More Funny Business in the Financial World

Tuesday, October 31, 2006
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From Ted Butler comes some startling news about the New York Mercantile Exchange. I’ll let Mr. Butler’s words carry the tune:

An extraordinary development has occurred at the NYMEX/COMEX. This development is unusual and may be unprecedented. Their Chief Financial Officer/Chief Operating Officer (CFO/COO), Jerome Bailey, has suddenly resigned. Any time a CFO suddenly and unexpectedly resigns, great attention is paid to what caused the resignation, since it may signal a serious problem with the organization. For a CFO to resign just prior to a planned initial public offering is downright shocking. I doubt if anyone reading this has ever witnessed it before. I know I haven’t.

…There can be no question as to the suddenness of Mr. Bailey’s departure. His signature appeared on an SEC S-1 Registration statement on Friday, October 20. Two business days later, on Tuesday October 24, his termination and release agreement were signed and recorded. From a reading of that agreement, it does not appear that Bailey was fired or quit because of illness It appears he pulled the trigger and wanted out in a hurry. The key aspect to the release was a $500,000 extra payment to not speak badly of the NYMEX.

Of course, there are many possible explanations that would not signal a problem within the organization, in spite of the extraordinary timing, and every reasonable effort must be made to discern the truth. Is he ill, was he fired, did he quit, and if he quit, why did he quit?

The central question is why did Bailey resign so suddenly? You would think that this is the question regulators and the underwriters would be asking. Whatever explanation you come up with, why couldn’t it wait until after the IPO? The only answer I can come up with is that he left so quickly to eliminate some personal liability that he foresaw. Remember, he was also looking at a very big post-IPO potential payday that could have netted him many millions of dollars. Here’s where the facts end and the speculation must begin.

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