Posted on 09/06/2002 5:26:32 AM PDT by Libloather
Lawmakers Joined Executives in Profiting from IPO Deals Under Investigation
Fri Sep 6, 1:13 AM ET
WASHINGTON -- Several members of congressional committees now investigating how Wall Street doles out lucrative initial public offering stocks to favored bigwigs have themselves gotten access to coveted IPOs, Friday's Wall Street Journal reported.
The most prominent is New York Rep. John LaFalce, the House Financial Services Committee's top Democrat. In calling for hearings last week, he contended that IPO allocations based on inappropriate considerations was one of many investment-banking practices "that are atrocious but not illegal." Long an active investor, Rep. LaFalce in 1995 secured $15,000 of IPO stock in Healthcare Services Corp., some of which he sold three months later for a $5,000-plus profit.
Mr. LaFalce denied getting favorable treatment from his broker and said he lost money overall on the investment, which he called a "once-in-a-life" event. "There's no awkwardness at all," said Mr. LaFalce of his participation in the IPO inquiry. "I'm not speaking against IPOs. Companies need to come to the marketplace and we want to encourage that. (But) we want to make it as open as possible."
Mr. LaFalce is one of numerous members who dabbled in such shares during the IPO salad days, when it was almost certain that prices immediately would spike. Others include Gary Ackerman, another New York Democrat on the Financial Services Committee, and California Democratic Sen. Barbara Boxer, who sits on the Senate Commerce subcommittee on consumer affairs, which is likely to hold IPO hearings this month.
Wall Street's habit of favoring big institutional and individual investors, celebrities, corporate chieftains and other VIPs with IPOs leaves average investors with almost no chance of securing them. Neither Congress nor past administrations have ever tried to force Wall Street to allocate in a more egalitarian fashion. But the atmosphere seems to have shifted in the aftermath of revelations that Citigroup Inc.'s Salomon Smith Barney unit allocated nearly one million hot IPO shares to WorldCom Inc. executives who were giving the firm tens of millions of dollars in investment-banking business.
The House Financial Services Committee has subpoenaed documents on those allocations and asked Credit Suisse First Boston, part of Credit Suisse Group, and Goldman Sachs Group Inc. (NYSE: GS - News) to disclose documents on their IPO allocations. Salomon has said its allocations conformed to industry norms. Goldman and Credit Suisse First Boston pledged to cooperate with the inquiries.
Meanwhile, Securities and Exchange Commission Chairman Harvey Pitt late last month called for the National Association of Securities Dealers and the New York Stock Exchange to review the IPO process and consider additional antifavoritism rules beyond the ones the NASD recently proposed sending to the SEC for approval.
The congressional ethics committees have never issued rules on IPOs, though House and Senate rules and federal law prohibit members from taking anything in exchange for official action. "If a member really has a relationship with a broker that would entitle them to participate in an IPO, that's fine," said Stan Brand, a Washington ethics lawyer. "But if the shares could be seen as provided based on the individual's status as a public official, that's going to draw scrutiny."
Before the IPO craze petered out in 2001, there were always at least a few members each year whose financial disclosure statements revealed IPO trades.
Wall Street Journal Staff Reporters Christine B. Whelan, Tom Hamburger, Gregory Zuckerman and Ryan Dezember contributed to this report.
Congressman Billybob
Click for major article on turnover in the House of Representatives: "Til Death Do Us Part."
No controlling legal authority...no problem. LaFalce, Ackerman and Boxer...all members of the anti-freedom, Democratic Crime Syndicate.
The most prominent is New York Rep. John LaFalce, the House Financial Services Committee's top Democrat. In calling for hearings last week, he contended that IPO allocations based on inappropriate considerations was one of many investment-banking practices "that are atrocious but not illegal."
The twisted talking points of a criminal thinker...slick John, very slick. Why have hearings? Your slimy A$$ is apparently covered.
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