fwiw:
"Dirty Gold in Goldman Sachs?
--------------------------------------------------------------------------------
"HOW GREED CHANGED GOLDMAN SACHS."
~ ~ ~
Sightings from The Catbird Seat
~ ~ ~
THE GOLDMAN SACHS GROUP is a leading global investment banking and securities firm with three principal business lines: Investment banking; Trading and Principal Investments; and Asset Management and Securities Services.
(WARNING! Take a deep breath and hold your nose before you enter this gilded cage -- the newspaper cage-liner hasn't been changed in decades!)
* * *
INSIDERS DON'T SWEAT COLLAPSE
by
Michael Perkins and Celia Nunez
Long before the stock market went into the toilet, the big boys got out.
Last March, the tech-heavy Nasdaq index reached a staggering 5048, prompting venture capitalist John Doerr to claim that we were witnessing "the greatest-ever legal creation of wealth in the history of the world."
This week, the Nasdaq fell below 2000. Someone is out a lot of money, and that someone is primarily the small retail investor. Why? Because the insiders- entrepreneurs, venture capital firms, investment banks and large institutional investors- pulled out their capital long before the fall, leaving mom-and-pop investors holding the bag.
Instead of the greatest-ever legal creation of wealth, the high-tech financial bubble represented the greatest-ever legal transfer of wealth - from retail investors to insiders.
For example, between November 1998 and July 2000, Goldman Sachs, Morgan Stanley Dean Witter and Credit Suisse First Boston each pocketed more than $500 million in underwriting fees from Internet companies. And over the past two years, technology underwriting as a whole brought in close to $1 billion for each bank. . . .
Some insiders would argue they, too, have been hurt by the market's decline. And in fairness, it should be noted that not every insider pulled out early. ... But the fact is, not all stock losses are the same, because the insiders get their stock for pennies a share, if that.
Thus, while an insider may have seen his portfolio slip from $50 million to $5 million, he probably paid only $100,000 for his stock, so he's still ahead in terms of real money.
But when individual investors see their stock portfolios plummet, it's real.
The TRUTH is, little investors never stood a chance, because they simply don't have the same access, both to key information and to early deals, as big investors.
One reason is the "quiet period" mandated by the Securities and Exchange Commission, which requires a startup company to shun any publicity regarding its finances for at least three months before its initial public offering. The law was intended to keep a company from hyping its stock, but in reality its main effect is to keep small investors in the dark.
Big institutional investors such as Fidelity and Vanguard are never in the dark. They're treated to what's known as a "road show" just days before an IPO. In this private meeting with company executives, they are updated on the startup's financial situation.
Thus, the big investors know if a stock has recently become more risky and can pass on it. Or they may decide to buy it anyway, knowing they can resell the stock on the first day of trading before any bad news about the company is reported. This practice, known as "flipping," became common in an era when Internet stocks were routinely tripling in value on their first day of trading.
Institutional investors weren't the only ones flipping stock during the hot market. Individual insiders did it too. During the Nasdaq bubble, investment banks would routinely give hot new IPO stocks - FREE - to corporate executives, venture capitalists and other decision-makers sitting on the boards of companies whose business the banks wanted.
These privileged decision-makers would then flip their shares on the first day of the IPO for quick profits.
While the investment banks were giving out free stock to their favored clients, they were also giving out bad advice to their mom-and-pop customers.
In a study of high-tech stocks, Roni Michaely of Cornell University and Kent Womack of Dartmouth College found that investment banks rarely downgrade a company's stock to a "sell" rating if they have a business relationship with the company.
Despite these shenanigans, the savvy retail investor could at least take comfort in Rule 144, the SEC regulation that bars a company's owners from selling their stock for 180 days after an IPO. (This type of stock is sometimes referred to as "locked stock.") So if the stock did tank three months after it was issued, at least the small investor could find solace in the fact that the entrepreneur and his venture capital backers had taken a loss on their stock as well.
Or did they?
Actually, during the high-flying days of the tech bubble, few insiders were required to take risks. The investment banks devised a new financial service: They would promise to buy a venture capitalist's or tech executive's locked stock as soon as the 180 days were up - but at the stock's higher early issue price.
This special service for favored customers didn't cost the banks a thing, since they would then use a combination of sophisticated financial instruments to "short" the stock. That is, the banks would make money if the stock dropped in value, which it almost always eventually did.
The technology stock bubble is already being compared to previous financial manias: Dutch tulips in the 1600s, U.S. railroads in the late 1800s, etc. But what sets this most recent mania apart is its Ponzi scheme quality.
Never before has so much wealth been transferred from one group of people to another in such a short time.
Maybe if the Securities and Exchange Commission steps in to restore fairness, it never will again.
(Michael C. Perkins is a founding editor of Red Herring magazine and co-author of "The Internet Bubble." He and Celia Nunez are authors of "A Cool Billion," a novel about Silicon Valley.}
* * *
From The Harvard Data Dump:
IS THERE A CONNECTION BETWEEN A $4.7 BILLION RESERVE BY THE SWISS RE NAZI GOLD,
AND A $4.7 BILLION ATTEMPTED SEIZURE OF GOLDMAN SACHS HUD LOAN SALE ASSETS?
In the summer of 1996, a highly political "investigation" was begun by the Department of Justice into bid rigging and insider trading with respect to $4.7 billion of HUD loan sales by Goldman Sachs and PNC.
If various efforts to falsify evidence by the HUD and/or destroy evidence by the HUD Inspector General (DynCorp, now prime contractor) and destroy witnesses through a smear campaign during the subsequent four year investigation had been successful, the Department of Justice Asset Forfeiture Fund (DynCorp, prime contractor) would have had the basis of a $4.7 billion seizure of assets from Goldman and PNC.
During the same summer in 1996, efforts began to identify and seek reparations regarding Nazi gold and other assets maintained by Swiss banks, including the Swiss National Bank, Credit Swiss, and United Bank of Switzerland (UBS). The interim reparations fund was established by the Swiss at $4.7 billion US.
Allegations exist that the PROMIS software system at the Department of Justice was used to identify Nazi accounts at the Swiss banks. According to Bill Hamilton of Inslaw, DynCorp is one of the contractors who assumed Inslaw's work in managing the PROMIS system for the Department of Justice.
Allegations also exist regarding the use by Lockheed and Pug Winokur/DynCorp of the PROMIS system to compromise the HUD systems, with $17 billion and $59 billion reported missing in FY1998 and FY1999.
Lockheed with DynCorp as a subcontractor manages the largest part of the HUD computer systems. HUD has refused to respond to FOIA's regarding DynCorp's contracts and subcontracts at HUD, taking the position that they have no contracts with DynCorp and that the prime contractor refuses to respond to their requests. . . .
* * *
From Russia Reform Monitor, No. 341, 11/22/97, American Policy Council, Washington, D.C.:
November 12, 1997 - Gazprom, the natural gas monopoly dominated by Prime Minister Viktor Chernomyrdin, announces a delay in its planned $3 billion bond offering due to pressure from Washington over its gas exploration deal with Iran, the New York Times reports.
The Iran deal would put Gazprom in violation of the 1996 Iran-Libya Sanctions Act designed to penalize those regimes for supporting terrorism. The deal might also make Gazprom's lead underwriter, the Goldman, Sachs investment bank, liable under the law as well. . . .
"This is a tough one," a senior Administration official said. "There are a lot of competing interests, and the coherence of our Iran policy is at stake."
"Stopping the Gazprom financing" would not only punish a partially state-owned firm vital to Russian economic recovery, the New York Times notes; "It would also punish Goldman, Sachs, a big contributor to President Clinton's campaign whose former co-chairman is the powerful Treasury Secretary, Robert E. Rubin, without stopping any other foreign company from underwriting Gazprom. . . .
Adding to the pressure on the Administration, Congress had begun to discuss how to punish Goldman, Sachs and is already holding up the issuing of further Export-Import credits to Gazprom."
[Editor's note: Secretary Rubin continues to hold financial interests in Goldman, Sachs but claims they do not influence his decisions.]
* * *
From Gold-Eagle, by Ted Butler, 12/08/99: UNRELENTING MISCONDUCT - In my last article, I publicly accused at least six financial firms of fraud and manipulation, for their dealings in the precious metals derivatives arena. I'm still here. The fact that none has responded or acknowledged my allegations can be interpreted in a number of ways. While it doesn't prove them guilty, it doesn't exonerate them either. Their silence will not deter me. Since the manipulation of the price of gold and silver continues, I intend to turn up the heat. . . .
The recent controversy about Goldman Sachs and its relationship with its client Ashanti Goldfields, provides further insight into the murky world of precious metals dealing, as well as the title of this piece. We are fortunate that this relationship has been made as public as it has, for it sheds more light on the gold and silver manipulation and permits specific new accusations against Goldman. One is very ugly indeed.
Published reports (principally from London) have presented detail that paint Goldman Sachs in a far different light than is normally associated with the high powered investment bank. For the record, I had contacted Goldman, once again, at the highest level prior to releasing this article, telling them the nature of this article and giving them the opportunity to refute my claims. Once again, they have chosen not to respond nor refute. I can't beg them to address this issue. I have no personal vendetta against Goldman ... my vendetta is against the crime of precious metals leasing and unlimited and unrestricted short selling in the 15 year manipulation in gold and silver.
Goldman Sachs is a key player in that manipulation and as such, they are a fair target in light of recent revelations. Certainly, no one can accuse me of being a bully towards Goldman, not when there is universal acceptance that Goldman Sachs is the bully of the entire precious metals market.
Let's face it, this firm is at the top of the food chain.
The dealings that Goldman Sachs had with their client Ashanti are sickening. It is hard to reconcile Goldman's actions in a world where the meaning of words such as honesty, fiduciary responsibility, fairness and some concern for your fellow man, is known to all.
If an individual lacked such basic traits, we would all consider that unfortunate. For an institution like Goldman to lack such traits is unacceptable. The public record shows that Goldman misled Ashanti. Just a little bit of common sense will prove it.
Step back for a moment, and try to put what happened in the Ashanti - Goldman relationship into proper perspective. Ashanti, which has only been a public company for five years, increased its Goldman-sanctioned short strategy to the point where a $60 increase in the price of gold rendered it insolvent.
Please think about this. This was no renegade unauthorized trader gone wild. This was Ashanti's corporate policy. Goldman was their banker. Goldman knew, or should have known, what Ashanti was doing. What Ashanti was doing was proving to the world just what a scam leasing/forward selling and derivatives are.
For the first time in history, a deliberate and widely known "hedging" strategy caused a public company to self-destruct financially. I wonder if that will go in Goldman's historical milestones category of their web site. This was no financial accident. This was a direct and unavoidable result of the systemic fraud that leasing is.
Your common sense should tell you that something is wrong, when for the first time ever, higher prices for their product hurts producers. This Wall Street designed Ponzi scheme has turned the metal world upside down, with producers actually rooting for lower prices. Bad things are destined to happen to the hundreds of mining companies that resemble Ashanti. The blame can be placed squarely on Goldman Sachs and the other unethical dealers.
It is no wonder that Goldman Sachs and its counter-party posse were quick to white wash the mess they created at Ashanti. (An aside - I'm starting to believe that "counter-party" means having a position that is counter to the best interests of your client). Since Ashanti couldn't meet its margin calls and no one has figured out how to repossess real estate in Ghana, margin was waived by a "standstill" agreement. This is outrageous. Manipulative short sales which, by definition, were a price depressant influence when initiated, were allowed to remain in place even after it became obvious that the short seller couldn't meet its obligations. Is it just me, or is this not a direct affront to the concept of free markets?
Those that had reassured themselves that the price depressing influence of all this obscene short selling would be negated and offset by the eventual buyback or delivery, should rethink their position. Every action in this crises revolves around preventing Ashanti from buying back its short position on the open market. Real gold and naked calls were sold on the open market at the outset of the transactions, but the requirement to buy-back was unilaterally waived by the new rules of the crooked dealers, lest the price get out of hand. Goldman's and the counter-parties' mopping up actions in waiving margin requirements for Ashanti make them clearly guilty of market interference for the purpose of price fixing.
I don't understand how the authorities can't, or won't, see this. You would think, aside from reckless client negligence, that this would be the most severe charge one could bring against Goldman. I only wish that were true.
Now I make an accusation that saddens me. It is an accusation that I have wrestled with, because it is so serious and ugly. The fact that I have offered pre-notification to the party I am accusing, and asked them to set me straight, does not lighten the burden. It is an accusation that not only have I never made about anyone, but one which I never thought I would ever make. But the evidence is so overwhelming, and the nature is so germane to the issue of fraud and manipulation in gold and silver, that I feel I have no choice. I claim that Goldman Sachs, as part of its role in the sinful manipulation in gold and silver, is additionally guilty of racial discrimination towards its client Ashanti Goldfields.
Please allow me to explain.
First, as a white man, let me give you my definition of racial discrimination. You know I don't mince words. White men taking advantage of black men, because they are black, is my definition of racism. Clearly, the record shows that this is what Goldman Sachs did to Ashanti in their financial dealings. The proof lies in the public record.
It is no secret that Goldman Sachs has been the main financial advisor to Ashanti since its formation as a publicly-owned mining company in 1994. The recent Financial Times article of December 2, 1999 describes the relationship fully (The title - "All Things to All Men"). Additionally, the 1998 Annual Review for Goldman Sachs (www.gs.com) actually highlights Ashanti as one of 16 corporate clients (out of thousands) deserving special mention, including a testimonial by Ashanti about how good Goldman was to them. The testimonial obviously predates the current situation.
Additionally, it is no secret that Ashanti led the gold mining world in the shortselling of gold and gold derivatives, compared to production. At its peak, Ashanti was close to 12 million ounces short, or an incredible 8 years worth of production shorted. ... The obvious question - how did Ashanti get to be the most aggressive short seller of gold? Did they do it to themselves, or did Goldman do it to them? Or, does it really matter - should Goldman, as its longtime financial advisor, have prevented Ashanti from being in the disaster short position in the first place?
I think you have to look at each participant to determine if Goldman Sachs was racist in its dealings with Ashanti. Ashanti is in Ghana, in the African Gold Coast. The country is poor, with a literacy rate of 60%, a life expectancy of 55 years, and 20% unemployment. The ethnic diversity is 99.8% black African and the GDP is $7 billion. ... Ashanti Goldfields is the largest employer by far (around 10 thousand), and along with cocoa, gold provides the bulk of Ghana's foreign exchange. Ashanti is overwhelmingly a black company, with a CEO who is a native Ghanaian and who worked himself up from a shift mine manager position. Ashanti's current stock (ASL-NYSE) capitalization is roughly $350 million.
Goldman Sachs is a global financial powerhouse whose ranks are loaded with talented and educated overachievers. It will earn net profits of close to $2 billion this year, and has a market capitalization of around $37 billion, or more than 100 times Ashanti's (Ashanti does produce a real product or true wealth, while Goldman is a moneychanger, but that's a different topic). Hell, Goldman's market cap is 5 times the whole country's GDP.
Goldman Sachs has been a pioneer and experienced hand in the gold and silver leasing /forward selling scheme for over 15 years. Ashanti has been involved for maybe 4 years or so. Goldman has a tradition of sophisticated financial dealings going back 130 years; the country of Ghana has only been independent for 40 years, mostly under military rule. Ashanti was government-owned until 1994.
One fact that I can't provide is how much money white Goldman Sachs made off of black Ashanti. You can be sure the amount was as obscene as racism itself.
It is not possible for a reasonable person to conclude that Ashanti, in any possible scenario, could hoodwink Goldman Sachs in a sophisticated game of dealing in precious metals derivatives. So, if Ashanti has ended up on the ropes financially, who's fault is it? It's so clear, it's obnoxious. A new, unsophisticated investor versus the master of the universe.
Ashanti, of all the mining companies hurt by the price rise, had the highest concentration of "exotic"(aka "toxic waste") naked mutant calls. Do you think that Ashanti dreamed up the terms and conditions of these derivatives that are polluting our financial markets?
The white man (Goldman) tricked the black man. That, my friends, is racism at the worst I have seen in thirty-five years. Goldman Sachs should be punished severely and stripped of any privilege of dealing with any government entity. At the very least, I can't imagine how they could be allowed to continue in the metal business.
Even if you refuse to acknowledge this conclusion on the information I've provided, and somehow still think Goldman's role was proper, ask yourself this - why did a majority of gold producing mining companies all do the same thing at roughly the same time? As I detailed in my last piece, there was an unnatural movement by all sorts of mining companies to load up on dangerous short gold derivatives at precisely the wrong time. Was this the mining companies getting together to trick the Wall Street Sharks?
In defense of Goldman, I don't think they are racist motivated. They are motivated by GREED.
They would steal from anyone, using any available method - in that sense they are truly non-discriminatory. Racism was not the primary motive in Goldman's dealings with Ashanti - money was.
But even though the people of Goldman may not be personally racists, or the firm may not normally be considered a racist organization, motivation doesn't matter. The law (both moral and written) doesn't distinguish - it is not permitted. The historic Civil Rights Movement that I personally witnessed was about eliminating institutional racial discrimination, and hopefully individuals' minds in time. That's what makes Goldman's actions so repugnant - the racial discrimination they are guilty of is institutional in nature. That Goldman's prime motivation in its dealings with Ashanti was not racial discrimination, doesn't excuse the fact that racial discrimination obviously existed.
And it should matter not that those discriminated against were not of our shores. Surely the law intended to preclude US companies from violating the civil rights of foreign citizens.
Goldman's role in Ashanti's finances was so pervasive, that they can't walk away. In this sense, Ashanti is likely to be restructured, rather than liquidated, because Goldman would really get a black eye otherwise. That, plus the mining assets can't be repossessed. Goldman might even arrange for a backroom covering of Ashanti's shorts. But even if Goldman were to refund all fees, rescind all transactions and make Ashanti whole, that doesn't change the fact that Ashanti was clearly racially discriminated against. And it doesn't lessen Goldman's involvement in the broader institutional fraud of leasing.
As disturbing as Goldman's transgressions against Ashanti are, I've always thought that one of the uglier aspects to the fraud and manipulation in gold and silver has been the hardship borne by the individuals who actually toil down in the mines. Not only do they labor in an unbelievably difficult environment, they all too often are deprived a livelihood because of the artificially depressed prices of gold and silver.
Over the course of the leasing scam, hundreds of thousands of innocent people (most of them black Africans) have been thrown out of work due to mine closures because of low prices. If that was because of legitimate supply/demand forces, it remains just sad and unfortunate. But if it was because of a manipulative hand from the canyons of Wall Street, it is also outrageous and unacceptable.
In this sense, while I've singled out Goldman Sachs in their dealings with Ashanti, Goldman wasn't alone at Ashanti, nor in the overall leasing scheme. By artificially depressing the price through their manipulative actions, AIG, Chase, JP Morgan, UBS and Republic Bank, and others, are also racists in the institutional discrimination against laid-off black workers. That they also caused the non-racist unemployment of non-black or other minority mine workers, does not lessen their guilt, that crime is separate to the discrimination.
So far, I've gone to the Federal Reserve, the Treasury, the Justice Dept., US Attorneys, the FTC, the Comptroller of the Currency, the CFTC (many times), and mining companies and their auditors in trying to end this scam. Wouldn't it be something if what broke the back of the manipulators was a civil rights activist?
(Catbird: Where was Jesse Jackson?)
The authorities who should be on top of the scam obviously won't do it - so maybe someone from left field might do the trick. I've always known that if this fraud and manipulation were as broad and deep as I've insisted over the years, the proof of its existence would manifest itself in many ways. But I must tell you, even I am shocked about the recent revelations in this scam. Even I am taken back by the ugliness and evil that has sprung from an inherently flawed concept - metal leasing and unlimited short selling.
* * *
From The American Populist Review - America's Financial Hoodlums - With its highly questionable involvement in the ruinous Ashanti Goldfields (Ghana) hedging mudslide, Goldman Sachs has suffered a public relations scorching of huge proportions.
For these New York-based investment traders, that's no novelty. ... Goldman Sachs, to put it mildly, has an unfortunate reputation associated with financial bubble crashes. . . .
It was in the late 1920s, when Goldman sought to project a public image as a "rock-ribbed conservative bank." In hard fact (how history repeats itself!) it was probably the most wildly speculative bank in the US at the time. It was named by a US government-appointed investigation as one of the banks which, by looting, market rigging and outrageous manipulation helped "
home.talkcity.com |
