"Massachusetts regulators accused Merrill Lynch & Co. of co-opting 'supposedly independent' research anaylsts to help them dump collapsing auction-rate securities on unsuspecting customers. ... 'We've seen a corruption of research', says Massachusetts Secretary of the Commonwealth William Galvin, who oversees the state securities division. 'This is an issue that many of us on the enforcement side have seen years ago, and it's the same pattern.' ... In August 2007, Martin Mauro, a fixed-income research analyst, issued a report noting some of the less-than flattering features of auction rate securities. That alarmed Francis Constable, a managing director in charge of Merrill's auction-rate securities desk. Ms. Constable demanded that Merrill retract the report. ... Constable ... sent the following message: ' Shut this guy down'," John Hechinger at the WSJ, 1 August 2008.
"New York state's attorney general, Andrew Cuomo, threatened Friday to sue Citigroup Inc. for alleged fraud in the marketing and sales of auction-rate securities and for destroying evidence after being subpoenaed by his office. ... Citigroup said it is cooperating with Mr. Cuomo's investigation and 'acted in good faith and in the best interests of our clients both before and since auctions began to fail, and there is simply no basis for claims to the contrary.' ... The firm also disclosed Friday in a regulatory filing that it has received subpoenas or requests for information for the [SEC], among others, in connection with its handling of auction-rate securities. ... The letter, written by David Markowitz, the head of the investor-protection bureau in Mr. Cuomo's office, accused the bank of wrongly telling customers the securities were safe, liquid and cash-equivalent. It added that the bank failed to tell investors that, from last August until earlier this year, the market was kept afloat only because the bank placed bids in auctions for the securities", Amir Efrati at the WSJ, 2 August, 2008.
"Pushing to put one of the biggest debacles on the credit crisis behind them, Citigroup Inc. and Merrill Lynch & Co, agreed to buy back $17 billion in auction-rate securities", WSJ, 8 August 2008.
"A once obscure corner of the bond market is triggering one of the messiest Wall Street scandals in years--and potentially the largest mass bailout of American individual investors ever. On Friday, facing allegations of wrongdoing over its sales of so-called auction-rate securities, UBS AG agreed to buy back nearly $19 billion of the investments as part of a settlement with federal and a group of state regulators. ... Regulators from several states have also shown up on Wachovia's Corp.'s doorstep demanding documents; the bank says it's cooperating. A New York state official has accused Citigroup of destroying documents, a charge Citi has denied. Federal prosecutors are preparing to file criminal charges against two former Credit Suisse Group brokers who allegedly lied to investors about auction-rate securities. ... UBS said it didn't intentionally hide the risks of auction-rate securities, and sold them 'appropriately' to individuals for 20 years. ... Merrill categorized auction-rate securities as 'other cash' on its brokerage statements. ... Also, regulators say brokers were paid unusually rich commission to sell the securities. ... UBS said that, after its own internal probe, it 'found cases of poor judgment' but not illegality by certain individuals, and is 'evaluating appropriate disciplinary measures", Liz Rappaport and Ann Randall Smith (R&S) at the WSJ, 9 August 2008.
"Securities regulators are widening the list of Wall Street firms that are being told to fix the auction-rate securities mess. ... State regulators have subpoenaed roughly 30 financial institutions about their involvement in the auction-rate securities market. ... In an SEC filing, [Wachovia] said its individual retail-brokerage clients held $8.7 billion of auction-rate securities as of Aug. 1. That doesn't count other clients, such as corprate clients and charities", Liz Rappaport at the WSJ, 12 August 2008.
Doesn't DA's participation in a "Corporate Fraud Task Force" (CFTF) make you feel nice and warm inside? Was the CFTF's job to facilitate corporate fraud by getting corporations prosecutorial immunity? Why did UBS hire DA? Did DA do anything at Treasury that served USB's interests? It's Alice in Wonderland at Treasury. I await Chris Cox's SEC joining in Cuomo's case. That'll be a long wait.
I wonder how Citigroup will account for the buy back.