'Hot Money' Depositors Bought Into BankIPO
WASHINGTON - (08/16/05) -- The Securities and ExchangeCommission filed suit against five Wall Street speculators whoallegedly bought into the first tier of last year's initial publicoffering of a hot mutual savings bank conversion, earning them aquick $2 million profit. The SEC charged the five illegallyestablished first tier status in last year's IPO of New HavenSavings Bank, which allowed them first crack at a maximum amount ofshares, by paying off nominees who were already depositors in themutual thrift, and thus qualified for the first tier. Immediatelyafter receiving the newly issued stock, valued at $4.9 million, thenominees transferred the stock to the group, the SEC claims. Thegroup then sold the stock for a quick 20% after-tax profit, almost$2 million. The SEC charges come as two Texas credit union giants,Community CU and OmniAmerican CU, are asking a federal courtWednesday to free them to convert to mutual savings banks, then toissue stock through IPOs. In most IPOs of mutual savings banks, thebank sets a date of a year, or sometimes two years, before the IPOin which someone may deposit funds in order to qualify in the firsttier.