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ARS Update: Jefferson County, Oppenheimer Holdings

Posted by Larry Doyle on November 15, 2011 7:33 PM |

This file photo shows a Jefferson County sewer manhole cover in Railroad Park in Birmingham, Ala. Leaders of Alabama's most populous county voted to file an estimated $4.1 billion bankruptcy. The world of Wall Street may go on but for many tens of thousands of investors their financial world has remained locked in place since February 2008 when the $330 billion auction-rate market froze like the tundra.

The pain of that reality remains fresh for so many who remain unable to access THEIR cash and receive real justice for THEIR emotional pain and anguish.

Wall Street certainly wishes that this ARS issue could or would just go away. 

The media at large has never truly invested the time nor the effort to fully outline the nature of the ARS scandal and its accompanying impact on the lives of so many.

Regrettably all too many of those investors still holding ARS feel they dare not speak in case it may negatively impact the return of THEIR money.

This is all so wrong on so many fronts.  In any event, in the course of conversations with people well informed and intimately involved in this mess, I was informed of the following:

1. The total volume of ARS which remains outstanding is approximately $120 billion. Yes, that is $120 BILLION with a B. These ARS are held by banks, institutional investors, our fellow American citizens, and investors overseas as well. Lives and businesses have been derailed if not worse in many cases.

2. A regular reader of Sense on Cents recently inquired about the impact of the Jefferson County, Alabama default on the value of ARS issued by that municipality. I was informed that those ARS, which had been trading at 70 cents on the dollar have declined in value and are now trading at 60 cents on the dollar.

Those holding the ARS do remain creditors of the county but what they may receive and how long they may have to wait through bankruptcy proceedings is anybody’s guess.  This default and the bankruptcy proceeding are truly added injuries to what has been the ultimate insult for those still holding Jefferson County ARS.

The fact remains, although the ARS were sold as cash surrogates, investors unknowingly have had significant credit risk throughout.

3. The crowd at Oppenheimer Holdings (not to be confused with Oppenheimer Funds) continues to stand out as being the most egregious in terms of investor treatment. Oppenheimer does have “good” company in the crowd at Pimco but in terms of investor outrage, Oppenheimer ‘takes the cake’.

Oppenheimer buys back its own stock and goes about its business with VERY little attention paid to its ARS clients which continue to hold many hundreds of millions of ARS sold to them through the Oppenheimer system.

In fact in its recently filed Form 10-Q, Oppenheimer highlights on page 53 of that document that it is committed to repurchasing a whopping $40.2 million ARS by end of 2016 of the $402 million ARS still held by its clients.

Wow. What balls!!

A commitment to  repurchase a whopping 10% over the next 5 years. At that rate, they will be done in a mere 50 years. Oppenheimers’ clients primarily hold auction rate preferreds issued by closed end funds for which there is NO maturity meaning these ARS may remain outstanding for a VERY long time. This is SO WRONG!!

Despite the fact that then New York AG Andrew Cuomo negotiated a ridiculously poor ARS settlement from the investors standpoint with Oppenheimer, who in the regulatory and political realms are truly going to hold Oppenheimer accountable.

The individuals and institutions holding ARS sold to them by Oppenheimer should be first in line in terms of receiving cash distributions.

Stock buybacks? Why would Oppenheimer do that instead of taking those funds and repurchasing ARS.

Are there any Oppenheimer clients out there who would like to offer an opinion or say anything to Oppenheimer’s CEO Albert Loewenthal? Yes, Loewenthal, the guy whom I have been told dumped his own personal holdings of ARS shortly before the market froze.

The fight continues. I strongly encourage those still enmeshed in this mess to contact your respective representatives from the NASAA. Keep banging the drum!!

Questions, comments, constructive criticisms encouraged and appreciated.

Larry Doyle

Related Commentary
Sense on Cents/Oppenheimer-ARS

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • coe

    To draw a sad parallel, Al Loewenthal might as well have raped these poor investors in the shower and persisted in this “investor abuse” for years – and the regulators/politicians/and even the press turn the other way in silent complicity…talk about NOT doing the right thing…it has been my considered opinion that buying back stock represents a concession by management that they have no vision, nothing to do with any capital investment, so they are conceding defeat…your point is well taken, LD, but why is it that they choose not to pay off the ARS holders? Because they don’t have to, that’s why!!! Never mind the implicit responsibility to make good on “cash substitute”…pathetic at the least/criminally negligent at worst…it’s no wonder why the financial “services” sector sure works to earn the negativity around reputation risk…keep on it, LD!

  • Dave

    what opco did to its clients is worse than anything Jerry Sandusky did to those boys. And no, comparting opco to alleged pedophiles is not a stretch. same with N.Y. regs, scum, scum, scum.

    my elderly mother is w.o food or medicinie thanks to oppenheimer and nobody gives a damn

  • Dave

    FYI – Larry I have contacted the head of the NASAA twice offering to assist with the pursuit of Oppenheimer and he did not give me the courtesy of a reply. You’ve been vocal in criticizing – correctly – the fompanies, but let’s also save some vitriol for NASAA which in many of our experiences is worthless.

    • LD


      Sorry to hear about your experience with the NASAA. I referenced them only because I believed they were productive in a few selected cases in certain states. I guess I was too naive in thinking that they might be helpful across other states as well.

      At this juncture, I believe nothing short of an all out public expose will be productive.

  • mikaele

    Nice work,
    I have contacted everyone and to read now that I won’t ever get my money back! UGGH! I guess they are in the right business. Patriotism thin as can be.

  • matt

    Terrible story about Dave’s mother!
    Bud Lowenthal, however,according to Yahoo Finance, pulled down $3.8MM in salary in 2010.The firm has expanded to Europe and Asia and continues to actively look to expand their branch network but there is no cash to pay these people!
    Some hope maystill lie in FINRA arbitrations where public customers won a siginificant ARS arbitration earlier this year!

    • Dave

      I think when you say “but there is no cash to pay these people” you are being sarcastic. Let the record note that.

      regarding FINRA arbitration – that’s only a recourse for those with millions frozen,. I contacted over 20 lawyers who specialize in going after brokerages and because I *only* had several hundred grand frozen nobody would handle my case. Not worth their time. One even laughed when I tried to explain about my mother, saying “Not pertinent, dude. The arbitration panel doesn’t give a #$%^ about Mama.” Also, there are reports that Oppenheimer alone, of all the brokerages, refuses to settle arbitration claims.

  • matt

    In May of this year a Finra panel in California found for a couple vs. Oppenheimer in an ARS case. The amount was around $400,000+ costs I believe. Check the FINRA website under Arbitration and Mediation.
    The tide may be turning.

    • Dave

      I saw that earlier this summer. It’s one case out of the dozens, maybe hundreds of Oppenheimer clients who’ve filed arb. There’s been nothing since. Not a good batting average.

  • Kathy

    If Opco can buy back its stock, then they can sell it again to get money to pay back the investors they defrauded.

    How $330 billion disappears in fraud without a peep, I will never understand.

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