HEDGE-FUND MANAGER PAYS BIG FINE AND FORFEIT

     WSJ - Mr. Douglas Whitman, founder of Whitman Capital in 1994, was sentenced to 2 years in prison by U. S. District Court Judge Jed Raskof.   Mr.  Whitman was fined $250,000 and ordered to forfeit $935,000 in illegal gains.  Mr. Whitman declared," I am terribly sorry. 

 

This something that haunts me today and will for the rest of my life". The Judge said, "Mr. Whitman repeatedly perjured himself" during the trial.  Passing inside information to outsiders on Google among other companies was Mr. Whitman's downfall.  Won't these supposedly smart fellows ever learn??

JAIL SENTENCES CAME IN BUNCHES

Justice prevailed.

•  Strib - Trevor Cook, a master pitchman, had a $158 million ponzi scheme and was convicted to 30 years in prison for it on August 24, 2010.  Jon Jason Greco was sentenced to 10 months in jail on November 15, 2011 for making false statements during Cook's trial.  On January 3, 2013, Jason Bo-Alan Beckman of Plymouth, Mn. was sentenced in Federal Court for 360 months or 30 years without parole (because it's a federal case) for his part in the ponzi.  Gerald Joseph Durand of Faribault, Mn. earned a 240 month sentence (20 years) for participating in the ponzi. Christopher Pettengill of Plymouth, Mn. was sentenced to 90 months in prison ( 7 l/2 years).  Infractions included wire fraud, mail fraud and filing false tax returns. These sentences came after due process that took more than 29 months after the sentencing of ringleader Trevor Cook.  Justice prevailed.

DEFENDANT WANTS TO BUY-OFF LIFE SENTENCE BY PAYING COURT $19,000,000

Strib - Defense Attorney Douglas Altman will present a 68 page sentencing memo Monday, 12/17/12, outlining why his client should not receive a life sentence for various crimes including fraud and money laundering as money manager for business associate convicted Trevor Cook.  To sweeten the arguments against a harsh sentence, the defendant, Jason Beckman, is offering to immediately pay a check for $19,000,000 to the court to pay victims of his latest charges.  Mr. Beckman is no stranger to court antics.  He tried to fraudently buy a part ownership in the Minnesota Wild hockey team for               $5,000,000;  tried to defraud an elderly couple of  $4,000,000 life insurance proceeds; is carrying 3 current tax charges; had to borrow with court permission $5,151 for living expenses;  looted the estate of his grandfather; was forced out of the U. S. Air Force Academy for dishonesty; forged his mother 's signature on a student loan application; and committed perjury during a divorce  proceeding to avoid child support, all contained in an article about Mr. Beckman in the Minneapolis Star Tribune newspaper.  It's going to  be difficult for the judge to go easy on a sentence, it would seem.

ATER 4 YEARS, MADOFF MONEY IS STILL FLOWING BACK TO INVESTORS

 Strib - A seemingly improbable 4 years ago, Mr. Bernard Madoff confessed to his two sons his 20-year run as Bernard L. Madoff   Investment Securiteies LLC with as much as $60 biliion of investors' real money in the firm was all a big ponzie scheme.. It was on December 11, 2008 the 2 sons reported the disclosure to federal authorities and Madoff was arrested the next day.  Mr. Madoff is today serving a 150-year sentence in a federal prison. Court-appointed trustee Irving Picard and a gang of lawyers headed by David Sheehan of the New York law firm of Baker-Hostetler have recovered $9.3 billion of the estimated $17.5 billion possible to recover.  The time and efforts to recover the money comes with a high cost.  To date, legal fees have been as much as $600 million.  Records have shown the $60 billion invested by investors was never re-invested by Madoff on their behalf but instead was used "bit by bit" to pay other investors as returns on their "investment" with him.  Additional money to recover can be from accounts in Great Britain, Spain and Israel according to the Associated Press.

GOLDMAN SACHS FINED $1.5 MILLION

NYT - Matthew Marshall Taylor was a market trader for Golden Sachs from 2007 to  recent times.  During his tenure, he is accused of "fabricating" transactions and trades that improperly hid $8.3 billion that translated  into $119 million in losses for the firm.  Goldman was accused by the Feds for not properly monitoring such trades and fined the firm $1.5 million. A Democrat Commissioner on the Commodity Futures Trading Commission labeled the fine "a token sum" for a firm the size of Goldman.  It was pointed out  the 60 violations cited could have been reasons for a fine of as much as $7.8 million and would have been more appropriate.

EX-CFO DIVERTS CHARITABLE MON EY TO PERSONAL USE

WSJ - Mr. Glen W. Albanese worked for the brokerage house Needham & Co.  As CFO, he collected money from the firm to aid victims of Hurricane Katrina, especially children in a scholarship fund.   Wearing a hooded gray sweatshirt and with handcuffs and waist chains in court, he was charged with conspiracy to commit fraud and was released on a $200,000 bail.   Supposedly, he maneuvered invoices to the firm and diverted the proceeds for personal use including 2009 World Series tickets, interior decorating, a Labradoodle Poodle Cross, fitness equipment and "tens of thousands of other  expenses". He agreed to seek mental-health counseling as a condition of his bail.  Sentencing will be later .

MAJOR INVESTOR DECRIES INCENTIVE PAY

NYT - The Louisiana Municipal Police Employees' Retirement System, a major investor in Simon Property Group of Indianapolis, is very unhappy with a Simon Group Board action of 2011.  An "incentive award" was given by the Board  to Simon's CEO and Board ChaIrman, David E, Simon .   The award of one million shares of stock is valued today at $146 million and will be paid in 3 installments 6 years from the award date. Usually, a major "incentive award" is tied to share price and growth of the company. Not in this instance.   As Gretchen Morgenson wrote in the Times article, "The only requirement to receive this bounty was that Mr. Simon show up for work".  It would seem such a Board Decision  best serves Mr. David Simon as CEO but also as Chairman of the Board, a subject open for criticism.

THE PIZZAZZY LADY MAKES HEADLINES

 WSJ - Rita Crundwell is a 59-year old former Dixon, Illinois comptroller who can maybe add more figures to her resume - 20 years in prison for helping herself to $53 million of city money to fuel a fancy life style over more than 20 years.  One extravagance was buying a race horse named The Pizzazzy Lady by falsifying a sewer project invoice for $350,000 and then using the money for her horse farm and purchase of the horse.

FORMER MADOFF CONTROLLER PLEADS GUILTY

WSJ -  When Bernard Madoff was arrested on December 12, 2008, he stated nobody else was involved in or guilty of his giant Ponzie scheme of $billions. On November 8, 2012 - nearly 4 years after Madoff's arrest - the ninth employee of BLMIS,LLC, former controller Mr. Irwin Lipkin, pleaded guilty to criminal charges and will be sentenced March 22, 2013.  Mr. Lipkin started with BLMIS in 1964 when it was a 2-man outfit and was employed by BLMIS until 1998.  He has stated, "at no time prior to my departure was I aware of any Ponzie scheme" ( in spite of being controller for 44 years??). He also has stated he signed "myriad documents" he knew to be false.  His guilty plea included forfeiture of $170 billion, the same amount both Mr. Madoff and chief officer Mr. Frank DiPascali agreed to forfeit.  The Madoff Saga goes on and on!!

PETTERS CLAWBACK BY RECEIVER DENIED BY JUDGE

Strib - Tom Petters, Minnesota businessman, is in prison for 50 years for his $3.65 billion Ponzie scheme loss to investors (pages 101-105 in The Greedsters). Douglas Kelley was appointed by the court to be a receiver and clawback donations made by Petters  to various parties.  The College of St. Benedict in Avon, Minnesota received a pledge of $3 million from Petters, $2 million of which had been paid to the College who spent the money  to renovate and expand the Benedict Arts Center in St. Cloud, Minnesota and $1 million had never been  paid.  Receiver Kelley sued the College to clawback the $2 million.  U. S. District Judge Richard Kyle ruled Kelley had no authority to sue the College as the lawsuit filed under  the  Minnesota  Fraudulent Transfer Act and the Federal Debt Collection Procedures Act was governed by a new 2-year  limitations statute and therefore the Feds could not sue the College with new State limitations of 2 years (in this case) instead of the original  6 years.  Lucky St. Benedict College!!

RAINBOW ROOM SAVED BY BECOMING A LANDMARK

NYT - On August 22, 2012 , a Greedsters Sequel was posted pertaining to the inability of tenant and landlord to arrive at a new rental agreement for the famous Rainbow Room space in 30 Rockefeller Plaza, New York City.  It has been closed for more than 3 years.  It's happy news that the city's Landmarks Preservation Commission voted 7 to 0 to give Landmark Status to the "Rainbow Room", even though a landmark conservative approach limits the designation only to that part of the 65th floor where the music and dancing occurred.  Restaurant support operations used part of the same floor plus the 64th floor.  It appears the owners - Tishman Speyer Properties - and the renters - the Cipriani family - support the landmark designation.  It just may be the thing to bring the two parties together to have a big smash grand opening someday in the future.  The entertainment space on the 65th floor was named "Rainbow Room" because of multi-colored lights that bathed the dance and dining area while a fancy house organ filled in the period when famous orchestras were catching their breaths between sets. Oh, those were the days!!

PERSONAL SECRETARY CHARGED WITH EMBEZZLING FROM EXECUTIVE

WSJ - William J. Salomon, now 98 years old and son of one of the founders of the 100-year old Salomon Brothers investment firm, was an active executive at Salomon Brothers after rising from a 19-year-old fresh out of high school.  On retirement, he maintained an office at the firm and continued with an office after Citigroup merged with Salomon Brothers in 1997.  His recent secretary, Karen R. Febles, charged with embezzlement,  was a former Citigroup secretary and became Mr. Salomon's secretary from 2000 to September, 2011.  "Ms. Febles was the only other person given access to  Mr. Salomon's personal checking account".   An example sited by prosecutors was a check signed by Mr. Salomon for $900 dollars and when cashed, "nine  hundred became nine thousand nine hundred".   Ms. Febles will stand trial set for November 13 after pleading not guilty.   An investigative official has stated, "Part of what goes into larcenous thinking is that this is a wealthy person who isn't counting his nickels and dimes and will never miss the money".   After many years of trust, Mr. Salomon apparently missed about $1.8 million and blew a whistle.   Mr. Salomon is known as "pleasant, well-tailored, casual and has all of his mental faculties at 98".   His wife of 70 years died in 2008 and he now has another office assistant.

A SHOCKER FROM CITIGROUP

WSJ - For the CEO of one of the world's leading banks to suddenly resign shook up Wall Street and the financial world.  Mr. Vikram S. Pandit took over at the helm of Citigroup in 2007, steering the bank through thick and thin from 2007 to October 17, 2012.  The company's wheel wobbled during these past 2 years until he was deposed as CEO of Citigroup by Board  Chairman Michael  O'Neill .  Mr. O'Neill is regarded as a new generation of Chairman of the Board - inquisitive, poking into trading , questioning trades of all kinds, reducing some costs and exercising the exit of thousands of employees. Behind the scenes the tension between the CEO and Board Chairman finally became too much and Mr. Pandit's head rolled.  The Board asked for Mr. Pandit's resignation, which is a polite way to say he was fired.

J P MORGAN MISTREATS CUSTOMER'S TRUST (Sequel)

NYT - Oklahoma Tulsa County District Court Judge Linda G. Morrissey declared J. P. Morgan Chase  must pay $18 million for breaching fiduciary duties managing a trust of Carolyn S. Burford.   Ms Burford died in 1996, leaving a rich trust for JP Morgan to manage.  This particular  trust was established in 1955 by Ms. Burford's mother and father who had founded the Skelly Oil Company.  The District Judge believed J P Morgan had used some of the trust's proceeds to invest in the bank's own trust, thereby  "double-dipping" its fees.  The Court admitted it was a convoluted case but the bank had violated its customer's trust by using trust money to invest in another trust for its own benefit.

TOYOTO RECALLS MILLIONS MORE CARS

NYT - In 2009 -10, Toyota suffered through the recall world-wide of 11,000,000 Lexus and Toyota cars with defective floor mats and sticky accelerator pedals. Now, once again, they must recall 7.4 million cars world - wide, 2 1/2 million of them in the United States.   Eleven different models are listed with inadequately - applied special grease on the power switches for power doors on the driver's side. Toyota warns the use of "commercially available lubricants" could melt, leading to fire.  Just imagine the costs involved in dealing with millions of cars with defects!.

SUB-PRIME MORTGAGE WOES GO ON AND ON

    

NYT/STRIBE - The Bank of America announced another major payment to shareholders - $2.3 Billion - to settle a lawsuit involving the acquisition of Merrill Lynch and misleading statements made by B&A in late 2008.  B&A's current CEO, Mr. Brian Moynihan, stated a week ago, "Resolving  this litigation removes uncertainty and risk and is in the best  interests  of our shareholders".  In early 2008, B&A acquired Countryside Financial and settlements to date for that deal has cost the bank more than $40 billion.  Only Enron, Tyco, and World Com settlements in the financial world have exceeded B&A's settlements.  Horrible losses, to be sure.  Some critics believe even more are yet to come as the period of 2007- 2012 keeps rearing its ugly head.

EAST INDIAN BILLIONAIRE SHORT ON CASH

    

NYT - Mr. Vijay Mallya, listed by Forbes on its billionaire lineup, is way short of cash to pay his debts.  His Kingfisher Airlines, owned by his UB Group, ordered 50 new Airbus planes at the 2007 Paris Air Show, has never made a profit, is late paying bank loans on time ($1.3 billion late) and it's claimed he hasn't paid most workers for months. The airline is called his "crown jewel".  A report states his executives "seemed willing to practically gamble away the health of the group's other businesses, which were used as collateral for bank loans to the airline".  These "other businesses" included expensive cars, a car racing team and fancy parties at his home in Mumbai with Bollywood stars and prominent politicians.  The airline featured red-suited flight attendants, very generous frequent-flyer programs and quality food at the start.  The airline faced drastic competition from state-owned Air India.  Its fleet is down to 12 airplanes from more than 70, and schedules have been pared to only curtailed domestic flights.  You might say he's being grounded.

MAN AND WIFE EACH GET 10 YEARS

    

Strib - Mr. and Mrs. James Ober of Hudson, Wisconsin were each given 10-year prison terms for racketeering by Hennepin County District Judge Joseph Klein.  The couple pleaded guilty for getting fraudulent mortgage loans through their company, Mortgage Planners, Inc., and then negotiating more than $6 million in "kickbacks" from many such mortgage loans. They engineered about $23 million in such loans.  Three other people were involved in these transactions, one has pleaded guilty, one will be standing trial and a third one has apparently flown the coop and is being sought.  This complex equity-plot relied on forged documents such as property records, college transcripts, pay stubs and even court  records to qualify 'straw buyers', according to the news report.  It is very unusual to have 5 forgers, 3 of who are unrelated to the other two. The combination of greed and fraud is most difficult to conceal when more than one person is involved.

"WORKING FOOL" GETS 3 1/2 YEARS

    

Strib - Mr. George Wintz, Jr., of Triangle Warehouse, Minneapolis, was found guilty by a jury and sentenced to 3 1/2 years by U. S. District Judge Ann Montgomery of bank fraud and embezzlement of money from employees' retirement plan.  Mr. Wintz kited and floated checks to keep his business going and employees working.  He wrote "batches" of checks against accounts in two banks and solicited "nominee loans" totaling $1.9 million, signed by family members and employees but used the money in his name.  Even the President of one of the banks signed such loans to cover overdrafts by Wintz.  One of the banks was closed in 2011.  The sentencing Judge said, "I think you're kind of a working fool" when she imposed a prison term of 3 1/2 years when she could have "given" him 8 years.

AMISH LONG HAIR WINS HATE CASE

     WSJ - NYT - In U. S .District Court in Cleveland, Ohio on September 20, 2012, 16  people of an Amish group from Bergholz, Ohio were declared guilty of a hate crime.  A jury deliberated for 5 days before declaring them guilty as charged.  The crime?  Cutting off the long hair of other Amish against their wishes.  Long Amish hair is a sign of devotion to their  religion, the longer the more devout.   Attorney Steven Dettelbach of the U. S. Northern District of Ohio stated "Our community and our nation must have zero tolerance for this type of intolerance".  The defiant group cut the long hair of fellow Amish with scissors and clippers usually used by them for cutting and trimming horse

hair.  The "head" Amish defendant, Bishop Samuel Mullet, Sr., has a history of ordering his Amish brethren be beaten with paddles or confined in chicken coops for violations of strict religious principles.  Come January 24, 2013, the 16 men and women involved in the hate crime could be sentenced to as much as life imprisonment. This is America, not the religious world of the Amish.

WIRTH WILL BE WORTH MUCH LESS

    

     Strib - Mr. Jeffrey Wirth, a resident of Plymouth, Minnesota, a CPA and developer of commercial real estate with 30 or so related and unrelated companies headquartered in Brooklyn Center, Minnesota, was sentenced to 41/2 years in prison and fined $6.45 million yesterday by U. S. District Judge Ann Montgomery.  A maximum of 20 years in prison could have been levied. Mr. Wirth had previously pled guilty to tax frauds, along with  Ex-CFO of Wirth Co., Holly Damiani, and outside accountant Michael Murray.  Wirth's sentencing terms were the result of a plea bargain. Judge Montgomery said "This is not a case of a single tax year or a slip-up" but frauds that continued over several years

 

   Wirth's Defense Attorney, Christopher Mandel, negotiated a time - release for Mr. Wirth so he could attend his son's piano recital in New York and will turn himself in at a later date.  Judge Montgomery said, "The most stupid thing Mr. Wirth could do in this situation is to run.  I realize I'm taking a risk on that".  Wirth had built a special 18,000 square-foot house with a 15-car garage (on an island?) dubbed "Isle Windemere" on Lake Minnetonka and has made very liberal donations to charitable causes - as well as family members.  Under the circumstances, it seems the Court and its decisions has been very fair. 

LUCKY THE LOSS WAS ONLY $2.3 BILLION, not $12 BILLION

    

NYT - A gambling stock market swinger, Kweku M. Adoboli, caused Switzerland's largest bank, UBS, to nearly fail because of wild trades and fictitious accounting.  His motivation was "greed and ego" while piling up billions in hidden losses until arrested and brought to trial in London recently.  Unauthorized speculative trading started in 2008 and  existed for 3 years before questions were asked.  His worst  exposure for the bank was $12 billion and the real financial risk stood at $8.1 billion late in September, 2011.  A Pete Hahn of the Cass Business School in London says."A fundamental rethink is underway".  Sounds like a good idea!

STANFORD EXECUTIVES STILL BEING SENTENCED

NYT - Laura Pendergest-Holt, a former Chief Executive Investment Officer for the Stanford Financial Group, Houston, Texas and Antigua in the West Indies, was sentenced to 3 years in prison by Houston's Federal District Court Judge David Hittner on Thursday, September 13, 2012. She was convicted of obstructing an SEC proceeding. 20 other similar charges were dropped in a plea bargain. Ms Pendergest-Holt stated before the Judge: "I'm sorry I was so trusting in people who didn't deserve my trust, and my trusting them caused harm in others". Judge Hittner is the judge who sentenced R. Allen Stanford to 110 years in prison in June, 2012 which he is currently serving in a Central Florida prison. This saga is a common one for Greedsters - loss of big money, prison terms, employees being convicted, years of trials and millions of dollars for lawyers. The end is still not in sight for the period we have experienced - pre - and post - 2007-2012 and beyond.

CEO PLEADS GUILTY AFTER PLEADING NOT GUILTY

WSJ - Russell Wasendorf, Sr. was CEO of Peregrine Financial Group when he tried to commit suicide on 7/9/12. On 9/11/12, he signed an agreement with Fed prosecutors, pleading guilty (after saying he was not guilty), as he admitted he was indeed carrying out a $200 Million fraud and embezzlement racket involving his financial customers. It's possible he could be sentenced to prison for up to 50 years. Mr. Wasendord asked to be freed until his hearing and sentencing but the request was denied by Judge Jon Scoles because of Wasendorf's attempted suicide. The long arm of the law got him and won't let go.

FELON WHISTLEBLOWER AWARDED $104 MILLION

WSJ-STRIB - A USB AG Swiss banker, Mr. Bradley Birkenfeld, at long last was awarded a fat purse of $104 million for whistleblowing on U. S. citizens who maintained secret accounts in the Swiss Bank. Federal prosecutors worked with Birkenfeld since 2007 collecting data and since that year, 30,000 U. S. taxpayers have owned up to undeclared overseas accounts and have settled for more than $5 billion in taxes and penalties. Mr. Birkenfeld was one of the 30,000 snagged.

He ran tax-evasion errands for clients and was also caught trying to hide undeclared diamonds in his toothpaste tube when entering the U. S. He was sentenced to 40 months in prison and is now serving the tail-end of the sentence in home confinement. If you don't mind spending the rest of your life being classed a felon, it's still a tough way to make your millions. $104 million may seem like a lot of money to award a felon, but after all, his information has snared over $5 billion and still counting for the Feds.

SMALL CHANGE STOPPED FOR PETTER'S EX-FIANCEE

Star-Trib - Tom Petters is in prison for 50 years for his $3.65 billion Ponzi scheme (see pages 101-105 in the book "The Greedsters"). His fiancee, Tracy Mixon, was awarded $1,879.00 per month for living and health insurance expenses, and has collected this monthly amount for more than 3 years. In early September, 2012, Judge Ann Montgomery issued an order ending these benefits. The Judge stated she felt Ms Mixon has had enough time to become "a sole wage earner" for the two children and herself. I'm sure many people will feel such action is unjust. For an adult to support two children and herself this day and age, $1879 per month is probably not enough. However, don't judge the JUDGE. She must have had her reasons for the order.

DO REAL ESTATE AND ART DESERVE THE SAME VALUE?

NYT - As each year passes, values of most everything increase. Is this true for real estate when compared to fine art? This question was raised when a penthouse in Manhattan was recently purchased by a Russian billionaire for $88,000,000 or $13,000 per square foot. Recent fine art has also been purchased at a high price (Cezanne's "The Card Player" was sold in 2011 for an estimated $250 million). Such a price for fine art is justified because a piece of fine art is "one of a kind" and cannot be replicated. A high real estate price is questioned for several reasons: a piece of real estate can be duplicated; a "local" piece of real estate can't be globally re-located; fine art values evolve from much scholarly research and critical appraisal which could take generations to recognize; and valuing art is a much more complicated procedure than real estate. Curator David Kusin has stated "When people get crazy over something, they like to rationalize something", like a high real estate price is justified by calling it apartment art or real estate art. It comes down to an individual opinion of someone who has money to spend to appease a strong attachment to an object like a painting or a piece of real estate. Value is in accordance with the desire of the buyer.

PEREGRINE ASSETS TO BE AUCTIONED

WSJ - The assets of Russell Wasendorf, Sr., founder and CEO of Peregrine Financial Group will be auctioned off shortly as announced by a court-appointed receiver. The futures and currency firm filed for bankruptcy July 10, 2012. Items to be auctioned are (per Wall Street Journal): a 1957 Ford Thunderbird; mason jars; a Swiss watch; clothes; an Italian Restaurant called "My Verona"; thousands of bottles of wine; Chicago Bears sports memorabilia; dishes; jewelry; sports vehicles and hundreds of other items. As the court-receiver said, "One man's trash is another man's treasure".

THOUSANDS OF TANK CARS PUT TO USE

WSJ - Norwegian company Statoil has announced the leasing of 1,000 rail tank cars to move crude oil from oil field to refinery or shipping port in the United States and Canada because of lack of pipeline capacity. The usual petroleum tank car(sometimes called "tankar") has a capacity of about 10,000 gallons or about 238 barrels of crude oil (at 42 gallons per barrel). Larger capacity tank cars exist but their use is limited by theweight most rail trackage can carry. Statoil estimates an average tank car will require up to 15 days for a round trip to destinations in Canada, Gulf of Mexico or the U.S. East Coast.

Coal trains are standard for moving coal from mine to production use but pipelines have long taken over the majority of crude oil shipping in the United States. Tank cars are still used, however. The increase in crude production in the Bakken oil region of North Dakota, for instance, has increased rail shipment of crude to more than 325,000 barrels daily in June, 2012, double the 2011 amount.

Tank cars are usually leased and may remain idle for weeks or months at a time, depending upon crude production and storage capabilities. New oil fields present special shipping problems as it takes time to apply for and put in place new pipelines with their gathering systems, storage and shipping facilities. The fast-moving oil business is a tough and expensive one.

PEREGRINE FINANCIAL NO LONGER A HAWK

NYT, WSJ - A Peregrine is a hawk that swoops after specific prey. One such human peregrine was shot down when a federal grand jury in Cedar Rapids, Iowa indicted Mr. Russell R. Wasendorf for 31 occasions when he made false reports to federal officials and can face up to 135 years in prison and fined as much as $7.75 million. Early in July, 2012, Mr. Wasendorf was found in his car in his company's parking lot attempting to commit suicide and leaving a note admitting to embezzling in excess of $100 million. The suicide note absolved his junior son, company president, from any involvement, but Mr. Wasendorf didn't hesitate illegally gathering funds for 20 years from friends and businesses for his own satisfaction and safety. Just one more case of a Greedster running wild.

SANDY CHANGES HIS MIND

NYT, WSJ - Anyone is free to change his or her mind, but for one of the WORLD'S foremost financiers, who was in favor of dumping the venerable Glass-Steagall Act, it was big news when he changed his mind on July 26, 2012 and announced to the trade he now believes the 1933 Glass-Steagall Act (struck down in 1999 by the adoption of the Gramm-Leach-Bliley Act) should be modified somewhat but reinstated by prohibiting a bank to be both an investment bank and a commercial under very specific rules. The Glass-Steagall Act in effect did just that- kept a Bank from being both a commercial and investment bank, denying an investment bank the right to use customer money (like CD's for instance) to gamble in financial markets.

The financial fiasco of 2007-2012 was fueled by the lack of controls as to whose money a bank could use for investments. Big Banks grew larger, balance sheets loaded up with risky paper like toxic assets and weird derivatives, loose mortgages and over-zealous investments with rewards handed out to executives and "hot" sales personnel for returns based upon faulty paper profits, watered-down intrinsic values of the very foundations under the financial institutions for whom they labored. Mr. Sanford Weill can take his share of the blame but it requires nerves of steel to step forward and announce to all he was wrong and The Glass-Steagall Act should be brought back albeit in a somewhat different form. Way to go, Sandy.

HEDGE-FUND MANAGER NEEDS NEW STRATEGY

WSJ - Mr. Chetan Kapur, founder and present lone manager of ThinkStrategy Capital Management, LLC, has been charged with securities fraud, investment-advisor fraud and wire fraud by a grand jury. Mr. Kapur started the company in November, 2002 and two of his executives have pleaded guilty and have been convicted of fraud. The year 2008 saw the peak of investor capital of $520 million poured into the company. One executive, Mr. Arthur Nadel, was imprisoned and died in April, 2012. The other executive pled guilty and is serving a 20-year sentence. 3 up and 3 down - wrong strategy. Certainly a new one is needed.

FEMININITY SCORES AT AUGUSTA

WSJ - The word "August" means "grandeur". The word "Augusta" has come to mean "Golf Club". 2012 is the year the first woman member was inducted into the Club - Dr. Condolezza Rice - former Secretary of State. Long a male business bastion, Augusta has hosted the prestigious Masters Golf Tournament for 79 years with most members guarding the male-only status. The gates have fallen. Congratulations!!

HEDGE-FUND FOUNDER FOUND GUILTY

Bloomberg - Doug Whitman, founder of hedge-fund Whitman Capital of Menlo Park, California, was found guilty by a jury in front of Judge Jed Rakoff in Manhattan of passing on inside information. Prosecuting attorney Pete Bharara led the charge. The duo of Judge Rakoff and Mr. Bharara have been most successful in bringing leakers of inside info to justice, proving that "The rules do apply". Up to 66 convictions to date have been racked up.

BUSINESS SCHOOL DEAN RETURNS $1.25 MILLION IN CONSULTANT FEES

Mpls Strib - Roger Jenkins, Dean of the Richard T. Farmer School of Business, Miami University, Oxford, Ohio returned cash of $1.25 million plus 22,000 shares of Enable Holdings, Inc.,(an Internet retailer worth less than a cent a share on today's market), to court receiver Doug Kelley as one settlement in the Tom Petters fiasco of a $3.65 Billion ponzi scheme. Mr. Petters is in prison under a 50 year conviction and sentence. In 2009, Miami University had returned to the receiver more than $5 million cash pledged by Petters to the U of Miami on behalf of his daughter and deceased son John, both students at the University. Dean Jenkins was paid stock and cash "for a variety of consulting services".

LEGAL SCHOLAR SEARCHES MINDS OF PONZI ARTISTS

NYT - Professor Tamar Frankel, on the faculty of Boston University Law School for 44 years, has written a book on ponzi schemers. A friend had urged her to write the book about "those mimics of trustworthiness: con artists". Among these artists were two I had not included in my book "The Greedsters" - the Caritas scandal in Roumania in the early '90s and a currency crime in San Diego in the mid-80s. She does include Madoff and his $64.8 Billion cheat. She has been asked what might be a final conclusion to her examinations. She states, "Victims failed to do their homework". I agree.

TAUNTING THE GOVERNMENT LEADS TO ANALYST'S DOWNFALL

NYT - Mr. John Kinnucan, founder of Oregon's Broadband Research, pled guilty of sharing insider information with customers evidenced by wiretaps, witnesses and instant messages. He could face many years in prison but is likely to settle on up to 5 years when sentenced. Mr. Kinnucan has been a long-time critic of government programs and actions relating to Wall Street regulations and controls. In one instance, he sent a voice mail to a United States attorney proclaiming "Too bad Hitler's not here. He'd know what to do with you". It's a good idea to be at least civil to someone who might be holding your fate in his hands.

IS THE RAINBOW OVER?

NYT - For more than 3 years, the famous Rainbow Room on the 65th floor of the Rockefeller Plaza just a short distance from Wall Street has been empty - as in nobody there. Disagreements between the landlord and restaurant owner have stalled a solution. It's too bad this one of a kind institution can't be preserved. However, the stakes are high.

The Ciprianai family who operated the Rainbow Room and the Tishman Speyer Properties who control the real estate are at loggerheads. The 65th floor was originally to be named the Stratosphere Room in the mid-30's, but the name was changed when a special organ was installed and bathed in colored lights while being played. Rainbow Room was fitting as the name. Every big band played the Rainbow Room and it was a thrill to be on top of the world dancing with a favored one as the Rainbow opened for business and happiness in 1934. I can attest to that during my college days. Come on, owner and operators, let's get together and preserve a sky-full of memories.

BRITISH BANK SETTLES $340 MILLION CLAIM

NYT - Legal responsibility for money laundering has long tentacles. The agency New York Department of Financial Services had charged a British bank, Standard Chartered, with $340 Million for money laundering for nearly a decade in a scheme between the Bank and Iran. The Bank has agreed to pay the charge. Involved in the charge were 60,000 transactions with Iran that hid tainted money with values as high as $250 Billion. The settlement money will go into the coffers of the New York Financial Services and then to New York State's General fund.

KNIGHT IN THE DARK FOR 30 MINUTES

NYT - Wednesday, August 4, 2012 should have been an average day for the electronic stock trading Knight Capital Group on Wall Street, but it became a nightmare. After the opening bell, a computer trading program at Knight suddenly burst forth with a huge volume of "erratic trades", and for 30 minutes no one knew how to shut the trading down. A former high-speed trader was quoted as saying "Trading being erratic even for just a minute or two would have been surprising to me, but to have something going on for 30 minutes is a shocking eternity". Knight barely survived the crisis after scrambling for 48 hours to secure temporary financing to save the ship. Regulators are investigating the possible cause of the malfunction.

G-e-e-e, GE Exec Retires on $89,000/mo.

     WSJ - GE  is splitting its energy division into 3 parts and a 50-year old energy executive has split with a retirement package estimated at $28.3 million.  The deal includes a non-compete for 3 years.  A monthly allowance of $ 89,000 also has been given Mr. John Krenicki for 10 years.  He is also maintaining eligibility in a further pension plan when he turns 60.  The generosity is part of a GE Plan labeled "retirement for the good of the company".  It goes without saying it's a  good one for Mr. Krenicki also.

Johnson & Johnson fined $2.2 Billion

WSJ-7/20/12 - Federal prosecutors reached a settlement with drug company Johnson and Johnson of $2.2 billion that includes a $400 million criminal fine for illegal marketing of the drug Risperdal.. Under
federal law, drug companies can only market drugs approved by the U. S. Food and Drug Administration. The Journal article stated many companies settle investigations into illegal marketing of drugs to avoid losing the ability to sell drugs to government health programs and Medicare.
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COUNTY COMMISSIONER GETS 28 YEARS

WSJ - 8/1/12 - A federal judge tossed Jimmy Dimora,  an Ohio, Cuyhoga County former county commissioner, into prison for 28 years. He had accepted bribes and asked potential County contractors for cash, business trips and prostitutes but 60,000 hours of wire-tap information led to his downfall.  There were more than 60 convictions of contractors and public officials, including an assessor and two judges. The judge gave Mr. Dimora 6 years more in prison than asked for by the prosecutors because
"the destruction left in its wake is incalculable"
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Ex-Banker Indicted for Muni-Derivitives Fraud

NYT  - July 21, 2012 -  Phillip D. Murphy, former head of Bank of America's Municipal Derivitives trading desk faced  indictment for wire fruad, conspiracy to defraud the United States and making false entries in bank  records.   He joins 13 other individuals of similar crimes who have pled guilty and their banks JPMorgan/Chase, Bank of America, UBS,  Wells Fargo and company General Electric have paid $700 million in penalties. Bank of America aided the Justice Department's investgation over a period  of 4 years.

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!!!