Rande, I think you will find this as much a double standard as I do.
Sell bad batteries, go to jail for 10 years.
Push stocks you know be to junk, pay a fine and walk away.
Nice to be connected with the White Shoe Mob...
This is a lot of reading but all goes to point.
Posted on Fri, Dec. 20, 2002
Wife's plea fails to delay Exide executive's jailing
BY BETH HUNDSDORFER
The former chief executive officer of the company that made the "most trusted battery in America" was led out of the courtroom as his wife pleaded for his freedom.
Arthur Hawkins, who headed Exide Technologies, which was the manufacturer of the DieHard battery, received a 10-year prison sentence from U.S. District Judge David R. Herndon.
Herndon presided over a three-month trial on charges of wire fraud and conspiracy in federal court in East St. Louis. Herndon also fined Hawkins $1 million.
After hearing the sentence, Hawkins' wife and former secretary, Cynthia Hawkins, asked the judge to wait until after the holidays to send her husband to jail.
"Please understand, Ms. Hawkins, I do have a job to do," Herndon said as two deputy U.S. marshals steered Hawkins out of the courtroom.
Hawkins, 60, requested a 30-day reprieve from beginning his jail term to prepare his finances.
"Whatever your decision is, it will be very binding on my life. At 60 years old, with my family history and facing a possible 10-year prison sentence, it is very likely that I will never see the outside again," Hawkins told the judge.
U.S. Attorney Miriam Miquelon requested Hawkins begin his jail sentence despite a pending appeal because "at an alarming rate (Hawkins) was liquidating his personal assets and business holdings" and could pose a flight risk.
Herndon ordered U.S. marshals to take Hawkins into custody immediately following the hearing.
Hawkins' company, Exide Technologies, supplied batteries to Sears. A guilty plea to conspirace was entered for its subsidiary, Exide Illinois, after the corporation admitted it manufactured defective DieHard batteries from January 1994 to September 1997, then falsified quality audits to try to cover up the defects. The company also admitted to spending $80,000 to bribe a Sears battery buyer.
Exide also paid Sears $5 million in incentives for sales associates to encourage them to sell DieHard batteries, which some employees stopped offering customers because the batteries were so defective, Miquelon said.
Gary Marks, the Sears battery buyer, and Joseph Calio, Exide's vice president of marketing, pleaded guilty to wire fraud. Marks accepted bribes from Calio under the direction of Hawkins, according to prosecutors.
During the sentencing hearing, Calio's attorney, John Donahue, said after Calio was fired from Exide, he confessed about the bribes to the Florida attorney general under questioning for another investigation.
Federal prosecutors in Southern Illinois were already investigating Sears' automotive centers when they came across Calio's statements in Florida. U.S. postal inspectors and the U.S. attorney's office for the Southern District of Illinois then built the battery case.
Marks and Calio received a three-year probation sentence and a $10,000 fine. Calio also was sentenced to six months of home confinement.
Exide filed bankruptcy under Robert Lutz, the automotive executive credited with Chrysler's turnaround. He was named Exide's chief executive officer in 1998.
Hawkins' attorney, Oscar Stilley, said Lutz was an "irresponsible and reckless person who took the reigns of this company and ran it into the ground."
Miquelon maintained during the trial that Hawkins' actions caused the downfall of the company.
A federal jury convicted Hawkins and former Exide vice president Douglas Pearson of wire fraud and conspiracy in June.
Pearson is scheduled to be sentenced today before Judge Herndon.
belleville.com
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Jack Grubman Takes The Fall For Many
FT.com - Nick Louth
12/24/02 - As a reporter who was once thrown out of a Salomon Brothers investment conference by Jack Grubman, the US telecommunications analyst’s own ejection and lifetime ban from the securities industry holds some irony.
My crime on that day in 1996 had been to ask too many questions of the telecom industry chiefs who were assembled there in New York to give Salomon clients the glowing view of an industry destined for everlasting expansion. These clients had paid handsomely for the chance to hear exclusive details that might put them ahead of the crowd, so I can understand their frustration when reporters such as myself buttonholed the executives they wanted to speak to. I was, however, just doing my job which as a Reuters’ reporter was to get timely information to all our clients.
Mr Grubman, however, was this week penalised for failing the investment clients he was there to serve. The ban, which will surely hurt this wealthy man more than the $18m fine, emerged as part of the $1.4bn settlement that US investment banks will pay to settle New York security regulators’ charges that the industry comprehensively misled investors during the 1990s. Mr Grubman had already resigned from Citicorp’s Salomon Smith Barney unit in August with a $32m pay-off.
Clients thought they were paying for independent research, harnessing the knowledge of Mr Grubman’s years at AT&T and his analytical skills to make them money by picking stock in the industry he knew so well.
However, his real value to Salomons and the reason he was better paid than other Wall Street analysts, was his role as a dealmaker, a role that arose through his friendship and association with Bernie Ebbers, then chief executive of telecommunications group WorldCom. Mr Ebbers was an acquisition junkie, and Salomon earned hundreds of millions of dollars in fees for arranging the unending diet of takeovers that took WorldCom from being an industry minnow in the early 1990s to a market value of $170bn at its peak in 1999. Mr Grubman’s enthusiastic stamp of approval on WorldCom shares was an important part of the symbiosis.
That a potential conflict of interest existed should have been obvious right from the early days. However, with WorldCom getting expert advice on the deals it wanted, and shareholders making money hand over fist throughout the 1990s, it was in no one’s interest to start digging into this little theoretical problem. While the share price rose, these interests didn’t even seem to conflict.
During this time Mr Grubman, in common with many other industry analysts, had WorldCom shares as an unwavering buy. In fact, it was only on April 22 2002, two years after the stock had begun its slide from a $65 peak to around $1, that Mr Grubman downgraded the stock from "buy" to "neutral". Again, he was not alone in being tardy to change his view. Mr Grubman’s record as an analyst is no worse than many others who lost clients millions by recommending buying telecoms media and technology stocks that continued to fall as the stock bubble burst early in 2000.
Jack Grubman is now taking the fall for thousands of others in the securities industry who were just as wrong, but less prominent, less arrogant and certainly less careless than he was. As well as the general allegation that Mr Grubman used the promise of sparkling investment gradings to lure corporate business to Salomons, a few more personally grubby matters were unearthed in his e-mails by the New York attorney general’s investigators.
For example, Mr Grubman was so desperate to get his two-year-old twins into an elite $14,000-per-year nursery where they could rub shoulders with the children of Kevin Kline and Michael J. Fox, that he got Sandy Weill, Citigroup chief executive, to donate $1m of shareholder funds to the nursery. Having got the donation, he allegedly offered to upgrade AT&T stock as a thank you, which would help Salomon’s investment banking unit tout for business from the telecom giant.
It is one shock that this kind of horse-trading is acceptable within some organisations, yet another that AT&T’s investment rating and $1m of shareholder cash were apparently treated as chips in such an odd game as nursery school poker.
What are investors to make of this? Certainly it will add to the caution in 2003. If three years of losses were not enough, there are the frauds at WorldCom and Enron that Wall Street’s finest analysts blithely failed to spot.
For the next few years we can actually relax a little. A leaner and much chastened securities industry will almost certainly behave itself. It isn’t really the new intense regulatory scrutiny, (though that helps) the real driver is the lack of fat enough incentives to stray over the line.
The trouble is we all have short memories. When Michael Milken, the junk bond king who was convicted of securities fraud in the 1980s, re-emerged as a go-between in the mid 1990s to introduce phone firm MCI (which was later bought by WorldCom) and Rupert Murdoch’s News Corp, we should all have been warned that the moral defences were down. Milken had himself been banned for life from the securities industry.
History repeats itself. The time to really start looking hard at company accounts, and questioning the motivations of the securities industry and those in it will come a few years down the line when memories have faded and regulatory oversight gets attacked, as it inevitably does, as a drag on competitiveness. It will of course be during a bull market.
That may be about the same time that Jack Grubman is sufficiently rehabilitated to be invited back on to the New York dinner party circuit.
1800lawinfo.com
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This is lurking>
Overview: Smith Barney Stock Fraud
The National Association of Securities Dealers is preparing to take regulatory action against Salomon Smith Barney analyst, Jack Grubman.
This action is in response to growing evidence that Salomon Smith Barney obtained investment banking business by agreeing to give companies favorable analyst reports. This marks the first major crackdown by federal securities regulators on the sordid relationship between analysts and investment bankers.
Mr. Grubman helped change the face of wall street analysts. Instead of simply assessing stocks, Mr. Grubman and his peers increasingly promoted them, and focused on helping bring in investment-banking deals for their firms. Mr.Grubman recently told Congressional investigators that his annual pay averaged about $20 million during the past several years.
The NASD, which last year became one of the first regulatory agencies to look at analysts, is investigating Mr. Grubman's issuing of positive research reports on Winstar during the winter and spring of last year, even as strong evidence began to emerge from other analysts and investors that the communications company was under financial duress, people with knowledge of the inquiry say.
Below is a list of stocks that Jack Grubman covered at Salomon Smith Barney:
Winstar
XO Communications
Pacific Gateway
GTE
Intermedia
Flag Telecom
Williams
AllegianceTelecom
Broadwind
Qwest
Nextlink
ATT
Carrier 1
Level 3 Communications
McCleod USA
PSI Net
Rogers Wireless
Metromedia
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