Gonzo Wall Street by Richard E. Farley

Author:Richard E. Farley
Language: eng
Format: epub
Publisher: Regan Arts.
Published: 2022-08-30T00:00:00+00:00

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IN THE MEANTIME, the problems at Hayden, Stone Inc. continued. On September 25, the N.Y.S.E. levied a $100,000 fine, the largest fine in history, on Hayden, Stone for failure to keep accurate records and file its financial statements in a timely way.12 Alfred J. Coyle, president of Hayden, Stone, assured the public that the company’s problems were behind it. Coyle released a statement that the firm’s “sound financial position is reflected in its audited financial statement, filed with the N.Y.S.E. on September 18, 1969, and soon to be mailed to its customers.”13 With the fine paid, the N.Y.S.E. removed all operating restrictions it had imposed on Hayden, Stone during its investigation of the firm’s affairs. The fine, Haack hoped, would satisfy the S.E.C. And the lifting of restrictions, he further hoped, would allow the firm to improve its financial situation.

The New York Regional Office of the S.E.C., however, was most unsatisfied. It remained deeply concerned about Hayden, Stone’s solvency notwithstanding the new clean bill of health from the Exchange.14 And its own investigation of Hayden, Stone’s books revealed it to be in violation of the net capital rule by a substantial margin. The Exchange had allowed Hayden, Stone to include as a liquid asset, essentially as cash, for purpose of the net capital calculation an expected tax refund of over $4 million despite the fact that the Internal Revenue Service had yet to approve the refund.15 In fact, Hayden, Stone hadn’t even filed its tax return claiming the refund. Kevin Thomas Duffy, the head of the S.E.C.’s New York Regional Office, was so alarmed by the lax practices of the N.Y.S.E. in enforcing the net capital rule that he wrote a letter to Hamer Budge recommending that the S.E.C. rescind the Exchange’s net capital rule exemption and bring in-house to the S.E.C. that compliance function.16 Robert Haack didn’t know about Duffy’s letter; but with it, another ball had dropped.

A fourth Wall Street firm of note fell victim to the crisis on October 13, 1969. Amott, Baker & Co. was overcome by its back-office woes. The firm, with about 7,000 customers, announced that it would be liquidating. All of its branch offices would be acquired by Charles Plohn & Co. in order “to enable us to devote all our efforts to clearing up the delivery of any securities or balances which may not have been accomplished as yet for some of our clients.”17 The board of governors of the N.Y.S.E. announced it had set aside $500,000 from the Special Trust Fund to assure all customers of Amott, Baker would be made whole. But Charles Plohn & Co., the Scanlan’s IPO underwriter and co-recipient of the largest fine ever levied by the N.Y.S.E., was hardly an ideal suitor for the shotgun marriage, as its financial condition was not much better than Amott, Baker’s.

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