Richard Harriton stood on a stage in a
ballroom in New York and began his ritual reading of an original poem to the annual gathering of the firms that cleared stock trades through
This was in 1997, when revelations of the firm's relationships with shuttered and soon-to-be indicted brokerage
emerged, and Bear was being labeled the home for many so-called bucket shops. Tiny Baron's client losses were about $75 million, and the stink was starting to creep onto the massive Bear Stearns.
"When I think of a bucket," a choked-up Harriton began the last verse, "I grin to myself and say ..." His voice trailed off, the crowd howled with laughter and approval at the implied vulgar ending. Behind him stood Bear Chairman Ace Greenberg, applauding Harriton, under whose hand the clearing unit had generated oodles of cash for Bear.
Those were happily defiant times for the firm. Monday's $25 million settlement with the
Securities and Exchange Commission
was humbling but may not mark the end of the A.R. Baron affair.
The settlement with the SEC includes a $5 million fine and $20 million in payments to settle certain private claims, Bear said in an SEC filing. The SEC's investigation stemmed from Bear's role as Baron's clearing broker. The agency was said to be looking into whether Bear ignored fraudulent activity at Baron, and if it did, why.
A Bear spokeswoman declined to comment on the settlement or any surrounding circumstances.
Even in the wake of Monday's deal, Wall Street pros who have been following the case are expecting more action, mostly because the $25 million settlement size is seen, as one competing clearing firm pro chuckles, "a bargain." Even the company's filing with the SEC said the penalty wouldn't have a material effect on the business or condition of the firm.
Jonathan Kord Lagemann, a New York attorney representing Baron clients still waiting for their restitution suits to be heard, thought it less humorous. "It's chump change," he says.
For the SEC, $25 million is a big fine. It's among the largest the SEC has taken in the past three years, falling short of the $47 million the agency forced
But at this point in the game -- more than three years since Baron was shut down by regulators and declared bankruptcy -- and considering Bear's almost $5 billion market cap, it seems less so.
What comes next remains a major question.
The Manhattan District Attorney, according to numerous published reports, has been looking into Bear's clearing activities. A spokeswoman there wouldn't say whether that office was involved in the settlement. It wasn't mentioned in the 8-K filing that contained the settlement information. About a month ago, the D.A. postponed the sentencing of Baron boss Andrew Bressman in a move that lawyers believed showed the inquiry was ongoing.
If it proceeds with its inquiry, it could put pressure on clearing chief Harriton. People keeping up with the case will be watching to see whether Greenberg follows his father's advice of quickly dumping bad inventory, which in this case could mean offering his clearing chief Harriton as a sacrifice.
While the district attorney got to parade a bunch of chumps from Baron on the local news when the office indicted them for defrauding investors, there have been whispers of many ancillary investigations, though there have been few tangible results.
Two attorneys representing former Baron clients expect the D.A.'s investigation to result in another settlement. "If Bear hasn't made a deal with the D.A. yet, it will," says one attorney who has claims against Bear. "The $25 million doesn't come near the amount of money lost, so we're thinking Bear is keeping it for some other parties."