Credit Suisse First Boston Fined $100 Million

A couple of people wrote in to note that Credit Suisse First Boston, which was the underwriter for VA Linux ^? ' IPO, has been fined $100 million for actions they took in that and other high-tech IPO's during the stock market boom. CSFB allocated shares of certain IPO's to customers who made kickbacks to CSFB. Here's their side of the story. There's also an additional statement by the regulators and CSFB's settlement agreement (PDF).

Comments

Re:Why?

[geekoid]

this is why people form corporations.
remove corporate "status" people would go to jail.
Why do you think corporations exist, to help consumers? hahaha

The chickens are coming home to roost.

[mrsam]

I wouldn't be surprised if a few other brokerages will get nailed pretty soon, for similar kinds of shennanigans. Disclaimer: I have no direct knowledge of any regulatory investigation of ETrade, but we all know that they pretty much played the same games with RHAT.

At least with CSFB did in fact give a handful of shares to everyone who applied for the friends-in-family deal - AFAIK - while ETrade tried to come up with every excuse in the book to kick out as many people as they could in their friends-and-family program. Although some of us did eventually get our pound of flesh (see my website: E*Trouble to revisit those exciting times) it would be icing on the cake to see EGRP whacked on the balls, again.

Dot com

[BluedemonX]

Ever heard the expression "Boston Wad" or "Pigeon Drop?" It's a con game where you get a roll of dollars, then add a fifty to the top. Wrap with elastic band.

Then you find your mark, and agree to go drinking. Show him the huge wad of "fifties". Drop it (with him in tow) in a locker or safety deposit box and keep the key.

Later on in the evening, get a phone call/page or something telling you to get out of town or whatever. (This works really well if both of you are dopers/criminal element) Suggest to your new friend that you need to boot out of town and could he grab you $400 from the ATM for bus fare, etc? He's totally entitled to keep the $1000 in the locker - you haven't time to get it and get out of town and are willing to eat the loss in order to save your neck.

You get the $400 and split. Your "friend" finds out his wad was worth $75 or so.

Dotcoms were pigeon drops. Legal ones. "Oh, uh, yeah, this stock's going to be the next Microsoft. Want mine for $100 a share? I made enough money on it having bought in at $3 a share!"

On that note, when will ESR step up and write...

[Anonymous Coward]

..."Even More Surprised By Poverty", his sequel to the much-ballyhooed "Surprised by Wealth"- an account of his candid feelings on being worth $36 million-ish after the VA Linux IPO?

A back-of-the-napkin calculation shows that $36M to now be $350K. Of course, to be fair, that still ain't exactly hurting. But yeesh, hindsight makes "Surprised By Wealth" one seriously painful read...

And even richer a read, given CSFB's plight, is the ZDNet article on the subject of ESR's fortune, which, with unintended irony, observes:

"Some open-source developers are envious of those whose work has brought them wealth. Some who could have made money from the recent VA Linux IPO weren't able to because they didn't have enough money or connections to get onboard the VA Linux IPO bandwagon.

The age-old question of the open-source community has been: "How do we make money at this?" That question, at least for some developers, has now been answered..."

Yeah. It's been answered alright.

Re:But then again

[jafac]

Food is a bad example.

In fact, there's really no good example of a commodity or security that's really a bullet-proof shelter.
for example, US farmers got raped back in the 80's as food prices failed to keep up with inflation, and the income they were counting on to pay off 10-year loans on $100,000 tractors - wasn't reliable, and they lost their farms. Granted, it was a stupid decision to take risks like that, but when you look at the pattern of the large numbers of farmers who were getting foreclosed on, it looks like something fishy was going on with the loan underwriting. That's really beside the point.

Food prices fall when there's an oversupply, which can be caused by poor planning, good weather, or unintended side effects of tax laws or changing political climates (with regard to economic sanctions, etc).

What are more reliable commodities? Precious metals are generally good. Oil used to be good, but that's because the prices were propped up by a monopolistic cartel. The Russians are fucking their asses right now. Yay Russia!
Land is almost ALWAYS a good deal - but there are factors that can sneak up on you and screw you. The value will drop out of land if there's a recession and people suddenly can't afford to pay $1 million for an 800 sq ft house anymore (San Jose, CA).

The thing that absolutely SHITS me, is - I'm relatively on the side of "free markets" and such. But when you deregulate some crucial infrastructure commodity like energy, and for whatever reason, the value of a commodity like natural gas spikes, then it's a happy good time for the commodity traders who can take advantage of it. It's a SHITTY BAD time for the poor consumers, who one month, were paying $30 to run their lights and TV, and the next month, are being billed $100, and they're suffering rolling blackouts. For some reason, I don't think it's a good idea to let the invisible hand jerk us off ALL the time. For me, it was a simple matter of realigning some of my bills for the extra cash I needed for my electric bill. For a low-income family, it meant choosing between electricity or food. What really sucks is the thousands of office buildings that were running air conditioning full blast, leaving computers and lights on at night, and the poor low-income families couldn't afford to power their refrigerator to keep their food from spoiling. These arguments seem to miss the ears of the "free market" champions.