The SEC Charges New Jersey With Fraud… Oh, and Nothing Happens as a Result
by ilene - August 18th, 2010 10:49 pm
The SEC Charges New Jersey With Fraud… Oh, and Nothing Happens as a Result
Courtesy of Jr. Deputy Accountant
OK now I have officially had enough with this settlement bullsh*t. The state of New Jersey is allowed to lie about pension funding and defraud investors, and isn’t even levied a penalty? That’s not a slap on the wrist, it’s a slap in all of our faces.
Basically all it means for NJ is that they can’t sell these crap bonds anymore. Way to regulate, you lazy, toothless **cks. Now what about the idiots who invested in this crap? Throw them on the pile with the rest of New Jersey’s creditors?
The Securities and Exchange Commission accused the State of New Jersey of securities fraud on Wednesday for telling the bond markets that it was properly funding state workers’ pensions when it was not, The New York Times’s Mary Williams Walsh reports.
As a result, the S.E.C. said in a cease-and-desist order, investors bought more than $26 billion worth of New Jersey’s bonds, without understanding the severity of the state’s financial troubles. New Jersey, the S.E.C. said, has agreed to accept the order, without admitting or denying the finding. The agency did not impose a financial penalty.
Wednesday’s action was the first time the federal agency has accused a state with violating securities laws. The S.E.C.’s powers of enforcement against the states are tightly limited by states’-rights concerns and constitutional law, and it has standing to get involved only when there is a clear-cut case of fraud.
“The State of New Jersey didn’t give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement. The cease-and-desist order named only the State of New Jersey, and not the financial institutions that helped it issue the bonds. Its largest bond underwriters during the period in question include Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital.
Well who cares, even if they did name banks by name it’s not like they’d actually DO anything about it, right? Maybe they priced in a few million extra when they last settled with EACH of those banks for financial misdeeds.
I don’t feel sorry for the investors, actually, since this is what…
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DiggSEC Brings GIGANTIC Insider Trading Case Against The Famous Wyly Brothers Of Texas
by ilene - August 2nd, 2010 7:57 pm
This post from Business Insider sets the stage for the next post by Cassandra Does Tokyo which discusses insider trading in general. – Ilene
SEC Brings GIGANTIC Insider Trading Case Against The Famous Wyly Brothers Of Texas
Image: www.charlesandsamwyly.com
Courtesy of Joe Weisenthal at Business Insider/Clusterstock
This evening the SEC announced a massive fraud charge against Dallas-based investors The Wyly brothers.
As Paul Murphy at FT Alphaville notes, the charge — which pertains to activity taking place over 13 years, worth $550 million — makes Rajaratnam and Martha Stewart look like small potatoes.
The gist of the allegations: The brothers Wyly (Samuel and Charles J.) used their various board seats and a network of offshore accounts to trade and conceal their holdings.
—--
The Securities and Exchange Commission today charged brothers Samuel E. Wyly and Charles J. Wyly, Jr. of Dallas with violating federal securities laws governing ownership and trading of securities by corporate insiders. The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.
The SEC alleges that the brothers created an elaborate sham system of trusts and subsidiary companies in the Isle of Man and the Cayman Islands to sell more than $750 million worth of stock in four public companies for which they were corporate directors. They also committed an insider trading violation in one of the companies for an unlawful gain of more than $31.7 million.
Along with the Wylys, the SEC charged their attorney Michael C. French of Dallas and their stockbroker Louis J. Schaufele III of Dallas for their roles in the fraudulent scheme. French was on the board of directors at three of the companies.
"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws," said Lorin L. Reisner, Deputy Director of the SEC’s Division of Enforcement. "They used these structures to conceal hundreds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders."
According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the public companies…
Oh, They DO Intend To Steal From You
by ilene - July 28th, 2010 4:39 pm
This is pretty rotten, and there’s no excuse. I doubt anyone will admit to writing the provision exempting the SEC from FOIA requests. – Ilene
Oh, They DO Intend To Steal From You
Courtesy of Karl Denninger at The Market Ticker
And what’s better, now the lapdogs of Wall Street are immune from FOIA requests!
The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.
That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings."
Mr. President, you’re a lying sack of crap.
Nor is this theoretical either. Fox News has already had an FOIA denied:
The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network.
Nice.
Oh, by the way, this would mean that a Madoff or Stanford "thing" would leave the SEC immune from FOIA requests by the Press (including the "mainstream" along with media folks like myself) to discover whether they had effective and early notice that they intentionally ignored.
Isn’t that convenient, given that they did exactly that with Madoff and, it can be argued, Stanford as well?
Indeed, the SEC, The Fed, and Treasury have all tried to refuse compliance with FOIA requests into the backstories of the financial meltdown.
FOIA requests that could (and in some cases have, when they were forced to be complied with via lawsuits) reveal double-dealing, "sweetheart" treatment, and even willful blindness that, in many people’s opinion (including mine) reaches the level of intentional collusion that, in a private context, would lead to civil and/or criminal racketeering charges.
To President Obama and CONgress for sticking this in FinReg (and yeah, I missed it, even though I read the entire damn thing):
Top picture credit: Jr. Deputy Accountant
High-Frequency Trading: Something Black?
by ilene - July 27th, 2010 10:31 pm
High-Frequency Trading: Something Black?
Courtesy of Karl Denninger at The Market Ticker
Now this is interesting, coming from the annual "black hat" conference in Las Vegas (for those not involved in the computer security world, that’s an annual gathering of hackers where various presentations are made that amount to brags and bags that have or can be run on various parts of information technology):
Among the talks conspicuously absent from this year’s schedule: a presentation exposing security vulnerabilities in banks’ high-speed trading systems.
The talk, planned by security researchers Varun Uppal and Gyan Chawdhary, would have dealt with methods for hiding risky unauthorized trades in high-speed trading applications, as well as demonstrating a "sniffing" software tool capable of siphoning trading information to a faraway hacker to allow a high-tech form of real-time insider trading. But Uppal tells us that the talk has been cancelled after concerns were raised by a financial industry client of the security auditing firm he works for, Information Risk Management.
Methods eh?
I suppose we’re supposed to believe that this is all theoretical, right?
Oh, somehow I doubt it.
And why?
Well, it wouldn’t have anything to do with firms intentionally ignoring security capabilities for reasons of SPEED, would it? (Note that encryption, in particular, is rather slow comparatively. Plain text is of course very fast.)
While security measures for FIX programs are available, Uppal says he’s audited firms that ignore them for convenience or speed. Uppal says that could allow a hacker to monitor a bank’s trades and make near-simultaneous ones, or even steal a bank’s unique trading algorithm.
Oh, they would do that. That’s very nice.
New? Oh no. It’s not new either
In a 2007 Black Hat presentation, David Goldsmith and Jeremy Rauch of Matasano Security listed systematic problems with the security of high speed trading systems such as the difficulty of encrypting trade data and banks’ reluctance to add any security that might slow down the transactions,
Right. Speed before security. Engage in an arms race and if someone else gets unlawful advantage as a consequence of your refusal to follow best practices, well, that’s too damn bad.
Let’s contrast that with what happens in the Interbank (e.g. Visa, MasterCard, Discover, etc) networks. There if you store unencrypted cardholder data (it’s faster and easier!) or if you use unencrypted transport between…
If My Aunt Had Balls She’d Be Mary Schapiro
by ilene - July 21st, 2010 12:33 am
If My Aunt Had Balls She’d Be Mary Schapiro
Courtesy of Larry Doyle at Sense on Cents
“If my aunt had balls, she’d be my uncle!!”
I love that line. I first heard it on the trading desk at Bear Stearns in the early ’90s. For the last twenty years, I have used the line often to counter those who would bemoan an outcome with the standard, “If only . . .” My response typically generates a healthy chuckle and we then move on.
At this point, I feel comfortable amending the line from above to “If my aunt had balls, she’d be Mary Schapiro.” Too harsh, you say? I think not. How so?
Let’s review a recent Wall Street Journal article, Madoff’s Ghost Still Haunts SEC:
Financial executives aren’t the only folks lawmakers are pursuing. They also want to see more heads roll at the Securities and Exchange Commission.
Nearly 18 months after Bernie Madoff’s multibillion-dollar Ponzi scheme was exposed and almost a year after the SEC’s inspector general issued a blistering report, lawmakers are still questioning how the SEC staffers who reviewed the Madoff firm and investigated fraud allegations were being punished.
SEC Chairman Mary Schapiro told Congress during an oversight hearing that 15 of 20 enforcement attorneys and 19 of 36 examination staffers that dealt with the Madoff matter had left the agency. The SEC was still conducting a disciplinary process, she said, but it should be concluded soon.
Republican Rep. Bill Posey of Florida –- home to many Madoff victims -– said he wants to know if those SEC employees ended up at other regulatory agencies, working for companies they were supposed to regulate, or retired with government pensions.
“There’s a necessity to know where they went,” said Posey. “It’s like letting a pedophile slink out the door or change neighborhoods. We’re dealing with the same type of problem here.”
Wow!! Representative Posey is being aggressive here, but I commend him because the nation still deserves answers to so many Madoff questions that have been swept under the SEC’s and FINRA’s rugs. The WSJ continues:
Schapiro strongly disagreed. “These aren’t bad people. In some cases they were people who were very junior and not adequately trained or supervised.” In other cases, she said, they were pulled from one project to another.
Junior people, my ass!! The people calling the shots on the Madoff investigation were…
Goldman Sachs Settlement with SEC Ignores Company’s Duty to Provide Timely Disclosures to Shareholders about Investigation Leading up to Litigation
by ilene - July 16th, 2010 4:07 am
Sam Antar makes a good point here. Looking out for shareholders was not the objective of the lawsuit brought by the SEC against Goldman Sachs. Whether it would have, should have, or could have been considered is another matter, and apparently not going to be addressed. What we have here (and seemingly everywhere within our financial system) is not a real operation of law, but more of a political sideshow. - Ilene
Goldman Sachs Settlement with SEC Ignores Company’s Duty to Provide Timely Disclosures to Shareholders about Investigation Leading up to Litigation
Courtesy of Sam Antar of White Collar Fraud
The Securities and Exchange Commission’s settlement of a lawsuit against Goldman Sachs (NYSE: GS) over a certain subprime mortgage product sold to investors misses a key issue concerning the company’s duty to provide timely and transparent disclosures to its own shareholders about government subpoenas, investigations, and pending enforcement actions against the firm. In this particular case, Goldman did not make timely disclosures about the regulator’s investigation and pending lawsuit against the firm, right under the SEC investigator’s noses.
Goldman Sachs chooses to keep shareholders in the dark about SEC investigation and pending enforcement action
During the summer of 2008, the SEC started investigating Goldman’s marketing of a certain subprime mortgage product, known as ABACUS CDO, to investors who lost over $1 billion from that transaction.
At that time, Goldman Sachs knew that the SEC was investigating its failure to disclose material information to investors in violation of SEC Rule 10b-5 in connection with that transaction. However, Goldman Sachs did not disclose the SEC’s investigation in its financial reports.
In July 2009, the SEC sent Goldman Sachs a Wells notice informing Goldman of its intention to file a lawsuit against the company. Still, Goldman Sachs chose not to disclose the SEC’s pending enforcement action in its financial reports.
On Friday, April 16, 2010, the SEC filed a surprise lawsuit against Goldman Sachs and Executive Director Fabrice Tourre alleging securities fraud in connected with the company’s marketing of the ABACUS CDO to investors. That day, Goldman Sachs shares plummeted from $183.31 per share to $160.30 per share or about 13%, wiping out about $12 billion of shareholder wealth.
Clearly, investors deemed the surprise news of the SEC complaint against the company as material information, unlike the management team running Goldman Sachs.
Goldman Sachs settles SEC charges
Yesterday, Goldman Sachs settled SEC charges…
The Serpent Swallows Its Own Tail
by ilene - July 15th, 2010 9:07 pm
The Serpent Swallows Its Own Tail
Courtesy of Joshua M Brown, The Reformed Broker
Goldman Sachs and the SEC settled the great big fraud charge at a dollar amount of $550 million just now. The regulators get to claim victory while the Eloi get to continue their frolic atop the fluffy clouds of privilege and untouchability. Nobody admits wrongdoing, rightdoing or frankly, admits anything at all for that matter.
The image that comes to mind when I think of this battle is that of a serpent swallowing its own tail, like the mythological Ouroboros of the ancient Egyptians.
Let’s do a quick civics course for those who’ve lost track…
There are three branches of government in the United States – Wall Street, Hollywood and the Military. Every once in a while, their courtesans in Congress feel the need to "tax" these firms for either actual dollars or for reasons of reputation and appearances.
So in this era, with trillions of dollars in wealth demolished and incinerated, the big case was finally brought to serve as a symbol that "someone on Wall Street was gonna pay." Two government appendages, Goldman and the Commission, faced off in conference rooms and before the cameras on Capitol Hill. After months of wrangling, they came to an agreement that allows shareholders and regulators alike to carry on business as usual and hold their heads up high.
Just as I predicted would happen, word for word.
Remember kids, crime never pays, but institutional influence and deep pockets can absolve you of anything.
GOLDMAN WINS AGAIN! Settles With SEC For Chump-Change $550 Million
by ilene - July 15th, 2010 6:35 pm
GOLDMAN WINS AGAIN! Settles With SEC For Chump-Change $550 Million
Courtesy of Courtney Comstock at Clusterstock
CONFIRMED: Goldman will settle for $550 million.
This looks like a huge win for Goldman.
Although Goldman will admit it included misleading information in Abacus materials, the investment bank will NOT admit to any major wrongdoing.
And — the figure is smaller than initial reports that were around $1 billion. So it comes off looking like it’s better for Goldman than the SEC. $550 million is still a big chunk of change though — the biggest settlement against a Wall Street firm in the history of the SEC.
What’s The Real Cost To Goldman? >
Was It Goldman Or BP That Saved The Close? >
Check Out: The Winners And Losers From Goldman Sachs Fraud Case Settlement >
Amedisys’s woes continue
by ilene - July 13th, 2010 10:50 am
Amedisys shares tumble 23% on earnings drop, Market Watch
Kudos to Sam Antar for the warning on this stock! – Ilene
Recall:
Open Letter to the Securities and Exchange Commission: Investigate Troubling Issues at Amedisys Missed by Wall Street Journal
Courtesy of Sam Antar of White Collar Crime
To Securities and Exchange Commission Chairperson Mary Schapiro:
On June 30, 2010, Amedisys (NASDAQ: AMED) announced that it "received notice of a formal investigation from the Securities and Exchange Commission (SEC) pertaining to the company, and received a subpoena for documents relating to the matters under review by the Senate Finance Committee." The SEC investigation follows an April 2010 Wall Street Journal report questioning Amedisys’s Medicare reimbursement patterns and raising serious questions about possible abuse by the company of Medicare’s reimbursement system. In mid-June 2010, several class action lawsuits were filed against Amedisys alleging securities fraud, based on the Wall Street Journal report.
In my analysis below, I will provide additional troubling data and issues missed in the Wall Street Journal report and not cited in the various class action lawsuits for the SEC to consider in its investigation.
Background
The analysis is based entirely on information derived from Amedisys’s public disclosures in various reports filed with the SEC. Those reports provide certain statistical information about Medicare episodic, non-Medicare episodic, and non-Medicare/non-episodic home health care visits, admissions, and recertifications for each reporting period.
Amedisys further categorizes that data by base/start-up entities and acquired entities for each reporting report. Amedisys defines Base/Start-up agencies as agencies that were originally opened by the company and acquired entities owned by the company for at least a year.
Therefore, the analysis below is based almost entirelry on Amedisys’s statistical data for base/start-up agencies to provide a consistent apple-to apples comparison of the data.
Note: Download entire work sheet here (formatted for legal sized paper).
What explains the sudden increase in the growth of in base/startup Medicare episodic visits per admission?
Prior to Q2 2007, Amedisys reported fairly typical (i.e., moderate) growth in visits per Medicare episode. For example, during 2006, the number of visits per Medicare admission for base/start-up agencies increased to 29.4 visits per admission from 28 visits per admission in 2005, or a 2.2% increase over the previous comparable period. See the chart below:
Similarly, in Q1 2007, base/start-up Medicare episodic visits per admission declined to 29.1 visits per admission compared to 29.4 visits per admission in…
Scientific Proof That High Frequency Trading Induces Adverse Changes In Market Microstructure And Dynamics, And Puts Market Fairness Under Question
by ilene - July 13th, 2010 12:46 am
Scientific Proof That High Frequency Trading Induces Adverse Changes In Market Microstructure And Dynamics, And Puts Market Fairness Under Question
Courtesy of Tyler Durden
Up until recently, any debate between proponents and opponents of High Frequency Trading would typically be represented by heated debates of high conviction on either side, with discussions rapidly deteriorating into ad hominem attacks and the producer screaming ‘cut to commercial’ to prevent fistfights. Luckily, all this is about to change. In a research paper by Reginald Smith of the Bouchet Franklin Institute in Rochester titled "Is high-frequency trading inducing changes in market microstructure and dynamics?" the author finds that he "can clearly demonstrate that HFT is having an increasingly large impact on the microstructure of equity trading dynamics. Traded value, and by extension trading volume, fluctuations are starting to show self-similarity at increasingly shorter timescales. Values which were once only present on the orders of several hours or days are now commonplace in the timescale of seconds or minutes. It is important that the trading algorithms of HFT traders, as well as those who seek to understand, improve, or regulate HFT realize that the overall structure of trading is influenced in a measurable manner by HFT and that Gaussian noise models of short term trading volume fluctuations likely are increasingly inapplicable."
In other words, the author finds ample evidence that during the past decade (on the NASDAQ) and especially since the 2005 revision of Reg NMS (on the NYSE), stock trading increasingly demonstrates "self similar" fractal patterns, resulting in volatility surges, recursive feedback loops, and a market structure which is increasingly becoming a product of the actual trading mechanism. In the process, as demonstrated by a Hurst Exponent gravitating increasingly further away from 0.5 (i.e., Brown Noise territory), the Markov Process nature of stock trading is put under question, and thus the whole premise of an efficient market has to be reevaluated. Simply said: HFT has been shown to affect the fairness of trading.
The paper is, needless to say, a must read for everyone who has an even passing interest in stock trading and market regulation (alas, yes, that would mean the SEC, and Congress). And while one of the key qualities of the paper is presenting the history and implications of High Frequency Trading, and its rise to market dominance primarily as a result of the revision…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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