As you know from my writings, I am certainly not in favor of some of the strong-arm tactics or empty promises that are used by certain brokerage firms to land new business at all costs. However, I also believe that there should be some responsibility on the part of the party agreeing to any deal. After all, we are not living in a country where someone is holding a gun to your head. We have the freedom to say no.
I was reminded of that when I read a blurb by 24/7 Wall Street titled “Merrill Lynch May Face A Judge:”
Merrill Lynch sold the city of Springfield Mass a financial instrument which lost 90% of its value. According to The Wall Street Journal “Merrill violated state law by not properly informing the city what it was buying.”
Christopher Gabrieli, who runs the city’s finances, wants his money back.
Gabrieli and his friends are one in a parade of boobs who appear to have wanted big returns but were not willing to apply proper due diligence to what they were buying. The man may be unhappy, but the result should be that he is pushed out of his job. He says Merrill did not send him details on the investment until it was too late. The real question is why he did not ask for them before he wrote Merrill a check.
Over the next few months, countless municipalities and institutions will complain that firms like Merrril robbed them. In reality, the buyers failed to read the fine print.
While I can imagine what the city of Springfield is going through, was there not some due diligence required on the part of Gabrieli? We had the same situation in Orange County, California, back in 1994, and it cost the treasurer and others their job, and rightfully so.
If you are appointed to handle a city’s finances you better be well versed on all investment topics, or you’re simply just a chair warmer now crying foul and trying to save a job. In this case, it sounds like sour grapes to me as Gabrieli is trying to pass the buck and the blame.