Ask Yourself Who Are These Paid Bashers Posting Here All Day?[Paid Bashers] DTCC Paper
Why The DTCC Is A Prime Mover In Securities Fraud and Naked Shorting
thesanitycheck.com
posted by BoBo
8/5/2008 7:29 AM
The DTCC.
To hear them tell it, they are powerless to deal with NSS, acting more as a vessel through which stock flows. They ignore that they are an SRO, chartered with regulating the business behavior of their owner/members. They pretend that they don't become the intermediary, and thus the contra-party to the trade, and thus in full control of buying in failed trades. They pass self-serving rules that declare they can't force a failing member to buy in the fail, even though they are chartered with ensuring timely clearance and settlement. And for years they have been claiming that NSS is basically a non-issue, while their press geeks and counsel employ mind-numbing doubletalk.
Read the explanation of what the press release that follows describes. It is unbelievable, and yet typifies the DTCC's behavior. It is a huge part of the problem, and yet continue to pretend to be an innocent bystander. That wouldn't have worked in any court in the land, and it is astounding that it is being attempted yet again, even as the SEC apparently wakes up to naked short selling as the systemic risk to the market we have for years claimed it to be.
I would suggest that if the SEC wants to understand what is going wrong in the US market, they have but to read a press release like this one. This is frigging nuts. Really. And yet, no SEC or Congressional action. Question is, why?
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A LESSON FOR HEAVILY NAKED SHORT SOLD CORPORATIONS
A SYNOPSIS OF THE BELOW ARTICLE
1) Grifco International, Inc. owns 75 million shares of Coil Tubing Technology, Inc. and they wish to dividend out this asset to the owners of their 40 million shares outstanding.
2) Each share of Grifco owned will therefore receive 1.89 shares of Coil Tubing.
3) Grifco’s 40 million shares are partially held in “street name” at the DTCC and partially in registered format wherein the shareholders hold their own certificates, perhaps in a safety deposit box.
4) The DTCC holds in “book entry” format 68 million shares and thus a large % of these book entries are associated with failures to deliver. For instance, if 10 million shares of Grifco are held in a registered format by their purchasers in certificate form then 30 million would be held in “street name” at the DTCC and thus 38 million of the book entries held at the DTCC were in a failure to deliver status. The DTC division of the DTCC acts as the “legal custodian” of these 30 million shares (an estimate) and is well aware of the disparity between the 30 million shares in their custody and the 68 million “shares” held in an electronic book entry format on the books of their participants. They learned of this disparity during the dividend process.
5) Due to the enormous amount of deliver failures held at the DTCC (28 million shares plus the amount held in certificated form by registered shareholders) there obviously weren’t enough dividend shares of Coil to go around if all shareholders of Grifco were to receive 1.89 shares of Coil per Grifco share owned.
6) The securities laws clearly state that any short seller that is short any shares of an issuer on a dividend record date must match that dividend.
7) Instead of forcing their DTCC participants holding the short positions (failures to deliver) to deliver the missing dividend shares of Coil, the DTCC management told Grifco to contact the shareholders that didn’t receive their dividends to sign a waiver waiving their right to these dividends. Obviously very few would comply as they had legally earned these dividends.
8) DTCC then demanded that Coil Tubing, whose shares were being dividended out by Grifco but that otherwise had nothing to do with the dividend distribution process, to go out and buy additional free trading shares in the market or supply the missing amount out of their treasury despite the fact that it was clearly the responsibility of those short the stock of Grifco on the dividend record date to match the missing dividend shares.
9) Grifco obviously refused this DTCC order as it would have been very damaging to their shareholders because of the dilution, as well as very expensive.
10) DTCC management then issued a statement on 7/10/08 that unless it received the necessary shares within 21 days that they were going to proactively reduce the size of the dividend distribution from 1.89 shares of Coil per Grifco share owned to 1.29 shares per Grifco share owned. They did this despite the fact that it was clearly the responsibility of those DTCC participants that were short the stock to match the dividend.
11) Coil Tubing refused to play ball with this DTCC mandate and filed suit against the DTC and Grifco itself claiming that Grifco should have been aware of this massive discrepancy. In reality Grifco management has no idea of the levels of delivery failures in their shares held at the DTCC or outside of the DTCC in an “ex-clearing” format.
12) The judge issued a temporary restraining order forbidding the DTCC from adjusting the Grifco shareholder’s accounts from 1.89 dividend shares per Grifco share owned to 1.29 shares of Coil per Grifco share owned.
QUESTIONS THAT ARISE
1) How dare the DTCC attempt to transfer this debt from their DTCC participating owners/participants (those with the short positions) onto the shoulders of either Coil Tubing or Grifco and their shareholders?
2) How dare the DTCC allow their participants to run up a massive level of delivery failures equaling 28 million shares plus the amount held in registered format in a corporation with 40 million shares?
3) How dare the DTCC try to get Grifco investors/shareholders to sign a waiver denying them of the dividend their purchases earned?
4) How dare the DTCC management force the shareholders and management teams of both firms to shoulder the financial and time burden of this litigation just to receive what was owed them?
5) How dare the “legal custodian” of these shares i.e. the DTC division of the DTCC treat the “beneficial owner” of these shares to whom they owe a fiduciary duty of care in this ugly manner?
6) How dare the “legal/nominal owner” of these shares, CEDE and Co. the nominee of the DTCC, treat the “beneficial owners” of these shares (to whom they owe a fiduciary duty of care as the surrogate “legal owner” for which they were appointed only as a means to streamline ownership transfer without cumbersome deed-like instruments) in this fashion?
7) How dare a “qualified control location” capable of granting compliance with the critically important “Customer Protection Rule” (Rule 15c3-3 of the ’34 Act) treat the “beneficial owners” of these shares in need of this protection in such a manner? The “Customer Protection Rule” mandates that the purchasing broker/dealer “promptly obtain and maintain the physical possession or control of fully paid for and excess margin securities” on behalf of their client, the investor, or keep them housed at a location, like the DTCC, that will obtain the physical possession or control of them on their behalf. This clearly was violated by the DTC.
8) How dare the DTCC acting in the capacity of a “Self-Regulatory Organization” (SRO) defined as “An entity, such as the NASD, responsible for regulating its members through the adoption and enforcement of rules and regulations governing the business conduct of its members” refuse to regulate the “business conduct” of its abusive participants that refused to deliver the shares of Grifco that they sold, as well as the dividend shares of Coil Tubing that they clearly owe?
9) How dare the DTCC with the Section 17A (’34 Act) mandate to “Promptly and accurately clear and settle all securities transactions” refuse to settle these transactions after these archaic delivery failures were brought to their attention?
Once the enormity of this delivery failure situation was brought to the attention of DTCC management, the correct course of action was obviously to firstly force the perpetrators of this massive fraud to buy-in the shares of Grifco that they'd previously sold, but refused after inordinate amounts of time, to deliver. Secondly, those short the stock on the dividend record date would obviously be on the hook for the dividend shares.
This is the type of corruption in the naked short selling arena that U.S. investors are up against in the DTCC-administered clearance and settlement system in use in the U.S.
THIS IS BUT ONE OF DOZENS OF REASONS WHY YOU NEVER HOLD SHARES IN DEVELOPMENT STAGE CORPORATIONS IN “STREET NAME” AT YOUR BROKER/DEALER, ESPECIALLY IF THEY ARE ABOUT TO DISTRIBUTE DIVIDENDS. YOU SHOULDN’T HAVE TO GO TO THE EXPENSE AND HASSLE OF FILING SUIT IN ORDER TO RECEIVE A DIVIDEND CLEARLY OWED TO YOU.
THE RECENT PRESS RELEASE
Coil Tubing Technology, Inc. Files Suit Against Grifco, Grifco’s former President and DTC
SPRING, Texas, Aug 01, 2008 (BUSINESS WIRE) — Coil Tubing Technology, Inc. (”CTBG”) (OTC:CTBG), its majority owned subsidiary, Coil Tubing Technology Holdings, Inc. (”CTTH”) and its President & Chief Executive Officer, Jerry Swinford, have filed suit against Grifco International, Inc. (GFCI.PK) (”Grifco”), Depository Trust & Clearing Corporation (”DTC”) and the former president of Grifco, James Dial (the “Defendants”).
As previously disclosed in CTBG press releases, DTC contacted CTBG in late April 2008 regarding issues associated with Grifco’s distribution of its 75,000,000 shares of CTBG in August 2007. The distribution was effected through a stock dividend of CTBG shares to Grifco shareholders as of the record date of May 1, 2006. Grifco announced that each of its shareholders would receive 1.89 shares of CTBG stock for each share of Grifco stock held as of the record date. Thus, the stock dividend was premised on Grifco having approximately 40 million shares outstanding on the record date. However, according to the DTC’s records there were approximately 68 million Grifco shares outstanding and held in book entry form on the record date. Additionally, there were a yet undisclosed number of shares outstanding held in certificate form, which are not included in the 68 million share total, and which may have not been included in the distribution by Grifco. Mr. Swinford was one such record shareholder of Grifco, who did not receive shares in Grifco’s distribution.
CTBG believes that all three Defendants were aware of the shortfall in shares in August 2007, but allowed the stock dividend to go forward.
When CTBG was contacted by the DTC regarding the shortfall in shares in April 2008, it immediately took steps to have Grifco contact shareholders who did not receive shares in the distribution and obtain signed waivers of their right to receive shares in the stock dividend. To date, a limited number of such waivers have been obtained; however, because of Grifco’s failure to obtain waivers from a sufficient number of shareholders, DTC demanded that CTBG acquire additional free trading shares in the market or issue additional free trading shares to satisfy the shortfall. Acquiring additional shares in the market is both financially and logistically impossible and, because CTBG does not have a registration statement on file allowing it to issue additional free trading shares, filing such registration statement would be expensive, time consuming, and subject to SEC approval. Additionally, issuing additional shares of CTBG would substantially dilute the interests of CTBG’s existing shareholders.
On July 10, 2008, DTC issued a Stock Dividend E-Mail Alert that stated it had not received sufficient shares from Grifco in order to affect the stock dividend at the rate Grifco announced. DTC further stated that unless it received the necessary shares by July 31, 2008, it would unilaterally adjust the ratio of shares received in the stock dividend from the rate originally declared, 1.89 shares of CTBG common stock for each share of Grifco common stock which shareholders of Grifco held, to a reduced rate of approximately 1.293870 shares.
By demanding that CTBG provide sufficient shares to satisfy the shortfall or unilaterally adjusting the ratio of shares issued, DTC was attempting to force CTBG to suffer the consequences created by itself, Grifco and others. Grifco and DTC were in possession of the relevant information when the stock dividend was issued.
Because the adjustment threatened by the DTC would irreparably harm CTBG and its shareholders, on July 30, 2008, CTBG filed suit against Grifco, DTC, and Dial. Additionally, CTBG sought and obtained a temporary restraining order to restrain the DTC from adjusting shareholder accounts.
Following the hearing, counsel for CTBG, Jess W. Mason, stated, “Judge Stovall’s Order today maintains the status quo and prevents DTC from adjusting any accounts until a further Order of the Court. A temporary injunction hearing will be held before the Court on August 22, 2008.”
About Coil Tubing Technology, Inc. (CTBG)
CTBG is the result of a reverse merger with IPMC Holdings Corp. which occurred in November 2005. After the reverse merger and until about a year ago, CTBG owned all of the outstanding shares of CTTH and currently owns 95.2% of CTTH’s outstanding shares of common stock. CTBG has historically conducted essentially all of its operations through CTTH and its subsidiaries.
About Coil Tubing Technology Holdings, Inc. (CTTH)
CTTH was formed as a holding company of several operating companies in 1999 and continues to have two wholly owned subsidiaries. Through its primary subsidiary, CTTH specializes in the design of proprietary tools for the coil tubing industry, concentrating on four categories of coil tubing application: thru tubing fishing, thru tubing work over, pipeline clean out, and coil tubing drilling. CTTH and its subsidiaries were founded by Jerry Swinford, an oilfield tool designer with more than 25 years experience in the creation of oilfield tools. Mr. Swinford continues to serve as CTBG and CTTH’s director, CEO and president.
Forward-Looking Statements
Certain statements in this release, and other written or oral statements made by CTBG and CTTH, including the use of the words “expect,” “anticipate,” “estimate,” “project,” “forecast,” “outlook,” “target,” “objective,” “plan,” “goal,” “pursue,” “on track,” and similar expressions, are “forward-looking statements” and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of the company to be different from those expressed or implied. CTBG and CTTH assumes no obligation and does not intend to update these forward-looking statements and takes no obligation to update or correct information prepared by third parties that is not paid for by CTBG or CTTH, respectively.
SOURCE: Coil Tubing Technology, Inc.
CONTACT: Coil Tubing Technology, Inc.
Attorney-CPA (Corporate Counsel)
John Akard Jr., 832-237-8600
or
Mason, Coplen & Banks, P.C. (Litigation Counsel)
Jess W. Mason, 713-785-5595
or
Bruce A. Coplen, 713-785-5595
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