Brokers Selling Pretzels…WTF?

Chicago finally got it’s very own Madoff.  His name is Charles Mosley and along with his partner Eric Bloom, he’s been a bad boy.

But this guy’s not an outright thief, he’s more like a reckless moron…

From Bloomberg:
As Sentinel Management Group Inc. neared collapse in August 2007, piling up $950 million in losses..(the company was) saying it was yet another victim of the credit crunch..The Securities and Exchange Commission didn’t buy the explanation. (The SEC) filed a civil suit against Sentinel accusing the company of, among other things, using client money to secure a $500 million credit line.

Nice, using customer funds to borrow money…Rock n Roll.  But that’s not the astounding part (in this day and age)…

Sentinel was actually making huge bets on unorthodox 30-year instruments that turned out to be another example of financial engineering gone awry — and hiding those bets with misleading accounting.

OK, so now wait til I tell you you what these instruments were called:

(Sentinel was) loading up on complex financial creations called PreTSLs (pronounced like pretzels), which stands for Preferred Term Securities Ltd. PreTSLs resemble collateralized-debt obligations in that they’re both pools of investments…PreTSLs consist of bundles of preferred shares issued by banks to raise regulatory capital.

Yeah, seriously, pretzels were pushed on this dumb sonofabitch “head trader” by Chicago brokerage firms who bribed him and gifted him into taking out loans to buy even more of this bullsh#t product.  I’ve been a broker a long time, and I’ve seen or have heard of every stupid packaged product you can think of (most don’t work), but this PreTSLs thing seems ridiculous.

And why would he risk everyone’s money and his own livelihood to load up on this garbage?

“It didn’t make sense for the kind of business they were doing.” (the receiver) also wondered why Sentinel had leveraged itself to the eyeballs; it had almost $3 billion in debt on a capital base of just $3 million.

In the four years before Sentinel’s demise, Mosley had developed a huge appetite for PreTSLs — based on a quid-pro-quo relationship with brokers who lavished him with gifts and goodies, including tickets to baseball games and limousine rides to football games.

OK, so the brokers send him to sporting events in limos and he gets back to the Sentinel office the next day and buys a ton of their Pretzel stuff with his clients’ money and additional leverage he’s secured with his clients’ money.

And here comes the punchline…what team’s events did he throw away his career and everyone’s money for?

A broker at Keefe Bruyette offered Mosley and other Sentinel employees tickets to watch a Chicago Cubs game at a rooftop party adjacent to Wrigley Field. Rodriguez sold Sentinel PreTSLs with a face value of $5 million on the same day of the baseball game, followed the next day by the sale of $10 million more of the notes.

Awwww Hell No!  The Cubs?  Are you kidding me?

You blew up a $1.4 billion fund for Cubs tickets?

Attention Charles Mosley:

THE CUBS ARE LITERALLY ALLERGIC TO WINNING A CHAMPIONSHIP.

That’s like stealing a car to drive to a Detroit Lions game or breaking and entering Madison Square Garden to sit through a New York Knicks bludgeoning.

Let this be a lesson kids, if you’re gonna commit larceny and fraud, do it for tickets to see a contending team.  The Cubs?  You can watch them lose on TV and you don’t need to buy a single Pretzel from Keefe Bruyette.

Full Story: Bankruptcy Sleuths (Bloomberg)