Windows on the World of Raymond Plank
Founder, Apache Corp
Vol. 2010 No. 3
 
 
Securities Exchange Commission Sues Goldman Sachs in Civil Suit for Fraud

 

The media “late breaking news” had a double header in the same week; the first event of which was the Iceland volcano, the second above, was combined and it was not a good week for Wall Street.  Goldman Sachs shares dropped 23 points or 7 percent on its “black Friday,” in which the Dow Jones Industrial average gave up 150 points.  All eyes shifted to Monday.

 

News of the S.E.C. action was on a Friday, while most public company releases tend to point to positive events, and often are made public earlier in the week.  The potential timing of both announcements enables decision makers Saturday and Sunday to weigh their Monday actions – dump versus hold.

 

By way of disclosure, Goldman is a company which manages a portion of my personal portfolio as well as a relatively smaller “donor directed charitable gift fund” from which I expect to make future gifts to such charitable interests where I have had a role in founding, and have personally funded until the point where it were established that the concept worked and was worthy of a broader support base.    

 

With reference to Goldman, their service and the quality of their expertise has been accompanied by coming to know personally a number of the people at several levels of management, whom I like and respect.

 

I can understand why they intend to resist the S.E.C. charges in the interest of preserving their credibility and protecting their valuable franchise.  I have no plans to discontinue my relationship.

 

At the same time apart from the legal aspects of the case, it is my judgment that on moral grounds and the broader issues of transparency, and conflicts of interest, Goldman skates on thin ice, as do a number of other less prominent well known players and competitors both in Wall Street and globally, including Greece, seeking bailout from the Euro based countries and the IFC International Finance Corporation.  There may be others standing in line, i.e. Argentina, South Africa, and within Latin America and beyond.   I noted, “Everything is related to everything else” a premise which has well served Apache and its Founder over many decades.

 

Recently Brooksley Born received from Caroline Kennedy the “John F. Kennedy Profiles in Courage Award” a very high award indeed.  Although you are referred to the link for biography information, I’m struck by high school graduation at age 16 with superior grades, was accepted by Stanford University/again outstanding performance involvement.  She had the base to go along way.  Ms. Born, well before being chosen by President Clinton to head the Commodities Futures Trading Commission (CFTC), held that position between 1996 to 1999, when the CFTC was formed in the 70ies to regulate futures contracts purchased by farmers who used hedging to access capital to raise their grains and cattle between planting their crops and growing their animals, bridging to higher weights and higher revenues.

 

Born recognized the dangers inherent in derivative securities at large, and unregulated over-the-counter securities.  Born of the CFTC, who was first called to my attention by grandson Travis Plank, enabled a look at such culprit behavior of Fannie Mae, Freddie Mac, created and ignored by Congress, and the S.E.C.   Alan Greenspan was joined in the ardent opposition of the heavy weights, including Robert Rubin, as Treasury Secretary, former Goldman head duck, later of Citigroup, where $5 million per year may have then been pocket change, and Larry Summers, whom I knew and liked as Harvard’s President before he was run off and became Economic Advisor to President Obama, and Arthur Levitt former head of the SEC, whom I’ve neither met nor have found any reason to respect.  With their and other opposition of “the notables,” Born was muzzled, but produced and released her and her team’s concept paper anyway.  To do so took both courage and the intellectual capacity to predict the future if not the timing. 

 

While it may have taken several years for her warnings to be realized, and thoroughly recognized, her challenges became both abundantly clear and prophetic.  One might pause to consider that when moral practices are supported by the force of law, corruption can give way to transparency and ground rules appropriate to the subject. The distinction can be mind boggling then a challenge.  Since when is a turd a tulip!  

 

Some opposed Born proposals on the grounds they would damage the economic values inherent in unregulated financial transactions.  I disagree strongly, however, while believing that Wall Street etc… should not be required to disclose counterparties to their trading activities, which if included in the rules and regulations, are a cynical endorsement to further disaster.

 

In personal conversations with former President Jimmy Carter, two of his observations may be worthy of note.  Working together with a bipartisan group, the president noted, that Congress (Senate and House) have no capability to reform themselves.  Reform emanates from public demand, “and initiative.”  At that time Jimmy Carter believed that a chance existed for reform introduced under the auspices of the then group of former presidents.  Several of whom have subsequently passed away. 

 

Secondly, Jimmy Carter was proud of the legislation he achieved under the “Foreign Corrupt Practices Act (FCPA),” as did and do I.    The principles embodied in that Act, have not proven to hamper but rather help Apache’s interests.  All one need do when there may be an introductory hint, is to note that we believe in and comply with the spirit of the Foreign Corrupt Practices Act, for which we are respected.  Its principles I continue to urge could be reflected in simple straight forward language.  As differentiated from a 13,000 page IRS tax code and 1,100 more pages before President Obama’s folks have gotten around to their recent threats. 

 

My next comment is directed to the naïve assumption that when our leaders are better informed we can expect the excesses presented by the failures of the Savings and Loan collapse, Long Term Capital Management failure in both name and deeds, the big high tech bubble, and burst, and the whopper housing and real estate scandals, failed to be addressed but are gridlocked because congress doesn’t understand.  Bat crap!

 

The super force based upon too much ego and greed has attracted elements of mankind throughout recorded history.

 

While civil and civilization are close together in the dictionary, they are and were far apart during the rise and fall of Roman History impacted by Julius Caesar approximately 50 years B.C. (Before Christ).  Obviously the greed of excess continues to prevail. 

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