Posts Tagged ‘fraud’
Trader pleads guilty to $1 billion stock fraud scheme
A former Rochdale Securities trader whose unauthorized purchase of about $1 billion of Apple stock caused the demise of the financial services company pleaded guilty on Monday to wire fraud and conspiracy.
David Miller, 40, entered his guilty plea before U.S. Magistrate Judge Donna Martinez in Hartford, Connecticut.
Miller faces a maximum 25 years in prison when he is sentenced on July 8, but under a plea agreement he could receive a term of five to eight years. The Rockville Centre, New York resident is free on bond…
Prosecutors said Miller bought 1,625 million Apple shares on October 25, 2012, the day the maker of iPads, iPods and iPhones planned to report third-quarter results, hoping to profit if the company’s share price rose.
But they said Miller falsely told Rochdale that the trade was for a customer that had in fact ordered just 1,625 shares.
When the bet backfired, Rochdale was on the hook for $5.3 million of losses on the extra 1,623,375 shares, leaving the Stamford, Connecticut-based company undercapitalized, the SEC said in court papers…
The SEC said as a result of Miller’s bets, Rochdale ceased operations and its staff left or was fired in November 2012. On February 25, Rochdale asked Connecticut, the SEC and other regulators to withdraw its registrations.
So much for counting on the industry kingpins to regulate themselves. So much for providing oversight – preventing deception and fraud. Things were sufficiently lax to kill the company providing the opportunity to commit the crime.
States begin to fight back against MERS mortgage fraud
A prominent economist said about the 2008 financial crisis: “At the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.
The Mortgage Electronic Registration Systems – MERS – was one of the main ways the swindle was done, and the main way in which counterfeit mortgages were laundered by the banks.
MERS is a shell company with no employees, owned by the giant banks.
MERS threw out centuries of well-established law about how real estate is transferred – and cheated governments out of many tens or hundreds of billions of dollars in recording fees…
MERS … is essentially an effort at systematically evading taxes … and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same…
Outrageously, MERS actually marketed itself to its customers as a way to save money by avoiding the payment of legally-mandated registration fees. Check out this MERS brochure from 2007. It brags on the face page about its fee-avoiding qualities (“MINIMIZE RISK. SAVE MONEY. REDUCE PAPERWORK”) and inside the brochure, in addition to boasting about helping clients “Foreclose More Quickly,” it talks about how clients save money because MERS “eliminates the need to record assignments in the name of the Trustee.”
All of this adds up to a system that enabled the mortgage industry to avoid keeping any kind of proper paperwork on its frantic, coke-fueled selling and re-selling of mortgage-backed securities during the bubble, and to help the both the Countrywide-style subprime merchants and the big banks like Goldman and Chase pull off the mass sales of crappy loans as AAA-rated securities.
Here’s a detailed and thorough indictment of Big Bank corruption and thievery. Read it and weep – and then holler at your elected representatives in that sewer called Congress. Tell ‘em to get off their rusty dusty and try working for voters instead of lobbyists and other corporate flunkies.
As Christopher Peterson at the University of Utah puts it – “There was no court case behind this, no statute from Congress or the state legislatures — It was accomplished in a private corporate decision. The banks just did it.”
NOTE: Didn’t notice the original source for this was Washington’s Blog when I read it at The Big Picture. Here’s the appropriate link.
The officers heading our “Reputable” banks are the fraud risk
A recent study confirmed that control fraud was endemic among our most elite financial institutions…“Although there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions”…
Finance scholars are not known for their sense of humor, but the irony of calling the world’s largest and most harmful financial control frauds our “most reputable” banks is quite wondrous. The point the financial scholars make is one Edwin Sutherland emphasized from the beginning when he announced the concept of “white-collar” crime. It is the officers who control seemingly legitimate, elite business organizations that pose unique fraud risks because we are so loath to see them as frauds.
…The definitive evidence of control fraud that PSW2013 identifies is by mortgage lenders who made, or purchased, mortgages and then resold them to “private label”…financial firms who were creating mortgage backed securities… The deceit they documented by the firms selling the mortgage loans consisted of claiming that the loans did not have second liens. The lenders knowingly sold mortgages they knew had second liens under the false representations…and warranties that they did not have second liens. [The key is that the officers who control the banks do not have skin in the game – they can loot the banks they can control and walk away wealthy.] The PSW 2013 study documents that the officers controlling the home lenders knew the representations they made to the purchasers as to the lack of a second lien were often false…that such deceit was common…that the deceit harmed the purchasers by causing them to suffer much higher default rates on loans with undisclosed second liens…and that each of the financial institutions they studied – the Nation’s “most reputable” – committed substantial amounts of this form of fraud…
The central point we have been arguing for years is now admitted – and treated as a universally known fact: “mortgage originators were told to do whatever it took to get loans approved, even if that meant deliberately altering data about borrower income and net worth.” The crisis was driven by liar’s loans. By 2006, half of all the loans called “subprime” were also liar’s loans – the categories are not mutually exclusive…As I have explained on many occasions, we know that it was overwhelmingly lenders and their agents (the loan brokers) who put the lies in liar’s loans…
The greatest importance of the PSW 2013 study is that even the fraud deniers have to admit that our most prestigious banks were the world’s largest and most destructive financial control frauds. Given this confirmation that the banks engaged in one form of control fraud in the sale of fraudulent mortgages…there is no reason to believe that their senior officers had moral qualms that prevented them from becoming even wealthier through the endemic frauds of liar’s loans and inflated appraisals…
Though I sometimes labor to edit and sort Ritholtz’s paragraphs, his choice of words matches laughter with indignation. His conclusion to this piece calls out President Obama and Attorney General Holder for their faith in a “virgin” crisis, e.g., although we all are fuckees as a result of this crisis – there are no fuckers among the bankers.
Barry Ritholtz continues his campaign for the arrest and prosecution of Wall Street criminals.
Here’s why our ratings agencies deserve the death penalty
The very belated Federal civil suit against Standard & Poors is based on one very specific deal, with an extremely egregious email trail. Looking at the entirety of the crisis, the Credit Rating Agencies were major players. Standard & Poor’s and Moody’s as well as the much smaller Fitch ratings agencies all appear to be culpable for similar frauds…
1. Business Model: They shifted their business model from an investor-pays-for-research to an underwriter-pays-for-ratings. Normally, any company is free to change their business model. But the major ratings are not just any business — these firms were all “Nationally Recognized Statistical Rating Organization” (NRSRO) — which the SEC allows other firms to rely on for regulatory purposes.
2. Ratings that were fraudulent: There is overwhelming proof that the ratings agencies knew what they were cranking out misrepresented the quality of the underlying bundles of paper. They did this because they were paid by the underwriters to generate an investment grade rating. THAT WAS THE SOLE PURPOSE OF THE RATING AGENCIES. Hence, why they were called the great enablers of the credit crisis.
3. Ratings Based on Bad Assumptions: Home prices never go down is the excuse we have heard — except there are many examples that disprove this. The data set allowed the rating agencies models to reach a A rating — build in the possibility of lower home prices, and you cannot get the same ratings out of subprime mortgage securitizations. S&P may want to plead Stupidity, and I suspect the prosecution will defer — but stupidity does not present a shield to civil liability.
4. Ratings that were not rated: There are examples of securitized bundles of mortgages that were unreviewed, unanalyzed — and AAA rated.
There are more examples, but let me simplify this for you: In an ultra low rate environment, Fixed income managers were under tremendous pressure to find yield. Their solution was to buy paper that was rated investment grade by the major credit ratings agencies EVEN THOUGH THEY KNEW OR SHOULD HAVE KNOWN IT WAS NOT. The agencies rated junk paper as AAA not because they believed it, but because they were paid to do so…
If Arthur Anderson received the ultimate penalty for their part in the Enron and other fraud, I see no reason why Moody’s and S&P don’t suffer the same fate — plus criminal prosecution for senior management.
Let’s start with the finance and banking communities. Outside of those directly in bed with Pentagon pimps, they are the biggest crooks affecting our daily lives. Fines that look big to ordinary folks who work for a living are an OK start. It’s time for some of these crooks to share cells with their peers from the ranks of car-jackers, armed robbery and other street thugs.
Hip implant maker was aware of 40% failure rate
An internal analysis conducted by Johnson & Johnson in 2011 not long after it recalled a troubled hip implant estimated that the all-metal device would fail within five years in nearly 40 percent of patients who received it, newly disclosed court records show.
Johnson & Johnson never released those projections for the device, the Articular Surface Replacement, or A.S.R., which the company recalled in mid-2010. But at the same time that the medical products giant was performing that analysis, it was publicly playing down similar findings from a British implant registry about the device’s early failure rate.
Some folks call that kind of lying “fraud”.
The company’s analysis also suggests that the implant is likely to fail prematurely over the next few years in thousands more patients in addition to those who have already had painful and costly procedures to replace it…
The A.S.R. belonged to a once-popular class of hip implants in which a device’s cup and ball component were both made of metal. While the A.S.R. was the most failure-prone of those implants, surgeons have largely abandoned using such devices in standard hip replacement because their components can grind together, releasing metallic debris that damages a patient’s tissue and bone…
About 7,000 of the A.S.R. lawsuits have been consolidated in a federal court in Ohio. An additional 2,000 cases have been consolidated in a California state court. The California case chosen to go to trial this week was selected because the plaintiff, a man named Loren Kransky, has cancer and may not live much longer, lawyers involved in the case said. DePuy has already settled a few A.S.R. cases before trial and it may choose to do so in Mr. Kransky’s case as well.
About 93,000 patients worldwide received an A.S.R., about one-third of them in the United States…
Aside from the class action liability – which I hope results in suitable replacement, compensation to patients and penalties exacted from Johnson and Johnson – I hope there is concerted action from the government to penalize J&J for the fraud committed by continued lies about the durability of the device if not an equal fraud in getting it approved for implant in the first place.
That should includes fines. That should include prison time for those who made each decision to lie to the government, the medical community and to patients.
Oldest Swiss bank closing down after tax evasion fine
Switzerland’s oldest bank is to close permanently after pleading guilty in a New York court to helping Americans evade their taxes. Wegelin, which was established in 1741, has also agreed to pay $57.8 million in fines to US authorities. It said that once this was completed, it “will cease to operate as a bank”.
The bank had admitted to allowing more than 100 American citizens to hide $1.2 billion from the Internal Revenue Service for almost 10 years.
Wegelin, based in the small Swiss town of St Gallen, started in business 35 years before the US declaration of independence. It becomes the first foreign bank to plead guilty to tax evasion charges in the US…
US Attorney Preet Bharara said: “The bank wilfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from US law enforcement.”
He added that it was a “watershed moment in our efforts to hold to account both the individuals and the banks – wherever they may be in the world – who are engaging in unlawful conduct that deprives the US Treasury of billions of dollars of tax revenue”…
Mr Burderer’s further admission that assisting tax evasion was common practice in Switzerland has caused huge concern among the Swiss banking community, according to the BBC’s Switzerland correspondent, Imogen Foulkes.
“Some Swiss financial analysts are already speculating that Wegelin’s $58m fine, which many had expected to be higher, was kept low by the US authorities in return for Wegelin clearly implicating the rest of the Swiss banking community in tax evasion,” she said.
No one’s publishing anything more than speculation about which banks – and which bank officers – are next in line to be prosecuted. The obvious reason for the comparatively light fine and delay of indictments of Wegelin’s officers leads easily to the conclusion that cooperation and leads are being offered. It’s called turning state’s evidence to save your buns!
Blair learned his lessons well from Bush, didn’t he? $16 billion in U.K. tax fraud from lack of oversight
The head of Britain’s Work and Pensions department charges that fraud in the country’s tax-credit system has cost taxpayers more than $16.2 billion.
Ian Duncan Smith said a system of tax credits targeting lower-paid Britons is open to abuse because of the inadequate number of checks on those who receive the assistance, The Daily Telegraph reported Sunday.
In an article published in the newspaper, Smith wrote that Britain’s welfare bill rose 60 percent between 2003 and 2010, with nearly $278 billion disbursed during that period…
The tax credits are based on a person’s estimate of salary for the coming year. At the end of that year, tax collectors are supposed to compare the person’s actual earnings against the estimate and reclaim any overpayments.
Smith said the revenue department conducted only about 34,000 checks a year on individuals who received what were considered “high risk awards.”
Even those found to have been overpaid often have not repaid the money, he said.
Blair followed Bush’s best practices all the way from war to poverty. No oversight. No responsibility. Nothing achieved beyond death, destruction and deficit.
Eric Holder announces UBS fines, criminal charges for fraud in global LIBOR scandal
Eric Holder at today’s press conference [link in the article]
UBS AG will pay about $1.5 billion and two former traders face prison as the bank settled charges with U.S. and U.K. authorities for manipulating interest rates in a global conspiracy to boost profits and bonuses.
Tom Alexander, William Hayes and Roger Darin were charged with conspiracy in a criminal complaint unsealed today, the U.S. Justice Department said. Hayes also was charged with wire fraud and a price-fixing violation for manipulating the London Interbank Offered Rate at another bank, the department said…
The charges are the first brought by U.S. officials against individuals alleged to have manipulated Libor and comparable benchmarks in Europe and Japan.
The U.S. Commodity Futures Trading Commission’s $700 million fine is the largest in the agency’s history, David Meister, the commission’s head of enforcement, said at the news conference. The total penalties of $1.5 billion represent about one-third of the bank’s 2011 net income.
The U.S. government said the two men were part of a conspiracy to commit wire fraud from September 2006 to 2009. Hayes, 33, served as a senior yen swaps trader at UBS in Tokyo, while Darin, 41, worked as a short-term interest rates trader at UBS in Singapore, Tokyo and Zurich, the U.S. said.
Prosecutors allege that Hayes and Darin “conspired with others known and unknown within UBS to cause the bank to make false and misleading yen Libor submissions to the British Bankers’ Association…”
At least 45 bank employees, including some managers, knew of the “pervasive” practice and a further 70 people were included in open chats and messages where attempts to manipulate Libor and Euribor were discussed, the FSA said…
The bank said it expects to report a fourth-quarter loss of between 2 billion francs and 2.5 billion francs, primarily as a result of litigation provisions and regulatory matters.
These crooks really believed the old adage, “Never steal anything small!” Problem for them is that an administration cam along that considered the corruption attendant upon the economic meltdown that became the Great Recession to be something that could be prosecuted.
Eric Holder’s DOJ – led by US Attorneys like Preet Bharara – have been prosecuting inside traders and their corrupt associates right and left. Setting records for convictions for economic crimes unseen in decades. The CFTC did the grunt work – and didn’t have a problem turning the case over to a department with a rep for prosecuting the big boys of banking.
U.K. prosecutor makes first arrests in Libor-rigging fraud
The U.K. Serious Fraud Office and City of London Police made the first three arrests in global probes into tampering with benchmark interest rates including the London interbank offered rate.
The three men arrested, ranging in age from 33 to 47, are all British nationals living in the U.K., the SFO said in an e-mailed statement. The agency and police also searched three homes in Surrey and Essex.
Global authorities are investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier. Swiss lender UBS AG is expected to face a fine as early as this week that may surpass the record $466 million paid in June by Barclays Plc, the U.K.’s second-biggest bank, to settle claims it attempted to manipulate Libor…
Libor, a benchmark for more than $300 trillion of financial products worldwide, is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. The rates help determine borrowing costs for everything from mortgages to student loans…
Criminal probes by the SFO and U.S. Department of Justice are running in parallel with civil investigations being conducted by the Justice Department’s fraud division, the U.S. Commodity Futures Trading Commission and the U.K. Financial Services Authority.
Anyone think the brave conservatives in our Congress will stand up and applaud, encourage prosecution of this criminal fraud?
Here we have an international conspiracy that manipulated rates affecting everything from student loans and mortgages to funding for corporate expansion. The investigating bodies accept as a premise they will not charge the management of these banks as responsible for the crime – only individuals will take the fall for the crime. The banks will pay fines. If the fines are big enough to affect their profit margins, they will pass the cost along to customers.
Contemptible!
Canadian National sent trainloads of biodiesel back and forth over the border – made millions never unloading the tankers
Well, it looked like this number – on paper
A CBC News investigation has uncovered a cross-border mystery involving unexplained shipments of biodiesel tanker cars that were sent back and forth numerous times between Canada and the U.S. by CN Rail but were never unloaded.
According to leaked internal CN documents, the rail company stood to make $2.6 million for the effort…
Here comes the papier-mâché excuse:
“CN received shipping directions from the customer, which, under law, it has an obligation to meet,” CN Rail spokesman Mark Hallman said last week. “CN discharged its obligations with respect to those movements in strict compliance with its obligations as a common carrier, and was compensated accordingly.”
When asked whether CN wasn’t helping to do something strange, Hallman responded: “CN met its obligations as a common carrier and we have no further comment.”
CN employees, although guarded, were more candid…“In 25 years, I’d never done anything like it,” one railway worker told CBC News on the condition he not be named for fear he might be fired. “The clerk told me it was some kind of money grab. We just did what we were told…”
“This unit train will move at least once daily to Port Huron starting on Tuesday, June 18,” said an email written by Teresa Edwards, CN’s manager of transportation for Port Huron/Sarnia.
It will “clear customs and return to Sarnia. If we can get in more flips back and forth we will attempt to do so. Each move per car across the border is revenue generated for Sarnia/Port Huron.
“It will be the same cars flipping back and forth and the product will stay on the car…”
Each shipment generated bills of lading, customs import and export forms that suggest total biodiesel shipments of 1,984 cars — which, taken together, would be valued in the hundreds of millions.
The U.S. biodiesel companies listed as customers were HeroBX and Northern Biodiesel. Northern Biodiesel did not answer calls, and it is unclear whether it is still operating as a business. CBC News called HeroBX repeatedly, but it has refused to respond…
RTFA for more of the same. There is a portion of North American capitalism completely absorbed in shuffling papers – with the complicity of local, regional and national bureaucrats – which produces a profit solely on the basis of manipulation. Entirely antithetical to the intent of law, commerce and justice. But, then, that doesn’t matter if it turns a profit, eh?
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