Rape, Pillage And Loot On Wall Street

[Policing Wall Street]

Ah the everlasting wisdom of Yogi Berra. On Wall Street some things never change. The Department of Justice finally decided to pursue tax fraud and money laundering charges against several Swiss banks, including UBS beginning last year.

Of course in 1993 I had informed FBI Special Agent Joseph Yastremski of money laundering by Amex specialists.

Fast forward to the present.

In 2008 the NYSE purchased the American Stock Exchange in hopes of obtaining synergy via a merger.

In my column "Wall Street Déjà vu Again," which was published on July 9, 2009 I discussed money laundering and tax fraud via Swiss banks by an AMEX specialist. This fraud was perpetrated by trading gold options on the Comex and utilizing a private Swiss bank to launder money.

My August 31, 2009 column "How Arthur Levitt Helped Ruin The U.S. Economy" discussed how the Specialist in Lilly Pharmaceuticals options at the American Stock Exchange fixed prices in the options of Lilly.

A specialist is not supposed to fix prices in conjunction with market makers. The purpose of a specialist and market makers is to provide liquidity in options--that is to make markets in options when there are no public bids and offers. These markets are supposed to be made at a fair price.

My article discussed money laundering and price fixing by the specialist in Lilly in collusion with AMEX market makers. I stated that the specialist in Lilly had earned $50 million by cheating the American public by price fixing.

So blatant was the price fixing that before the opening bell rang, the specialist would rub his hands together and say: "It’s time for RPL." RPL being his acronym for Rape, Pillage and Loot.

This money laundering and option price fixing occurred when Arthur Levitt was Chairman of the American Stock Exchange and continued during Levitt’s tenure as Chairman of the Securities and Exchange Commission.

So in 1993 the FBI knew that the Specialist in Lilly had spoken to me of laundering money via a privately owned Swiss Bank-privately owned by the family of his brother’s wife. The brother was also a partner in the specialist firm.

Several weeks ago I met with some traders, who told me some good news- good at least for the public investor.

They told me that circa September 2009 the specialist in Lilly had his specialist book taken away from him; but that the NYSE Had not published this disciplinary action.

So, on Tuesday, November 24, 2009, I telephoned the NYSE about the specialist in Lilly being disenfranchised of his specialist operation. First I was connected to the Regulatory Division. Then Regulatory connected me to Corporate Communications. I spoke to Rich Adamonis. Adamonis told me that someone would get back to me. And sure enough someone did. Ray Pellecchia, Vice President of Corporate Communications, returned my call. When I inquired about the alleged disciplinary action taken against the Specialist in the options of Lilly by NYSE-AMEX, Pellecchia told me to call the former specialist and ask him why he is no longer the specialist in Lilly options. Pellecchia must think that he is appearing on the Sopranos.

Well that is true in a sense. The NYSE is like the Italian Mafia in that it steals from the public. The difference is that Mafiosi get indicted; NYSE-Amex specialists do not. I told Pellecchia that if a member is disciplined for violating the Securities Exchange Act of 1934 must announce that disciplinary action. I am not supposed to call the specialist and ask him if he violated the law.

Pellecchia told me that he would get back to me. Pellecchia never did.

So today I called Pellecchia. He apologized for not getting back to me. When questioned about the fact that the former Specialist in Lilly options, was no longer the Specialist, Pellecchia responded: "I’ve looked into it. I haven’t come up with anything."

This is like a doorman at a Speakeasy saying "I didn't know there was drinking and gambling here."

So the topic of conversation with these former Amex members was: For what illegal activity was the specialist in Lilly disciplined?

Was it for tens of millions of dollars in tax fraud? Was if for having a secret bank account in a Swiss Bank? Was if for massive illegal short sales in stock? Was it for options price fixing? Perhaps we will never know. But this we do know: The United States Attorney will never indict him.

Why? Well nobody from the Amex or NYSE-Amex is ever indicted by the Department of Justice. That was Arthur Levitt’s true legacy to the investing public.

But there is a footnote, an important footnote, to this money laundering. The money was laundered via Spear Leeds and Kellogg and later by Goldman Sachs Clearing Corporation.

Goldman never gets indicted.