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Guest Post: Shining A Light On Expert Networks Part 2

Tyler Durden's picture




 

Submitted by Hedgehog's Repent

An Open Letter to Andrew Cuomo, Part II:

Dear Mr Cuomo (or should I call you Andrew by now?):

In my last missive, in (re)introduced you to the potential for illegal and unethical harvesting of inside information as created by so-called "expert networks." I singled out the Gerson Lehrman Group in my last missive. Today, I'll keep my laser-like focus on GLG and a little phone company called Verizon (Ivan Seidman, please pick up the phone now.). Verizon is one of the two largest phone companies in the country right.

As such, people working inside Verizon are privy to untold quantities of potentially material information not only about their own company but about any number of other companies including but not limited to: handset companies, communications tower operators, communications equipment manufacturers, fiber-optic cable makers, engineering contractors, colocation facilities companies, and OSS/BSS software companies. So one would think that senior level (or any level, for that matter) of employees at Verizon would be forbidden to speak to hedge fund managers without a handler of some sort on the line (IR, PR, whatever).

Yet our old friend GLG broadly advertises a senior Verizon manager as a key thoughtleader in the GLG network. Andrew Malis is the Director of Packet Network Engineering at Verizon Communications (I linked to his LinkedIn profile -- these days, LinkedIn looks a lot like GLG thanks to deals like this. Reid, got your lawers ready to go?). Malis also heads a key telecom industry standards determination board, as President and Chairman of the Board at IP/MPLS Forum. Now, Mr. Malis may indeed only be providing 5,000 foot commentary on the telecom landscape.

But isn't it remotely possible that his insights might be colored by the fact that he is privy to secret information inside a telecom behemoth that can single-handedly swing the fortunes (and share prices) of dozens of other publicly traded companies? Or what if Mr. Malis mistakenly reveals to a GLG caller that, indeed, Verizon does have a deal planned with Apple to launch a new iPhone? What value would this be to a hedge fund manager, even if the revelation was the result of a slip? Could such tantalizing prospects in fact be the primary reason that hedge fund managers have made Mr. Malis a Top 5% selection in the GLG network?

These are idle allegations, of course. Not that any of this could ever be true. Of course, it would be very easy to disprove such allegations. Should GLG or Mr. Malis be able to produce a transcript of conversations he had conducted with hedge fund managers, that would do the trick nicely. And considering the nature of the business that GLG conducts -- essentially, facilitating investment advice -- one would think that such transcripts, or at least recordings, do exist. Right? So a simple habeas corpus for such transcripts should be no problem at all.

What do you think, Andrew? Might it be worth asking to take a look at those transcripts? Or asking if they do in fact exist?

Sincerely,

Hedgehog's Repent

 

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Wed, 08/19/2009 - 10:14 | 40977 ShankyS
ShankyS's picture

Markopolous part deux. Wonder if Cuomo can act any faster than the SEC? Something tells me that Sphincter (I mean Spitzer) would have been all over this by now.

Wed, 08/19/2009 - 10:26 | 40991 PragmaticIdealist
PragmaticIdealist's picture

Spitzer has been backed by the hedge fund industry his entire political career. Best friend is Cramer, his call-girl was a "friend" of Chanos.

He only targets Wall Street banks and researchers with inane attacks intended as a sleight of hand manoevre to propel himself into power via populist appeal.

Wed, 08/19/2009 - 11:09 | 41058 ShankyS
ShankyS's picture

Thus my point after the last letter that Cuomo will tread lightly as his political aspirations will outweigh public well being. They are all crooks.

Wed, 08/19/2009 - 11:11 | 41066 Sqworl
Sqworl's picture

Markopolous recently stated that CDO market made Madoff look like a peanut.. His mistress confirmed that statement in her new book!  lol

Wed, 08/19/2009 - 14:18 | 41404 Anonymous
Anonymous's picture

+1

Wed, 12/15/2010 - 06:01 | 807422 Karston1234
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These are idle allegations, of course. Not that any of this could ever be true. Of course, it would be very easy to disprove such allegations.High School Diploma | Online GED | Online homeschooling

Wed, 08/19/2009 - 16:54 | 41238 darkness (not verified)
darkness's picture

But there are political limits to labour exploitation in China (those guys sure know how to riot!), and any real, lasting

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 10:17 | 40981 Sqworl
Sqworl's picture

Again, at present our AG will not target NY based corps...Campaign money will get him to Albany!!!

Wed, 12/15/2010 - 06:01 | 807424 Karston1234
Wed, 08/19/2009 - 10:23 | 40989 PragmaticIdealist
PragmaticIdealist's picture

1) www.deepcapture.com --> Hedge funds will do anything as covertly as possible and manipulate even cancer biomedicinal industries to achieve their means.

2) They will never provide damning recordings of conversations and probably never record the damning conversations in the first place.

Wed, 08/19/2009 - 10:26 | 40993 peoplesdemocrat...
peoplesdemocraticsocialistrepublicofmaryland's picture

Seems like a no brainer.....Andy should be all over this.

So many crooks and so little time.

Go get'm TD!

 

Wed, 08/19/2009 - 10:30 | 40996 Anonymous
Anonymous's picture

this is incredible info, and you guys really have balls for putting it out here.

that said, the regulators aren't exactly "regulating" anything any more, so....whatever....

i mean, the manipulation is breathtakingly blatant at the Comex. JPM is virtually dictating the price of silver, and are they even talking about position limits for that yet?

so.....insider info? pfffftttttt

Wed, 08/19/2009 - 11:09 | 41060 Sqworl
Sqworl's picture

lol...exactly when do you believe they stopped regulating???

Wed, 08/19/2009 - 12:05 | 41155 Art Vandelay
Art Vandelay's picture

It says everything about the world we live in, that it takes bigger balls to write about this going on than it does to do the deeds being written about in the first place.

Wed, 08/19/2009 - 10:35 | 41008 JohnKing
JohnKing's picture

Please stop all this!

First front running and now insider trading, how will the important people be able to survive if you take away their edge?

Wed, 08/19/2009 - 16:54 | 41236 darkness (not verified)
darkness's picture

We've picked up since then, volumes are lower than last year but, looks like a normal year end ramp up. Next year will be another question mark.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 10:48 | 41029 Anonymous
Anonymous's picture

Of course. There are way too many conflicted wheelings and dealings that is going on in the world of finances. And those efforts of uncovering them are appreciated. But for once, I would like TD (or I could do that myself)to present a solution that takes out the heart of the issue. If back in the fifties I wanted to gamble,and I knew that Las Vegas is run by the Mafia,then I would do it on my own. There was no goverment incentive(through tax incentive) for me to do that. So we take all the tax incentive from socks investing. I mean you make it a go it alone.

Wed, 08/19/2009 - 11:13 | 41032 channel_zero
channel_zero's picture

..about their own company but about any number of other companies including but not limited to: handset companies, communications tower operators, communications equipment manufacturers, fiber-optic cable makers, engineering contractors, colocation facilities companies, and OSS/BSS software companies.

... Andrew Malis is the Director of Packet Network Engineering at Verizon Communications

TD,

I do MPLS deployments with telco's all of the time and it's the same organizational silos everywhere.   If you understood what MPLS was you would have a clue that fiber optic cable makers aren't paying this guy a visit any time now or later. 

Colos. Why would they care?  Their network connections dwarf MPLS on the slowest day in a century.   That is unless you are talking about the 'colo' in my garage or other genius plans where execs think managing the physical location just because it looks like they can.  (And why not? They don't get the call at 2AM when the AC breaks)

The guy  provides b*llsh*t detection for interested parties.  At best, he can share Engineering department gossip.  The guy has almost no business-side exposure.

Your Wynit piece was *way* more likely than this one.

Finally, I earned some money through GLG after a previous super-niche employer. 

1. Some of the customers talking to me got their deeply flawed technical explanations from the basket cases trying to pump share prices or do an M/A.  What made matters worse was they believed *all* of it.

2. The vast majority of the people I talked to didn't ask very good questions.  I don't expect them to be specialists, but I expected better questions.  I wrongly assumed they cared about other people's money.

3.  There were some good ones who didn't know enough, but still had excellent questions.   Those were so few and far between I lost all hope that the financial side was any better than the industries I've worked in.

Wed, 08/19/2009 - 11:08 | 41054 Milton
Milton's picture

I'm surprised that Golgman Sachs hasn't sent Gerson Lehrman a cease and desist on their logo. Creepy.

Wed, 08/19/2009 - 11:54 | 41141 zeropointfield (not verified)
zeropointfield's picture

Good catch. Seems that Board Member Mike Bingle is a former Goldman Sachs investment banker. Mike Bingle also worked for Apollo Management L.P.

Wed, 08/19/2009 - 12:12 | 41166 GoldmanSux
GoldmanSux's picture

Verizon has poor ethics. They took their sleepy yellow pages division, a cash cow in a mature industry, levered it up and paid the parent a wopping dividend. I think it was $9 Billion. Then they spun it off with a rag tag board of directors. Three CEO's within the first year. Needless to say, the sub is now basically bankrupt. Out and out fraud if you ask me.

Wed, 08/19/2009 - 12:13 | 41171 e1even1
e1even1's picture

Hedgehog's Repent, i think you're on the wrong side of the real scam here. it's a garden variety advisory service scam.

the expert or a partner takes a leveraged position, it doesn't matter what, and contacts the institutional clients with the tip. soon the dark pools are swirling and roiling, the market is popping and pulling all the momo quant triggers, and next thing you know it's heat map city and off to the races. the expert liquidates into the market move. easy money.

front running. one of the oldest scams in the book. i dont know if it's actually illegal though because it's not done by a broker/dealer. that could be why i've never heard of a prosecution.

Wed, 08/19/2009 - 16:53 | 41234 darkness (not verified)
darkness's picture

The foreign capital that jumped in will have to come out. The dollar and the yen are the most likely beneficiaries.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 13:03 | 41298 Anonymous
Anonymous's picture

I've crossed paths with GLG's founding partners, and it's fair to say ethical niceties don't preoccupy them

Wed, 08/19/2009 - 14:57 | 41463 Anonymous
Anonymous's picture

According to the GLG website, their co-founder was a Yale Law graduate, thus I am guessing they have a very built out compliance department. They have probably taken all the necessary steps (paperwork, consent forms etc) to remove themselves from the equation and any liability for the content of the phone discussions.

Also, it looks like Silver Lake Partners took a $200m position in the company early 2007. I am not sure how much equity they purchased, but I am guessing around a quarter or a third of the business. I can't imagine SLP making a smaller scale investment in GLG if they had ANY concerns about the legality of their model (the risk v reward for someone like SLP wouldn't make sense).

It's probably the hedgies and the consultants who are holding the stick on this one, and with how far behind the SEC is already, I am sure they are willing to take the risk or fudge the line on their "key" discussions. Besides, some of these large funds have bigger legal departments than boutique law firms.

I tend to agree with channel_zero that the majority of the conversations are probably just young analysts asking stupid questions to get up to speed on some space or company their PM has tasked them on. I imagine that the real info probably changes hands in a more ambiguous manor, but then again, look at Pequot - and the SEC can't even lock that one in...sigh

Thu, 08/20/2009 - 04:15 | 42027 Anonymous
Anonymous's picture

Hey, I resemble that remark - I live in an "ambiguous manor".

Thu, 08/20/2009 - 13:11 | 42365 Anonymous
Anonymous's picture

If you look at GLG's founding individual investors, you'll find a lot of overlap with the firms engaging GLG.

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