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Calling All Auction-Rate Holders: OPEN FORUM

Posted by Larry Doyle on January 17, 2013 8:57 AM |

We are now less than one month away from the five year anniversary of what I believe is the greatest fraud ever perpetrated on Wall Street. Regular readers know I am referencing the ARS (auction-rate securities) tragic debacle. I have been remiss in not addressing this situation for more than a few months and apologize for that.

Some past holders may wonder, “Is the ARS pain ongoing?” Indeed it is. Tens of billions of ARS remain outstanding. Some individuals and institutions still trapped in the painful ARS predicament may wonder if anybody even still cares about their plight. We do. Not only investors, but ARS issuers as well were ensnared by the Wall Street ARS trap and continue to experience very real pain in the process.

I broach this topic once again thanks to a reader who shared the following story about a communications firm entangled in the ARS mess the other day: 

ClearOne Inc. (CLRO) said it has received mixed results from a dispute concerning auction rate securities sold to it by Morgan Stanley & Co. Inc. (MS) and UBS Financial Services Inc. (UBS).

A panel denied its claims against Morgan Stanley, however under a separate panel, ClearOne settled its dispute with UBS for $45 million, effective Dec. 10, 2012.

“We are pleased the litigation surrounding auction rate securities has been settled in favor of ClearOne,” ClearOne Chief Executive Zee Hakimoglu said. “We will carefully evaluate over time, opportunities available to us and use the cash for selective infusions of technology, sales & marketing, infrastructure, and other investments to fuel our growth, as well as acquisitions that may strategically fit our business and are accretive to our performance.”

Almost five years have passed and people are still “fighting” with mixed results for a return of THEIR cash. Think of the lost opportunities for individuals and institutions alike to put THEIR cash to work. Think of the needs that have gone unmet and unfulfilled because individuals and institutions remain unable to access THEIR cash.

I would very much like to hear from people who were or still are entangled in the ARS fiasco.

How are you doing?

There is clearly strength in numbers and real value in learning from others who have gone down the ARS road to hell and returned to tell about it.

I recall one ARS holder who shared with me words to the effect that in regard to regulators or others charged with investor protection, “They have forgotten about me.”

Not quite two years ago, I had written a chilling commentary, Auction Rate Comments Reflect Real Pain, and shared numerous comments that had previously been left here at the blog. One ARS holder named John C. had written:

I am right there with you; stuck and feeling powerless. I called my Raymond James FA on Friday and he insulted and embarrassed me in front of my employee. I reported the incident to his boss and got better treatment but of course no results or any promise of recovery. They continue to maintain there arrogant position. I am seriously considering arbitration but will start by filing complaints with every regulatory agency I can. I am so emotionally drained from this ordeal that I turned the file over to my part time Admin Assistant for help. I am truly at my wits end.

To ARS holders everywhere, I still care.

Please write and update us as to your situation, stories, and feelings about the ARS fraud.

Thank you.

Sense on Cents/Auction-Rate Securities

Larry Doyle

Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no 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 so that investor confidence and investor protection can be achieved.

  • mikaele

    Still waiting on Opp to give the remainder of my money back. Sold on the secondary because 96 % of all I am was in those things that was a cash/floater account which had its own checkbook. Liars! Our Hawaii investigators tone lets me know I will never get that money back. Cuomo deal says I am @ the back of the line. You know the rate they are paying back.
    Mahalo for your efforts!!

  • Matt

    Larry,

    Just in case you haven’t seen it yet, Finra decided against OpCo to the
    tune of $30MM in an ARS case.

    The ice may finally be breaking beneath Bud Lowenthal’s feet!

  • LD

    Matt,

    Thanks for sharing this news. I just looked up the case and saw this review at Yahoo News,

    News on Oppenheimer Holdings

    I see that US Airways was looking for $140 million down from $250mm. Not knowing how much aof a loss it incurred when they sold their ARS, I am not sure if this $30 million settlement would be construed as a win, loss, or tie.

    That said, 30 is certainly better than zero and it also highlights the fact that almost 5 years from the day when the ARS market failed in Feb 2008, this nightmare continues.

    Thanks again for sharing it.

    • Matt

      LD,

      I think this is a good portion of the unredeemed position. In addition, it looks as though OpCo spent $8MM+ in legal fees to defend this. It might have been cheaper to try to settle rather than fight to the bitter end.
      The important point, though, is US Airways is by all measurements an “accredited” institutional investor which has always been a higher hurdle for claimants to clear. This may be good news for Mom and Pop investors who typically have a better claim of relying on the their broker’s advice.






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