Category Archives: Kleptocracy

Sad SAC: Reuters Spikes Hedge Story On Complaints From Steve Cohen

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Via Finalternatives:

“Reuters opted against running a story about alleged insider-trading on the part of SAC Capital Advisors founder Steven Cohen after Cohen himself complained about the news agency’s coverage, a journalism blog reports.

Cohen repeatedly called Devin Wenig, CEO of Thompson Reuters Markets Division and the second-in-command at Reuters parent Thomson Reuters, according to Talking Biz News. The hedge fund boss reportedly complained that the story, which the University of North Carolina blog reports would have been an “incremental” advance in the story of alleged insider-trading more than 20 years ago, was part of a pattern of persecution on the part of Reuters.

Wenig forwarded Cohen’s complaints to Reuters editor-in-chief David Schlesinger, who in turn referred the story to editors. Those editors debated the story, written by Matthew Goldstein, before deciding to kill it after three days.

“We make decisions on whether or not to run stories purely on journalistic grounds,” a Reuters spokesman told Talking Biz News.

Goldstein was the first reporter to cite the unsealed court documents that include explosive allegations against SAC and former SAC portfolio manager Ping Jiang. Cohen’s ex-wife, Patricia, last week sued him for $300 million, accusing him of insider-trading, perjury and hiding assets from her and from the authorities.”

My Comment

Looks like more confirmation of the Deep Capture thesis – that major newspapers are bending over backwards…and forwards….for the big hedge funds.

I notice that Hedge World has picked this story up….as well it should, it’s a big one… and very kindly links this blog, as well as the ever-alert zerohedge – the only MSM-touted blog I truly dig, mainly because I dig the characters on it.

Earlier, I blogged that Steven Cohen was also having problems with a militant ex-missus, who has gone public with allegations that he perjured himself, hid money from the government (here we are on Stevie’s side), and did other sorts of naughty things, like insider trading, that reclusive billionaires really shouldn’t do, not if they want to stay either reclusive or billionaires.

We have much more sympathy for Mr. Cohen, of course, than we do for the self-important twits and petty tyrants who fly their bylines at major newspapers with little respect for the body politic. At least, we understand simple greed. But the weedy vanity of the pen-pushing mob needs to be exposed for what it is. 

Now comes Mr. Goldstein, who clearly suffers from the delusion that his job is to break important stories, no matter how exalted the net worth of the subjects. That didn’t sit well with his boss, and now the dirty laundry is out in the open.

Meanwhile, as if irate Sith ladies and spiked stories weren’t enough, there’s also a forced oral sex- cross-dressing- cum- sexual-harassment suit coming back from the past to haunt Sad SAC.

Who knew you could have so much fun without getting naked (shorted)?

SEC’s Own Accounting Is Deficient

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Apparently, the SEC, top regulator of financial fraud, isn’t up to snuff keeping its own financial books…
We don’t say it’s cooking its books, but it sure looks like if someone wanted, they could cook them quite easily, according to this report at law.com:

“The GAO found that the SEC “did not have effective internal control over its financial reporting as of Sept. 30, 2009.”
As part of its mission, the SEC is charged with enforcing strict financial disclosure rules for public companies. Apparently, it is less adept at policing itself.
For example, the GAO reported that SEC’s general ledger system allows unauthorized personnel to view, manipulate or destroy data, and that “serious unauthorized activity” may remain undetected.
Until the SEC fixes these problems, the GAO found, the SEC can’t be sure “1) its financial statements, taken as a whole, are fairly stated; 2) the information the SEC relies on to make decisions on a daily basis is accurate, complete, and timely; and 3) sensitive data and financial information are appropriately safeguarded.”
Nor could the SEC “provide evidence that it monitored controls over its payroll exception reports to ensure payroll transactions were recorded accurately and timely.”
While the GAO did credit the SEC with producing statements that were “fairly stated in all material respects,” it flagged “six significant deficiencies” for FY 2008 and 2009.

The six areas are:

• information security;
• financial reporting process;
• fund balance with Treasury;
• registrant deposits;
• budgetary resources;

My Comment:

Translated, those six problem areas amount to this:
No one can really be sure if or when

1. Someone steals information from the SEC
2. Something is wrong in the SEC’s accounts
3. How much money the SEC has with the Treasury
4. How much money the SEC takes in
5. How the SEC is doing on an ongoing basis

Chew on that…

IPCC Chief Pachauri Central To Cap-and-Trade Scam

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From Mish Shedlock:

“The crux of the scheme is this: European steelmakers have threatened to leave the EU for India, eliminating the jobs of thousands of workers in the process, unless the EU grants the steelmakers free carbon credits worth hundreds of millions of dollars.

Eurofer, a European trade group, is at the center of the scheme. The web of the plot, however, weaves in not only several companies, but also the United Nations’ climate change chief:

* Among its members, Eurofer represents two EU steelmakers, Corus Redcar and ArcelorMittal, each of which has ties to India as well as to Rajendra K. Pachauri, the Indian industrial engineer who has been chairman of the U.N. Intergovernmental Panel on Climate Change, or IPCC, since 2002.

* Eurofer appears to have coordinated a threat to the European Union Greenhouse Gas Emission Trading System that its steelmakers would move their operations from the EU to India unless the EU cap-and-trade exchange issued them – at no cost – carbon emissions permits worth hundreds of millions of dollars.

* Once the bureaucrats in Brussels acquiesced, Corus Redcar and ArcelorMittal maneuvered to cash in windfall profits from the EU carbon permits given them at no cost.

* Additionally, Corus Redcar has now announced a decision to close operations in Great Britain nonetheless and relocate its steelmaking activities to India in order to gain additional U.N. carbon credits.

Ironically, EU and U.N. officials who might have thought requiring cap-and-trade permits would operate as “protection racket” in which EU companies need to buy carbon credits to continue operations, have now found themselves on the losing end of the reverse scheme.

In the final analysis, the winners are the European Union corporations willing to play hardball with the European Union Greenhouse Gas Emission Trading System, and the losers are the EU middle class workers that are held hostage in the scheme.”

Wall Street: The Crematory Of Capitalism

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Bill Cara:

“Independent traders know as a fact that Humungous Bank & Broker (HB&B) research analysts are biased and unaccountable. We also know they give short-term tips to their firm’s proprietary traders and sales people that are at odds with their longer-term published opinions. These unfair practices are permitted because the fundamental conflict of interest structure of the securities industry is permitted.

Today the Wall St Journal has reported that FINRA (the Financial Industry Regulatory Authority) has launched a broad inquiry into how up to a dozen Wall Street firms disseminate stock ratings and research. Important questions are being asked.

On August 24 this year, WSJ informed the public of how Goldman Sachs analysts were tipping their traders with info that differed from published reports. These regular meetings were called “trading huddles”. At the time, I called it insider trading, which is criminal.”

My Comment:

A reader commented earlier that “insider trading” is a big yawn as a story  (for the latest insider trading arrest, see this case, of an ex-banker from Lazard, a relatively small case, admittedly)

Someone might come to that conclusion only if their knowledge of the practice were abstract and based on theoretical debate on the subject. But anyone who knows the history of the capital markets over the last 30 years or so knows that a big part of the story is that investment (merchant) banks turned into traders by the end of the century and that their proprietary trading became more important to them than their retail clients or customers. I’ve written about this in relation to Goldman Sachs, which was the most egregious (because it was the most powerful) of the lot.

Insider trading is essentially a failure of banking as a profession, with professional ethics. There is a fiduciary responsibility to shareholders (in the case of a company) and of clients (in the case of banks).  Conflict-of-interest is a problem in every other work place. Why not here?

Besides conflict-of-interest, insider trading involves an explicit fraud on the client.

That’s in addition to the crime of fractional brokering, as someone cleverly puts it. (This is quite different from fractional banking. Due to the confusion of language that lets banks perform both safe holding and investing functions at once, fractional banking is legal).  On the other hand, “fractional brokering,” which is what naked shorting and “fails-to-delivered” amount to, is illegal.

Unfortunately, the professional financial reporters seem too myopic to understand the gravity of the problem, our self-involved “gonzo” journalists (yes you, Matt Taibbi) are too politically-driven to explain it correctly, and right now I’m too disgusted by the intellectual dishonesty of the media to take the trouble to make the argument on the web and see it lifted by all and sundry with nary a link or footnote, let alone verbal acknowledgment.

As Cara points out correctly (and safely, since he’s in Canada), Wall Street and the American capital markets have become a joke, and a substantial part of the financial media still doesn’t seem to realize it’s the punchline.

That gives me no pleasure to say. For years, I defended American business to my foreign friends, claiming that Americans at least held to standards, regulations, and transparency requirements higher than theirs (meaning, Indian and non-Western).

Behind all the glitz “America” still operated somewhere, I argued.

The Marxists and communists who called the whole thing a charade and a lie didn’t quite get it, I was sure. The values of the American republic would prevail. Once most money-managers and businessmen were alerted to what was going on in the markets, I fully expected that their outrage would be enough to stem the rot. I saw CEOs stepping up to the plate and doing their duty, when the future of their own (rather than someone else’s) children was at stake.
That was four and a half years ago, when I first began researching the markets.

In retrospect,  I see I was incredibly naive.The rot goes deep.

Those are somber thoughts to have around Christmas time. But perhaps not inappropriate. If you recall, in the Christmas story, gold (or should I say, gld?) and frankincense were only two-thirds of the offering. The other third was myrrh. Myrrh is a resin whose oil, I read here, is used for embalming and whose incense is used by penitents at funerals and cremations.

That must be the bitter scent I smell rising from the capital markets.

Ex-Sith Lady Uses RICO On Sith Lord (?)

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The ex-wife of Steven A. Cohen, legendary multi-billionaire manager of hedge-fund SAC, whom the ever controversial (and confrontational) Patrick Byrne has for some time been suggesting is the, or perhaps, one of the Sith Lord/s of Wall Street, is using RICO laws to get a bigger settlement from her former husband. That´s turned up some interesting accusations:

“In Ms. Cohen’s version of events, her husband and his brother, Donald Cohen, orchestrated a long-running racketeering scheme. She says her former husband lied under oath about his net worth, conducted mail and wire fraud, and concealed from her and the Supreme Court of New York millions of dollars that he possessed in 1990, thus reducing her divorce settlement.

Even in this post-Madoff era, the accusations might seem outlandish. Mr. Cohen, known as Stevie, is one of the nation’s most successful money managers. With a $13 billion hedge fund and a sumptuous Connecticut estate, he is, at 53, a Wall Street legend.

But all of this comes at an uncomfortable moment for Mr. Cohen and his company, SAC Capital Advisors. Since federal prospectors began making arrests in a major insider trading investigation in October, SAC, which is based in Stamford, Conn., has been linked to the case.

A former SAC analyst has pleaded guilty on charges related to insider trading that occurred years after he left the firm and has agreed to provide any information he might have about insider trading that occurred when he was at SAC. No current SAC employee or manager has been charged with wrongdoing.”

and this:

“She claims in her suit that in 1985, while they were married, Mr. Cohen confessed to her that he received inside information about the takeover of RCA by General Electric, a megadeal of the 1980s that prompted a sweeping insider-trading investigation. The Securities and Exchange Commission dropped its investigation after bringing charges against a G.E. executive and a Houston family with ties to a Wall Street bank.”

and this:

“When the couple divorced, Mr. Cohen stated that, on paper, he had a net worth of $16.9 million. But $8.7 million of that was “worthless,” he said, because of a bad real estate deal with Mr. Lurie.”

Lurie, who later fell out with Cohen, claimed that the money he got from Cohen to put through the deal came from an SAC trading account.…

My Comment

And some substantiation for the charges can be found in this WSJ story on Goldman Sachs analysts tipping off their own traders first and then favored hedge-funds (SAC at the head of them), before their own clients(which I noted in 2006).
See also this Deep Capture post.

Apparently, it´s not easy street being a Sith Lord. You never know when your spurned Sith Lady (not to mention various disgruntled Sith Knaves) might spring out from the shadows to expose what´s apparently standard operating procedure in the money business.

(Sigh) Not even a Greenwich mansion seems worth it (for a colorful account of the culture of the hedgies, whom we call the bubble kings, see “The High Way Robbers,” in ¨Mobs, Messiahs and Markets,”(Bonner & Rajiva, Wiley 2007).

I said this a long time ago  in “Three Card Capitalists”

The market collapse might have been triggered proximately by failed sub-prime loans, but the deeper sources of it lie in the massive fraud and corruption that go back to the  1980s, and even earlier, to the 1970s.

Open Letter To The Secretary-General Of UN

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Open Letter to Secretary-General of United Nations
Wednesday, December 9th 2009, 2:07 AM EST
Co2sceptic (Site Admin)

Dear Secretary-General,

Climate change science is in a period of ‘negative discovery’ – the more we learn about this exceptionally complex and rapidly evolving field the more we realize how little we know. Truly, the science is NOT settled.

Therefore, there is no sound reason to impose expensive and restrictive public policy decisions on the peoples of the Earth without first providing convincing evidence that human activities are causing dangerous climate change beyond that resulting from natural causes. Before any precipitate action is taken, we must have solid observational data demonstrating that recent changes in climate differ substantially from changes observed in the past and are well in excess of normal variations caused by solar cycles, ocean currents, changes in the Earth’s orbital parameters and other natural phenomena.

We the undersigned, being qualified in climate-related scientific disciplines, challenge the UNFCCC and supporters of the United Nations Climate Change Conference to produce convincing OBSERVATIONAL EVIDENCE for their claims of dangerous human-caused global warming and other changes in climate. Projections of possible future scenarios from unproven computer models of climate are not acceptable substitutes for real world data obtained through unbiased and rigorous scientific investigation.
Specifically, we challenge supporters of the hypothesis of dangerous human-caused climate change to demonstrate that:

Variations in global climate in the last hundred years are significantly outside the natural range experienced in previous centuries;

Humanity’s emissions of carbon dioxide and other ‘greenhouse gases’ (GHG) are having a dangerous impact on global climate;

Computer-based models can meaningfully replicate the impact of all of the natural factors that may significantly influence climate…”

For the rest of the post and the complete list of signatories, see Climate realists.

Hedge-Fund Pays Naked Shorting Critic Byrne $5 Million

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Copper River Partners (formerly Rocker Partners), the short-selling hedge-fund of David Rocker and Marc Cohodes, and associated entities have settled a case brought against them in 2005 by Patrick Byrne, CEO of embattled internet retailer Overstock, according to  The Register.

Note: The suit doesn´t charge naked shorting, but defamation and illegal collusion with research analysts.

Copper River worked with a research firm, Gradient Analytics, that  employed well-known financial journalist Herb Greenberg, one of the central figures in the story of the “capture” (corruption) of Wall Street journalists by speculators. Hedge funds stand accused of engaging in illegal collusion with journalists to drive down stock-prices of companies.

Last year, Gradient settled for a figure between $1.5-$2 million and issued an apology. Now comes this further vindication.

Despite the relatively trivial amount won in the Rocker case, $5 million, it´s noteworthy that the settlement does all the things victory in an actual court trial does, without the risk of losing on a technicality.

It also underscores something I´ve been suggesting for a while.

That public interest blogging and journalism alone isn´t enough.

It´s necessary to actually sue or inflict damage of some kind to score victories in these things.

Unfortunately, that´s usually not worth doing for people who aren´t wealthy.  Vicariously, however, we “little people” can at least relish the spectacle of the behemoths of finance getting it in the rump.

And this case  could prove to be a model for similar lawsuits by other embattled companies.

Still to come is Overstock´s suit against 12 prime broker-dealers (including Goldman Sachs), which will go to trial in late 2010. The suit charges an illegal stock market manipulation scheme.

Also in the works, the SEC, which dropped its investigation of Gradient in 2007, has now turned its sights on Byrne. Given Byrne´s  charge of regulatory and media capture, there are some who see this as retaliatory.

Death Penalty for Chinese Embezzler

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“China on Tuesday executed a former securities trader for embezzlement, the first person in the industry to be put to death, but millions of yuan are still missing, a state newspaper said.

Yang Yanming was sentenced to death in late 2005 and took the secret of the whereabouts of 65 million yuan ($9.52 million) of the misappropriated funds to his grave, the Beijing Evening News said.

The report added that Yang was the first person working in China’s securities sector to be executed.”

More here at News Daily.

Stories like these should alert us to the possibility that there may very well be mini-Madoffs (mini in absolute money terms only) all over the world, on which this recovery rests flimsily.

Danish Climate-Gate

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From the Washington Examiner:

“Police and authorities in several European countries are investigating scams worth billions of kroner, which all originate in the Danish quota register. The CO2 quotas are traded in other EU countries.

“Denmark’s quota register, which the Energy Agency within the Climate and Energy Ministry administers, is the largest in the world in terms of personal quota registrations. It is much easier to register here than in other countries, where it can take up to three months to be approved.

“Ekstra Bladet reporters have found examples of people using false addresses and companies that are in liquidation, which haven’t been removed from the register.

“One of the cases, which stems from the Danish register, involves fraud of more than 8 billion kroner. This case, in which nine people have been arrested, is being investigated in England.

“The market for CO2 trade has exploded in recent years and is worth an estimated 675 billion kroner globally.”

Checking Back On Old Posts

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Delving into the archives is a lot of fun. It´s uncanny, how things turned out…

Check this post from October 9, 2008:

(Mind you, I hadn´t come across Deep Capture at that point. I started reading it in the spring of this year. I think I came across a link to it on Doug Boggs´blog – The Banterer)

October, 2009 2008

Do Statistics Back Claims of Complete Credit Freeze?

“Many commentators claim, however, that virtually no transactions are occurring in this market. These claims are completely false. For the week that ended October 1, which is the most recent week currently reported, total commercial paper outstanding amounted to $1,607 billion. Yes, this amount was down from the $1,702 billion reported for the previous week, but is a 5.6 percent drop a good reason to panic? If we go back to March 2008, when nobody was talking excitedly about the commercial market’s “freezing up,” we find that the total amount outstanding, on average, was $1,822 billion, or only 13 percent more than last week. In March, the market was working fine; now it’s “locked up.” This sort of hyperbole, with which we are being bombarded hourly around the clock, is totally without a basis in the facts…..”

Robert Higgs, suggesting that some people are fomenting panic. He asks why.

Comment:

The answer lies in asking yourself:

Who has benefited so far? How? What do they want to happen?

Paulson Plan Premeditated?

Here’s Bill Engdahl tying up the loose ends of my piece on Paulson on how Paulson’s plan benefits the three new super banks, Goldman, JPMorgan Chase, and Citi and how they would be used to dominate global, especially European, banking.

Interbank Wars – Latest

The latest in Citi’s fight with Wells Fargo is that Citi has terminated negotiations and is planning to pursue breach of contract against Wells, so Wells is going ahead with its deal. Citi has Goldman Sachs connections: Rubin, Clinton’s Treasury Secretary and a former Goldman chief is a director.

Meanwhile, with regard to Bear’s demise, here is a piece arguing that JPMorgan was involved in gold price manipulation under cover of their bail out of Bear this spring. JPMorgan chief Jamie Dimon sits on the Board of the NY Federal Reserve and as such was privy to the NY Fed’s actions re Bear Stearns.

Media Trix

Bill O’Reilly, not usually my favorite person, has been pretty good on standing up to the bail-out. This evening, he had a clip from an NBC skit on the sale of subprime mortgages to Wachovia by a couple, the Sandlers. It mocks Barney Frank’s role in eliminating oversight of Fannie and Freddie. Apparently the video was edited to remove the reference to Frank. The Sandlers had a long list of progressive groups they donated to (including Move On.org).

O’Reilly’s tack seems to be that the positions of those groups is undermined by the funding. That part is far-fetched, but it is time someone pointed out that not everyone affected by the decline in housing prices is an innocent. Many people made fortunes during the boom and are making more money from the bust.

Update – Market Moves Or CyberWars?

Another amazing day. I walked out of the house for 2 hours to buy a laptop for traveling, since my old one had mysteriously lost its internet connectivity. When I came back, the market was closing with a sell off, down 7% (679 points).

It began in the morning when
Paulson announced that insurance companies were in for trouble. That set off the selling in the bank and insurance stocks, including regional bank funds.

The whole thing was compounded by the fact that today was the day the ban on short-selling around 1000 financial and finance related stocks was lifted, so short-sellers were pouncing.

[Companies on the SEC’s list slid 18 percent on average during the ban, compared with 24 percent drop for all financial companies in the Standard & Poor’s 500 Index].

Then, General Motors had a bad day: Standard &Poor threatened to downgrade it (as well as Ford) to junk. GM shares got beaten down under $5; Ford was down over 20% too.

You had to wonder at the timing.

1) It’s the Jewish holiday, Yom Kippur, today. Recall that the selling began the evening of Rosh Hashanah. Remember that old saw – sell Rosh Hashanah, buy Yom Kippur? Markets are weaker at the time…

2) The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It’s the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent.

3) The decline is 7 years from 9/11

Anyway, when I got back the damage had been done.

[I ended up buying my computer at a shop that sold refurbished electronics in a rather shady side of town. A cop car was pulling away just as I walked in. But having just been a spectator to one of the biggest bank heists in history, I suddenly found the grungy looking characters hanging around rather harmless].

James Altucher, a trader, has this to say at The Street:

“The single biggest reason the stock market has fallen in the past five days is hedge fund liquidations. Of the top 20 hedge funds in the world, something like 18 are down 20% or more this year. They are getting redemptions, they are liquidating, they are selling stocks with reckless abandon to raise cash. Our job as good investors is to give them liquidity and take their bargain-basement merchandise off of their hands. Let’s get their selling over with so we can make money.”

Well, that’s evident. There was big selling, especially at the end, the kind from sell signals going off in program trading.

Morton Kondracke on FOX News in the evening was telling us sagely that it’s not a liquidity issue, it’s a confidence issue, and (get this) the answer is to create a global central bank. Right. The solution to a confidence problem is to give the markets to the confidence-men.

A note on cyberwarfare might be apposite hear [sic]. I dig it up from an old article I wrote that references Laurent Murawiec’s now notorious power-point presentation in 2002 advocating seizing Saudi oil fields. Murawiec is connected to Donald Rumsfeld’s Revolution in Military Affairs (RMA) which makes InfoWars central to the battle ground.

“In all these cases, IW involves creating phantom cyber-images, which can include phantasms of nonexistent trains, airplanes, stock market orders, and bank transfers; false impressions of the enemy’s troop strength and one’s own, of supplies and movements, of fake attacks and all-too-real defenses; and phantom images of the enemy’s leaders doing evil things on screen because one has video-morphed images of them doing them so.

“Information warfare is not about machines or even electrons. It is about people’s minds, society’s functions, and armies’ strategies. Cyberspace endows us — and our enemies — with new and extraordinary means with which to achieve our respective aims. “We have only begun to cyber-fight….”

More at “Tom Tancredo Takes Out Mecca: The Cyber Wars Playing Near You” (Dissident Voice, August 8, 2007)