LIN CHUMPING TAKES A THUMPING

     Denver Post - Lin Chumping,  a Chinese buyer and seller of rice, has claimed to have paid $60 million for the Atlantic Bank in Delaware.  It  turns out there is no such bank in Delaware and he did not spent $60 million for any such thing as a bank anyplace.  Arrested in China on an unrelated fraud, he  was forced to step down from his "Municipal-level appointment to the Chinese People's Political Consultive Conference", a governmental advisory group.  At least he's gained a reputation for a novel scheme.

GUPTA CONVICTED FOR LEAKING INSIDER INFORMATION

     NYT,etc - Mr. Ragat  Gupta, former CEO of McKinsey and Company and past Board Member of Goldman Sachs, was found guilty and convicted June 15, 2012 for securities fraud and conspiracy.  It's another "victory" for federal prosecuting attorney Bharara in Judge Jed S, Rakoff''s court room. Attorney Bharara has successfully charged 66 executives and traders in the past 3 years on insider trading crimes, with 60 of them pleading or found guilty.  "The government wants to protect investors, sending the message that the stock market is a level playing field and not a rigged game favoring Wall Street professionals" states the NYTimes. 

 

     Mr. Gupta is from Kolkata, India and per the Times article was "an orphan who earned an engineering degree and came to the United States to attend the Harvard Business School on a scholarship.  The global world has been stunned by the charges against Mr. Gupta".  Sentencing has been set  for October but an appeal is likely.

EXECUTIVE COMPENSATION PER EQUILAR, INC.

     NYT - The New York Times has published the total compensation of 200 Chief Executive Officers of U. S. public companies for the year 2011.  These  200 employees averaged $19,801,485 each. Total compensation includes base  salary, cash  bonus. perks/others, stock awards and option awards.  The average base salary was $1,322,908. Heading total compensation list of the 200 is CEO of Apple, Timothy D. Cook, with $377,996,537 (that's $3/8's of a $Billion). The next 4 CEO's are:  David Simon of Simon Property Group with $137,206,818; Lawrence J. Ellison of Oracle  with $77,556.015; Leslie Moonves of CBS with $68,422,211; and  Ron Johnson of J.C.Penny with $53,281,505.  If the annual compensation of the "average" worker is about $58,000.00 and the average annual compensation of the 200 Executives under discussion, the average executive is annual paid 341 times that of the average worker.

     It is not disclosed how many of these CEO's are also the Chairman of their Board of Directors, but it's a fair assumption the majority are also their Boards' Chairman. ALL German and Dutch public companies DO NOT allow dual CEO/Chairman roles.  79% of British companies have a 2-tier CEO-Board Chair relationship. (See Chapter 9, Lax Board of Directors, in the book "The Greedsters", pages 325-353 and especially page 334).

    It's only fair to shareholders to separate the roles of CEO and Board Chairman. The corporation will be better off because of it.

LONG SENTENCES FOR NON-VIOLENT CRIMES VERY COSTLY

     NYT - An editorial in the New York Times raises the question of the costs of long confinement of non-violent prisoners whose early releases would have little risk to public safety and would save $billions of dollars in the long run.  Ask someone who has been fleeced of life-time savings, whose children have been deprived of a good education, whose life styles have been severely altered by "non-violence"  crimes. Their "penalty" is a changed life style.  Madoff's ponzi caused at least two suicides, and who knows the effects of many other "non-violent" crimes.  Today's sentences may be questioned, but isn't living a degraded innocent life destroyed by a crime worse then incarceration for life?  The non-violent crimes are committed by those who should know the consequences, whereas many victims of such crimes unknowingly are at risk. Who should deserve the long penalty?  Certainly not the innocent. A crime deserves a punishment but when is enough? - when is too much?  Tough questions.

STANFORD GETS 110 YEARS IN PRISON

WSJ - .NYT - StarTrib - No longer  "Sir ", but rather "Stir" R. Allen Stanford was handed a sentence of 110 years in Federal Prison on June 15, 2012. (no parole but possible appeal).  Mr. Sanford is detailed on pages 181-202 in the book "The Greedsters". The 6 foot 4 inch Texan maintained his innocence despite testimony by his former Baylor University roommate, James M. Davis, who was also his chief financial officer but main informant.  Mr. Stanford said after being convicted and sentenced, "I am not a thief".  One victim who lost $1.5 million to Stanford said in court, "You deserve what's coming to you. You are a dirty rotten scoundrel".  Federal Judge Hittner, besides the prison sentence,  ordered Mr. Stanford to forfeit $5.9 BILLION in his bank's deposits associated with his misdeeds. A severe prison beating had caused Stanford to suffer a memory loss, but the Judge stated Stanford  had "exaggerated  his impairment" and he was competent to stand trial.  Three of the perpetrators of the largest ponzi schemes have been sentenced: Madoff to 150 years, Petters to 50 years and now Stanford to 110 years.  All three will probably die in jail - were  the crimes worth it?  In 2000 Mr. Sholam received an 845-year sentence for fraud and in 2008, Mr. Norman Schmidt was given a 330-year sentence for an investment fraud. Why don't others learn from these experiences?

BANKS PAY RECORD FINES FOR ILLEGAL FOREIGN EXCHANGE

     WSJ - Sanctions enforced  by the U.S. Treasury Department's Office of Foreign  Assets Control against foreign banks for "moving" sums of money without disclosure to the Treasury have resulted in big fines to several banks.  The Wall Street Journal announced the ING Bank, a unit of ING Group NV (a large Netherland bank) "stripped" mention of some foreign countries when moving large sums through the processing by the U. S. Treasury in Manhattan where most dollar payments are "filtered" to spot terrorists and those involved in money laundering.  ING agreed to a penalty of $619 MILLION.  The Credit Suisse Group AG bank paid $536 MILLION and  Lloyd's Banking Group forked over $350 Million in 2009.  In 2010, Barclays PLC Bank was fined $298 MILLION.  One of the common money routings used Cuba and Iran to get around clearing through Manhattan.  By stripping "little white lies", forming shell companies and other  devices, transactions were most difficult to trace.  So you think "banking" is an honorable profession?  Only sometimes!!! 

3 MORE SNAGGED IN COOKS' PONZI SCHEME

     StarTrib - Trevor Cook was found guilty in a massive Ponzi scheme in 2010 and is now serving a 25 year prison term.  3 more men were convicted  yesterday of varying degrees of fraud and money laundering related to Cook's misdeeds.  Cook concentrated mainly on hedge funds, Jason "Bo" Beckman, Patrick Kiley and Gerald Durand essentially targeted individuals.  Mr. Cook had explained earlier to authorities his program, created by him, dealt with fraudulent currency investments, working through special access with banks that comply with Islamic Shariah law prohibiting interest charges, thereby affording his investments a higher rate of return.  It takes all kinds---.  

ABACAS, A CHINESE AFFINITY BANK

     NYT - In 1984, Mr. Thomas Sung, along with business leaders from the Chinese community that included Lower Manhattan, formed the Abacas Federal Savings Bank. The bank became an important financial source for Chinese  people in northeastern United States.  Because the bank was primarily for Chinese customers, it can be classed as an "affinity bank".  Abacas mortgages were sold to other financial institutions to raise cash for the bank after a "run" occurred on the bank when it was disclosed a bank manager had helped himself to $1 million of customers' money.  It was discovered very lax mortgage requirements applied to many of the sold mortgages, smacking of a scheme.  Ms Jill Sung became Bank CEO and her father Thomas became Chairman of the Board. 

    
 Neither Sung has been charged in the mortgage schemes.  However, 19 "former" employees were charged, with some of them requiring a translator for them to understand the charges.  Mr. Yiu Wah Wong was the most senior manager of the bank and one of those charged.  According to Mr. Edward Starishevsky. an assistant district attorney,  "Mr. Wong was involved in this entire conspiracy from beginning to end".  He was arrested in April and has been free on $100,000 bail. Those charged could face up to 25  years in prison.  It's not uncommon for a specific race or group to be called an "affinity" when gathered together.

DENNY HECKER MOVED AGAIN

     StarTrib - For at least 6 times in 5 months, prisoner Denny Hecker has been moved, this time to the U. S, Penitentiary in Canaan, Pa. from a transfer facility in Oklahoma City. Mr. Hecker has been "given diesel therapy" for breaking prison rules. He has been sentenced to 10 years in prison for fraud. He had compiled debts of $767 million while living a high life style with and through 26 car dealerships. " Diesel Therapy" is an insider's description of penalizing a prisoner by constantly moving him or her from state to state and prison to prison, "to show who's the boss", disrupting contacts and maintaining some semblance of privacy as to where the  prisoner is.  Hecker can be classed as a "greedster" but was not included in the book "The Greedsters" because sentencing came after the book was published.

BEAR STEARNS EXECS SETTLE FOR $275 MILLION

     WSJ - Wreckage from Bear Stearn's March, 2008 demise reared its ugly head once again when it was announced yesterday the settlerment of a shareholders' lawsuit against top executives of the firm. The settlement? $275 million on behalf of sued executives that included Mr. James Cayne and Mr. Alan Greenberg.  What does this settlement cost the executives?  Not much.  When J.P.Morgan Chase took over Bear Stearns in 2008, a $9 billion fund was established by J. P. Morgan for probable settlements.  Part of this $275 million settlement is a statement that executives involved denied any wrongdoing.  An article in the Wall Street Journal stated in 2010, a Countrywide Financial lawsuit was settled for $600 million and in 2009, Merrill Lynch paid $475 million, after these two firms had been purchased by Bank of America.  In 2011. Washington Mutual paid $208.5 million settlement in a lawsuit and was snapped up by J,P,Morgan, and in May, 2012, a $90 million settlement of an investors lawsuit was reached regarding Lehman Bros.  Much of the settlement money came from "Directors and Officers Insurance". 

     It's a warning to all Boards of Directors - be sure the company you represent have you covered with adequate insurance. You're at risk. See  Chapter 9 in the book "The Greedsters".

DUAL ROLE OF CEO/BOARD CHAIR UNDER ATTACK

     WSJ- At  long last, the pendulum is swinging towards non-sharing of the roles of CEO and Board Chairman by the CEO.  According to head-hunter Spencer Stuart, 20% of S&P companies now have separate individuals as CEO and Board Chair compared to 12% in 2007.  This development "is creating a second seat of power (and responsibility) at the top of big companies".  Mr. Stephen Davis of Yale's School of Management states "Shareholder resolutions have been critical in opening boards' minds to splitting the chair and CEO".   At Nabors Industries, Ltd., a shareholder's resolution was approved to give shareholders a better way for making choices felt when voting occurs.  A  restriction on shareholders limits a shareholder's vote, however, to one who has held at least a 3% ownership position in shares for more than 3 years to nominate competing candidates for up  to a fourth of the Board's seats. It's a start, at  least.

CLAWBACKS HAVE SHARP CLAWS

Star Tribune - Tom Petters ran a $3.65 Billion Ponzi fraud in 2008. He declared bankruptcy and  has been convicted in Federal Court and sentenced to 50 years in prison.  But - effects of the fraud live on.  The law firm of Fredrickson & Byron in Minneapolis on May 31 announced a settlement with the bankruptcy trustee and returned $13.54 million in fees collected for legal work during the Ponzi scheme period.  The firm stated its payment was fully covered by a professional insurance policy.  The law firm denies any awareness of the Ponzi.  

     Also, the trustee said on May 31 it collected $1.25 million in settlement with the John T. Petters Foundation, monies contributed to it by Petters and others. On May 30, the trustee had announced collecting $19 million from General Electric Capital Corp with GE professing no knowledge of the Ponzi.  These figures swell the Petters clawback total to $299 million. The threat of a court trial showed the sharp claws of the recovery.  Settlements must be approved by Judge Gregory Kishel of the Federal Bankruptcy Court. 

SHAREHOLDERS KEPT IN DARK ON MERGER LOSSES

     Three and a half years late, it was revealed in court documents filed June 3, 2012 (in advance of a shareholder's lawsuit) that in the merger of Bank of America and Merrill Lynch on September  12, 2008, B&A  failed to disclose to shareholders (voting for a Merger in person and in a proxy)) that huge losses to B&A were probable because of the Merger.  Subsequent undisclosed losses totaled at least $14 billion. As these losses unfolded after the Merger, the common stock of B&A fell more than 50%, wiping out about $50 BILLION in market value. Per the New York Times article of June 4, 2012, 2 days after that shareholders meeting, B&A's Board of Directors met and were told of the loss of $14Billion in the 4th quarter of 2008. The Bank's General Counsel, Mr.Timothy Mayopoulos, lost his job the next day after he expressed  surprise by the size of the losses. "He was fired without explanation and immediately escorted from the premises without being given the opportunity to collect  his personal belongings".

      At Merrill Lynch, before the Merger, Mr. John Thain displaced Mr. Stanley O'Neal as CEO and Board Chairman in November, 2007. Previously, Mr. Thain had been Co-Chief Operating Officer for Goldman Sachs, COO and CEO of NYSE and NYSE Euronext, Inc.  Merrill Lynch under-performed badly in 2008 and Mr. Thain finally found B&A agreeable to a merger which  was consummated on September 12, 2008. Mr. Thain received total compensation of $83 million for his less than a year at Merril Lynch. He was slated to be the new CEO and probable Board Chairman of B&A after the Merger was completed.in January, 2009. After 2008 multi-billion dollar losses (with  many days losing $16.5 Million every HOUR of an 8-hour day) at Merrill Lynch for the 4th quarter were announced, Mr. Ken Lewis ( the CEO at B&A who Mr.Thain was replacing) called Mr.Thain, after which Mr. Thain was fired the next day, receiving $93 million for his 53 days associated with B&A.  In 2010, Mr. Thain became CEO of the CIT Group Inc. at a salary of only $6 million. Wall Street is unbelievable, isn't it?  

WSJ SCOOPED BY NEW YORK TIMES

The Greedsters Sequels originates in Minneapolis, Minnesota.  Where the printed editions of home-delivery-week-day Wall Street Journal and New York Times papers are completed aren't totally known, but the Journal's  Monday, June 4, 2012 home edition carried nary a trace of the news pertaining to Bank of America's current announcement of the lack of notice to its shareholders of the pending horrendous losses in the merger with Merrill Lynch in December, 2008.  The New York Times carried a front-page story in  IT'S June 4, 2012 home edition with the column headline, "Merrill Losses Were Hidden Before Merger". 

 

     This news item is a major development from the 2007-2012 financial disaster and will be detailed in another Sequel.  Somebody at the WSJ certainly has egg on his or her face but you can't win 'em all!!

"THE GREEDSTERS' ON KINDLE

     NOTICE: The new book "THE GREEDSTERS" has recently been listed on Kindle, for sale at $16.99. The Greedsters had its initial printing in late April, 2012 and is now being distributed in the market. The 400-page paperback will be available through most bookstores and other forms of availability.  Early comments from readers include "astonishing" and "a must for every household and business".  "THE GREEDSTERS SEQUELS"  is available on the Internet as to current information on  individuals, companies and organizations contained in the book plus any related items not contained in the book because of its publication date. The purpose of the Sequels is to keep "The Greedsters" book up-to-date so it has a life of its own.