What Goddamn Sword! Filing late is an adminsistrative violation.
The paperwork involved in selling rule 144 stock is about as onerous and complex as you’re likely to see in any transaction that the government gets involved in.
It gets filed late all the time. You have to fill a bunch of shit out, a designated official of the corporations treasury or controller office has to fill a bunch of shit out, your accountants and lawyers have to fill a bunch of shit out, and then the securities firm you did the transaction through has to fill a bunch of shit out.
Then, once that’s done, either your lawyers review it again for completeness(or else you do it yourself if you’re not that rich,) and then you send it back to all the people who filled it in wrong, missed parts or fucked up and made mistakes.
Then you file a copy with everyone on the planet, including the SEC.
Now, it is my professional opinion that a person should have all the appropriate paperwork completed and in hand, save for the financial institution’s disclosure before you do the transaction, so that the institution can do the transaction, complete their portion, and you can promptly file.
This avoids the problems that inevitably occur when people get your lengthy government form in their inbox for completion say “Not another one of these,” and sit on it for six weeks until you harass them enough.
The rule 144 form itself is pretty simple, but look through it
The problem is all the bullshit that goes along with it and needs to be filed. Every transfer agent and every Corporation, and every financial institution does this differently and has different forms, and requirements for all kinds of things, like remoing the legend which is ia pain in the ass if you’ve sold the stock before you’ve filed (which Bush seems to have done.) And you’ve got to get that shit done before you send in your form, or risk filing a fraudulent document.
Again, the filing late is neither unusual, nor a big deal. We have cites agreeing that this is so from Bush’s lawyers as well as representatives of the SEC.
You also have my explanation, and a link to the form and the requirements itself.
Unless you know what you’re talking about, or care to do the research in an attempt to refute what has been cited and demonstrated, what say we drop the bullshit about the late filing?
Well, looky here! Scylla has left me a trap! Seems all I gotta do is accept all his premises, and his definitions, and then argue my point successfully. Well, then, lets clear up a couple of points beforehand. Just to be sure we’re all singing from the same page.
Step one: defining the ground, as it were
…
Unfortunately, Harken was also losing money hand over fist. But in 1989 the company managed to hide most of those losses with the profits it reported from selling a subsidiary, Aloha Petroleum, at a high price. Who bought Aloha? A group of Harken insiders, who got most of the money for the purchase by borrowing from Harken itself. Eventually the Securities and Exchange Commission ruled that this was a phony transaction, and forced the company to restate its 1989 earnings…
(From the Krugman article)
What, precisely, are the errors of fact in the previous quote? In your opinion, is this kind of transaction entirely legitimate? If so, why did the SEC disagree with you? Or is Mr. Krugman making this stuff up?
If it is entirely legal, does it fit your standards of ethical business behavior, that is, an entirely blameless accounting manuever?
You seem to be demanding that I believe that George was positively restrained from having information on this “asset sale”. Despite Mr. Watson’s statements to the contrary, and despite George’s connection to the auditing processes, nonetheless, you insist that I believe that only the Executive Committee has any pertinent information.
What information have you that this is how things were done at Harken? Are you seriously trying to suggest that had George inquired regarding the Aloha sale, he would have been rebuffed! And was he not a director of said Harken?
I’m merely suggesting that George certainly was in a position to know. You seem determined to have me believe he couldn’t have known.
You know that phrase I like so much? It goes here.
But once we have these ground rules settled, we can move on. But first things first, shall we? Just knock off these piddling little questions, and then a few other minor nags.
And, oh, by the by, you might be interested in the alternative scenario, here…
elucidator The White House Web Site which gives transcripts of press conferences is edited/editable… That fact came up in a thread on this board or another which I read. I believe that I have that in a file somewhere, but I’ll have to dig to find it.
That’s why I asked what your son’s source was. I was pretty sure it would be the admin’s website. Don’t trust it automatically.
In connection with that line of reasoning, I believe that in the initial exchanges between Fleischer and a reporter, there is mention made by the reporter that earlier that morning there was another exchange between Ari and the reporters. I’d be curious to know if that’s what you saw?
Before Scylla or others say that I’m making too much of a small point, $20 would get me through three days.
I hereby apply for the generous stipend if the mystery shows elucidator to be correct. Snail-mail address available.
Again, I’ve answered every single question and point your’ve brought, and twice you’ve falsely accused me of doging.
We are now three pages into this thread, and you have yet to tell us what crime you think Bush committed.
If you cry “murder” you should at least have a corpse first, or at least a missing person.
This has been so frustrating I’ve come to do your work, and I’ve given you two scenarios already. One which I think is credible, the other which is deeply flawed (but yet I nonetheless beleive it to be what you have in mind.)
Since you won’t tell us what you think happened that was illegal, I’d say you aren’t doing to well.
After three pages, I think it’s about time to pony up, and no, I prefer not to answer your questions at this time. I’ve been answering your questions for three pages. We’ll get sidetracked and I’ll be asking you the same questions for another three pages. You my friend are the one who is supposed to make a case that it is likely that Bush engaged in criminal activities.
But you’re not telling us what those activities are.
I’ll happy answer your questions. But quid pro quo is fair dealing, and you’re behind.
I’ll appeal to your better nature to answer the simple questions in my recent post to you:
Hear they are again:
We’ve been pretty gentlemanly about acknowledging points. I don’t expect you to come up with a smoking gun. Most likely your scenario will require refinement, or have errors in it, and we’ll address those and refine it, and see if what we’re left with is credible. If it’s not credible or possible you’re free to come up with a different one. That’s a fair process.
But you sir, have been called. Please show your hand.
You misunderstand Scylla The questions just posted by me are questions, as I said, to establish a base line. They are not complicated questions, by any means. But I am hesitant to begin conjuring scenarios that have little hope of meeting anything but contemptuous derision.
So, if can take the time, kindly answer my “grounding” questions as outlines, and we can move from there into scenarios, plausible and otherwise. I note with interest your offer to assist me in refining my scenarios. I hope you will forgive me if I view the prospect with a soupcon of skepticism.
Keep in mind, I do not entirely admit your premise here, that somehow I must provide plausible scenarios. Given, as you insist, that my ignorance of the matters involved is hampering your efforts to enlighten me, how can you plausibly suspect I can do so.
But I like a challenge, so, as I have said, I’m willing to take it on…provided we can establish certain mutually accepted facts. As stated above.
In the meantime, I would be interestsed in your reaction to the degree of expertise as regards various documents given in this (excerpted) letters sent to Media Whores Online.
(Be advised I assume tht “88” refers to Our Leader, but have no idea why).
…The latest developments and the past and present spin puts 88 in a pickle. I am a lawyer who has, in the past, been responsible for preparing things like Forms 3, 4 and 144, as well as Audit Committee charters. But any 2nd-year law student can tell you that a director has a duty to protect the interests of shareholders, which would include for a member of the Audit Committee not-so-mundane things like being aware of fraudulent accounting schemes that will force restatements on such a massive scale. So either he is a criminal, or he breached a duty to the company’s shareholders.
Forms 3 and 4 actually are, in any ordinary circumstance, boring and insignificant. If 88 filed his Form 144, which announces an intent to sell stock in reliance on Rule 144 (which allows a person to sell unregistered shares of a publicly traded security it was held long enough and the company is current in required reports), then he announced to the world an intention to sell a certain number of shares.
Form 3 is what an insider files when he becomes an insider. Form 4 is basically an amendment to the information on Form 3 that says something has changed. It specifies the date, price and character of the sale (market sale, non-market disposition like a gift, etc.). Forms 4 are filed late all the time, in both perfectly innocent situations and otherwise. Under current rules, a Form 4 must be filed by the 10th day of the month following the sale. If a Form 4 is filed late, that fact is disclosed in the next annual proxy statement sent to shareholders.
It is significant in 88’s obviously illegal insider trading, however, despite the Form 144, precisely because it would have specified the date, price and character of the sale. People would have immediately recognized the illegality of the sale because the timing of the sale would have been screamingly obvious, and 88 was on the Audit Committee, so he may have been privy to things like conversations with the auditors and draft financial statements. As the other director pointed out, they were kept constantly aware of developments in the company’s finances.
If, on the other hand, 88 and his various mouthpieces are telling the truth (insert prolonged sardonic laughter here), and he didn’t know what was going on, then he is guilty of exactly the same kind of inattentive, lazy, and negligent behavior as any of the Enron, Tyco, Global Crossing, etc. board members.
So which is it? Did he cheat the shareholders (and the market as a whole) by using his inside knowledge to pull money out ahead of them, or did he cheat shareholders by breaching his duty of care and being lazy and ignorant? Six, two and even, it’s both…
SamClem don’t know what to tell you about the quote. I did in fact see it on tv, CNN, purely by accident. Somehow, at first blush, it seemed to me that he was speaking about the document linked previously (so long ago!) when we were battling as to its “provence”, but on reading the transcript, no question - I got it wrong.
He was actually talking about the offense outlined in said document, and admitting that they were as the “memo” outlined, but did not in fact make any specific reference to the “memo”, nor to its “provence” (Why do I keep thinking of the South of France?)
My mistake was assuming that the veracity of the “memo” was the issue. In fact, Scylla was arguing the authenticity of the “stolen” document. I stated that I had Ari F.'s word that the document was authentic. Actually, I only had his word that it was factualIn tres polaris, ibidem est
Very well, I willl take you at your word and answer your questions:
Well, I’m not sure what losing money hand over fist means. I’d prefer a figure per share, and I’d like to see that interpolated based on the company’s past and future prospects. I mean, are we talking about a cyclical downturn, a temporary problem, or a company on the verge of bankruptcy. Also, what is a high price for Aloha? Based on what? It’s my understanding that the purchase was in fact substantially if not totally by insiders, and I’ve seen nobody disputing that The large portion if not all the money came from Harken. Do we hae a cite for “phony?” I don’t think the SEC said phony, though they might have. What is factual is that they disallowed the transaction.
It would take a fair bit of research to verify these issues, but they’re nitpicks, and I’ll accept the statements provisionally with the noted reservation.
I dunno. If they had reason to suspect the SEC would take issue with it, and disallow it, then it would have been unethical. I mean, the thing here is that you are supposed to reflect your earnings as favorably as possible without defrauding, lying, or violating GAAP. You can be complex and creative, but you have to be accurate. You can see that these two things are somewhat at odds with each other. An earnings statement is part advertisement. Like a commercial you want it to look as good as possible; emphasize strong points, deemphasize weak ones. This is fine, as long as don’t lie and you conform to GAAP.
Doubtless, before they did the transaction, they had some kind of reason to believe it was legitimate. They may have had some precedents to strengthen this beleif, maybe a favorable line ruling from the SEC from another company that did something similar, as well as a bunch of securities lawyers and accountants who said it was fine. You just say “Hey this’ll be fun. Let’s give it a try!” Once they did it, Arthur Andersen reviewed it (and they were on the a list, then) and concurred that it was indeed Kosher, and the financials as they put them, passed the audit.
The SEC said “Sorry, you can’t do it.” and made them change it.
Based on the fact that they would have had to have done due diligence before the transaction, that they had a second opinion, and that it passed AA’s audit, I would guess that they had every expectation that the SEC would concur that the transaction was proper.
So, I see nothing illegal about it at all. I don’t know enough about what they were thinking and what their reasoning was to tell you if it was ethical or not.
Without being privy to their due diligence and reasoning, I couldn’t take a responsible guess.
[quote]
If so, why did the SEC disagree with you?[/'quote]
They didn’t. They didn’t go after Harkens for fraud. They just disallowed the transaction. It happens. It’s like if the IRS looks at your taxes and disallows a deduction that you thought was legitimate. As long as they don’t beleive you had intent to defraud, there’s no problem. They’ll just keep the money, and make you pay any taxes or penalties that may have accrued.
Again, I don’t know what their reasoning us. Part of the problem is that like the IRS, the SEC is monitoring a changing environment. They are not always consistent in their rulings. They change what’s allowable and what’s not over time, and they don’t always issue memorandums, they just do it. Similarly one guy at the SEC might think its fine, and another might not. It’ll depend on whose desk it lands on.
The thing is these things get complicated on their own. Sometimes things will pass the SEC. Years later, the auditor will discover there was a booboo and do a restatement. This happens, too. I remember a good example I believe in 1997 when Orbital Sciences did this.
Just because the transaction was phony doesn’t mean it was in bad faith:
For example, they may have decided to this deal for one reason or another, and looked for investors, but couldn’t find them. Or, maybe somebody said “This looks pretty good, can I get in on it?” The board says “Sure!” Trying to do a private placement is an expensive proposition. Other guys say “Hey me, too!” Where do they come up with the money? Maybe the executive says “I don’t wanna sell my stock, maybed I’ll just use this loan against there value. I mean it looks great. It’s forgivable, so I won’t even be out of pocket.”
And then they do it. And the auditors look at the transaction in pieces (corporate accounting is complex. You can’t look at it all at once.) and nobody puts the pieces together and sees that what happened was an illegal transaction until the SEC uncovered it.
That kind of stuff happens often enough that’s it not surprising.
Or, they might have known about it, and thought it was ok. I don’t know how it happened, and I don’t why the SEC disallowed it.
I already covered this issue in great detail. George and the SEC say one thing. Watson makes a general statement that seems to contradict it. We don’t what he meant because nobody asked the specific follow up question. Again, I’ve covered this in great detail already today.
I don’t care what you believe. You seem to be arguing to the contrary, and disagreeing with the SECs specific statement that came directly from their investigation, based on a generalization from another party that may not have meant what you think it does. You are only willing to accept your interpretation of events, though there are others that are more consistent with the rest of the facts. You have a preferred conclusion. Again, I don’t care what you believe, but if you want to argue that the SEC is wrong, and that Bush is wrong, and that Watson’s general comment applies to that specific instance, than you need a reason to do so or you are being purely specious.
None besides general knowledge and personal familiarity with corporate structure, and how boards work, as well as a farily intimate knowledge of securities transaction, Financial accounting, and glancing experience with rule 144 transactions, stock options, and futurecomp.
I know the way things are generally done. However, the audit committee is empowered and reports to the full board. If the full board tells the audit committee that their only responsibility is to bring beer to the Christmas party, than that’s all they do. They almost always serve as go between for the auditors and the board, and some audit committees may have, or just think they have the power to oversee various corporate happenings.
Where it comes to push and shove is what the Chairman says, and what the full board says, and these guys don’t always agree with each other. They are like any other committee in any other organization and subject to all kinds of personality conflicts, politicing, stonewalling, etc.
He might have been, or they just might have said: “Here’s everything on it.” Either is possible. I tend to think that if he asked they would have told him, but that’s not necessarily true.
So far you haven’t told me what it is that you think Bush knew. You seem to be referring to the Aloha transaction, and it is of course possible that the SEC got it wrong and Bush knew all about it. Even if he did know, that’s not problematical from the standpoint of insider trading. He would have had to have known, and had knowledge that the transaction would later be disqualified by the SEC. If he thought the transaction was ok, and he would have had no reason to think otherwise based on the audit, then there was nothing wrong with selling his stock. He could have even looked at the transaction and decided it made him uncomfortable with the company’s financials and sold his stock. He’s completely fine unless he has reason to suspect that the transaction is either illegal or will be disallowed.
Jeez man, you’re like a girl going on a date. Cut to the chase please.
Next post:
They were kind of complicated. Fear not, if your scenarios are credible, logical, and fit the facts, they will stand on their own merits regardless of what slings I may hurl at them.
However, if they are pieces of shit, than youare right to fear.
Why? I’ve been doing your work for you. I’ve already given you a couple of scenarios, and explained all this shit to you. I have no other choice seeing as you’ve yet to display an actual argument, and think that your general ill-will towards Georgie boy is sufficient.
Jesus Christ Elucidator, then what are you doing in Great Debates? It follows logically that if you wish to say a thing is so, that you would have to justify that position. So far all you’re doing is saying it’s so. So far you haven’t told us exactly what “it” is, nor have you bothered to show us that “it” is even possible.
If it is simply your unsubstantiated opinion that Bush is a criminal, then that statement belongs IMHO, not GD.
Here, you have to back it up.
OK, whatever it takes.
His conclusion is false. It’s not an either or proposition, and he’s committing the fallacy of the ommited middle. It’s like saying apoliceman’s job is to be aware of what crimes are happening, and that if he isn’t he’s responsible for them. They need to be diligent, adn competent, and they can be responsible for a failure of either, but if they took all prudent steps in good faith to discharge their duties, they should be pretty secure.
Looks ok, so far.
This is just plain false, and it makes me doubt the man’s stated credentials, or competance.
I’ve already provide a link to form 144, the same form Bush filed. If he’s filled these things out, then he knows you have to disclose the time frame of your planned sale.
Also false. Again. ommitted middle fallacy, again. He’s also repeating himself. Before they are guilty of anything yu have to show that they did not discharge their duties with due diligence. “Due diligence” being a legal term that this guy should be familiar with as it applies to security transactions, as well as the discharge of fiduciary responsibilty. In other words you have to show that they failed to find something that they would have if they were executing their duties properly. Part of the way that they discharge this due diligence is by getting a second opinion from a licensed independent outside auditor. As long as you do not interfere with the independant auditor, and cooperated with the audit to the fullest of your abilities, and did not seek to defraud the auditor, or pass on information that you knew was false or misrepresentative, than you are pretty much in the clear.
Oh, and you have to address any of the issues or irregularities that the auditor finds as well.
I now eagerly await your answering my questions as you have promised.
The 144 was filed the same day that he sold (the 22nd). But, as you know doubt know, the 144 is not a committment to sell, but rather a necessary precondition.
Furthermore, the 144 is normally filed by the broker rather than by the stockholder. Many brokers will simply refuse to sell without a 144 unless they are unaware that the seller is an insider. So Bush may not have have been able to prevent it from being filed even if he wanted to.
So, it is as my previous metaphor implies, rather like declaring your shadow a seperate entity, loaning that shadow sufficient money to buy your shoes, and declaring that sale of shoes to be profit. Which is precisely, if memory serves, why Enron is currently synonomous with Ponzi.
And what, pray, was the motivation? I cannot fault your wording, it is unlikely that the word “phoney” was in a document written in High Bureaucratese. But they did disallow it, just as you say.
Why? For the reasons of bogusity, as I suggest? If not, for what other reason? Something whimsical, mayhap?
Some of your responses seem to imply a business ethic of not caught- ergo legal, which is rather more Darwinian than I would like, and certainly far below the ethical standards Our Leader is currently impersonating.
A bit more clarity here, if you don’t mind.
Why did the SEC disallow the transaction? (Your best guess)
Were they right to do so? Or perhaps more importantly, depending on your ethical standards, was such a disallowance predictable? Keeping in mind the eagerness with which a mid-level bureaucrat challeneges the son of a sitting President?
“Nitpicks” Maybe, maybe not. Again, you seem to be implying the position that if you get away with it, cool!
But, we’re getting there.
[columbo]
Just a couple more questions, then I’ll stop bothering you…
[/columbo]
Just trying to lay down the basement on true, before I begin building “scenarios”.
Well, that’s not completely true. You can file it after the fact, or, rather, if you do sell the stock, you still have to file the 144.
Say what!!!
Not by any broker who wants to keep his license. You need to file a 144 manually signed by the stockholder of record, as a matter of law.
Well yeah. I don’t know about 10 years ago, but these days they are comprehensive with the legend attached to the stock in question which identifies it as 144 stock. You can’t get the legend taken off without the 144 form, as well as some otehrs that vary from firm to firm.
The only way around this, well perhaps I shouldn’t disclose it. I’ll see if a moderator gives me permission, but I don’t think I’m supposed to explain how to get around the law on this message board.
Well, all he would have had to have done would be not to sign the form, but again, there is away around this, and sell the stock without filing.
I know you probably won’t accept my word about this, and I don’t feel comfortable disclosing it in this forum. If you want I’ll email Manhatten, tell him the method, and he can verify it with you guys.
Or, you can take my word that I know what I’m talking about.
I certainly do not want to be the recipient of privileged information, by way of Manhattan or anybody else! I only have so many hats, and tin foil is more expensive than you might think!
So, if that’s all cool…what do you think about the Harken/Aloha transaction?
[columbo] you see, that’s impossible…
[/Peter Falk)
As I’ve stated, I don’t have any information concerning the boards motivation and reasoning for the transaction, nor has the SEC shared their logic with me. I’ve already given you a couple of guesses as to both.
No. It is not like that at all as I’ve already shown you. I have explained to you how a corporation, and particularly one that is a conglomerate will compartmentalize its accounting to facilitate financial analysis of various departments and subdivisions. I even gave you an example (warranty service on a car.) I have explained how those entities within a corporation may actuallly conduct business with each other. There are lots and lots of good reasons for this, and it is correct and appropriate, and goes towards providing more transparent accounting in many cases. Just about every corporation big enough to have stock traded does it.
Either you didn’t read, are forgetful, or else you are being willfully ignorant.
(And Enron’s scenario wasn’t a ponzi scheme)
Again, I explained several possible reasons in the post you’re quoting from.
Example, please. I implied no such thing.
Any of the ones that I’ve given you are as good as any other. Without more information from the SEC, it’d be pure speculation, but, I’ll speculate purely:
[speculation hat on] They noticed it, the auditors and the board didn’t[/speculation hat off]
Again, I have not examined the transaction, nor am I qualified to second guess the SEC’s decision, so I would imagine they were
Ethical standards would have nothing to do with it. Intimate knowledge of GAAP, and corporate law, as well as and almost unbelievable level of intimacy with the SECS compliance trends would have been necessary to form a reasonable prediction of what the SEC would do, particularly with a financial transactio that had passed experts with the independant audit who are supposed to be qualified and trained to look for just such things. Would you suggest that Bush had such a knowledge base superior to both the auditors and everyone on the board that only he would see such a thing?
The skills and knowledge necessary would serve a man of poor ethics equally well as a man of high ethics in making such a prediction.
Well, apparently being the son of a President wasn’t enough to stop that mid-level bureacrat from disallowing the transaction and investigating Bush’s sale.
Not at all. There is no violation of ethics in placing your financial statements in the most attractive light you can, for the same reason that there is no violation in ethics in trying to take every deduction which you believe you are entitled to when you file your taxes. In both cases the government agency in question may choose to interpret it differently than you, your CPA, and your lawyer interpreted it in good faith.
You’ve used up my good will. Quid pro qo. There is no reason why your questions should have precedence over mine, and I’ve been more than cooperative, and done my part.
Please answer the questions that I’ve posted twice.
We’re getting very close, Scylla. In fact, you may just have provided the insight that blows the thing right out of the park!
Well! That’s a whole different kettle of fish, isn’t it? You’ve put your finger on the single most salient point! The Aloha “scheme” (as the scurillous Mr. Krugman, amongst others, might have it) was nothing more than a routine accounting procedure between “departments and subdivisions”.
All this fuss and feathers, the entire magilla is rendered null and void by you sir! All you have to do is provide only a few of your many, many examples wherein this is all quite kosher! Imagine the look on Mr. Krugman’s face after we e-mail him your insight! How will he word his retraction and apology?
Does this also mean that the same sort of manuevers as conducted by Enron are also entirely legitimate? For I can well imagine that a hefty honorarium from a grateful BoD will soon be speeding your way! Or perhaps something in the way of a “loan” (wink wink, say no more)? No doubt someone as even-handed and fair as yourself will rush to share with your collaborator!
All you need do is outline the circumstances under which the Aloha deal may be interpreted as entirely legitimate. That being done, the SEC had no basis for an investigation whatsoever!
Indeed, Mr. Krugman is not the only pundit to make this fundamental mistake, I have read many articles and commentaries on this matter and not one, not one!, of them had the intelligence to cut right to the core of the thing and realise that the Aloha transaction was perfectly kosher in the first place!
Alas. I must ruefully look forward to having my entire position dashed to shards and tatters, but that is the price one pays, is it not? Waste no time, Scylla! Get “on the record” with this before somebody else catches on.
You’re making me regret the good faith with which I’ve treated you.
You’re being fundamentally dishonest, and it speaks poorly of you. That’s not what I said at all. I’ll say it again for the fourth or fifth time. Debits, credits, and loans accrue interdepartmentally within the same company as a matter of standard practice which is legal, ethical, and prudent. It would be tough to run GE with just one checkbook. You seem to be focusing on this aspect of the transaction as something damning. It’s not.
Why do I bother? Any person posessing a modicum of intelligence and integrity would see the point that I am making. These accounting techniques are tools. They are useful and good tools. They are neither good nor evil. It is how they are being used, and to what end that is the issue. Like a hammer. You can use it to build a house, or to bash somebody’s head in. But there isn’t anything wrong with a hammer (or right about it) in and of itself.
The fact that Harkens has internal transactions is not by itself an issue suggestive of abuse.
I just answered your question concerning whether I thought the Harkens transaction was legitimate or not. The answer was I saw no reason to disagree with the SEC’s ruling that it was illegitimate. Again. I do not maintain, nor have I maintained that that particular transaction was legitimate.
The problem is that you beleive what is wrong with the transaction is that it was completely internal. However, that is not the issue. Their is nothing wrong with a completely internal transaction. The issue lies in how they used this internal transaction. The SEC beleived that manner was not legitimate. So, in hopes of clarifying this for you, the fact that the transaction was internal is not the issue. The fact that it was not legitimate was.
elucidator:
I am now forced to consider your behavior as trollish, and dishonest. I believe you are deliberately dodging my questions and deliberately misinterpreting my statements for rhetorical effect.
I think you are refusing to answer any of my questions and substantiate your claims, becuase you have nothing to offer but innuendo, and bullshit.
Odd, isn’t it? I’ve often harbored the same reservations about you!
I’m curioius about one other thing: your use of the word “internal” to describe the Aloha transactions. Does that accurately reflect your view?
And if these transactions are, essentially, internal - why then does one go to all the trouble of even setting up a “sock puppet” corporation (or would you be willing to accept the terminology “dummy corporation”?)
Mr. Krugman, et al firmly suggest that the purpose of the entire Aloha transaction is, at bottom, mendacious. They were attempting to hide the degree of indebtedness that they were burdened with. Is this the sort of thing that falls within the bounds of “putting the best possible light on the situation”?
Now we’re getting somewhere! So. at bottom, you, I and Mr. Krugman agree that the Aloha transaction was not legitimate? Mr. Krugman further avers that the paralells between the Aloha transactions and Enron’s adventures with Jedi, Chewco, etc. are very close, as both were intended to hide the debt load of the respective companies.
Does this square with your interpretation? Are there more than one interpretation? If it does not square with your interpretation, can you refute his?
Or can we accept as a given in our discussion that: the Aloha transactions were illegitimate, they were attempts to present thier debt load “in the best possible light” at best, attempts to commit outright fraud at worst. Clearly, if I cannot establish this as a fact, there is no reason to trouble your attention with my fanciful “scenarios”.
But it would seem that we are quite close to that. Please advise if I have intrepreted you correctly, and, if so, we can move ahead.
Is if fair to assume that a reasonable man, operating out of self interest, would prefer to sell his stock in Harken before such a obfuscatory manuever becomes public knowledge? May we accept as a given that when knowledge of the Aloha manuever becomes public, and the resultant awareness of Harken’s true financial condition (a quadrupeling of reported debt!) becomes clear, a reasonable man would expect a severe impact on the value of Harken stock.
And here, we come across a complication: one set of pundits cited above concentrate on the notion that the plummeting value of Harken stock results from the revelations forced upon Harken by the SEC.
There is, however, another factor: it is noted that Harken was reduced to one potentially profitable endeavor, a drilling project in Bahrain. The Gulf War made this entirely impossible. Other pundits, as cited above, allege that this fact is the core reason for the precipitate loss of value of Harken stock.
A reasonable person, such as we, might simply say both are factors, both a very bad news, certainly bad enough in and of themselves such that we can safely conclude that any potential SEC investigation of George’s behavior is probably irrelevent (at least in terms of the stocks market value.)
Now, lest this be seen as a tiresome and pointless question, keep in mind the potential of awareness here. On the one hand, we have to focus our inquiry on George’s internal knowledge of conditions and activities at Harken. On the other, we would have to conjecture as to possible sources of knowledge: who might be in a position to warn George that a Gulf War was cooking? Well, duh!
But, of course, that line of inquiry is blind, as far as you and I are concerned. There is zero chance that you or I will find conclusive evidence, one way or the other, as to this possibitlity. Clearly, I cannot prove he did know, as you cannot prove that he didn’t. As tantalizing as the prospect may be for those of us on the scabrous left, it is very unlikely that even the most competent and dedicated investigation could prove anything.
So: for the purposes of our discussion, we will presume this second scenario is moot?
If he had knowledge of the manuever, knew it was obfuscatory, and had the expectation the both the manuever and its nature would come public, then yes. It is my understanding that the manuever cleared audit without raising any flags, and was greeted in sanguine fashion by the investing public when Harken announced its regular quarterly financials (complete with the manuever.)
No. How the market will react to a given piece of news on a given stock is extraordinarily difficult ot predict. Doubly so, with something like an oil stock in the early 1990s. I’ve seen stocks drop like hell on great news because people just decide this must be the top and it can’t get any better, and I’ve seen stocks go up on bad news, because people figure that it must be a bottom or a buying opportunity. So no, a reasonable person wouldn’t speculate on the short-term effect the news would have on the stock, for all these reasons and also because a lot would depend on how the news was broken. Indeed, the stock dropped and recovered itself in four days! I know you’re going to doubt what I’m saying, but this happens a lot
A case in point might be Allied Irish Bank. When they found out a rogue trader lost almost 700 million dollars in fraudulent transactions, the stock dropped a couple of points, and then almost immediately turned around and went from 18-28 in the space of a couple of months without anything but bad news, and huge loss restatements.
Intel used to go down all the time, when they’d beat their earning for the aforesaid “It ain’t getting any better than this,” reason.
The market is inexplicable, and the spin it puts on an event is everything.
Well, then, we can agree, can we not, that bad news is most likely to produce negative impact on a given stock price. Even if the market is irrational, and I have no argument whatever with that concept, nonetheless its is not random
A reasonable man would expect that very bady news is most likely going to have a very negative effect. It might, just might, have the opposite effect. But a reasonable man would not accept the the odds are even, 50/50.