Le Metropole Cafe, a cyber creation of Bill Murphy (not related) has been following this PEI story for quite a while. He gave me permission to post this email that he sent out last Friday. Bill has posted on SI many times...usually concerning the gold market.
----------------------------------------------------------------------
Le Metropole members,
Methinks there is a big scandal here. One of your café
members used to work in a very senior capacity at
E.F. Hutton. Remember the great jingle: "When E.F. Hutton
talks, everybody listens."
I am listening!
Your Cafe member sent me the following email. It is of
special note to me because I met Arnold Phelan a few
times in the Big City way back when, God rest his soul.
Being an Irishman, this story pales the heart:
"Sweeney and Curley, the CEO of Cresvale were #2 and
3 executives in the Futures Division of EF Hutton in
the mid-1980s. They and their boss, Arnold Phelan,
were responsible for tipping off the Mafia that the
FBI was onto them, thus blowing the famous
"Pizza Connection" drugs and money-laundering
case."
Here is his follow up email:
"Cresvale was part of Princeton. Princeton blames
Republic; Republic blames Princeton. All I know is
that Sweeney and Curley worked together for over 15,
probably 20 years, at EF Hutton, Prudential, and
then at Republic...Sweeney was in fact Curley's protege
as the article below points out. What are the odds that
Curley would stick his protege with a dirty deal
without Sweeney understanding what it was? In this
case I say virtually nil. Republic and Cresvale cooked
up these "tobashi" deals together. I believe
under US accounting they are illegal. If Armstrong didn't
know what was going on he either is not too smart,
incompetent, or both."
My source went on to tell me some great nitty gritty.
For example, Arnold Phelan met with one of the Mafia
boys at a bar who had $15 million in cash with him.
Phelan called his guys at the cage in N.Y. and said,
"hey, we got $15 million here." Another Irishman, a
portly off duty retired cop with a pistol in his pocket
was sent to pick up the money.
Funny thing was, according to my source, Phelan and E.F
Hutton's own hubris brought them down. Will the same
happen to the "manipulators of the gold market."
Right before E.F. Hutton went tapioca because of a
check kiting scandal, and their own arrogance, my
source told me the following two great stories.
Phelan went into a big exec meeting with a new,
sparkling Rolex and told his colleagues how he got it.
"The Don."
The other beauty that my source sat in on: It was in the
big Arab money days. These Irish cronies were trying
to figure out a way to make another fast buck with
an Arab Shiek. Phelan, Curley and Sweeney came up
with the idea of some sort of gold backed credit card
for the Moslems to get around the Moslem usury laws -
bottom line of that is that Moslems are not supposed
to charge interest. My source thought
this Irish gang was nuts. After the Sheik left,
he asked, "what % of our clients are Jewish?" The
answer from the Irish boys was 50%. He countered with,
"then what are even looking at this for?"
As you all know, sources tell have told me Martin
Armstrong is mega short "borrowed gold." That is
why I press on about this story. If it is true what
I have been told about his short gold position,
I want to expose it. And, perhaps that will begin
to expose the entire gold market manipulation and
scandal. This whole affair is disgusting and
those that have perpetuated the gold market
"collusion scam" should be demonized and prosecuted.
Martin Armstrong attacked the Gold Anti-Trust
Action Committee's credibility. I know challenge
his. Republic Bank would not open a GATA bank account.
Now, it is time that their own bank accounts be
opened. What goes around comes around!
In case all, or part, of this is new to you, I
have attached last Sunday's Reuters wire which will clarify
what this is all about:
Sunday September 5 2:08 AM ET
Brokerage More Trouble Than It's Worth
By Jack Reerink
NEW YORK (Reuters) - Republic New York Corp.
(NYSE:RNB - news), the small
"New York retail bank that billionaire Edmond Safra
built into a global powerhouse, made a brief foray
this decade into U.S. futures and stock
brokering that turned out to be more trouble than
it was worth.
A probe into alleged wrongdoing at Republic New York
Securities sent the parent company scrambling this
week to overhaul the unit's management and
reassure investors that the investigation would
not scuttle Republic's $10.3 billion merger with
Britain's largest banking group, HSBC Holdings Inc.
The probe, disclosed this week, is only the latest
in a series of strange twists and turns in the brief
history of Republic's obscure securities
unit. In seven years, Republic New York Securities
has seen sweeping changes in its business and
management; regulatory problems; lagging profitability.
The probe is especially ''unfortunate,'' as bank
spokeswoman Melissa Krantz put it, because Republic
was close to dismantling the securities unit as
part of a restructuring.
The unit has come under regulatory scrutiny for
dealings with two affiliates of New Jersey financial
forecasting and investment firm Princeton Economics
International. The U.S. operations of one of the
affiliates being probed is run by the former chief
executive of Republic New York Securities.
Republic's securities unit generated just $9.6
million in commission income last year, a minuscule
sum compared with even the parent company's latest
quarterly profit of $143 million
The unit did not achieve the bank's target of
returning 15 percent on equity. Clients had fled its
futures brokerage operations: the unit listed
$71 million in customer funds this February, almost
one-fifth of the $347 million it listed less than
four years before.
The bank, which declined to comment, has fired the
head of the unit's futures department and has suspended
its chief executive, James Sweeney, pending the outcome
of the probe. Sweeney could not be reached for comment.
Analysts and sources close to the situation said
regulators are investigating whether Republic
inflated the value of futures and other derivatives it
held for those Princeton affiliates, investment manager
Princeton Global Management and futures broker
Cresvale International.
Investors jittery over the merger's fate sent the
parent company's stock tumbling 10 percent Thursday.
Republic shares recovered $2.13 Friday to
close at $64.31 on the New York Stock Exchange, after
bank officials reassured investors the probe will
merely delay, and not scuttle the merger.
Republic Friday delayed its shareholders vote on
the merger to Oct. 12, from an earlier date of Sept. 9.
The probe started in May, when Japanese investigators
inspected Cresvale's Tokyo office. Republic said it
informed U.S. regulators after it received a
letter from Japanese investigators, and is
cooperating with the probe.
Analysts and a Republic shareholder told Reuters
they thought the Republic unit and the Princeton
affiliates may have participated in so-called
''tobashi'' deals, in which Japanese institutions
hide losses through complex derivatives transactions.
The probe is limited to the Republic's dealings with the
Princeton affiliates and does not extend to other client
relationships, these sources said.
Princeton affiliates officials did not return phone calls seeking comment on the probe.
''It could be innocent, like (Republic brokers)
didn't know what they were doing was technically not
correct,'' said Nomura Securities analyst Oscar
Wu. ''Or it could be something more sinister.''
Analyst Gerard Cassidy of Tucker Anthony agreed.
''It appears one of two things happened: Princeton
told Republic this is what (the investments) are worth
and Republic took it at face value,''Cassidy said.
''Or Princeton in conjunction with Republic Securities
determined the value, which was artificially inflated.''
Republic originally started the securities unit,
which has offices in Philadelphia and Chicago,
to diversify its revenues from lending income to
fee-based income such as stock and futures brokerage,
Cassidy said.
The bank hired former executives of brokerage Shearson
Lehman, which was owned at the time by American
Express Co. (NYSE:AXP - news) Shearson faced
financial difficulties in the early 1990s.
Former Shearson executive Louis Lloyd set up
Republic's unit in 1992, and was joined by his former
boss and Shearson's former chairman, Peter Cohen,
who became chairman of Republic New York Securities.
The firm also hired Lee Hennessee, an advisor who
helped clients pick hedge funds, or unregulated
investment funds for wealthy investors that trade
a variety of securities usually using borrowed money.
The firm grew rapidly, and focused on hedge funds,
brokerage, proprietary trading, and so-called
soft-dollar business in which a brokerage flips
back part of its commission income to investment
advisors that bring in client business. Advisors
often use those monies to pay for research, usually
purchased from the firm.
Republic had 80 of such soft-dollar agreements by
early 1994, according to U.S. Securities and Exchange
(SEC) documents. Around that time, Republic
had a change of heart about the unit and decided
to downsize it and focus on brokerage services only.
Cohen left to set up his own firm, Hennessee took her
research group elsewhere, and Lloyd and others were
ousted. A New York Stock Exchange arbitration panel
in 1997 ordered Republic to pay Lloyd more than $3
million to settle charges of breach of employment
contract.
Republic bank insider Daniel Morris served as the
unit's chairman until late 1994, when Republic
named former Prudential Securities futures executive
James Curley as the unit's chief executive and
chairman. Sweeney, who joined Republic as a consultant
in 1993, became the unit's chief operating officer.
Curley left in 1996 to become the head of U.S.
operations of Cresvale, the company that investigators
are now focusing on. The bank has declined to
say when its relationship with Cresvale started.
Curley, who also is a director of the Chicago Board
of Trade, did not return repeated phone calls.
Sweeney, who replaced Curley as the unit's head in
1996, paid a $25,000 fine earlier this year for paying
$84,000 in soft dollar rebates to now defunct Sweeney Capital Management, which used the monies for operating
expenses such as buying office furniture without
telling clients. James Sweeney is not related to Sweeney
Capital, or its president, Timothy Sweeney, according
to the SEC.
Republic paid a $50,000 fine in the same case. The
unit also in 1997 paid one of its clients $13 million
in compensatory damages to settle charges of
unauthorized trading and gross negligence, according
to documents of the futures industry's self-regulatory
organization, the National Futures Association."
My final thought is this: Martin Armstrong said today that
"he wanted to talk to his lawyers to find out what was
going on." Give me a break. You do not talk to lawyers about
what was going on in your trading operations. You talk to
your lawyers about how to save your own skin!
All the best,
Bill Murphy
Le Patron
lemetropolecafe.com
|
