June 21st, 2011 at 2:14pm
The securities division of financial giant JPMorgan Chase & Co. has agreed to pay out $153.6 million to compensate investor groups that lost large sums of money due to the hedge fund Magnetar Capital betting against the securities portfolio that it had convinced the investors to purchase.
The investor groups that lost big due to the omission. Unlike Chase, investment firm Goldman Sachs Capital Partners (GSCP) and its team leader Edward Steffelin, Magnetar was not charged by the Securities and Exchange Commission (SEC), which led the investigation. SEC enforcement chief Robert Khuzami said Magnetar “was not responsible for those disclosures to investors.” Maybe not legally, but certainly ethically.
April 19th, 2011 at 6:49pm
Paso Robles lenders Rod Jarmin and Tammy Jordan have been charged with seven counts of embezzlement and fraud in a real estate investment fraud scheme that may have cost the investors $30 million.
Jarmin and Jordan, both licensed real estate brokers, operated Real Property Lenders (RPL) in Paso Robles and allegedly solicited investors – many of them seniors (elder financial fraud) to purchase securities for projects that the RPL owners knew were in danger of failing. Rod Jarmin’ s real estate license was revoked in 2003 but reinstated in 2007. Tammy Jordan‘s license shows no disciplinary action.
The California Department of Corporations (DOC) began investigating RPL in 2007 and revoked its license to sell securities in June 2008. Following the DOC action, the San Luis Obispo County District Attorney’s office initiated its own inquiry into RPL after it received complaints about the firm’s practices.
Read the original article in the Cal Coast News.
March 25th, 2011 at 9:05am
Barry Minkow, who gained notoriety as a 16 year-old precocious founder of the ZZZZ Best Carpet Cleaning company in the 1980s that was nothing more than a Ponzi scheme.
Now his attorney Alvin Entin has revealed that Minkow has reached an “agreement in principle” with the U.S. Attorney’s Office for the Southern District of Florida and will be pleading guilty to one count of trading on non-public information (insider trading). Hopefully he will receive and (fully) serve the possible five year sentence. Minkow is making this plea even though he has not been charged.
Barry Minkow was sentenced to 25 years in prison for 57 counts of fraud in ZZZZ Best. After his unfortunate early release, the born-again Minkow became a pastor at Community Bible Church in San Diego and founded the Fraud Discovery Institute, supposedly to catch people like himself. Minkow was accused of using the Fraud Discovery Institute to post articles on his web site about publicly traded firms he was “investigating” , then purchase options that he would short. The firm in question was Lennar Corp., a Miami-based home builder.
Read the original article in the Wall Street Journal.
February 17th, 2011 at 8:38am
The California Public Employees’ Retirement System, aka CalPERS, has filed suit against Lehman Bros. Holdings Inc., its top executives and bond underwriters of defrauding the $229 billion pension funds by failing to disclose that Lehman funded risky investments that through heavy borrowing from 2004-2007.
CalPERS is the largest public employees pension plan in the nation. When Lehman Bros. filed for bankruptcy protection in 2008, CalPERS owned 3.9 million shares of Lehman common stock and about $700 million worth of Lehman bonds.
Named as defendants in the lawsuit are Chief Executive Richard S. Fuld Jr., Citigroup Global Markets Inc., Mellon Financial Markets and Wells Fargo Securities.
Read the original article in the Los Angeles Times.
February 2nd, 2011 at 10:59am
James Benjamin Duncan, 40, and Maurice Emil McLeod, 38, have pleaded guilty to to marketing fraudulent securities in a massive mortgage fraud scheme that the Riverside District Attorney said was a major factor in the losses to value in real estate in Corona, Lake Elsinore, La Quinta, Murrieta, Palm Desert and Riverside.
Five other defendants have been charged and are awaiting trial: Charlie Sung Muk Choi, 35, Thuan Nhan Du, 34, Cindi Gayle Kelly, 34, Hendrix Moreno Montecastro, 38, and Montecastro’s mother, Helen Moreno Pedrino, 59.
The alleged crimes by the defendants include securities fraud, grand theft, identity theft and elder financial abuse. Prosecutors believe that the total victms may be in the hundreds.
Read the full article in the Southwest Riverside News Network.
October 15th, 2010 at 1:58pm
Angelo Mozilo has agreed to pay $22.5 million in fines to the SEC in its civil lawsuit brought against him and will turn over $45 million in what would termed “ill-gotten gains” to his former shareholders who sued him for their losses.
His co-defendant, Countrywide’s former president, David Sambol, has also agreed to pay $520,000 in fines and $5 million in restitution, and Eric P. Sieracki, Countrywide’s former chief financial officer, got off with $130,000 in fines.
As is typical in these types of civil cases, Mozilo and Sambol did not admit or deny liability. They also are forbidden from ever serving again as officers or directors of public companies.
Read the full article in the Los Angeles Times.
October 15th, 2010 at 9:12am
The word is out from the courtroom of U.S. District Judge John F. Walter: the Securities and Exchange Commission (SEC) is in settlement talks with Countrywide Financial Corp. co-founder Angelo Mozilo, just days before he was to go to trial in the government’s civil fraud and insider training lawsuit against him.
Angelo Mozilo and his co-defendants, former Countrywide President David Sambol and former Chief Financial Officer Eric P. Sieracki have been the target of multiple federal agency investigations of securities fraud.
It would be in Mozilo’s best interest to negotiate a settlement, as defendants in such cases usually do not admit to wrongdoing, something that would be a disadvantage to plaintiffs suing Mozilo and his co-defendants for their losses. A trial verdict against Mozilo, on the other hand, would not only be a boost to the plaintiffs’ cases but also provide evidentiary material to the criminal investigation against him that is in process.
Read the full story in the Los Angeles Times.
June 22nd, 2010 at 1:10pm
Ten months after admitting his responsibility in the Ponzi scheme perpetrated by Ponzi-king Bernard Madoff, his former finance chief was released on a $10 million bail.
Frank DiPascali, 53, left U.S. District Court in Manhattan. He had provided information to investigators that has led to the arrests of Bernard Madoff’s former auditor and two computer programmers (hmmm, computer programmers, really dangerous types).
U.S. District Judge Richard Sullivan has twice rejected bail packages that were acceptable to prosecutors, instead noting DiPascali’s “crucial” role in the fraud, which DiPascali admitted he had known about since the 1980s or early 1990s and presumably voluntarily participated in.
Read the full article from the Associated Press in Yahoo News.
April 19th, 2010 at 10:19am
Attorney General Edmund G. Brown Jr. announced he is taking bond rating firm Moody’s Investor Service to court to force it to explain how it decided to give its highest ratings to subprime mortgage-backed securities that ruined investors and caused the government to force taxpayers to bail out the makers of these “risky and toxic” financial products. Moody’s had refused to respond to the Attorney General’s subpoena, forcing Brown to take court action.
Brown accuses Moody’s and other ratings firms of working closely with the Wall Street firms that formulated the securities in order to earn what amounted to billions of dollars in revenue from those same firms, ignoring ethical, regulatory and legal considerations about remaining “arm’s length” as a rating agency.
“A central question in the aftermath of the financial meltdown is whether Moody’s gave investment banks and other securities packagers unwarranted high ratings at the expense of investors, who depended upon the integrity and independence of Moody’s ratings,” according to AG Brown.
The subpoena from Attorney General Brown’s office seeks to learn:
- Whether Moody’s knew that the AAA ratings it gave to high-risk securities weren’t warranted
- Whether Moody’s made fraudulent representations about the quality of its ratings
- Whether Moody’s made fraudulent representations concerning the independence of its ratings
- Whether Moody’s conspired with companies it rated to the detriment of investors
- Whether Moody’s profited from giving inaccurate ratings to some securities
- Whether Moody’s compromised its own standards and safeguards in order to increase its own profits.
Read the press release by the California Attorney General’s Office.
April 16th, 2010 at 1:40pm
The Securities and Exchange Commission (SEC) has filed a civil complaint against Goldman Sachs alleging that the financial giant worked with one of its key clients to create collateralized debt obligations (CDOs) consisting of subprime mortgage-backed securities. Goldman Sachs then sold the CDOs to investors knowing that the client was betting heavily against the very same product.
The SEC’s complaint says that Goldman Sachs vice-president Fabrice Tourre, who was personally charged in the complaint, put the plan into operation in 2007, bragging in an email to a friend that he was “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!” Fabrice Tourre has since been promoted to executive director of Goldman Sachs International in London. Mr. Tourre also has a profile on LinkedIn.
John Paulson, the hedge fund manager of Paulson & Co. was involved in choosing which securities would be part of the portfolio, according to the SEC’s complaint, but neither he nor Paulson & Co. have been charged with any crime. The SEC also alleged that Paulson took a short position against its ABACUS 2007-AC1 CDO in a bet that its value would fall spectacularly. Here is Paulson & Co.’s response to the SEC’s civil complaint.
More than $1 billion was lost by ABN Amro and IKB Deutsche Industriebank AG, two of the European banks that bought these toxic securities. According to the report in Yahoo News, John Paulson’s hedge fund ended up with the profits from those two banks’ losses.
Informed readers know that Goldman Sachs, which earned a staggering $4.79 billion in 4th quarter 2009, was one of the top recipients of corporate welfare at the largesse of taxpayers through the generosity of the Bush and Obama administrations. Rolling Stone writer Matt Taibbi, in his 2009 expose of Goldman Sachs, refers to the firm as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
And derivatives expert and Huffington Post blogger Janet Tavakoli, who also is the founder of Tavakoli Structured Finance, accuses Goldman Sachs of “malicious mischief” and of creating “bad securities”. Further, “the SEC itself has shirked its responsibilities in these matters for years” she said, adding that the SEC’s “hands have been forced by public voices” rather than its regulatory mandate to protect investors.
Read more on Yahoo and MSN. You can also read the SEC’s complaint against Goldman Sachs here.
This article was also published in Examiner.com by Monique Bryher.
