step in the Right Direction

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  Yesterday FINRA announced a pilot program to do away with the financial services industry participant in arbitration panels. Rather, all three panelists will consist of an investor’s peers.
  
  FINRA is to be commended for at least putting a toe in the water towards arbitration reform. Studies have shown investors [...]
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  Posted: July 25, 2008, 9:48am EDT
  by Jacob H. Zamansky

• Frank Quattrone’s Utopia

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  I’m quite sure everyone will take Frank Quattrone’s recent comments about returning to his glory days of conflicts between research and investment banking at face value, but at the risk of indulging his attempt at a comeback I’ll address his flawed reasoning. Mr. Quattrone believes barring Wall Street’s research analysts [...]
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  Posted: July 25, 2008, 9:42am EDT
  by Jacob H. Zamansky

• Mr.Cuomo: ARS Investors Don't Need a Spitzeresque Settlement

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  After learning that New York Attorney General Andrew Cuomo is set to bring charges against UBS related to their marketing of auction rate securities, I am of mixed emotions. On the one hand I am pleased that the scandal is resulting in complaints, but I am only cautiously optimistic that [...]
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  Posted: July 23, 2008, 4:52pm EDT
  by Jacob H. Zamansky

• The Hapless Members of Citi’s ELKS Club

  Number of comments: 1
  It’s only a hunch, but experience tells me you can soon expect to be reading a lot about “ELKS” and other structured investments in the business press.
  
  The name evokes images of a hardy, austere and stable animal able to withstand the harsh elements of the forest. But [...]
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  Posted: July 21, 2008, 4:10pm EDT
  by Jacob H. Zamansky

• Business Journalism at its Finest

  As someone who has spent more than three decades representing individual investors who have been wronged by Wall Street, I have been at a loss to understand the seeming lack of public rage about the dire economic circumstances our Masters of the Universe have inflicted on the country. Although extensive [...]
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  Posted: July 21, 2008, 4:04pm EDT
  by Jacob H. Zamansky

• “My Take” on the SEC posted on BusinessWeek.com

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  A few weeks ago I sent a comment to BusinessWeek’s senior editor and blog contributor Diane Brady agreeing with an item she posted that questioned the usefulness of the SEC’s charges against former A.I.G. CEO Hank Greenberg. I was asked to elaborate on my position by BusinessWeek.com for their [...]
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  Posted: July 21, 2008, 3:49pm EDT
  by Jacob H. Zamansky

• Cioffi and Tannin's Indictment: Good News for Investors

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  Ralph Cioffi and Mathew Tannin, the former managers of the Bear Stearns' hedge funds that collapsed last year, were indicted today. The SEC also filed civil charges today as' [...]
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  Posted: June 19, 2008, 6:25pm EDT
  by Jacob H. Zamansky

• Keeping Callan and Gregory in the Lehman Tent

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  It’s standard practice for Wall Street firms to retain executives tied to extensive financial losses and persistent questions about accounting practices, particularly if there is the likelihood of lawsuits. So I note with great interest that that Erin Callan and Joseph Gregory, who today “resigned” respectfully as CFO and [...]
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  Posted: June 12, 2008, 3:03pm EDT
  by Jacob H. Zamansky

• Lessons From Lehman

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  I’m still trying to make sense of Lehman’s disclosure yesterday that it will post a whopping $2.8 billion loss in the second quarter and raise $6 billion in equity by selling shares at a 20% discount to book value, but one lesson is already readily apparent: the best and brightest [...]
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  Posted: June 10, 2008, 3:01pm EDT
  by Jacob H. Zamansky

• Don Quixote and Ars Investors

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  Recent articles in The Boston Globe and Bloomberg underscore how Wall Street firms woefully favor their own interests at the expense of individual investors.
  
  According to a report in today's Globe, UBS [...]
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  Posted: June 09, 2008, 4:33pm EDT
  by Jacob H. Zamansky

• Lehman?s Investment Banking Prowess

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  The ways of Wall Street never cease to amaze me.
  
  You might think that a company responsible for orchestrating one of the biggest M&A banking debacles in recent memory, the reputational damage would be quite severe. Think again. In justifying his upgrade of Lehman’s stock, Merrill Lynch analyst [...]
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  Posted: June 06, 2008, 9:06am EDT
  by Jacob H. Zamansky

• When Companies Doth Complain Too Much

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  I was taken somewhat aback when I read how Lehman Brothers responded to an inquiry about allegations made by short seller David Einhorn. “We will not continue to refute Mr. Einhorn’s allegations and accusations,” an unnamed spokeswoman told The Wall Street Journal. "Mr. Einhorn cherry-picks certain specific items" [...]
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  Posted: June 05, 2008, 3:52pm EDT
  by Jacob H. Zamansky

• For Lehman Brothers, Perception is Everything

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  One of the sad lessons that most individual investors fail to learn is just how badly the stock market is stacked against them. Yes, there are rules that supposedly ensure a level playing field, but those rules become meaningless when some of the players are decidedly smarter and know how [...]
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  Posted: June 05, 2008, 9:50am EDT
  by Jacob H. Zamansky

• The Piety of Henry Blodget

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  Henry Blodget and I have a history, there’s no denying that. Back in 2001 I sued him and his former employer Merrill Lynch for fraudulently touting tech stocks that Mr. Blodget privately confided were “POS,” “pieces of junk” and “pieces of crap.” My case caught the attention of former New [...]
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  Posted: May 27, 2008, 9:40am EDT
  by Jacob H. Zamansky

• Falcon Falling: Citi�s Hedge Fund Litigation Problem

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  I’m no expert on public relations, but I’d expect the flacks at Citigroup would go to great lengths to avoid maligning the firm’s Smith Barney brokers. But the financial giant’s public defense for peddling risky proprietary hedge funds to wealthy clients seeking conservative investments implicitly undermines either the integrity or [...]
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  Posted: May 20, 2008, 2:17pm EDT
  by Jacob H. Zamansky

• Calling for an Investor's Bill of Rights

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  While the presidential candidates have been aggressively courting homeowners with mortgages under duress, they seem to care little for the rights of individual investors. As today's New York Times points out, these are grim days for [...]
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  Posted: May 08, 2008, 4:27pm EDT
  by Jacob H. Zamansky

• Senator Grassley and the SEC

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  It’s well known to anyone with experience representing individual investors that the SEC is shamefully ineffective when it comes to regulating the major brokerage firms. To wit: the SEC might have prevented the collapse of the auction rate securities market. The agency knew of extensive wrongdoing in the marketplace as [...]
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  Posted: April 23, 2008, 12:40pm EDT
  by Jacob H. Zamansky

• Auction Rate Securities Compensation: Peanuts or Icing on the Cake for Brokers?

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  Dow Jones (no link available) touches today on an issue I’ve covered in my blog often: Wall Street’s compensation tied to the auction rate securities (ARS) market. Wall Street is claiming that “they picked these products because they offered higher yield for investors than other cash-like products, not because [...]
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  Posted: April 09, 2008, 2:35pm EDT
  by Jacob H. Zamansky

• Fortune's Must Read Articles on the Wall Street Bailout

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  If you don’t subscribe to Fortune, I strongly recommend forking out five bucks and buying the latest issue on how to fix Wall Street. Bethany McLean’s column alone is well worth a Lincoln.
  
  Ms. McLean, who is best known as the reporter to first sound the alarm [...]
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  Posted: April 07, 2008, 4:36pm EDT
  by Jacob H. Zamansky

• Paulson Proposal Neglects Individual Investors

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  By any measure, Paulson’s plan shows a certain disregard for individual investors, who have suffered the brunt of Wall Street’s extensive wrongdoings of the past few years. The plan neglects the pressing need to bolster investor protections for individual investors and threatens to usurp the authority of state regulators, who [...]
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  Posted: April 01, 2008, 11:30am EDT
  by Jacob H. Zamansky

• Paulson to Individual Investors: Drop Dead?

  I know it was wishful thinking, but I secretly hoped The Daily News would revive its famous headline in its story today about Treasury Secretary Hank Paulson's plan to restructure Wall Street's regulatory framework.
  
  By any measure, Paulson's plan shows a certain disregard for individual investors, who have [...]
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  Posted: March 31, 2008, 5:13pm EDT
  by Jacob H. Zamansky

• Rx for Cleaning up Wall Street

  Wall Street is finally getting its comeuppance judging by all the calls for more regulation. As a sign of how big an issue it has become, the Presidential candidates have announced reform-minded plans. But I wonder if they are truly keyed-in with all these supposedly "sophisticated" instruments that are commonplace [...]
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  Posted: March 30, 2008, 8:31pm EDT
  by Jacob H. Zamansky

• Its Time Wall Street Answered to Main Street

  Ever since the Curbstone Brokers traded stocks outside the NYSE in the 1800s, its always been a dog-eat-dog world on Wall Street. In today’s market where thousands of hedge funds managed by glorified day traders are answering to sophisticated investors craving alpha, eating one’s own is as common as [...]
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  Posted: March 20, 2008, 4:47pm EDT
  by Jacob H. Zamansky

• JP Morgan Buys Bears Stearns: Assets Less �Liabilities�

  The shocking news that JP Morgan is buying Bear Stearns for the price of $2 per share has many people scratching their heads. Currently Bear Stearns stock isn’t even trading that low. However if you examine the amount of litigation costs and arbitration claims that JP Morgan inherits, [...]
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  Posted: March 17, 2008, 11:36am EDT
  by Jacob H. Zamansky

• Carlyle Group and Wall Street Firms: Different Strokes for Different Folks

  When the market for auction rate securities collapsed a few weeks back, not one of the big Wall Street firms offered to help their clients deal with the fallout. Although the clients were told that the securities were cash equivalents, they were in fact bonds that carried a significant amount [...]
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  Posted: March 14, 2008, 3:32pm EDT
  by Jacob H. Zamansky

• Auction Rate Securities Taken Up By Congress

  Tomorrow Barney Frank (D-MA), Chairman of the House Financial Services Committee, will hold hearings into the municipal bond market. After reading the press release, it appears most of the hearing will be dedicated to the “impact on state and local governments and other municipal bond issuers as the current [...]
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  Posted: March 11, 2008, 4:40pm EDT
  by Jacob H. Zamansky

• When Wall Street Exploits A Charity

  Having represented investors who have been wronged by Wall Street for more than three decades, I've seen a lot of scandalous activities. But nothing outrages me more when a brokerage firm seeks to exploit a charitable group. Sadly, I'm dealing with yet another egregious instance, this one involving the peddling [...]
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  Posted: March 09, 2008, 6:00am EDT
  by Jacob H. Zamansky

• Merger Meltdown: $29.5 billion!

  That is the amount Sprint Nextel wrote down in the fourth quarter largely because of the failed melding of Sprint and Nextel Communications three years ago. It turns out the merger news release headline touting the “unmatched asset mix” was an unusually prescient investor warning: the companies have struggled mightily [...]
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  Posted: March 03, 2008, 3:14pm EST
  by Jacob H. Zamansky

• Alt-A Mortgage Class the Next Shoe to Drop?

  For credit rating purposes, the class above subprime is known as "Alt-A". It is likely Alt-A bonds is the next shoe to drop… that is if it hasn't already.
  
  Issuances of Alt-A mortgages has tumbled, according to a Dow Jones report, however, "the mortgages still made up 28 [...]
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  Posted: February 29, 2008, 5:04pm EST
  by Jacob H. Zamansky

• Financial Regulators Missed the ARS Market, But That�s Par for the Course

  I can’t help but note the irony of David Brown, executive director of the New York State Dormitory Authority, lambasting Wall Street for allowing the collapse of the auction rate securities market.
  
  “As a whole, this is not the finest hour of the investment-banking community,” the Wall Street Journal [...]
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  Posted: February 28, 2008, 11:19am EST
  by Jacob H. Zamansky

• Auction Rate Securities Round-Up

  Number of comments: 1
  The financial media is moving the needle forward with regard to the auction rate securities crisis. Both the New York Times and Dow Jones have interesting takes today:
  
  

  • Floyd Norris reports that auctions continue to fail and that municipalities as a result will likely pay more to borrow [...]
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  Posted: February 20, 2008, 3:43pm EST
  by Jacob H. Zamansky

• Auction Rate Securities: A Scandal Made Possible by the SEC

  The SEC's Division of Enforcement has never been considered a tough minded regulator. But the collapse of the auction rate securities market underscores just how frighteningly ineffective the division really is.
  
  On May 31, 2006, the SEC's Division of Enforcement issued a news release trumpeting that it had settled [...]
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  Posted: February 19, 2008, 4:29pm EST
  by Jacob H. Zamansky

• Auction Rate Securities: An Investor Scandal of Significant Proportions

  Our office has been flooded in recent days with inquiries from panicked investors who have suffered incredible harm because of the collapse of the auction rate securities market. All these investors vehemently insist they acquired auction rate securities because their brokers advised them they were as good as cash but [...]
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  Posted: February 19, 2008, 4:19pm EST
  by Jacob H. Zamansky

• Bear Stearns & Ralph Cioffi: Breaking Up is Hard to Do

  We've obtained the termination "Form U-5" filed by Bear Stearns regarding the now departed portfolio manager, Ralph Cioffi, who guided the two hedge funds specializing in investing in mortgage backed securities into the abyss. My prior blog post anticipated this filing.
  
  The document discloses Cioffi left the firm under [...]
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  Posted: February 13, 2008, 7:30am EST
  by Jacob H. Zamansky

• My Subprime Litigation Speech

  As previously posted about, I just wrapped up a speaking engagement sponsored by Bloomberg and Eversheds. To see my full remarks, click here. [...]
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  Posted: February 08, 2008, 4:07pm EST
  by Jacob H. Zamansky

• The Impending Subprime Litigation Tsunami

  Tomorrow I will be participating in a panel discussion hosted by Bloomberg News and Eversheds, one of the world's largest law firms. The conference is entitled "Sup-prime and global credit symposium: [...]
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  Posted: February 06, 2008, 5:20pm EST
  by Jacob H. Zamansky

• Moody's Finds Religion: Too Little Too Late

  It was announced that Moody's is weighing a new 21-point scale for rating structured finance securities. The firm is also considering adding a warning label that acknowledges the ratings' limitations. While I welcome any reforms that can prevent another subprime collapse, this to me falls into the too-little-too-late category.
  [...]
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  Posted: February 06, 2008, 5:06pm EST
  by Jacob H. Zamansky

• Moody's Finds Religion: Too Little Too Late

  It was announced that Moody's is weighing a new 21-point scale for rating structured finance securities. The firm is also considering adding a warning label that acknowledges the ratings' limitations. While I welcome any reforms that can prevent another subprime collapse, this to me [...]
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  Posted: February 06, 2008, 5:06pm EST
  by Jacob H. Zamansky

• Harvey Pitt on Individual Investors: Let Them Eat Cake

  Former SEC chairman Harvey Pitt was no champion of individual investors. Pitt was in charge of the agency when the former New York Attorney General put the SEC to shame and took the lead in exposing Wall Street's conflicted research. Pitt was also among the regulators who signed off on [...]
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  Posted: February 01, 2008, 4:46pm EST
  by Jacob H. Zamansky

• FBI's Subprime Investigation and Cuomo's "Martin" Move

  If the legal departments at our nation's major financial services firms weren't nervous before, they certainly are now. According to news reports, the FBI is looking into potential subprime crimes by 14 companies as part of a wide ranging investigation into the troubled mortgage industry. Apparently they have been doing [...]
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  Posted: January 31, 2008, 1:52pm EST
  by Jacob H. Zamansky

• Sub-Prime Crisis and the Ratings Agencies

  Sub-Prime Crisis and the Ratings Agencies
  
  Back in August, Fortune ran a story that took the ratings agencies to task for their role in the subprime mortgage crisis. A noted investor named Jim Chanos, the head of Kynikos Associates, acknowledged he had a short position in Moody's [...]
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  Posted: January 29, 2008, 4:06pm EST
  by Jacob H. Zamansky

• Chairman Waxman�s CEO Compensation PR Stunt

  Next month, Congress will be schlepping in the former chief executives of several financial services firms damaged by the subprime crisis to question them about their compensation packages. House Oversight and Government Reform Chairman Henry Waxman (D-Calif.) has sent letters to Angelo Mozilo, CEO of Countrywide Financial, Charles Price, former [...]
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  Posted: January 23, 2008, 9:15am EST
  by Jacob H. Zamansky

• Front Running and Institutional Investors

  A few years ago there was a Long Island restaurant that served the most deliciously yummy foods and desserts, all of which were labeled as being ridiculously low in calories and fat. The lines extended out the door. But one night a local television station reported that its testing revealed [...]
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  Posted: January 22, 2008, 12:21pm EST
  by Jacob H. Zamansky

• The Subjective Nature of Wall Street Write-Downs

  Fourteen billion. That's the apparent magic number for Merrill Lynch and its new CEO John Thain as formally they announced a write down of $14 billion for the fourth quarter of last year. An equally staggering number was announced by Citigroup and [...]
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  Posted: January 17, 2008, 8:48am EST
  by Jacob H. Zamansky