Market Marker Implications for Alydaar --- FYI, a post from another board
Tuesday, Nov 24 1998 7:07AM ET
Well, there are many things going on behind the scenes right now when it comes to the 'Thomson Kernaghan' - Mark Valentine - Steve Hicks.... shorting crew. Actually if you check you will see that Mr. Valentine works for Thomson Kernaghan. I have heard that the NASD, SEC, and FBI may be investigating the above mentioned parties and any potentially criminal activities as they pertain to illegal shorting of stocks in which debenture deals have been done with associated parties.
This 'investigation' may also look into certain NASD members (i.e) MM's that may have knowingly participated in these activities. Knight
Securities (NITE) seems to be a name that comes up frequently when we
talk about the Canadian group, and if you look at both TPII and SGI...
guess who you find trying to keep the stock down so they can cover at cheaper prices. This is basically how it works:
1. While the Canadians are negotiating a debenture deal, they start taking short positions in the stock, and continue shorting the stock after the deal is signed.
2. Thomson Kernaghan is the Canadian company that does the shorting for the tree Canadian Limited Partnerships. As mentioned Mark Valentine the 'agent' for these partnerships also works for Thomson Kernaghan.
3. There shorting is done through CDSE (Canadian Depository Securities
Exchange. They pay a fee to the CDSE to maintain their short position.
4. They take naked shorts,(i.e.) they don't even borrow the shares nor
do they even put up a large margin %. Since the shorting is done out of Canada they are not subject to the U.S. rules regarding margin, etc.
5. Nite, Fran, Fahn, and NAIB are rumored to be the MM's that execute
the short and also participate. The problem is not that they are shorting, that part is not technically illegal. The problem for them is the connections between the parties that are shorting and the parties who are going to get shares via the convertible debentures. That is quite illegal. You can't use those share or take a short position with intentions to cover with the share you are going to get. It is also a problem for any U.S. MM's that knowingly participate in these activities. What really takes the cake is that there isn't just one or two companies who have been nailed by the Canadians. There could be dozens. Here are a few I found- RTIN, LNST, AHIC, WHCC, MGAM, USAM.
From what I hear there are dozens more and the SEC, NASD, and FBI may be looking into this. What even makes it a bigger deal is that the SAME MM's seem to have short positions on these stocks and they can't then claim they were ignorant to what the Canadian's were doing if they helped them do it over and over again on many different companies. THIS COULD BE HUGE! and hundreds of millions of dollars worth of fines and penalties could be the results, including possible criminal charges filed against the parties involved in the shorting /debenture scam.
We're talking front page of the WALL STREET JOURNAL huge!anyone who would like more information can call Curtis Swanson CFO at RTIN his E-mail curtis@freshnlite.com Phone 800-259-2675
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