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Oppenheimer ARS Investor Rails on NY AG Cuomo re: OPCO-ARS Settlement

Posted by Larry Doyle on March 3, 2010 5:15 PM |

How often do politicians declare victory while innocent victims remain baffled, bewildered, and befuddled as they hang onto the pangs of defeat? How often do politicians look to score political points while not delivering real progress let alone justice for those victimized by fraud? Regrettably, this dynamic plays out all too often.

I witness it in a letter sent today by an innocent investor victimized by the fraudulent distribution of auction-rate securities by Oppenheimer Holdings. This investor who remains nameless for obvious reasons shares his pain and anguish in a letter sent to New York Attorney General Andrew Cuomo’s office.

Feel his pain and know that Cuomo’s settlement and victory lap are not even a drop in the bucket of the remaining $150 billion frozen ARS market. Two years have passed since the ARS market froze. For many investors, their lives and well beings froze right along with it.

Who within our political circles, our financial regulatory framework, our media are truly willing to stand up for all these victims?

The money frozen in these ARS investments does not belong to Oppenheimer or any of the other banks or managers. The fraud in the distribution process is now nothing more than an ongoing theft. I humbly submit:

Mr. Sangeap,

There seems to be a large disconnect between N.Y. state’s reaction to your settlement with Oppenheimer over auction rate securities and that of Oppenheimer auction rate clients. While in public statements Mr. Cuomo said it was a good settlement and that “this should restore investor confidence” I can tell you that amongst the 20 or so Opco ARPS clients I’m in touch with there is  huge disappointment in the settlement. Perhaps you can say something or point something out to address the sentiment that this settlement is sorely lacking. Maybe we have not been given enough info.

Considering that many of the most put off are N.Y. residents, you may want to address some of these points:

1) While every other state settlement has required the firm to buy back 100%, N.Y.’s deal with Opco calls for an initial buyback of approximately 5%, or, zero to those with over $1 million. How is that not terrible?

2) Unlike every other settlement thus far – about 25 between you and Massachusetts – this is the only one with no provision for those who sold on the secondary market. Why?

3) Cuomo calls this “an important first step.” When can we expect the second step? Will it be larger? At the current re-payment rate, Oppenheimer will redeem all client shares in about 27 years. Up till now, the longest any firm has been given is 18 months. You would surely agree that when the most any other firm is given is 18 months, that 27 years seems a bit long. Considering many of those clients Opco sold this garbage to are seniors and will be dead in 27 years, this strikes me as hollow and insensitive.

Regarding those seniors Opco sold this to – it seems that Oppenheimer had a strategy much like a pack of lions stalking wild elk – to pick off the weakest of the herd. In Oppenheimer’s case, the weakest were their elderly, naive senior clients, who hold ARS in disproportional numbers. What do you say to these senior citizens on fixed incomes, many in New York, who feel they’ve been victimized a second time by your office?

I know of two Oppenheimer clients – one worth about $50,000, the other $200,000 – whose Opco broker took their entire modest nest eggs and put it in auction rates. Do you have any reassuring words to them, that these folks of modest means won’t have to wait 27 years for the return of their money, while Oppenheimer continues on with business as usual, hiring new employees and opening new offices, both of which they’ve done recently.

4) The threat to use the Martin Act seems idle. What, specificially, does Oppenheimer have to do to get this thrown at them? Is the criteria spelled out somewhere?

Sincerely,

Fraud is fraud. Theft is theft.

America is supposed to be better than this.

LD

  • phil trupp

    Everyone by now understands that Oppenheimer is gaming the system. It is bewildering that AG Cuomo allows this to continue, especially given his past record of solid ARS settlements. Let’s hope six months from now he pulls out the ultimate weapon–the Martin Act–forcing the holdout brokerage to do the right thing.

  • E*Trade ARPS Victim

    I believe this investor hit the nail on the head. I would also like to point out that Mr. Cuomo’s initial settlements with the very firms which underwrote this toxic crap and took it to market (UBS, Merrill Lynch, etc) have put those left behind in even more dire straights than if he had done nothing at all.

    You see, the always political minded Cuomo, in his haste to extract a settlement, ANY settlement, which he could then triumphantly waive in front of the cameras, agreed to a horrible deal. The underwriters offered to buy back 100% of the ARPS from ONLY their respective clients, not what they actually underwrote.

    This would certainly not be accepted by Cuomo as any person of even average intelligence would see right through this silly offer. If accepted, this settlement would only cover a tiny fraction of the total number of defrauded investors. After all, the underwriters took ALL this garbage to the market and would only be liable for buying back a small portion. And, even worse, this settlement would totally place those investors left out in a no man’s land where no company takes resposibility. It’s a never ending cycle of finger pointing by the underwriters, the brokers and the closed end funds who are actually holding and using our money to this day.

    But Cuomo did accept the settlement and prompty called for a press conference.

    Now, those left

    • NOT GONNA TAKE IT ANYMORE!

      HERE IS AN ‘INSIDE’ EMAIL ADDRESS TO FINRA OMBUDSMAN OFFICE

      Ombudsman’s Office

      USE IT, THEY SAY THEY WANT FEED-BACK

      I HAVE GIVEN THEM PLENTY

  • lily

    It seems to me Oppenheimer and the financial advisors that targeted naieve investors and senior citizens into the ARS should be arrested for fraud and theft. There bank accounts should be frozen and their licenses revoked for life. Everyone that was conned by these firms deserve to have every penny back and I cannot believe how pathetic this latest redemption is. One share per account. Where is the justice.

  • anonymous

    I agree completely with the above letter. My unborn grandchildren might see this ARS money from Oppenheimer. This is not a settlement it’s a sell out. Cuomo is far more interested in the health and financial well being of Oppenheimer then the 1,246 victims who suffer from Oppenheimers misrepresentation in selling them auction rate securities. That’s including the residents of his state who he is supposed to protect.
    Cuomo and AG of Mass.Galvin set a new standard of acceptable behavior for CEO’s across the country.
    Galvin said. He will enter a cease-and- desist order and findings against Oppenheimer “for dishonest and unethical conduct and failing to reasonably supervise its agents regarding the firm’s marketing and sale of auction-rate securities,” he said.“Oppenheimer significantly misrepresented not only the nature of ARS, but also the overall stability and health of the ARS market when marketing the product to clients,” Galvin wrote in the administrative complaint. “Oppenheimer executives and ARS department personnel sold their own ARS as they learned that the market was in danger of imploding.”The executives didn’t disclose that information to investors, Galvin said. Oppenheimer Chief Executive Officer Albert “Bud” Lowenthal sold $1.78 million of his own auction-rate holdings between Jan. 29, 2008, and Feb. 12, 2008, according to the complaint.
    Cuomo actually believes that his settlement will help restore investor confidence. Every CEO in the country must be celebrating this one. Insider trading, no problem. Responsibility for broker behavior, not anymore. Dishonest and unethical behavior, no issue here.
    Oppenheimer has a whole year to give $31 million back to the people they misrepresented auction rate securities to. This is after they have held this money for 2 years. So after 3 years Oppenheimer will still be holding $929,000,000.00 of auction rate securities they misrepresented the sale of. Then every 6 months after that Cuomo will check to see if they have any extra money to give us. Of course the company described above will be diligent about watching their spending, honest, and won’t over due their bonus’s etc to make sure they have a little extra for us. I feel like I’m being punished for something I did to Oppenheimer. What Oppenheimer did to us is despicable, from the words of Galvin himself. What Cuomo did is worse.

    • Dave

      agreed. except they don’t have a year to give back the 31 million. it’s 5 days from when you accept the offer.
      Still, the bottom line is oppenheimer is organized crime. if you’re thinking of investing with oppenheimer DO NOT. There are many other firms with more integrity.

  • jimmy

    This is a travesty. Why on earth would anyone EVER invest with Oppenheimer if this is how they treat their clients?

  • Kathy

    How can anyone call this settlement fair? These victims have been deprived of their money for over two years, and now they get pennies, because Oppenheimer says it doesn’t have the money? Let Oppenheimer go out of business. Strip the owner of his savings, the way he stripped his victims of theirs.

    And let’s focus on the FUNDS. BlackRock. Pimco. VanKampen. These firms profit off ARS victims’ money EVERY DAY, and they have gotten away without any prosecution, no bad press.

    Well, here’s some bad press: Pimco, BlackRock, VanKampen, you are parties to fraud. REFINANCE ARS NOW.

  • ADVENT CLAYMORE IS POND SCUM

    THEY HANG UP ON ME ON THE PHONE, NEVER ANSWER EVEN CERTIFIED MAIL, REFUSE TO DISCUSS ANY REDEMPTION PLAN.
    SAY THEY HAVE NO REQUIREMENT TO PROVIDE A PROSPECTUS ON THE AUCTION RATE TRASH THEY WONT REDEEM. USING MONEY AT 1% . THEY ARE IMMORAL AND THIEVES LIKE ALL THE OTHER IN MY OPINION.
    RUN, DON’T WALK FROM CLAYMORE FUNDS.

    ALL THIS PROVES IS THAT WALL STREET AND THE BANKS AND CEFS ARE SO LOW ON CASH OR HAVE NONE THAT A MASS REDEMPTION WOULD TRIGGER A REAL DEPRESSION.
    That is my theory and why the govtmnt ignores it. It would put 90% of the USA financial thieves out of business with a CERRADO sign on the door.
    THEY ARE PART OF THE PACK OF WOLVES THAT STOLE FROM US.

  • john w

    A day before that settlement, Oppenheimer reached terms with New York Attorney General Andrew Cuomo, promising to provide $31 million in liquidity to some auction-rate shareholders. Cuomo’s office called it a first step, noting that the face value of customers’ frozen securities “exceeds the resources” Oppenheimer can pledge for a buy-back under regulatory requirements. Oppenheimer committed to additional buy-back offers if and when it obtains additional capital or access to credit, it said.

    I’LL JUST TELL MY CREDITORS THAT MY CREDIT CARD BALANCE EXCEEDS MY RESOURCES TO PAY THEM BACK

  • Mikaele

    Oppenheimer put over 95% of all we had in this. If I had not sold on the secondary we would be on the streets. But now, because we sold we are not included in getting back @ par.
    Just think, if we were on the streets and someone came to us and said,
    Boom, heres 25k! That would be awesome.
    Thanks Cuomo, and sorry to bother you.
    Mikaele

  • jim

    Hopefully this is not the direction we are heading in settling ARS cases – AG Cuomo needs to go for full redemption of all outstanding ARS just as he did earlier with the major players. Over two years without final resolution is unacceptable. What about Raymond James – they are missing in all mentions about settlements! Pimco is one of the worst offenders. They should all be forced to make ARS investors whole NOW.

    • john w

      No kidding , that exit to an alimentary canal… Bill Gross of Pimpco gets on CNBC with all of his blather, why dont those whores at CNBC ever ask him about the Auction Rates his crappy firm fraudulently sold its customers… its all one big cluster frock, imo






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