Thursday, June 12, 2014

Insider Trading Mickleson vs Schilling and 38 studios

Insider Trading Mickleson  compared to Curt Schilling and 38 studios

                     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.

1 comment:

  1. I don't agree with Smedley. 38 Studios had Corso out peddling tax credits they didn't even have at the time. Certainly 38 Studios knew the end was near for some time yet made no successful attempt at getting new financing. They were dead in the water when Chafee made his remarks.