Monday, October 20, 2014

We're from the to manipulate your stock

Insurance Journal tells a little more about the trial in Washington over how American Int'l Group was treated as a cash cow by the Treasury and the Fed, to the ultimate benefit of Goldman Sachs;
Under questioning by [plaintiff Starr's attorney David] Boies yesterday, [AIG ex-CEO Edward] Liddy [who was handpicked by Goldman Sachs executives, and former Goldman executives running Treasury, to head AIG] testified that he supported a reverse 20-1 stock split in 2009 only to boost AIG’s lagging share price.
“We were in danger of being de-listed by the New York Stock Exchange,” he told Boies. “I didn’t want that to happen.”
 Our bold in the above.
[Plaintiff] Starr contends the reverse split was designed to allow the government to get a desired proportion of common stock without winning a shareholder vote. The maneuver reduced the number of issued shares while leaving untouched authorized shares.
The effect of that tailoring was to enable the government to convert preferred shares to common stock from the undiminished pool of authorized shares, endrunning a shareholder vote against increasing the number of authorized shares, according to Starr’s lawsuit.
Normally, a company's CEO owes a fiduciary duty to his shareholders. (Again, our bold in the above two paragraphs.)
Boies asked Liddy, as an experienced businessman and former head of the Goldman Sachs Group Inc. board audit committee, if he’d ever heard of a reverse split that applied only to issued shares.
And didn't get a responsive answer;
“I just didn’t focus on those mechanics,” Liddy testified.
Boosting the share price “was the only reason I wanted it done,” he told the court.
But there has already been evidence produced in the trial that it didn't much matter what the hand-picked by Goldman CEO wanted. Only what the government wanted mattered;
Earlier in the week, [plaintiff attorney] Boies confronted Sarah Dahlgren, the New York Fed’s monitor of AIG after the bailout, with documents suggesting the government was running the insurer.
Boies showed Dahlgren an April 2009 e-mail to her from one of the bank’s attorneys asking for comment on a draft version of an AIG proxy statement and noting an upcoming call to discuss the document.
AIG executives were “not on the invite list” to participate in the call, Dahlgren said.
Advantage; plaintiff.
Boies also showed the court a February 2009 e-mail, in which a Federal Reserve official told Treasury Department counterparts that his bosses wanted the New York Fed “to have people lined up to replace the board of directors and assign a successor to Liddy.”
Game; plaintiff.
Another witness, Margaret McConnell, a former deputy chief of staff to then-New York Fed President Timothy Geithner, was shown a March 2009 e-mail she received from a colleague stating that Liddy “has no decision-making authority and is paralyzed at this point by the USG’s [US Government's] role.”
Set; plaintiff.

1 comment:

  1. ( )

    When the President does it, that means that it's not illegal.
    - Richard M. Nixon

    Obama follows in the master's footsteps and improves on his skill and execution.