The Conflict of Interest Game

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The Conflict of Interest Game

By: Ulli Niemann

Disgruntled investors are going after Wall Street once again, this time accusing one of investment bank Morgan-Stanley's high-tech mutual funds of making biased stock picks.

Recent lawsuits allege the Morgan Stanley Technology fund was influenced to buy and hold stocks of companies that delivered huge investment banking fees - or could potentially bring big business - to the investment bank.

According to the lawsuits, the Morgan Stanley fund followed the biased recommendations of the firm's analysts - decisions that have cost shareholders millions of dollars since the portfolio's October 2000 inception.

The fund lost 48 percent in 2001 and was down another 50 percent during the first nine months of 2002.) While Morgan Stanley strongly denied the allegations, I fail to see how the management of the fund is somehow distinct from the other divisions of Morgan Stanley. Ultimately, they all work for the same boss.

The suits further claim that the tech fund failed to disclose that the firm had investment banking ties with a number of companies whose stocks were part of the portfolio. They also failed to reveal that those links could affect the fund's buy or sell calls.

Why bring all this up? For one thing, it is interesting to note that Morgan Stanley offered four of these types of funds in October 2000. Just around the time when we sold all of our positions (Oct. 13, 2000) and it became clear, at least to those of us who were tracking long-term trends, that a major trend change had taken place.

More recently in the news it's been Merrill Lynch who had a questionable deal involving transactions with failed energy trader Enron. Of course, the financial services industry regulates itself so well, that an $80 million payment to the SEC is sufficient to wrap up this case without admitting or denying wrongdoing.

What's the moral of this story? While it is impossible to predict these alleged conflict of interest schemes, it is definitely possible to follow a disciplined approach and be on the "right" side of the market so you can avoid jumping aboard a sinking ship.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit:


ScienceDude 04.01.2011. 05:22

Will there ever be Call of Duty game that takes place during the Korean War or World War I? They have already covered World War II, Vietnam War, and modern conflicts. Now, I feel they should go off to the side and make two separate games that focus on these two major conflicts as well. Plus, these two conflicts would definitely bring a lot of interesting game play never before seen and Treyarch and Infinity Ward could definitely take advantage of the opportunity to make the first FPS games that take place during these conflicts.


Admin 04.01.2011. 05:22

Its possible I'd like to say highly possible but not many people (the younger generation which is majority of buyers) know a lot about the Korean war. And World War I, although great source of story and action may not be a good FPS since it was mostly trench warfare and very hard to put into an action pact campaign/multiplayer. But I don't work for Treyarch or whatevers left of Infinity Ward so I can't say they won't do it. Anyway my guess is that they might do it but don't plan on it coming out for awhile.


Michael 22.10.2007. 03:26

Why would a damaging story about steroids come out the day of game 7? George Mitchell the lead investigator to the MLB steroid scandel owns a part of the Red Sox. Sounds like a conflict of interest to me. What do you think?


Admin 22.10.2007. 03:26

he also was owned by espn at one point. he ran disney i believe and was head of disney. disney owns espn-but i also believe that mitchell was head of espn at one point as well

the only news group who really cares about this is espn. but so far-all these stories do is show that reporters aren't getting their facts straight-only report what they feel will give headlines and then HIDE behind..oh i can't give my sources. then when the facts REALLY COME OUT....where's the retraction of the story?

each day the reporters or news papers report someone for nothing-the papers lose that much more crediblity.

got news for mitchell..over 3 years now and STILL no career ending stuff againts players. think they want to drag this on as long as possible so they can get some sort of news out of it all? because we know and they know-they got nothing.

the ironic thing is THE REPORTERS as well knew that players were using SUPPLEMENTS...half the stuff that the reporters and the likes are calling "performance drugs" are things you can buy over the counter at gnc-but now suddenly its a crime? loooooooool. I recall back in the days when Big mac was asked by a reporter about andro-BECAUSE BIG MAC had it right there in his locker (same with bonds)..the reporter asked..oh you use that to?...yeah sounds like the guy was worried about it then.

the reporter worked for espn by the way.


lele T 31.07.2007. 16:31

what are some remedies for conflicts of interest in real estate? i have read some cases and i still havnt been able to find out some remedies one can take if a conflict of interest occurs. for example if a real estate agent is selling a property and he has connection with the property through family and the person buying the property doesnt know but eventually finds out what can the buyer then do as a breach has occured?

lele T

Admin 31.07.2007. 16:31

The real estate agent must disclose if he/she has an interest in the property. However, what kind of breach are you referring? If the agent has interest in the property and you didn't know, it still does not mean that you lost something because of it. If this agent represented the buyer and failed to disclose that he/she had an interest in the property, well then buyer can claim that agent failed to help the buyer negotiate the best available price. But disclosure is the name of the game. The agent must disclose to all parties any kind of interest in the transaction. You could report the agent to the association of Realtors or office of banks and real estate for failure to disclose. Perhaps speak to your attorney first. Try to identify what is it that you lost due to this failure to disclose and see if your attorney will rectify it for you directly with the agent.


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