Daniel Scotto

Daniel "Dan" Scotto is an American financial analyst. In August 2001, as an analyst with BNP Paribas, Scotto downgraded Enron securities from "Buy" to "Neutral".^[1] He took this action four months before the Enron accounting scandal was revealed that led to the company's bankruptcy. Scotto claims that he was fired due to this decision, a claim that is disputed by BNP Paribas.^[1] According to the March 2002 Publication of Infrastructure and Financial Markets Review (page 9), the Enron report “All Stressed-up… And No Place To Go” issued by Dan Scotto was characterized by BNP Paribas as “we don’t think it was a good recommendation or a reasonable one.” At the time Enron’s stock was trading at in a range of $35 to $40 per share which “…provided investors with a good opportunity to cut their losses.” Over coming months the stock declined. By the end of September it had dipped below $30 a share; on 22 October, as the scale of Enron's accounting practices became apparent, the price fell to $20.65, and within three weeks it had dropped below $10. The shares were delisted from the New York Stock Exchange on 15 January 2002, having traded below $1 for thirty consecutive days.

Mr. Scotto had previously spent the better part of three decades researching, analyzing and issuing reports on the Utility Industry. He worked at Standard & Poor’s in the Corporate Bond Rating division, with primary analytical responsibilities to assign bond ratings to electric, gas and telephone industries. From 1982-1988, Scotto served as Director of Corporate Bond Research for L. F. Rothschild and head of its utility analytical team. Mr. Scotto then moved to Donaldson, Lufkin & Jenrette (DLJ) where he was Director of High Grade and High Yield Corporate Bond research until 1994, and was then recruited by Bear Stearns as Managing Director of High Grade, High Yield, and Emerging Market Research as well as Senior Electric Utility analyst. In April 2000, Mr. Scotto moved to BNP Paribas as Director of U.S. High Grade Research and Senior Utility Analyst. Following the Enron report released while at BNP Paribas and his subsequent firing, in 2002 Mr. Scotto founded Whitehall Financial Advisors LLC to offer independent research, forensic financial analysis, consulting services to corporate clients, institutional investors and State and Federal legislators.

Mr. Scotto has sponsored several landmark conferences dealing with Structural changes in the Electric Utility Industry, these include:

• Hedge Funds: Market Makers or Market Breakers?
• Public Utility Holding Act Is It Really Time for Change?
• Shattered Expectations: Electric Utility Restructuring
• Securitization of Utility Assets
• Electric Utility Restructuring: Joint Conference Weil Gotshal & Manges
• Breaking Up Is Hard to Do: Releasing Power Plants from Mortgages

Mr. Scotto also has extensive investment banking project experience – having served as the Senior Regulator/Company negotiator when the Long Island Power Authority (LIPA) acquired Long Island Lighting Company (LILCO). The list of other Investment Banking assignments also includes Western Resources “re-profiling,” restructuring of Tucson Electric, and representing Sale-Lease Back Bondholders (SLOB) in the bankruptcy of El Paso Electric. Daniel Scotto has been indoctrinated into Beta Gamma Sigma by Pace University as the 2008 Honoree for exemplifying the ideals of Beta Gamma Sigma.

Establishing Mr. Scotto’s public credentials in the timeframe leading up to the Enron affair, Institutional Investor Magazine published the following:

• For 9 consecutive years Dan Scotto was named “First Team” in research and analysis in the Energy field – an achievement that has yet to be surpassed.
• “Labeled the icon of fixed income electric utilities. His macro-economic analysis is more insightful than any other analyst.”
• “He’s practically an institution.”
• “Investors are grateful to Scotto for consistently steering them clear of regions where the movement to disaggregate is well advanced.”
• “Being on top of every trend put him a cut above everyone else.”
• “In 2000, Scotto began lowering his credit ratings – beating the rating agencies to the punch. Grateful clients recall that he issues a number of outright sells.”
• “Few investors agreed with DLJ’s Scotto, but those who did not listen were very sorry.”
• “Client’s haven’t been disappointed with Scotto’s advice”
• “Adherents are impressed with Scotto’s top-down approach…he helps clients understand why utilities are making new highs in key measures of financial strength and are not improving their credit rating.
• Additionally, Marty Linsky of the Harvard Business School has been quoted as saying “Is Daniel Scotto ever wrong? The answer appears to be no. Scotto’s ability to spot distressed issues that are improving and close to upgrade is uncanny.”

References

• Feature Article on Dan Scotto in The Wall Street Journal January 29, 2002
• Fast Company Article Referencing an interview by NBC's Matt Lauer
• http://archive.pulp.tc/electric_perfect_storm.pdf New York's Perfect Storm An Industry in Crisis:The Financial Condition of Electric Generating Companies in New York State
• Infrastructure and Financial Markets Review (page 9) March 2002