As Gretchen Morgenson reported in Sunday's New York Times, the S. E. C. recently reached a settlement with Citibank over Citibank's promotion of risky municipal bonds to investors as safe investments. The bond sales, which took place from 2002 to 2008, involved considerable leverage and were inherently risking, ultimately costing investors $2 billion dollars.
At the center of this sale was one particular fund manager who planned the marketing for these toxic bonds. As the SEC order states:
“The fund manager and the fund manager’s staff played a significant role in drafting and disseminating information regarding the funds to investors and financial advisers without sufficient review or oversight to ensure that the information given to investors was accurate.”
There is a little problem you may notice with the above quote. It refuses to name the fund manager in question.
My Gut Reaction: It's bad enough that the SEC refuses to prosecute these people, but now they refuse to even name them!?!
Morgenson identifies the fund manager in question as being Reaz Islam and current head of L-R Managers L.L.C. Islam has not been charged with any crime, and is not mentioned in the SEC order. He refused to answer inquiries from Morgenson and pointedly avoids talking about his municipal bond work at Citibank. Consider this excerpt from the biography on his website on why he left Citibank:
In 2008, Reaz Islam, an innovative visionary, did [not] let the financial crisis hold him back and left Citigroup in amicable terms to become a Managing Partner at LR Global, a frontier market investment firm founded by J. Murray Logan – Rockefeller & Co., in New York to expand its presence in South Asia. He is one of the three principal Managing Partners at LR Global and serves as CEO of LR Global Bangladesh, where he oversaw the creation of the country’s second largest financial asset management company. He is also the President of LR Global Asia Pacific and the President of LR Global Sri Lanka. Under his leadership, similar to Citigroup LR Global, had tremendous success in South Asia developing a strong team of investment professionals, performance track record, deep institutional client base, and attracted over US$ 170 million in client capital between 2009 and 2010 in the midst of global financial crisis.
Without a willingness to prosecute or even identify Reaz Islam as a perpetrator, there is little to stop him from bilking other investors in the future. We need and should expect tougher action from our government against this kind of malfeasance.