Daily Blog - Tiger Software

                              July 28, 2007 (A)
Who's Guarding The Investors' Hen House?

Answer 2/5/2009  NO ONE AT THE SEC
Video: Rep. Gary Ackerman slams the SEC

  New SEC Chairman Cox and Investor Protection

>>> The Case of Sam Waksal, Imclone's Convicted CEO - 7/4/2007

   William Schmidt,     - Tiger Software's Creator
   (C) 2007 William Schmidt, Ph. D.  - All Rights Reserved. 

   No reproductions of this blog or quoting from it
   without explicit written consent by its author is permitted.

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   to william_schmidt@hotmail.com

    People have asked me to write a Daily Blog.   They seem to want
    me to give them a thought or two each day.  About what?    Well,
    we'll just have to wait and see.  As, I see it, a blog is a personal
    statement.  I will try to make it entertaining and relate it mostly to the
    stock market. 

   I do promise not to belabor the obvious. So, I hope these thoughts,
   reflections and finds are worth your time.  I will give you my best

   As it fills up, it will be organized by month and topic  
   Look for something new most every day.  If you find
   it helpful, buy something from us.  You'll be glad you did.
   Tiger could easily be one the best investments you ever made. 


   Back to Home Page - www.tigersoft.com


               Thursday - June 28, 2007     - Who's Guarding The Investors' Hen House?

New SEC Chairman Cox and Investor Protection

The issue of a toothless, for show only,  Securities and Exchange Commission will
      not go away.  On the one hand, Wall Street's crooks are always busy finding new ways
     to rig stocks and fleece investors.  On the other hand, the SEC is charged with protecting 
     investors and keeping the playing field fair.  But it's an uneven battle.  Those on the inside have all
     the advantages, especially if the SEC is understaffed and lacks the will and muscle to
     protect investors.  I have focused www.tigersoftware.com on this imbalance.
I always
     come back to the notion that investors have to look affter their own interests.
And one of
     the very best is to use Tiger Software's Accumulation Index
and also Joe Granville's OBV
     Line.  Let the market tell its own story.  We can usually spot insider selling, long before it is reported.

             I read with interest how the new SEC Chairman's style and priorities are becoming
      clear after being appointed a year ago.  When his appointment was announced, the LA Times
      ran an article by Michael Hiltzik on June 9, 2005 with the headline                          

           Cox's Past Ties to Con Man Raise Questions

              "In the halls of Congress, Rep. Christopher Cox (R-Newport Beach), who has just been
       nominated to be the nation's top securities regulator, stands out for his intelligence.

              "When it comes to the work he performed as a lawyer for one of the state's most notorious
      con men, however, he pleads ignorance.  Apparently he was unaware that William E. Cooper
      was a crook or that his company, First Pension Corp., was a fraud. In 1985, when Cox assured
      state securities regulators that a new Cooper investment scheme would be "low risk" and an absolute
      boon to small investors trying to save for retirement, he was apparently unaware that the scheme
     was really designed to hide the losses already incurred by Cooper's investors and to keep the scam
     alive. In 1991, when Cooper hosted a fundraiser for Cox at his Villa Park home, Cox thought of him
     as merely "an upstanding member of the community.
            "A few years after that, the fraud finally exposed, Cooper and two partners went to jail.  And now,
     Cox has been nominated by President Bush as chairman of the Securities and Exchange Commission."

      Back in 1995, as a Congressman, Christopher Cox had authored a bill which became the
     Private Securities Litigation Reform Act of 1995. This changed the long-standing Securities Exchange Act
     of 1934.  It required a plaintiff to identify in his complaint  each Insider statement which is alleged to have
     been misleading.  Seems reasonable.
            Most important, Cox's legislation required the shareholder-plaintiff to prove that the Insider knew
     the challenged statement was false at the time.
  This is important because shareholders often do not
     have access to proof of what the state of mind was of the Insider.  Again quoting from wikopedia.com, 
     "This requirement allows defendants to obtain dismissal of cases where the plaintiff merely points to a
     false statement and declares that the defendant "must have known"  that the statement was false,
     based upon his position within the company.
This requirement has frequently proven difficult for plaintiffs
     to overcome because, without the benefit of discovery, plaintiffs often do not have access to witnesses or
     documents that might prove the defendant's state of mind in making the false statement
."  Critics called
     this piece of legislation, the "Ken Lay Protection Act".

                                                Background:  The 1934 Securities legislation:
                                            (quoting now from wikepdia.com) "gives shareholders the right to bring a private action in
                                            federal court to recover damages the shareholder sustained as a result of securities fraud.
                                            To make a such case against an insider, the Supreme Court as ruled that the:
                                                      1.     The defendant made a "material misrepresentation or omission";
                                                      2.     The defendant intended to make the material misrepresentation/omission,
                                                            or acted with recklessness in making the misrepresentation/omission);
                                                     3.     The material misrepresentation/omission was made "in connection with the purchase or
                                                            sale of a security";
                                                     4.     The plaintiff who was allegedly victimized by the fraud relied upon the material
                                                     5.    The plaintiff suffered an economic loss as a result of the alleged fraud; and
                                                     6.    The plaintiff can allege and prove "loss causation," which means that the allegedly
                                               fraudulent misrepresentation or omission caused the plaintiff's economic loss.
                                                See Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005).

               Yesterday, CNN reported that the new SEC Chairman had appeared before the House of
         Representative's Financial Services Committee, chaired by Massachusetts Barney Frank 
         wpe1F.jpg (6061 bytes)     To the surprise of his critics, the hearing was not heated
         or contentious.  But what did emerge was that the SEC had voted to support investors in a
         Supreme Court case that could determine liability for Enron's "secondary actors," but after
         talking to President Bush, Cox discouraged the SEC and the Solicitor General from acting
         as a "friend of the court" (amicus curiae) and siding with the investors.  President Bush stated
         it would be better for business and the economy if the SEC regulated insiders, rather than
         letting independent lawyers do it through investors' law suits.
         (http://www.cfo.com/article.cfm/9333431?f=related&x=1 ) 

                 The SEC has sued " secondary actors for  helping Enron to misrepresent its financial health
          before its collapse in 2001.    As of February, 2007, the SEC has collected $440 million from
          settlements and enforcement actions against individuals and business partners (including some
          banks) that it accused of participating in Enron's fraudulent activities. The
SEC has not yet
         announced a distribution plan for the funds!
. (Sarah Johnson, www.cfo.com - June 13, 2007).
         See http://www.washingtonpost.com/wp-dyn/content/article/2007/06/13/AR2007061302124.html    


        It's Very Risky To Trust Most CEO's. 
       Trust TigerSoft To Reveal The Truth about What They Are Doing with Their Own Money!

         The 2001-2002   Decline of Imclone shows how irresponsible and selfish
          insiders can be.

ImClone's Sam Waksal Pleads Guilty

wpe1E.jpg (61170 bytes)

NEW YORK, Oct. 15--Samuel Waksal, founder and former chief executive of ImClone Systems Inc.,
                pleaded guilty to six criminal charges this morning in the insider-trading case that has
                ensnared lifestyle guru Martha Stewart.

Waksal, who resigned from the New York-based biotechnology company earlier this year amid
growing controversy, pleaded guilty in federal court to charges of securities fraud, perjury, bank
fraud and obstruction of justice. The charges carry a maximum prison sentence of 65 years.

"I am aware that my conduct, while I was in possession of material non-public information,
was wrong," Waksal told the judge.

Waksal had been charged with 13 counts on June 12. It was not immediately clear if the
remaining charges would be taken to trial, but prosecutors said there had not been a plea
agreement leading to Waksal's actions today.

Waksal has been negotiating with prosecutors for weeks to try to secure a lighter sentence
and to protect family members who have also been targeted in the probe.

Prosecutors have been discussing whether to bring charges against Waksal's father, Jack,
and his daughter Aliza. They are accused of selling about $10 million worth of ImClone shares
after being tipped off by Samuel Waksal about impending bad news about the ImClone's main
product, the cancer-fighting drug Erbitux. Stewart, a close friend of Samuel Waksal's, sold
nearly 4,000 shares of ImClone, worth about $230,000.

The questionable stock sales took place just before the firm announced late last year that the
Food and Drug Administration had rejected an initial application to approve Erbitux, a drug that
showed early promise in treating colorectal cancer. ImClone shares, already dropping, began a
steep decline after the Erbitux announcement. Stewart has said she sold because she had a prearranged
agreement to liquidate her ImClone holdings when the share priced dropped below $60, as it did on
Dec. 27, the day of her sale. ImClone announced the FDA decision Dec. 28.

But Merrill Lynch, the brokerage firm that handled Stewart's trade, turned up no solid evidence
of such an agreement in an internal investigation. And an assistant to Stewart's Merrill Lynch
broker pleaded guilty early this month to helping concoct the story of the "stop-loss" agreement.
The assistant, Douglas Faneuil, told a judge that the Merrill broker, Peter Bacanovic, gave him
extra vacation and an airline ticket to mislead Securities and Exchange Commission and FBI
investigators about what he knew.

Legal experts have said Faneuil's plea would put pressure on Bacanovic to cooperate in the
ImClone investigation. Neither Bacanovic nor Stewart has been charged with any crime.
Prosecutors are said to be considering charges of both insider trading and obstruction of
justice against Stewart, chief executive of Martha Stewart Living Omnimedia Inc.
An attorney for Stewart could not be reached for comment regarding Waksal's anticipated guilty
plea. Shares in Stewart's company have suffered badly under months of tabloid headlines surrounding
her ImClone trade.

In August, Waksal, a New York socialite long known for his lavish parties and famous friends,
pleaded not guilty to multiple counts of securities and bank fraud.

The bank-fraud charge alleges that he used ImClone shares he no longer controlled to secure
$44 million in loans from Bank of America. That charge, the most serious of the 13 counts a
gainst Waksal, carries a maximum sentence of 30 years in prison. He also is charged with
obstruction of justice and a handful of other offenses.

Prosecutors allege that two Waksal family members, identified by sources as his father and
daughter, started quickly selling their ImClone shares in late December after Samuel Waksal
alerted them to the impending bad news. Waksal also allegedly attempted to sell $5 million
of his own ImClone shares through a family member's account but had the sales refused by
brokers who cited a company ban on insider sales.

A source familiar with the case said recently that prosecutors had been negotiating a plea
arrangement with Waksal's attorneys. Talks broke down, the source said, when the two
sides could not agree on the size of a fine or the length of a prison term.

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