Our Common Good

The Securities and Exchange Commission is preparing to file a civil lawsuit against the $14 billion Connecticut hedge fund run by Steven A. Cohen, a legend in the industry whose business has attracted the government’s scrutiny for years.

In a call with investors Wednesday morning, SAC Capital Advisors revealed that it had received a notice from the SEC detailing charges that the government is preparing to file against the firm, according to a person familiar with the call.

It’s unclear when the firm received the notice. But the call came about a week after a former SAC portfolio manager — Mathew Martoma — was charged with running the most lucrative insider-trading scheme ever while working with Cohen. In separate cases, federal prosecutors and the SEC accused Martoma of getting secret tips from a neurologist about the results of a clinical trial involving an Alzheimer’s drug, enabling his hedge fund and others to make more than $276 million in illegal profits or avoided losses.

Cohen was not accused of wrongdoing in either case, nor was he named in the court filings. Instead, the documents refer to the “hedge fund owner” or “Portfolio Manager A.” Cohen is a billionaire with mythical status in the hedge fund world given his firm’s consistently stellar performance.

[…]

In recent years, at least five people have been accused of insider trading while working for SAC, including Martoma, who worked for an SAC affiliate called CR Intrinsic Investors.

Federal regulators on Wednesday voted to require U.S. companies to disclose what they pay to harvest crude, natural gas and minerals from other countries, delivering a big blow to oil companies that say the mandate will force them to shut down drilling in some areas.

The rule adopted 2-1 by the Securities and Exchange Commission, drew applause from human rights activists and social justice groups that insist the added transparency could discourage corruption in resource-rich countries.

The measure is aimed at preventing graft, exposing bribes and deterring corruption in resource-rich nations where oil and mineral wealth isn’t trickling down.

While it may have taken more than four months for him to decide, Judge Frederic Block has finally done what everyone expected him to do: bless the pittance of a settlement between the Securities and Exchange Commission and the two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, whose poor investment decisions cost investors $1.6 billion and proved to be the canary in the coal mine of the financial crisis.

To his credit, Judge Block was not happy about it. Four years after Cioffi and Tannin were sued civilly by the SEC and indicted criminally by the U.S. Attorney in the Eastern District of New York (a jury acquitted the two men in 2009), Judge Block wrote in an opinion that the settlement — in which Cioffi will pay $800,000 and Tannin will pay $250,000 and be enjoined from the securities industry for a short period of time — raises legitimate questions about the tools the SEC has to extract meaningful accountability from Wall Streeters who mess up.

He noted that the proposed settlement is a tiny fraction of what investors lost, although some have recovered a portion of their investments through private litigation and arbitration. The settlement “would amount to less than half a percent of the $1.6 billion in investor losses the defendants allegedly precipitated,” Judge Block wrote. “Little wonder that many believe that the SEC is simply not up to the task of enforcing the securities laws.”

The SEC filed 735 enforcement actions in 2011, a record for the agency. It collected $928 million in penalties, almost four times the amount it collected in 2008. Rajaratnam is in jail—though he is appealing—and his case has generated scads of leads, which the SEC continues to pursue. On May 21 a fish even larger than Rajaratnam will appear in court: Rajat Gupta, the senior partner of McKinsey. Gupta, a former director on the board of Goldman Sachs (GS), stands accused by the SEC and the Department of Justice of tipping Raj Rajaratnam about the bank’s inner workings as the financial markets fell apart in 2008. Gupta has pleaded not guilty.

“From 2006 to 2011, Goldman held weekly huddles sometimes attended by sales personnel in which analysts discussed their top short-term trading ideas and traders discussed their views on the markets,” said the SEC in a press release issued earlier this week. “In 2007, Goldman began a program known as the Asymmetric Service Initiative (ASI) in which analysts shared information and trading ideas from the huddles with select clients.”

Insider trading – as we have noted before – is the practice of cashing in on information that is not known to the general public. Although it is not illegal in many other countries, the U.S. takes it very seriously and will jail violators and sometimes ban them from trading. Bigger companies – like Goldman Sachs – will typically pay out large sums in order to avoid such punishment.

Washington, D.C., Feb 1, 2012The Securities and Exchange Commission today charged four former veteran investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC alleges that Credit Suisse’s former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs along with two mortgage bond traders deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books, and send a message to senior management about their group’s profitability. The SEC alleges that the mispricing scheme was driven in part by these investment bankers’ desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse’s investment banking unit.

ryking:

John Boehner is heavily invested in Canadian oil companies which stand to profit handsomely if the Keystone XL pipeline were built.

occupyonline:

CITIGROUP is lucky that Muammar el-Qaddafi was killed when he was. The Libyan leader’s death diverted attention from a lethal article involving Citigroup that deserved more attention because it helps to explain why many average Americans have expressed support for the Occupy Wall Street movement. The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust.

It doesn’t get any more immoral than this. As the Securities and Exchange Commission civil complaint noted, in 2007, Citigroup exercised “significant influence” over choosing $500 million of the $1 billion worth of assets in the deal, and the global bank deliberately chose collateralized debt obligations, or C.D.O.’s, built from mortgage loans almost sure to fail. According to The Wall Street Journal, the S.E.C. complaint quoted one unnamed C.D.O. trader outside Citigroup as describing the portfolio as resembling something your dog leaves on your neighbor’s lawn. “The deal became largely worthless within months of its creation,” The Journal added. “As a result, about 15 hedge funds, investment managers and other firms that invested in the deal lost hundreds of millions of dollars, while Citigroup made $160 million in fees and trading profits.”

liberalsarecool:

The SEC announced Wednesday that Citigroup agreed to pay $285 million to settle charges that it misled (synonyms for that word include deceived; lied to; tricked and defrauded) investors in a mortgage securities deal, telling them it was a good investment when it knew otherwise and was secretly…

The SEC announced yesterday that Citigroup agreed to pay $285 million to settle charges that it misled (synonyms for that word include deceived; lied to; tricke and defrauded) investors in a mortgage securities deal, telling them it was a good investment when it knew otherwise and was secretly betting it would fail.

That’s not just slimy. As the Financial Crisis Inquiry Commission found in other instances, that kind of behavior is also illegal.

Here are five reasons you should be outraged.[…]

…Apparently, the Perrys know all too well the pain of unemployed Americans, because their own son has lost his job. Not just that, but he was made jobless by the Obama administration’s onerous regulations! The conservative nightmare scenario played out right in their own family!

“My son had to resign his job because of federal regulations that Washington has put on us,” Mrs. Perry said while campaigning for her husband in South Carolina, after a voter shared the story of losing his job.

She is speaking of Griffin Perry. Griffin Perry, who worked at Deutsche Bank until recently, when he had to quit in order to work on his father’s presidential campaign.

“He resigned his job two weeks ago because he can’t go out and campaign with his father because of SEC regulations,” she continued, referring to the Securities and Exchange Commission. “He has a wife… he’s trying to start a business. So I can empathize.”

“My son lost his job because of this administration,” she said a few minutes later.

She can relate to the downtrodden because Barack Obama forced her son the banker to quit his job in order to help his father run for president. Griffin Perry is the 53 percent.

Excuse me while I clean the vomit off of my keyboard.

The U.S. Securities and Exchange Commission, trying to encourage employees to report corporate wrong-doing, opened a website today to gather tips as its new bounty program for whistle-blowers officially begins.

The Dodd-Frank Act’s new incentive program, which rewards tipsters with as much as 30 percent of penalties collected, has been operating on an interim basis since the law was enacted last year.

Sean McKessy, chief of the SEC’s whistle-blower office, said in an interview that tip quality — if not volume — has already improved since last year’s enactment. Some recent tips will be eligible for the bounties, he said.

The SEC’s Office of Market Intelligence will do most of the “wheat versus chaff work” to filter incoming tips, McKessy said, noting that the SEC whistle-blower office has just seven staffers. “We just don’t have the resources to read every single one of them.”