NakedShorts: Wot? No dwarf-tossing?

Party animals kept Sentinel trader buying

It’s been all too long since failed futures cash manager Sentinel Management Group troubled these pixels, but it seems that bankruptcy trustee Fred Grede has not run out of people to sue. This week’s effort involves allegations that FTN Financial Services and a couple of its brokers unloaded highly dubious drekk on Sentinel head trader Charles Mosley by, inter alia, unlawfully showering...

...Mosley with vacations, tickets to sporting events, expensive meals, all-night drinking excursions, limousine rides, plane tickets, golf outings, and the use of condominiums and houses belonging to the brokers...

...These inducements went far beyond typical or acceptable levels of client entertainment measured by the value of the gifts and favors offered, the frequency of the offers, the proximity of the offers to sales, the implicit quid pro quo nature of this entertainment, and the extent of the debauchery involved in many of the events.

Grede regrettably fails to embellish the ‘debauchery’ allegation, but it certainly sounds like the lads had a whole lot of fun.

In approximately mid-April 2005...Folan offered Mosley a trip to Memphis, Tennessee, where FTN had its headquarters, and stated that he would try to get tickets for an NBA basketball game...
On August 10, 2005, Folan offered Mosley tickets to Chicago Bears football games...
On August 15, 2005, Folan offered Mosley and his assistant the opportunity to stay at Folan’s vacation home at the Geneva National Golf Club in Lake Geneva, Wisconsin for lunch, dinner, entertainment and golf. This was one of at least three trips Mosley took to stay at Folan’s Lake Geneva home for parties and golf...
On September 12, 2005, Folan offered to pay for a trip for Mosley to New York in early November 2005. In October, Folan in fact purchased plane tickets and paid for hotel accommodations for himself and Mosley for the trip...
On or about November 9, 2005, Folan paid for Mosley’s ticket to a Chicago Bulls basketball game.

You get the general idea. Then, the partying got serious.

The planned dinner meeting between Folan, de St. Phalle and Mosley took place on March 1, 2006, at Entourage, a restaurant owned by a friend of Folan in Schaumburg, Illinois. At about 3:00 pm, Folan had a limousine pick Mosley up at his office in Northbrook and drive him downtown, where he met Folan at a bar in the Rush Street area for drinks. Then, Folan hired a limousine to take them to Entourage with de St. Phalle and others. After dinner, a limousine transported Mosley and the others back to downtown Chicago for a drinking binge that lasted until about 5:00 the following morning. And finally, Folan hired a limousine to take Mosley home to Vernon Hills.

Sounds like normal course for fixed income securities transactions in Chicagoland to these cynical ears, but several things:

The entire 63-page filing is well worth a close read. The allegations of book cooking, bond parking and other activity that, if true, would appear to breach statutes involving the phrase “criminal securities fraud” are truly impressive. Perhaps the Obama administration can establish an enforcement agency that might actually investigate and prosecute these things, rather than leaving it to the mugs caught in the fraud.But, of course, as one of the defendants noted in a slightly different context,
Of course, as one of the defendants noted in a slightly different context, it wasn’t “anything that hasn’t been done 150-[expletive deleted]-thousand times before.”
This may sound familiar: “De St. Phalle and FTN arranged for a ratings agency to provide an “investment grade” rating for these combo notes. Obtaining the rating cost Sentinel tens of thousands of dollars for the first transaction...”. The agency in question is unnamed.4.
FTN Financial Securities is a subsidiary of NYSE-listed First Tennessee National Bank & Trust Association. According to the not-always reliable Yahoo! Finance, First Tennessee had approximately 500 business locations in 42 US states and Hong Kong; and 216 financial centers in six states.
From the small world file: before joining Sentinel, Mosley worked for Fidelity Investments.