I don't think the idea of finding a lawyer "willing to make his bones" by going after the SEC is completely far-fetched. There has to be some young, aggressive securities attorney out there just starting to develop a practice that would leap at the chance to make his mark. The trouble is finding one willing to work without a guarantee of getting paid, other than in reputation.
There are a lot of politicians that are sensitive to their constituents problems. The problem is access. There are many private bills put thru Congress every year. I am convinced that, at the latest, once the fraudulent 10K was submitted to the SEC in the first week of January, 1997 there was sufficient grounds for them to declare a temporary trading halt while they visited the company's offices and inspected the claimed assets and determined why the biographys contained in that document didn't reveal the criminal history of both Mo and Retorik (Mo's, as an officer of the corp, was absolutely required, and Mike's should also have been reported as he was known to the SEC already, thus his employment should have triggered an even earlier scrutiny of GIFS).
While a January trading halt, and revelation of what we now know, would not have prevented all losses, it could have prevented those losses from trades in 1997. In my case it would have cut my total losses by about a third. I have heard stories about other alphabet agencies that were looking at the company including the FBI as well as the IRS (for failure to pay withholding tax on employee's salaries). However, the SEC is the only agency that is charged with the responsibility to have taken timely and early action on the appearance and suspicion of a fraud being perpetrated by a public company. And once they received that 10K, they had proof of fraud and deception, as well as the possibility of mail fraud and likely a lot of other charges as well.
The SEC has historically taken a slow process on companies like GIFS, as well as broker-dealers scamming the public. With the transmittal of info (fraudulent or not) now so rapid due to the internet, the process must change. This is why I think Congressional hearings could be of interest to the right politician. I am not interested in more govt regulation of the internet, rather I want to see the agencies involved gear up to respond more rapidly. Had GIFS been a legitimate company that just made some mistakes thru inexperience, then it likely would have hurt the price temporarily, but the fundamentals would have eventually won out. And if it turned out to be the fraud that we now know it to be, then a trading halt and close scrutiny by the SEC (and possibly other agencies as well) could have prevented four more months of trading losses for ill informed and naive, trusting investors.
I blame no one but myself for my failure to do my own due diligence prior to my first investment. I saw the stock breaking out technically, and relied on posts I had received from one of those texas sounding websites (afraid to mention the name for fear I will get sued, and I never was able to figure out which was which even then). On the other hand, once I read the 10K at the SEC site, I continued to buy shares relying on the harsh consequences of a company filing a false document with the SEC. It's mere presence at the SEC website gave GIFS credibility, as it implied that it had been reviewed and placed the company in compliance with reporting requirements. Granted, its sheer size was daunting, and concerned me (IBM's is probably only one fourth the size), but they had included a biography and other stuff not mandated, which I now recognize was just fluff and more lies.
If this kind of stuff is being posted at the SEC site for investors to review as "credible documents" without being first reviewed by the SEC, then change is needed. Congressional hearings could accomplish this. Yes, I am sure there are many other examples of "GIFS horses" whose mouth should be more closely examined. But the SEC has the resources, properly applied, to do this. We, as investors, often don't, nor do we have the power to physically walk into the GIFS office and demand to see documents. And if the SEC doesn't already have the necessary power to perform this kind of prevention and scrutiny, then Congress needs to be made aware, and give them more authority over publicly owned cos.
My interest in recovering any of my investment is actually secondary to seeing that this kind of scam can't continue to be repeated by other crooks without consequences, and rapid intervention. Idealistic, yes, but that's me. I want to be able to rely on what I find at govt websites as valid. My tax dollars, just like yours, are paying for those websites as well as the people who create and maintain them. The SEC, by their failure to act on what they knew, OR SHOULD HAVE KNOWN, effectively became one of the prime players in accomplishing this scam. Knowingly or unknowingly, they gave their seal of approval to GIFS and the fraud they were perpetrating. I think it is noteworthy that the SEC only FINALLY acted two days after the state of Tennessee had already seized the company. By that time it was several million dollars and at least four months too late.
My known criticism, BTW, has undoubtedly erased any hope I ever had of finding a job with the SEC and thereby elevating my financial position to where I can at least pay my bills on time. I have spent ten years in the securities industry, and consider myself a knowledgable and experienced professional. With 40 years as an investor, and I was so badly conned, I cannot fault any innocent person who got caught up in this. My greed factor definitely kicked in, and I relied on news releases and email I received as honest and factual, since they were supported by the document at the SEC site. If the SEC is simply unable to move in a timely manner in similar cases due to their organization and/or charter, then I accept that in the case of GIFS. But then major change is needed so it does not continue to happen, as there will continue to be crooks on the internet preying on innocent and trusting investors.
tom w |
