Sunday, September 27, 2009

Allegations Against Saleh

On Wednesday, the SEC accused Reza Saleh of civil fraud. Saleh is a long time close friend/associate of Ross Perot, and on Monday Dell offered $3.9 billion for stock of Perot Systems. The SEC contends that Saleh used his alleged knowledge of the impending Dell bid to buy options in the weeks before that announcement, selling them all Monday for the big illegal pay-out.

A statement from the Perot family Thursday: "Reza has been a close friend of the family for the last three decades, and it troubles them deeeply to learn of these allegations

"He has made many contributions to the various Perot businesses over the years, and the courage he showed as a young man inhis early 20s in helping secure the freedom of the EDS executives held captive in Iran was nothing short of miraculous."

The purchases of these options cost him roughly $477,000. Did he have that much money available in a checking account or the petty cash drawer, or did he take out a loan? In this day of tight credit, a natural line of further inquiry would be: what did the lenders know and when did they know it?

Personally, I hope that inquiry goes unpursued, because as regular readers of this blog are aware I am opposed to the prosecution of insider trading as such. Presumably Saleh's purchases of options drove up the price of those options. Who would have been harmed by this? Anyone with a speculative trading position to the effect that option prices would hold steady or go down. Here's a tautology for you: speculators take risks.

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