|
| |||
|
Official indignation spurred by corporate chicanery mostly a lot of grandstanding | |||
|
By DAVID MOON, Moon Capital
Management In 1979, the University of Tennessee football squad suffered an embarrassing homecoming defeat at the hands of the Scarlet Knights of Rutgers. If sports talk radio shows had been around, hosts would have called for the heads of UT coaches, players and administrators. The Vols finished the season with a dismal 7-5 record. A win over Rutgers ' in any fashion - would have been welcome manna to all of the Vol faithful. An ugly 35 to 14 UT victory over Rutgers in 2002, however, is cause for concern and discontent among the 103,000 at Neyland Stadium and dozens others watching on pay-per-view. Isn't it amazing the difference made by a little change in perspective and expectations? I think about that often as I read the daily tales of scandal and outrage from Wall Street. High-profile analysts are now being criminally investigated for issuing research reports containing conclusions and recommendations influenced by the investment banking fees (or prospective fees) generated by the subjects of the supposed unbiased reports. This is news? Hardly. This practice is as old as Wall Street itself. For twenty years of a bull stock market, no one cared that research analysts were really just extensions of a brokerage firm's marketing arm. As long as stock prices were going up, there were no congressional inquiries, no state attorneys general investigations and no FBI press conferences. It is tempting to call the relationship between investment banking and research 'Wall Street's dirty little secret,' but that isn't an accurate term. It never has been a secret. It was a given. But with the smell of blood in the water, regulators, legislators and financial masturbators all want to claim some type of victory for the average investor. If that is actually true, where were these public watchdogs five or ten years ago? How about ten months ago? Regulators are investigating whether or not CS First Boston allocated shares of hot initial public offerings (IPOs) to people with whom it wanted to curry favor. Business Week magazine calls the investigation one of a "Pandora's box of potentially ruinous scandals." Maybe these regulators can also investigate and figure out who killed Nicole Brown Simpson. Just as certain as you are of the identity of Ms. Brown's murderer, I know the answer to the $64,000 IPO question: of course CS First Boston gave its prized clients and would-be clients shares of hot IPOs, virtually guaranteeing those lucky few an easy and risk-free profit. Since the first stone mason invited Rome's leading architect to be his guest at a leisurely afternoon of watching lions eat Christians, businessmen have used whatever advantage and tools they have to gain favor with their customers. Shares of an IPO are no different than tickets to the World Series. Does that make it morally right? No. But it doesn't make it wrong, either. And it doesn't make it illegal. But it certainly shouldn't be a surprise to anyone, much less smart people with law degrees who live in the middle of the world's financial capital. Do not misinterpret any of these observations as justification of the many illegal and immoral deeds perpetrated by corporate executives of which we are only now learning. There are a bunch of people who need to go to jail ' directly to jail - without passing 'Go' or collecting another $200 million. Corporate executives who treated public company coffers as their private piggy bank. Bankers, brokers and auditors who conspired to hide those actions from shareholders. But much of what is currently masquerading as investor protection and stiff regulatory action is nothing more than public official grandstanding. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
|
