Monday, October 13, 2014

Larry Pressler Is Just Plain Stupid

     How Pressler could have gotten involved--as a Director, no less--with a guy named Ross Mandell and his company Sky Capital is a symptom of more than just bad judgement.  It's plain stupidity.  Mandell last Spring was sentenced to 12 years in federal prison for securities fraud.  A long story about this just came out in Buzzfeed, but here's my take on the whole thing--and remember that this comes from the perspective of a long time securities trader and broker (see my bio on the right for a recap):
     1)  Mandell and his brokerage firm were known to me and everybody else in the trade as a pack of scoundrels decades ago, when they were kicked off the New York Stock Exchange.  That occurred back in 1995.  Mandell blamed it all on substance abuse, a not untypical dodge for low-character individuals who also happen to snort cocaine.  The formal reason for his suspension?  Unauthorized trades.  From my floor trading background at the Chicago Board Options Exchange I'd guess that he was putting in trades for customers--generating hefty commissions as a result--without telling the customers about them.  This is scumminess de la scumminess in that business, mainly because it's usually perpetrated on the "widows and orphans" class of customers who have money, don't know how to manage it, and entrust it to smooth talkers like Mandell and his ilk.
     2)  Resurfacing in '02, Sky Capital went public on the London Alternative Investment Market.  AIM  definitely has its place as a venue for start-up, low-capitalized firms to search out investors willing to take hefty risks on unknown but promising ventures.  By its nature, AIM has fewer rules and easier financial requirements than its stodgier big brother, The London Stock Exchange.  That Mandell found good reason to migrate to the loosely-regulated AIM after his bad reputation got around in New York makes sense.  That his firm stopped trading after 4 years is no surprise.  That his fraudulent activities on AIM are among the charges that recently got him busted and convicted seems consistent with the rest of his "career."
    3)  What makes no sense to me is how Larry Pressler, given Mandell and Sky Capital's long history of financial debauchery, could have chosen to sit on the board of Sky Capital from 2004-2006.  I mean, it was pretty clearly established by that point that Mandell was a scoundrel, if not by the criminal justice system certainly by the word-around-the-street court of professional opinion.  Pressler even knew about Mandell's history when he joined the board, but rather lamely tells Buzzfeed that he thought Mandell "was a changed man."  In '05, Pressler told Forbes (which characterized Pressler as not just a board member, but as an advisor--and not just as an advisor, but as one of Mandell's "closest advisors") that even though Mandell had had his troubles in the '90s, he "believes in second chances" and that Mandell was "honest and good."  Pressler, like so many other of Mandell's victims, got conned.
     I admire Pressler's trusting nature, but certainly have to condemn his judgement, not just of Mandell but of how his association with Mandell could create such a serious public relations problem for a high-visibility person like himself.  On balance, Pressler is the sap that Mandell thought he was. Pressler's decision to identify with Sky Capital was stupid from its inception.
 

8 comments:

  1. Well John, I kind of resent your comment, " This is scumminess de la scumminess in that business, mainly because it's usually perpetrated on the "widows and orphans" class of customers who have money, don't know how to manage it, and entrust it to smooth talkers like Mandell and his ilk."

    I am neither a widow or an orphan, but I got scammed by two different reputable brokerage firms in the mid part of the first decade of this century. Our US Senator Tim Johnson, joined with the Clinton administration to repeal Glass Steagall, and a lot of us unsuspecting citizens were bilked by people just like you are describing. To my knowledge no brokers and no bankers went to prison. If they had there would not be enough room in the prisons of this country to house them all.

    ReplyDelete
    Replies
    1. Lanny, were the brokers making trades that you never authorized? If so, you may be able to get some relief, though I'm not sure about a statute of limitations. A lot of people got scammed on a systemic level--being told that securities were a good buy because rating agencies like S & P and Moody's deemed them so. Ugly as that was, it really was a different animal from making unauthorized trades in order to generate commissions.

      Delete
    2. Even though I had been in the market for over 40 years, never making much if any money, I did not consider myself smart enough financially to make my own decisions, so when I retired, I allowed my former employer, Citi's brokerage, Smith Barney to make trades for me. After three years of having them trade in and out of various stocks and seeing no appreciation in my capital, I moved my 401K savings which I had converted to an IRA and merged with my other IRA savings, to another brokerage house, with whom my buddy had invested his money and was showing considerable gains, albeit he had quite a bit more capital to work with than I did, so it may have made a difference in how he was treated. I told the broker that I was looking for some growth but that I wanted my funds to be safe, because I did not want to take a chance of losing the principle. He said not to worry, as they had 4 brokers in house and they kept an eye on everyone's account. Both of the funds that they put me in took a better than 50% hit and to this day have never recovered as they were in that new phenomenon, derivatives. I ill never get my money back and now take the attitude, that like the poor orphans and widows, I am just a victim and chalk it up to, if there is a God, they will have to answer to Him or Her in the hereafter. But I am pretty sure that I am not the only senior citizen male who got took.

      Delete
  2. John, you obviously know nothing about the Mandell Case---you just read a bunch of headlines and since when does the truth come out there??? Senator Pressler was down and out when Mandell met him. Mandell never defrauded anyone and is sitting in jail for crimes that were fabricated by the governement---why?? because he wasn't too big to jail....Did you know that at trial a representative was flown over from the AIM in London and said Mandell and Sky broke no laws in London...never even charged by one single customer!! Now that is mind boggling--how do you get put in jail for a so-called crime if no customers ever complained--how??? because you were set up---keep blogging about what you think is the so called truth "no credibility" with anything you say.

    ReplyDelete
    Replies
    1. I did not "just read a bunch of headlines." I read the stories in Forbes and Buzzfeed linked in the post and stand by my opinions. I invite readers to do the same and draw their own conclusions. Thank you for commenting.

      Delete
  3. So I gather Pressler needed an income. They paid him to be on the board to give credibility to the business? There's been so much funny business in the brokerage business and the trading fees used to be so high. Churning. I'm sure it's not fun to look back or add salt to this wound, but there are some basic rules of investing like not doing so in things you don't understand or all your eggs in one basket. Derivatives are confusing so I wonder how many brokers even understand them? They were too often salesman. Never give it all to one broker either even if they cry. Thankfully we're in the days of Vanguard, Fidelity and others with low fees and commission rates with simple invests like index funds so hopefully those widespread bad experiences are less likely to repeat. Everyone must take some responsibility for their investments even if they don't do it themselves.

    ReplyDelete
  4. Thanks for this post John. I was unaware of Pressler's involvement in this mess. Unfortunately for him, it reinforces my memories of his Senate terms as less than quick and astute. Actually, he seemed like a bit dimmer bulb than some.

    ReplyDelete
  5. I like the helpful information you provide in your articles.
    I will bookmark your weblog and check again here frequently.

    I'm quite certain I will learn many new stuff right here!
    Best of luck for the next!

    Here is my web blog - kos kosan dijual di stt telkom

    ReplyDelete