Bank-Buying Strategy Backfires
A former Wall Street analyst who happened upon a strategy to make money from banks’ initial public offerings has been sentenced to two years in prison for using other people as fronts to help him profit.
Bert Fingerhut, former director of research of Oppenheimer & Co., pleaded guilty in May to conspiring to defraud banks and their depositors. A federal judge in Newark, N.J., imposed the sentence on Friday, the Wall Street Journal (sub. req.) reports.
Fingerhut had already retired from Oppenheimer & Co. when he learned of a new way to make money: bank-conversion investing. Depositors at mutual-owned banks that decide to sell shares to the public are entitled to buy stock at the initial-public-offering price. The technique is legal as long as the rules are followed.
Fingerhut invested in more than 400 depositor-owned banks, and some of them went public. But he improperly used friends and family to open the accounts, and borrowed money to buy more IPO shares, the newspaper reports. He made $11 million over the course of a decade.
More cases involving this kind of investing are in the pipeline.
