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WASHINGTON -- April, often a cruel and volatile month, this year has been filled with a bumper crop of outrages. A few good things, however, have glimmered through the mists of evil.
One of them is New York State Attorney General Eliot Spitzer's recent battle cry against those unctuous stock touts one used to see all over the boob tube, assuring you riches awaited if only you'd buy shares of anything with a dot-com behind it or the Internet in front of it. That was before the big cyberspace and telecommunications market crash and current recession, out of which we may or may not be pulling. Joe Sixpack and Mrs. Sixpack lost millions following the bad stock advice.
Well, guess what Spitzer has discovered? Your suspicions are correct: The game was rigged.
Previously respected analysts for some of Wall Street's largest investment banks were babbling on the television and telling print reporters in glowing language that such-and-such a stock was can't-miss, bet-the-ranch solid -- even for issues that later went down the monetary toilet. A bunch of retirement nest eggs gurgled down the porcelain chute with them.
Meanwhile, in private e-mails -- now in the prosecutorial hands of Spitzer through imaginative use of subpoenas -- these so-called experts were dumping all over lots of the very same stocks they were publicly praising.
They described top-rated stocks to each other, in the supposed privacy of their Wall Street lairs, as "such a piece of crap" and "junk."
The absurdity and chutzpah of it all sounds like a "Saturday Night Live" sketch, but the swindle is real. It is born of corporate arrogance.
The attorney general began to look at this over nine months ago, with a review of Merrill Lynch insider memos. Now Spitzer has subpoenaed four more big investment firms with familiar names -- Morgan Stanley Dean Witter, Bear Stearns, Salomon Smith Barney, and Credit Suisse First Boston -- for related documents. Prediction: Goldman Sachs, Lehman Brothers, and Paine Webber won't be far behind in drawing scrutiny.
So where's the conflict of interest? What is the common denominator triggering this scandal?
The so-called analysts work for these big investment firms. The investment firms bring to market the stock issues of the startup companies in question. The "analysts" thump the tub for these companies -- even when they privately deem them crapola.
That's because the outfits signing their paychecks and bonuses could collect huge fees from the dot.com and computer technology and telecom firms for the market making and follow-up consulting work. The firewall that supposedly existed between the investment bankers and their analysts obviously didn't exist.
There was a flipside, too. It got so blatant that a sort of analysis blackmail flourished on Wall Street. In some cases, if a startup firm took its business to a rival bank, the first investment house that had been touting the stock would suddenly rate it garbage.
In one case, Spitzer has discovered, an Internet search engine called "GoTo" switched its stock offering from Merrill Lynch to Credit Suisse First Boston. Merrill Lynch immediately drafted proposals to downgrade GoTo stock -- a memo that reached Merrill Lynch wunderkind analyst Henry Blodget. According to the Washington Post, his e-mail response was, "beautiful fuk em." Just one hour after GoTo announced it would contract Credit Suisse to handle its stock sale, Merrill Lynch downgraded the GoTo stock. Just a coincidence, I'm sure.
Promoting a product you don't believe in may be considered a brilliant idea by Madison Avenue, but it's obviously immoral and unethical. When the odious process wipes out mom-and-pop accounts just before retirement, the scam kindles some legal and political interest. Spitzer plans public hearings under New York's rigid securities laws.
Merrill Lynch spin doctors are trying to depict all these smoking-gun e-mails as mere friendly, if inappropriate, banter among fiscal sophisticates.
It does not, said one release, amount to "bias in the research reports."
Puh-leeeeze. Beware of people like this. They will piss down your leg and tell you it's raining.
So when Saudi Arabia and Iraq openly offer funds to the families of such bomb-bearing "martyrs," it begs for condemnation. And then the blatant "Who, us?" denials that this doesn't foster further deadly acts of self-explosion. Get real.
A gleeful Saddam Hussein, intelligence reports have it, has upped his normal bonus to Palestinian families of blow-yourself-up sons and daughters from $10,000 to $25,000 -- a veritable fortune in a land where the average wage is a couple of bucks a day.
Last year, a committee with government connections in Saudi Arabia proposed over $5,300 each in award money for families that experience "martyrdom." And just before last weekend, the royal Saud family, using official Saudi television and radio stations, borrowed a page from American culture and kicked off a telethon to raise money for Palestinian families of "martyrs."
The Saudi embassy here hastened to explain that term means any Palestinian "victimized" by Israeli violence -- not just suicide bombers. The pot at press time was over $85 million, $5 million of it from the royal family itself.
My colleague Bill Gallagher, as usual, hit the nail square on the head several weeks back, when he portrayed the Saudis as undeserving of our trust, winking at terrorists in their midst, and not true friends to America. Sure, sure, sure, we need the oil. But at least the Pentagon is waking up and quietly transferring U.S. military might and air bases to a smaller, more moderate state on the Persian Gulf -- tiny Qatar (pronounced "gutter").
Saddam, meanwhile, canceled scheduled negotiations to readmit United Nations inspectors anxious to find out how much progress he's made on his mad dash to develop nuclear, chemical, and biological weapons of mass destruction since kicking out the UN examiners in 1998 with only a few peeps of protest from the United States. Recent defectors have told American intelligence agencies Saddam is getting ever closer to nuclear capability.
And now, for the Outrage of the Week:
Georgia Democratic congresswoman Cynthia McKinney -- a controversial demagogue and ineffectual lawmaker given to wild accusations, crackpot conspiracy theories, and routine plunges off the deep end of the pool of public debate -- last week came close to accusing the Bush administration of: 1. Knowing about the Sept. 11 terrorist attacks in advance, and 2. Allowing them to happen so money could be made in the aftermath.
"What did this administration know, and when did it know it, about the events of Sept. 11?" she asked on California (where else?) radio. "Who else knew and why did they not warn the innocent people of New York who were needlessly murdered?"
Big businesses "close to the administration," she charged, "have directly benefited from the increased defense spending" in the wake of the Sept. 11 carnage. That last may be true, but to believe the White House knew of the terrorist plot and did nothing, just to enrich some well-heeled plutocrats at the expense of 3,000 lives and our national sense of well-being, is to display frightening paranoia and pessimism.
Shortly after Sept. 11, this writer watched McKinney futilely try to prevent a House panel on international relations from showing a shocking video of terrorist groups raising money smack in the middle of several American cities. The supposedly clandestine meetings, captured on undercover film, were replete with blood-curdling anti-American threats, death chants and oaths of chaos from hooded and armed figures. She said it would be prejudicial and against free speech to show them. She was gaveled down.
The White House response called McKinney's latest slams "ludicrous" and "baseless" -- and indicative of "a partisan mindset beyond all reason."
| Niagara Falls Reporter | www.niagarafallsreporter.com | April 16 2002 |