Another Point of View
Thought we would start sharing particularly interesting emails from readers of our blog. Here is a recent email from a retired state regulator, who agreed to be our first Guest Blogger. Thanks Ray!
Counselor:
As a retired state examiner (somewhat of an oxymoron because being a state examiner allows one to have the power of a retired examiner) I have signed up for your blog. Nevertheless, the title of the blog is not encouraging. Was the securities industry over regulated all those years that the NASD pretended to monitor spreads (the Christy Study)? Have you, like, heard of Henry Lodge and the other analysts who labeled stocks "POS"; a scatological reference that was at variance with their enthusiastic recommendations?
I'll probably think of the guy who changed his securities recommendations based upon those most likely to get his child into an elite school. Never mind, there is no need to guild the lily.
Moreover, one could go back all the way to the first SEC commissioners who numbered among their luminaries such admitted "pump and dump" operators as the senior Kennedy. Maybe it wasn't precisely illegal then; but only a fool would say Joseph Kennedy and "investor's advocate" in the same sentence. And the last ten years (and week) have pretty conclusively established , at least in my puny mind, that one cannot criticize securities regulation until it is at last tried.
But, hey, maybe you have the eloquence of angels and are endowed with the persuaveness of Michael Milken; the people who put together the Prudential Partnerships, or any of a myriad of miscreants who populated, and probably still populate the securities industry.
With respect to your talent, if not your views,
Raymond Gambel Louisiana 77-2000
It's not the same NASD you retired from..
In Switch, Company Sues NASD For Fraud, Says NASD Aided FBI In Creating Bogus B/D
posted by Mark Astarita
In an unlikely lawsuit, a private company is suing the NASD for securities fraud. A small cancer-research firm called Shimoda-Atlantic, based in Bentonville, Ark., filed a lawsuit against the NASD on Wednesday because, the company says, the self-regulatory organization helped several men, allegedly employed by the FBI, to create and perpetrate a fraudulent securities scheme against the company Shimoda alleges that the FBI operators, with the help of the NASD,committed fraud against the company by posing as NASD-registered brokers, working for an NASD-registered broker/dealer called Talon Holdings, and pretending to secure $3 million in private placement funding for Shimoda. The alleged FBI agents were named in the suit as John Firo a/k/a Thomas Faro, and Robert Betes a/k/a Robert Brewer. Also named in the suit were Patrick Joseph Lochrie, The Mix Group of South Florida,Talon Holdings and Mohammed Galani a/k/a Mohammed Gilani.
According to the lawsuit, filed by attorney John Dodge of Little Rock, Ark.,“NASD senior managers and/or directors instructed subordinate staff at NASD in Dallas, Texas, in Washington, D.C., and in New York to create false registrations for these defendants, all the while knowing that they were intentionally facilitating bogus operations and operators, regardless of their ulterior motives.” What’s more, the NASD allowed the defendants to operate without a fidelity bond in place—something that is supposed to cover monetary damages to an injured third party—violating NASD Rule 3020, the suit alleges.
The NASD declined to respond to repeated questions about the case or about cooperation between the regulatory body and the FBI, saying it doesn’t comment on pending litigation. The Arkansas offices of the FBI said they had been instructed to direct all inquiries on the matter to the Washington FBI offices, which could not immediately respond to requests for comment.
According to Shimoda’s FDA compliance officer, Jim Bolt, Shimoda was first approached over email by John Firo in April 2005. After a year of negotiations, on May 9, 2006, Shimoda signed a $3 million private placement agreement with one of the defendants, Mohammed Galani, allegedly a wealthy man from Dubai. The next day, May 10, Bolt says the FBI came to Shimoda’s offices, told them the deal was off, that they had been dealing with “enforcement officers” and handed them a grand jury subpoena for all of their corporate records, patient records and computer hard drives.
Shimoda also alleges that the NASD, when it got wind of the potential lawsuit, began erasing records of the registrations it provided to the broker/dealer and one of the agents. (According to the lawsuit the NASD issued defendant Talon Holdings with CRD# 126778, and issued defendant John Firo with CRD# 4654582. Shimoda provided Registered Rep. with a faxed copy of a former CRD for the b/d and says it called the NASD broker-check numerous times to verify that Talon had a clean record before doing business with the firm. But “Talon Holdings” and Firo no longer exist in the NASD’s official CRD database, records that the NASD says are never eliminated.)
The lawsuit alleges that in the process of securing the financing from Talon, Shimoda turned over proprietary and trade-secret data to the defendants, one of whom—Lochrie—is engaged in competitive business operations through pharmaceutical companies of his own. In addition, they say, if they hadn’t been contacted by Talon they would have secured financing from other sources.
Why would the NASD and the FBI want to trick Shimoda? Bolt says they have several theories about that, but he’s not sure. “When people start shredding files, they have something to hide,” says Bolt.
Article: In Switch, Company Sues NASD For Fraud, Says NASD Aided FBI In Creating Bogus B/D
Copyright: 2006 Prism Business Media
Publication: Registered Rep.
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