Auction Rate Comments Reflect Real Pain

Today’s commentary is a little lengthy but is very personal. I hope you will take the few extra minutes to read it and share it with friends, family, and colleagues. Thanks. LD

Each and every day I think of what I can write that will truly help people further understand the dynamics at work in our global economy. In the course of my writing I am often drawn to specifically help those who have been defrauded or abused by the system that operates on Wall Street and in Washington.

I derive tremendous personal satisfaction in providing an outlet and a sympathetic ear to those who feel that few if any people are in their corner. No group of investors and individuals deserves greater sympathy and a stronger voice than our fellow American citizens so badly mistreated in the entanglement of auction-rate securities.

While many within our nation and the markets today may care to focus on recent earnings reports, a rebounding equity market, or the upcoming long weekend, let us remember that there are thousands in this country who still experience real pain from the ARS scandal. Is it easier to forget about them? If you care.

I choose to reach out to them again and spread their stories of real pain and anguish. Why?

Two reasons. First and foremost, I hope that this commentary incorporating individual comments of those stuck with ARS will attract the attention of others who can make a difference in rectifying this massive injustice. Secondly, I hope this commentary will cause all who read it to stop and reflect on how we as a nation can allow innocent and unsuspecting citizens to experience such heinous treatment from those who distributed the ARS and regulators as well.

What does this say about our country? I implore anybody reading my work to take an extra minute or two and appreciate that the individuals who wrote the attached comments continue to suffer. They have extensive company. How do they suffer? THEIR money which continues to be frozen was intended for retirement, college education, and so much more.

I stand with these individuals. I hope you will also stand with us and spread this story so their pain can be ended and their money returned. These comments are a mere cross section of the multitudes I have received over the last two plus years.

April 20, 2011 at 10:52 PM
I too have been burned by the ARS mess. I own Jefferson County, Al. water & sewer ARS sold by Morgan Keegan. I moved my account to Raymond James when the @#$# hit the fan. I have had good service in other areas at RJ but I am repeatedly advised to hold tight, that I will be made whole when the water/sewer board is able to refinance the debt. Mine was a 35 day commitment and the broker lied to me, and without permission, put all of my ARS cash in the same Jefferson County instrument. My business is struggling because of this mess. Does anyone else own Jefferson County ARS and do you have any advise as to what to do now?

John C
March 7, 2011 at 5:30 PM
I am right there with you; stuck and feeling powerless. I called my Raymond James FA on Friday and he insulted and embarrassed me in front of my employee. I reported the incident to his boss and got better treatment but of course no results or any promise of recovery. They continue to maintain there arrogant position. I am seriously considering arbitration but will start by filing complaints with every regulatory agency I can. I am so emotionally drained from this ordeal that I turned the file over to my part time Admin Assistant for help. I am truly at my wits end.

October 28, 2010 at 11:15 AM
My sentiments and comments are similar to Susie. I have Nicholas Applegate ARS through
Raymond James and have been powerless. They have now also started to discount the value on the statments. When questioned, they say it is third party valuation as there is not market for these securities.

I am lost.

April 20, 2011 at 8:26 PM

Seemingly according to Alvarez and the Federal Reserve the banks needed the cash more than the individuals and institutions to whom it belonged.

After 3 years of fury at having been defrauded, I am more furious than ever.

I was one of the people who filed a complaint with the SEC. I followed it up. I called them, and got “investigators” to return my calls. They seemed so sincere. They were patsys at best.

I have wondered for three years how a $330 BILLION fraud so central to the collapse of our economy could go virtually undiscussed. I wondered why Congress held a hearing, and then essentially talked about something else.

I have my answer, after three years. The fix was in. They had the money, and they decided to keep it, because they could.

Now someone tell me what I’m supposed to believe in when I hear “United States Of America.” I have lost my trust.

April 16, 2011 at 11:49 PM
Been reading you and following your concern for all of us who own ARS….it’s been 3 years and my husband is 81 and I can’t wait for ARPS to be redeemed any longer….I started arbitration against the financial advisor who sold them to me and I am finding it will be a very expensive as I have to get a lawyer since he has one.. The ARPS he sold us are Blackrock and MFS two very active financial rich companies….My question who is responsible to get my money returned…The financial advisor who advised us to purchase them ??? and why can’t Blackrock and MFS give back our funds after 3 years…I have since left the advisor as of course I lost faith in him…it seems I have no choice but to go to arbitration but of course I could lose and it will cost a lot of money as well. What to do??? Thanks for being there and keeping this terrible injustice alive….

Eddie D
April 15, 2011 at 7:38 AM
Hi Larry, On behalf of all Ars victims thanks for keeping the fight alive. I have been stuck in Ars for over 3 yrs and have not seen one penny back from Oppenheimer &co. I have learned a few things about where I stand in the financial world. Nowhere. Only after you have been lied to, manipulated out of your money, and robbed do you find out there is no recorse or protection for you out there. If you happen to get your money back after you were the victim of some scheme it’s only because it served some other purpose or you got lucky. The SEC, FINRA, almost all AG, put NY at the top of the list, and the rest of the governmental agencies exist to protect the financial industry from real damage. They are not there to watch over you and your money. The guise of investor protection allows you to sleep at night believing your money is safe. When you realize that you have been done wrong and turn to one of the angecies mentioned above for help and get treated like your the criminal it hits you how screwed you really are. Anyone still stuck in Ars that attempted to get their money back can attest to that.

July 21, 2010 at 3:19 PM
Raymond James sold me Nuveen muni ARPS instead of treasuries (which I suggested) and has stonewalled for 2 1/2 years. My broker keeps telling me Nuveen will redeem them… What do you think? Are regulators going after RJ? My kids’ college money is locked up – legal fees will eat up too much of it, secondary market is a huge hit.

July 1, 2010 at 9:11 AM
I too have waited for over two years to get my money, my story has the added pressure of having to borrow money against these illiquid bonds to cover money earmarked for taxes. OPCO was informed that some of the money they were “protecting” for me had to be sent to the IRS by April 2008.
Every month I lose money by having to sell stocks/bonds at a loss to cover the interest payment.

July 1, 2010 at 12:05 PM
I’ll add to the above the rude, hostile treatment I’ve received at the hands of Oppenheimer. They’re just mean, bitter people who have no regard for clients. Why would anyone ever invest a nickel with Oppenheimer when here on this page you have a list of firms who do the right thing for their clients?

For the uninformed, the Massachusetts complaint vs. Oppenheimer asserted that senior management sold their own prive ARS holdings upon hearing that the auction rate market was tanking, and neglected to notify their clients. Is this who you want managing your money? Since the meltdown I moved money to 3 of the brokerages listed above and all have been above board and ethical. AVOID OPPENHEIMER LIKE THE PLAGUE.

September 29, 2009 at 4:53 PM

I have worked hard and saved my whole life while I watched my friends by bigger houses, boats, jet skis, nice cars and everything else they don’t need. I saved and saved and one day my broker says why do you have all that money just sitting in a money market account? You could get three times the interest and still have it liquid. Better yet, the interest is TAX FREE. I moved my money and now it’s like I don’t have it. I can’t touch it even though it is mine! A lifetime of savings has been robbed from me and no one seems to care. This is the first new article I have seen about ARS in over a year. How this isn’t more of a story is beyond me.

When I stated that I need my money the firm’s lawyer said that I should have thought of that before investing. When I said that I stated that I needed the money to be safe and liquid she said I should have read the prospectus (that I never received). That’s what is great about this country. We will screw anyone in the name of business. This story needs to be FRONT PAGE NEWS!!!

This is America? A nation that waves its flag touting ‘liberty and justice for all’ allows the pain and injustice embedded in these comments to go unheeded.

Something is seriously wrong. This is not the country that I want to give to my children. I want real justice and real liberty for all our citizens, especially those abused by financial frauds, such as ARS. I plan on voicing that opinion loudly. God Bless our America and all those who cherish real liberty and real justice.

Perhaps somebody with a conscience inside the industry may care to share some insights. Your anonymity is TOTALLY protected. How about it? Do you recognize some of the pain expressed above from some of your clients? Got a conscience? Did your management run you over just as you ran over your clients? What kind of country do you want to leave your children? Did you just get a pit in your stomach? That’s right. I’m talking to you. Go ahead, talk back!!

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

Visit: Sense On Cents

4 Comments on Auction Rate Comments Reflect Real Pain

  1. I was burned by UBS on Auction Rate Securities.

    They had them listed on my UBS statement as Cash Equivalents.

    o They sold me an additional $ 75,000 worth of ARSs 2 weeks before
    the freeze on Feb. 1, 2008.

    o The financial sector went from holding 80% of the ARS at the beginning of 2007 to 30% at the end of 2007; yet claim that they could not “see” nor predict that ARSs were in trouble. UBS President of Securities, was found to have dumped all of his ARS 3 months before the meltdown. His emails confirming this fact were made public.

    o Since I live in Washington, DC; I was able to bring alot of preasure to bear and get my money back. It took nearly a year.

    o I was not compensated for any of my time, mental anguish, pain and suffering. UBS was found guilty by Cuomo, Attorney General of NY and was force to give the money back and they did. This was like committing a BANK ROBBERY and being told that if you just give the money back everything will be forgiven. A meer slap on the wrist.
    ( Cuomo justified this on the basis that the ARS holders wanted their money back ASAP, and that prosecuting this case would take to long in the courts.)

    o I would like to find someone to present my case of PUNITIVE DAMAGES.

  2. UBS Cash Alternative — Complaint Form – Part # 1 May 16, 2008

    1. UBS Financial Advisors Sold Me $ 75,000 ARS on February 1, 2008 —
    On 2-1-2008 there were many indications that the ARS (Auction Rate Securities)
    were very risky and auctions were failing severely. ( See Item # 4 Below for details)

    2. UBS Misrepresented What they Sold me as Being Risk Free and Liquid.
    UBS Financial Advisors sold me what I was told was an Alternative to my “Cash Account” which was only paying 1.0 %. ( I was getting over 4% in my Senate Credit Union Money Market.) I had asked for very risk free money market holdings or CDs. They encouraged only one alternative option. They told me what they were putting me in was perfectly liquid, and I could get my money out within 7 days. I was told that my base investment capitol was not at risk. The only risk was specifically how much interest I would get.

    What they sold me turned out to be high risk “auction rate securities” that were frozen and I am unable to get my cash. . They told me nothing about what they were putting me in and never provided me any prospectus information about what turned out to be ARS.
    I was given the alternative between cash at 1% or this cash alternative.

    This is much of my life savings. I have lost many anxious days and nights sleep over the past months. I have spent much of my time for the past several months studying this and contacting the SEC, the FED, DC Securities Oversight Office, Senate Banking Committee, Calamos, DTC, the New York Attorney General and others.

    3. UBS Knowledge of My Conservative Cash Goals were Ignored:
    UBS knew that I was 66 years old and retired.
    Prior to federal retirement, served 19 years with the United States Senate and a year at the White House, 7 years with USD Agriculture, 4 with the U.S. Army TAG and 4 with USPS R&D. I am a very conservative investor and had retreated from stocks.
    They realized that a good portion of my life savings was in my UBS cash account.
    UBS knew of my very conservative goals for cash as based on my 30 years with them and Paine Weber which they acquired.

    UBS full page ads running in May 2008 which state: “Because today you more than ever you need financial solutions that reflect a ‘deep understanding of your needs and goals. A financial relationship based on trust and sound advices.”

    I trusted them and was subsequently — advised or misadvised by a series of UBS “Financial Advisors” to put my money into their cash alternative ARS funds. It needs to be emphasized that this was not just one bad egg “broker”; but a series of UBS “Financial Advisors”.

    4. Bad Financial Advise: UBS Financial Advisors Sold me ARS on
    February 1, 2008. I realized that this was bad advise — learning of the ARS problems in February; when I:

    • Read in the New York Times that Institutional Investors had reduced their holdings of ARS from 80 % to 30 % of the outstanding market during 2007.

    • In Calls to the top levels of the Senate Banking Committee and to the top level SEC officials; I was told that the ARS were failing severely in January 2008.

    Official response Issued by UBS fraudulently stated:

    “The liquidity crisis and its wide reaching effects were not anticipated by investors, the financial services industry, government leaders, US and issuers of the securities.”
    The really stunning item in this rebuttal is the refusal of UBS to accept responsibility for advising and managing CASH accounts.

    • Later learned of New York Attorney General “Criminal Investigation” of UBS.

    5. UBS Inappropriately Reducing the Value of ARS on Monthly Statements
    In May when the Fund Issuer Calamos stated that they were pursuing refinancing and would make distribution in such a way as to NOT Reduce the Par Value of $ 25,000 per share. UBS inappropriately reduced the Value of my Holdings on my Monthly Statement from $ 75,000 to $ 73,185 based on some undisclosed calculations.

    UBS also issued a written mailing that stated that they would no longer list ARS as Cash Alternatives on the monthly statement. They reconsidered this and as of the April 2008 statements had not made this improper re-classification change.

    6. UBS Using Undisclosed and Improper Distribution of Calamos CSQ Funds following 81.5% Refinancing and DTC Distribution.

    UBS refused my request to issue me their written guidelines for the dispersion of Calamos CSQ funds released by DTC following 81.5% refinancing by Calamos. This was after I had talked with Calamos and DTC.

    I hold 3 shares of “Calamos Strategic Total Return Fund Series F
    Symbol RINTFI CUSIP NO. 123125606
    $ 75,000 = 3 x $ 25,000

    I had expected that after the Refinance; a return to My CASH of approximately 81.5%
    i.e., at least 2 shares. I have not received any of this $ 75,000 as of May 15, 2008.

    7. UBS Detailed Violations of Federal Securities Laws and FINRA Prohibited Conduct Guidelines:

    A. FINRA – Policy Definition of “ Prohibited Conduct”:

    1. Recommending to a customer the purchase or sale of a security that is unsuitable given the customer’s age, financial situation, investment objectives and investment expertise.

    4. Misrepresenting of failing to disclose material facts concerning an investment.
    Examples of information that may be considered material and that should be accurately presented to customers include: The risk of investing in a particular security, the charges or fees involved, company financial information and technical or analytical information such as bond ratings.

    7. Guaranteeing customers that they will not lose money on a particular securities transaction, making specific price predictions, or agreeing to share in any losses in the customer’s account.

    13. Using any manipulative, deceptive, or other fraudulent device or contrivance to effect any transaction in , or induce the purchase or sale of, any security.

    [[ It is of particular note that these were my CASH ACCOUNTS not just any ordinary security holding.]]

    B. My research has revealed the following class action suit filed by Binkow & Goldberg LLP in a Class Action lawsuit:

    “The Complaint charges violation of federal Security Laws. Among other things, plaintiff claims that defendants’ material omissions and dissemination of materially false and misleading statements concerning auction rate securities caused those securities to be overvalued and artificially inflated, inflicting damages on the investors.”

    “Defendants knew, but failed to disclose to investors, material facts about auction rate securities.”
    “Specifically, the Complaint alleges that the defendants failed to disclose:
    (i) That Auction rate securities were NOT cash alternatives, but actually were complex, long-term financial instruments with 30-year maturity dates or no maturity at all;

    (ii) that auction rate securities were only liquid at the time of sale because the auction market was artificially supported and manipulated by various broker-dealers to maintain the appearance of liquidity and stability; and

    (iii) That auction rate securities would become illiquid as soon as the broker-dealers stopped maintaining the auction market.”

    8. Damages Inflicted by UBS on Investors:

    I repeat…UBS stated officially in mailed writing that:
    “The liquidity crisis and its wide-reaching effects were not anticipated by …UBS

    Further, UBS articles of late have them admitting that they in general did a poor job of managing risks at many levels. Their errors are not my responsibility.

    This is precisely the point. They are the Experts. They are getting paid to “anticipate” market trends. They are hired by investors to be knowledgeable experts. As expert “Financial Advisers” and brokers they have a contractual obligation to provide Cash Alternatives which are just that… risk free and completely liquid cash like investments. That is what they said they were doing.

    Their failure needs to be more than just acknowledged.
    They need to accept responsibility for their failure.
    But that is just the beginning. …they need to fulfill their obligations to their clients…

    a) They need to pay investors the CASH that they have invested NOW…not wait.

    b) They also should compensate investors for the anguish they have caused. To just use the latest PR technique of admitting they erred and walk away is just not going to cut it. Any Doctor, Lawyer, Engineer or Manufacturer who makes a mistake; they must compensate their clients for the Damages in terms of time, pain and suffering inflicted on their clients.

    It has been very stressful for me for the past three months. It was difficult to believe that I would ever see my $ 125,000 again. UBS had not told the truth before about the risks and my ability to get my cash. So how in good faith have I been able to believe them when the say that “eventually” I will get all my money back.

    Finally, UBS has shaken my confidence in the United States Stock Market to the core.
    How do I regain the trust and confidence to move back into the US Financial Markets
    that should function in the best interest of you, me and the nation?


    Roger Myers

  3. How can ANYONE SAY — that their faith and confidence in Wall Street and the United States of America’s Financial System has been restored !!!

  4. A Civilized counties Legal System must rest on solidly like a
    Three Legged Stool.

    o Existance of a LAW or REGULATION

    o Enforcement of the LAW or REGULATION

    o Penalties for breaking the LAW or REGULATION
    sufficient to Deture the Crime.

    We have inadequate laws and regulations and Obama’s admistration has done little about reforming them.
    We have insufficient, lax and understaffed Enforcement.
    We have seen only Madoff be given any thing near a Penalty.
    and it was not suffienct to deter the crime, but amounted to
    really high Salary for each day he is incarcarated.

    — Only a Gallows on Wall Street —
    is going to restore My and Many other Americans confidence in Wall Street.
    and when Foreign governments and investors finally realize; the sad state of finacial affairs existing in the US, we will really be in trouble financing our incredibly huge national Debt.

Leave a Reply

Your email address will not be published.