Sunday, on “Face the Nation” retired Army general, Wesley Clark, made direct assaults against John McCain’s military service and his qualifications to be president. Clark insinuated that commanding a training squadron in peactime wasn’t equal to commanding that same squadron during war; that it didn’t require ordering bombs to be dropped. He also stated that getting shot down while flying in combat didn’t qualify a person to be president.
Let’s not even compare John McCain’s experiences to Barack Obama’s since there’s really no comparison. In many ways, retired General Clark is right. Flying a ground attack fighter through a barrage of SAM missles over North Viet Nam is no more presidential than parking your PT boat in front of a Japanese destroyer and getting it cut in two. Also, being a prisoner of war in North Viet Nam for five and a half years is no more presidential than shacking up with a German spy in a downtown Charleston, SC hotel for several months during World War II. President Kennedy was given a medal for not being able to outmaneuver a destroyer with his agile PT boat. He was put in charge of the PT boat in the South Pacific to get him out of the European theater after living with a woman in Charleston who was found to be a German espionage agent by the FBI.
When taking Air Force ROTC in college, my classmates and I were constantly being barraged with the notion that where else but in the military could a young officer get such leadership experience with the responsibility over numerous personnel and millions of dollars of equipment. Was all of that just a bunch of hogwash? The military builds leaders … at all levels of command. That was the military message. Maybe Wesley Clark should review some of the “propaganda” that the military indoctrinates it’s officer candidates with if his view is so contradictory to the time honored line. According to what I was taught, and based on my experience while on active duty … during peacetime … squadron commanders get a lot of executive experience.
And, Wall Street, as well as corporate America, amply rewards that executive experience. Wesley Clark should know. He’s been a beneficiary.
Let me tell you a story … a factual and true story.
Back in 2006, I became interested in some low priced biotech stocks that were involved in doing research in the area of flu vaccines. I invested in several of these and followed them closely for about a year, buying and selling, trying to get a sense of why they were moving as they did. These were really budget stocks … less than $10 a share … and one fluctuated between $1.20 and $2.00 a share. I actually did quite well with that stock when buying selling it in lots from 3 to 10,000.
Watching these closely and continuing to do research on them, trying to figure why they moved as they did, I began to notice that the financial analysis of these stocks was being done primarily by one company, Rodman and Renshaw. When the stocks were doing terribly and some bad news about them would come out, the analyst would write a glowing and promising review of the stocks and a predictable group of suckers … I mean investors … would rally the stock. I quickly learned to buy on the bad news and sell on the predictable rallies that would occur after the financial analyst would make his report. It became a matter of trying to pick the trough the stock hit before the predictable good news would come out. I actually did fairly well.
Over time, my curiosity about Rodman and Renshaw grew and I decided to research it. I found that Rodman and Renshaw had started filing financial reports with the SEC and reviewed these. To my surprise, Rodman and Renshaw’s stock was virtually worthless with the bulk of the financial transactions involved paying legal fees to maintain it’s public corporate status … less than $100,000 a year.
On further investigation, my findings were quite surprising. Rodman and Renshaw was a New York city firm that dealt, as best I could tellat the time, exclusively with biotech stocks … but not just any biotech stocks. They seemed to specialize in biotech stocks that were in extreme financial distress and in great need of cash to continue their research. Rodman and Renshaw organized biotech “fairs” to match their biotech clients with their investor clients while having their financial analysts write glowing reports which were publically available for market researchers like myself.
Not that long ago, Congress passed a bill called the Sarbanes-Oxley Act. Another name for this bill is the Public Company Accounting Reform and Investor Protection Act of 2002. It was designed to force publicly traded companies to clean up their accounting practices and provide greater transparency for the investing public. One of the sections of this act was specifically aimed at financial analysts, holding them accountable for their assessments of publicly traded corporations and theoretically protecting them from executive pressures to overvalue or falsely valuing the corporations they were analyzing.
Rodman and Renshaw refers to itself as a full service investment bank and a leader or specialist in PIPE and RD transaction markets. PIPE stand for “private investment in public equities” and RD stands for “registered direct placements”. Basically, what this means is that they’re in the business of arranging private funding for these corporations, in essence diluting the real value of the stocks, while they’re being trading on the open market. In other words, it’s like the selling out of K-Mart to private investors during their bankruptcy and receivership without these companies actually having to declare bankruptcy … doing all of this while promoting these stocks to the gullible public who aren’t watching and questioning the financials.
It seems that back in 2006, Rodman and Renshaw got into a little trouble. One of the stocks they were promoting was being followed by a financial analyst at their firm by the name of Matthew N. Murray.
It seems that a stock he was following and had done an analysis on had risen in price on the stock market. In following quarterly review, he maintained his valuation of the stock in spite of its superfluous rise in the market. He was approached by his supervisor and “encouraged” to raise his valuation of the stock which he refused to do stating that his original assessment of the stock was a truer representation of its actual value rather than it’s market price. This was his job … what he was supposed to do.
Murray reported the actions of his supervisor and possibly others to the Senate Finance Committee since the actions of the Rodman and Renshaw executives was a violation of the Sarbanes-Oxley Act. And, he was subsequently fired … also a violation of the Sarbanes-Oxley Act.
The chairman of Rodman and Renshaw was called to testify before the Senate Finance Committee.
Senate Group Investigating Firing at a Brokerage Firm – New York Times
In her New York Times article, Gretchen Morgenson points out that Rodman and Renshaw was a privately held company at the time of the article. It appears that some time in May of 2007 it became a publicly traded company. So, it’s possible that it may have been able to avoid prosecution under Sarbanes- Oxley although that would bring into question why the Senate finance Committee held inquiries and why Mr. Murray made his complaint to them. Evidence presented in Ms. Morgenson’s article would indicate that,for some reason, Rodman and Renshaw were doing their best to try to discredit Mr. Murray …. which wouldn’t be necessary if they weren’t subject to the provisions of Sarbanes-Oxley. They would simply thumb their nose at the Senate committee.
While digging a little deeper into the financial history of Rodman and Renshaw, I ran across some interesting facts. A group of investors bought a firm in Colorado that was involved in real estate and land development. They, then sold all of its assets. Next, they bought a defunct firm based in New Jersey that had, years before, been involved in market trading. It’s name was Rodman and Renshaw. So, they bought a name … that sounded respectable. Next, they found a lucrative market to manipulate … primarily biotechnology … with struggling companies who had an extremely long shot of discovering something of worth but at great expense with frequent and heavy losses … sucking up lots of capital.
Rodman & Renshaw
Read the New York Times article and note the date. A nose thumbing is exactly what Rodman and Renshaw did to the Senate Committee. In November of 2006, elections were held in which the Democrats gained control of the committees in both houses of Congress. By the time I had correspondence with Ms. Morgenson in the fall of 2007, the issue was dead … apparently dying as it was probably tabled by the now Democratic controlled Senate Finance Committee.
By the way, if you haven’t taken the time to read the New York Times article, the chairman of the board of Rodman and Renshaw was then and is now retired Army General Wesley Clark.
Frankly, my sleeze-meter went off the register when I was doing the research on Rodman and Renshaw. Watching the interview of Wesley Clark on “Face the Nation” reminded my why.
Addendum: 7/1/2008 – Review of the Sarbanes-Oxley Act, Section 5 deals with securities analysts. It is the one section of the act which says nothing about a publicly traded company but refers to securities analysts who are employed by brokers or dealers involved in investment banking without specifying whether they are public or privately owned. To me, this implies that any broker or dealer who is involved in investment banking, which Rodman and Renshaw claims to have been doing since 2003, are subject to the provisions in this section.
Section 501 — Treatment of Securities Analysts by Registered Securities Associations and National Securities Exchanges
Filed under: News | Tagged: Barack Obama, biotech stocks, Charleston SC, Face the Nation, FBI, Gretchen Morgenson, John F. Kennedy, John McCain, K Mart, Matthew N. Murray, New York Times, North Viet Nam, PT boat, Rodman and Renshaw, Sarbanes-Oxley Act, Senate Finance Committee, South Pacific, Wesley Clark, World War II | 7 Comments »