Both Golfer Phil Micklesons' trades and the recently discovered
trades in World Series MVP Curt Schilling 38 studios bonds were "well
timed" trades. An insider inquiry into Micklesons' trades is now two years
old and publicly acknowledged by the SEC and FBI. The unknown insider in 38
studios bonds who also had terrific timing has yet to be determined and the SEC
recently said they cannot confirm or deny an official investigation. The
investigation into 38 Studios bond trades is much easier than the Mickleson,
Icahn case and could be resolved in well less than a month but there is a big
potential that high powered Rhode Island Government officials or even Curt
Schilling himself could have been the “tipster”. The notable reluctance to ask
for SEC investigation
and deafening
silence of
RI Governor Chafee, Treasurer
Raimondo , Attorney General Kilmartin and the RI House Finance Committee after
they have all been notified of the well timed trades are unusual to say the
least.
Some in the
local RI media, who finally decided to cover this revelation, suggest the SEC doesn’t
investigate insider trading unless the harmed party complains or damages can be
shown. This is simply not true as is evident in the Martha Stewart case and
recent reporting on the Mickleson case in the New York Times.RI media is oblivious to all of this. Here are NY Times excerpts re Mickleson:
“The F.B.I. is pursuing a
criminal investigation, while the S.E.C. is running a parallel civil inquiry.”
“It is unclear why federal
authorities initially suspected that Mr. Mickelson may have played a role in
the Clorox trades. The S.E.C. began the inquiry into Clorox trading after
finding suspicious trades in the stock just days before Mr. Icahn’s unsolicited
bid. Although Mr. Mickelson is not connected to the Clorox trades, he is not in
the clear on Dean Foods.
The F.B.I., federal
prosecutors in Manhattan and the S.E.C. continue to investigate well-timed
trades made by Mr. Mickelson and Mr. Walters in shares of Dean Foods in the
summer of 2012, the people briefed on the matter said.”
So there it is the cause of the inquiry was the unusual timing of the trades. The sale of
Curt Schillings 38 studios bonds was about loss avoidance. On May 23 , 2012 a “customer
sold” $ 1.21 million worth of the privately placed bonds. On May 24 Schilling
announce 38 Studios had laid off all of its employees and had shut their doors
forever. Actual Bankruptcy took place a month later. The firm has been
liquidating or is near the end of liquidation at this date. The trade of May 23
rd loss avoidance has been calculated as $100,000 , significantly more than the Imclone/ Martha Stewart case. Micklesons' case is about gains from unusually timely
trades.
But the 38
Studios case is significantly more sensitive because 38 studios and the financing
of it is under investigation by multiple State and Federal authorities already.
Several high ranking Rhode Island officials may have been subpoenaed, a reported 100 subpoenas are
outstanding. Governor Chafee has been frantically trying to pay the debt and “move forward” after
having failed to do any of his promised “forensic investigation into 38 studios”
” of two years ago.
Both the ex-head
of the EDC and Sony executive John Smedley paint a much different picture of
Governor Chafee and his role in the collapse of 38 Studios . Stokes is seeking
legal action and Smedley, head of Sony online entertainment wrote this letter
to the people of Rhode Island:
"Dear
people of Rhode Island. Look to your elected government for failing to protect
you. That 38 studios deal just never should have been. Public funds shouldn't
be backing risky things like online games."
He respects Schilling for investing his now money in the company, but said
"If that idiot Governor Chafee hadn't trash talked right at the time Curt
was trying to get funding you would be playing the game now."
"The idea of suing someone when Chaffe's (sic) own comments were what
poisoned the well at the end is beyond the pale. All he had to do was give Curt
another week and we wouldn't be here today."
Governor Chafee
says now that anyone, meaning 2014 Gubernatorial Candidates Allan Fung and Ken
Block , who suggests not paying the next $12,500,000 to 38 studios bond holders
is “unfit to Govern”.
A concerted
effort has been made by Chafee and friends of House Speaker Gordon Fox , who sits in resignation
limbo after FBI and State police raided his state office and home and new house
speaker Nicholas Mattielo ,a former confidant of Fox , to vote through the
payment which would prevent an investigation by the bondholders insurance company, No charge for Gordon Fox has been made public since the March 2014
raid.
All of the
above makes the reluctance to call in the SEC on this insider trade of May 23,
2012 look very suspicious. Who knows who the seller was? Even more interesting
who told the seller that 38 studios was closing its doors the next day? Lets
hope the SEC isn’t waiting for Chafee or his former Democratic Majority Whip ,the
now silent attorney General Peter Kilmartin, to request an inquiry. The SEC should do exactly as they have in the
Mickleson case and examine the unusual timing of that significant sale in May
2012 in 38 Studios 7.75% bonds.
