Edwards Story

-A +A
0

The takeover did not take place before the expiration of options. It took place a
short time afterwards. Frost & Sullivan lost more than $3 million.

[Policing Wall Street]


THE SEC ARE THE CLOWN POLICE:  PART DEUX
 
In a previous article, “The SEC Are Clown Police On Wall Street,” which was published in The Black Star News on November 17, 2010, I detailed my involvement with Frost & Sullivan, a trading firm which was to be the epicenter of a massive insider trading scheme which was centered in the offices of Wagner Stott Clearing Corporation.

Now the Department of Justice is investigating an insider trading ring. Their ultimate objective is Steven A. Cohen, founder of SAC Capital. So this article will provide the reader with some knowledge of how insider trading works.
 
In 1989 Frost & Sullivan was minting money- like Ben Bernanke is doing now.  Heinz Grein, Vice Chairman of Frost & Sullivan who ran the daily trading, and I got along well. I even got along well with Michael Borlinghaus, the other partner in Frost & Sullivan. But Joseph Latona, a trader for Frost & Sullivan, did not trust me- because I was too honest. Latona had been a commodities futures trader and was not an options trader.

The person, whom Latona did trust was Joseph Greenwald, President of Greenwald Securities. This was later to be a fatal mistake for Latona. Greenwald’s firm was represented on the floor of the American Stock Exchange by Jeff Green. Green shared an office with Gary Rosen, a former trader at Spear Leeds and Kellogg. Their office adjoined Greenwald’s office.  As Jonathan Frey, Joseph Greenwald’s brother later said: Green was a nice guy who got in over his head with Joey (Greenwald). 

On several occasions Grein asked me to bring prospective investors from Germany to the floor of the American Stock Exchange.  But that practice desisted after I accompanied two German investors to the floor of the Amex. One referred to the
floor of the Amex as “Scheiss” and the other as “schmutzig”- not exactly complimentary terms.

Everyone worked together because everyone wanted to earn money the easy way- that is, the crooked way.  But everyone involved in this insider trading scam had a source of information on takeovers. It is here that I must state that I was the
recipient of inside information in 1988 -- I learned that Pillsbury was being taken over. The source was a trader at Spear Leeds and Kellogg. I did not trade on the information- even though I knew I could never be caught.  

Even Green had a source of information. His brother was an investment banker for a white shoe boutique Wall Street firm.  Occasionally he would pass Green some information. But Green made small trades- earning perhaps $50,000 at a time on
the information, which was provided to him by his brother. Greenwald’s source of information was David Simon, a friend of Greenwald. Simon came from Spear Leeds and Kellogg and maintained some good connections there.

Latona had no sources of information. His only value was to serve as an intermediary with Greenwald.  

One day I entered the offices of Frost & Sullivan and noticed that there were huge piles of research reports from Merrill Lynch.  Frost & Sullivan had offices at Wagner Stott Clearing Corporation, a subsidiary of Merrill Lynch.

I asked Grein what he was doing with these reports. Latona, was a loudmouth with bellicose manners; he shouted that the reports were for research.  I laughed.  Grein told me that the reports were there to show that he had done research on firms.  

Everyone at Wagner Stott suspected that the information had come from a source.  But where? 

I observed that these fellows were hitting home runs too many times- as if they were on steroids- the steroids being inside information. I could not prove that they were trading on inside information, but I had this gnawing feeling in my gut that they were. And it wasn’t Grein who gave me the feeling. You could understand that he might have contacts and pick up information
legitimately.  But not Latona.  
 
So in October 1989 I told Grein that I would no longer represent Frost & Sullivan at
the Amex.  Latona went berserk.  Latona said that Frost & Sullivan needed the market
maker margin to be successful.  But something else was wrong- and that will be
discussed in another article.
 
In the spring of 1990 there were rumors that Robert Maxwell was going to launch a
takeover bid for Harcourt Brace Jovanovich.  Borlinghaus told me that after I had
put on a large complex position. 
 
After Borlinghaus gave me that information I began to take off my large complex
position.  When Al Sedita, Vice President of WSCC, told me that in this takeover I
could not be short calls.  I explained to him that my short calls were covered by
long calls, - and that I had numerous puts to protect my downside.  But Sedita was
adamant.  Sedita told me that Grein and Borlinghaus assured him that there would be
a takeover.  So I had to take off this position- at a loss.  When the deal did not
go through, Borlinghaus spoke to me and told me that Frost & Sullivan had taken a
loss.  It was later revealed to be close to $5 million.
 
In July 1990 Accor made a bid for Motel 6.  I was given the information prior to the
takeover.  But it was neither Grein nor Borlinghaus, who provided me with the inside
information in Motel 6.  It was Greenwald.  Greenwald sauntered into the offices of
Wagner Stott and began to talk about Motel 6.  Greenwald stared at me and said:
“Buy it.  It’s guaranteed.”  Of course in 1993 this became absolute proof of my
honesty to Assistant United States Attorney Frances Fragos- later President George
W. Bush’s personal advisor on Homeland Security. 
 
I was not the only individual, to whom Greenwald gave the information on Motel 6.
Greenwald gave it to George Wellington and Sam Gottfried of Wellmont Securities- and
even Darryl Hirsch, a trader for Wellmont.  Greenwald gave the takeover information
in Motel 6 to Al Sedita, Vice President of Wagner Stott. 
 
Greenwald provided information to Jonathan Frey, Greenwald’s brother and a partner
in J Streicher & Co- the firm formerly led by Joe Streicher, their grandfather.
Streicher cleared its options trades through WSCC, but its office was located at 19
Rector Street.  The takeover information in Motel 6 was given to Joel Lovett, Vice
Chairman of the Amex, and to Joel’s son, Evan,- specialists for Streicher. 
 
Joel Lovett and his son, Evan, were later to be involved with the Russian Mob in the
takeover of Harbor Securities- and Joel was protected by none other than Robert
Morgenthau, the Manhattan District Attorney. 
 
And when Motel 6 was taken over, 20 year old scotch was being poured and Cuban
cigars were being smoked in the offices of Wagner Stott.
 
After the Motel 6 takeover I told Sedita that if this insider trading ring were ever
investigated it would take down Wagner Stott and have serious implications for
Merrill Lynch.  Sedita replied that it wasn’t my business.  I told Sedita that Grein
and Borlinghaus kept the information to a few, but Greenwald was telling everyone-
even Wellington and Gottfried who were  involved with Al Avasso, a convicted felon
and stock fraud artist.
 
Then in early 1991came the debacle of Square D.  Square D had been the subject of
takeover rumors for months and the options, which were listed at the Amex, were very
busy- and thus very liquid.
 
Frost & Sullivan had a huge options position in Square D.   And ten days before
expiration of the January options, Grein asked me if I would do him a favor and go
to the Amex options specialist in Square D.  I was to ask the specialist the
calendar spread market in Square D options.  In this instance Grein wished to sell
the February call options, which he owned, and purchase the March call options.  I
asked Grein how many times he wanted to do the spread.  Grein said 3,000 times.
That meant that he was long approximately 3,000 call options.  I told Grein that it
was best to do 500 spreads at a time.  And to make it known to the specialist that
he needed 3,000 options spreads.
 
Grein assented.
 
So I went to the floor of the Amex and told the specialist that I needed to do 3,000
calendar spreads and needed a market for 500 spreads at a time.  At this time
options were traded in 1/16ths, not pennies.  The specialist gave me a market of 1
5/8 for the first 500; 1 11/16ths for the second 500; 1 ¾ for the next 500-
increasing the price by 1/16th for every 500 times that he wished to do the spread.
(Little did I know that performing this broker function for Grein would lead to the
Federal Bureau of Investigation Special Agent Joseph Yastremski to believe me about
the pandemic nature of criminal activity at the Amex.)
 
I returned to the offices of Frost & Sullivan on the fifteenth floor of Two Rector
Street and spoke to Grein.  I told Grein that he should purchase the spread.  I said
that he had millions invested in this deal and should minimize the risk and purchase
the next month’s options.  I told Grein that Frost & Sullivan had a big loss in
Harcourt and their capital was strained.
 
Latona was furious with my advice.  Latona screamed:  That’s the problem with you
Manfredonia, you don’t have any balls.
 
I retorted that it was not a question of balls, but a question of the options
expiring worthless.  I said that in two days’ time this spread could not be done.
 
Then Grein intoned in a German accent:  “We have information that it will take place
by then.”
 
Latona just laughed at me.
 
With that I left the office.  But no information is perfect.
 
The takeover did not take place before the expiration of options.  It took place a
short time afterwards.  Frost & Sullivan lost more than $3 million.
 
It was a month later that Michael Borlinghaus, Grein’s partner in Frost & Sullivan,
asked me:  Who is the boss of Frost & Sullivan.
 
I replied:  Heinz.
 
Borlinghaus replied:  No, I am.  It is my source.
 
Borlinghaus continued that he had set up another company to trade on the basis of
inside information that he had obtained.
 
And Borlinghaus then made a telephone call and spoke to the person in German. When
the call ended, Borlinghaus stated that this was his trading firm.
 
And then the world began to collapse.

Also Check Out...

'LION OF ZIMBABWE'
The 6th Annual LGBT Immigration
WEST COAST 'BLACK COMMENTATOR
Educational Alliance Opens New
Vision of Flight Is Dedicated To
Ode To Conservatism