YOUR MONEY IS NOT YOURS.
THE MONEY BELONGS TO THOSE WHO GRAB IT!
andrew-racz.com
"Other People's Money"
-Enron & Martin Siegel, Esq.
posted January 28, 2006
YOUR MONEY IS NOT YOURS.
THE MONEY BELONGS TO THOSE WHO GRAB IT!
In September, 1998, at the age of sixty, I flew to Budapest with the idea of associating with a top-notch Hungarian brokerage firm both in Hungary and the United States, a job which is commonly called early retirement. After all, I worked from age of 14.
About a year later, in 1999, Tarsoly Csaba, the president of Quaestor, a large Hungarian brokerage firm and his closest colleagues, including Peter Ocsody, the Iowa board president of Quaestor-USA, flew to New York with the desire to raise money in New York to buy the tenth largest bank in Budapest. Mr. Tarsoly didn't come here as a refugee the way I came in 1964, but a successful businessman. He is, according to printed material, the fifteenth richest man in Hungary. Young, probably 37 years old today, with a brokerage firm of some 300 people, a group of faithful and talented lieutenants, he came here to America with full pockets--dollars--dollars he earned in ten years since Hungary had a change of government. He landed at Kennedy airport -- he came to do business in the country of immigrants, the country of unlimited opportunities.
Little did Mr. Tarsoly know that his trip, his money, his intentions, are going to set in motion an international financial scandal, about which the public knows nothing but the regulatory authorities in New York are more or less aware. I introduced Mr. Tarsoly to Time McNamara, former Deputy Secretary of the Treasury, who was credited with saving the world in 1998 from the Russian monetary meltdown. He was an old friend. Tim outlined Tarsoly's possibilities and directed us to Fox, Pitt and First Boston.
"Welcome to America," he said. He also encouraged me to call on Donald Regan, the former head of Merrill Lynch, and former Secretary of Treasury. Actually, I knew Mr. Regan well. "Welcome to New York."
They all turned down participation. The emerging markets were four years later in the year 2004-05. Quaestor came early.
Eventually through the good offices of Fox, Pitt, we met Securities Capital which undertook the challenge. We needed to raise money immediately. I took them to Securities Capital Trading, a small Madison Avenue brokerage firm, where the star attraction was Ray Dirks, a well-known character on Wall Street. Among others, Ray Dirks was known to be a small-scale underwriter, with some success and some failures behind him, but he was well known. I knew Ray Dirks for thirty years.
Dirks received the Hungarian delegation and myself at 520 Madison Avenue, 10th floor, which was divided up between two firms. One was Dirks & Co., owned by Jesse Dirks, Ray Dirks' wife, and the other was Securities Capital Trading, owned by Ron Heineman, where Ray Dirks was on paper an analyst but in practice the dealmaker. In any case, the conversation was strictly between the Hungarians, myself and Ray Dirks. Dirks offered the following deal. He needed $94,000 to prepare a letter of intent and the initial research, and then he would raise $35 million at a 10% commission. The proper papers were prepared on Securities Capital Trading stationery and eventually dispatched to Hungary.
Nobody noticed but the bank account which was given to the Quaestor team was a newly opened bank account opened by an individual named Tom Husick, whom I never met and never heard of, who was present at the meeting but hardly said a word. It was all conducted by Ray Dirks himself, which was business as usual. The money was wired and it has become what is called "wire transfer embezzlement".
Quaestor also wired another $200,000 to an Iowa-based brokerage account where Quaestor had an office, to Securities Capital Trading. Mrs. Dirks of Dirks & Co. was coming out with a very hot issue called Log-On America and they were given instructions to do nothing else but buy the new issue at $10. The Quaestor people, Peter Ocsody and Tarsoly, were experienced in the stock market and they knew what a hot issue means. The account was non-discretionary and later it was found out that Dirks did some 40 transactions. He placed 3,000 shares at the underwriting price of $10 to the Hungarians and put 7,000 shares of the Log-On America issue into their account at a price of $30. Within a month the account was down 60%.
An arbitration ensued against Securities Capital Trading and related parties. It was learned that the $94,000 went into Mr. Husick's account who signed all the papers on behalf of Securities Capital Trading. He prepared a menu on Securities Capital stationery, named himself and Dirks as directors. It was a fraud! They claimed it was for European distribution. This is a serious securities violation in America, but reminds me of Dr. Goebbels' propaganda to a Hungarian. Today, in Budapest, a lot of people are still sensitive.
During the arbitration was filed and several unusual issues came to the fore. First of all, Securities Capital was represented by Mr. Martin Siegel, Esq., and Dirks had privately an old friend, Joe Tandet, as his attorney. The preliminary hearings lasted for a year and didn't go particularly well for the Securities Capital group.
I was supposed to be the key witness. I received telephone calls one day from Ray Dirks and half an hour later from his attorney, Joe Tandet, threatening me with a most unusual person, a divorce lawyer called Eugene Wolkoff, Esq., 700 Camino del Monte Sol, Santa Fe, NM 87505, Tel: 505-982-2063, who destroyed my family life and took over half a million dollars in legal fees out of a small dispute of $25,000. Nevertheless, Mr. Wolkoff was a formidable threat because he twice tried to put me in jail. My oldest son Gregory Racz, who is now an attorney, came to court and asked for my imprisonment. Two years later, the Ethical Culture School in New York, a famous private school to whom I gave half a million dollars in tuition for my two children, couldn't wait for the last $17,000 and actually put me in the Bronx Federal Penitentiary.
Ray Dirks basically threatened that if I didn't close the arbitration for $5,000, my wife's house in Southampton, which is worth about $1.5 million, would be taken away. Again, he was a formidable person because in 1999 he actually grabbed my apartment at 444 East 86th Street, a building where Rudolph Giuliani lived, and he grabbed it for $100,000. The current price today would be over $600,000.
Martin Siegel -- and this is where the story begins -- fought tooth and nail for the arbitration to have Mr. Wolkoff as a chief witness with his papers. He claimed four reasons why he could not carry the arbitration without Mr. Wolkoff. The so-called $94,000 wire transfer embezzlement was shown to the FBI and they said they would take up the matter but it was 2002, a year after 9/11. The Hungarians would have to come over to testify. Mr. Siegel subpoenaed and cross examined Mr. Husick, who bluntly said that he paid personal debts because he was just trying to come out of bankruptcy. Actually, we still do not know who Husik was. He took $22,000 out in cash and $22,000 went to an old partner of Ray Dirks, a fellow called John Sullivan. Dirks and Sullivan were partners in John Muir & Co., that went bankrupt. But what happened to the $200,000?
The non-discretionary account, registered in Iowa, turned out to be according to Mr. Dirks, an account on which he was a broker of record, which violated I think state rules, and under cross-examination the following conversation took place.
Q: Mr. Dirks, did you trade these accounts?
A: Yes.
Q: How many transactions did you make?
A: Forty.
Q: Did you discuss the transactions with anybody?
A: Yes, with Mr. Tarsoly or Mr. Zsolt in Hungary.
Q: Did you know that neither Mr. Zsolt nor Mr. Tarsoly do not speak a word of English?
A: Andrew Racz was there.
I categorically deny under oath that I ever knew about this transaction and never participated in them. In any case, to make 40 connections with Hungary requires at least a hundred telephone calls because of the time difference and the non-availability of Mr. Tarsoly. So far no record has been shown Mr. Dirks had permission to make 40 transactions.
It has to be said clearly that the cross-examination of Mr. Dirks was also conducted on the defense side by Martin Siegel, Esq. Mr. Tandet claims some eye problems and Mr. Siegel was present when the conversation took place. Neither during nor after, nor before the arbitration, did Securities Capital where Ray Dirks worked make a special report to the NASD of all the violations of Ray Dirks.
Martin Siegel was active in the arbitration. He subpoenaed records from Hungary and discovered that actually Mr. Tarsoly did not buy the bank and Mr. Siegel used it as an excuse for not returning the $94,000 for which Quaestor received no service whatsoever. In fact, he repeated that since there was no purpose for the research work, the money stays. Mr. Siegel also stated that his wife was Hungarian, but when it comes to the Quaestor money, whether it's wire transfer embezzlement or unauthorized illegal trading, the message is clear to Hungary: Let them eat cake.
We in America know that for a much smaller securities dislocation, Martha Stewart went to jail for five months and her personal and business life was almost torn to pieces. I had my first question about the 40 transactions: Why is Ray Dirks above the law? In thinking through that basically, and successfully, Martin Siegel, Esq. defended Securities Capital, defended Ray Dirks, defended Mr. Husick, he defended the president of Securities Capital. Ronald Heineman. Why is Martin Siegel not instructing his clients to report the irregularities? Why is Martin Siegel above the law?
Actually, I had another encounter, an earlier encounter with Mr. Siegel. I had an $800,000 claim against First Boston for a finder's fee. I never met Martin Siegel but he became the lawyer. He placed his own client, Bishop Rosen, as claimant, and I got, frankly, a message: Let Racz eat cake. Subsequently, when I was angry and at least I have shown sufficient anger, he demanded that I give a release to his law firm and himself. Otherwise, he basically stated I would never be able to work on Wall Street again.
This whole issue bothers me. When I came to America as a penniless immigrant, I had two old suitcases and $700 in my pocket. I had a job arranged with Fahnstock & Co. I knew nobody in the U.S. but I was welcomed. In fact, there is a scene I will never forget. The first day after I settled at the YMCA and the first day after work I went to the Young Democratic Party. It was a political meeting and I must have asked some intelligent questions because the chairman personally not only stood up from his desk, but came forward and gave a very vivid explanation of whatever I asked. Then in a puzzled but polite way, he said "I never saw you here before." To which I answered something which I will never forget, which was one of the proudest remarks of my life. I said, "You couldn't have seen me. You couldn't remember me, because it was only yesterday that I immigrated to the United States of America. Ich bin ein American."
I received an ovation and reception like President Kennedy probably received in Berlin. Many years have passed and America has changed. In 1964, the events I'm relating couldn't have happened.
I have seen in the newspapers and through the Internet that Martin Siegel defended Ken and Linda Lay, saying they should keep the $100 million that they took out from an exchange of stock for cash on a bi-weekly basis. The credit limit was $4 million and in the year 2001 when Enron collapsed, $81 million of other people's money, Enron's people's pension money, went into the pockets of Linda and Ken Lay. The defense attorney was Martin Siegel, Esq.
I cannot help but reflect on the emotional and practical side of the story. In 1964, as a penniless immigrant, I was received with applause among young politically minded Americans. I must have had 25 invitations for dinner and I picked up three dates.
After the end of the Cold War, the 40-year-old Tarsoly Csaba flew over the Atlantic, hard-earned dollar bills in his pocket, desiring to do business in the U.S. He was robbed by a bunch of misdirected brokers. Not only was his money illegally taken away, and had he been here at the hearings and had he had an instant translation, he would have been ashamed that he came to America because Martin Siegel and his clients almost labelled him a con man, as a con artist, as a man who wanted to use America to buy some assets in Europe and the best punishment was to take away his money, Other People's Money. This happened in New York City, in America, in the year 1999.
On my side, a leading Canadian newsletter gave me celebrity status for pulling together the $3B Diamondfield-First Boston merger. They asked - What deal would initiate with the Vancouver billionaire next?
He found the Chelakis article re Andrew interesting.
However, the client was Bishop Rosen alone.
He billed for October 1996 $9,566.06 -- for one month alone.
I never appointed Martin Siegel ever. $10,000 a month is $120,000 a year, more than the average pension for a blue-collar Enron employee.
J.P. Morgan . . . where are you? Where are your yachts?
The various characters from Houston and New York can be put together and analyzed, but that's the job of the law enforcement agencies. I have written to Senators. I have written to Senators about what happened but also because I feel that as a Hungarian-born businessman, I have witnessed something that as an American I am ashamed of. Not only am I ashamed but the whole game cost me a substantial sum of money. I did not go to work for Quaestor. Now at the age of sixty-seven, it is unlikely that I will do something which would have been the crowning glory of my life, joining Hungary and America together. The people who stopped this also stopped Mr. Tarsoly from perhaps building up a financial empire in America. His talent and his people wanted to do so.
In life, we dream. I am appealing to the Senators to correct these enormous mistakes from Houston to New York. I trust the Senators will take the appropriate action so that Winston Churchill's words will come true: "The wicked are not always clever, nor do lawyers always succeed."
The practical side is:
Wall Street needs the Hungarian Quaestor
or
Andrew Racz needs Hungary.
Tarsoly's trip created one more reason to bring about President Bush's Corporate Responsibility Act.
Tarsoly's effort clearly points out that Enron is not an isolated event. Perhaps, most important, Quaestor stood up in New York and said that we need laws that protect our assets.
The moral of Enron and Ken Lay and Securities Capital -- and their lawyers -- is they want to sell the public that "Your money is not yours -- the money belongs to those who grab it".
The above statement is not true!
There are two messages:
First, the Right Hon. Mayor Michael Bloomberg should personally apologize to Csaba Tarsoly. Second is a quote from my Congressional testimony of 1974:
"I immigrated to an America (1964) where people were happy, where Doris Day was still a star."
Curtain
(Article 19 - posted February 9, 2006)
e-mail: mlikar@aol.com
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