Category Archives: Finance

Wall Street Powerhouses Invested Alongside Madoff

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“Primex Trading’s Dark Pool Operations

There has been much debate among Wall Street veterans as to why major European investment banks suffered serious damage from the Bernard Madoff Ponzi scheme while our biggest U.S. investment banks escaped unscathed.

For the past two decades, Wall Street watchers could count on four U.S. firms to land in the middle of every securities scandal. From Nasdaq price fixing to fake research to rigging the IPO markets to peddling toxic subprime assets, one could rest assured that Citigroup’s Smith Barney, Morgan Stanley, Merrill Lynch and Goldman Sachs would be heading the lineup. Their complete absence from the greatest Ponzi scheme in history raises the question: what did they know and when did they know it?

The answer may reside in a pentagonal structure created in 1999 to serve the interests of a Wall Street cartel.

On September 14, 1999, it was officially announced that Citigroup’s Smith Barney, Morgan Stanley, Merrill Lynch and Goldman Sachs had partnered with Bernard Madoff to compete head on with the New York Stock Exchange in a venture called Primex Trading.

Madoff had bought the rights to a new technology called Financial Auction Network (FAN) created by Christopher Keith, a 17-year veteran of technology creation at the New York Stock Exchange (NYSE). Mr. Keith had retired from the NYSE and started a technology think tank in lower Manhattan in the early 1990s called Exchange Lab. FAN was one of the early technology offerings and the rights to develop it were bought by Madoff. The firm that emerged was Primex Trading, a division of Primex Holdings. (Primex Holdings holds two patents and may be part of those secret Madoff assets the court won’t release to the public.)

In addition to harnessing the brains of Mr. Keith from the New York Stock Exchange, Primex hired Glen Shipway, the Executive Vice President of the over the counter stock market, Nasdaq, whose duties had included market surveillance of broker dealers like this gang of five.

The partners made a big splash in the press at the time, extolling altruistic intentions of getting better prices for their customers in an electronic version of the New York Stock Exchange. Here’s an excerpt from the New York Times on September 19, 1999:

“Primex is aiming to be an electronic version of the New York Stock Exchange. Participants will not only be able to buy and sell stocks at prevailing market prices, as they now do through many traditional and electronic exchanges, but also interact openly with one another — in effect, bargain — to find the best prices possible. ‘I think the fact four of the world’s largest securities firms have backed this system suggests that it brings something new and unique to our ability to obtain the best execution for our customers,’ said Bill Hart, a managing director in equity trading at Salomon Smith Barney.”

In reality, a very different motive was at work. One of the best kept secrets from the public is a benign sounding process on Wall Street called internalization. That’s where broker dealers like Madoff’s Primex partners match their customers’ buy and sell orders in-house rather than sending them off to the New York Stock Exchange or some other transparent stock exchange. The entities that engage in this trading process are called dark pools. (Recall that “pools” were the same secretive creatures that rigged the stock market leading up to the crash of 1929.)

While the investing public was being served up visions of Primex creating a more transparent and fairer pricing market mechanism, the goal for Madoff’s partners was to legitimize the highly questionable trading practice of internalization….”

— Pam Martens at Counterpunch.

Another “Mobs” Review On Seeking Alpha

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“I have a confession to make. Twice while reading the book Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, by William Bonner and Lila Rajiva, I felt a compelling need to refer to the first few pages and refresh my memory on when the book was published. For your information, it was published in the year 2007 (I believe in August) and well before the mega crisis and financial blowup of the second half 2008 unfolded. If not for anything else, then you have to read this book for its clairvoyance alone.The authors have been bang on target painting what was then a potentially scary scenario which ended up becoming one of the biggest blowups in the financial history of the world as it unfolded. They deserve credit for having faith in their contrarian doomsday vision when everyone else was going all out buying mortgage originator companies and expanding prop desks funded by banks’ leveraged books without any due regard for the inherent risks…..”

Atim Kabra on Seeking Alpha

Comment:

It’s nice to be complimented about abilities…even if you don’t have them! And I can’t say that a little green man popped out of the corner to tell me to do it, either.

Clairvoyant? Who would want to be….since the essence of playing Cassandra is you’re doomed not to be believed at the time it counts.

What’s more, we weren’t the only ones who predicted a credit crisis and global financial collapse.

I found out recently that economics professor and author Ravi Batra also did – only so frequently that by the time it actually came around, he’d moved out of the spotlight. (His doomsday books are 15 years old).

Austrian-oriented libertarians have been warning about an impending train-wreck for years. Seems like it didn’t get through to the mainstream press – which, of course, had every reason not to want it to come through…

But ours is the most wide-ranging analysis and we were certainly the first ones to get a best-selling book out about it. [I should correct that – one of the first ones….I see that Peter Schiff’s Crash Proof and Michael Panzner’s Financial Armageddon were out in April that year. So was Bookhaber’s  “industry insider” peek into hedge-fund risk management that I posted about earlier. But I didn’t get to read them and only skimmed Schiff’s and Bookhaber’s book after the publication of ours. And I still think ours was the most wide-ranging…and spookily timed – Mobs came out exactly as the first banks started collapsing.

And, even if I do accept credit only for doggedness, not prescience, it’s true that I’m mildly fey.  I sometimes feel I was led to this project by a series of events that go back to 2001…. by strange coincidences, uncanny repetitions, chance encounters where the past and the future were entangled. 

So, thanks for the thumbs up, Mr. Kabra – maybe I’ll pass it on to the green man.

Financial Follies: Eurozone Debt Near Unsustainable

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“In Portugal, one in every €8 of economic turnover goes overseas to settle its trade deficit. Rome owed 109% of Italy’s annualized GDP on the latest data.Today the Irish prime minister, Brian Cowen, warned trades union leaders that without public-sector pay cuts and job losses, he may seek a rescue by the International Monetary Fund (IMF).Dublin’s budget deficit is now running at 6.2% of Ireland’s annual economy, and the cost of credit-default swaps on its sovereign debt has now risen 7-fold since Sept.Default insurance on serial bankrupt.Mexico, in contrast, has fallen according to CMA Datavision.”

Adrian Ash at Bullion Vault

The comeuppance of the Euro was long overdue, which is why I’ve suspected that the short term prospects of the dollar are better than most give it credit for. In the mid-term, its prospects are 50-50.

In the long term, it’s down. But then, in the long-term, to paraphrase someone, all currencies are dead anyway.

Asia-Europe Shipping Rates Plunge to Zero

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“Idle ships are now stretched in rows outside Singapore’s harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes.

It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction.

The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the Second World War. This appears increasingly certain with each new batch of data.

Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc – possibly 12pc. Trade flows grow 8pc in an average year. ”

Says Ambrose Evans-Pritchard at The Daily Telegraph, in a piece on the drop of Asia-Europe shipping rates to zero.

Boycott Israel

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“When I think of all the millions of dollars that people wasted on “change” I want to vomit.

Peace groups, don’t tell me to write or call these unspeakable political lowlifes. Start thinking up ways to disrupt their lives and the lives and fortunes of all the self-satisfied racists who make life hell for Palestinians.

Some suggestions:

1. Demonstrate in the Streets. Not just in front of the government buildings, but in front of Israel Bonds offices, El Al Airlines, the homes of members of Congress, and the businesses of people who give massive amounts of money to Israel. There’s a weekly picket of the Manhattan diamond store owned by Israeli settlement builder Leviev. In a city like New York there should be enough people to picket 9-5 every day it’s open. There are plenty more places to picket. In 2007 Donald Trump gave a quarter million dollars to the “Friends of the Israeli Defense Forces”. Why not demonstrate in front of his ailing Atlantic City casinos?

2. Buy a Keffiyeh. Wear a Keffiyeh. During the Holocaust the Nazis in many countries made Jews wear Jewish stars so that they could be singled out and humiliated or attacked.. According to the Yad Vashem institute in France many non-Jews won the Jewish star as an act of solidarity. According to legend the Danish King Christian X put on a Jewish star for the same reason.

Today our symbol of solidarity must the keffiyeh, the head scarf worn in different styles by Arab men and women. You could see it everywhere among the 15,000 who marched in New York City last week, a march of mostly Arab and Islamic people. It needs to be worn proudly by the “whites”, too. Wear it to work and see what conversations it starts.

3. Demand unions publicly sell their Israel Bonds. 1700 unions own Israel Bonds. Last September the head of the Retail, Wholesale and Department Store was honored at a dinner of the Israel Bonds National Labor Division where $40 million was raised for the bonds in one night. See him beaming at Hillary Clinton in a picture here. How many of the members of those 1700 unions have any notion that their leaders are buying these bonds with their dues or pension money?

It’s time to play hardball. The union movement is desperate to get a card check bill passed. Word is that Obama has already decided not to make it a top priority. So it’s going to be a fight. The last thing unions want is bad publicity in a dispute with human rights and Islamic groups about their owning bonds that support an apartheid state. I love unions and have been a union member for 40 years, but enough is enough.

4. Meet up with Muslims. Muslim people in the U.S. have been arrested, demonized and demoralized since 9/11. The horror of Gaza is making U.S. Muslims furious and they’re starting to get active in the streets. A good place to work with them is through the local chapter of CAIR, the Council on American Islamic Relations. www.cair.com

5. Boycott Israeli goods. I haven’t bought as much as a Hanukah candle from Israel in years. I won’t buy a computer made with an Intel processor because Intel has a huge factory in Israel on confiscated Palestinian land. Here’s one list of Israeli products and here’s another courtesy of a site urging you to buy Israeli goods!If you need more arguments see Naomi Klein’s recent article And if a boycott is to have any effect it has to be an active boycott. Ask store owners to remove offending goods and picket the stores that stubbornly trade in the “forbidden” goods. For tips google the Jewish anti-Nazi boycott of the 30’s.

6. Boycott Israeli personalities. Not everyone of course, not Israelis who will speak out against apartheid and war crimes. (There are some Arab countries which stupidly make it a crime to deal with any Israeli!) Obviously picket any Israeli political speaker. (Screw dialogue with them.) If your college works with Israeli institutions campaign to have it stopped. Try to keep the Israeli Philharmonic or Israeli athletes out of your city. No team would ever play against a South African team during the heyday of apartheid protests.

7. The corporate media sucks, but use it as much as possible. Write letters and op-eds. If they’re not published call the editors and bug them about denying equal time. Closely monitor what the editorial page and news page publish. If they don’t cover your protests call the news desk, call or email the publisher. Ask for meetings. The Israeli embassy does it all the time. Get all the coverage you can, but at the same time raise money for your own publicity.

8. Raise money, lots of money. You gave it to stonehearted politicians. Now give it to human rights groups. Rent billboards. Put ads on buses or in college newspapers, or on internet sites. Plaster signs on walls. Run 30 second spots on cable TV. If the stations object to running a “controversial political message” announce a run for political office. Legally they have to run ads by candidates!

9. Give money to Gaza. Eventually some of it will get through. Give to the UN via UNWRA.

10. Insist the national peace coalitions act together. We have UFPJ, ANSWER and the IA Center all calling their own demonstrations. The differences in their programs are less than the length of a gnats toenail. Press them to cooperate. Insist they have open planning meetings.

11. Start thinking of ways to boycott Egypt. Their dictator Mubarak is a full partner to war crimes. By international law people being massacred have a right to flee and become refugees. Mubarak’s troops maintain the Rafah-Egypt wall and shoot and Palestinians who try to break it down. Stay away from Egypt. You can see the pyramids some other time.

12. Think of new ways to put the heat on. Try them out and publicize them. Invent Wiki-Protest.”

Stanley Heller in Counterpunch.

Several Jewish women are at the forefront of protests here in the US, according to Amy Goodman’s Democracy Now. 

“Tens of thousands of people took to streets over the weekend in cities across the globe to demonstrate against Israel’s assault on Gaza. Some of the protests have been organized by Jewish groups who are speaking out against Israel’s actions. We speak with two Jewish women for peace: Dorothy Zellner, one of fifteen Jews who have signed a call for a protest in front of the Israeli consulate in New York, and Judy Rebick, who organized a sit-in comprised of Jewish Canadian women at the Israeli consulate in Toronto. “

Comment:

As a libertarian, I don’t think sanctions against a population, whether Palestinian or Israeli, are just.

But targeted boycotts are a different thing.

And the keffiyah idea is a good one.

Three High-Profile Suicides Related To Financial Losses In 6 Months

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I forgot to post this interesting news from earlier in the week (January 5, Monday) :

“The patriarch of a German family whose assets include a majority stake in HeidelbergCement died on Monday in an act his family attributed to “the desperate situation of his companies caused by the financial crisis”…….

Merckle’s situation echoes those of Olivant chief operating officer Kirk Stephenson and Access Partners’ Rene- Thierry Magon de la Villehuchet, both of whom committed suicide last year. All faced large, rapid financial losses. All were caught out by forces that may have been hard to accept. Merckle was a once-conservative industrialist seduced by the returns available through heavy leverage. Unable to refinance loans taken out to cover trading losses, including an estimated E400m from short-selling VW shares, he faced a very public liquidity crunch…”

More at The Telegraph

Comment:

The first of the suicides was by Kirk Stephenson, the New Zealand born COO of Olivant Advisors.

He apparently threw himself in front of a 100 MPH train at Taplow railway station in Berkshire while under increasing financial pressure from the credit crisis. Olivant is a private equity firm that tried to buy a 15% (1 million P ) stake in Northern Rock before the bank was was nationalized. Stephenson, 47, married and with an 8 year old son, was a well-respected millionaire City financier.

Merckle, 74, known as the German Warren Buffett and once the 92nd richest man in the world according to Forbes, was until the financial crisis worth $9.2 billion.  His holding company owed $6.7 billion to the banks when he was found dead on the tracks outside his home town of Blaubeuren. He left a suicide note behind.  Merckle expanded his grandfather’s pharmaceutical business from 80 employees to over 70,000 but seems to have run it like a family firm, giving employees as many as six years at home to raise children.  That might have been the reason he took his losses so personally. The last straw apparently came when his holding company shorted Volkswagon and the shares went on to quadruple.

The third suicide (which I posted earlier) was that of Rene-Thierry Magon de la Villehuchet, the French manager of Access International, one of the European “feeder funds” for Madoff. Villehuchet was found dead, his wrists and biceps slashed with box cutters, at his NY office, after losing clients over a billion (1.4 at least) dollars. That sum included his own money as well as the money of family and friends. Villehuchet was a French aristocrat whose ancestors made a fortune in shipping in the 17th century and the (apparent) suicide is attributed to the loss of honor and reputation he suffered. Villehuchet did not leave behind a suicide note. Villehuchet’s brother insisted that the return he and others received from the Madoff fund  (which he described as 17 percent distributed over  4 years) was far from excessive. He also insisted that his brother was a modest and honorable man, not a greedy socialite, as he was being portrayed in the media. However, it does look like Villehuchet used excessive leverage (150 percent) that left him with losses greater than his investment.

Item: There was no suicide note in the Villehuchet case.

Item: Villehuchet lived in Westchester County in New York and worked in New York city.

Item: Villehuchet co-founded Access International Advisors with Patrick Littaye in 1994. Littaye had been investing with Madoff for a while. It was Littaye who brought Villehuchet into Madoff’s ambit. Access raised funds in Europe to invest with Madoff (75% of it was with him) through  LUXALPHA  SICAV-American Selection, a fund managed by the bank, UBS. Its objective was “to provide a consistent performance” for investors, who included the Rothschilds and Liliane Bettencourt.

Item: Prior to founding Access, Villehuchet was CEO and Chairman of Credit Lyonnaise Securities, the US Investment Banking arm of the French bank, and prior to joining there in 1987, he ran Interfinance, a broker firm specializing in the European markets that he founded in 1983. Before that, he worked at Banque Paribas from 1970 and it was then he met Littaye who worked there too.

Item: He was working closely with American financiers from at least 1987, from this account. Twenty years of living in New York where most top fund managers were reportedly aware that something was not right with Madoff, and he didn’t know? Shouldn’t he at least have diversified? Instead, one report says he actually put all of his brother’s money into the fund and 20 % of his own (another report reverses the figures). That sounds as if he knew enough about Madoff to be absolutely sure about the deal. How could he so sure? Could he have been  oblivious to the complaints going on from 1999 and earlier?

Not likely. In fact, I would say impossible. Just as it’s impossible that the SEC was simply incompetent on this. As my previous post shows, the SEC was quite capable of rooting out Ponzi schemes of just this sort in several cases. Note the number of times (8) there were investigations into Madoff:

(1) 1992 – an SEC probe of Florida accountants who allegedly sold unregistered securities brings up Madoff’s name (2) 1999 -SEC examiners review trading practices at Madoff’s investment advisory firm (3) 2001 – The SEC’s Boston office notified by Harry Markopolos about questionably stable returns of Madoff’s firm (4) 2004 – SEC investigates Madoff for improper trading practices (5) 2005 -SEC interviews Madoff and family and finds no improper trading practices (6) 2005 – industry-based regulatory office finds no improper trading practices by Madoff’s firm (6) 2005 – SEC investigators meet Markopolos, who calls Madoff’s firm  “the world’s largest Ponzi scheme” (7) 2006 – SEC enforcement investigation says Madoff and a client misled regulators and Madoff agrees to register as an investment adviser (8) 2007 -Financial Industry Regulatory Authority examines Madoff’s firm but takes no action.

No. Someone with oversight of the SEC squashed the investigation.

And Villehuchet, whatever his personal sense of honor, very likely knew what Madoff was all about.

Madoff & Co. – How The SEC Tackled Other Scams

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The SEC is going after the small fry, now that’s it’s been caught with its pants down in the case of the biggest fry of them all.

A Philadelphia investment manager, Joseph Forte, has been charged with having swindled around $50 million from 80 investors in a mini Madoff scheme.

It’s not the only such case in the SEC’s files. The Commission just closed up a civil case against Renaissance Asset Fund, Inc.’s  Ronald J. Nadel, and Joseph M. Malone, which charged them with swindling over $16 million from more than 190 investors nationwide, most elderly and belonging to Jehovah’s Witnesses congregations.

“According to the complaint, from at least March 1999 through April 2004, the defendants raised funds for multiple purported projects, including a general fund, an outlet mall, an international currency exchange, and a Swiss bank. Some of the purported projects did not exist, and others were unsuccessful. The defendants misrepresented to investors that their investments would earn returns ranging from 10% to 25% in as little as four months. The defendants also sent quarterly account statements to investors setting forth the fictitious profits their investments had purportedly earned. Based on the representations in these account statements, many investors reinvested their principal and purported profits in other Renaissance projects.

The defendants operated Renaissance’s programs as a Ponzi scheme, paying earlier investors with funds raised from later investors. Nadel also used investor funds to pay for lavish expenses, including country club memberships, car leases, and retail purchases. The majority of investors in Renaissance never received the interest or return of their principal the defendants had promised. …”

Read more at Jehovah’s Witness.Net. Here’s the link to the original SEC complaint in 2006 and here’s the record of the SEC’s administrative proceeding (January, 2008) barring Nadel from selling securities for 5 years.

Comment:

I am posting material that creates a context for the Madoff business. Florida is one place to start because the state is notorious for attracting scamsters lured by its population of wealthy seniors. Reports like the ones I’ve posted show that while the SEC sat on its hands during the Madoff scam, it was doing its job when it came to the smaller fry. In other words, it isn’t the lack of laws or regulation that is the problem. It’s the selective enforcement of laws. And that’s a problem not of structure, as the liberals would have it, but of political culture and corruption.

Supporting that take, here’s another, older piece (1992), “An Oasis Rich in Shady Operators,” Diana Henriques, NY Times, October 4, 1992 which describes scams in the booming 1990s, supposedly the golden age of the markets.

“College Bound is not unique in Boca Raton. Indeed, in the past year, this expensive enclave has experienced the financial equivalent of a cancer cluster. Six local corporations, including College Bound, have fallen under S.E.C. investigation; a seventh has been shut down and its chairman arrested and accused of running a Ponzi scheme. Dozens of other companies based here are little more than corporate shells created by boiler-room brokers, or financially flimsy companies whose chief products seem to be their own stock and news releases boasting of their prospects.

Regulators policing the penny stock market refer to the area’s unsavory brokers as the Boca Bunch, and state investigators have dubbed the area “the Maggot Mile.” The United States Attorney’s satellite office next door in West Palm Beach, once a three-person operation, now keeps 14 attorneys busy. ‘Very Appealing Location’

“Once it was North Miami that had become notorious, then Fort Lauderdale,” said Caroline Heck, executive assistant United States Attorney in Miami. “Now, Boca is a very appealing location.”

Charles A. Harper, the regional administrator for the Miami office of the S.E.C., agrees. “We’ve definitely seen problems moving up the coast.”

And this excerpt below (also from the same Times piece) shows that money-laundering often accompanied the fraud:

“According to court records in Miami, the Bank of Credit and Commerce International, which has since emerged as one of the largest bank frauds in history, opened a branch here just to cater to Munther Ismael Bilbeisi, a Jordanian businessman and Boca Raton resident indicted in August 1991 on tax evasion charges stemming from a coffee-smuggling scheme financed by B.C.C.I. Mr. Bilbeisi left Boca a fugitive.

Cary Maultasch, who testified under a grant of immunity against Michael R. Milken in 1990, still lives here, as do other former Wall Street lions from the scandals of the 1980’s, including Martin A. Siegel, who pleaded guilty to insider trading charges involving Ivan F. Boesky.”

Drugs often played a role in many suspect firms, as this piece from Sept, 08, indicates:

“In 1987, Jerold Weinger was the CEO of a Wall Street brokerage firm crushed under an avalanche of coke.

One of the firm’s partners, six brokers and a receptionist were arrested in a massive U.S. Drug Enforcement Administration Wall Street sweep called Operation Closing Bell. A ninth employee was arrested in the firm’s Florida office. Partner Wayne Robbins ultimately pleaded guilty to drug charges, and seven of the eight others either pleaded or were found guilty of possession, distribution or conspiracy to distribute cocaine, according to the DEA’s New York office.

According to federal court documents filed in the Southern District of New York, brokers at Brooks, Weinger, Robbins & Leeds regularly traded stock tips for cocaine. In one instance, a broker gave cocaine to a principal of another company in exchange for $10,000 worth of stock in that company’s initial public offering. At one point during the sting, a broker was arrested on drug charges and fired from the firm. A day later, he was rehired “because he was a good, trusted source of cocaine.” (“ Fool’s Gold: Desperate clients hand over thousands of dollars for a chance at a job,” Craig Malisow)

S. Korean Blogger Arrested For Spreading Economic False Information

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“SEOUL, South Korea – A South Korean blogger pleaded not guilty Saturday to charges that he spread false economic information on the Internet, a news report said, in a case that drew heated debate over freedom of speech.

The blogger, identified only by his surname Park, gained prominence among South Koreans because some of his dire predictions about the global economy, including the collapse of Lehman Brothers, later proved to be correct.

Known widely by his pen name “Minerva,” the mythological Greek goddess of wisdom, the 31-year-old Park was accused of spreading false information on an Internet discussion site last month that the government had ordered major financial institutions and trade businesses not to purchase U.S. dollars.

Kim Yong-sang, a judge at the Seoul Central District Court who issued an arrest warrant for Park following Saturday’s court hearing, said the case “affected foreign exchange markets and the nation’s credibility,” Yonhap news agency reported.

Park told the judge he wrote articles to help underprivileged people and did not seek any personal financial gain or harm the public interest, Yonhap said….”

More at AP.

Dow Jones NewsWire On Sentier 2

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Just to make sure this news report doesn’t vanish into the murky depths of Google, I’ve posted it below in toto.

http://news.morningstar.com/newsnet/ViewNews.aspx?article=/DJ/200812111307DOWJONESDJONLINE000860_univ.xml

(downloaded, 12:40 PM January 9, 2009)

Note that the report is dated 12-11-08. Madoff was arrested on Dec 11 (Thursday).

SocGen, Barclays Cleared Over Franco-Israeli Money Laundering12-11-08 1:07 PM ESTPARIS (AFP)–A Paris court Thursday cleared the banks Societe Generale SA ( 13080.FR) and Barclays PLC (BCS) of complicity in money-laundering between France and Israel, but convicted a top Pakistani bank and a U.K.-owned lender.

The court also sentenced a former French prosecutor to 20 months for corruption, and gave two executives from the National Bank of Pakistan (NBP.KA) two-year suspended jail terms following a mammoth trial. Judges heard how the four banks handled money from merchants in Paris’ Sentier garment district – the proceeds of tax evasion, embezzlement or stolen checks laundered through banks or money exchange offices in Israel.

The banks had all denied any wrongdoing in the case, dubbed “Sentier 2.”

A previous “Sentier” trial saw dozens of clothing merchants from the district convicted of defrauding banks, and investigators looked at whether the firms had made proper checks before handling the merchants’ payments.

One hundred and fifty-two people were on trial alongside Societe Generale, the French units of Barclays and of the National Bank of Pakistan, and Societe Marseillaise de Credit, owned by HSBC Holdings PLC (HSBA.LN).

Daniel Bouton, the chairman of Societe Generale – which was hit by a massive rogue trading scandal at the start of this year – was acquitted along with his bank and three other senior managers at the lender. They were accused of handling the equivalent of EUR32 million in ill-gotten funds.Investigators told the court that Societe Generale knew of the fraudulent origin of this money but the judge accepted defense arguments that there was no “intentional element” on the part of the bank.Bouton’s lawyer welcomed what he said was a “coherent” decision. Bouton had been charged with aggravated money laundering and faced 10 years in jail.Barclays-France and four of its former or current executives were also cleared of wrongdoing.The court fined the National Bank of Pakistan EUR200,000 and gave two-year suspended jail sentences to two of its bosses for failing to spot EUR1.8 million in illegal transfers.The pair were also fined EUR20,000 each. Two other executives from the NBP, one of the largest commercial banks in Pakistan, were acquitted.Societe Marseillaise de Credit was also convicted of failing to spot EUR1.8 million in illegal transfers and fined EUR100,000. One of its executives was given an eight-month suspended sentence.A former French prosecutor was convicted of for corruption and influence peddling and given a three-year jail sentence with 16 months of it suspended. He was fined EUR30,000.Click here to go to Dow Jones NewsPlus, a web front page of today’s most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=OBSC4tG5tv93CjIHwO9G9A%3D%3D. You can use this link on the day this article is published and the following day.