Merck and the SEC: No Joke

And I thought that I was kidding, at least a bit, in my post where I warned some of the folks buying into Schering-Plough (SGP) that they might be hearing from the SEC. Well, maybe not - whenever a deal like this goes through, the first place they look is in the options market:

Some lucky option players appeared to have reaped a windfall with Schering-Plough call options rocketing after Merck (MRK) on Monday announced a proposed $41.1 billion takeover of the drugmaker.

. . .a burst of activity in the stock's call options last Tuesday and again on Friday may be too much of a coincidence to overlook and prompted some option traders to ask if inside word of the pending deal reached some investors.

"Our examination of the data suggests a high degree of likelihood that someone did indeed place what I will be politically correct and call nicely timed trades," said Jon Najarian, a founder of Web information site optionmonster.com, in an email to Reuters.

Good luck explaining these, is all I can say. Telling them how lucky you felt that day won't make the folks from the enforcement division go away. As a lawyer in this business once said to me at a meeting, "I have to make sure that no one in this company trades our stock on material information. And material information is defined as something that makes you think about trading the stock."

Comments

[Respirate:]

Good article. Thanks to you (and to Jon Najarian) for helping to expose another instance of criminal activity. The Merck-Schering Plough deal had hands in the pie well before it was announced to the public. Evidence of criminal activity has already been published in numerous articles.

In the gentlemen’s club of American business, cheaters game the system; liars lend money without regard for creditworthiness; thieves steal hard-earned funds and "invest" it in their own pockets; criminal CEOs knowingly falsify reports to the public. The blatant offenses are rampant. Less egregious offenses are even more widespread and are readily accepted as daily business.

These crimes are not victimless. In the past year I have personally owned shares of three companies that lost most of their value overnight due to white collar crime. The most recent was IT firm Satyam (not a US company, BTW) aided in crime by accounting firm PriceWaterhouseCoopers... White collar crime, or whatever else it may be called, siphons wealth from investors and erodes whatever small amount of trust that may still exist for the business community.

Average investors cannot hope to participate in the cesspool of modern investing and finance. Not when the "justice" system calls for "white collar" criminals to be detained in luxury penthouses, or early golf course retirements, or at worst, a country club prison.

(By the way, the military unofficially polices its own members. The sound of white collar skulls cracking in the night would do wonders to clean things up.)

It's time for the "white collar" to be removed from criminal activity that has crippled our system. Long, harsh penalties are needed and must be demanded by the public.


Thanks for the early morning rant. We now return to our regular programming, and business as usual.

Mar 10 05:31 AM