Author Archives: Susan

Posted on by

SEC Boasts Record Wins but Powerful Execs Remain at Large

Top regulators at the Securities and Exchange Commission have been taking victory laps for having scored a record 755 enforcement cases in the fiscal year that ended September 30. Enforcement chief Andrew J. Ceresney said in a press release that the agency was holding wrongdoers accountable.

But it’s enlightening to see which wrongdoers he’s talking about, because the SEC has been under fire for wimping out when it comes to going after individuals.

In a telephone interview, Ceresney told me that 70 percent of the agency’s cases in 2014 were against individuals. Bet you didn’t know that. Dig deeper into the cases, though, and you find this result: Only 15 were against national or international institutions. Of those, only four named individuals.

Here’s my story for TheStreet.com.

Posted on by

Case “closed” on accounting problems at RCS Capital, but were problems fixed?

It was only three months ago that RCS Capital Corp. told shareholders in a quarterly report  that it was in the process of remediating “several significant deficiencies” in its internal control over financial reporting. Since then, shareholders have been told that all is well — sort of. But the company has not specifically told shareholders that the deficiencies have been addressed and solved.

RCS is the holding company for a collection of brokerage firms and other financial companies. One of them, J.P. Turner Associates, was purchased by RCS this year, and has a horrific history of customer complaints and regulatory action against executives at the top of the company. Here’s my story about Turner.

Along with its bad judgment in picking acquisition targets, RCS also has the baggage of having employed Brian S. Block as its CFO for most of 2013. Block is the guy who resigned under a cloud on Oct. 29 as CFO of American Realty Capital Properties Corp., which announced that he and another senior financial executive had intentionally covered up an accounting error. Both RCS and American Realty Capital Properties are controlled by real-estate mogul Nicholas Schorsch.

On that news, shares of both RCS and American Realty Capital Properties plunged.

Since then, RCS has said publicly that it hired a law firm and forensic accounting firm to examine the books for the first nine months of 2013. That was a period when Block was signing off on the financials. Michael Weil, CEO of RCS, said in a conference call with analysts on Nov. 13 “We consider the question of RCS Capital’s accounting integrity as closed.” But the forensic probe was limited. For example, it didn’t include an examination of emails.

RCS first flagged its accounting deficiencies in its March 31, 2014 quarterly report. It subsequently mentioned the deficiencies in filings on May 6 and May 29. Among other problems, it noted in the May 29 filing that its auditors had been given “multiple versions” of the company’s books and records.

In other words, seven months before Block resigned in the American Realty Capital Properties scandal, RCS was noting significant problems in its accounting during the period Block was its CFO. The company of course could have brought that up in its analyst call last week, and if it was all fixed, management could have said so.

Instead, RCS carved out a nine-month period, authorized a limited investigation, and declared that the issue was closed. To really close it, though, RCS needs to tell what it did about the deficiencies it mapped out in that May 29 filing, and why investors can be assured that problems like that won’t happen again.

RCS, by the way, declined to comment when I sent a detailed list of questions to its outside PR firm. Here’s the story I wrote about it for TheStreet.

Posted on by

DeMarse: Journalism Schools Over 70% Female, Newsrooms, 60% Male

Seventy percent of journalism school students are women, as are 76 percent of students in Columbia University’s prestigious Master of Arts in Journalism program. So what gives that in real-life newsrooms, 60 percent of the seats are filled by men?

I learned those statistics last night at the annual fundraising gala of The Knight-Bagehot Fellowship, a treasure of business journalism that’s been educating mid-career journalists for one-year stints at Columbia University for 39 years.

The keynote speaker was Elisabeth DeMarse, chairman, president and CEO of TheStreet, Inc. From her talk:

“So Columbia J School is doing its bit — it’s manufacturing a trained, credentialed pipeline of female talent. But we are out of synch. There is a gap in hiring and promotion. There is a gap in giving women and minorities a fair chance.”

And a call to action to younger men more prone to being gender- and color-blind:

“Please be leaders. Please hire and help and lift a hand outside of your image, outside of a narrow idea of clubhouse chemistry. After all, isn’t journalism about fairness and objectivity?”

I am not a neutral commentator on Elisabeth. I’m a journalism fellow at TheStreet Foundation and have known her since I joined Bloomberg News in 1995. (She worked for that guy who became mayor of New York City). So I’m biased. That said, consider the closing of her keynote address, and judge for yourself.

Here’s her closing on gender issues: Continue reading →

Posted on by

Brokers Countersue to Thwart Suits by Unhappy Investors

So your broker sold you some shoddy private placements and you sued? Brace yourself, because you might get sued back.

In The New York Times today, I told the story of investors who sued their brokers for selling them private placements that tanked only to be hit with a suit from the broker. The firms’ argument: That the customers signed indemnification agreements when they purchased the securities, and thus owe the firms money for legal fees and other costs.

“The investors make representations to buy these things” and have a legal obligation to be truthful, said Vincent D. Louwagie, a Minneapolis lawyer who represented the brokerage firm Berthel Fisher.

It’s tough to evaluate the cases when the firms win. If you do business with a brokerage firm, you are stuck in private arbitration, where nobody has to explain how they came up with a decision. Suffice it to say, though, that a lot of customers will get spooked when they find out they’re threatened with a countersuit after they already have lost money. You can read the story here.

Posted on by

Unfazed by Finra Charges, Seniors Still Swoon for David Lerner Pitch

Elderly investors are looking for yield. And elderly investors are suckers for a free meal. Put the two together and you’ve got a recipe for packing the grand ballroom of a Marriott hotel with 300 sixty- and seventy-somethings who are prime targets for a brokerage firm looking to peddle illiquid investments.

David Lerner Associates, a Syosset, N.Y.-based brokerage firm whose founder was barred from the securities business for a year in 2012, is still out there pitching seniors to break bread at a local hotel and hear the pitch for its investments.

I went to one of those dinners at a Marriott hotel in Trumbull, Conn. in June, and wrote about it in my column tonight for TheStreet Foundation. Prominent in the pitch that night was the firm’s non-traded real-estate investment trust, a highly illiquid investment that I sure wouldn’t want my elderly mom to buy.

What’s stunning is that investors trip over themselves to attend Lerner events despite the firm’s history. From my story:

Finra said in a complaint on May 27, 2011 that Lerner and his firm targeted many “unsophisticated and elderly” clients to sell illiquid non-traded real-estate investment trusts that were concentrated in the hotel industry. The firm used misleading marketing techniques to sell the REITs, Finra said. In the months after the complaint, Finra said Lerner sent letters to 50,000 customers in an attempt to “counter negative press.” And even those letters had “exaggerated, false or misleading statements,” according to an amended Finra complaint on Dec. 13, 2011. The $14 million in fines and restitution against the firm was Finra’s largest monetary sanction of 2012, said Michelle Ong, a Finra spokeswoman.

 

You can read the story here.

Posted on by

Can Goldman Sachs’ Women Make the Cut at ‘Extreme Jobs?’

Here’s the latest in the long-running battle between Goldman Sachs and the women who sued the firm in 2010 for gender discrimination:

Both sides in recent weeks have filed dozens of briefs and exhibits, mostly focused on the women’s request earlier this year that the court grant them class status so that they can represent 2,300 current and former associates and vice presidents who allegedly were discriminated against in pay and promotion policies. Among issues that have come up: Whether women at so-called “extreme jobs” like the ones at Goldman simply can’t cut it.

Goldman trotted out Michael A. Campion, a Purdue University management professor, to make the  case. While Campion testified that he did not have the data to draw a conclusion as to whether women make less because of the demands of an extreme job, he said it is “plausible” and that “it’s a consideration that’s not minor.” I talk about Campion’s theory in my column today for TheStreet Foundation.

Posted on by

Why Jordan Belfort’s ‘Sucker List’ Won’t Be Released to ‘Inside Edition’

The list of investors who got fleeced by convicted felon Jordan Belfort, aka “The Wolf of Wall Street,” would be gold in the hands of financial crooks, and that’s why a federal judge in Brooklyn told the producers of “Inside Edition” in June that he wouldn’t hand it over to them.

“It’s pretty well known in the fraud world that the best list to get is the list of people who have already been taken,” Doug Shadel, an expert on fraud schemes and the elderly at AARP, told me in an interview.

In my story for The New York Times DealBook last month, I looked at the ways that financial criminals find and fleece their victims. You can read the story here.

Posted on by

Goldman Sachs Doesn’t Want to Be Known as Misogynist ‘Vampire Squid’

On July 3, Goldman, Sachs & Co. submitted a 74-page memorandum of law and declarations of 27 Goldman Sachs witnesses to Judge James C. Francis of the U.S. District Court for the Southern District of New York and to three women who are suing the firm for gender discrimination.

So where are the documents?

The high-profile case of Cristina Chen-Oster et al. v. Goldman, Sachs & Co. et al. has been going on since Chen-Oster and two other former Goldman women sued in 2010. On July 1, the women’s lawyers filed a brief asking the court to certify them as a class. I wrote about the heavily redacted document in this story for TheStreet.

On July 3, Goldman filed its response. But 16 days later, it still is not on the court docket.

As it turns out, Goldman has been at work redacting that document over the past two weeks, and you can’t help but wonder what it is that the firm is so hellbent on keeping from the public. I raised that question in my latest column for TheStreet. You can read it here.

Posted on by

Goldman Sachs Women Say They Make Less Than Men Who Frequent Strip Clubs, Call Them ‘Bimbos’

Four years ago, a former Goldman Sachs & Co. executive and two of her former colleagues sued the firm, alleging sex discrimination and asking to be certified as a class.

Today, the women filed documents that added to an extensive dossier of allegations. Among the filings was a request that a judge in the Federal district court in Manhattan allow H. Christina Chen-Oster and her co-plaintiffs to proceed in their suit as a class representing a class of women who work — or worked — at the bank.

I wrote about the latest round of filings for TheStreet Foundation today. You can read my column here, but here are a few highlights:

There are the strip clubs. The guys who organize departmental golf games and don’t invite the women. The liberal use of the word “bimbo” to describe Goldman women, many of whom graduate from the same Ivy League schools the men do. And, of course, the very discouraging numbers about pay and promotion. But the biggest deal about Chen-Oster’s brief filed in U.S. District Court for the Southern District of New York court July 1 seeking class action status is the redactions. Because even when women and their lawyers fight bitter battles to get their hands on important documents that expose discrimination, companies always seem to find a way to keep the public from hearing about the worst stuff.

Brokerage firms put an immeasurable amount of energy into making sure the public never sees the real numbers on women, promotions, and compensation. And they get apoplectic  at the idea that the public might read allegations like that of former Goldman employee Shanna Orlich, who says she went to a holiday party in 2007 where a male managing director had hired women clad in “short black skirts, strapless tops, and Santa hats” to mingle with the Goldman men.

And yet, somehow, what started as a cluster of professional women at Goldman has mushroomed into a very important case.

Still, there’s much we don’t know.  Take a look at the latest filing and scroll through to see the thick black lines that keep you from hearing the whole story.

Posted on by

Finally, the Regulators Are Trying to Protect You. But It’s Nothing But Bad News for Investors

Finra, which is the outfit that Wall Street pays to regulate itself, is pushing hard on a proposal that it thinks will help nail bad guys on Wall Street.

It sounds great on the surface: Give arbitrators permission to refer a rogue to the director of enforcement even as an investor’s hearing is going on. You know, so we can catch people like Bernie Madoff, who was such a trusted name on Wall Street that he was chairman of the Nasdaq Stock Market.

As of now, arbitrators have to wait until a hearing is over before they can tell headquarters that a villain is on the loose. Finra wants to be able to get on the case ASAP.

Nice idea, if only it didn’t have the potential to wreak havoc on the arbitration hearing of the poor slob who’s in the middle of trying to get his or her case resolved. It’s yet another example of the nutty things that can happen when you bar investors from going to court, where you don’t have all the secrecy of arbitration and thus don’t have to jump through hoops to figure out ways to get the word out. Here’s my story published tonight on TheStreet.com.

Posted on by

Anworth Mortgage, Your Greed is Showing

“Do your homework” sounds like reasonable enough advice when you’re leafing through a personal finance magazine or listening to the babble of the talking heads on a financial show. But is it practical?

In my story today for TheStreet Foundation, I write about a publicly traded real-estate investment trust, Anworth Mortgage Asset Corp. Its shareholders will vote at the company’s annual meeting today to determine whether the current board will be ousted in favor of a group proposed by activist investor Arthur Lipson.

I’m not so interested in the pyrotechnics of the fight itself. I’m just wondering if there’s any way that a shareholder without a private investigator’s license could possibly understand the far-flung activities of Anworth management without quitting their day jobs. From my story:

A thorough vetting of the company’s officials would take an investor from Anworth’s standard filings with the Securities & Exchange Commission to a hodge-podge of regulatory documents that occasionally outline mishandling of investor money by stock brokers who worked for a brokerage firm controlled by the CEO.

We really ought to stop giving the public the impression that if they just took the time to read an annual report, or a prospectus, or whatever, that they can take control of their portfolio and stay on top of things.

It’s my first column as founding journalism fellow at TheStreet Foundation, and I’m looking forward to producing more. You can read the column here.

Posted on by

Antilla Gets Silurians Award for NY Times story on brokers

The Society of the Silurians said last week that my June 10, 2013 New York Times article “A Rise in Requests From Brokers to Wipe the Slate Clean” won first place in the Excellence in Journalism Awards competition in the Business/Financial journalism category.

From the press release:

“Her article highlighted the quiet attack by brokers on BrokerCheck, the Financial Industry Regulatory Authority database that theoretically is intended to protect investors from unscrupulous securities salesmen. Antilla discovered tremendous acceleration in efforts by brokers to have mentions of misconduct expunged from their records and an apparent willingness on the part of the regulators to go along. Her article prompted the regulatory group to review the proposed easing of expungements and to issue new guidelines to securities case arbitrators.”

You can read the article here.

Posted on by

New Evidence May Reopen Broker Fraud Case

You may recall the bizarre story of the Long Island stockbroker who hoodwinked the producers of the Broadway show “Rebecca” into thinking he’d lined up millions of dollars for the show. The producers put up $60,000 and the broker, Mark C. Hotton, put the money in his pocket.

It was a strange tale in many ways, not the least of which was that Hotton had been fleecing investors of millions of dollars for years before he wound up in headlines for picking up a paltry $60,000 from the show biz chumps.

I nearly choked when I read that Manhattan U.S. Attorney Preet Bharara had said in a press release that the FBI had uncovered Hotton’s misdeeds “with lightning speed” in 2012. Hotton had been fleecing people ever since he forged documents and bounced a $31,550 check to buy some used cars in 1990. That’s some pretty slow lightning.

In my story for The New York Times last week, I wrote about the latest twist in Hotton’s story. His former employer, Oppenheimer & Co., had been ordered by arbitrators to pay out only $2.5 million of the $5 million that a married couple had lost at Hotton’s hands. Then, six months later, their lawyer discovered evidence that the firm had held back a smoking gun. Read about it here.

 

Posted on by

Founding fellow, TheStreet Foundation

TheStreet Inc. announced last week that I will be the founding fellow at its newly formed foundation to support investigative journalism and promote financial literacy. It’s a wonderful opportunity for me to continue writing stories that hold financial institutions and regulators accountable when they neglect or abuse the public.

TheStreet Foundation is the brainchild of CEO Elisabeth Demarse, and will be run by Vanessa Soman, General Counsel at TheStreet. TheStreet’s Chief Investment Officer, Stephanie Link, is Chairman of the Board of the foundation.

“We are thrilled to name Susan Antilla as our Founding Fellow and to help her continue her insightful and impactful reporting,” Ms. Soman said in a press release. “Investigative journalism has become a thing of the past in many newsrooms, but The Street Foundation’s efforts will help keep original reporting alive and consumers informed.”

You can read the full press release here.

Posted on by

“Flash Boys” irritates Wall Street and even some finc’l journalists. (Two reasons to buy it.)

Best-selling author Michael Lewis (Liar’s Poker, The Big Short) has often irritated Wall Street with his readable inside takes on the goings-on of financial one-percenters. And with his latest best-seller, Flash Boys, he’s even getting under the skin of other financial writers, which I suppose makes sense since there isn’t a one of us who can come close to Lewis’s genius.

Flash Boys is Lewis’s book on high-frequency trading, a topic that, up until now, was impenetrable to the average reader. And that’s what’s so threatening to Wall Street: Grandma could read Flash Boys and get a handle on the downsides of the computer-driven trading that’s dominating the markets.

The book is mostly a look at HFT through the eyes of a Canadian trader who got tired of getting bad trade executions and pushed back against what he considered market manipulation.

But Lewis also writes about the bizarre case of a former Goldman Sachs computer programmer who got thrown into jail for taking HFT code with him when he left Goldman. That’s right — a computer nerd you’ve never heard of wound up in the slammer for taking high-frequency computer code from Wall Street, while Wall Street big shots who oversaw mortgage fraud and other disgraces that helped bring down the economy walk the streets. You can read my CNN.com column about Goldman and its former computer programmer here.

I reviewed Flash Boys in today’s San Francisco Chronicle. You can read my review here.

Posted on by

Not even the EEOC was allowed at this sex discrimination hearing

On Feb. 26, eight women who had sued Sterling Jewelers, Inc. were ushered into a private hearing room in midtown Manhattan with their lawyers, lawyers for Sterling, and an arbitrator. The door was shut behind them.

Like an increasing number of disputes between employees and employers, this one would be heard in a forum where the public and the press were forbidden.

I asked to attend the late February hearings on this sex discrimination case that could wind up including 44,000 women in 50 states, but the arbitrator declined my request. More important is that the Equal Employment Opportunity Commission – the agency in charge of enforcing federal civil rights laws – also asked, and also was declined. 

Joseph Sellers, a lawyer for the plaintiffs, said that the agency was told it could ask for a transcript, although no guarantee was made that it would receive one.

Sterling, based in Akron, Ohio, is parent of 12 jewelry chains in the U.S., including Jared the Galleria of Jewelry and Kay Jewelers.

The two sides presented their arguments for and against a motion to certify a class of women who’d worked in sales positions at Sterling since 2003. The women at the hearing, who would act as representatives of the class, say that Sterling discriminated against them in its pay and promotion policies.

The case, which I wrote about Saturday in The New York Times, includes examples of some of the worst sexual harassment allegations I’ve ever heard, and that includes the vulgar behavior I wrote about in my book “Tales From the Boom-Boom Room: The Landmark Legal Battles That Exposed Wall Street’s Shocking Culture of Sexual Harassment.”

Sterling says the allegations are “without merit.” Continue reading →

Posted on by

Wall Street Says It’s Classier Than “Wolf of Wall Street.” Really?

The depiction of stock brokers in that “Wolf of Wall Street” movie has the securities industry on the defensive. In my column today for Investopedia.com, I talk about how a faction that considers itself the “real” Wall Street is anxious to get the word out that it has no similarity to the thugs who appear in the movie with Leonardo DiCaprio.

Ask a pal at a Wall Street firm about the box-office hit The Wolf of Wall Street, and brace for one of those sour faces that suggests there’s a bad smell in the room. Those sex-obsessed, drug-taking thugs who ripped off investors in Martin Scorsese’s all-time, biggest-grossing film have nothing in common with the refined investment professionals who do business on real Wall Street, they will tell you.

But that’s not entirely true. The Wall Streeters who wear expensive suits and do business in Manhattan may not be tossing midgets around the trading room, as the perhaps less genteel Long Island brokers in the movie did. They aren’t above hurting investors, though.

“If people understood the similarities between Belfort and Wall Street, there would be a riot in this country,” says Dennis Kelleher, CEO of the investor advocacy group Better Markets Inc. Kelleher explains, for example, that Belfort’s operation dealt in barely-regulated penny stocks that came with either skimpy information or documents that twisted or obfuscated the facts. On conventional Wall Street, says Kelleher, firms bask in the convenience of the opaque, too, trading the kinds of over-the-counter derivatives that helped crash the economy in 2008.

Here’s a link to the story.