On Being Held Accountable And Being A Fall Guy

It’s a hectic week for me this week as I get ready for Washington, DC and the Compliance Week Annual Conference.  I expect to be busier than last year, when I had to do more introducing and explaining about the blog than I expect I will have to do this year.  Many who will be there are now my readers and many who will speak I have already written about, sometimes unfavorably or at least sometimes with mixed feelings.  I’m hoping some will introduce themselves to me and a few will share a story or two, both on and off the record.

I’m still enjoying the ongoing fallout from the SocGen story and all of the commentary yesterday on their annual meeting.  Some folks are even talking about the IT angle.  Is anybody listening? More on that later.
Boos!  Hisses!  
Shareholders large and small standing up for themselves and declaring Emperor Bouton and his French Lieutenants have no clothes.  
I’m lovin’ it.
The first question from the floor of a packed auditorium set the tone.

“I say you are twice guilty,” said the representative of one small shareholder association who did not give his name.

“You’re putting the employee into prison when it was the bosses who should have left,” he said to bursts of applause. “And your second failure was to turn our bank into a casino.”

Next was a private shareholder, Jean Richard, who emphasized that he had been a client at the same Société Générale branch for 36 years. “Mr. Chairman, who do you take us for?” Mr. Richard said. “Have responsibilities been established at all levels of management?”

A third did not let up. “We have lost a lot without saying very much,” he said, “Today we are going for it.”

After the 10th question — this one asking Mr. Bouton personally how he, the author of a 2002 report on corporate governance, could remain chairman — a nervous-looking Mr. Bouton said amid boos and heckles that he would only take one more question on the fraud.

Mr. Bouton, who relinquished the position of chief executive in April but has not indicated that he would step down as chairman, did not address his future or that of Mr. Mustier, once his presumed successor. Their positions were not up for vote at the meeting.

And then there’s Jake Zamansky. Having met the man, I can close my eyes and very clearly see him spitting out these words, all New York-like. I take great pleasure in his way with words and chutzpah. But he’s just a lawyer, an investors’ lawyer at that, one of the guys that get under the skin of business executives the world over because they put their money where their mouth is and bring suits on behalf of aggrieved investors. They sue bloody bastards on behalf of folks like the the SocGen folks that are mad as hell and just aren’t going to take it anymore.

…Blodget understands full well how the game is played, particularly since Merrill’s brokers dutifully peddled his research to clients, even when they began to openly question the integrity of his analysis. Furthermore, the Wall Street Journal recently quoted a Smith Barney broker as saying, “”That’s why they bought it,” said the broker whose clients, many of them wealthy retirees, invested in the Falcon fund. “These kinds of clients weren’t looking for a home run.”

Interestingly, Mr. Blodget remained mum on my comment that Citi was positioning its own brokers as fall guys, when in all likelihood they were merely following the direction of the company’s wealth management executives. I’d expect this comment to strike a particular nerve given that Mr. Blodget took the fall for Merrill’s conflicted research while his senior managers was given a free pass. As I noted in my earlier post, Wall Street’s senior executives almost never are held accountable for the wrongdoing under their watch.

Finally, there is Mr. Blodget’s issue with my transparency:

Since Zamansky is taking a stand for “transparency,” Blodget thinks it might also have been appropriate for Zamansky to disclose that he is in the business of suing companies based on allegations like the ones above.

Setting aside the irony of Mr. Blodget requesting transparency, my interests in the Citi hedge fund post were patently obvious. But in deference to Mr. Blodget’s new found piety, I must point out that in my blog post I referenced angry calls from investors who are my clients. If that wasn’t clear enough, my biography is clearly posted on Seeking Alpha, a financial blog aggregator which is where Mr. Blodget originally saw my post. And finally, my blog post first appears on my law firm’s website.

Most people in the industry know – Mr. Blodget certainly one of them – that I represent investors who have been harmed and abused by Wall Street.

Suffice to say, I never thought I’d see the day when I’d be holding myself accountable to Henry Blodget. Perhaps that explains the pigs I’ve just seen flying past my office window.