Smart Money?

"The big Wall Street firms are finally coming clean about the collapse of the auction-rate-securities market--now that New York Attorney General Andrew Cuomo and other regulators have put a gun to their heads. The truth is even uglier than I suspected. ... As regular readers know, I was among the victims. ... I've since heard from hundreds of others. Wall Street's reaction was to offer to lend investors their own money--using our other assets as collateral and charging us market rates. It was insult on top of injury. ... Thanks to a wave of subpoenas, lawsuits or threatened lawsuits, and the prospect of disclosure, three of the biggest sellers of auction-rate securities agreed last week to reimburse clients. ... Those firms said they will buy back a total of nearly $40 billion in the securities, a sum that, while large, can indeed be absorbed by their balance sheets. What's really shocking are the allegations and evidence that some executives may have known that the auction-rate market was about to collapse even as they pressed their brokers to push the product on unsuspecting clients. ... Katrina Byrne, a spokeswoman for UBS, responded: 'We catagorically reject any claim that the firm engaged in any widespread campaign to move auction-rate securities inventory from our own books into private client accounts.' As for the emails, she said, 'We were disappointed the New York attorney general released details on certain transactions when we conducted our own internal investigation with the assistance of external counsel. We found no evidence of unlawful conduct by any employees'," James Stewart (JS) at the WSJ, 14 August 2008.

JS is a Smart Money columnist. Imagine, he bought this junk. Are we impressed with UBS's internal investigation? Yes, unfavorably. Will the NY State Bar investigate the investigators? Will it find UBS's attorneys are "justice obstructors" and make a criminal referral, or at the very least, violated some canon of legal ethics? Ain't gonna happen. Where was the SEC while this went on? Where's Mike Garcia (MG)? Will he indict anyone? Why not start with the attorneys who conducted UBS's internal investigation? Or is MG too busy with the "Bear Stearns Two"? Hey MG, how many SDNY US Attorneys Office "alumni" work for UBS's law firm? Enough to give it prosecutorial immunity? The Feds prosecuted Milberg Weiss. Whaddayasay Mike?