The Five Dumbest Things on Wall Street This Week: July 27
4. STEC's Brotherly Larceny
Come on you Securities and Exchange Commission book-throwers. Take mercy on STEC (STEC) CEO Manouch Moshayedi. The man is clearly his brother's keeper, so what's the harm that he kept a little for himself too?
Okay. He kept a lot for himself and it looks like he did it illegally. But still.The SEC filed a civil complaint against the solid state drive maker's chief executive late last week, accusing Moshayedi of violating insider trading rules in a secondary offering of his shares. According to the charges, Moshayedi unloaded a major chunk of his holdings, as well as shares owned by his co-founder brother, in August 2009 despite learning "critical nonpublic information" about a deal with EMC (EMC) gone sour that would likely have slammed the stock. "Moshayedi did not call off the offering and abstain from selling his shares once he possessed the negative information unbeknownst to the investing public. Instead, he engaged in a fraudulent scheme to hide the truth through a secret side deal, and proceeded with the sale of 9 million shares from which he and his brother reaped gross proceeds of approximately $134 million each," says the SEC about Moshayedi, who according to his lawyer intends to vigorously defend himself. Wow! $134 million each. Oh brother! Literally. The part of the SEC allegation that really made us chuckle was when Moshayedi begged EMC brass to step up its third-quarter order to $50 million from $35 million ahead of a call with Wall Street analysts. "Just tell me what you need, I knew asking you guys for a favor would go nowhere so I am now back at paying for favors. What is your price for keeping inventory for a week or two? I thought East Coast guys from Boston area were supposed to be nice," pitifully pleaded Moshayedi in an email. Unluckily, just hours before that call, those "nice" guys from Boston treated Moshayedi like a Yankee fan in Fenway Park, telling him that they were no longer buying STEC products in volume. Nevertheless, Moshayedi did not inform Wall Street or his investors of that unfortunate fact until three months later in November. Once STEC's CEO did come clean about EMC's demand reduction, the stock price sank by nearly 40%, but of course by that time the Moshayedi brothers had already made their sales at far higher prices. Hey, you know what they say. Bros before holders. Shareholders that is.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV