Meeting With The Enemy
Victoria Murphy, 04.11.02, 8:15 PM ET
NEW YORK - The ongoing Securities and Exchange Commission investigation into abusive practices by brokerage firms during the late 1990s IPO mania is taking a literary turn. A source close to the investigation says that Nicholas W. Maier, embattled author of the new book Trading with the Enemy, was interviewed in March by the SEC regarding IPO trading activity at his former employer Cramer & Company, the hedge fund once run by James J. Cramer, the confrontational CNBC on-air personality and co-founder of financial news Web site TheStreet.com.
Discussions focused on Cramer & Co.'s purchase of aftermarket orders from Goldman Sachs (nyse: GS - news - people ), says the source. In his book, Maier alleges that most of the major investment banks made Cramer & Co. commit to aftermarket orders in exchange for shares in initial public offerings. He writes: "This was their way of making sure hot deals stayed hot. If we didn't buy in the aftermarket, we wouldn't get any shares of the next hot IPO."
This week Forbes received a copy of a letter addressed to Maier requesting an additional appearance in front of the SEC, stating: "...the 'Commission' would like to interview you in connection with the above-captioned matter [Re: In the Matter of Certain Initial Public Offering Allocations]." Maier will likely honor the request. "It is obvious that given the content of my book the SEC would be interested in speaking with me," he told Forbes. A spokesperson for Goldman Sachs assured that the firm has been cooperating with the larger SEC investigation into IPO allocations, but was unaware of any specific inqueries.
So far the SEC has nailed only Credit Suisse First Boston, a unit of Credit Suisse Group (nyse: CSR - news - people ), for abusive practices, forcing the firm to pay a total of $100 million for violations. But the latest inquiries could suggest that the feds are hoping to build a case against other big leading underwriters such as Citigroup (nyse: C - news - people ), Merrill Lynch (nyse: MER - news - people ), Morgan Stanley (nyse: MWD - news - people ) or Goldman.
Maier's credibility came under fire when HarperCollins acknowledged that three pages of his book contained false assertions that Cramer traded on inside information about Western Digital (nyse: WDC - news - people ). The publisher sent a notice to bookstores and reviewers correcting the text, and will reprint new copies without those pages.
Cramer has dismissed the allegations in Maier's book as unfounded. In a statement issued by CNBC, Maier was characterized as a "disgruntled former employee of his [Cramer] who he dismissed for poor performance." Cramer's lawyer, Eric Seiler, confirmed that the SEC has not contacted his client.
More From Forbes
Cramer Book To Be Reissued 03.18.02
HarperCollins deletes passage on Western Digital from tome alleging stock manipulation. |
