The Circle of Greed: Who Wants to be a Congressman?

Mark Faulk, The Faulking Truth

Call it what you want. Naked short selling. StockGate. Fail to delivers. Stock counterfeiting. Financial terrorism. By any other name, it’s still the same thing. Fraud. Millions of Americans being robbed by hedge funds and multi-millionaires utilizing loopholes built into our stock market system.

This is no longer news. No one in Congress can claim plausible deniability, no one in the SEC can say that is doesn’t exist. The White House, and even President Bush himself, can on longer claim ignorance when it comes to the financial raping of our country that has driven thousands of young companies into bankruptcy and ruin, the same companies that our economy depends on to provide the jobs of the future, the same companies that we depend on to keep our workers and our money right here in America. Even the media, who, controlled by the brokerage firms, investment banking companies, and New York Stock Exchange representatives who sit on their Boards of Directors, until recently has either turned a blind eye to this massive scandal or actually seemed to side with the criminals, has begun to realize that this is an issue that, to borrow a line from Dylan Thomas, will “not go quietly into that good night”.

How long have our country’s elected officials known about stock counterfeiting, how long have they turned a blind eye while countless retirement accounts, college funds, and small businesses have been bled dry by an industry that seems to care only about its own, and by “its own” I don’t mean the millions of investors who they are pledged to protect and represent, I mean the chosen few who have a large enough net worth to buy influence and control, and the industry itself, who profits to the tune of billions of dollars a year from buying and selling shares of stock that don’t exist?Advocates of stock market reform have been “lobbying”, in their own small way, the SEC and Congress for years. They have been prodding and poking at the media to do the right thing and expose this story to a larger audience. They have watched as both our elected leaders and our media has succumbed to pressure from special interest groups, and done nothing while our country suffers. I know for a fact that articles from The Faulking Truth and other publications were sent to every member of Congress on a regular basis as far back as 2004.

The Justice Department has presented compelling evidence that substantial naked short selling existed at least as far back as 2000, as seen in the Anthony Elgindy stock fraud case. According to an article in TheStreet.com in August of 2005, “Ken Breen, an attorney in the Justice Department during the Anthony Elgindy case, says the prosecution presented evidence that naked short-selling was active in stocks between late 2000 and early 2002.’There was a significant amount of naked short-selling in the Elgindy case,’ says Breen, now a partner at Fulbright and Jaworsky. ‘We presented evidence on nearly 40 stocks where there was manipulative short-selling, and in nearly all of those cases, there was naked short-selling.’”

Lawsuit after lawsuit has been filed alleging abusive trading and stock market manipulation, and more recently, the states have begun to get into the act, as the North American Securities Administrators Association has launched its own investigation into stock market fraud, citing the irreparable damage done to their own citizens and economies by corruption in the stock market. And just last week, incoming New Jersey state treasurer Bradley Abelow was grilled for his role in allowing abusive naked short selling during his three-year tenure on the board of the Depository Trust and Clearing Corp.

On March 9 of 2005, behind the scenes efforts directed at the Senate Banking Committee seemed to finally be paying off when Banking Committee member Sen. Robert Bennett (R-UT) grilled then SEC Chairmen William Donaldson about naked short selling. Then, a scheduled Banking Sub-Committee hearing on the issue was postponed several times, and finally, killed by Committee Chairman Sen. Richard Shelby (R-AL) in September of 2005. The Faulking Truth had personally worked for over a year with inside sources who were instrumental in setting up the hearing, only to have Shelby betray all of America, instead apparently caving in to special interest groups and lobbyists who helped finance his political campaigns.

And now, it appears that another planned hearing dealing with stock market reform, including naked short selling, was scrapped as far back as two years ago by the House Financial Services Committee as well. In a series of emails sent to Dave Patch of www.investigatethesec.com , our political process is seen at work in its truest form.

First, on April 8, 2004, Patch and others received this email from CEO Council Director Steve Crane pertaining to a $2,000 per person meeting with selected members of Congress, set up by lobbyist Jack Wynn, president of the “Small Company Capital Formation Club”, and dealing with stock market reform. That email said, in part:

On March 31st, Ian Park (Legislative Affairs Consultant) and I attended meetings with various Congressmen/Women and Congressional Staff persons to generate support for a House Financial Services Committee Hearing to be held to review Regulatory Reform for Small Public Companies.

We met with the following Financial Services Committee members and/or their staffs in this regard:

Rep. Ron Paul, 14th District – Texas (Vice Chair - Oversight and Investigations Sub-Committee)

Rep. John Linder, 7th District – Georgia

Rep. Jeff Flake, 6th District – Arizona

Rep. Rick Renzi, 1st District – Arizona

Rep. Maxine Waters, 35th District – California

Rep. Allan Boyd, 2nd District -- Florida

Brendan T. Reilly, Professional Staff Member – House Financial Services Committee

After a rather frenzied day of going back and forth between offices on “the Hill”, we added the endorsement of Rep. Sue Kelly, 19th District – New York who is also the Committee Vice Chair and Chair of Oversight and Investigations Sub-Committee.

The following day we obtained the formal support of Rep. Michael Oxley, 4th District – Ohio, (who is also the Chairman of the House Financial Services and co-author of the Sarbanes Oxley Act) for a hearing to be held this year to review regulatory reforms for small public companies

It should be noted that Committee Vice Chairwoman Sue Kelly and Subcommittee Vice Chair Ron Paul were particularly helpful and supportive of this effort.

We ended the day at the Old Executive Office Building, where we met with two Special Assistants to President Bush. They reiterated President Bush’s support for small business and offered to stay in ‘the loop’ on the forthcoming Congressional hearing.

So, by now you are probably asking – “What is the next step?”

Next week Messrs. Park and Cochran will meet with House Financial Services Committee staffers to tighten the agenda and schedule the hearing. We have been asked to prepare a list of 5 critical action items to be placed on the agenda.

So far, we have received the following recommendations:

1. Association Health Plan which would allow small companies to band together and buy insurance at much lower rates than they are currently able to get on their own.

2. Small Business Amendments or Exemptions from certain sections of Sarbanes Oxley.

3. Reinstatement of the Reg. D – 504 exemption and increase in maximum offering to $2-5 million.

4. Create a small business ‘watchdog’ with oversight authority on the SEC.

5. A complete overhaul of the small business regulatory system / forced sale of the OTC-BB.

6. Trading practices reforms to eliminate naked shorting.

So that’s that. All that remained was to schedule a date for the hearing, and America would have been on its way to a fair and unbiased stock market, thanks to the efforts of these eight Congressmen. But it wasn’t just the House Financial Services Committee members who were aware of the issue. On June 26, 2004, just two days after the SEC approved Regulation SHO, Patch received a request from Wynn for information pertaining to naked short selling:

Dave: Can you mail me all of your naked short selling memos? I only need the latest ones mixed with others that are educational in nature (in other words, memos that explain how naked shorts work, etc.). I'm organizing a policy paper on this issue for distribution to the White House (which has requested it) and Members of Congress (who support us).

So now the White House and Congress was requesting information on naked short selling, purportedly with the intent of putting halt to the corruption that had permeated our stock market system. Patch sent the requested information to Wynn, But then, like the Senate Banking Sub-Committee hearing that Sen. Shelby would kill a year later, the scheduled House Financial Services Committee hearing never happened.

According to Patch, “Sue Kelly, Vice-Chair of the House Financial services committed to hearings on this and has subsequently squashed every one when raised by Democrat Barney Frank. The story is no better at the Senate Banking committee side as Republican Shelby has killed every effort there to air this publicly.

Congresswoman Kelly had no qualms, however, about ringing the opening bell two weeks ago at the American Stock Exchange, amidst applause from traders and ASE employees.

And what about the White House, and our President? Surely if we could just get word to the leader of the Free World, he would take immediate steps to right this wrong, to save the companies that are the very foundation of our free enterprise system, to protect the retirement funds of our elderly, and the college funds of those who represent our country’s future.

Let’s go back to the email from lobbyist Jack Wynn, whose support, according to Patch, “quickly waned as the abused could not finance his lobbying efforts. As the Bush Administration did nothing and as the Administration silenced this issue to protect the campaign to put Social Security into our markets, Wynn abandoned the effort completely.”

On June 26, 2004, 20 months ago to the day, Wynn added these words of encouragement to Patch, effectively damning the President who has abandoned his own constituents, those who voted for him, and those who didn’t, instead choosing, like his colleagues in Congress, to sell out the vast majority of Americans to benefit the wealthy few. Here’s is Wynn’s closing statement, almost two years ago:

Hang in there. Bush is aware of this issue and is concerned.

Well, guess what, America? We are on the cusp of either changing our country for the better, or watching it go down the path of financial ruin. It’s 2006, an election year for many of our “representatives” in Congress. They have known about this travesty for years, and they have done nothing to fix it, choosing instead to line their own pockets and the pockets of the already ultra-wealthy.

As he often does, Patch summed it up best:

Clearly this is not a republican issue or a democrat issue — it is an issue about the diversion of capital from middle class America to our nations wealthy and our nation's politicians. I believe we have friends in both camps but friends who are unwilling to step up to the plate and alienate those that have the wealth to keep them in office.

There’s only one thing left to do: throw the scoundrels out. Republicans and Democrats alike, send them all packing, let them move on to the lucrative jobs that are undoubtedly waiting for them now that they’ve sold their souls for the almighty dollar. This topic, and the bigger issue of stock market reform in general, should be the hot-button topic of this year’s election. Every single Congressman who is running for re-election should have to answer for their failure to do the only job that they were elected to do, to represent ALL Americans, and not just those who can afford to buy influence. After years of ignoring the single most important issue facing our country today, do you really believe that Congress cares about America? Do you believe that our President is truly “concerned”?

If not…..then I repeat, it’s time to throw the scoundrels out. And that, fellow Americans, is the Faulking Truth.