The Lizards in
Sightings from The Catbird Seat
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From their website:
Lazard Ltd. began trading on the New York Stock Exchange on May 5, 2005 under the ticker symbol “LAZ”. Lazard, the world’s preeminent advisory investment bank, has offices in 16 countries around the globe.
With origins dating back to 1848, the firm provides services including mergers and acquisitions, asset management, and restructuring to corporations, partnerships, and individuals. Immediately prior to completing its initial public offering, Lazard spun off its Capital Markets and certain of its Merchant Banking businesses.
December 16, 2009
SEC Charges Former Employees of Global Firms in Serial Insider Trading Scheme
FOR IMMEDIATE RELEASE
Washington, D.C., Dec. 16, 2009 — The Securities and Exchange Commission today charged two former employees at major global financial institutions and two of their friends in a serial insider trading scheme to profit on highly confidential merger and acquisition information.
The SEC alleges that Vinayak S. Gowrish, a former associate at multi-billion dollar private equity firm TPG Capital L.P., and Adnan S. Zaman, a former vice president and investment banker at Lazard Frères & Co. LLC, stole confidential information from their firms in connection with five deals and tipped two friends in exchange for kickbacks. Pascal S. Vaghar and Sameer N. Khoury both then traded stock and options on the basis of the nonpublic information and made nearly $500,000 in illicit profits.
According to the SEC's complaint in the case, the illegal tips, trades, and kickback payments were structured to avoid detection. They exchanged illegal tips through coded text messages and yellow sticky notes. Vaghar often wrote checks made payable to himself or cash rather than to Gowrish or Zaman directly so as not to create a paper trail. Vaghar also gave his credit card to Zaman so he could charge purchases of personal items in stores and on the Internet for himself in Vaghar's name. They also attempted to avoid drawing regulatory scrutiny to their illegal activities by deliberately trading relatively small amounts of the targeted securities.
"Confidential deal information is not just another commodity that can be traded for profit," said Robert Khuzami, Director of the SEC's Division of Enforcement. "These financial professionals betrayed their firms and clients to make some easy money with their friends, and they tried to cover their tracks to no avail."
According to the SEC's complaint, filed in U.S. District Court for the Northern District of California, Gowrish misappropriated and illegally tipped material, nonpublic information that TPG was in negotiations to acquire Sabre Holdings Corp., TXU Corp., and Alliance Data Systems Corp. Gowrish illegally tipped this information to Zaman, who then tipped the inside information to Vaghar and Khoury. The SEC further alleges that Zaman misappropriated and illegally tipped material, nonpublic information that Lazard clients were in negotiations to acquire webMethods, Inc. and Myogen, Inc. Zaman tipped the information to Vaghar and Khoury through in-person meetings or by writing trading instructions — including the ticker symbol of the call option (or stock) and the number of contracts (or shares) to purchase — on yellow sticky notes. Coded text messages were used to exchange trading instructions. In exchange for the confidential information, Gowrish received cash kickbacks from Vaghar, and Zaman received kickbacks in the form of cash, free rent, and other items of value from Vaghar and Khoury totaling approximately $70,000.
The SEC's complaint charges each of the four defendants with violating the antifraud provisions of the federal securities laws. Zaman and Vaghar were also charged with violations of Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 thereunder in connection with tipping and trading on material, nonpublic information concerning a tender offer. Zaman, Vaghar, and Sameer Khoury have offered to settle to full injunctive relief and disgorgement, and Zaman has agreed to be permanently barred from associating with any broker or dealer. In addition, Sameer Khoury's brother, Elias Khoury, who is not accused of any wrongdoing, consented to the entry of a final judgment ordering him, as a relief defendant, to disgorge the profits from trades Sameer Khoury executed in his account. The Commission is seeking permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the imposition of financial penalties against Gowrish.
The SEC thanks the U.S. Attorney's Office for the Northern District of California, the Federal Bureau of Investigation, and the Chicago Board Options Exchange, Inc. for their cooperation and assistance in connection with this matter. The SEC also acknowledges the cooperation of Lazard and TPG.
# # #
For more information about this enforcement action, contact:
Scott W. Friestad
Associate Director, SEC's Division of Enforcement
Robert B. Kaplan
Assistant Director, SEC's Division of Enforcement
October 20, 2009
Fees Draw U.S. Trustee’s Ire
In Hawaiian Telcom
By Eric Morath
The Justice Department is questioning why Lazard Freres & Co. is being paid $2,527.38 per hour for its work in Hawaiian Telcom Communications Inc.’s bankruptcy case.
For 237.4 hours of work between April 1 and June 30, the investment bank submitted a bill for $600,000, an amount the U.S. Trustee says “far exceeds” rates charged by other professionals working on the phone company’s Chapter 11 case.
“Simply put, the amount of time Lazard is devoting to this case is not commensurate with its interim compensation,” Acting U.S. Trustee Tiffany Carroll said in papers filed with the Honolulu bankruptcy court.
A Lazard spokeswoman declined to comment.
In February, the court authorized Lazard to serve as Hawaiian Telcom’s financial adviser. Under its deal with the company, Lazard would collect a $200,000 monthly fee that would be offset against a $4 million restructuring fee that advisers are slated to collect at the end of the case.
At the time, Lazard was charged with exploring sale and merger possibilities for Hawaii’s largest phone company. Now that case is headed toward a standalone reorganization, the trustee is asking if Lazard’s services are even necessary.
“The flat monthly rate appears to have contemplated a greater level of participation by Lazard than has actually occurred,” Carroll said.
She also complained the bill was high considering that 46% of the work was done by supposedly lower-paid associates and analysts, and that 45 of the hours billed were for either “travel” or “update” conference calls.
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FOR THE LATEST, FLY TO...
SIGHTINGS FROM THE CATBIRD SEAT
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September 26, 2007
G.M. and Union Reach
By MICHELINE MAYNARD and NICK BUNKLEY
DETROIT, Sept. 26 — The United Automobile Workers union and General Motors reached a landmark agreement early today, ending a two-day strike. The key provision of the new contract is a health care trust that would get G.M.’s massive liability off its books.
The deal was announced by the company and the union in separate statements. The U.A.W. had walked out on G.M. on Monday morning, but production will resume this afternoon....
G.M. said implementation of the trust would be subject to court approval, as well as a review by G.M.’s accounting for the trust by the Securities and Exchange Commission....
“There’s no question this was one of the most complex and difficult bargaining sessions in the history of the G.M./U.A.W. relationship,” Rick Wagoner, G.M.’s chief executive, said in a statement.
U.A.W. leaders are likely to meet on Friday to consider the contract. If approved, it would go to workers for a vote....
G.M.’s key demand was the trust, called a voluntary employee benefit association, or VEBA. The VEBA, which would include the union’s participation, would be the first among the Detroit companies to take full responsibility for coverage for active and retired workers and their families. G.M. estimates that liability at $55 billion.
Similar trusts could soon follow at the Ford Motor Company and Chrysler LLC. They have pushed hard in contract negotiations for the union to agree to form such trusts, maintaining that their so-called legacy costs hinder their ability to compete with Japanese auto companies, whose costs are lower.
All told, the three companies have health care liabilities totaling nearly $100 billion....
A primary concern for U.A.W. leaders, who have seen such funds at other companies run dry, forcing the union to grab concessions so that they could be replenished. Mr. (Ron) Gettelfinger hinted that if this fund runs low, G.M. would make new investments in it. Asked if there was a “backstop” for it, Mr. Gettelfinger said, “I’m not going into details, but I like that word.”
The U.A.W., in turn, was pushing for job security for the workers who remain at G.M. after it completes a restructuring plan. G.M. plans to cut 30,000 jobs and close all or part of a dozen plants by next year....
Once the voting ends, the union will move on to the other car companies, where it traditionally tries to get similar agreements....
Mr. Gettelfinger said the U.A.W. worked closely with G.M.’s chief financial officer, Frederick Henderson, to be sure that the VEBA plan would be "secure." The union also received advice from Lazard Limited as well as actuaries who specialize in such plans....
For more, GO TO > > > GM - Possessed by Legions of Demons
September 11, 2007
NORTHWEST FLIGHT ATTENDANTS OBJECT TO OUTRAGEOUS BANKRUPTCY FEES
Company Attorneys and Consultants seeking Millions More
Washington, DC – Northwest flight attendants, represented by the Association of Flight Attendants-CWA (AFA-CWA), today stood squarely in the path of outrageous enhancement fees demanded by four firms that represented Northwest Airlines during its restructuring.
The firms were demanding millions of dollars in additional fees for services for which they have already been compensated. The Court agreed with the flight attendants’ objection and denied two of the fee applications, delaying until later the hearing on two others.
“If AFA-CWA had not objected today, more millions of dollars of our concessions would have been wasted on these outrageous fees,” said Kevin Griffin, Northwest's AFA-CWA Master Executive Council President.
“Management did not object to these fees, so the money is clearly available. Since they will not have to pay these ridiculous bonuses, we think it is far better spent on returning some of the pay and workrules the Northwest flight attendants have sacrificed.”
The four firms, Cadwalader, Wickersham & Taft LLP; Otterbourg, Steindler, Houston & Rosen, P.C.; FTI Consulting, Inc; and Lazard Freres & Co. have already received tens of millions in fees. The cost of their professional services soaked up a significant portion of the lost wages and benefits for all Northwest employees. Flight attendants alone are working under 40 percent wage and benefit reductions.
The Court recognized that it was the sacrifice of the employees and other factors -- not just the work of these firms -- that helped turn Northwest around. The Court denied the applications from Cadwalader and Otterbourg. The other firms’ applications will be heard at a later date. In so ruling, the Court noted the importance that the process be perceived as a fair one, clearly concerned that these outrageous fees would have diminished the fairness of the entire process.
“This is yet another example of why corporate bankruptcy reform is so badly needed in our country,” said Griffin. “Here is a company that begged and pleaded with its employees to give up their hard earned wages and benefits so that the airline could survive. The greed has to stop and AFA-CWA is working with supporters in Congress to make sure the laws are changed. This cannot continue to be standard practice in corporate bankruptcy cases.”
The hearing on the fee application was held at 11:00 a.m. Tuesday before Judge Alan Gropper of the U.S. Bankruptcy Court for the Southern District of New York. AFA-CWA was joined by the U.S. Trustee and representatives of Northwest’s bondholders in opposition to the fees.
June 28, 2007
UAW May Hire Lazard for Advice In
U.S. Auto Talks, People Say
by Jeff Green And John Lippert/Bloomberg News
The United Auto Workers may hire investment bank Lazard Ltd. to advise the union on health-care concessions in contract talks with U.S. automakers, two people with knowledge of the matter said.
The union told New York-based Lazard to be ready to assist in negotiations that begin next month with General Motors Corp., Ford Motor Co. and DaimlerChrysler AG’s Chrysler, said the people, who asked not to be named because the plans are private.
Lazard advised the UAW in talks in 2005 that led to reduced health-care costs for GM and Ford. Hiring the bank again would signal the union’s willingness to consider significant additional concessions, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan.
“This is definitely a sign that they plan to try and get something done or there wouldn’t be a reason for outside expertise,'’ Virag said. “We’re really entering a new era for the U.S. auto industry.'’
U.S. automakers are seeking union cooperation as they push to close a $25-an-hour gap in U.S. labor costs with Japan’s Toyota Motor Corp. “A level playing field has to be created with the Asian automakers or it will be back to more restructurings and more plant closings,'’ Virag said.
Contract revisions sought by the automakers may include shifting as much as $114 billion in retiree health-care obligations from the companies to an independent fund administered by the union, people familiar with preliminary negotiations said earlier this month.
Lazard would advise on establishing the fund, one of the people familiar with the matter said. Roger Kerson, a spokesman for the Detroit-based union, declined to comment. Barry Ridings, a restructuring executive at Lazard, declined to comment.
The UAW turned to Lazard in July 2005 to assess whether the union should support health-care concessions sought by GM and Ford. The mid-contract agreement that resulted eventually helped cut GM’s retiree medical obligations 21 percent last year and trimmed $5 billion from those liabilities at Ford.
Lazard also aided the UAW in a review of options before last week’s agreement with GM and Delphi Corp. that included wage cuts in exchange for buyouts and other payments, people familiar with those talks said. Delphi workers are set to vote this week on that plan, which would help the parts supplier exit bankruptcy later this year.
GM has made a health-care fund its top priority in the UAW talks, people familiar with the plans said. The funds are seeded with an initial investment by the automakers, with returns from that used to pay health-care benefits.
The idea was inspired by a plan at Goodyear Tire & Rubber Co., which had a $1.3 billion health-care liability for United Steelworkers retirees, the people said. The tiremaker and the union agreed in December to set up a health-care trust fund with a one-time $1 billion payment in cash and stock.
After the payment, Akron, Ohio-based Goodyear will have no further health-care obligation to current or future union retirees. The accord came after an 85-day strike.
The UAW is willing to consider a health-care fund, one of the people familiar with the matter said earlier this month.
GM, Ford and Chrysler are trying to pare health-care expenses that totaled a combined $12 billion in 2006, according to GM Chief Executive Officer Rick Wagoner.
Providing health care to 2 million employees, retirees and dependents contributed to combined 2006 losses of more than $15 billion at the U.S. automakers. Toyota, Honda Motor Co. and Nissan Motor Co. earned a collective $23 billion.
After the 2005 Lazard review, GM, Ford and the UAW last year agreed to a court settlement that for the first time required union retirees to pay part of their health-care costs. GM, based in Detroit, and Ford, based in Dearborn, Michigan, also pledged not to alter the retiree health-care benefits until after 2011 without union consent.
That settlement, as well as benefit reductions for salaried workers, helped GM cut retiree health-care liabilities to $64 billion at the end of last year. Ford had retiree obligations of $31 billion, and the potential future tab of Auburn Hills, Michigan-based Chrysler was about $19 billion.
Achieving Toyota’s level of fixed costs would imply total reductions of $10.1 billion for GM and $9.3 billion for Ford, Rod Lache, a Deutsche Bank analyst based in New York, wrote in a June 15 report. He rates shares of both U.S. automakers as “buy.'’
“Restructuring retiree health-care costs will represent a key part of any plan to close this gap, and that this will have meaningful implications for valuation and competitiveness,'’ Lache wrote.
June 30, 2006
WHO IS BANKRUPTING AMERICA?
Felix Rohatyn’s “al-Qaeda” Destroyed American Industry
by EIR Staff
What international investment bank has consulted in the disappearance of every formerly major American steel company?
Felix Rohatyn’s Lazard Freres.
What investment bank set up the infamous United Airlines employee ownership plan of 1994 – which lost each employee’s every dollar of stock – and had “consulted,” altogether, seven major airlines into bankruptcy and/or liquidation?
What investment bank put together the mergers that created, and then advised, the monster Enron?
What investment bank has been the strategic advisor to each of the big auto supply companies with has gone into bankruptcy; has advised both GM/Ford and the UAW on the ongoing shutdowns of auto plants and jobs; and developed the strategic bankruptcy plan for Delphi Corp., the worst industrial outsourcing in U.S. corporate history?
Rohatyn’s Lazard Freres, again.
And, in the case of the Delphi outsourcing plan, the crime was done by Felix Rohatyn personally.
But don’t get the idea that this is a project by one greedy individual. Rohatyn himself is simply the front-man for a tightly-knit network of private financier institutions – investment houses, commercial banks, and their allied law firms and consulting firms – that have systematically moved to shut down the entire industrial base of the United States over the past 30 years, and have now nearly succeeded in wiping it out altogether.
They have implemented globalization-through-fraud, taking advantage of a corrupt rewriting of America’s bankruptcy laws, which, in effect, hands life-or-death decision-making power over to this financial cartel, and a new generation of thieves they’ve created, like Delphi Chief Steve Miller, and “former” Rothschild agent Wilber Ross.
In effect, what has occured is a foreign take-down of the United States, led by an international Synarchist network which has always hated the United States, and set out to destroy the legacy of Franklin Delano Roosevelt as soon as his heart stopped beating in 1945....
The Rohatyn Record
Like an alQaeda of Wall Street, Felix Rohatyn’s investment banks and their network of partners have closed and destroyed more factories, firehouses, and police stations in the past 35 years than terrorists have ever dreamed of – while adopting the pose of Democratic Party funders, and friends and advisors to labor unions.
Ever since taking control of New York City in 1974 and shrinking its municipal services by 25-40%, and taking hold of its unions’ pension funds to pay out to its bank creditors, Felix Rohatyn has claimed that this looting job was a model for all of industrial America. ... With partners and proteges pulled out of the socialist labor movement and made into bankers, this leading synarchist fascist has made Lazard and his own Rohatyn Associates bank, the top deindustrializers of America...
AIRLINES AND AEROSPACE
Overall results: Aerospace employment in the United States fell from a peak of 900,000 during the late 1980s to 550,000 now, a 40% drop; 60 million square feet of aerospace/defense capacity was shut down from 1990-97 alone, and its machinery sold off at auctions.
The Case of Joshua Gotbaum
During the 1980s, there were about 20 prime military contractors, and more than 130,000 scientists and engineers working on aerospace research and development, according to the Aerospace Industries Association. With the end of the Cold War as the pretext, there took place a drastic downsizing of both the high-technology, machine-tool-rich defense/aerospace industry and U.S. military forces, initiated by Dick Cheney, when he was Secretary of Defense from 1989 through January 1993.
Today, there are only five major prime military contractors, and only about 30,000 scientists and engineers working on aerospace R&D.
In the mid-1990s, the downsizing and dismantling of the defense/aerospace sector was led by the little-known Joshua Gotbaum, a protege of Frlix Rohatyn at Lazard Freres, and the son of New York City labor leader Victor Gotbaum, himself a close collaborator with Rohatyn in the razing of New York City public services in the 1970s under “Big MAC” – the bankers’ Municipal Assistance Corporation.
During 1975-82, Rohatyn, with the indispensable cooperation of the senior Gotbaum, brutally cut vital public services – fire, police, hospitals., and transit – by 15% to 40%, driving out much of the city’s poorer population in the process. As a reward for his father’s collaboration, Joshua Gotbaum was made a banker by Lazard Freres in 1981. By 1990 he was a general partner, and was entrusted to serve as the Managing Director of Lazard’s London office from 1989-92.
In 1994, Joshua Gotbaum was suddenly named to a newly created Pentagon position, assistant Secretary of Defense for Economic Security, with a 260-person staff and considerable powers. At a time when defense expenditures were being slashed, Gotbaum applied pressure to shut down aerospace factories. During the 1990s, more that 250,000 aerospace production workers were axed, and more than one-third of the aerospace sector was liquidated in the process of “consolidation.” With it, went much of the industry’s irreplaceable advanced machine-tool capacity....
Gotbaum also pushed to implement Cheney’s 1992-initiated policy of outsourcing and privatizing military functions....
Airlines Shot Out of the Sky
Closely related to the aerospace industry, is the commercial airline sector, whose destruction was also crafted and facilitated by Lazard Freres and Joshua Gotbaum.
Listen to the description in the Jan 7, 2004 Honolulu Star-Bulletin: “Gotbaum was an investment banker with Lazard Freres & Co., in New York and London, providing advice to airlines on mergers, acquisitions, bankruptcies, and restructuring. He consulted with Eastern, Braniff, Pan American, British Airways and Air France.”
This is quite a record: Eastern, Braniff, and Pan American each went bankrupt and was eventually liquidated.
In addition, in 2003 Gotbaum was appointed the operating Trustee for Hawaiian Airlines, after it filed for reorganization under Chapter 11. His was an extremely rare position; normally, the existing management continues to operate a company (as “debtor-in-possession”) in a Chapter 11. Hawaiian was not bankrupt; its reason for filing bankruptcy was to force concessions from its employee unions and to renegotiate it aircraft leases with Boeing. The head of the Air Lines Pilots Association correctly called it a “sham bankruptcy.”
The outcome, for which Gotbaum demanded almost $10 million in fees, was that 2) creditors got paid in full (very unusual); 2) shareholders saw their stock actually increase in value, instead of being wiped out, as is normal; 3) employees made concessions and give-backs in wages, benefits, and work-rules; and 4) pilots had their pensions frozen and revamped.
That’s only part of the picture. Overall, there were at least nine airlines to which Lazard and Gotbaum were consultants. Seven of the nine ended up in bankruptcy, most of which included “restructuring” consulting by Lazard....
Read the complete article at: www.kycbs.net/Bankrupting-America.pdf
April 19, 2005
General Motors Getting
Eaten Alive by a Free Lunch
By Allan Sloan, Washington Post
A free lunch can be the most expensive meal in the world. For living proof, look at General Motors. A big reason that GM has gotten into such trouble is that the pension and health care commitments it made to employees decades ago seemed to be a free lunch.
The United Autoworkers placed a high value on these benefits, but the accounting rules of the time placed no cost on GM's risk of providing them. So the UAW and GM made deals that were heavy on benefits, relatively light on wages.
Lower salaries meant that GM reported higher profits, which translated into higher stock prices -- and higher bonuses for executives. Commitments for pensions and "other post-employment benefits" -- known as OPEB in the accounting biz -- had little initial impact on GM's profit statement and didn't count as obligations on its balance sheet. So why not keep employees happy with generous benefits? It was a free lunch. Besides, GM's only major competitors at the time, Ford and Chrysler, were making similar deals.
Now, as we all can see, pension and health care obligations are eating GM alive. The bill for the "free" lunch has come in -- and GM is having trouble paying the tab. In the past two years, GM has put almost $30 billion into its pension funds and a trust to cover its OPEB obligations. Yet these accounts are still a combined $54 billion underwater.
"Any market economist would tell you that things that are 'free' are overconsumed," says Greg Taxin, chief executive of Glass, Lewis & Co. "That's true of pensions, it's true of OPEB, and it's true of stock options in the '90s." That's a lesson the SEC seems to have ignored, given last week's decision to let companies delay counting the value of options as an expense....
GM began its slide down the slippery slope in 1950, when it began picking up costs for medical insurance, pensions and retiree benefits. There was huge risk to GM in taking on these obligations -- but that didn't show up as a cost or balance-sheet liability. By 1973, the UAW says, GM was paying the entire health insurance bill for its employees, survivors and retirees, and had agreed to "30 and out" early retirement that granted workers full pensions after 30 years on the job, regardless of age.
These problems began to surface about 15 years ago because regulators changed the accounting rules. In 1992, GM says, it took a $20 billion non-cash charge to recognize pension obligations. Evolving rules then put OPEB on the balance sheet. Now, these obligations -- call it a combined $170 billion for U.S. operations -- are fully visible. And out-of-pocket costs for health care are eating GM alive.
GM spokesman Jerry Dubrowski says the company expects to pay $5.6 billion in health care costs this year for 1.1 million people covered by its plans. That's up from the $3.9 billion it shelled out in 2001 to cover 1.2 million people.
"At the time GM began offering these benefits, no one had any idea that the costs for prescription drugs and medical services would explode the way they have," Dubrowski said. True. But the UAW was astute (or lucky) enough to push the risk of covering these costs onto GM.
GM's pension funds are in pretty good shape, thanks to an $18.5 billion infusion two years ago. GM got this cash by selling bonds at relatively low rates, hoping to resolve its pension problems once and for all. This maneuver has been successful so far, but funding the pension plans has consumed much of GM's borrowing power and strained its balance sheet.
At the end of last year, GM says, its U.S. pension funds showed a $3 billion surplus. GM's pension accounting, which assumes that the funds will earn an average of 9 percent a year on their assets, is highly optimistic. But things are under control -- as long as GM stays solvent.
By contrast, OPEB is out of control. At year-end, OPEB was $57 billion in the hole, even though GM threw $9 billion into an OPEB trust in 2004. The company has no legal obligation to pre-fund these costs, but it's trying to show the financial markets and its workers that it's dealing with them. The OPEB trust has a hefty $20 billion of assets -- but GM calculates its obligations at a staggering $77 billion.
What's more, GM says they're rising at 10.5 percent a year. Thus, even though President Bush's Medicare prescription drug benefit whacked $4 billion off GM's OPEB obligation last year -- thanks, George -- it covered barely half the year's increase in the liability.
If GM were making lots of money selling vehicles, this would all be manageable, sort of. GM could buy enough time for demographics to bail it out, as more retirees begin getting Social Security and Medicare, reducing GM's costs, and other retirees die off. Its ratio of retirees to workers, currently 2.5 to 1, would shrink. Alas, GM's vehicle business is in the tank. Unless GM starts making money on vehicles or gets a break from the UAW or the federal government, things are going to get really ugly. I hope that doesn't happen, but it easily could.
The bottom line: Whenever you offer someone a free lunch, make sure that you'll be able to pay the bill when it comes in.
Sloan is Newsweek's Wall Street editor. His e-mail address is email@example.com.
< < < FLASHBACK < < <
August 9, 1996
Investment adviser guilty in
fraud and corruption trial
BOSTON - A former partner at Lazard Freres & Co. was convicted on fraud charges Friday in the government’s biggest victory yet as it cracks down on unethical dealings in the $1.2 trillion municipal bond market.
Investment adviser Mark Ferber likely faces five years I prison on 58 counts of fraud and corruption for not disclosing to his government clients that Merrill Lynch paid him an $800,000 retainer to direct business its way.
Those who police the municipal bond market – which raises money to build public facilities such as highways, schools and sewage treatment plants – said Ferber’s case represented a betrayal of the public trust.
“We all depend on the government process being fair and impartial,” said federal prosecutor Brien T. O’Connor. “Here, it was infected.”...
Prosecutors argued during the 38-day trial that Ferber violated his duty to give unbiased financial advice to this government clients by taking the secret fees from Merrill Lynch.
Those clients included the U.S. Postal Service, the District of Columbia, Michigan’s Transportation Department and the Massachusetts Water Resources Authority, which eventually hired Merrill Lynch as its lead broker in the sale of $800 million worth of bonds to finance the Boston Harbor cleanup.
As a former partner at Lazard Freres, Ferber also consulted with government agencies on how best to issue bonds. Ferber helped arrange interest rate swaps for the Massachusetts Water Resources Authority through Merrill Lynch, with Lazard and Merrill Lynch agreeing to split any fees from these complex swaps....
Merrill Lynch and Lazard Freres paid a total of $24 million in fines and restitution in October 1995, the largest settlement of its kind, to resolve charges that they failed to ensure full disclosure of Ferber’s conflicting contracts. The companies admitted no wrongdoing....
Denver International Airport Bondholder Lawsuit
In 1997 five underwriting firms - Lehman Brothers, Goldman Sachs, Dain Bosworth, Piper Jaffray and Lazard Freres - agreed to to settle four class action lawsuits that had been brought by holders of $4.9 billion in bonds issued for Denver International Airport.
The plaintiffs had charged that the defendants knew about but failed to disclose construction problems that led to cost overrruns and an 18-month delay in opening.
The settlement, the amount of which was not disclosed, came after the U.S. Supreme Court rejected arguments that municipal issuers should be shielded from being sued under federal law.
Dec 4, 1997
Former Clinton Fund-Raiser
Indicted in Bribery Case
ATLANTA - The top fund-raiser in Georgia for Bill Clinton’s 1992 election campaign was indicted Wednesday on charges that he took a bribe to help a Wall Street investment company gain an estimated $500 million in bond business.
Former Fulton County financial advisor Michael deVegter was accused of conspiracy and wire fraud, stemming from his alleged acceptance of a $41,916 bribe from Lazard Freres & Co. in return for his help in gaining the firm an unfair advantage in the county’s bond business.
At the time, deVegter also served as vice president in the Atlanta office of Stephens Inc., a Little Rock, Ark.-based firm whose owners, in an unrelated transaction, helped arrange a $3.5 million credit line for Clinton’s 1992 campaign.
Also indicted was Richard Poirier Jr., a former Lazard Freres partner. Both men deny the charges.
DeVegter was chosen as Fulton County’s financial advisor in June 1992, according to the indictment, at the same time the county was deciding whether to refinance its water and sewer bonds to get a lower interest rate.
In July 1992, deVegter made a deal with Poirier and another Lazard Freres executive, James Eaton, under which he would accept the bribe money in exchange for funneling the bond business to the firm, the indictment alleges.
Lazard Freres refinanced $163.4 million in bonds for the county in November 1992. Later that year, the investment firm also refinance $336 million bonds for Grady Memorial Hospital, where deVegter was also a financial advisor.
Last month a bribery lawsuit against deVegter was filed with the Securities Exchange Commission.
Lazard Freres has agreed to a $12 million settlement to the civil charges of defrauding the county and investors in three municipal bond sales. The U.S. attorney’ office announced that no charges are planned against the investment bank.
For more on the Clinton-Wall Street connection, GO TO > > > Black Berets...Red China; Dirty Gold in Goldman Sachs; The Donkey Nests; The Indonesian Connection; The Nests of Osama bin Laden
April 22, 1999
Lazard Whistleblower settles federal
yield-burning case for $11 million
Lazard Freres & Co. has agreed to pay the federal government a total of $11 million to settle allegations that the firm improperly overcharged municipalities for U.S. Treasury securities, a practice known as “yield-burning.”
With the resolution of this case, Lazard will have paid a total of $20 million in the past six months to settle yield-burning charges.
“This is a significant milestone in the government’s enforcement action against yield-burning,” said Erika A. Kelton, a Washington, D.C., attorney whose firm, Phillips & Cohen, represents the whistleblower in this case. “The settlement establishes a framework for setting similar yield-burning charges pending against other Wall Street investment banks.
The federal investigation of illegal yield-burning practices has dogged many banks for several years. The investigation was sparked by Michael Lissack, a former managing director of Smith Barney, who first brought public attention to the fraud perpetrated by Wall Street and filed the “qui tam” lawsuit against Lazard that resulted in today’s settlement....
Yield burning occurs when banks improperly inflate the price of securities above their fair market value. The inflated price improperly lowers, i.e., “burns,” the securities’ yield. The practice is prohibited by federal law....
“Deal by deal, year after year, Wall Street raked in hundreds of millions in improper profits,” Kelton said....
Dec 17, 2004
Lazard Files for $850 Million IPO
After a prolonged battle among its top executives, Lazard filed with the Securities and Exchange Commission to sell as much as $850 million in stock of the investment bank....
Reflecting Lazard’s pedigree, the deal’s underwriters include the top firms on Wall Street: Goldman Sachs, Citigroup, Merrill Lynch, Morgan Stanley, Credit Suisse First Boston, and J.P. Morgan, as well as Lazard subsidiary Lazard Freres....
June 16, 2005
Lerach Coughlin Stola ... LLP Files Class Action Suit
against Lazard Ltd. and Goldman Sachs & Co. in
Connection with Lazard’s Initial Public Offering
Lerach Coughlin Stola Geilier Rudman & Robbins LLP today announced that a class action lawsuit has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of Lazard Ltd. publically- traded securities who purchased such securities pursuant and/or traceable to the Company’s false and misleading Registration Statement and Prospectus issued in connection with the initial public offering of Lazard shares, together with those who purchased their shares in the open market between May 4, 2005 and May 12, 2005 inclusive....
Lazard is a financial advisory and asset management firm. The complaint alleges that Lazard, Goldman Sachs & Co. (the lead underwriter of the IPO), and certain of the Company’s officers and directors violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by issuing a materially false and misleading Registration and Prospectus in connection with the Company’s IPO, which was priced at $25 per share, and continuing to conceal material facts about the true value of the Company’s stock price after the stock began to trade on the open market.
Specifically, the complaint alleges that the Registration Statement/Prospectus failed to disclose, among other things, that (a) the basis for the $25 price for shares sold in the IPO was to enable defendant Bruce Wasserstein (the Company’s Chief Executive Officer) to raise sufficient funds to gain control of the Company from Michel David Weill, a cousin of the Company’s founders ...
On May 12, 2005, only days after the IPO, and right after Goldman stopped buying back the Company’s shares, the price of the Company’s shares plunged from $25 per share to less that $21 per share....
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(Catbird Note: For some poop on another former Lazard Freres player, Joshua Gotbaum, GO TO > > > Hawaiian Airlines: Flying with the Bankruptcy Buzzards; Office of U.S. Trustee vs. Harmon: Witness Joshua Gotbaum; The Eagle Hooded: The 9-11 Coverup.)
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Jun. 22, 1987
Making Oodles of Boodle
Wall Street has generated plenty of scandal in the past year, but it has been even better at cranking out rewards for canny investors. In its second annual listing of the financial community's biggest moneymakers, the biweekly FinancialWorld heavily underlined that fact. The top ten names on the magazine's list of 100 superstars earned an average of $68.8 million each in 1986, up from $51.1 million in 1985.
At the very top of the list was Michel David-Weill, 54, a senior partner at the Manhattan-based Lazard Freres investment firm. According to FinancialWorld, David-Weill earned an estimated $125 million last year. He had pulled down only an estimated $50 million in 1985. (Lazard Freres disputes the 1986 FinancialWorld figure, arguing that David-Weill earned only somewhere between $65 million and $75 million last year.)
Ranked just below David-Weill on the FinancialWorld roster were such eminences as George Soros, 56, president of Manhattan's Soros Fund Management ($90 million to $100 million); Richard Dennis, 38, a partner in Chicago- based C&D Commodities ($80 million); and Junk Bond King Michael Milken, 40, senior executive vice president of the Drexel Burnham Lambert investment firm (up to $80 million). Not far behind, at $65 million or so, was J. Morton Davis, 58, chairman and president of D.H. Blair, a Manhattan investment bank that specializes in stock offerings for health-care firms.
Sharing equally in their firm's good fortunes this year were three partners of the San Francisco- and Manhattan-based investment firm of Kohlberg Kravis Roberts. Masters of the so-called leveraged buyout, Jerome Kohlberg, 62, Henry Kravis, 43, and George Roberts, 44, each earned $50 million. Neck and neck were former Treasury Secretary William Simon, 59, chairman of Wesray Capital in Morristown, N.J., an investment firm, and Raymond Chambers, 44, president of that company. They pulled down an estimated $45 million to $50 million each.
Absent from FinancialWorld's list this year was 1985's top money earner, Arbitrager Ivan Boesky. The man who reportedly made $100 million that year awaits sentencing on charges related to his insider-trading activities.
# # #
THE SEC: GARBAGE IN ... GARBAGE OUT!
For more Wall Street Vulture Capitalists
AIG: THE UN-AMERICAN INSURANCE GROUP
ALLIED WORLD ASSURANCE
ALOHA, HARKEN ENERGY!
THE BANKRUPTCY BUZZARDS
BEWARE! THIS BULL IS FOR THE BIRDS!
BIRDS IN THE LOBBY
BIRDS THAT DRINK FROM CESSPOOLS
THE BLACKSTONE GROUP
THE BRIBES & BOONDOGGLES OF BOEING
THE CHUBB GROUP
CONFESSIONS OF A WHISTLEBLOWER
A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
DIRTY GOLD IN GOLDMAN SACHS
* * *
THE EAGLE HOODED: THE 9-11 COVERUP
PART I - PART II - PART III
* * *
G.M.: POSSESSED BY LEGIONS OF DEMONS
MARSH & McLENNAN: THE MARSH BIRDS
MARSH & McLENNAN’S MERCER CONSULTING
MARSH & McLENNAN’S PUTNAM INVESTMENTS
NESTS ALONG WALL STREET
NESTS IN THE PENTAGON
NESTS OF THE INSURANCE VAMPIRES
PRUDENTIAL: A NEST ON SHAKY GROUND
P-S-S-T, WANNA BUY A GOOD AUDIT?
THE ACCOUNTANTS’ HOEDOWN
THE GREAT NEST EGG ROBBERIES
THE OFFICE OF THE U.S. TRUSTEE VS HARMON
THE STORY OF ENRON
TINKERING WITH eTOYS
TRACKING THE TYCO FLOCK
VAMPIRES IN THE CITY
VULTURES IN THE MEADOWS
THE VULTURES OF ORANGE COUNTY
WHAT PRICE WATERHOUSE?
WHO IS BANKRUPTING AMERICA?
THE XEROX CONSPIRACY
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Originally posted July 28, 2006
Last Updated December 16, 2009, by The Catbird