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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (10059)	3/27/2002 1:24:32 AM
From: russet	Read Replies (1) \| Respond to of 36161

BINGO http://abcnews.go.com/sections/business/DailyNews/stark_painewebber_020326.html Enron Caution Prompts Analyst Firing UBS PaineWebber Stock-Watcher Says Sell, Then Loses Job By Betsy Stark N E W Y O R K, March 26 — Stock market analysts have been faulted for not knowing how bad things were at Enron, or knowing and not warning clients. But one financial adviser for a big Wall Street firm did try to warn his clients and paid for it with his job. Last Aug. 21, one week after Enron CEO Jeffrey Skilling unexpectedly resigned from the firm and months before its financial problems became painfully obvious to the world, UBS PaineWebber financial adviser Chung Wu sent this e-mail to 73 clients just after midnight: "Financial situation is deteriorating in Enron. … I would advise you to take some money off the table. … Waiting to make a decision would cost you a fortune." The e-mail reached Enron executive Aaron Brown. At 1:17 that afternoon, he sent this e-mail to Wu's bosses at PaineWebber: "Please handle the situation. … This is extremely disturbing to me." Hours later, Wu's boss, Patrick Mendenhall, fired Wu. And at 7:26 p.m., Mendenhall sent this e-mail to Wu's 73 clients: "I hereby retract Mr. Wu's statements. … UBS PaineWebber has a strong buy recommendation on [Enron] stock." Enron stock was worth almost $37 a share when Wu urged his clients to sell it. By the time UBS PaineWebber dropped its "buy" recommendation, in November, Enron was on the brink of bankruptcy and the stock was worth just 61 cents a share. Waxman: 'People Are Starting to Feel Uneasy' Rep. Henry Waxman, D-Calif., who is now investigating Wu's dismissal, says the evidence suggests UBS PaineWebber was far more interested in protecting its business relationship with Enron than protecting its clients. "I think Mr. Wu was fired because the higher-ups at PaineWebber didn't want to offend the higher-ups at Enron," said Waxman. In a letter to Waxman, the firm said, "Mr. Wu was terminated for violating firm policy concerning electronic communications," a policy that requires firm approval for "correspondence being sent to 10 or more persons." However, two previous e-mails Wu sent to more than 10 clients did not result in termination. Said Waxman: "I think one of the consequences of this Enron debacle is that a lot of people are starting to feel very uneasy about the capital markets, the accounting firms, the investment banking firms and Wall Street itself."

To: Frank Pembleton who wrote (10059)	3/27/2002 7:07:47 AM
From: long-gone	Respond to of 36161

What Good Are Disclosures That Go Unread? Tue Mar 26,10:13 AM ET Daily Briefing: WASHINGTON WATCH By Howard Gleckman Back in the 1980s, a couple of hustlers tried to get rich selling tax-exempt bonds. Before their scheme collapsed, they convinced folks to invest $120 million in retirement homes that had no prayer of making any money. Amazingly, they carefully laid out the scam in the prospectuses they gave to potential investors. They figured full disclosure would keep them out of trouble with the Securities & Exchange Commission. After all, they reasoned, it can't be fraud if you tell investors everything. So they disclosed the huge upfront fees they paid themselves. They reported the heavy debt the projects were carrying. They even said the businesses had little chance of ever being profitable. Yet people invested anyway. ``They had a simple technique,'' a lawyer familiar with the projects told me: ``Sell 'em garbage. Just always tell 'em its garbage.'' LESSON ONE. How did these guys find so many gullible investors? The suckers never read the prospectuses. They saw the part that promised 17% tax-exempt returns. But they never bothered with the details. It seems there's a lesson here for everyone debating what to do in the wake of the collapse of Enron, Global Crossing, and, for that matter, all the dot-coms whose corpses are littering the financial landscape. The government, of course, needs to crack down on companies that lie on their financial statements. No matter how much proxy reading an investor does, it's hard to protect yourself from someone who is set on deception. And the SEC would do all investors a favor if it pushed companies to write their proxy statements in a language resembling English. The legal gibberish that fills most financial disclosures may satisfy the letter of the law, but it isn't very illuminating. However, no amount of reform will matter if people don't bother to read the information companies give them. And the sad fact is, few investors and shockingly few professional analysts ever bother combing through financial documents. DON'T LEAVE TO OTHERS... Ordinary investors don't because they're intimidated by the numbers, because they don't have time, or because they're willing to leave the hard work to others. It's easy to guess what many people say: ``I don't read that stuff. That's what I pay my broker for.'' Except your broker may not be reading the financials either. Indeed, I'd venture to say some brokers, planners, and other investment professionals haven't looked at a financial statement since they got their securities license. Stock analysts? Leave aside for a moment the question of whether they can be objective when they recommend stocks that their own companies underwrite. The real problem, even for those who are truly independent, is time. A securities analyst may be required to follow dozens of companies -- all of which are filing a blizzard of SEC-mandated paper throughout the course of a year. They simply don't have time to properly sift through all of it. MAKE IT EASIER. A CEO tells the following story: A couple of years ago, a Wall Street analyst downgraded his company's stock. The CEO arranged to visit the analyst at his New York office. As the corporate exec tried to explain that the analyst had misunderstood some information disclosed in the company proxy, he noticed a stack of untouched financial statements piled in the corner of the guy's office. ``Oh, those,'' the analyst reportedly said. ``I never look at that s--t.'' An extreme case? Maybe. A bit of hyperbole by an angry CEO? Perhaps. But overworked analysts simply can't review all the paper they see. The message for the SEC is simple: Make this stuff easier to read. The message for market professionals is also clear: End the conflicts of interest and hire more analysts. You can afford it. And the message for investors: If you're not prepared to do some reading, buy shares in a mutual fund. story.news.yahoo.com