Businessweek Archives

The Askin Tapes: Do They Show Chicanery?


Finance: DERIVATIVES

THE ASKIN TAPES: DO THEY SHOW CHICANERY?

The following conversations were excerpted from court-filed tape transcripts by BUSINESS WEEK. William O'Connor was Kidder's chief salesman and Jay Pappas was his assistant. The first conversation was on Mar. 25, 1994, the eve of the Askin funds' collapse. Creditor lawyers say,, and Kidder denies, that the O'Connor-Pappas conversation illustrates the symbiotic relationship between Kidder and Askin and that Kidder conspired with Askin to report inflated returns to investors.

PAPPAS: Just pull the plug on these guys if they don't pay.

O'CONNOR: You don't seem to understand. We can't pull the plug. We are in bed with these guys. O.K. Last thing in the world we want to hear is that they can't meet a margin call and we got to liquidate this nuclear waste they bought.

PAPPAS: A lot of it's nuclear waste?

O'CONNOR: It's all nuclear waste, come on.... What do you think these are. We get paid a point. Nuclear waste.

PAPPAS:...You got a point and a half, two points on some of them.

O'CONNOR: Yes.

PAPPAS: Do you know that when you sold them?

O'CONNOR: Of course I do.

(Later in the conversation)

PAPPAS: What do you think, you give them a break on the marks [the prices of the securities reported to investors in the Askin funds]?

O'CONNOR: We marked the bonds as high as we can stand and then I chop off another 10% or 12%.

The following exchange was on Mar. 31, 1994, as the funds collapsed. Richard John was Askin's top trader. Creditor lawyers say, and Kidder denies, that it shows Kidder collaborated with other brokers to get phony prices for Askin holdings it had seized to meet margin calls.

O'CONNOR: Whatever has to be done, let's get it over with today, and then let the lawyers come in and solve it all, but unfortunately you're right. For the time being it's like in a death bath with Wall Street saying, "We are going to liquidate you if you don't send money" and you say, "I'm not going to send you money, but who are you going to sell it to?"

JOHN: ...Make sure you get three bids so you're documented, pal.

O'CONNOR: Exactly.

JOHN: Tell me what the highest one is.

O'CONNOR: Everybody is faxing us over their sheets, you know, "Please just put a number next to all these bonds."

JOHN: Right.

O'CONNOR: I think everybody is calling the other guy, going "if you do mine I'll do yours."

JOHN: Right, right.

DATA: COURT RECORDS


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus