Monday, July 20, 2009
Morgan Stanley, selling bullion they don't have and getting away with it
The crooks get fined, never admit guilt and nothing is done to force these villains make good on the damage their bogus bullion sales caused.
I originally caught wind of this case some time ago from the works of Ted Butler and I've blogged, blogged again and blogged more on this and other schemes by banks to sell non existent bullion and unbacked bullion certificates to unwary investors. These scum also got up to other mischief like charging people storage on bullion that was never purchased, cute huh! So after several years in civil court Morgan Stanley has made a deal to pay $4.4 million in fines and remediation but get off without admitting any crime. If you tried this kind of crap you'd be tried in criminal court and go to jail for life.
I'm not only quite disappointed that no guilt was attributed to Morgan Stanley in this case but also the fact that $4.4 million in payouts for 21 years of misleading thousands of investors is considered a reasonable settlement. That's a mere $209K for each of the years they wrongfully charged people for storage of bullion they never purchased, that's $209K for each year they thwarted the market and legitimate price discovery for Silver and Gold by not actually investing peoples money in the product they wanted to buy. This is a $30 Billion dollar company and this settlement is no deterrent but simply the cost of doing dirty business.
With 22,000 people in the class action against Morgan Stanley that's less than $10/year/victim
At bare minimum Morgan Stanley needs to refund all service charges and storage fees for the last 23 years, they need to do submit to an audit to prove they have now obtained the bullion needed to back all the products they sold and they should be required to move all bullion to a independent third party storage facility. Then throw $50 million in fines just to make a point that this behaviour is wrong.
During this court case Stanley admitted that not buying 100% of the bullion to back products was an industry norm. Seeing this statement governments and bank regulators should be issuing a memorandum to all banks that an audit of bullion accounts and certificates will be made mandatory in 6 months time and that they had better step into the market and cover their positions in that time frame or face fines and/or government oversight. This bullshit of selling people things they don't own has got to stop. People need to know that their purchases are real investments and not gimmicks to use their own money to bet against them in the futures market. Purchasing a commodity based investment should actually impact the supply and demand of that commodity and in return support its real price.
For Canadians don't think it's any better here. In the last year or so we've seen TD's unwillingness or inability to redeem silver Certificates and we have seen recent work showing that other Canadian Banks don't fully back bullion based financial instruments they sell, hell most don't even report their bullion holdings in their financials or answer simple questions from customers regarding these products. The MSM and Governments need to investigate this kind of corporate behaviour so I would ask you to complain to your elected officials, write letters of complaint to your financial institutions, letters to the editors of local and national papers, and ask business and crime reporters to investigate these scams.
I've been surprised a few times to find certificate investors among the people I interact with every day. Most of these folks do not consider themselves gold or silver bugs and because of that they don't see the information about manipulation and fraud most of us are saturated with. Go out on a limb and tell all those around you about this case and the likelihood that all other banks selling similar products are either marginally backed or not backed by bullion at all.