OPM--Other People's Money

An article in this morning's paper details charges that another money manager has violated his obligation to investors who have entrusted him to manage their money. This recalled to me a drawing on the blackboard by my corporate finance professor, Pearson Hunt, illustrating the common tendency of individuals to commit abuses with Other People's Money, OPM. The drawing consisted of a coat of arms crossed by a black bar sinister indicating illegitimacy in the family background and a motto at the bottom in mock Latin "OPM Soc it Tuum!" The drawing was used by Professor Hunt to illustrate the perils of investing in "preferred" stock. Too often, the interests of "preferred" stock holders are neglected rather than preferred.

OPM AT ALETHEIA RESEARCH AND MANAGEMENT

Anyway, the article linked below tells the story of a S.E.C. investigation and a lawsuit by the founder of Aletheia Research and Management against the firm and its C.E.O., Peter J. Eichler, Jr. Aletheia's co-founder. Roger B. Peikin's suit cites Eichler's "trading practices, general disregard for regulatory controls, wanton expenditure of corporate assets for Eichler's personal benefit, and overall neglect of the business side of Aletheia's operations." Peikin's complaint depicts Eichler's lavish lifestyle including "the use of private jets and hotel suites ranging from $10,000 to $18,000 per night." Mr. Peikin claims that in 2008 Mr. Eichler transferred $500,000 from client's accounts into Aletheia accounts to buy Chinese currency option contracts. I'm sure Professor Hunt would appreciate the irony of the English translation of the firm's name, "Aletheia" which is "truth and disclosure" according to the firm's website.

OPM AT DISCOVER CREDIT CARDS

A second article, also linked below was headlined "Minnesota Says Discover Cardholders Were Deceived on Financial Products." The article said that the Minnesota attorney general filed a lawsuit accusing Discover Financial Services of "tricking consumers into buying optional products that would protect them from fraud and financial hardship." The lawsuit contends that Discover, one of the largest issuers of credit cards, made "aggressive and, misleading and deceptive" telemarketing calls to get customers to sign up for identity theft protection and a credit score tracker. Does that sound familiar? I seem to recall getting similar calls from an HSBC card that I've since canceled.

COMMENTS ABOUT OTHER ABUSES OF "OPM" ARE WELCOME BELOW.