Apr 30

Is FINRA Charles Schwab’s concubine?

By Alex Neihaus Charles Schwab, Consumer Outrage, Politics No Comments »

Have you ever had a problem with a huge company that tries to “make you go away” by stonewalling and ignoring you? That’s what Charles Schwab has been trying to do since it sold me auction rate securities in 2008 on the day before markets froze. They had to have known when they took the order that these things weren’t liquid and safe, the two reasons they sold them to me in the first place. They were happy to take the order then…but today they, alone among retail brokers, have refused to make good on the ARSs they sold to conservative investors like me.

I have been using this blog (see my previous posts) and the interest of reporters to make my displeasure public.

Beth Healy of the Boston Globe missed the irony of Massachusetts residents lending the state money for the Big Dig and not being able to get it back by pointing out that the state “saved” money by not calling the notes.  Healy asserts, “…regulators say they’ve done all they can to help.”

Uh, no, not quite. I’ve never received a single response to repeated inquires to the governor, the secretary of state, the attorney general, my local representative and, above all, the source of these ARSs, the treasurer’s office. Why the silence? Simple: it would be too embarrassing for the politically ambitious Treasurer Cahill to force Schwab to settle. And no state department is going to make another department look bad. AG Coakley can get headlines for pursing fraud from just about any company. Why expose the shady dealings the state itself engages in?

Still, Schwab hated that Globe story enough to send me a letter terminating my accounts. No problem, guys, I was happy to leave.

So, you might think, why not complain to the SEC and to Wall Street’s “self-regulator,” the Financial Industry Regulatory Agency (FINRA)? I have, of course. In 2008 I filed complaints with both agencies. How’d that work out?

Just as you might expect. We all know how well the SEC has done at protecting people from Madoff, Stanford and CDOs. With so many larger fish to pry off the hook, paying no attention at all to individual investors stuck in ARSs is a natch.

And FINRA, known as Wall Street’s favorite regulator, actually contributed its former boss, Mary Schapiro, to the helm of the SEC. Miraculously, after years of doing nothing to protect the little guy at FINRA, Ms. Schapiro apparently grew a pair just in time for her confirmation hearings. Just saying you are for strong consumer protection is, I guess, enough to assure congressional committees you should run an agency we now know was dysfunctional.

Still, FINRA — like Schwab — is listening to the political discourse and is maybe (finally) rubbed a little raw by the attention their abject failures have generated. When Jed Horowitz of Investment News wrote about the lack of action in New York’s suit against Schwab, something must have clicked at FINRA headquarters.

A week or so after Horowitz’s article, I got a call from FINRA. I assume the timing wasn’t accidental. They probably hoped to convince me to shut up, at least for another year or two until they find a way to exonerate Schwab or the whole thing blows over.

They wanted me to know they were “actively engaged” and they’d “made progress.” They couldn’t say what, if anything, they actually plan to do. Or when, if ever, they plan to do whatever they decide they are going to do.

While Congress debates partially re-regulating Wall Street, the simple fact is that the entire industry is morally bankrupt and the interests of the country have been repeatedly subjugated to the greed of the industry. Worse, regulators, such as they are, are victims of “regulatory capture.” Even if FINRA wasn’t designed as Schwab’s concubine, it has willingly become one. Schwab asks, FINRA dances.

Mar 22

Health care: yes, it’ll cost me more…and, yes, I’m glad we (finally) did it

By Alex Neihaus Politics No Comments »

Well, the political battle of the (still young) century is over. And, despite the ugly fear mongering of the Republicans — and the very sad racial and homophobic epithets tossed at members of Congress this weekend during the final debate by “Tea Party” activists — the country has shown some political spine and done the right thing.

You’d expect me to have been, like the crazies on the right, apoplectic about the proposed changes to health care. Simply, I am a winner in the current system. I actually have a choice of excellent, affordable group coverage for me and my family through either my wife’s employer or mine.

My taxes will go up: I will have to pay Medicare taxes on unearned income. We won’t get a dime in government subsidies to buy insurance. Because we live in Massachusetts, I suspect the Cadillac tax will eventually hit us as well.

So, why am I pleased at the prospect of real, fundamental, systemic change in health care? Two simple reasons. First, even as a winner in the current system, I can tell you it’s broken, busted, kaput and will bankrupt us. Check this out: I went to see a doctor in my network. Six weeks later, I was checking claims online for another reason and noticed the insurance company had paid thousands for an office surgical procedure I didn’t have on that date. I called the insurance company who wanted me to have to call the doctor’s office and get them to fix it. Sorry, but I took the time to try and fix it by calling the insurance company, who effectively admitted to me that there’s so much waste and confusion in the system that unless I personally undertook to fix it, it would cost them more than they could recover to do it themselves.

Second, anything can happen. Today, I am winner. Tomorrow, I could be destitute. I am willing to pay more now to make sure that when and if the bottom of my life falls out, I could still get medical help. It just seems so basic, so fundamental to life in a civilized country that I am astonished it took 100 years and (probably) will destroy the Obama presidency. One thing I am certain of: without this reform, if the worst were to happen, it would easy to die indigent — a terrible way to go after a lifetime of work and taxes.

Bottom line, this was about fairness to people.

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Jan 27

Federal judge to Charles Schwab: pound sand

By Alex Neihaus Charles Schwab No Comments »

It’s no secret I’m angry at Charles Schwab (here and here). And they don’t like me back. In fact, they’ve “fired me,” sending me a letter terminating my accounts with them in February. (What was it, guys? The blog posts? The Boston Globe story? Did I offend you by insisting that you send me written terms for the “loan” you wanted me to take on these bonds? No matter…when the state of New York whoops your ass in court, you’re still gonna have to settle with me.)

Let’s review: Schwab sold me Massachusetts auction-rate securities underwritten by Goldman Sachs, promising safety and liquidity, but never sent me a single document that described the bonds as ARSs, much less described the auction process and the possibility of them becoming illiquid. Then it sat by while the auctions tanked in 2008 and instead of settling, blamed everyone else for their lies and deceptions.

Worse, when Goldman Sachs settled with its customers who bought these ARSs directly from them, Schwab — alone among downstream sellers — decided not to do the right thing for its customers. They were “not responsible.” They were “just the middle man.” Instead, Schwab decided to manufacture a pile of principles (or what’s really just a pile of you-know-what) that’s convenient for their bottom line.

So you can imagine I search for every bit of news about New York State Attorney General Mario Cuomo’s suit against Schwab and try to follow its progress closely.

And just a week or so ago, a federal judge in the Southern District of New York crushed Schwab’s legal hopes of moving the NY AG’s suit to a federal court. I’ll bet the legal team’s dreams that the judge would move the case to federal court went something like this: “Let’s go for a Bush-era appointee on the Federal bench. You know, a business-friendly Bushie who believes caveat emptor means ‘go ahead and steal from the rubes and we’ll cover for you.’ We gotta shop around, because that NY AG has got us by the you-know-whats with the Martin Act and those recordings of us lying to customers. Unless we can turn this into a case about something other than what we actually did, we’re gonna lose.”

Interestingly, the judge’s decision was based on a fascinating legal concept going back to the Constitution: “diversity of citizenship.” As the linked explanation notes, the framers were concerned about bias when a state court heard a case made up solely of its citizens who sued solely citizens of other states. IOW, if people in Massachusetts could sue in Mass. court those carpet-baggin’ brokers from California, what Mass. judge wouldn’t favor folks from his or her own state?

Well, my former friends at Charles Schwab, your arguments against remand to state court apparently didn’t cut too much mustard with the feds. You’re right back in state court, the AG’s home field. And there I hope you’ll get the shellacking you so richly deserve for treating me and other small-fry investors like lemons to be squeezed dry.

As the judge who remanded the case back to state court wrote in the decision (a full copy of which is attached below):

“[T]he purpose of seeking this wide-ranging relief is not merely to vindicate the interests of a few private parties. Rather, it is to take a step toward eliminating fraudulent and deceptive business practices in the marketplace…The State’s goal of securing an honest marketplace in which to transact business is a quasi-sovereign interest. It is completely understandable that a state should…seek to prevent the recurrence of harmful conduct in the future and to remedy the damage it has caused in the past.

icon for podpress  Federal court decision to remand Charles Schwab case to state court: Download (173)
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Jan 11

Dear Martha Coakley: maybe now that you want my vote, you’ll respond to my letter about “accountability”

By Alex Neihaus Charles Schwab, Politics No Comments »

I’ve really had my fill. I’m up to here (picture my hand patting my chest just below my neck) with the claims Martha Coakley is making about bringing “real accountability back to Wall Street and Washington.” The Attorney General is talking, in part, about the settlements she negotiated in the auction rate security scandal.

Here’s the ad she’s running ad nauseum:

Each time I see it, it rings less and less true, based on my direct experience.

The claims about getting “$1B back from banks” conveniently leave out the fact that the Mass. AG’s office left thousands of small-fry holders of ARSs high and dry in the Commonwealth’s settlement with the banks. She got her press conference announcing a settlement…freeing the AG, the Treasurer’s Office and the banks to get back to business as usual. And the claims of accountability don’t match up with the fact that nobody from her office has ever returned my calls or a letter about this in nearly two years.

Madame Attorney General, isn’t it time, as you say in your ads, that you or someone in your office responds to retail customers’ frozen ARSs? (On the off chance you didn’t see my letter from December, 2008, I’ve attached it to this post.) Isn’t it time for you to stop claiming you’re for the little guy when your office cut deals with Goldman Sachs and UBS that left us out in the cold?

There’s at least one voter in the Commonwealth who knows what the AG’s brand of accountability will mean.

And, no, I am not a Republican.

icon for podpress  Letter to state government about ARSs: Download (162)
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Dec 22

HP machines are far from color blind

By Alex Neihaus Digitoy 1 Comment »

I first heard about this YouTube video on Consumer Reports. As you watch this, note the humor with which the black worker describes the racist HP laptop. I, for one, wouldn’t have been so level-headed if, say, the HP laptop ignored Jewish faces with big noses. The one thing you gotta ask yourself is what engineer could have declared the webcam and its software “finished” without testing it on people of color.

How embarrassed must HP be with QA being done by a white person and a black person in front of a retail display of the product?

Nov 22

Hungry? Check out seasonalfeast.com

By Alex Neihaus General musings 2 Comments »

Stuffing your face

I love to eat. I can’t cook. Even microwaved Velveeta on Ritz is well beyond my gastronomic capabilities. I am quite content to sit at home all day Sunday, watch football all day and consume embarrassingly large quantities of things the FDA has no labeling standards for.

Still, I have a lot of respect for “foodie” culture, which prizes organic, sustainable and locally-produced food. So, I am very pleased to recommend a new blog, http://www.seasonalfeast.com, written by my colleague, Sonal Rajan (get it…”See Sonal feast?”) which is off to a great start with mouth-watering new recipes for things I could only dream of being able to make.

So, Sonal, any time you wanna freeze some of that stuff for me for the next Patriots home game…

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Nov 11

Bank of America marketing: how to lose customers on a grand scale

By Alex Neihaus Consumer Outrage, Politics No Comments »

embarrassed

Well, growing a business ethically continues to defy Bank of America. First, it duped shareholders by concealing girnormous losses at Merrill-Lynch last year — then it agreed to paying ML’s brokers astronomical bonuses, all apparently in exchange for an extra $50B in TARP funding.

Next, it pissed off a Federal judge who wouldn’t let BofA off the hook for the ML debacle. The judge simply refused to approve a sweetheart settlement.

Now, its CEO is leaving early…much to the relief of taxpayers, shareholders and John Thain (who’s looking for a new office to redecorate for millions of dollars). And, worst of all from BofA’s perspective, slamming credit card customers is going to be much harder next year because Congress passed new, long-overdue credit card regulations.

So, I guess it’s no surprise that BofA’s marketing is as ham-handed and tin-eared as the rest of the company. Consider this: the well-known WalletBlog has taken Bank of America to task for misleading customers and congressmen on credit card charges. First, Bank of America said it wouldn’t increase fees; then it announced it will. When WalletBlog pointed this out, they got a call from BofA corporate communications, trying to explain how a fee increase isn’t a fee increase by using Clintonesque parsing of words like “pricing.”

OK, so I don’t begrudge a PR type arguing strict meanings with bloggers; they have lawyers who can assure them that the plain meaning of their promise to not raise fees — what normal people understand — doesn’t count…that it’s OK to write a letter to legislators that sounds like a commitment, then decide to do what they really want to: fleece people.

But what shows how completely off the planet BofA is…how tin-eared they are…is their request to WalletBlog to lay off:

Naturally, at the end of our call, Bank of America asked that we stop circulating our blog post from last week. But we’re going to hold off on that until they provide the public with some clearer answers. The more digging we do, the more it seems like Bank of America should be taken to task. And it’s possible that we’ve just cracked the surface.

Anyone with half a day’s experience in press relations knows you never ask a writer, blogger or journalist to retract a story in the absence of factual errors. It’s guaranteed to produce exactly what this did: a mention of your arrogance along with an enhanced determination to keep the story going.

Would BofA have asked the Wall Street Journal to recall copies of the paper with a story it didn’t like? How about asking MSNBC to stop talking about a story like this? No…it’s only because the fool who called WalletBlog thinks less of new media — that it can be more easily controlled — that he or she asked WalletBlog to quash the story. It’s emblematic of problems not just in the risk management side of BofA, but throughout the entire bank.

My message to the WalletBlog: keep it up and don’t ever consider retracting something because some corp comm hack who thinks you’re unimportant asks you to leave them alone.

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Oct 22

Dear Michael Steele and the Republican Party: Please leave me alone

By Alex Neihaus General musings, Politics No Comments »

An open letter to Michael Steele and the Republican Party

Dear Chairman Steele,

Last November, I made a $25 contribution to your party’s candidate. I also made a $25 contribution to the Obama campaign. Then, I wasn’t sure who would have been the better president.

Now, after months and months of non-stop invective from you and your party against President Obama, I am sure I did the right thing in voting for Obama.

Let me get something off my chest: when I gave you my contribution I asked you not to send me email…not to call me at home…not to keep sending me the vile propaganda and lies via snail mail that you are now sending at least twice a week. (We’ll get the the “survey” I’ve attached to this post in just a minute). I made the same request of the Obama campaign. They honored my request; you and your party of naysayers and obstructionists have not.

Instead, you keep sending me items like the “survey” I’ve scanned in and attached to this post. Maybe you thought that you could make wild claims like the one that the current administration is issuing “radical environmental regulations based on unproven theories and the demands of out of-touch left wing extremists.” Or maybe that some misguided Republicans might be pleased that your politicians “…have successfully blocked or amended many of their most radical proposals” while proposing and contributing nothing to the debate.

I get it…I really do. Negative works. Calling everyone names…calling their mothers nasty names…works better than actually governing…being a loyal opposition…contributing to the greater weal. Instead, for your party everything the other party does is wrong; only you can solve problems like Wall Street’s greed, a war based on lies and a sunken economy. Oh…I forgot. For those, we have Republicans to thank. As President Bush said, “Mission accomplished.”

I hope everyone reading this post takes a look at the “survey” you sent me. C’mon…do you think your voters are idiots? These questions are one-sided and are like waving the red flag at a bull. All you want is money…and if you piss people off at government…make them feel it’s working against them, so much the better for you and your power-hungry Senators (and so much the worst for us).

It’s too hard to pick the most egregious of the 19 questions on this “survey.” Clearly, you don’t give a damn about what people think…you just want them to read this, get angry and send you money. Still, what’s the point of a question like #16 (Are you in favor of the federal government taking a permanent ownership stake in the nation’s largest banks)? Aren’t Citibank and AIG dying to pay back TARP funds so they can get back to ripping off investors without government oversight? Didn’t the taxpayers line Goldman Sachs’ pockets with credit-default swap payments via AIG’s bailout? Isn’t it enough for you that Wall Street is too big to fail while the rest of us aren’t?

Seriously, Chairman Steele, if you want people to consider Republicans to be capable of running the country, start by working with the current administration to fix the problems we have. Next, admit to the failed policies of eight years of the Bush administration…including torture, warmongering and being asleep at the economic switch.

And please, please stop sending me twice-weekly appeals for money disguised as the worst kind of pandering direct mail.

icon for podpress  The Republican's Stop Obama : Download (301)
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Oct 09

Guess what I am doing at Oracle OpenWorld next week in San Francisco

By Alex Neihaus General musings No Comments »

Those of you who know me may remember Revit’s 2001′s “shelf present” or 2002′s infamous treadmill pr stunts. If you do, you won’t be in the least surprised to see images of the front and back of a card actors in prison uniforms are going to be handing out next week at Oracle OpenWorld in San Francisco.

Yup, I am back to some tried-and-true marketing tactics: poke the opponent in the eye using humor and rely on the power of community. What is new this time is how effective social media has been in helping create buzz about this stunt before we even pull it off.

If you are in SF next week, please do join us at the party. Remember to bring along photos and/or videos of the stunt for the competition.

Update October 21, 2009: It was a massive success. Check out the hi-jinks here

Oracle OpenWorld 11 things to consider before buying Oracle SOA Suite 11g

Oracle OpenWorld social media meetup invite

Oct 07

Choose one: New FTC blog post guidelines a) protect you b) kill free speech

By Alex Neihaus Consumer Outrage, General musings, Politics No Comments »

shillwarning

Well, this is one of those times when the government acts and you get to chose your reaction. On the one hand, the emergence of the ‘net as the definitive source of reviews for everything from software to celery has become a bonanza for the shills of the world who review products for filthy lucre and who pretend or obscure that they’ve been bought.

On the other hand, while advertising isn’t a protected form of free speech, it’s sad that we need government intervention limiting speech to prevent these people from preying on grandma’s Google search for cookie dough.

Into this fray steps the FTC with new rules to take effect in December, 2009. (I’ve attached a PDF of the new rules to this post for your convenience.)

You can see the rules struggling to keep up with new and social media. That, in itself, is an interesting commentary on how technological innovation always outstrips government’s ability to keep pace, much less anticipate the impact of technological change. Consider this heavily parsed defintiion from the rules:

An advertiser’s lack of control over the specific statement made via these new forms of consumer-generated media would not automatically disqualify that statement from being deemed an “endorsement” within the meaning of the Guides….Thus, a consumer who purchases a product with his or her own money and praises it on a personal blog or on an electronic message board will not be deemed to be providing an endorsement.

In contrast, postings by a blogger who is paid to speak about an advertiser’s product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer.

…For example, a blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an “endorsement” within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests.

You all clear on that now?

icon for podpress  FTC advertising rules on blogging and social media: Download (241)
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