There's a fascinating op-ed in Monday's NY Times by banking security specialist Robert Mazur, entitled: "
Follow the Dirty Money."
Follow the Dirty Money
By ROBERT MAZUR
Op-Ed
NY Times
September 13, 2010
LAST month, a federal district judge approved a deal to allow Barclays, the British bank, to pay a $298 million fine for conducting transactions with Cuba, Iran, Libya, Myanmar and Sudan in violation of United States trade sanctions. Barclays was discovered to have systematically disguised the movement of hundreds of millions of dollars through wire transfers that were stripped of the critical information required by law that would have enabled the world to know that for more than 10 years the bank was moving huge sums of money for enemy governments. Yet all federal prosecutors wanted to settle the problem was a small piece of the action.
When Judge Emmet Sullivan of federal district court in Washington, who ultimately approved the deal with Barclays, asked the obvious question, "Why isn't the government getting rough with these banks?" the remarkable response was that the government had investigated but couldn't find anyone responsible.
How preposterous...
--SNIP--
The Barclays deal was just one in a long line of wrist slaps that big banks have recently received from the United States.
--SNIP--
Bankers are escaping prosecution because law enforcement is failing to expose the evidence that some bankers market dirty money. Years after the transactions occur, any effort to prove what was known at the time is practically impossible. The bankers simply say they didn't know where the money came from. Naturally, prosecutors look for ways to get around trying to prosecute those sorts of cases, and instead make deals...
Mazur continues on to mention:
--This past May, ABN Amro, now mostly a subsidiary of the Royal Bank of Scotland, was nailed for "...funneling money for the benefit of Iran, Libya and Sudan, it was fined $500 million, and no one went to jail. "
--In December of 2009, Credit Suisse Group paid a $536 million fine "for doing the same. "
--Over the past few years, "...Union Bank of California, American Express Bank International, BankAtlantic and Wachovia have all been caught moving huge sums of drug money, but no one went to jail. The banks just admitted to criminal conduct and paid the government a cut of their profits."
Wachovia alone had moved more than $400 billion for account holders in Mexico, $14 billion of which was in bulk currency that had been driven in armored cars or flown to the United States. Just who in Mexico did anyone think had that kind of cash? Of course, the government did a thorough investigation but could find no individuals responsible.
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This morning's piece in the NYT reminded me of another post I read on Alternet, just yesterday, from Zach Carter: "Why Robert Rubin and Citibank Execs Should Be in Deep Trouble."
Why Robert Rubin and Citibank Execs Should Be in Deep Trouble
Posted by Zach Carter on @ 5:28 am
Alternet.org
September 9, 2010
Former Citibank Chairman Robert Rubin knew about mounting subprime mortgage losses at his company, but still allowed executives to mislead to Citibank's shareholders about those losses, according to the SEC. But that same agency wants to let Rubin off the hook for an offense that has sent others to jail, and which contributed directly to Citi's epic taxpayer-funded bailout.
Those subprime losses were no small matter. Citi told its shareholders it had $13 billion in subprime exposure, when the actual figure was almost $40 billion higher. As the financial crisis deepened, Citi's heavy involvement in the subprime business nearly destroyed the bank, propelling it into one of the ugliest bailouts of 2008. The new revelations about the depth of Rubin's involvement in Citi's subprime scam come from a damning court filing the SEC turned over on September 7, at the request of Federal Judge Ellen Huvelle, and reported by Joshua Gallu and William McQuillen for Bloomberg News. The SEC has been dragging its feet and pulling its punches on the Citi case, which appears to be one of the most straightforward examples of Wall Street fraud from the crash of 2008. The agency is still trying to prevent fraud charges from being filed against either Citi CEO Chuck Prince or Rubin, who served as Treasury Secretary under President Bill Clinton before raking in more than $120 million at Citi.
According to court documents, the SEC believes that all of Citi's top officials knew exactly what was going on with the bank's subprime accounting, and knew that the official line being fed to the public was bunk. Lying to your shareholders is a big, straightforward no-no in Corporate America--it's considered securities fraud, subject to both hefty fines and jail time...
As many reading this may know, Rubin was President Clinton's Treasury Secretary, and very much the mentor for those managing our economy, today, including current Treasury Secretary Tim Geithner and chief White House economics advisor Larry Summers. In fact, Summers assumed the Treasury Secretary's role when Rubin moved over to Citigroup. And, in the Fall of 2007, Rubin (perhaps Geithner's staunchest supporter when he assumed the Presidency of the NY Federal Reserve, earlier in the decade) offered the Citi CEO job to him, as well. Geithner turned down the "opportunity."
From Bloomberg, this past Thursday: "SEC Says Prince, Rubin Knew of Losses Assets at Suit's Focus."
SEC Says Prince, Rubin Knew of Losses Assets at Suit's Focus
Bloomberg Media
By Joshua Gallu and Donal Griffin - Thu Sep 09 15:09:32 GMT 2010
Charles O. "Chuck" Prince and Robert Rubin were among Citigroup Inc. officials who knew 2007 losses were mounting on mortgage assets that U.S. regulators have faulted the bank for not disclosing, a court filing shows.
Prince, the bank's chief executive officer at the time, and Rubin, who was then chairman, knew the highest-rated segments of subprime mortgage-backed securities were the source of about $200 million in new losses in October 2007, the Securities and Exchange Commission said yesterday in a filing at federal court in Washington. In July, the agency accused the bank and two other executives of failing to disclose $40 billion in subprime assets before losses surged. It didn't target Prince and Rubin.
U.S. District Judge Ellen Huvelle asked the agency last month to explain what senior executives knew as she considers approving Citigroup's $75 million settlement with the regulator. The agency's identification of Prince and Rubin may trigger questions from the judge about why the agency didn't bring claims against more people, said Peter Henning, a professor at Wayne State University Law School in Detroit.
--SNIP--
"There has been nothing here that is being done to assure anyone that senior management who's responsible, whatever level of culpability you're talking about, is going to have any pain here," Huvelle told the SEC at an Aug. 16 hearing on the proposed settlement.
In addition to the proposed $75 million handslapping of Citibank, readers should be reminded of the $150 million fine which Bank of America is set to pay for their trangressions.
(Chump change.)
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Ah, yes..."the pain."
This motivated me to checkout my library of stories relating to the now-lengthy list of financial fraud incidents we've been reading about over the past few years. But, frankly, I came across so many of them, I stopped after compiling a partial list from just the past 8-1/2 months!
(Exactly how many of these folks went to jail? How quickly we forget!)
Here's some light reading links, which only selectively covers the year, to date, in fraud. (A lot of the pieces regarding pension-related fraud, in particular, in addition to many other stories relating to financial fraud from just this year aren't listed. I also have a few hundred other links from 2007, 2008 and 2009, also not included.)
For some perusing this I'm sure this abbreviated list will bring back fond memories, nonetheless...
JANUARY
Geithner's dubious AIG cover up, 1/7/10, Credit Writedowns via Naked Capitalism, Edward Harrison
Might AIG Escape Prosecution for (Allegedly) Cooking the Books? Marla Singer, Zero Hedge, 01/07/2010
SEC order helps maintain AIG bailout mystery Matthew Goldtein, Reuters, 1/11/10
New York Fed Faces House Subpoena Over AIG Bailout (Update2), Hugh Son, Bloomberg, 1/12/10
Breaking (Update): Fed Denies House Subpoena For AIG Docs (1/12/10)
(Sorry, I couldn't resist pulling this quote from Stiglitz, below...)
Moral Bankruptcy
by Joseph E. Stiglitz
Mother Jones January 2010
...Exaggerating the virtues of one's wares or claiming greater competency than the evidence warrants is something that one might have expected from many businesses. Far harder to forgive is the moral depravity--the financial sector's exploitation of poor and middle-class Americans. Our financial system discovered that there was money at the bottom of the pyramid and did everything possible to move it toward the top. We are still debating why the regulators didn't stop this. But shouldn't the question also have been: Didn't those engaging in these practices have any moral compunction?
Sometimes, the financial companies (and other corporations) say that it is not up to them to make the decisions about what is right and wrong. It is up to government. So long as the government hasn't banned the activity, a bank has every obligation to its shareholders to provide financial support for any activity from which it can obtain a good return. The predecessors to JPMorgan Chase helped finance slave purchases. Citibank had no qualms about staying in apartheid South Africa.
But consider, too, that the business community spends large amounts of money trying to create legislation that allows it to engage in nefarious practices. The financial sector worked hard to stop predatory lending laws, to gut state consumer protection laws, and to ensure that the federal government's ever laxer standards overrode state regulators. Their ideal scenario, it seems, is to have the kind of regulation that doesn't prevent them from doing anything, but allows them to say, in case of any problems, that they assumed everything was okay--because it was done within the law...
Bold type is diarist's emphasis.
New York Fed Told AIG To "Stand Down" On All Counterparty Discussions Zero Hedge, 1/19/10
Naked Capitalism Guest Post: AIG Bailout Secrets Exposed! (1/23/10)
SEC mulled national security status for AIG details Matthew Goldstein, Reuters, 1/24/10
Reuters: SEC Considered AIG Bailout National Security Matter (1/25/10)
Is Geithner Toast? Barofsky Announces 2 New Fed-AIG Probes (1/26/10)
FEBRUARY
When is a Fraud Not a Fraud? (Greece-Goldman Edition), Yves Smith, Naked Capitalism, 2/17/10
Goldman Says `Nothing Inappropriate' in Greek Swaps (Update1) Gavin Finch and Andrew MacAskill, Bloomberg, 2/22/10
Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs, Richard Teitelbaum, Bloomberg, 2/23/10
MARCH
"NY Fed Under Geithner Implicated in Lehman Accounting Fraud Allegation," Yves Smith, Naked Capitalism, 3/11/10
Goldman's Great Greek Swindle and the American Blowback, Scott Thill, Alternet.org, 3/16/10
Deutsche Bank, JPMorgan, UBS Are Charged With Fraud (Update1), Elisa Martinuzzi and Sonia Sirletti, Bloomberg, 3/17/10
Repo 105's antecedents: Ken Lewis, Bronte Capital, 3/20/10
Obstacles to SEC/DOJ Pursuing Criminal Indictments for Lehman, Yves Smith, Naked Capitalism, 3/21/10
Bank Of America Can Not Deny It Used Repo 105, Response From PricewaterhouseCoopers Pending; The BofA QSPE's, Zero Hedge, 3/23/10
Full SEC Letter Demanding Repo 105 Disclosures From Financial Firm CFOs, Zero Hedge, 3/29/10
SEC Launches Repo 105 Investigation, Yves Smith, Naked Capitalism, 3/30/10
APRIL
Wall Street's Repo 105 Cops Wake Up From Dead: Jonathan Weil, Jonathan Weil, 4/1/10
Finally! SEC Charges a Big Bank with Fraud, Zach Carter, Alternet.org, 4/7/10
Rampant Fraud and Financial Collapse, Zach Carter, Alternet.org, 4/14/10
S.E.C. Inquiry May Widen, Khuzami Hints, NY Times, 4/16/10
Fraud Finally Being Discussed In Polite Company...Now Where Are The Prosecutions? George Washington's Blog via Naked Capitalism, George Washington, 4/17/10
SEC Investigating Other Soured Deals, Wall Street Journal, Carrick Mollekamp, Serena Ng, Scott Patterson, Gregory Zuckerman, 4/19/10
Criminal Charges Next? Barofsky To Coordinate With DOJ To See If US Taxpayers Were Victims Of Goldman Fraud, Zero Hedge, 4/20/10
The Feds vs. Goldman Sachs Matt Taibbi, Rolling Stone, 4/26/10
Goldman Said to Face Criminal Probe by U.S. Prosecutors Examining SEC Case, Bloomberg, Justin Blum and David Glovin, 4/29/10
MAY
Crisis Panel to Probe Window-Dressing at Banks NY Times, Louise Story, 5/5/10
SEC Didn't Act After Spotting Wall Street Risks, Documents Show, Bloomberg, Jesse Westbrook, 5/6/10
Citi And Deutsche Subpoenaed Over CDO Sales, Zero Hedge, 5/12/10
Conspiracy of Banks Rigging States Came With Crash (Update1), Bloomberg, Martin Z. Braun and William Selway, 5/17/10
DOJ: Banks Colluded with Municipal "Advisers" to Rig Bids on GICs, Naked Capitalism, Yves Smith, 5/18/10
Goldman to Face SEC Deputy Director in Subprime Securities Suit, Bloomberg, David Glovin, 5/20/10
No Criminal Charges Against AIG Execs, Naked Capitalism, Yves Smith, 5/21/10
JUNE
SEC Investigation of Goldman Trading Against Its Clients Widens, Naked Capitalism, Yves Smith, 6/10/10
JULY
Senator Kaufman Blasts SEC And Getco For Latest Episode Of Glaring Regulatory Capture, Zero Hedge, 7/1/10
Bank of America Admits To Repo 105-Like Fraud, Even As End Of Quarter Window Dressing Continues Unabated Zero Hedge, 7/11/10
AUGUST
Wall Street's Big Win, Rolling Stone, Matt Taibbi, 8/6/10
SEPTEMBER (through the 14th--see above)
And, here's a list of senior Wall Street executives convicted of fraud this year...
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