British readers of a certain age will remember the practice of carpet-bagging building societies — open a series of savings accounts in societies that were likely to demutualise, and then scoop up free stock when the institution converted.
Everyone did it. Well, everyone that had 500 quid to their name. And if you didn’t have 500 quid (like if you were, say, 15) chances are a parent or other relative would open an account or two in your name so you could play the game.
It now emerges, in the eyes of US regulators at least, that Britain was a nation of fraudsters at the time.
In the US such activity — specifically opening an account in the name of an off-spring — is a serious offence.
Witness the case of one James D Sterling, a New Yorker who has just settled with the SEC over a “fraudulent scheme” involving 51 public offers of banks that were converting from mutual to stock ownership. Says the SEC:
The SEC’s complaint alleges that, from January 2003 until October 2008, Sterling defrauded these banks and their depositors by secretly using his daughter as a nominee to acquire stock in conversion offerings in violation of the offering terms and applicable banking regulations. Over the course of the fraudulent scheme, Sterling reaped $1,502,193 in ill-gotten gains….
The SEC’s complaint alleges that Sterling, to evade these restrictions, opened numerous savings accounts at mutual banks for himself, and in his daughter’s name, in the hope that some would convert to stock ownership. When banks converted, Sterling executed his daughter’s signature on stock order forms certifying that she was purchasing stock solely for her own account and was not transferring her purchase rights or the underlying stock to anyone else. The SEC’s complaint alleges that Sterling funded his daughter’s purported stock purchases, controlled the depositing and sales of the shares issued to her, and transferred all of her purported stock sale proceeds to himself.
Sterling has had to cough up $2m to buy the regulator off his back.
But we’ve got to ask: does the SEC have nothing better to do?
Bizzare.
Related links:
SEC vs James D Sterling – Complaint