Nests Along
Wall Street

~ PART II ~


 

Sightings from The Catbird Seat

~ o ~

“I spent 33 years in the Marines. Most of my time being a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer for capitalism. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenue in. I helped in the rape of half a dozen Central American republics for the benefit of Wall Street.”

— U.S. Marine Corps Major General Smedley D. Butler, in Common Sense, Nov, 1935.

~ ~ ~

NOW, FOR A CLOSER LOOK AT SOME OF THOSE “GILDED CAGES”...

TAKE A WALK DOWN
WALL STREET

A - B - C - D - E - F - G - H - I - J - K - L - M

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Adelphia Communications Corporation - The cable guys.

Adelphia is filing for Chapter 11

By Deborah Solomon, The Wall Street Journal

NEW YORK, June 25, 2002 —— Adelphia Communications Corp. is in the process of filing for bankruptcy court protection in New York, according to people familiar with situation....

THE BANKRUPTCY FILING, which had been expected for about a week, was preceded late last week by a deal that gave Adelphia financing of as much as $1.5 billion to allow it to continue operating.

The lender banks, which include J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America Corp., granted $500 million immediately and planned to approve the remaining $1 billion contingent on preparation of an acceptable business plan....

Adelphia is the target of a Securities and Exchange Commission accounting probe, and two federal grand-jury investigations into multibillion dollar off-balance-sheet loans given to the Rigas family.

The family has relinquished control of Adelphia’s board, and new directors disclosed that Adelphia’s cash flow, revenue and subscriber figures had been overstated.

The new management team also disclosed a web of dealing that included $2.45 billion in company-backed loans....


 

American Express - The credit card company and, according to some reports, a major money-laundering machine.

From Conspirators’ Hierarchy: . . . Others on the board of Xerox are Howard Clark of the American Express Company, one of the main conduits for moving drug money through “travelers checks” . . .

* * *

From The Laundrymen: . . . Over the years, the Justice Department has become more adroit at digging deeper into a bank’s affairs and rooting out the laundrymen . . .

At the end of 1994, the government’s wrath was directed at the American Express Bank International, after two of its senior officers were indicted in Houston for helping to wash $40 million belonging to Mexican drug trafficker Juan Garcia Abrego. . . .

A Mexican gas station owner named Ricardo Aguirre Villagomez ... was Abrego’s primary laundryman. Under Villagomez’s supervision, drug money collected on the streets of Texas was sent through exchange houses and banks along the Mexican border to Switzerland.

From there is was wired to a holding company in the Cayman Islands established for Villagomez by Antonio Giraldi and Maria Lourdes Reategui at the Beverly Hills branch of AMEX. Some of his money was invested in a Blockbuster Video franchise . . .

But the lion’s share went into American real estate. Giraldi and Reategui accepted $29 million as collateral for $19 million worth of property loans, reputedly making Villagomez the bank’s biggest customer — at least until U.S. Customs identified and froze the funds in the Caymans.

Giraldi and Reategui both pleaded not guilty to several charges, including money laundering, but a Brownsville, Texas jury found otherwise. He was sentenced to 10 years, and she got 3 ½.

The government then went after the bank, fining it $7 million.

American Express Bank International also had to forfeit $40 million of Villagomez’s laundered money and assets, and was obliged to spend $3 million on employee training. . . .


 

American Financial GroupFrom The Buying of the President: . . . Finally, we come to the No. 3 soft-money patron of the Republican party in the 1990s.

What would it take to get the U.S. government to go to bat for your company before an international trade organization even if there were virtually no American jobs at stake? Only about $4.5 million and some friends in high places.

Don’t believe us? Ask Carl Lindner, the founder of American Financial Group, Inc., a holding company specializing in insurance that in 1998 posted more than $4 billion in revenue. Lindner’s company and family have been among the biggest political donors ever, giving more than $1 million in soft money to the Democratic party and nearly $3.5 million to the Republican Party from 1991 through June 1999. . . .

Lindner’s biggest coup came in May 1999, when the World Trade Organization ruled in favor of the United States and several Latin American countries that had brought a complaint against the European Union for unfair tariffs on bananas.

In mid-1993, when the European Union imposed a tariff on bananas not coming from former European colonies in the Caribbean, Lindner’s Latin American-based Chiquita felt the crunch.

He immediately turned to the U.S. government for help, even though 39,000 of Chiquita’s 45,000 employees are in Latin America.

Linder met with then-U.S. Trade Representative Michael Kantor on Jan 13, 1994 to discuss the issue ... In August 1994, Dole and 11 other Senators urged Kantor to intervene and on Nov 17 Dole, Gingrich, and House Democratic Leader Richard Gephardt wrote to the President asking for similar assistance. . . .

By April 1996, Kantor announced that he would bring the U.S.— that is, Lindner’s — case before the World Trade Organization. In May 1999, the WTO awarded the United States more than $190 million in punitive tariffs based on European violations of free-trade principles.

Lindner’s money had bought him access, and the access had bought him action. . . .

See also: Carl Lindner


 

American International Group - From The Washington Weekly, Mar. 17, 1997:

THE BARBADOS CONNECTION -- CORAL REINSURANCE

The link between the Arkansas Development Finance Authority (ADFA) and AIG goes beyond $5 million. An AIG affiliate has managed over one billion dollars worth of ADFA’s bonds, according to the Arkansas Democrat Gazette. An allegation that ADFA launders money for U.S. intelligence has repeatedly surfaced but without any direct documentary evidence to date . . . .

Apart from ADFA, where does AIG get its money to fund, among other things, lobbying on behalf of the Chinese government? The answer is not clear, though some indications are available.

(1) In 1995, AIG became the first company to be licensed to sell insurance in China.

(2) AIG is a client of Kissinger & Associates. It was Henry Kissinger, the former Secretary of State, who advised against harsh sanctions after the Tienanmen Square massacre....

(3) AIG has also been the focus of SEC and BCCI investigator, Manhattan DA Robert Morgenthau’s attention . . . to explore its ties to the BCCI.

(4) And finally, AIG is headed by Maurice Greenberg, one-time chairman of the NY Federal Reserve Bank, and in 1995 a candidate to head the CIA.

Greenberg is chairman of the US-China Business Council and lobbied hard (and successfully) for the Clinton administration to sever the link between China’s human rights record and renewal of China’s Most-Favored-Nation trade status.~ ~ ~

Whatever AIG is, it appears to be tied into that big, bipartisan, ugly network of intelligence, money laundering, Arkansas, and Communist China.

~ ~ ~

For much more, GO TO > > > AIG: The American Idol of Greed


 

Allied World Assurance Company - The new baby vulture on the block. Watch it grow!

November 27, 2001

AIG, Chubb, And GS Capital Partners 2000 Announce Formation Of New Bermuda-Based Insurance And Reinsurance Company

NEW YORK--(BUSINESS WIRE)--Nov. 26, 2001-- American International Group, Inc. (AIG), The Chubb Corporation (Chubb) and GS Capital Partners 2000, L.P. (GSCP), an investment fund managed by Goldman, Sachs & Co., announce the formation of Allied World Assurance Holdings, Ltd (Holdings) and its wholly owned subsidiary, Allied World Assurance Company, Ltd (AWAC), an operating company organized to underwrite, from Bermuda, insurance and reinsurance business worldwide....


 

American Continental Corp. - Fraudulent forerunner to Enron.

From http://www.dcia.com/settlement.html

BILLIONS WON BY INVESTORS

The Arizona Republic

Damages and out of court settlements won by investors in Charles H. Keating Jr.'s American Continental Corp. who filed a $1.2 billion fraud and racketeering lawsuit in U.S. District Court in Tucson:

DAMAGES AWARDED BY JURY:

Defendants will share in a judgement of $1.8 billion in compensatory damages returned by a jury Friday against:

Charles Keating, former chairman of American Continental, who also owes $1.5 billion in punitive damages.

~ ~ ~

Editor's note: Now that really sounds wonderful but what does it mean? Since Keating says he is broke that $1.5 billion just disappears from the equation. Now there is just chicken feed left for the investors. This headline is a lie. Notice (buried at the very end of the article!) the amount Michael Milken had to pay and remember he was making $550 million per year when he was stopped. That is what it means to have attorneys like the Dershewitz brothers, Melvin McDonald, and John Dowd. I can think of about 200 million people who would think serving a few years in the pen and keeping all that loot was a pretty good deal!!

~ ~ ~

Saudi European Investment Corp. of Paris, was a financial partner.

Conley Wolfswinkel of Tempe, was a borrower from Lincoln Savings and Loan Association, an American Continental subsidiary.

Continental Southern Inc., Atlanta, was a Lincoln borrower.

SETTLEMENTS REACHED

Former executives of American Continental and Lincoln Savings, $4.75 million.

Law firms and individual lawyers

Jones, Day, Revis & Pogue, Cleveland: helped Lincoln prepare for a 1986 federal examination, $24 million.

Kaye, Scholer, Fierman, Hays & Handler, New York: represented Lincoln in its disputes with federal regulators, $20 million.

Parker, Miliken, Clark, O'Hara & Samuelian, Los Angeles: worked with American Continental's Lincoln subsidiary in connection with investigations by California regulators, $5.65 million

Sidley & Austin, Chicago: represented Lincoln in dealings with federal regulators, $4 million.

Mariscal, Weeks McIntyre & Freidlander, Phoenix: represented Lincoln in dealings with federal regulators, particularly in disputes over appraisals of properties, including the Phoenician Resort, $2 million.

Barbara Thomas, New York, $90,000.

Accountants

Arthur Young & Co. (succeeded by Ernst& Young); audited Lincoln and Continental's financial statements for 1986 and 1987, $63 million.

Arthur Anderson & Co.: audited Lincoln and American Continental's financial statements for 1984 and 1985, $22.8 million.

Touche, Ross & Co.: audited Lincoln and American Continental from November 1988 until April 1989, $7.5 million, plus $1 million in services for accounting and distribution of payments to investors.

Lincoln borrowers

MDC Holdings, Denver, $1 Million

Isaac Heimbinder, US Homes president, Houston, $1 million.

C.V. Nalley, Atlanta, $750,000

Lee H. Henkel Jr., Atlanta, $100,000

E.C. Garcia & Co., Phoenix $90,000

Others

Offerman & Co., Minneapolis, investment bankers, $1.5 million.

Lexecon Inc., Chicago Financial Consultant, $1 million in services for investors.

Jeffery C. Patch, PHX, appraiser, $500, 000

Richard Fenn, former vice chairman of Saudi European Investment Corp. a financial partner, $16,000

ANTICIPATED SETTLEMENTS

Drexel Burnham Lambert Inc. Investment bankers, $40 to $50 million

Michael Milken, former head of junk bond sales for Drexel, $35 million to $50 million.

Emerald Homes, PHX, Lincoln borrower, $200,000

* * *

See also: Charles Keating

For more on Lee H. Henkel and the Kamehameha Schools Scandals, GO TO > > > Dirty Money, Dirty Politics & Bishop Estate


 

Amway Corp. - The world’s largest multi-level marketing sales conglomerate.

December 7, 2004

Bush + Republicans + Amway = Fraud

Former Amway insider, Eric Scheibeler, has written a must read new book called “Merchants Of Deception.” This one time member of the Amway motivational cult has turned whistleblower and FBI witness and boy does he have some tales to tell.

In the book, Scheibeler exposes an Enron sized fraud with Amway raking in billions of dollars annually, and the billionaire founding families being the largest soft money contributors to the GOP, with funds that have been generated from what may turn out to be one of the largest consumer fraud scandals in history, perpetrated by the world’s largest multi-level marketing company (MLM).

The former Federal Auditor also has a website, www.merchantsofdeception.com, that reveals the close ties between Amway and Republicans.

As a life long conservative, Scheibeler was discouraged to both discover and document that “the GOP seems to have been hijacked by political payoffs from an industry that is rife with consumer deception, and bogus ‘business opportunity’ selling. He goes on to say that it’s “time this secret influence peddling and the harm it causes consumers and our democracy are revealed. I was on the inside for nine years. I saw it with my own eyes. I also have the internal documents, financials, and the audio and video tapes to prove it.”...

Scheibeler & Dateline Team Up In Sting Operation

In addition to writing a book and setting up a web site, Scheibeler provided key documentation for the May 7, 2004, NBC Dateline program that televised an expose of the secretive and illegal pyramid business run by Amway & Quixtar kingpins.

During its investigation, Dateline smuggled hidden cameras into recruitment meetings in order to document the company’s deceptive claims and promises, and to expose its multi-million dollar ‘secret’ business. The expose verified the common allegation made in numerous consumer lawsuits, that the company is merely a front for a hidden pyramid business based on selling books, tapes, and registrations to seminars and rallies to new recruits, with nearly all participants losing money.

According to Dateline, the FBI and the IRS are conducting investigations into the scheme.

Republicans Will Do Anything For A Buck

Amway’s billionaire founders, Rich DeVos and Jay VanAndel, have been the largest soft money contributors to the GOP on and off for the past 20 years. Together, DeVos and VanAndel gave $4,000,000 to a 527, just 45 days prior to the last election.

And you can bet that they demand (and get) a bang for every red cent.

Scheibeler’s book reveals how GOP donations and corporate promotion have resulted in a trade off for political protection and tax reduction benefits for the MLM. His web site provides a goldmine of documentation to back up his claims....

Scheibeler tells how some members of the GOP have been paid as much as $100,000 for a single promotional appearance at an Amway seminar. The list of high-paid Republican speakers who have appeared at rallies over the years, reads like a list of who’s who in the GOP. It includes former Presidents George Bush, Ronald Reagan, Gerald Ford and former Vice Presidents Bob Dole and Dan Quayle, along with other GOP heavyweights like Gingrich, Oliver North, Senator Rick Santorum and even the latest SE Regional Chairman for the Bush-Cheney ‘04 campaign, Ralph Reed....

$ $ $

November 6, 2004

Amway family and Jeff Stone
are buying Honsador Lumber

Pacific Business News

Honsador Lumber, the largest wholesale building products distributor in Hawaii, is being sold to a consortium that includes Ko Olina developer Jeff Stone and one of the families behind Amway.

Honsador owner Jim Pappas is selling the company, and its affiliates Honolulu Wood Treating and Ariel Truss, but will remain in Hawaii as a member of the board of directors and an adviser to the incoming owners....

The consortium includes RDV Corp., owner by the family of Rich De Vos, who with Jay Van Andel founded the direct sales congolmerate Amway Corp. RDV has been a longtime partner with Jeff Stone. Also involved is Key Principal Partners, a private investment firm affiliated with the $84 billion financial services firm KeyCorp.

“We are very excited to be part of this acquisition,” said Stone. “RDV’s initial investment in Hawaii came during a lull in the state’s economy. They were instrumental in resurrecting Ko Olina Resort and the creation of thousands of jobs for local residents, ensuring the economic prosperity of the west Honolulu region. RDV’s continued long-term commitment to this marketplace shows a depth of loyalty that is unprecedented in this day and age.”

KPP and Honsador expect to retain all 213 of the company’s employees, they said in a statement this weekend.

Honsador was established in 1935 as Honolulu Sash & Door. It has operations on Hawaii’s four major islands, and a facility in Portland, Ore....

See also: KeyCorp

For more on developer Jeff Stone, GO TO > > > The Grand (and dirty) Ko Olina; Paradise Paved


 

AOL Time Warner - The world’s largest media company when joined in a merger made on Wall Street.

April 24, 2002

AOL TIME WARNER LOSS IS A RECORD

AOL Time Warner Inc., the world’s largest media company reported a net loss of $54.2 billion for its first quarter today, the largest quarterly loss ever for a U.S. company, due to a massive balance sheet write-down mandated by new accounting rules.

AOL took the write-off – the same amount as the net loss – because of a sharp decline in the company’s stock, which has fallen by more than half since the merger of America Online and Time Warner was announced in January 2000.

In the same period a year ago, AOL Time Warner had a net loss of $1.4 billion.

The company also acknowledged weakness in its AOL unit, an area that has been causing increasing concern among investors.

Dick Parsons, incoming chief executive officer, said the results were a “disappointment,” but also said the company was “underneath the situation.”


 

Aon Corporation - The world’s second largest insurance broker (behind Marsh & McLennan).

Aon accounting questioned by SEC,
drops spin off plan

By Bill Rigby

NEW YORK, Aug 7, 2002 (Reuters) - Aon Corp. (AOC) said on Wednesday it may have to restate several years' earnings after regulators questioned its accounting practices.

The world's No. 2 insurance broker also put its underwriting unit up for sale, dropping plans to spin it off.

Aon shares fell as much as 34 percent to a seven-year low of $13.95 on the New York Stock Exchange, as investors recoiled from another firm with potentially unreliable accounts. They recovered slightly to finish the regular New York Stock Exchange trading session at $14.77, down $6.43, or 30.3 percent. Aon stock has fallen more than 55 percent this year.

Aon, second only to Marsh & McLennan Cos. Inc. (MMC) in the insurance brokerage industry, also said earnings would be lower than forecast as it struggles to keep costs down.

"(The results) leave us with little confidence that management can accurately forecast Aon's results," Salomon Smith Barney analyst Ron Frank said. "The outstanding SEC accounting issues, even if they prove benign, will likely hang over the stock."

SEC QUESTIONS

The Securities and Exchange Commission questioned several items in Aon's accounts, including the reporting of investment write-downs, the timing of some costs and a reinsurance recoverable item and the decision not to consolidate certain special purpose vehicles.

Chicago-based Aon said it may have to restate earnings for the past three years, if the SEC says it is necessary.

"If (the SEC) thinks additional disclosure is appropriate, we're going to do it," Aon Chief Executive Patrick Ryan told analysts during a two-hour conference call. "There is not a revenue recognition problem."

The firm also said it was looking at alternatives -- including a sale -- for its underwriting unit, Combined Specialty Group, which it had planned to spin off, blaming poor stock market conditions.

"We will provide an update when new plans have been finalized," Ryan said.

The move is a blow for Aon management and investors, who were hoping to cash in on soaring insurance rates with the spinoff.

Late Wednesday, Moody's Investors Service cut Aon's senior unsecured debt rating one notch to "Baa1," its third-lowest investment grade, and said it may cut the rating again.

ACCOUNTING PROBLEMS

Aon's news caps several years of nagging problems for the company, which has struggled to consolidate its operations and cut costs after a string of acquisitions in the 1990s. The firm grew rapidly over the decade, becoming the only serious rival to Marsh, the world's long-established leading broker.

The firm lost 176 employees in the attacks on the World Trade Center on Sept. 11.

The SEC's questioning of its accounts suggests that the firm was aggressive with its profit reports. To remedy the situation, the SEC demanded that the firm release more information in its financial reports and stop using EBITDA numbers, which are potentially misleading earnings numbers, excluding a host of charges. . . .

For more, GO TO > > > The Poop on Aon


 

Apollo Advisors - Financial investment managers. 13th largest campaign contributor to Senator Joseph Lieberman (D-CT), Al Gore’s vice presidential running mate, and a client of lobbying firm Akin, Gump, Strauss, Hauer & Feld.

One of Akin, Gump’s clients is Miller & Chavalier, a Washington, D.C.-based law firm which, together with PricewaterhouseCoopers, drafted the multi-million dollar IRS settlement agreement for Hawaii’s Kamehameha Schools.

Apollo Advisers has another connection with Kamehameha Schools: Along with National Housing Corp (which was involved in an alleged kick-back scheme with ousted Bishop Estate trustees Henry Peters and Richard Wong), Apollo has financial interests in several estate owned properties involving two alleged Yakuza-connected companies: Azabu Building Company and Mitsui Trust.

* * *

Journal Inquirer, 5/11/99, by Don Michak:

Are Finder’s Fees Behind the Silvester Probe?

An FBI investigation of former state Treasurer Paul J. Silvester’s actions at the end of his term may force the disclosure of one of the best kept secrets in the public pension business.

Insiders say a far-reaching probe could throw a spotlight on the longstanding but little-known practice of paying “finder’s fees” to individuals who put together investment deals with public pension officials in Connecticut and other states.

The FBI last month began investigating Silvester’s authorization of $852.5 million in pension fund commitments in the final quarter of 1998. . . .

Past and present treasury officials agree that the fees involved in such transactions can be remarkably lucrative for the “finder”-- in some cases, a percentage of the overall deal and as much as 20% of certain profits produced over the term of an investment.. . . .

Payments Hard to Trace

[State Treasurer Denise] Nappier responded to a formal request filed under the state’s freedom-of -information act by providing a list of nine companies that were paid placement fees in connection with 15 pension fund deals since 1997.

The investments— including 13 “private investment fund” and two “real estate fund” deals— involved a total of $1.3 billion in pension plan assets...

Several of the placement agents are associated with well-known securities firms...

Merrill Lynch led the pack, collection fees in connection with two deals: a $200 million investment in Triumph Capital Partners III and $75 million in Thayer Equity Investors IV, LP.

DLJ Group followed with fees from four deals worth $225 million: a $75 million investment in Apollo Real Estate Investment Fund III, LP; $75 million in the DLJ Merchant Banking Fund II; $50 million in Kelso Investment Associates VI; and $25 million in Greene Equity Investors III....

Beacon Hill Financial Group ranked third, with fees from $200 million worth of deals, including $130 million in Forsttmann Little MBO VII and $70 million in Forstmann Little Equity Fund IV.

The remaining placement agents included Farrall Marsh, which did a $148.9 million deal with Hicks Muse Tate & Furst Equity Fund III; Potomac Investment Services, which marketed a $75 million deal with SCP Private Equity Partners and a $50 million deal with Wellspring Capital Partners II; and three others, Truro Associates, New York Capital Partners, and St. James Associates, which did $100 million deals for Crescendo World Fund; Crescendo III, LP; and Westport Senior Living Fund, LP, respectively.

Salomon Smith Barney rounded out the roster, bringing the pension fund into a $50 million deal with Greenwich Street Capital Partners II, LP.

For much more, GO TO > > > Apollo Advisors


 

Asset Management International Financing & Settlement - A New York City-based company purchased by West Tsusho, a Tokyo-based company allegedly connected with the Yakuza, in a deal brokered by Prescott Bush, Jr., older brother of President George Bush.

See also: Yakuza


 

Bank of America - From The Buying of the President (1996): . . . While the interstate banking bill was moving through conference, on Aug 23, 1994, Clinton and Hugh McColl (president of NationsBank) were present at the White House Community Development bill signing, and the president declared, “Today, I’m proud to announce commitment from two of the nation’s leading banks to help us in this effort--$25 million from NationsBank and $50 million from Bank of America over the next four years.”

Five weeks later the interstate banking bill was law; the $3.5 million loan to the DNC came two weeks afterwards.

* * *

From The Washington Post, 2/5/01, by Kathleen Day: REPORT FINDS WIDE MONEY-LAUNDERING . . .

The failure of U.S. banks and regulators to track transactions with foreign banks enables criminals to route billions of dollars from drug sales, Internet gambling, tax evasion or other illegal activities into the United States each year, a new Senate subcommittee report concludes. . . .

“Inattention and disinterest by U.S. banks in screening the foreign banks they take in as clients have allowed rogue foreign banks and their criminal clients to carry on money laundering and other criminal activity in the United States and to benefit from the protections afforded by the safety and soundness of the U.S. banking industry,” said Sen. Carl Levin of Michigan, the senior Democrat on the subcommittee.

RUSSIAN SCANDAL SPARKS PROBE

The subcommittee launched its investigation after a Russian money-laundering scandal erupted at Bank of New York 18 months ago. It examined a number of well-known banks, including Bank of America, Citigroup, J.P. Morgan Chase & Co. and First Union Corp....

In all, the subcommittee staff questioned 20 institutions and pursued, in detail, more that a dozen U.S. banks involving “dirty money” flowing through U.S. accounts from suspicious foreign banks, especially offshore banks in jurisdictions with weak money-laundering laws, according to the report. . . .

The correspondent relationships that offshore banks have with American banks have become a major tool to facilitate such laundering, the report says.

$1 TRILLION LAUNDERED ANNUALLY

Money laundering is the act of concealing the source of funds obtained from an illegal activity.

An estimated $1 trillion is laundered each year– about half of it, or $500 billion, through the United States, according to the report....


 

Bank of Boston - From The Laundrymen: . . . Despite peace initiatives in Northern Ireland, the Irish Republican Army (IRA) continues to ride shotgun on shipments for international traffickers, deal drugs, run protection rackets, and rob banks and post offices on mainland Britain. ... Cash-rich, they wash their money through pubs and drinking clubs, construction firms, taxi companies, and private security services. Once they’ve laundered it, they invest their money in such places as the London Stock Exchange.

Nearly $5 million a year is sent to the IRA from the United States through NORAID. Considering the large Irish population in Massachusetts, it’s hardly surprising the Bank of Boston has been used as a sink for a cell of the Provisional IRA. In the early 1970s, an ad hoc coalition was formed between active members of that cell and local Mafia dons. . . . Organized crime wanted marijuana, the Provo sympathizers became the importers. The middleman, Joe Murray, ... ran a towing company in nearby Charlestown. ... Murray smuggled tons of drugs into the Boston area on fishing boats. The cash he received for his efforts, laundered through the Bank of Boston, was spent on arms, which those same boats then transported to Northern Ireland.

The Bank Secrecy Act of 1970 attempted to force banks, savings and loans, and other financial institutions to report all cash transactions over $1,000 to the IRS. But the ceiling proved to be too low. . . . Because there weren’t enough people to process them, most of those forms wound up decomposing in a Detroit warehouse.

Although forty-three ... banks, including Chase Manhattan and Bank of America were penalized for a total of $20 million, the currency-reporting requirement was still widely disregarded until 1985. That’s when the government decided to call time. It accused the Bank of Boston of gross and flagrant violation of the Bank Secrecy Act, alleging that the bank had failed to report 1,163 cash transactions amounting to $1.22 billion.

Among the companies the Bank of Boston had supposedly exempted from cash reporting was the law firm of F. Lee Bailey. More ominously, the bank had given dispensation to a pair of real estate agencies controlled by a local organized crime boss. In the face of overwhelming evidence, the Bank of Boston pleaded guilty, admitting to an additional $110 million worth of violations, and was fined a then-record $500,000.


 

Bank Chara - From Red Mafiya: . . . The FBI got particularly lucky in the autumn of 1994 when Bank Chara in Moscow collapsed under suspicious circumstances, costing it depositors more than $30 million.

Some $3.5 million of the money had been invested in Summit International, a New York investment house that had been founded by two of Chara’s Russian board members, Alexander Volkov and Vladimer Voloshin.

The Summit executives were no strangers to organized crime. Volkov, Summit’s president, is an ... ex-KGB officer with a noxious temper. Voloshin, Summit’s VP, is a member of the Lyubertskaya crime family in Moscow, where he had once mixed up a target’s address and torched the wrong apartment, as well as its female inhabitant.

Their unlicensed Wall Street investment firm was actually a giant Ponzi scheme, preying mostly on Russian emigres who were promised up to 120% per annum returns on phony companies with names like “Silicon Walley.” To cover itself in a cloak of fiscal respectability, Summit entered into a contract with Prudential Securities vice president Ronald Doria to serve as its financial adviser. (Doria was later terminated by Prudential, and took the Fifth, refusing to testify, during a National Association of Securities Dealers arbitration hearing.)

Between 1993 and 1995, Volkov and Voloshin took in $8 million from investors, spending nearly the entire sum on their own lavish entertainment: beautiful women, long weekends in the Caribbean, and gambling junkets to Atlantic City. In one night alone, Voloshin lost $100,000 at Bally’s Hotel, he covered it with his investors’ money.

In the spring of 1995 Bank Chara’s new president, Roustam Sadykov, flew to New York to ask Summit’s directors to return the bank’s missing funds. When the men refused, Sadykov turned to (Vyacheslav Kirillovich) Ivankov to collect the debt....

When Ivankov and two henchmen paid a visit to Summit’s Wall Street offices, Volkov and Voloshin fled in terror to Miami. But Ivankov’s men caught up with them when they returned to Manhattan, kidnaping them at gunpoint from the bar of the Hilton Hotel and forcing them to sign a contract promising to pay one of Ivankov’s associates $3.5 million.

“You understand who you are dealing with?” snarled Ivankov to the Summit officials....

As an inducement to honor their commitment, Voloshin’s father was stomped to death in a Moscow train station....


 

Bank of Credit and Commerce International (BCCI) - From The Laundrymen:

Banco Ambrosiano was the greatest banking collapse in Europe since the end of World War II. It was shortly to be followed by the greatest banking collapse in the history of banking...

In 1988, the Justice Department launched Operation C-Chase, the letter C standing for currency. Posing as drug dealers, undercover agents put out the bait that they had loads of currency to launder.

And BCCI fell for it....

A costly and complicated five-year operation— involving agents from Customs, the IRS, the DEA, and the FBI— C-Chase produced more than twelve hundred conversations and nearly four hundred hours of clandestinely recorded videotape. By assisting drug dealers to wash $34 million, the Justice Department was able to indict, and in 1990 to convict, several BCCI bankers and dozens of other individuals. In one blow, the Americans had unknowingly pulled the bottom out from under a gargantuan house of cards. . . .

* * *

From Multinational Monitor, 12/94: The Corporate Hall of Shame . . . The 10 Worst Corporations of 1994 — Who examines the examiners? . . . PRICE WATERHOUSE faces approximately $12.5 billion in legal claims from the Deloitte & Touche liquidators of the collapsed Bank of Credit and Commerce International over Price’s audit of the bank. . . .

* * *

For more, GO TO > > > The Strange Saga of BCCI; What Price Waterhouse?


 

Bank of Hawaii - One of Hawaii’s largest banks.

From greaterthings.com, by Greg Wongham:

HAWAIIAN BANKS LINK: China-US Campaign
Scandal and Illicit Capital Flow

The Link Between Mochtar Riady and the Clinton Administration

The problems with the FDIC/Donna Tanoue and the two big Hawaii banks will undoubtedly effect people throughout the country. I believe that the Hawaii links to Mochtar Riady are attempting to gain access to the American capital market through Riady’s brother-in-law, Mumin Ala Gundawun. Riady was too hot (BCCI, Chinagate), so they wisely chose to approach their plan via the Hawaii connection.

Sec. Treas., Robert Rubin played a major role in setting up this new bank scandal by lobbying for repeal of the Bank Holding Company Act. The purpose for this action is to allow Bank Holding companies (Hawaii’s Pacific Century Financial Corp and BancWest) to expand their financial services, thus allowing them to become full service securities brokerages. This seems like an ideal front to legitimize their deals to the American capital markets....

Overview. I am the producer/host of a public access TV show called “Corruption in Hawaii.” I have spent 6 years exposing different aspects of the Hawaii machine....

During the month of August ... a segment of my show (was) titled, “What does Hawaii’s Bank Losses Mean to You?” The show featured a guest who described the losses he experienced in his family trust which was handled by Pacific Century Financial Corp (formerly Bank of Hawaii). He lost $1 million, plus $300 thousand in legal fees.

Numerous people called and said that they too, had experienced significant losses. Last week the public access station pulled the segment of the show. The next day the CEO of Pacific Century resigned. Two of the board of directors for the public access station are with the two big banks....

The important points in this story revolve around the fact that Hawaii’s Democratic machine played a major role in the Chinagate scenario that grew out of the investigation into illegal foreign campaign fundraising.

The machine headed by Hawaii’s political godfather, Senator Dan Inouye was being investigated by the FBI during former (R) President George Bush’s tenure. The basis of the investigation stemmed from allegations of extortion and bribery aimed at the administration of former (D) Gov. John Waihee. The investigation was killed by Clinton’s friend Webster Hubbell, the number three man in the Justice Dept under Janet Reno. (AP story by J. Solomon: FBI failed to act on fund-raising of ex-Hawaii couple.)...

Eventually the investigation focused on Indonesian banking tycoon, Mochtar Riady and his Lippo Group.

The basis of the story I am trying to relay to you is that Hawaii’s Democratic Machine used the billions of dollars of the Kamehameha Schools / Bishop Estate assets to undertake the task of underwriting and orchestrating the initial public offering of the Xiamen International Bank on the Hang Seng and the NY Stock Exchange. This would have the effect of legitimizing a Communist Chinese banking entity on the biggest stock exchange in the U.S. and open the doors allowing American money to capitalize a communist regime....

It begins in 1963 to 1970, when a group of Hawaii legislators killed a Bank Examiner Bill. They were already employed as legal counsel or otherwise associated with the top banks. This, I felt, was a good point to begin telling you the story because it begins to reflect a pattern of using politically appointed people to legally white-wash or cover-up the wrong-doing of the big banking and financial interests here in Hawaii.

Today the same thing is happening, and this time they were successful in persuading President Clinton to push Hawaii’s Donna Tanoue to become the head of the FDIC. The significance in this is that the only time anyone here in Hawaii ever heard of Ms Tanoue was when she was tapped to cover-up the scandals that arose when 9 out of 20 of Hawaii’s Industrial banks failed. Many of them were linked to former (D) Gov. George Ariyoshi and the high ranking Democratic ‘old boys’. The results were that no one was convicted or sentenced to do time and the people of Hawaii ended up footing the bills....

The point is ... that once again Hawaii’s top banks are in a financial tail-spin and Donna Tanoue has been conveniently positioned to allow the banks to expand throughout Asia, the Pacific-Rim and the western part of the U.S....

For more, GO TO > > > Predators in Paradise


 

Bank of New York - On 09/22/99, James A. Leach, Chairman of the U.S. House of Representatives’ Committee of Banking and Financial Services issued this Press Release at the conclusion of the first two days of money laundering hearings concerning the Bank of New York:

The meaning of today’s testimony is than money-laundering has gone to the tome of the Russian political structure with the confirmation that President Yeltsin’s son-in-law is the beneficiary of two accounts in the Cayman Island’s branch of a reputable New York bank....

Second, the Bank of New York confirmed $7.5 billion in questionable money flowed through eight accounts controlled by one figure over a three-year period....

Third, the CEO of the Bank of New York acknowledged that his bank has correspondent relationships with 160 Russian banks and that on an average day $3.5 billion flows through those accounts.

This figure is particularly noteworthy given prior testimony before the Committee that many Russian banks are mob-influenced and serve more as money-laundering platforms than providers of traditional banking services.

* * *

The New York Times, 02/17/00: . . A former executive of the Bank of New York and her husband told a federal judge yesterday that they helped a group of small but politically connected Russian banks create an elaborate money laundering scheme that moved billions of dollars out of Russia through the American bank....

After more than 18 months of investigation, federal authorities delivered Lucy Edwards, a former Bank of New York vice president, and her husband, Peter Berlin, to the U.S. District in Manhattan. They described how between 1996 and last year, more than $7 billion left Russia illegally and flowed through a network of front company accounts at the Bank of New York that were controlled by Mr. Berlin. From there, the money was transferred to offshore accounts.

The network, according to the couple, was designed by Russian bankers to whisk money electronically between Russia and the United States for three broad purposes: to evade Russian taxes on money from legitimate business transactions, to avoid Russian customs duties on imports, and to “wash” the profits of outright criminal enterprises through legitimate banks, including a $300,000 ransom payment in 1998 to the kidnappers of a businessman in Russia.

The couple, who said they were paid nearly $2 million for their services, said the scheme allowed Russian bankers to conduct illegal banking activities in the U.S. that circumvented the scrutiny of federal banking regulators and law enforcement officials....

The couple agreed to plead guilty to a series of federal crimes, which carry sentences of up to 10 years in prison and heavy fines, and to cooperate with investigators in a plea bargain that federal authorities hope will produce more charges....

* * *

“More than one or two people had to turn the other way,” an investigator said, “You don’t transfer $7 billion through the spanking new Eastern European division without somebody knowing.”...

* * *

Ms. Edwards, Mr. Berlin and three companies controlled by Mr. Berlin — Benex, Bec International and Lowlandpleaded guilty to laundering money to promote criminal activity and defraud the Russian Government; conducting unlicensed banking operations; establishing an unauthorized branch of a foreign bank; operating an illegal money transmitting business; bribing a bank employee; receiving illegal payments as a bank employee and laundering those payments abroad; tax evasion; and fraudulently obtaining visas for hundreds of Russians to enter the United States....

* * *

Ms. Edwards ... said she was first approached in late 1995 by representatives of DKB, a Russian bank whose full name is Depozitarno-Kliringovy Bank, who were interested in using the Bank of New York’s offices and technology to illegally move money out of Russia. During the following years, Ms. Edwards said, those activities came to include money laundering and the other schemes to which she pleaded guilty....

Russian banking during the 1990's has been a notoriously freewheeling affair, with allegations of extensive involvement in the banks by organized criminals.

Ms. Edwards noted in her testimony that DKB’s Moscow employees told her in 1998 that they were afraid to leave the bank’s headquarters because “customers with machine guns were waiting for them.”...


 

Banker’s Trust - From Corporate Crime Reporter, 3/15/99: . . . Bankers Trust was fined $60 million for its role in a scheme by high-ranking bank officials to enhance the bank’s financial performance by falsely recording approximately $19.1 million unlawfully recorded as the bank’s income and reserves to their rightful owners.

Bankers Trust’s plan to return the remaining balance of the $19.1 million will be supervised by the Federal Reserve Bank of New York. Three Bankers Trust executives were indicted...

“Bankers Trust’s guilty plea should send a strong signal to all companies that negative consequences will flow from putting pressure on their executives and employees to generate revenues and meet expense targets with any means necessary,” said U.S. Atty Mary Jo White.

“While a corporation, especially a financial institution — naturally expresses concern and interest in the bottom line, it must at the same time ensure that it fosters a corporate culture requiring strict compliance with all applicable legal and ethical obligations.”


 

Barclay’s Bank - Barclays PLC is a UK-based financial services group engaged primarily in banking and investment banking businesses, and, according to Dr. John Coleman in his book, The Conspirators’ Hierarchy, a member of the Committee of 300.

* * *

From The Guardian, 9/25/99, by Jane Martinson:

Briton Investigated in US Bank Scam

International police agencies are investigating possible links between a British man suspected of involvement in a $17m (£10.4m) securities fraud and the global money-laundering scam encompassing the Bank of New York and the Russian mafia.

Andrew Warren, a Surrey-based solicitor who is wanted in the United States for his alleged involvement in a securities fraud, is suspected of setting up shell companies for Russian clients as part of a money-laundering exercise.

Britain's national crime squad and the US authorities are investigating alleged dealings between these shell companies and two companies linked with Peter Berlin, the Russian émigré at the heart of the Bank of New York inquiry. The two companies, Benex, which is registered in Essex, and Becs International, are alleged to have been used to divert up to $15bn from Russia during the past 18 months.

Mr Warren, who lives in Chauldron, Surrey, was arrested by the national crime squad last year and has since been on police bail while the UK investigation continues.

No direct links between Mr Warren and Mr Berlin are understood to have been found. The investigation is understood to have focused on the dealings between Mr Warren's alleged clients and the companies set up by Mr Berlin, who is married to a Bank of New York employee who has been sacked as a result of the money- laundering investigation.

The Manhattan district attorney's office started extradition procedures against Mr Warren in June when it charged him with enterprise corruption, 15 counts of securities fraud and 61 of falsifying records. The British police are still investigating the case.

Barclays Bank also appears to have been implicated. Money from the $17m scam is understood to have been deposited in the bank's offshore accounts in Jersey.

Barclays is also understood to be one of several international banks which were used to illegally transfer funds out of Russia....

* * *

From The Laundrymen: . . .

BRINKS-MAT MELTDOWN.

Shortly before dawn on Saturday morning, Nov 26, 1983, armed hoodlums broke into the heavily fortressed Brinks-Mat warehouse at Unit 7 of the International Trading Estate....

With great expertise, they neutralized the guards ... Then, with gruesome brutality, they terrorized the guards— pistol whipping them, pouring gasoline over them, and holding lit matches close enough to make them believe they were going to be torched....

One hour and forty-five minutes later, the gang was gone. With them went 6,500 gold bars. Three and a half tons worth.

The price of gold on the London market had closed the night before at about $357 an ounce, valuing the booty at just under $40 million. The following morning, when word of the size of the haul got out, gold prices jumped $18, giving the thieves an additional paper profit of $2 million.

Although Scotland Yard never established whether there were six men in the gang or eight, it arrested four of them within two weeks.

A year later, three of those four were in jail. One was Mickey McAvoy, a 38-year-old professional thug ... Another was 41-year-old Brian Robinson, a professional criminal ... As the reputed masterminds, and for the depth of their barbarity, they were both sent away for 25 years.

The only thing they had to look forward to was the gold.

A year after the largest heist in British history, the police still hadn’t found a single ounce.

~ ~ ~

Brian Perry ran a minicab agency in east London . . . John Lloyd ... lived with an archetypal gangster’s moll— a woman named Jeannie Savage . . . They were the ones McAvoy trusted to make sure his share would be waiting for him when he got out.

To help, Perry and Lloyd brought in a crony of theirs called Kenneth Noye . . . most of the time he dealt in watches and jewelry, and, unlike Perry and Lloyd, did have a record— for receiving stolen goods, shoplifting, assaulting a police officer, and gun licensing violations.

One of his pals was John Palmer, a 34-year old jeweler who some years before set up a gold bullion dealership in Bristol called Scadlynn Ltd. Noye brought Palmer in to use Scadlynn.

Now [Noye] began transporting McAvoy’s gold to Scadlynn— taking exactly 11 resmelted bars per journey . . . Scadlynn, meanwhile, sold the resmelted gold at the going scrap rate, plus a valued-added tax (VAT), which stood at 15%. For its trouble, it would keep the undeclared VAT.

The money from the scrap was deposited at a local branch of Barclays Bank, then withdrawn as cash, stuffed into black garbage bags, and trucked to London. Over the next five months, Scadlynn paid Noye, Perry, and Lloyd in excess of $15 million.

Using a false passport bearing the name Sydney Harris, Noye deposited his share at a Bank of Ireland office in south London, where it was wired immediately to a Dublin branch. McAvoy’s girlfriend, Kathy Meacock, did the same thing on alternate days. So did Jeannie Savage.

If anyone at Barclays or the Bank of Ireland was in the least suspicious, they apparently weren’t troubled enough to tell the police about it.

~ ~ ~

Brian Perry also had a buddy named Gordon John Parry . . . Parry in turn brought in Michael Relton, a crooked lawyer who’d defended him on a drug trafficking charge....

With Relton’s help, Parry deposited $1,190,250 from Scadlynn into a Bank of Ireland branch in southwest London. The money was then wired offshore to the bank’s office in Douglas, on the Isle of Man. Next, Parry convinced his wife’s cousin to help, and she used the bank to send $750,000 to the Isle of Man.

Other deposits followed, bringing the total washed through that branch to $2.25 million. To confuse anyone who might attempt to follow the paper trail, Parry brought some of the money back from the Isle of Man, redeposited it, and sent it offshore to yet another bank. And all this time, Noye continued to deliver gold to Scadlynn— eleven bars per journey— while Scadlynn kept melting it down, selling it as scrap, and sending cash to London....

In early August 1984, Relton helped Parry open an account at the Hong Kong and Shanghai Bank in Zurich. Although they later claimed it was nothing more than coincidence, each of them opened accounts at the same branch of the Hong Kong and Shanghai Bank. Between them, they deposited a total of $735,000, bringing their Zurich holdings to just under $1.5 million....

Scadlynn was proving to be a cash cow beyond anyone’s wildest imagination. It got to the point where they were moving so much money that Barclays had to bring in extra tellers just to deal with Scadlynn’s business....

Tipped off by the Jersey police, Scotland Yard put Noye under surveillance. After observing him in the frequent company of Brian Reader— a wanted criminal whom they’d believed had been hiding in Spain— they brought in C-11, a specialist unit used exclusively for top-secret, close-target reconnaissance.

On a cold and dark Saturday evening in Jan 1985, two officers scaled the perimeter wall of Noye’s house and positioned themselves to spend the night on the grounds. One of those officers was John Fordham, a nine-year veteran of C-11.

One of Noye’s rottweillers discovered Fordham. Two more dogs joined the commotion. That’s when Noye arrived, possibly with Reader, carrying a four-inch knife.

Fordham’s body was recovered with eleven stab wounds, mostly in his back.

Noye was immediately arrested, Reader was picked up a few miles away, and the two were charged with murder. Noye pleaded self-defense. Reader claimed he wasn’t involved at all. To the utter astonishment of the police, ten months later a jury acquitted both of them. However, a small cache of gold bars was found at Noye’s house— enough to link them with the Brinks-Mat gold. Noye and Reader were charged with conspiracy to handle stolen goods.

Within three days, the police also arrested Palmer and moved in on Scadlynn....

~ ~ ~

[A Catbird Catcall: And where did this dirty money go after it left Barclays Bank? Of course only Royalty and Robert Rubin may really know, butBarclays Bank is the 4th largest institutional investor in Goldman Sachs; the 4th largest in Marsh & McLennan; the 6th in Chubb Group; the 2nd in Citigroup; the 6th in Lockheed Martin; the 4th in Raytheon Company; the 5th in Columbia/HCA; the 2nd in Merrill Lynch; the 4th in Riscorp, Inc.; the 3rd in Conseco, Inc.; the 6th in Trump Hotel/ Casino; the 7th in Mirage Resorts, Inc.; the 5th in Boyd Gaming Corp.; the 6th in Harrah’s Enterprises; the 2nd in Bank of America; the 4th in American Express; the 3rd in CBS Corp; the 2nd in America Online, Inc; the 4th in Time Warner, Inc.; the 5th in Wilmington Trust; the 3rd in PNC Bank; the 3rd in Allstate Insurance; the 2nd in American International Group (AIG); the 4th in Xerox Corp; and the #1 institutional investor in Lucent Technologies and The Walt Disney Company — just to name a few possibilities.]

* * *

From www.moneylaundering.com: . . . A front-page article in the Oct 20, 2000 edition of the Financial Times reports that the London branches of some of the world’s largest banks played a key role in what is believed to be a $4 billion international money laundering operation involving former Nigerian dictator Sani Abacha.

The Times says 15 banks, including Citigroup, Merrill Lynch, Barclays, HSBC, Standard Chartered, and Australia and New Zealand Banking Group, handled transactions for the Abacha Family and their collaborators.

The transactions allegedly involved funds looted from Nigeria’s central bank and other corruption proceeds. The Times says British officials have been slow to respond to requests by the new government of Nigeria for assistance in that country’s investigation of Abacha....

* * *

And did you know? . . .

The sixth largest institutional investor in Barclays is Citigroup. The tenth largest is Bank of America.

* * *

Recommended Reading: The Conspirators’ Hierarchy: The Story of the Committee of 300


 

Bentley Financial Services - From Lexington Herald-Leader, Dec. 21, 2001:

Financial firm in Pennsylvania placed in receivership

by Jim Jordan

A Pennsylvania firm that invested more than $4 billion for 3,200 banks, credit unions, non-profit groups and individuals since 1986, including credit unions in Kentucky, has been placed in receivership by a Philadelphia judge.

Bentley Financial Services and its founder, Robert L. Bentley, are accused of fraud and securities violations, but not of losing or stealing investors’ money.

“What we are being told (by state and federal regulators) – is that no assets will be lost,” said Piper Swanson, manager of Metro Employees Credit Union in Lexington. . . .

Swanson declined to say how much money Metro has invested with Bentley, but she said the 10-month investment matures Jan. 1.

Metro, which serves Lexington police and other local government workers, researched Bentley’s record before making the investment, Swanson said.

Major factors were Bentley’s 15-year track record and its ability to return high yields on federally insured investments, she said. . . .

On Oct. 23, the U.S. Securities and Exchange Commission filed a lawsuit in Philadelphia that accused Bentley of selling uninsured “privately issued notes” to investors by telling them the notes were actually federally insured.

What Bentley was doing, the SEC alleged, was buying long-term CDs from banks and then selling a portion of each CD, represented by an uninsured note, to investors at a lower interest rate than Bentley was receiving on the long-term CD....

The SEC also accused Bentley and his firm of operating as an unregistered securities dealer in issuing the notes.

Bentley, 43, of Paoli, Pa., is a registered representative of TDI Securities Inc. in Denver, the SEC said, but the “fraudulent note sales” were not done through TDI.

The SEC also said fraud was involved because investors could get their principal back when their notes matured only if Bender had been able to attract new investors whose money could be used to pay off the older notes.

Another Bentley company, Entrust Group, was used to buy and hold the long-term CDs.

In mid-September, Bentley had $318.8 million in notes outstanding, the SEC said.

Since Oct. 23, a federal judge in Philadelphia has issued a preliminary injunction against the firm and Bentley, frozen the firm’s assets and appointed Philadelphia lawyer David H. Marion as receiver....


 

Carl Lindner - From Frontline: Carl Lindner, a Cincinnati businessman with international interests ranging from banking to bananas, is one of the nation's wealthiest men. His frequent, abundant contributions to political candidates and parties have put him at times in the public spotlight.

His friends defend his political giving as merely the generosity of a public spirited citizen. His critics suspect that his money buys him political access and influence. In either event, he is one of several large contributors at the center of the controversy over whether the American campaign-finance system is serving the public interest.

Born in Dayton, Ohio, he dropped out of high school to help run the family's ice-cream store when his father became ill. With a head for figures and a knack for financial deals, Lindner built the business into a chain of stores known as United Dairy Farmers. Today there are over 200 such stores run by his brother Robert. Dairy-store profits have fueled Lindner's investments in financial institutions. First, he acquired savings and loans companies and then diversified into the insurance business. Today he runs a corporate empire known as American Financial Group.

As chairman and chief executive of American Financial Group, Lindner presides over business assets worth $14 billion by his own reckoning. He is a former part owner of The Cincinnati Enquirer. He controls, among other businesses, Chiquita Brands bananas. Lindner has made a name for himself on Wall Street as an astute investor. He has a reputation for "bottom fishing" -- that is, buying a financially troubled or undervalued company at a bargain price and transforming it into a profitable enterprise. He was an important customer of "junk" bond king Michael Milken, who worked for the now-defunct investment banking firm of Drexel Burnham Lambert.

For years American Financial employed a Cincinnati lawyer, Charles Keating, as corporate counsel and executive vice president. Lindner and Keating parted company, and Keating moved to Phoenix and gained notoriety in the 1980s as the man behind the multibillion-dollar failure of Lincoln Savings & Loan....

Lindner gives heavily to political campaigns. While his contributions in Cincinnati and Ohio heavily favor Republicans, in national races he gives generously to both sides. Since 1988, Lindner and his associates and companies have given $650,000 in soft money to the Democrats and $1.5 million to the Republicans, according to Common Cause, a Washington watchdog group. Lindner, his family, and business associates also make donations directly to politicians.

Among them: $106,000 to George Bush's presidential campaigns in 1988 and 1992; and $172,500 to Senator Robert Dole since 1980. In a field of the "top ten career patrons" of Senator Dole, Lindner ranks seventh, reports the Center for Public Integrity, a nonpartisan Washington public interest research group. Dole has also made frequent use of private jets owned by the Lindner family -- twelve flights in 1995 alone, according to the Federal Election Commission.

Recently, Majority Leader Dole, House Speaker Newt Gingrich, and members of the Clinton Administration have moved to help Chiquita open European markets to its bananas. For years, Chiquita grew lots of bananas throughout Latin America and was the largest supplier to Europe. Then in 1993, the European Union announced changes to its trade regulations on banana import quotas. Colombia and Costa Rica agreed to this new European "banana plan" and were key to making it work. Chiquita said because of this new policy, which it claims violated trade laws, sales and profits dropped.

Although there are relatively few US jobs at stake, Lindner has managed to bring his "banana problem" to the top of our national agenda. The Clinton Administration investigated the idea of imposing trade sanctions against Colombia and Costa Rica, and Bob Dole pushed the issue in Congress. In January of this year, US Trade Representative Mickey Kantor concluded his year-long investigation of the European banana trade dispute and determined that Costa Rica and Colombia's trade agreements with the Europeans are "unfair."

Despite Chiquita's lobbying, the US has decided for the time being not to impose retaliatory sanctions against the two countries, instead pressuring the Europeans to open their banana market to free trade.... * * *

From Intelligence Connection, by Brian Quig:

Charles Keating started out as an attorney for Carl Lindner, the original owner of AMERICAN CONTINENTAL CORPORATION.

Lindner, a well documented profiteer off the VIETNAM WAR, is a much bigger player than Keating. Lindner owned 7 failed S & Ls but has gone virtually unmentioned in regards to the S & L looting scandal.

Linder owns 38.5% of the CIRCLE K CORPORATION (which exploits the underclass in America the same way his UNITED BRANDS exploits the underclass of Honduras) and has been reported to be one of the ten wealthiest men in America and one of the 5 top financiers of CIA.

At the same time as Keating was purchasing the ACC HQ property, Linder was transferring almost the total assets of his AMERICAN FINANCIAL CORPORATION (a private company requiring no stockholder reports) into a Honduran company, UNITED BRANDS taking UB from a publicly traded to a private company.

UNITED BRANDS was formed when UNITED FRUIT, a CIA front prominent in several Latin American coups (as well as the assassination of President Kennedy) was merged with a second company....

See also: American Financial Group


 

Carlyle Group - a Washington-based merchant bank that is chaired by Frank Carlucci, the former Secretary of Defense in the Reagan Administration.

MERGER TALK- Carlyle wants more than political clout

By Dane Hamilton

NEW YORK, May 21, 2001 (Reuters) - After a steady stream of superstar hires from the ranks of government, Carlyle Group finally is getting the recognition its founders think the private equity firm deserves. But for the wrong reasons.

Carlyle, one of the world's largest leveraged buyout firms, wants to be known as the Goldman Sachs Group (NYSE:GS - news) or Morgan Stanley (NYSE:MWD - news) of private equity.

Instead, Carlyle is better known for employing more Washington heavy hitters than any other similar investment firm.

That growing list now includes former President George Bush, former Secretary of State James A. Baker III and Frank Carlucci, President Reagan's defense secretary. In recent weeks, the firm added John Major, the former British prime minister, and Arthur Levitt, the former Securities and Exchange commissioner, to its advisory panel.

David Rubenstein, a 51-year-old lawyer who helped build the Washington-based buyout firm into a $12.5 billion powerhouse over the last 14 years, bristles at the charge that politicians are too ``addled'' to be effective in business.

The names, he says, are mainly there bring in new business, especially in aerospace, telecommunications and other regulated industries....

For more GO TO > > > Birds That Drink From Cesspools


 

Cendant Corporation - A marketing and franchising company whose holdings include Century 21, Ramada Hotels, Days Inn and Avis Car Rental.

December 8, 1999

Cendant to Pay $2.8 Billion Fraud Settlement

Shareholder Suit Was One of Largest in U.S. History

NEW YORK (AP) -- Cendant Corp., the marketing and franchising company battered by accounting problems last year, has agreed to pay $2.8 billion to settle a shareholder lawsuit accusing it of fraud.

The settlement, announced Tuesday and subject to approval by a New Jersey federal judge, would end one of the largest shareholder suits in U.S. history....

Accounting irregularities

Cendant, whose brands include Days Inn and Ramada hotels, the Avis car rental agency and real-estate brokerage Century 21, saw its stock price plummet last year after announcing the accounting irregularities, which forced the company to restate earnings from 1995 to mid-1998.

Cendant said CUC International, which merged with HFS Inc. to create Cendant in 1997, had used irregular accounting practices to inflate earnings by as much as $500 million over the previous three years.

The scandal prompted several resignations, and Cendant's market value dropped by $14 billion in a single session last April.

Pension funds sue

In June 1998, the accounting woes prompted a class-action suit filed by two major pension funds -- the California Public Employees' Retirement System and the New York State Common Retirement Fund -- on behalf of all shareholders. The plaintiffs accused Cendant of issuing false and misleading statements and allowing former company directors and officers to sell Cendant shares prior to the disclosures of the accounting problems. . . .

Audit board established

It also requires Cendant to adopt a number of changes in the way it governs itself, including setting up an audit board comprised entirely of independent directors rather than company officials.

Meanwhile, Cendant is suing Ernst & Young LLP, the accounting firm that represented CUC. As part of Tuesday's settlement, shareholders will be eligible to receive 50 percent of any judgment against Ernst & Young.

* * *

May 29, 2002

Cendant makes final fraud payment

Cendant Corp. said Tuesday it made a final payment on a record $3.2 billion securities-fraud settlement, which stemmed from a class-action suit against the company. A spokesman for the real-estate and travel concern said the payment was about $1.2 billion.

Last year, a federal appellate court endorsed a record $3.2-billion settlement that New York-based Cendant and its accounting firm, Ernst & Young LLP, made with stockholders relating to accounting irregularities at the former units of CUC International.

The alleged accounting fraud, which Cendant disclosed nearly four years ago, led to a one-day, $14 billion stock plunge and class-action lawsuits from shareholders.

* * *

From thestreet.com, Sept 14, 1999, by Eileen Kinsella

Mergers, Acquisitions and Joint Ventures

Cendant (CD:NYSE) agreed to sell its Entertainment Publications division to investment firm Carlyle Group for about $345 million, including about $325 million in cash, resulting in a fourth-quarter gain of approximately $140 million. Cendant will retain an approximately 16% stake worth $20 million. . . .

For more on Ernst & Young, GO TO > > > P-s-s-t, wanna buy a good audit?


 

Charles Keating - From tripod.com, by Ron Bell (9/11/92)

Charles Keating and the S&L Crisis

Charles Keating, the godfather of the S&L scandal, now sits behind bars, perhaps for the rest of his life. He has been assessed fines exceeding 3.6 billion dollars in just one civil action. Federal prosecution has not yet begun. Yet after several books and tens of thousands of column inches of newsprint, the major features of the Keating story remain, until now, untold.

For example, General John Singlaub and the CIA's Latin American military campaigns, Carl Lindner's purchase of UNITED BRANDS and the U.S. Honduran aid program, extensive BCCI transactions, PRUDENTIAL INSURANCE, and Keating's attempt to get a strangle hold on the water supply of Arizona are key essential features of Keating's story that have not had national exposure.

An army of federal regulators, prosecutors, attorneys and judges have combed the affairs of Charles Keating. So why haven't the major features of his operations come to light? Having a brother who was vice president of ASSOCIATED PRESS helped keep items off the wire service.

The ownership of Phoenix's two city newspapers helped even more. The ARIZONA REPUBLIC and the PHOENIX GAZETTE are owned by the Dan Quayle family.

The Vice President's involvement in the affairs of CIA Latin American programs provided plenty of incentive for Phoenix newspapers to keep the Keating affair as quiet as possible. And Carl Lindner, a much bigger fish than Charles Keating in these affairs, holds the largest stock interest in KTSP TV, the CBS television affiliate in Phoenix.

Keating is a man who has done favors for many powerful individuals including Presidents Ford, Reagan and Bush.

Steven Pizzo, author of INSIDE JOB, one of the best books on S&L looting, supplied Barbara Honegger, author of OCTOBER SURPRISE, a Defense Intelligence Agency telex indicating that the alleged OCTOBER SURPRISE airplane for William Casey's and Heinrich Rupp's Paris trip was arranged by Kenneth Qualls, formerly the chief pilot of Charlie Keating's AMERICAN CONTINENTAL CORPORATION.

This and other high level CIA favors may suggest even more sinister reasons why the major features of the Keating story never made it to print....

Savings and Loans were originally chartered to provide home mortgage loans. When Ronald Reagan deregulated the industry, high rollers were free to attempt more ambitious projects with the federally insured deposits.

No one was more ambitious than Charlie Keating and no one lost more of the tax payer's money.

To date taxpayers have been assessed $500 BILLION for the S&L looting$2 1/2 BILLION for Charlie's sins alone.

After providing less than a dozen home loans, Keating set out to build THE PHOENICIAN, a $300 million luxury resort hotel financed 55% by his newly acquired S&L, LINCOLN SAVINGS, and 45% by the King and Queen of Kuwait.

In November of 1989, six months after Keating's parent company AMERICAN CONTINENTAL finally hit the skids, the Feds took over the PHOENICIAN RESORT in a surprise 1:00 AM raid.

At 4:00 AM Keating was summoning bellmen to a side entrance where 24 cartons of files were loaded into Keating's recreational vehicle. When asked about this by a member of the local press the Feds responded that they knew of this and Keating was allowed to take these files because "they were his personal correspondence --- like letters to his family." The federal investigation of Keating was totally compromised from beginning to end.

If the Feds had done even the most elemental examination of the business affairs of Charles Keating, this is what they would certainly have found: On November 26, 1980, just two weeks after the election of Ronald Reagan and George Bush, Keating purchased the property located at 2735 East Camelback Road for his AMERICAN CONTINENTAL CORPORATION Headquarters. For this he paid $3,083,000 to the MICHAEL J. PELOQUIN DEVELOPMENT CORPORATION.

During the period from 1980 to 1984, Maricopa county court records show that sixty civil suits were filed against Peloquin. And Michael J. Peloquin has a famous father, Robert Peloquin, who has an even more questionable past.

After serving on Robert Kennedy's Strike Force On Organized Crime, Robert Peloquin and half the other attorneys there, distinguished themselves by going directly to work for the major organized crime figures they were investigating.

Peloquin Sr. set up the private spy company, INTERTEL, reportedly for the king pin of American organized crime, Meyer Lansky.

After Lansky had failed to introduce legalized gambling into Atlantic City, INTERTEL was formed to "police the gambling industry" to make gambling acceptable to the state of New Jersey. It is a matter of record that Robert Peloquin ran the PARADISE ISLAND CASINO in the Bahamas for Lansky. This is interesting since Keating had his mansion base also in the Bahamas.

It was INTERTEL that was responsible for the security of Howard Hughes the last two questionable years of his life. Nixon's Domestic Affairs Advisor, Charles Colson once stated that it was difficult to tell "where the HUGHES CORPORATION ended and the CIA began".

The parent company of INTERTEL is RESORTS INTERNATIONAL whose original name was MARY CARTER PAINT COMPANY. MARY CARTER PAINT was reported in a significant May 20, 1976 article by Howard Kohn in ROLLING STONE to have been founded by Allen Dulles, the Director of CIA under Presidents Eisenhower and Kennedy.

In the book, THE COMPANY THAT BOUGHT THE BOARDWALK, INTERTEL was described as a merger of former FBI, CIA, Customs, Bureau of Tobacco and Firearms, IRS and other federal agents with organized crime. This book describes in some detail how Robert Peloquin headed the first Justice Department STRIKE FORCE ON ORGANIZED CRIME, then retired to go directly to work for those Justice was investigating.

Michael J. Peloquin purchased what would soon become the AMERICAN CONTINENTAL Headquarters property April 2, 1979, from James E. Patrick II and Herman Chanen for $550,000. The sale to Keating represented a bump of $2.5 million in only 8 months! What is more, Patrick II and Chanen are not stupid when it comes to real estate. Patrick II is the son of James Patrick, who at this time was President of VALLEY NATIONAL BANK, Arizona's largest bank. Herman Chanen owns the largest construction company in Phoenix and at sale time was Chairman of the State Board of Regents which oversees all state universities.

These men represented the very pinnacle of the Phoenix business establishment. Soon after the Keating deal, James Patrick Sr. retired to become president of ROYAL PETROLEUM in Kuwait, a country closely connected to Charlie's business affairs.

September 19, 1985, Keating received a $5 million loan on this property from
PRUDENTIAL INSURANCE COMPANY, a bump of another $2 million. This was a one payment note that was due in total October 1, 1990. The note was secured with nothing more that the property which had been purchased for $3,083,000. When Keating filed Chapter 11 in April of 1989 this $5 million was added to the rest of the money that just evaporated.

Why were these big business interests coming forward to set Charlie up in business?

PRUDENTIAL is a big player in this. Not only was George Bush's father, Prescott Bush, on the board of Directors of PRUDENTIAL but Ronald Reagan was one of the largest stockholders.

It was PRUDENTIAL that owned the land upon which Herman Chanin built the lavish shopping center, BILTMORE FASHION SQUARE, which is located just across the street from Keating's headquarters. . . .

See also: American Continental Corp.

For more, GO TO > > > Prudential: A Nest on Shaky Ground; Vultures in The Meadows


 

China Petroleum & Chemical Corp. - From American City Business Journals, March 27, 2001:

Chinese corruption probe targets Sinopec executive

DALLAS -- Six months after China-based oil company Sinopec made a $3.5 billion offering to foreign investors, a top executive has been suspended and is under investigation on corruption allegations related to "economic problems," The Wall Street Journal reported Tuesday.

Among the key investors in the company, also known as China Petroleum & Chemical Corp., is Irving-based ExxonMobil Corp., BP Amoco P.L.C. and Royal Dutch Shell Group.

The Journal said their combined investment in the IPO of the Chinese oil venture exceeded $1.8 billion.

The Journal quoted a spokesman with Sinopec as saying 59-year-old Han Qingzhi, the general manager of wholly owned subsidiary Sinopec Sales Co., was relieved of his duties more than a week ago.

The company official did not elaborate on the focus of the investigation, which reportedly has drawn the attention of Chinese government graft inspectors.

The top official of Hubei Xinghua Co., another Sinopec subsidiary, was given a suspended death sentence last year for embezzling $600,000 from the oil company, The Journal reported.


 

Cisco Systems - From Parish & Company, 9/22/00: CISCO SYSTEMS WATERED STOCK SCHEME...

Microsoft erected a financial pyramid scheme, using employee stock options, designed to leverage growth in its stock price. Cisco Systems’ competitive response ... involved using a merger scheme designed to leverage growth in its own share price.

What neither company anticipated was the impact of Citigroup, quietly using a merger scheme similar to Cisco’s, in addition to a variety of predatory practices designed to generate merger fees through its Salomon Smith Barney subsidiary.

While all eyes are on technology, Citigroup has effectively unplugged the new economy due to excessive mergers and their various peripheral implications, in addition to becoming a watered stock itself. This may represent the biggest untold story in the financial media and also the greatest overall risk to the stock market and economy.

No one doubts the remarkable transformation brought about by the Internet. It has ignited a whole new era of economic prosperity. With an 85% market share in routers Cisco has certainly seized this opportunity and seen its stock market value soar to half a trillion dollars. . . .

Meanwhile, Cisco Systems’ remarkable market capitalization is supported by only $20 billion in total revenue and represents a mere $2.35 in sales per share. The current share price is $67 and there are 8.5 billion shares of stock outstanding, including options. It’s the 8.5 billion shares outstanding that deserves more attention along with the illusion that Cisco is rewarding employees with stock options when in reality employees are prepaying their own wages while management pilfers the retirement system in a desperate attempt to sustain their financial scheme. A scheme largely based upon Microsoft like anti-competitive business practices still unknown to the general public.

Cisco claims that “everyone is doing it” yet this report will confirm that this is simply not true. One notable exemption, however, is Citigroup, which now has 4.5 billion shares outstanding and is the largest bank in the country with a market value of $230 billion. Citigroup is using a similar merger scheme and the equivalent of a “fee mill” to sustain its stock price. This includes aggressively selling high priced annuity contracts into pension plans and various other practices, the exact opposite one would expect in a period of increased automation and efficiency. . . .

For the new economy to regain its footing, industry dominating predators like Cisco Systems and Citigroup must first be exposed for what they are doing. This will allow consumers to instead focus on the many excellent alternatives available, both as consumers of financial services and as investors. . . .

The Big Players and a Historical Perspective

Cisco Systems is using techniques no different than those used by Charles Keating. Many forget that Keating was a hero in his day ... with even Alan Greenspan referring to his bank as “an outstanding success.” Sadly, Keating was the catalyst in destroying a great industry that allowed many consumers to purchase their first home. . . .

You might ask, how does a company become worth half a trillion dollars with gross revenues of only $20 billion? And why do leading pension funds including Fidelity, Janus, AXA and Vanguard, which alone own more than $50 billion worth of Cisco shares, invest in the company? If $300 billion worth of Cisco shares are in equity mutual funds and other managed investment accounts, it is likely that more than $4.5 billion in management and brokerage fees, 1.5 percent, are being siphoned from its equity base each year....

Cisco is a giant company that has placed its employees, shareholders and customers in a mathematical vice resulting from a collapse of ethics and integrity by management. While they will note that “everyone is doing it,” we will see what is simply false....

Key Factors Leading To “Watered Stock” At Cisco Systems

1) Excessive use of the pooling method to account for acquisitions, thereby hiding the true cost of acquisition activity....

2) Paying employee wages mostly in non-qualified stock options. This removes the cost of labor from the financial statements and overstates earnings because these wages for options exercised, unlike cash wages, are not included as a charge to earnings.

3) Sales adjustments now represent a large component of gross revenues and investors should begin to ask questions. The first question should be, are gross revenues being manipulated by management? . . .

4) Cisco’s auditors, PricewaterhouseCoopers, are not independent and are helping disguise the scheme. This firm also audits Fidelity, Janus, AXA and Vanguard in addition to co-marketing Cisco’s products through its consulting division....

Cisco Systems Becomes a Financial Pyramid

...Cisco boasts that it will acquire 25 companies this year, many software related, by simply issuing more shares of stock that are never accounted for in the financial statements.

This is done by using what accountants call the ‘pooling technique’ for acquisitions. As with the excessive issuance of stock options to cover wage costs, no cash is required and such costs are not reflected in the financial statements. The only direct cost for pooling and options is a small amount of ink toner and paper used to print up new stock certificates...

Pooling, already outlawed in most countries, was scheduled to be repealed by the Securities and Exchange Commission in December. Cisco has since mounted a quiet and furious lobbying effort and already pushed the repeal back 6 months to June 2001....

In addition to pooling, Cisco Systems is also simultaneously issuing a large number of employee stock options instead of paying cash wages. The wage expense for the options exercised is not shown as a charge against the company’s earnings even though the company gets a full tax deduction for such wages. This explains why Cisco Systems no longer pays federal income tax, even though they report billions in profits...

The company has offloaded its entire tax burden to employees who, along with the retirement system, are being left with inflated shares....


 

Citigroup - In March, 1998, Citicorp and Travelers Group pioneered the merger of the banking and insurance industries with the announcement of a $74 billion merger that ranks as the largest transaction in the history of the financial services industry.

At the time of the merger, Citicorp was the second-largest bank in the U.S. with assets of almost $311 billion and more than 3,200 offices in 100 countries. Travelers, after completing the acquisition of Salomon Inc. (Salomon Smith Barney) was the largest U.S.-based insurance company with $387 billion in assets at year-end 1997. Combined assets of Citigroup total nearly $700 billion!

* * *

October 8, 2001

ATTACKS TAKE TOLL ON BIN LADEN COMPANY

MANAMA, Bahrain (AP) – Respected across the Middle East, the Saudi Bin Laden Group renovated Islam’s holiest sites, helped build the skyline in Saudi Arabia’s capital – and forged ties with the kingdom and royal family that are critical to its business.

Since Sept. 11, these carefully nurtured business connections have been threatened.

The family has disowned Osama bin Laden, the main suspect behind the Sept. 11 assault, and there is no evidence of financial links between the suspected terrorist and the business conglomerate.

Yet, some of the Bin Laden Group’s international bankers and business associates said they are reconsidering or even cutting their ties. . . .

Citigroup, which provides banking services to the Bin Laden Group, would not discuss specific banking ties. But spokeswoman Susan Weeks said: “Given the events of the past two weeks, we will be monitoring the situation closely.”...

For more, GO TO > > > The Eagle Awakes; The Nests of Osama bin Laden

* * *

From The Washington Post, 2/5/01, by Kathleen Day: REPORT FINDS WIDE MONEY-LAUNDERING ...

The failure of U.S. banks and regulators to track transactions with foreign banks enables criminals to route billions of dollars from drug sales, Internet gambling, tax evasion or other illegal activities into the United States each year, a new Senate subcommittee report concludes....

“Inattention and disinterest by U.S. banks in screening the foreign banks they take in as clients have allowed rogue foreign banks and their criminal clients to carry on money laundering and other criminal activity in the United States and to benefit from the protections afforded by the safety and soundness of the U.S. banking industry,” said Sen. Carl Levin of Michigan, the senior Democrat on the subcommittee.

RUSSIAN SCANDAL SPARKS PROBE

The subcommittee launched its investigation after a Russian money-laundering scandal erupted at Bank of New York 18 months ago. It examined a number of well-known banks, including Bank of America, Citigroup, J.P. Morgan Chase & Co. and First Union Corp....

In all, the subcommittee staff questioned 20 institutions and pursued, in detail, more that a dozen U.S. banks involving “dirty money” flowing through U.S. accounts from suspicious foreign banks, especially offshore banks in jurisdictions with weak money-laundering laws, according to the report....

The correspondent relationships that offshore banks have with American banks have become a major tool to facilitate such laundering, the report says.

$1 TRILLION LAUNDERED ANNUALLY

Money laundering is the act of concealing the source of funds obtained from an illegal activity. An estimated $1 trillion is laundered each year– about half of it, or $500 billion, through the United States, according to the report....

In one case, for example, subcommittee investigators found that a convicted felon in California used Citigroup to launder nearly $8 million obtained through credit-card fraud. The money went first from the United States through bank accounts in the Cayman Islands to those in the South Pacific island country of Vanuatu and then back into the United States via an account in New York at Citigroup....

* * *

From www.moneylaundering.com: . . .

A front-page article in the Oct 20, 2000 edition of the Financial Times reports that the London branches of some of the world’s largest banks played a key role in what is believed to be a $4 billion international money laundering operation involving former Nigerian dictator Sani Abacha.

The Times says 15 banks, including Citigroup, Merrill Lynch, Barclays, HSBC, Standard Chartered, and Australia and New Zealand Banking Group, handled transactions for the Abacha Family and their collaborators.

The transactions allegedly involved funds looted from Nigeria’s central bank and other corruption proceeds. The Times says British officials have been slow to respond to requests by the new government of Nigeria for assistance in that country’s investigation of Abacha.

* * *

November 3, 1997

Federal Reserve Bank of New York Melted Down,
Reissued NAZI GOLD

From Conspiracy Newsline

The Federal Reserve Bank of New York melted down $23 million worth of Nazi gold bars in the 1950s, replacing the swastika with a U.S. seal on the reissued bars. The New York Times cited recently-released Federal Reserve memos which indicated that the U.S. Treasury knew that the Nazis had looted the bars from Belgium and the Netherlands.

The gold was sold on the world markets by the Swiss National Bank during World War II. According to the Times, the Fed melted down the bars after the National City Bank (now known as Citibank) urged that they be reissued and used as collateral to help Spain purchase a new phone system from ITT. . . .

The documents did not indicate whether the Treasury or the Federal Reserve knew or suspected that the gold had come from Holocaust victims. But a federal report issued this year concluded that jewelry and gold fillings taken from concentration camp victims were melted together with gold the Nazis took from the central banks of Europe.

A Citicorp spokesman defended Citibank’s actions by explaining,this all happened in an era when there wasn’t as much introspection about this kind of transaction.. . .

* * *

From Honolulu Star-Bulletin, 01/05/99:

Citibank seeks receiver for Oahu Hotel- Citibank, N.A. of Hong Kong has asked a state court to appoint a receiver to take control of revenues generated by the Executive Centre Hotel. The action follows two foreclosure lawsuits against the 41-story hotel filed in December for overdue loan payments totaling $1.5 million.

The hotel is owned by MKS Executive Partners and SHW-Realty, holdings of Indonesian businessman Sukamto Sia. . . .

The hotel owners borrowed a total of about $80 million from Citibank in separate loans in the past 10 years.... payments on the loans stopped in September....

Sia, who was arrested in Las Vegas in October for bouncing $8 million in checks at the Rio and Caesars Palace, filed for Chapter 11 bankruptcy protection on Nov. 6....

* * *

For more, GO TO: Vampires in the City


 

Coca Cola Co. - From Rense.com, 09/05/00, By Sherman H. Skolnick, http://www.skolnicksreport.com:

Coca-Cola, The CIA,
& The Courts

Anatomy Of The Big Court Fix

One of the hardest things to understand for poorly informed folks is that the law and the facts are not the controlling factors in important cases in Court. Mind you, not every case is corrupted or "fixed". Too often, however, the big ones show signs there has been a malign, if not corrupt, influence on the Judge or Judges involved.

Our court reform group, targeting court corruption, has been active for four decades. We know what to look for. The assignment of cases, is, to us, a key sign.

We have been writing and commenting, and did a one-hour Cable TV Program, on the corruption in the case against The Coca-Cola Company, in Chicago's notorious federal district court. With no exceptions, every judgeship in the place has been bought and sold over the years. [Visit our website story, Buying a Judgeship.]

The case against Coca-Cola was brought in January, 1997, by a Nebraska attorney, John DeCamp, with long prior experience with the American CIA. [The plaintiff, Robert E. Kolody, found it difficult to get a local attorney.]

DeCamp was in a position to understand plenty. He was in a position to know that this important case in Chicago, involving claims against the soda pop monster for theft of intellectual property, storyboards and designs, would be difficult to continue. Any plaintiff's attorney might get chewed up and spit out, especially by Coca-Cola, a worldwide adjunct and proprietary operation of the American CIA.

By the corrupt process of random magic, instead of random selection, the Coca-Cola case was assigned to Chicago U.S. District Judge Blanche M. Manning . . . And the road to reportedly blackmailing her, to favor Coca-Cola, was already built.

 Running on that road was waste hauler John Christopher who had a criminal past with reputed ties to organized crime. He agreed to be an FBI "mole" and to wear a "wire" to target some of Chicago's City Officials, known as "the best that money can buy".

The FBI / U.S. Justice Department project was dubbed "Silver Shovel". Screwing the residents in their own districts with poisonous waste, various city council Aldermen took apparent pay-offs or reportedly extorted pay-offs from Christopher, so he could illegally dump huge waste in their neighborhoods. Left-over construction junk. This was primarily or exclusively in poor black areas, with an empty lot or two, areas without financial or political clout.

By the way, after the FBI dust had settled, the U.S. Government did NOT quickly offer to haul away all the toxic mess that Christopher unloaded, often right near populated inner city areas.

"Silver Shovel" was a headlined scandal in the local press starting about January, 1996. By the time the Coca-Cola case got started a year later, City of Chicago Commissioner of Water, John Bolden, was targeted for federal criminal prosecution in "Silver Shovel".

His and the soda pop case were both pending before Judge Manning. Commissioner Bolden's defense attorney, James Montgomery, was reportedly a close crony of Judge Manning.

It was obvious to savvy sorts what might happen. Montgomery reportedly had ties of some sort over the years with Nevada gambling casino gangsters.

Reportedly part of the crime cartel and a big-time owner of gambling casinos, William F. Cellini reportedly had bought the federal judgeship for Manning, paying some one million dollars through then U.S. Senator Carol Moseley-Braun [D., Ill.].

John DeCamp, in a position reportedly to understand a few things about Coca-Cola and the CIA and the Chicago federal judges, withdrew from the newly started case against Coke, in July, 1997. A few weeks later, started the federal criminal trial USA vs. John Bolden.

Same Judge.

Anyone knowing a lot about court knows that even trials by jury can be "fixed" or sabotaged by the trial Judge. Such as, by the Judge keeping out key evidence as being "inadmissible", by manipulating the dates and circumstances of the jury procedures. By slanting the court procedures against the prosecutors and in favor of the criminal defendant. By scheduling the jury under peculiar circumstances.

In September, 1997, the jury in the Bolden case came back with a split verdict. Guilty on tax evasion, wherein Bolden could get, at most, six months in prison. They acquitted Bolden on the more serious charges of extortion.

John Bolden was a bigshot making as much as 90 thousand dollars a year as Commissioner of Water for City of Chicago. [And perhaps much more as pay-offs to influence his official position.] He was a big fish. The team that helped put together the charges against Bolden were and are livid. Why?

They contend that Judge Manning, to go easy on Water Commissioner Bolden, got a financial benefit that some might construe as a bribe. The team, in plain language, grumbles loud enough for others to hear, that U.S. District Judge Blanche M. Manning is a crook, whose chair reportedly was bought for her by a crook, and that she belongs in prison, along with the one who bought her the Judgeship.

To understand this story fully, you have to understand the realities of political and financial power. Those who put together criminal charges are most often NOT concerned about bribes to Judges in CIVIL cases. So, if Judge Manning had been bribed or corruptly influenced or blackmailed in the CIVIL case, the one against Coca-Cola, well, the team is NOT concerned.

In the Water Commissioner's case, Judge Manning made the same mistake, however, as Chicago Federal Appeals Judge Otto Kerner, Jr., in 1969. He had reportedly taken a huge bribe in a CIVIL case, involving a five million dollar claim regarding a pet food company. The matter, however, that instigated the federal criminal charges against Judge Kerner was that he had been corrupted to turn loose the Silver-Hi-Jacking Gang, an important federal CRIMINAL case.

A federal judge is a fool to counter the prosecutors in a federal criminal case. A federal judge who takes bribes or financial benefits or is corruptly influenced or blackmailed, in a CIVIL case, most likely stays peacefully and quietly on the bench until he or she retires or croaks.

The other some two dozen U.S. District Judges that sit with Judge Manning in the federal courthouse in Chicago are just as corrupt as Manning. EXCEPT, they do not screw or sabotage or sabotage CRIMINAL cases. [This is not a blanket generality. I could detail their crimes as well, one by one.]

Judge Kerner learned the hard way the number one unwritten law that applies to crooked judges: YOU DO NOT SCREW AROUND WITH CRIMINAL CASES, only civil cases.

Our group, by the way, was instrumental in getting Kerner put in prison. He was the highest ranking sitting federal judge to be sent to jail for bribery in U.S. history. Also sent to jail with him, by our work, was his crony, the former Director of the Illinois Department of Revenue, the highest Illinois state tax collector, Theodore J. Isaacs.

When I publicly accused Kerner, he tried to get a fellow judge to jail me for contempt of court. Kerner held a press conference and all the local media carried his statement calling me a "liar".

But get this, he died an ex-convict. So who was lying after all?

Here are a few questions to think about:

[1] Were and are Coca-Cola's hotshot Chicago lawyers in a position to know that Judge Manning may be in big trouble and subject to blackmail, such as reportedly by Coke's lawyers, because of her role in the Water Commissioner's case. Coca-Cola's attorneys are: Ms Laura Beth Miller, of Brinks, Hofer, Gilson & Lione. . . .

[2] Why is nothing done about Simon Marketing, a marketing adjunct of Coca-Cola and also defendant with them? The one in court that purports to represent Simon Marketing, reportedly actually represents the insurance carrier. Are they committing a fraud upon the court? Simon Marketing merged with Cyrk, Inc., not shown in the Court record. Purporting to represent Simon Marketing is: Jacqueline A. Criswell. . . .

[3] Why did Judge Manning have six federal police in her courtroom, to intimidate me, when I testified at a hearing as to my investigations in respect to Judge Manning and the Coca-Cola case?

[4] The other judges in the federal courthouse with Judge Manning know better than to sabotage or corruptly screw up the prosecutors in a federal criminal case. How is it that she does not realize she on the road to possible disaster? Did she flunk out of Crooked Judge 101? The other crooked judges in her courthouse have all passed the test. They are each as corrupt as her but know how to survive as a corrupt judge.

Cynics claim that the School for training Corrupt Judges how to survive, is financed, in part, by gambling casino loot. Wise bookies are refusing bets, however, on Judge Manning, a judicial school drop-out. Do we know who actually runs such a school?

You betcha. . . .

For more on Simon Marketing and the McDonald’s McMillionaire scandal, see: Simon Worldwide Inc.

See in Part I: Douglas Ivester


 

Committee of 300 - Recommended Reading: Conspirators’ Hierarchy, by Dr. John Coleman


 

Commodity Futures Trading Commission - From: The Buying of the President (1996 ed): . . .

Phil Gramm has also been criticized for mixing government business and campaign politics by using his Senate office staff to work on campaigns. . . . At least two different aides to Senator Gramm have written memos about how Gramm’s wife, Wendy...should be used for his reelection bid....

That is particularly interesting in light of the powerful position she held in Washington as chairwoman of the Commodity Futures Trading Commission. As the nation’s leading regulator of futures contracts for all agricultural commodities, Wendy Gramm was under tight ethical constraints as to the degree and nature of her personal daily interaction with agribusiness interests.

In other words, the chairwoman of the powerful federal regulatory agency overseeing agriculture commodities futures trading would be helping her U.S. senator husband raise campaign funds from the corporations and individuals she regulated....

The CFTC oversees federal regulation of the nation’s fourteen commodities and futures exchanges. At those exchanges, contracts to buy and sell a seemingly endless variety of commodities are traded: oil and gas, soybeans, cattle, pork belies, corn, precious metals, cocoa, lumber, cranberries, and sugar, to name but a few. The regulatory duties of the CFTC are aimed largely at ensuring fairness and stability at the nation’s commodities exchanges.

One week after Bill Clinton won the presidential election it became clear that Wendy Gramm would be leaving the politically appointed CFTC post. On November 16, 1992, nine energy companies wrote to the commission seeking to exempt energy derivative contracts, a business valued at $5 TRILLION a year, from federal regulation....

In response to the energy companies’ request, Wendy Gramm set in motion the process that led to those energy derivative contracts, and other exotic financial transactions, being exempted from regulation. . . . A Center for Public Integrity investigation shows that of the nine companies that requested the exemption, seven had donated to Phil Gramm campaigns through PACs, company officers, or employees....

Cumulatively, Gramm’s campaigns had received $157,250 from the people who were asking his wife to exempt energy derivatives and the other transactions from regulation....

During Wendy Gramm’s tenure with the commodities commission, Phil Gramm accepted $38,500 in commodity honoraria, according to his actual disclosure records. . . At the same time she was heading the commodities commission, he was on the Senate Banking committee. That means that Phil Gramm, too, had regulatory jurisdiction and oversight regarding commodities.

On July 24, 1990, Phil Gramm voted to kill an amendment that would have lowered the sugar price support from eighteen cents a pound to sixteen cents a pound. That was a potential conflict of interest because Gramm’s disclosure show that at the time the couple owned between $15,000 and $50,000 worth of stock in a sugar company named Castle and Cooke....


 

Coral Reinsurance - From: The Strange Clinton - Rubin - Insurance Industry Connection. 6/13/97: . . .

As American Deposit Corp. learned the hard way ... strong ties exist between Clinton, Secretary of Treasury Robert Rubin and the insurance industry.

Insurance industry representatives secretly approached the IRS to issue damaging proposed regulations to the Retirement CD and the Treasury Department pressured the IRS to acquiesce.

Some say that campaign fund contributions were at the source of this action...

But was this the first time Clinton, Rubin and the insurance industry acted together for a dubious project? Apparently not. A strange and convoluted story begins in Arkansas in 1987.

In that year American International Group, Inc., headed by Maurice Greenburg, founded an offshore reinsurance company in Barbados. For several years, AIG denied being affiliated with Coral Reinsurance, as it was named....

While Bill Clinton was governor of Arkansas, he founded the Arkansas Development Finance Authority, a government agency empowered to issue industrial bonds. The ADFA came to the attention of the Arkansas Committee, a group investigating rumors of drug trafficking out of the Mena, Arkansas airport.

Observing the adage, “follow the money,” they were lead to the ADFA. And the ADFA had some strange dealings....

The ADFA borrowed $5 million from the Chicago branch of Sanwa Bank. It then purchased slightly over $5 million in stock of Coral Reinsurance, the Barbados insurance company founded by AIG. Coral then deposited the $5 million, along with $55 million in other investors’ stock purchase funds, in Sanwa Bank. The net result was the bank loaned the money and got it all back in days....

This strange deal was the scheme on Goldman Sachs, headed at the time by Robert Rubin.

Goldman also provided guarantees to ADFA, such a put agreement should ADFA not be permitted to own the stock. (It is against the Arkansas Constitution for the government to own stock in corporations.)....

Some reporters draw inferences from several facts: Barbados has lax banking regulations and tight corporate secrecy laws preventing outsiders from learning corporate ownership; and when ADFA was set up, the legislation prohibited the state auditors from examining the agency...

* * *

For More, GO TO > > > AIG: The American Idol of Greed


 

Credit Lyonnais - In 1996, Credit Lyonnais was the world’s largest non-Japanese bank, ultimately owned by the French Government.

From the 10/01/96 net article, Credit Lyonnais & L.F. Rothchild Ready to Topple by J. Orlin Grabbe:...

What will happen when the world’s largest non-Japanese bank topples? The repercussions will ripple throughout the world banking system. Get ready to see Citibank, Chase and the Chicago Mercantile hammered....

Credit Lyonnais has long relied on two simple mechanisms to ensure its bloated growth; a ready supply of money-laundering deposits from the Cali cartel and similar sources, and financial infusions from the French government (which owns most of the bank) when all else fails...

Meanwhile, the bank has frittered away its assets in an endless array of non-performing loans. Representative of this is Credit Lyonnais’ financing of Giancarlo Parretti’s purchase of Metro-Goldwyn-Mayer from Kirk Kerkorian in 1990 for $1.3 billion. Later, in 1992, Credit Lyonnais acquired the assets of MGM, which it then sold to a Kirk Kerkorian-backed group for $1.3 billion earlier this year . . . after having pouring millions of dollars into the company.

The big private loser so far is L.F. Rothschild, much of whose fortune is tied up in Credit Lyonnais. ... Meanwhile, the European Commission has launched a series of investigations into a number of suspicious transactions associated with Credit Lyonnaise...

Finally, there is the usual assortment of dead bodies that often appear in the banking world when millions of dollars are at stake.

One of these is Armschel Rothchild, who until his demise was the chairman of British mutual fund group, Rothschild Asset Management.

Amschel committed suicide by a very innovative method back in July. He took the belt from a hotel robe, tied one end to a towel rack, and the other end to his neck. He then hanged himself by, well, let’s see, “jerking back suddenly.” ... Hmmmmm.

* * *

From The Financial Express, 10/28/98: Credit Lyonnais sale put back to 1999 - French finance minister Dominique Strauss-Kahn will unveil the terms of sale for French bank Credit Lyonnais on Thursday but the float will now be pushed back to 1999 . . . Several groups, including Europe’s largest two insurance companies — France’s AXA and Germany’s Allianz — have expressed interest in strategic stakes in the bank.

* * *

From Forbes Magazine, 12/13/99, by David McClintick:

The Dirtiest Bank
in the World

THE FIRE BEGAN at 8:30 on a Sunday morning in 1996 ... in the main trading room of Credit Lyonnais, one of France’s biggest banks. . . . Dozens of offices and thousands of documents, as well as the trading room, the largest in Continental Europe, built by Gustave Eiffel, were reduced to ashes and rubble. French police suspect the fire was the work of arsonists.

It’s a striking and fitting image of what Credit Lyonnais has become. Once a force in global finance, the bank is little more than half its former size, having been looted by criminals, racked by scandal and decimated by the loss of at least $20 billion ... in reckless and corrupt investments.

It is by far the biggest banking debacle in history. (CB: Until 2008...)

This institution, nationalized by the French government in 1945, is an object lesson in what can go wrong in a government-owned commercial enterprise without accountability....

A criminal inquiry, which began quietly five years ago as a narrow probe of an eccentric Italian tycoon, has grown dramatically into more than 100 separate cases of suspected fraud, embezzlement, bribery, perjury, forgery, money-laundering, and even blackmail and arson in France and several other nations, including the U.S. ...

The Department of Justice, the FBI, the IRS and the Federal Reserve ... are examining Credit Lyonnais’ far-flung activities. Rarely have U.S. authorities so deeply probed the operations of a foreign bank. It is now clear that Credit Lyonnais was an octopus of fraud. By comparison, the infamous BCCI, which collapsed with a $7 billion loss, was small change....

Unlike BCCI, Credit Lyonnais is still with us. Reorganized in a French taxpayer-funded bailout that segregated most of the bad loans into a separate entity, the bank was privatized earlier this year, with the government retaining 10% of the common shares. Credit Lyonnais is now a profitable business, with assets of $214 billion, new management and a market value of $9.6 billion. But the sordid past is not behind it. It will be years before the lawsuits and criminal investigations are resolved and the bad assets liquidated....

Among possible crimes in the U.S. under investigation are securities fraud, mail fraud and lying to the Federal Reserve in connection with the purchase of the controversial California insurance company, Executive Life, and its junk bond portfolio....

If the Federal Reserve finds Credit Lyonnais culpable for serious misconduct, as it did Japan’s Daiwa Bank, it could fine it tens — even hundreds — of millions of dollars and even expel it from the country, where it is believed to earn more profit than in any nation outside France....

In France it is nothing less than a phenomenon of historic import, a jolting demonstration of the arrogance, insularity and lack of accountability of the state-dominated elite that has governed the country’s financial sector since World War II. The criminal investigation is the country’s largest ever. In a move virtually unprecedented in history, offices of the French Treasury, the core of the Ministry of Finance, have been searched for evidence of crime...

Investigators are probing a wide array of Credit Lyonnais’ clients and subsidiaries, some of which have bred sizable scandals of their own. These include the doings of such former clients as Robert Maxwell, the late British publisher who died under mysterious circumstances in 1991, and Bernard Tapie, who owned Adidas for a time with Credit Lyonnais’ help and later went to prison for bribery in a separate case....

Even a former governor of France’s central bank has been questioned. Investigators had discussed with other top officials whether their actions or inactions might have fostered Credit Lyonnais’ frauds and losses. Prominent financiers, well-known in global banking circles, face possible imprisonment, financial calamity and public disgrace....

* * *

From The Conspirators: Secrets of an Iran-Contra Insider, by Al Martin:

IRAN-CONTRA REAL ESTATE FRAUD

The final Iran-Contra note I wanted to make about Nevada was the egregious swindle that George Bush Sr. himself instituted in concert with Frankie Sue DelPapa on that Cosmos Development deal.

The scenario in question later became known as the Peruvian Gold Certificate Swindle, where DelPapa actually substituted corporate records.

Bush had formed a corporation with a very similar sounding name. This was commonly done – mimic corporations with similar sounding names.

You simply substitute the records and it was an out-and-out swindle of the Durham family. This is the scenario that the famous California conspiracy theorist, E.E. Eckert, got involved in....

What Eckert did was connect this fraud to ever larger frauds. He connected the gold certificate fraud into big money, tens and hundreds of millions of dollars in bank loans at Banque Paribas, Credit Lyonnais, Union Bank of Switzerland.

This is also part of the National Bank of Greece swindle that was instituted by Prime Minister Papandreou and George Bush together....

This wound up being an enormous swindle in the end and this is what is called the Grade One Swindles in Iran-Contra. These are the swindles that nobody is ever going to want to look at because it gets far too close to the way everything works and what it’s really all about.

For a long time Eckert tried to get the major media interested in it. And they would bite. ABC bit a couple of times on it. As long as the fraud could be contained, to say: “Well, it’s just a small $75 million fraud, and Bush was connected to it.”

But the minute Eckert was able to show that this was up in the clouds....

This is one of the frauds in the clouds that makes the world go around, that ultimately was to involve Daiwa Bank and Sumitomo Bank.

It’s an interesting example. They had hired me at one time as a consultant to provide some further information for them, which I did. They needed some connecting pieces of the puzzle.

But this is a very interesting fraud about which an entire book could be written. It’s a fraud that starts out with a $50,000 investment by George Bush, and ultimately it grows into a $2 or $3 billion international bank fraud.

How? By simply rehypothecating loans and/or borrowing ever greater amounts of money, using proceeds to pay back the old loans, or in some cases to partially pay them back, which was more common.

Then the corporate entity would go bankrupt. Credit Lyonnais was one of the very few banks to ever admit that it lost money, that it had in fact lost about $68 million on this fraud. Of course, they would have no comment when they were asked about George Bush’s involvement with this fraud.

But Eckert knew, and the Financial Times of London knew, that Bush’s signature was on loan papers at Credit Lyonnais.

You may remember this famous scenario. FT London revealed that Credit Lyonnais had a fire in their reserve document storage facility in Paris and (wouldn’t you know it?) there were three or four file cabinets that got burned up, including all of the Bush documents....

* * *

Pecked from the Chicago Mercantile Exchange website by the Catbird on 12/25/99:

Clearing Member Firms: Credit Lyonnais Rouse (USA) Limited

Firm Description: Credit Lyonnaise Rouse Limited, founded in 1847....

Credit Lyonnais Rouse Ltd. (CLR) is an international house with offices in the major financial centers of the world. As a wholly-owned subsidiary of Credit Lyonnais S.A. (itself ultimately owned by the French Government), CLR enjoys a long history in satisfying customers who demand high quality, professional services in exchange-traded futures and options, cash markets and overnight Exchange for Physicals. . . .

[A Catbird comment: Wh-a-a-at? ...no mention of it being the dirtiest bank in the world???]


 

Credit Suisse First Boston - A Swiss-owned Boston-based bank with a long history – too long to view but a bit here.

CSFB gets new IPO headache
with U.S. House probe

By Brian Kelleher

NEW YORK, Sept 5, 2002 (Reuters) - Just when Credit Suisse First Boston must have thought it was off the regulatory radar, government investigators have placed the top Wall Street investment bank back into their sights.

A congressional inquiry into how underwriting firms allocate initial public offerings of stock has been expanded to include CSFB, a unit of Credit Suisse Group Inc. , and Goldman Sachs Group Inc.

Lawmakers are investigating whether firms favored top executives of companies which were also clients of the investment banks when they doled out shares of hot IPOs.

"It seems to have been a widespread practice (for investment banks) to hand these underwritings out as if they were frequent flyer miles, which I think is wrong," said Ray Soifer, a former bank analyst who runs Soifer Consulting.

The U.S. House Financial Services Committee initially began its investigation into IPO allocations at Salomon Smith Barney, the Citigroup Inc. brokerage, then expanded to include the other investment firms.

The House probe centers on whether Wall Street banking clients were bribed with IPO shares to keep sending their underwriting and merger advisory business to certain firms.

Along with the pressure from Congress, investment banks may eventually face stricter rules when doling out IPO shares.

Salomon revealed it allocated large numbers of shares to top WorldCom Inc. executives, including former Chief Executive Bernard Ebbers, who made $11 million over four years off the stock offerings.

Ohio Republican Michael Oxley, chairman of the committee, said insider allocation of IPO shares unfairly dilutes the value of the stock for the small investor.

It's not the first time CSFB's IPO process has raised eyebrows. In January, it agreed to pay $100 million to settle accusations it charged extraordinarily high trading commissions in exchange for shares of high-flying offerings.

CSFB become one of Wall Street's top tech IPO underwriters during the boom of the late 1990s and early 2000, when the shares were virtually guaranteed to skyrocket and created insatiable investor demand.

CSFB's West Coast banker Frank Quattrone, who drove the firm's success in the tech sector, may become a target of the allocation probe.

Quattrone pushed to get more IPO shares for brokers who worked with his group, according to The Wall Street Journal on Thursday. Tech executives he worked with opened CSFB accounts and received up to 1,000 shares of hot IPOs, which were sometimes sold within days, the paper said. . . .

Harvey Pitt, chairman of the U.S. Securities and Exchange Commission, on Aug. 22 asked the National Association of Securities Dealers and the New York Stock Exchange to review the IPO allocation process to see if it needs to be reformed....

'FRIENDS OF FRANK'

The NASD on Aug. 15 suspended and fined six former and current CSFB executives a total of $320,000 for their roles in the original IPO probe. The four ex-staffers who were censured worked in CSFB's brokerage unit and reported to Quattrone.

By early 2000, executives for Quattrone banking clients had opened 160 CSFB brokerage accounts -- known as "Friends of Frank" accounts -- up from 26 in January 1999, the Journal said, citing a CSFB e-mail.

The value of those accounts tripled to a peak of $150 million, and the clients would sell two-thirds of their IPO allocations within a month of receiving them, the paper said. . . .

© 2002 Reuters

For more, GO TO > > > The Turnstone Birds


 

Dean Witter - From Associated Press:

Dean Witter Charged With Fraud

Elderly Investors Allegedly Lost $65 Million

NEW YORK, Nov 21, 2000 (AP)-- The National Association of Securities Dealers charged Monday that broker Dean Witter Reynolds unfairly coaxed thousands of elderly investors to put $2 billion into volatile bond funds by fraudulently marketing them as secure, conservative investments.

NASD regulators filed a complaint against Dean Witter and two executives, John B. Kemp and Lawrence J. Solari Jr., accusing them of targeting holders of certificates of deposit and other low-risk investments in the early 1990s for the brokerage's Term Trusts.

'Particularly surprising'

Dean Witter's bond funds were embraced by more than 100,000 customers, many of them elderly and on fixed incomes. About 30,000 of those investors lost $65 million after the value of the Term Trusts dropped precipitously in 1994, NASD Regulation said.

The brokerage firm denied the allegations Monday.

"We are disappointed that the NASDR, following an investigation that lagged for more than four and a half years, has decided to pursue this action," said Bret Gallaway, a spokesman for Morgan Stanley Dean Witter Co. "The NASDR's action against our firm and the two named individuals is unfounded and particularly surprising since it concerns investments sold seven or eight years ago."

Long investigation

But Barry R. Goldsmith, the NASD's executive vice president for enforcement, said it took time before investors realized their losses and several years beyond that for investigators to uncover and document the depth of the problems.

"This is a major case. It's a fraud case and, obviously, before we bring a case like this with this kind of serious allegations, we want to make sure we have a complete record," Goldsmith said.

Dean Witter, which conducted an extensive internal marketing effort encouraging its brokers to sell the trusts, pocketed more than $119 million in underwriting fees and sales concessions, plus $7 million annually in management fees, the NASD said.

Kemp is president of Dean Witter Distributors and director of sales for Dean Witter InterCapital. Solari was the regional director of Dean Witter's Northeast Region. It was unclear if he still works for the company; Gallaway said he did not know offhand.

'Significant risks' or 'safe'

"The campaign presented the Term Trusts to brokers as a .... safe, high-quality alternative to CDs," the NASD said in a release Monday. "The campaign failed to mention, or obscured, the significant risks associated with Term Trusts."

Term trusts are proprietary bond funds structured to offer dividends outpacing the low interest rates offered of CDs. When the funds were offered in 1992 and 1993, much of their portfolio was comprised of risky mortgage-derivative securities highly sensitive to interest-rate fluctuations, according to the NASD.

When interest rates rose in 1994, the Term Trusts lost more than 30 percent of their value and the dividends paid to investors dropped by nearly one-third. Morgan Stanley no longer offers new Term Trusts, but the shares issued in the early 1990s continue to trade on the New York Stock Exchange.

Gallaway, the spokesman for Morgan Stanley Dean Witter, noted that a federal judge in New York in 1996 dismissed a class action suit brought against the company for its marketing of term trusts.

But two other cases are still pending, a class action suit in state court in Orange County, Calif., and a suit in state court in Palm Beach County, Fla.

The NASD complaint, filed with assistance from the New York State Attorney General's office, will be settled before a panel made up of an independent hearing officer and two members of the securities industry. The panel has the power to impose penalties including fines, restitution and suspension or expulsion of members from the industry.


 

Drexel Burnham Lambert Inc. - From Den of Thieves, by James B. Stewart:

On Sept 7, 1988, the SEC filed its long-expected lawsuit against Drexel.

The 184-page complaint named Drexel, Michael Milken and Lowell Milken, Cary Multasch, and another high-yield employee, Pamela Monzert, as well as the Posners, Milken’s clients in Fisch-Bach....

The SEC accuses them of insider trading, stock manipulations, fraud, and other violations of federal securities laws....

In December, 1988, Drexel agrees to plead guilty to six felonies, settle SEC charges, and pay a record $650 million.

In March, 1989, Michael Milken and his brother Lowell are indicted on 98 counts of racketeering and securities fraud....

In October 1989 the junk bond market collapses....

In February, 1990, Drexel files for bankruptcy protection....

In April 1990, Milken agrees to plead guilty to six felonies and pay $600 million....

In November 1990, Milken is sentenced to ten years in prison....

Recommended Reading: Den of Thieves; F.I.A.S.C.O.


 

Dynegy Inc. - Another energy trader (like Enron) going down the slippery slide.

May 29, 2002

Dynegy chief executive Watson resigns

Its stock spiraling amid questions about possible sham trades, Dynegy Inc. announced the resignation of its chief executive Tuesday in yet another top-level shake-up of an energy trading company.

Chuck Watson, a co-founder of Dynegy, became the latest casualty of turmoil that has spread through the industry since the Enron Corp. scandal broke last fall. He led an abortive attempt to buy Enron as it was collapsing.

With his company's stock down as much as 88 percent in a year, Watson stepped down as both chief executive officer and chairman of the board.


 

DynCorp - From “From The Wilderness” - What Happens in Congress May Not Be As Important As What Happens With CIA, The Military and The Private Contractors Leading Us To War in Colombia . . .

When The Children of the
Bull Market Begin to Die

By Michael C. Ruppert

[Bill Clinton arrives in Cartagena Colombia on August 30, 2000 on the heels of three unpublicized massacres by right wing paramilitaries designed to inflame FARC guerillas. The real shooting and the American publicity machine churning out war fever will start on the same day. This was the lead story in the June issue of "From The Wilderness."]

While attention is being increasingly focused on a billion dollar military aid package for Colombia that is nearing Bill Clinton's desk for signature, experience - especially that taken so painfully from Vietnam - tells us that the real determinants of how deeply involved we will become in Colombia are not in Washington, but already down there stirring the pot.

As in Vietnam, and unlike the Contra War, Congress may just be playing "catch-up" with events created by various interests serving more than one master. And experts are becoming increasingly persuaded that our current Colombian experience is more like Vietnam than anything since.

The likelihood of direct involvement of U.S. forces in a dense hostile terrain, controlled by experienced, organized, well-armed, indigenous forces, toughened by three decades of civil war is growing daily. And indicators of the imminence of conflict are not to be found in whether the Senate or the House chops or adds a few dollars or helicopters which can all be restored without fanfare to the Foreign Aid Bill in Conference Committee at the last minute. They are to be found in the movements and actions of money, the U.S. military and some CIA / DoD connected corporations, possibly using "sheep-dipped" CIA and military personnel disguised as employees of private companies in roles that can only expand the conflict.

The money flow in and around Colombia, both as connected to the drug trade, to vast oil reserves and to the other abundant resources accessible through the "back door" to the Amazon, only hints at the financial and economic power accumulated in the country. As FTW observed a year ago, the wealth accumulated by the FARC guerrillas, largely through the "taxation" of the drug trade, was sufficient to induce Richard Grasso, Chairman of the New York Stock Exchange, to travel to Colombia seeking investment funds for Wall Street.

That same wealth has made it possible, according to MS-NBC, for FARC to purchase enormous quantities of weapons from the Russian Federation and have them delivered to Colombia in huge Il-76 transport planes. The rebel forces (both FARC and ELN), now controlling a third of the countryside, are paying for the weapons with cocaine which is then flown back, under the control of the Russian Mafia for sale in Europe, the Middle East and the former Soviet Union.

The model is not substantially different from that employed by CIA protected assets and operations during the Contra War of the 1980s except that there is no ideological mask. And, as documented heavily by FTW (10/99), the proceeds of Russian organized crime are increasingly finding their way into profitable investments in U.S. banks like the Bank of New York or into Wall Street where history is again affirmed that the real power always profits from both sides of a war.

To understand the significance of this trade it must be noted that, in spite of the continuing expansion of violence between the three dominant factions (government, right wing paramilitaries and rebels), all of which deal prodigiously in drugs, Colombia has been able to steadily expand its drug production every year for the past ten years. Now the largest drug producing nation in the world, according to DEA and DoJ sources, Colombia produces almost all of the world's cocaine and almost two thirds of all the heroin entering the United States. If one imagines three rivals locked in a raging gun battle, one wonders how or why they could all simultaneously increase drug production at rates that would make major corporations jealous. Clearly something else is operating here and that is the hand guiding the huge accumulation of wealth resulting from decades narco-expansion.

That hand, we believe, is the CIA.

That accumulated drug wealth is what is attracting the likes of major World Trade Organization advocates like former Bush Treasury Secretary Nicholas Brady and his Darby Investments and multi-national giants like Philip-Morris, which, at press time, has announced plans to purchase Nabisco with some of the excess cash it has derived from laundering drug money.

The other key to understanding the motive for a full regional conflict in and around Colombia comes when one grasps fully that the accumulated equity of decades of drug trafficking, possibly several trillion dollars, would be enough, if properly focused in a unified national economy to threaten United States economic dominance in the Western Hemisphere and perhaps the world. Better to have the country divided into warring factions and incapable of focusing a unified national will or acting as a regional lynchpin to lead other South American nations in opposition to the re-colonization of the region .

The Private Contractors

As noted by highly credible writers such as Peter Dale Scott, Col. Fletcher Prouty and even the legendary "retired" CIA executive Ted Shackley in his book The Third Option, the use of private corporations, whether directly owned by CIA as "proprietaries" or not, is a common practice for the extension of U.S. military and diplomatic power. Examples of the former in Vietnam include Civil Air Transport or Air America while examples of the later include large multi-nationals such as Bechtel, Brown and Root, AT&T or any of the major oil companies.

In regions where overt commitment of U.S. military forces is impolitic these private corporations, as they have evolved in the last few decades, can accomplish a multitude of objectives essential to inflaming regional conflicts to the point where U.S. military forces must be called in to save the day.

The use of these companies, which serve as actual profit centers for their private investors, their intelligence agency owners, or both, has evolved to the point where the corporations offer off-the-shelf war making capabilities from infantry fighters, to aerial reconnaissance, to general officers capable of setting up or commanding division sized maneuvers in client countries. The survivability of these companies is a priori tied to the creation of conflict and regional destabilization with the blessings of CIA so that there will always be customers. Peace becomes the enemy.

One such corporation, heavily involved in both Colombia and in Kosovo is the Virginia based DynCorp.

DynCorp, according to Alex Cockburn and Jeff St. Clair, is the nation's twenty-second largest defense contractor with 1998 U.S. Government contract revenues of $475 million. DynCorp, which currently has between 300-600 contracted employees in Colombia, is performing functions like crop eradication (using defoliants - like Vietnam), to sophisticated aerial reconnaissance, to combat advisory roles training military and possibly even paramilitary forces.

When the history of the Colombian War is written it may well be noted that the first U.S. casualties were actually three DynCorp employees killed when their reconnaissance aircraft crashed on a mountaintop in the drug growing regions last summer. DynCorp employees have been described as being arrogant and more than willing to get "wet" by going out on combat missions and engaging in firefights.

A British source reminded us recently that DynCorp Chairman, Pug Winokur, begged out of Commerce Secretary Ron Brown's ill fated last flight in the Balkans.

The same Pug Winokur is on the board of Harvard Endowments which had a behind the scenes hand in destroying the economic research conducted by former Assistant Secretary of Housing, Catherine Austin Fitts in 1996. That research was beginning to illuminate how the drug trade generates profits for Wall Street through the subsidized HUD housing market where Harvard is a heavy investor. . . .

(For more on this connection, GO TO > > > HUD)

The parallels between Colombia and Vietnam are inescapable and unavoidable. After twenty-five years, the passing of an entire generation, the forces that govern us behind the scenes are poised to unleash another "floating crap game" of profits, corporate expansion, re-colonization and even genocide. The one glaring and hope-giving difference is that this time the war will be justified on the basis of fighting not Communists, but drug traffickers - and only one gang of drug traffickers at that.

We will see the American people's willingness to accept this ploy when the children of the bull market begin to die.


 

ecampus.com - From The Courier-Journal, 6/27/01: Wendy’s Founder Sued Over ecampus . . . A group of Tennessee investors has sued Wendy’s founder Dave Thomas, claiming he misled them into investing nearly $1.7 million in a now-bankrupt Internet company.

The company was ecampus.com, founded in 1999 by former Kentucky Gov. Wallace Wilkinson to sell books and other goods to college students.

Wilkinson was forced into bankruptcy in February, listing $418 million in debts, mostly from his collapsed textbook empire. Ecampus.com filed for bankruptcy in May, listing 429 investors.

Among them is Thomas, who has filed a lawsuit in Florida claiming he was misled into guaranteeing a $25 million loan to Wilkinson’s businesses last year.

Seventeen Knoxville investors filed suit last week in Knox County Circuit Court claiming they were misled by Thomas. They claim Thomas “touted this investment ‘as better than Wendy’s’” without disclosing that up to $20 million of a $50 million initial private stock offering for ecampus.com went to prop up Wilkinson’s bookstore business.

If the investors, who participated in a second private offering in 1999 that raised $31 million, had known of Thomas’ financial connection to Wilkinson or that ecampus.com’s money was being diverted, “they would not have invested in ecampus.com” their lawsuit said. . . .

* * *

From The Courier-Journal, 6/27/01, by David Mcginty: SEC Rules Violated, ecampus Suit Says ...

A group of Florida investors in ecampus.com, former Gov. Wallace Wilkinson’s failed on-line bookstore, are claiming that ecampus.com stock was sold to them under conditions that violate U.S. Securities and Exchange Commission rules.

The 11 investors, in a complaint filed in U.S. District Court in West Palm Beach, Fla., allege that two ecampus.com figures, Kentucky businessman L.D. Gorman and Wendy’s restaurant founder Dave Thomas, solicited investors and sold shares in the company in a private stock offering, without complying with SEC rules for a private sale.

The 11 investors paid a total of $1.1 million to buy shares of ecampus.com stock in August 1999 at $3.90 a share.

Earlier this year, after Wilkinson’s personal bankruptcy had cast doubt on the viability of his business enterprises, including ecampus.com, the investors filed suit in state court in Florida. They claimed the stock sale violated state securities laws and named Gorman, Thomas and ecampus.com officers as defendants. (Wilkinson, because of his bankruptcy, is protected for the moment from such suits.)

The suit was later moved to federal court, and in a filing late last week the investors filed a new complaint, adding charges of violations of SEC rules.

Thomas and Gorman, the suit claims, did not disclose that they were founding investors in the company, at a price of $1 or less a share, and “stood to benefit significantly” from the August offering at $3.90 a share. Nor, the suit alleges, did they disclose that much of the money would go to Wallace’s Bookstores, another Wilkinson company in which Gorman and Thomas had an interest.

According to information filed in another court, Thomas owned stock in Wallace’s Bookstores worth $15.7 million and owned 2,622,950 shares of ecampus.com stock. Gorman owned stock in ecampus.com valued at $7.3 million and has been named by Wilkinson as a shareholder in Wallace’s.

Gorman and Thomas also offered the stock as a “private placement” exempt from registration with the SEC, although the stock offering failed to meet SEC requirements for such exemptions, the Florida investors claim. . . .

Further, the suit claims, investors were not supplied audited financial statements of the company, although they should have been.

Both Wallace’s Bookstores and ecampus.com have declared bankruptcy and are being liquidated. . . .

The circumstances under which Wilkinson sold stock in ecampus.com are being investigated by the SEC, which interviewed him last week. Also last week, Thomas was sued in a state court in Tennessee by a number of investors who claim he misled them into buying ecampus.com stock.

In a related matter, an affidavit filed in another federal lawsuit said that in early February, when Wilkinson filed for bankruptcy, Gorman said he “might have to sell” Citizens National Bank & Trust of Hazard to cover a debt the bankruptcy had saddle him with.

Gorman or his companies had loaned Wilkinson more than $40 million and had also signed a guaranty for a $25 million loan to Wilkinson from The United Co. When Wilkinson declared bankruptcy, The United Co. loan went into default.

Thomas, who also signed the guaranty, has since sued The United Co. and Gorman, claiming he was misled. . . .

The loan has not been repaid. In April, Citizens Bank announced it will be acquired in the fall by Whitaker Bank in Lexington for an undisclosed amount. . . .

* * *

For another interesting Dave Thomas investment, see “McKenzie Methane” in Dirty Money, Dirty Politics & Bishop Estate


 

Enron Corporation - If you haven’t heard of them, go back to playing your video games .

Nov 28, 2001

Markets Down on Enron's Collapse

By Jerry Knight, Washington Post Staff Writer

The stock market was jolted today by the impending collapse of Enron Corp., the biggest company in the natural gas business and the nation's seventh largest corporation based on revenue.

Dynegy Inc., another big gas company, backed out of buying Enron at mid-day, leaving the giant gas company teetering toward bankruptcy. Enron's natural gas trading desk, which dominates that business, was shut down.

After credit rating agencies downgraded Enron to the "junk bond" level, the company stopped paying its bills and others refused to do business with it.

Enron's stock, worth nearly $90 a share a year ago, plunged into penny stock territory –– closing down $3.50 to 61 cents –– and some traders speculated that it might become worthless.

Enron's collapse pulled down the stocks of Citigroup Inc. and J.P. Morgan Chase & Co., which only a few weeks ago gave Enron several hundred million dollars in unsecured loans.

Citigroup and J.P. Morgan Chase are both members of the Dow Jones industrial average, and the declines in their stocks alone knocked more than 30 points off the Dow, which fell nearly 161 points to 9711.86.

The sudden implosion of Enron is the most serious business failure since the dot.com and telecom collapse, and it triggered widespread selling on Wall Street. . . .

Enron's failure has nothing to do with economic conditions and everything to do with the way the company was run.

Only a few months ago, Enron was being touted as the model of the modern corporation. Starting out as a stodgy natural gas pipeline, Enron used the Internet to make itself the master gas trader, revolutionizing the business and generating vast profits.

Much of those profits turned out to be the product of mysterious deals with affiliated companies that never actually put any cash in Enron's coffers.

As Enron's problems began to become evident a few weeks ago, the Houston company put itself up for sale, finally accepting an $8.4 billion offer from much smaller Dynegy Inc. But the more Dynegy executives looked into Enron's business, they less they liked.

Today they pulled the plug leaving Enron little alternative but to file for bankruptcy. . . .

For more, GO TO > > > The Story of Enron


 

Ernst & Young, LLP - One of the Big Five accounting firms.

GO TO > > > P-s-s-t, wanna buy a good audit?


 

Federal Reserve Board - From Corporate Predators, by Russell Mokhiber and Robert Weissman:

BOOM AND BAILOUT

So, you’re John Meriwether, the bond trader who was forced to leave Salomon Brothers in 1991 after a trading scandal.

And you leave to start Long Term Capital. And for the first couple of years, you are making 30 percent return on investment for your millionaire friends. And they are loving it. And then you lose the $4 billion. Who do you call? The Federal Reserve Boardbailout central.

So it was that on a late August day, New York Federal Reserve Bank President William J. McDonough received a phone call from Meriwether and bailout fix-it man supreme David W. Mullins, Jr, the architect of the bailout of the savings and loans under President Bush.

Big institutional investors in the hedge fund – Merrill Lynch & Co., Goldman Sachs & Co., Bear, Stearns & Co., and Bankers Trust Corp were also calling begging for a bailout.

These companies were of course seeking to save their own skin. But McDonough put forth the official spin before a House of Representatives Committee earlier this month.

 “Everyone I spoke to that day volunteered concern about the serious effect the deteriorating situation of Long Term Capital could have on world markets,” McDonough said.

Ah, yes, world markets. And so McDonough calls Fed Chair Alan Greenspan and Treasury Secretary Robert Rubin and a bailout is arranged.

Former Lehman Brothers partner and current financial columnist Michael Thomas is right— it was improper for the Federal Reserve to arrange a private bailout. If Merrill Lynch and Goldman Sachs want to protect their behinds by arranging for a private bailout, fine. But the Fed should have stayed out of it.

Or, as former Fed Chair Paul Volcker asked in a speech, “Why should the weight of the Federal Government be brought to bear to help out a private investor?”

“Capitalists now all want it one way,” Thomas says. “They want to do whatever the hell they feel like, but let someone else pay. It’s called privatizing the profits and socializing the risks.”

Hedge funds, which make complicated financial bets with millions and billions of borrowed dollars and are almost totally unregulated, do indeed pose risks to the economy. Because of the nature of their gambles, they can lose huge amounts of money, leaving investors holding the bag (absent a bailout).

Even worse, they leverage borrowed money to exert extraordinary influence over markets, and cause serious problems when they overreact en masse to new fads. (That’s a big part of why the value of the dollar has plunged recently, for example.)

But these are reasons why hedge funds must be subjected to regulatory discipline— not an argument for why high rollers deserve government-orchestrated bailouts.

With the global financial system in frenetic disarray, Long Term Capital is not likely to be the last financial player to go bust. If the government is not able to act quickly to rein in hedge funds and other unbridled financial activities, it should at least declare that no bailouts will follow ... Each bailout makes the next one more likely, as investors are given implicit assurances that they will not have to face the down side of risky bets gone bad.

The gamblers in Atlantic City don’t get this kind of treatment. Neither should those on Wall Street. . . .


 

George Soros - From Free Republic, 2/12/98, posted by Stefan Lemieszewski:

The Secret Financial Network Behind ‘Wizard’ George Soros

This is another post in the series along the theme that: “Corrupt elites prosper at the people’s expense of the IMF, World Bank and ‘shock therapy’ policies of Western advisors under the guise of free-trade or democratic or market-reforms.”

In his article, “Communique of American-Ukrainian Advisory Committee,” ... Eugene M. Iwanciw wrote: “The American-Ukrainian Advisory Committee met in New York on Nov 17-18, 1995 and reiterated its strong conviction that a resilient Ukraine is in the interest of European stability and thus also American security.” . . .

The American participants of the AUAC sponsored by the Center for Strategic and International Studies (CSIS) included:

Zbigniew Brzezinski (CSIS counselor); Richard Burt (chairman, International Equity Partners); Frank Carlucci (chairman, Carlyle Group); Gen. John Galvin (dean, Fletcher School of International Law and Diplomacy); Michael Jordan (chairman and CEO, Westinghouse Electric Corp); Henry Kissinger (chairman, Kissinger Associates) and George Soros (chairman, Soros Foundation).

Previous American advisers of AUAC included Malcolm Steve Forbes, Jr. (editor-in-chief, Forbes magazine) ... and Dwayne Orville Andreas (chairman and CEO, Archer Daniels Midland Co. ), whose company pleaded guilty last month for anti-trust and price-fixing violations and agreed to pay a $100 million fine– the largest fine on its kind ever.

Also in a previous post it was indicated that at least six of the current seven American members of AUAC are also members of the Council of Foreign Relations (CFR), including George Soros....

It has also been reported that Soros has contributed $15 million to groups advocating an array of alternatives to the Clinton administration’s “War on Drugs,” including a personal donation of $350,000 to fund a “medical marijuana” ballot initiative in California and a personal donation of $100,000 for a similar ballot initiative in Arizona.

The following Nov 1, 1996 article by the Executive Intelligence Review provides additional background information on George Soros...

The Secret Financial Network Behind “Wizard” George Soros, by William Engdahl...

Time magazine has characterized financier George Soros as a “modern-day Robin Hood,” who robs from the rich to give to the poor countries of eastern Europe and Russia. It claimed that Soros makes huge financial gains by speculating against western central banks, in order to use his profits to help the emerging post-communist economies of eastern Europe and former Soviet Union, to assist them to create what he calls and “Open Society.”

The Times statement is entirely accurate in the first part, and entirely inaccurate in the second. He robs from rich western countries, and uses his profits to rob even more savagely from the East, under the cloak of “philanthropy.” His goal is to loot wherever and however he can. Soros has been called the master manipulator of “hit-and-run capitalism.”

As we shall see, what Soros means by “open,” is a society that allows him and his financial predator friends to loot the resources and precious assets of former Warsaw Pact economies. By bringing people like Jeffrey Sachs or Sweden’s Anders Aslund and their economic shock therapy into these economies, Soros lays the groundwork for buying up the assets of whole regions of the world at dirt-cheap prices.

The Man who Broke the Bank of England?

An examination of Soros’s secretive financial network is vital to understand the true dimension of the “Soros problem” in eastern Europe and other nations.

Following the crisis of the European Exchange Rate Mechanism of Sept, 1992, when the Bank of England was forced to abandon efforts to stabilize the pound sterling, a little-known financial figure emerged from the shadows, to boast that he had personally made over $1 billion in speculation against the British pound. The speculator was the Hungarian-born George Soros, who spent the war in Hungary under false papers working for the Nazi government, identifying and expropriating the property of wealthy fellow Jews.

Soros left Hungary after the war, and established American citizenship after some years in London. Today, Soros is based in New York, but that tells little, if anything, of who and what he is.

Following his impressive claims to possession of a “Midas touch,” Soros has let his name be publicly used in a blatant attempt to influence world financial markets– an out-of-character act for most financial investors ... Soros the financier is as much a political animal, as a financial speculator.

Soros proclaimed in March 1993, with great publicity, that the price of gold was about to rise sharply; he said that he had just gotten “inside information” that China was about to buy huge sums of gold for its booming economy. Soros was able to trigger a rush into buying gold, which caused prices to rise more than 20% over four months...

Typically for Soros, once the fools rushed in to push prices higher, Soros and his friend Sir James Goldsmith secretly began selling their gold at a huge profit....

The Secret of the Quantum Fund NV.

Soros is the visible side of a vast and nasty secret network of private financial interests, controlled by the leading aristocratic and royal families of Europe, centered in the British House of Windsor. This network, called by its members the Club of Isles, was built upon the wreckage of the British Empire after World War II.

Rather than use the powers of the state to achieve their geopolitical goals, a secret, cross-linked holding of private financial interests, tied to the old aristocratic oligarchy of western Europe, was developed. ... Soros is one of what in medieval days were called Hofjuden, the “Court Jews,” who were deployed by the aristocratic families.

The most important of such “Jews who are not Jews,” are the Rothchilds, who launched Soros’s career. They are members of the Club of the Isles and retainers of the British royal family. This has been true since Amschel Rothschild sold the British Hessian troops to fight against George Washington during the American Revolution.

Soros is American only in his passport. He is a global financial operator, who happens to be in New York, simply because “that’s where the money is,” as the bank robber Willy Sutton once quipped, when asked why he always robbed banks.

Soros speculates in world financial markets through his offshore company, Quantum Fund NV, a private investment fund, or “hedge fund.” His hedge fund reportedly manages some $11-14 billion of funds on behalf of its clients, or investors– one of the most prominent of whom is, according to Soros, Britain’s Queen Elizabeth, the wealthiest person in Europe.

The Quantum Fund is registered in the tax haven of Netherlands Antilles, in the Caribbean. This is to avoid paying taxes, as well as to hide the true nature of his investors and what he does with their money.

In order to avoid U.S. government supervision of his financial activities ... Soros moved his legal headquarters to the Caribbean tax haven of Curacao. The Netherlands Antilles has repeatedly been cited by the Task Force on Money Laundering of the Organization for Economic Cooperation and Development (OECD) as one of the world’s most important centers for laundering illegal proceeds of the Latin American cocaine and other drug traffic....

Soros has taken care that none of the 99 individual investors who participate in his various funds is an American national. By U.S. securities law, a hedge fund is limited to no more than 99 highly wealth individuals, so-called “sophisticated investors.” By structuring his investment company as an offshore hedge fund, Soros avoids public scrutiny.

Soros himself is not even on the board of Quantum Fund. Instead, for legal reasons, he serves the Quantum Fund as official “investment adviser,” through another company, Soros Fund Management, of New York City. If any demand were to be made of Soros to reveal the details of Quantum Fund’s operations, he is able to claim he is “merely its investment adviser.” Any competent police investigator looking at the complex legal structure of Soros’s businesses would conclude that there is prima facie evidence of either vast money laundering of illicit funds, or massive illegal tax evasion. Both may be true....

George Soros is part of a tightly knit financial mafia – “mafia,” in the sense of a closed masonic-like fraternity of families pursuing common aims. Anyone who dares to criticize Soros or any of his associates, is immediately hit with the charge of being “anti-Semitic” – a criticism which often silences or intimidates genuine critics of Soros’s unscrupulous operations....

According to knowledgeable U.S. and European investigators, Soros’s circle includes indicted metals and commodity speculator and fugitive Marc Rich of Zug, Switzerland and Tel Aviv; secretive Israeli arms and commodity dealer Shaul Eisenberg, and “Dirty Rafi” Eytan, both linked to the financial side of the Israeli Mossad; and the family of Jacob Lord Rothschild....

~ ~ ~

Comment on above article from navigator, 2/12/98: Soros is directly linked to Bill and Hillary. Along with Larry Lawrence (not really a wealthy man, rather a money launderer for organized crime) George Soros is one of the “legitimate” sources of Clinton campaign money and a financial director of the Elect Clinton campaign. The illegitimate sources being the PRC and money robbed from failed banks, etcetera.

* * *

From The Spotlight, by Godfrey Fortune, 3/2/98:

Speculators, D.C. in Cahoots

Fat Cat Internationalists Are Making a Fortune at Your Expense – with a Little Help from the U.S. Government.

It is now quite clear what happened in ‘Southeast Asia vis-a-vis currencies.

George Soros and his pals saw that the local economies were shaky and took advantage of the situation to make billions by selling their currencies short (with money borrowed from the banks).

Soros did the same in 1992, with the British pound and Italian lira. So did the big American brokerage firms, led by Salomon Brothers, with the Mexican peso.

Mahathir Mohamad, prime minister of Malaysia, did something unforgivable when he actually dared to identify his enemies. But now he will have to go, cap in hand, and borrow from the international bankers, just like all the others. When you realize that Soros himself is deeply involved with the International Monetary Fund (IMF), you will realize that the shortselling and lending forces are working in unison.

The meeting of Asian and Southeast Asian government officials at which Mahathir denounced Soros and his pals for selling Southeast Asian currencies short was covered by British correspondent Derek Stoneham. He reported that when Mahathir made his denunciation, only U.S. Secretary of State Madeleine Albright and Assistant Secretary of State Stuart Eizenstat failed to applaud.

Within hours, they were denouncing Mahathir and calling reporters to defend Soros. As Albright told the London Financial Times, Soros is “a valued citizen [of the U.S.] who has done much good in the world. He is not involved in any financial dealings anywhere in Southeast Asia.” Eizenstat said it was “naive and mistaken” to blame the sudden shakeout on currency speculation: “Other forces – lagging trade, rising deficits – are behind this devaluation.”

CRASHES & SHORT SELLING

But such influences do not have sudden effects by themselves. Even persistent selling causes only gredual depression of the market. Crashes always involve short selling. They certainly did on this occasion.

As The Spotlight (9/22/97) reported, it wasn’t long before the computerized currency trading logs from Hong Kong and Singapore were made available to the unjustly maligned newspaper. These show that Soros quietly began betting against the Thai baht and Malaysian ringgit as early as Feb 1997.

In the first three months of 1997, his $10 billion Magnum Fund profits were a mere 2.3%. By August they were 22.3%....

A Soros raid involves gearing short positions up to $20-30 billion with the help of bank loans. Few countries have sufficient reserves to stand against such pressure, and his profits are commensurate.

Southeast Asian diplomats whom I meet at functions in Vienna confirm The Spotlight allegations but ... the Southeast Asian governments which resent the money power are by no means guiltless themselves.

And the Indonesians are the most corrupt of all. . . .

* * *

From The Spotlight, by Martin Mann, May 11, 1998: Elite Gobble Your Tax Dollars ! —

The House and the Clinton administration are eye-ball to eye-ball on billions for the IMF. The key question is, who benefits?...

The Clinton administration is pressing Congress to vote a hefty new handout — some $18 billion — to the International Monetary Fund (IMF) this year...

These stories have been well covered in the mainstream media. But what has been missing from the White House press releases — and mainstream media reports — is where the money really goes....

To make up for such lack of candor, this populist newspaper has launched its own inquiry to find out just who gets the dough rolled out for this conspiratorial one-world financial bureaucracy The answers turned out to be revealing....

First rakeoff rights off the top go to Goldman Sachs, the giant Wall Street investment bank where Treasury Secretary Robert Rubin made his first billion in the anything goes 1980's...

Goldman Sachs has been retained as a lavishly-paid financial adviser, underwriter and syndicator both by the governments of South Korea and Indonesia, as well as some of the largest banks and corporations in these sorely squeezed countries....

BILLIONS INVOLVED . . . Under current arrangements, stage-managed by Rubin and his faithful sidekick, Undersecretary of the Treasury Laurence Summers, Indonesia and South Korea are slated to share an eye-popping $100 billion in IMF bailout funds during the next 16 months or so....

“You’d think most of the loot would go to help ease some of the crushing dollar-denominated debt of these hard-hammered Asian economies — at least, that’s what Rubin and Larry Summers claim,” commented Fred Ackerman, a veteran Wall Street trader in international debentures...

Nothing like it, warned this veteran money manager. “In reality, the IMF’s bailout is being used mainly as loan insurance to enable Indonesia’s and Korea’s tapped-out state agencies and corporations to borrow even more in the global markets.”...

Goldman Sachs, chosen as the lead underwriter and syndicator of new bond issues for some of the largest Southeast Asian borrowers, is already collecting millions — and is expected to collect tens of millions — of dollars in fees and royalties for helping to pile more debt on the stumbling Indonesian and Korean economies....

“It’s like one of Mike Milken’s daisy chains, isn’t it?” asked Ackerman sarcastically, referring to the fraudulent syndicates set up in the ‘80's by convicted swindler Michael “Junk King” Milken to rig the bond markets....

In much the same fashion, there is just a thinly veiled linkup between the official acts of Treasury Chief Rubinknown to insiders as the most powerful man in Washington as well as the main back-channel promoter of the IMF — and the huge profits skimmed by his once-and-future firm, Goldman Sachs, from such international bailouts, Wall Street sources say...

The second kickback from the IMF bailout goes to what even the Wall Street Journal calls “vulture capitalists” — that is, international financiers who pounce on distressed corporations, buy them out at knockdown prices, and then use “special connections” to make a killing on the deal. This is what happened in Mexico in 1994-95, and it’s happening now in Southeast Asia, Wall Street sources say....

For an example, they cite the case of Daewoo, a major Korean car manufacturer, crushed by a back-breaking $3 billion debt it could no longer service after international speculators, led by George Soros, raided Korea’s currency and devalued it by more that a third last year...

An international syndicate headed by General Motors and advised by Goldman Sachs is now negotiating to buy a controlling interest in Daewoo at a time when they can acquire the huge bankrupt manufacturing complex at a steep discount, something like “15 cents on the dollar,” these sources averred...

“That’s a real sweet deal for the vulture investors grabbing Daewoo, but will they also get stuck with its $3 billion in outstanding debt,” asked Dr. Gottfried Sieberth, the dean of European financial writers based in the U.S....

Not if the IMF cash is divided up the way it was in Mexico, where it was used to buy up the defaulted loans of the biggest banks and corporations, explained this knowledgeable observer.

* * *

"Daddy Warbucks" of Drugs and Death -
CFR member George Soros

In April 1998 Reader's Digest printed an article by Senior Editor Daniel Levine, titled "HIGH ON A LIE." The article is about the "medical marijuana" movement and explains how the movement is a hoax and a fraud. Levine fails to point out the Council on Foreign Relations links to sponsorship of the movement.

In November of 1996 the California voters passed Proposition 215 - the Compassionate Use Act. It allows the marijuana to be grown and used for "any illness for which marijuana provides relief." The Campaign for the "Compassionate Use Act" to legalize medical marijuana would not have been successful without the funding of billionaires George Soros, Peter Lewis and John Sperling....

Council on Foreign Relations member George Soros is one of the world's richest men (estimated worth: $10 billion) and probably the biggest international investor of all time. This guy lost $600 million in one day speculating on which way the yen would jump and never flinched.

Soros doesn't flinch because he and his fellow Council on Foreign Relations members can always steal more money. In 1995, Senator Alfonse D'Amato, as head of the Senate Banking Committee, issued a report about the Clinton Administration's $20 billion loan to Mexico. The reason given for the loan was to prop up a staggering Mexico because any default on loans would end foreign investment in all developing countries.

The real reason was to rescue American and Mexican investors who had thrown their money into the craps game of high-interest Mexican Government bonds. For a year before the loan was ordered, on January 31, 1995, top Treasury officials and President Clinton were telling us how great things were going economically in Mexico. It was a cover-up to prevent Congressional defeat of the North American Free Trade Agreement, to bolster the Mexican and US administrations in upcoming elections in both countries, and to protect the major speculators.

An article from Newsday, "Peso Hits Record Low As Bailout Is Debated" ( Karen Rothmyer - 1/31/,95) identifies some of the Council on Foreign Relations members involved in the cover-up. They were "Former Presidents George Bush, Jimmy Carter and Gerald Ford [who] signed a declaration of support for the [bailout] plan. Also endorsing the plan was George Soros, probably the world's most influential international investor."

George Soros is also a member of the Carlyle Group. The Carlyle Group is an investor team led by Ronald Reagan's Defense Secretary Frank C. Carlucci III and funded in part by the Mellon family....

Soros uses some of the money he steals to fund a group of international foundations. Foundations are used by The Council on Foreign Relations to funnel corporate and personal wealth into the policy-making process. Foundations are tax-free. Contributions to foundations are deductible from federal corporate and individual income taxes.

The Foundations themselves are not subject to federal income taxation. Foundations control hundreds of Billions of dollars of money that would normally go to pay federal and individual income taxes.

In 1970 there were 7000 foundations that controlled $20 Billion in assets. Nearly 40% of these foundation assets were controlled by the top 12 foundations [Ford Foundation, Lilly Foundation, Rockefeller Foundation, Duke Endowment, Kresge Foundation, Kellogg Foundation, Mott Foundation, Pew Mutual Trust, Hartford Foundation, Alfred P. Sloan Foundation, Carnegie Foundation].

 

The top twelve foundations were controlled by the Council on Foreign Relations

Foundations can he created by corporations or individuals. These corporations or individuals can name themselves and their friends as directors or trustees of the foundations they create. Large blocks of corporate stock or large amounts of personal wealth can be donated as tax-exempt contributions to the foundations.

The foundations can receive interest, dividends, profit shares, and capital gains from these assets without paying any taxes on them.

The directors or trustees, of course, are not allowed to use foundation income or assets for their personal expenses, as they would their own taxable income, but otherwise they have great latitude in directing the use of foundation monies-to underwrite research, investigate social problems, create or assist universities, write research, investigate social problems, establish "think tanks," endow museums, etc.

At the Soros foundation Web Site (http://www.soros.org) we learn that the:

"National foundations are autonomous institutions established by Mr. Soros in particular countries to initiate and support projects. National foundations are located primarily in the previously communist countries of Central and Eastern Europe and the former Soviet Union, but also in Guatemala, Haiti, Mongolia, and South Africa. Each national foundation has a board of directors and staff who set the priorities for the foundation's work. The national foundations are, in most cases, autonomous nongovernmental organizations registered in their own countries and staffed by local professionals...."

One of the Foundations, the Open Society Institute, is issuing grants to promote abortion. Among the programs those that use abortion as a method for family planning.

Is the Soros foundation a way for the Council on Foreign Relations to use tax payer money to promote abortion and population control?

Are the Soros foundations part of the Council on Foreign Relations "Secret Team" ?

Do Soros Foundation employees double as covert operators who carry out well planned psycho-political operations in the Eastern Europe and the Soviet Union?

Are any Soros' Foundation employees also CIA agents?...

The Council on Foreign Relations controls the US Banking industry, and has controlled the Federal Reserve since it's inception.

Council on Foreign Relations member Robert Edward Rubin was sworn in as the 70th Secretary of the Treasury on January 10, 1995. On May 18, 1998 Reuter's reported "Treasury Secretary Robert Rubin and Attorney General Janet Reno, at a joint news conference, said a three-year undercover operation had resulted in the indictment of officials from 12 of Mexico's 19 largest banks. They said it was the first time that Mexican banks were "directly linked to laundering the Cali and Juarez cartels' U.S drug profits."

Are any drug profits laundered by Council on Foreign Relations controlled US banks?

CFR member Congressman Richard Gephardt (D-MO), recently informed the TV audience America will soon have to relinquish control to a "International Regime." Are we approaching the day when students and workers marching in the United States will be crushed by UN Peacekeeping Forces under the control of this International Regime? Who will control the Regime? The Council on Foreign Relations?

Should a major political party consider someone willing to turn our country over to a "International Regime" a possible presidential candidate?...

* * *

From When Corporations Rule the World, by David C. Korten:

PREDATORY FINANCE

CREATING UNCERTAINTY AND RISK

For global corporations engaged in producing and trading real goods and services, the sometimes considerable swings in the exchange relationships among different currencies can be a serious problem ... Speculators, by contrast, thrive of volatility, as it is their source of extractive gain...

There would be little opportunity for speculative profit in a stable financial market. In most instances, the extractive investor is taking advantage of price fluctuations to claim a portion of the value created by productive investors and by people doing real work – a private tax on the productive output of others....

The riskier and more destabilizing forms of extractive investments have received a major boost from the formation of a new breed of mutual funds – called hedge funds – that specialize in high-risk, short-term speculations and require a minimum initial investment of $1 million.

The biggest of these, Quantum Fund headed by George Soros, controls more than $11 billion of investor money. Since aggressive hedge funds may leverage investor money to borrow $25 or more for every investor dollar, this would give a fund with $10 billion in equity potential control over as much as $250 billion.

Many of the largest hedge funds produced a return of more than 50 percent for their shareholders in 1993. The downside risks are also substantial, however. One small hedge fund lost $600 million in two months in the mortgage markets and went out of business....

The fact that hedge funds are generally highly leveraged greatly increases both the potential gains and the risks. It also ties up banking system funds in activities that are of questionable benefit to society when the credit needs of home buyers, farmers, and productive businesses go unmet.

The claim that speculators increase price stability by moving markets more quickly toward their equilibrium was recently debunked by George Soros himself in testimony before the Banking Committee of the U.S. House of Representatives. Soros told the committee that when a speculator bets that a price will rise and it falls instead, he is forced to protect himself by selling, which accelerates the price drop and increases market volatility....

Soros speaks from experience when he claims that speculators can shape the directions of market prices and create instability. He has developed such a legendary reputation as a shaper of financial markets that a New York Times article, “When Soros Speaks, World Markets Listen” credited him with being able to increase the price of his investments simply by revealing that he has made them.

After placing bets against the German mark, he published a letter in the Times (London) saying, “I expect the mark to fall against all major currencies.” According to the New York Times, it immediately did just that “as traders in the United States and Europe agreed that it was a Soros market.”

On November 5, 1993, the New York Times business pages included the story, “Rumors of Buying by Soros Send Gold Prices Surging.”

In September 1992, Soros sold $10 billion worth of British pounds in a bet against the success of British Prime Minister John Major’s effort to maintain the pound’s value. In doing so, he was credited with a major role in forcing a devaluation of the pound that contributed to breaking up the system of fixed exchange rates that governments were trying to put into place in the European union.

Fixed exchange rates are anathema for speculators because they eliminate the volatility on which speculators depend. For his role in protecting the opportunity for speculative profits, Soros extracted an estimated $1 billion from the financial system for his investment funds. The resulting gyrations in the money markets caused the British pound to fall 41 percent against the Japanese yen over eleven months.

These are the kinds of volatility that speculators considered a source of opportunity....

For more on George Soros and Indonesia, GO TO >>> The Indonesian Connection


 

Gibson Greetings, Inc. - From F.I.A.S.C.O., by Frank Partnoy: . . . In the derivatives world, Tuesday, April 12, 1994, is a day that will live in infamy. On that day the first significant derivatives losses were announced....

The first public announcement was that Cincinnati-based Gibson Greetings, Inc. – the third largest U.S. maker of greeting cards – had lost $20 million on what it called an unauthorized interest rate swap with Bankers Trust....

The loss sent shock waves though the financial world. William Flaherty, Gibson’s chief financial officer, had tried to slough it off, saying, “We decided this is a nonoperating issue and we won’t be commenting further.”...

One of Gibson’s directors, Anthony Wainwright, reportedly claimed the swaps were “illegal,” and CEO Benjamin Sottile stated in a press release, “The company should never have been put in a position like this, as we relied on Bankers Trust to advise us on these transactions. We are presently evaluating legal alternatives.”...

BT released a brief statement saying its trades with Gibson were “legal and proper.” It appeared, surprisingly, that tiny Gibson Greetings had been trading swaps for a long time. According to Gibson’s 1993 annual report, the company had a $96 million swaps portfolio even then, up from $67 million in 1992. Gibson wasn’t as adept at swaps trading as it was at making greeting cards, and its swaps trading returns had been less than spectacular. At the end of 1993, it had lost $1 million.

As the facts unfolded, I learned that in early 1994 Gibson had purchased two new swaps from Bankers Trust, and it was those swaps that caused the damage....

BT estimated Gibson’s loss on these swaps at $19.7 million....

No one commented on what the purposes of these swaps had been. No one explained how either of the bets Gibson had made could even conceivably be connected to making greeting cards....

For more on the rape of Gibson Greetings, see: Wesray Capital


 

Goldman Sachs - The Goldman Sachs Group is a leading global investment banking and securities firm with three principal business lines: Investment banking; Trading and Principal Investments; and Asset Management and Securities Services.

For Much, Much More GO TO > > > Dirty Gold in Goldman Sachs?


 

Halliburton - The nest that Dick Cheney built.

February 9, 2002

Big Contractor Settles Lawsuit
in Fraud Case

The New York Times

SACRAMENTO (AP) —— A military contractor will pay the government $2 million to settle accusations that it defrauded the government, the United States attorney's office here said.

Kellogg Brown & Root, a Houston subsidiary of the multinational energy services corporation Halliburton, was accused of inflating contract prices for maintenance and repairs at Fort Ord, a military base, now closed, near Monterey, Calif.

The company admitted no liability in the settlement and denied any wrongdoing, said a Halliburton spokeswoman, Wendy Hall. The settlement precludes further investigations and penalties, Ms. Hall said, and Halliburton expects to continue as a major military contractor.

Under the terms of its contract, Kellogg Brown & Root did not bid against other contractors for maintenance and repair projects; instead, it presented the military with fixed costs that it said were necessary for specific projects.

The suit, filed in Sacramento, said the company submitted false claims and made false statements in connection with 224 delivery orders between April 1994 and September 1998.

Vice President Dick Cheney was Halliburton's chairman and chief executive when the government says Kellogg Brown & Root made the false claims and statements, but no evidence has surfaced that Mr. Cheney knew of them.

A Cheney spokeswoman did not immediately return a call seeking comment today.

Democrats made the federal grand jury investigation into Kellogg Brown & Root an issue before the 2000 presidential election.

One of the company's managers, Dammen Campbell, helped prepare the contract prices and filed a whistle-blower complaint that was also settled by the federal agreement with Halliburton. Mr. Campbell will receive an undisclosed share of the settlement, said Patty Pontello, a spokesman for United States Attorney John Vincent.

* * *

CheneyGate

Veep's Firm Collapsing Over Asbestos Lawsuits

© Media Whores Online, All rights reserved.

Big-Time Payoffs to G.O.P. Pols
- Panic On Pennsylvania Avenue

The lid has just about blown off this already tense capital city with breaking news of the possible impending collapse of Vice-President Cheney's old firm, Halliburton Company of Dallas, Texas.

With its stock value in free fall for months, Halliburton is reported on the edge of doom, thanks to a mountain of asbestos lawsuits linked to its 1998 acquisition, under then-CEO Cheney, of Dressler Industries. The company has paid out more than $150 million in recent damages for asbestos cases - and has about 260,000 related lawsuits still pending. More than $19 billion in Halliburton shareholder value has vanished since the summer of 2001 - an undisclosed amount of it in employee 401(k) plans and other pension funds.

To try and stem off the disaster, Halliburton has given huge gobs of money to former and present Congressional Republicans in order to gain favorable deregulation rulings and other breaks. Among the more prominent names caught up in the Halliburton political operation, apart from Cheney, are former Missouri Senator and current Attorney General John Ashcroft and House Majority Leader, Dick Armey of Texas.

Both stock-watchers and political heavyweights are nervously awaiting Halliburton's release of its latest earnings report, now scheduled for Wednesday. Bad news could lead to allegations of fraud and mismanagement like the ones that have befallen Enron.

Confidence in Halliburton and its imminent statement is all the shakier given that the firm's accountant is none other than Arthur Andersen LLB - the same outfit mixed up in destroying documents and defrauding shareholders in the Enron affair.

Non-partisan watchdog groups warn than Halliburton shows all the signs of becoming another Enron. "Halliburton is just as vulnerable to collapse but doesn't get much scrutiny", said Craig McDonald, director of Texans for Public Justice. "We definitely should be alarmed."

So, apparently, should the White House and the Republican Party - big time. According to public records, Halliburton and Cheney funneled nearly $500,000 to congressional candidates from 1997 to 2000, including more than $150, 000 to members of Congress sponsoring legislation that would limit the ability of workers to sue companies for asbestos exposure. The vast majority of the money has gone to Republicans - just as, not surprisingly, did the great bulk of the company's contributions in the last presidential campaign.

Of special interest are Halliburton's payouts in connection with the highly controversial Fairness in Asbestos Compensation Act, a piece of legislation so outrageous that it has not yet passed the Congress. Halliburton gave big money to 49 of the 77 lawmakers who in 2000 co-sponsored the act in the House of Representatives and 14 of 29 co-sponsors of similar legislation in the Senate.

Halliburton's spending on the bill was intensely partisan, including 46 House Republicans and only three House Democrats, along with 14 Senate Republicans and no Senate Democrats.

Of the more than $150,000 Halliburton doled out over the asbestos bill, all but $3500 went to Republicans - a pro-Republican division of 98% to 2%.

Among the top beneficiaries were Tom De Lay (R-TX, $5500), Dick Armey (R-TX, $6000), and J.C. Watts (R-OK, $7000).

Cheney, as an individual, donated $12,500 to members who sponsored or co-sponsored the asbestos bill. A Halliburton spokeswoman, Zelma Branch, told reporters that the contributions were "purely coincidental." Further complicating matters, while Halliburton, under Cheney, pressed for radical deregulation, it also fed richly at the federal trough, benefiting from at least $3.8 billion in federal contracts and taxpayer-insured loans between 1995 and 2000.

If he were to become vice president, one Halliburton official who admires Cheney but asked to remain anonymous said in 2000, "the company's government contracts would obviously go through the roof". But the company's demise now could well bring close scrutiny to its government contracts, both before and after Cheney and George W. Bush "won" the disputed 2000 election.

There were some scattered press reports about Halliburton during the 2000 campaign, no more. Even though charged by consumers and workers' groups with being an integral part of an asbestos industry which knowingly poisoned its own workers for years, Halliburton escaped media scrutiny. Reporters were too busy tracking down every last detail of Al Gore's "exaggerations" and the phony Buddhist Temple non-scandal to pay much mind to Dick Cheney and Halliburton - to say nothing of Halliburton's hundreds of thousands of victims, Americans who are today riddled with cancer and other diseases which could have been prevented, except for Halliburton's immoral worship of the bottom line.

Now, just maybe, the press will start paying attention....

* * *

July 22, 2002

Halliburton to take large asbestos charge

DALLAS, Texas (Reuters) - Halliburton Co. (HAL) said on Monday it will take a "substantial" charge against second-quarter earnings to cover future asbestos claims, and announced more than $250 million in additional losses and one-time charges.

Shares of the Dallas-based oilfield services and engineering company fell as much as 14.7 percent to $9.85, their lowest level since hitting a 15-year low of $8.62 in January. The shares closed $1.58 or 13.7 percent lower at $9.97.

Halliburton, led from 1995 to 2000 by U.S. Vice President Dick Cheney, said it will disclose the full extent of the asbestos charge in its quarterly earnings report on Wednesday.

The company also said its KBR unit, formerly known as Kellogg Brown & Root, will record a pretax loss of $119 million on an offshore engineering and construction job in the second quarter, equivalent to about 25 cents per share.

Bear Sterns Analyst Robin Shoemaker said this was a "whopping loss" on a single project and indicated that Halliburton had bid too aggressively for the work and thus forfeited any profits.

Questions about Halliburton's accounting for cost overruns and disputed claims relating to construction projects led earlier this year to a probe by the Securities and Exchange Commission.

HALLIBURTON, CHENEY SUED

Halliburton and Cheney were recently sued by the Judicial Watch group which alleged that the company overstated its revenues by as much as $445 million over three years.

The company and the White House both said the Judicial Watch case was meritless. Halliburton says it has applied accounting rules correctly and is cooperating with the SEC probe.

Halliburton said it will no longer pursue offshore engineering and construction contracts that require it to complete a project for a fixed price, but will instead seek agreements under which it is reimbursed for its costs. . . .

Halliburton also announced a second-quarter restructuring charge of $56 million before taxes, or 8 cents per share, with further such charges of $20 million expected later this year. . . .

Since 1976 some 499,000 asbestos claims have been filed against Halliburton and its subsidiaries, of which 292,000 were still unresolved at the end of the first quarter of 2002.

The company said it has settled or disposed of 207,000 claims at an average cost of $309 per claim, after deduction of money it expects to recover from its insurance companies.

© 2002 Reuters

For more on Halliburton, GO TO > > > Nests in the Pentagon; The Sinking of the Ehime Maru


 

Henry Silverman - From Milken Institute: (310-998-2605)

Henry Silverman

Henry Silverman is Chairman, President and Chief Executive Officer of Cendant Corporation, a global provider of consumer and business services primarily in travel and real estate. Cendant employs about 60,000 people and operates in more than 100 countries with annual revenues of $11 billion.

Prior to Cendant, Silverman was an investor and manager of private equity including Days Inns of America, now part of Cendant, Telemundo Group, and HFS Incorporated, a predecessor of Cendant.

His philanthropy includes Silverman Hall at the University of Pennsylvania Law School, the Silverman Professor of Obstetrics and Gynecology and the Silverman Reproductive Choice Foundation at NYU School of Medicine.

He is the recipient of awards for his work fighting discrimination and promoting workplace diversity. Silverman earned his law degree at the University of Pennsylvania Law School. . . .

* * *

HENRY SILVERMAN: THE REAL ARTIST OF THE DEAL?

This empire builder is riding high, but investors are jittery

Business Week

When Henry R. Silverman gazes north from the cozy 41st-floor office he shares with two assistants on New York's Fifth Avenue, he looks down on the famed Plaza Hotel and much of sleek Trump Tower. The view couldn't be more fitting. Silverman, chief executive of HFS Inc., has no use for trophy properties, though he controls the biggest hotel network in the world.

And there are few dealmakers he differs from more than his flashy longtime acquaintance, Donald Trump. Says the reserved former tax attorney: ''I don't believe in self-promotion.''

Nonetheless, the hotel, real estate, and rental-car empire Silverman is building seems bound to make him a far more important dealmaker than Trump. Already, he owns the rights to such powerhouse brands as Howard Johnson, Days Inn, and Ramada in hotels; Century 21, ERA, and Coldwell Banker in real estate; and Avis in rental cars. With his $1.7 billion purchase of PHH Corp., announced on Nov. 11, he'll add a topflight corporate relocation, mortgage, and car-fleet management company. The deal will bring to about $5.1 billion the value of acquisitions he has made since mid-1990.

If all the pieces of this disparate empire work together as he expects, Silverman, 56, will be a billionaire in just a few years. The value of his stake--12.2 million shares and options--has rocketed to more than $615 million since he took HFS public in 1992. The stock has soared from a split-adjusted 4 3/8 to a high of 79 5/8 on Oct. 14 and now trades at about 64.

''He's come out on top of all of us,'' says Leon D. Black, managing partner of the investment firm Apollo Advisors LP and a longtime friend and associate.

But Silverman's hold on his fortune is hardly rock-solid. After its dizzying climb, the stock has become stunningly volatile. When Silverman disclosed on Sept. 3 that he might sell as much as 5% of his holdings each year for estate-planning purposes, the stock fell 6.1% on fears he was reducing his role. (In fact, his compensation plan lets him earn more stock than he would cash out.) And since the PHH purchase, his biggest single deal, was announced, the stock has fallen nearly 13%, closing Nov. 19 at 63 5/8.

UPS AND DOWNS.

Riding such a roller coaster is nothing new for the driven Silverman. A dealmaker since 1966, when he went into investment banking at White, Weld & Co., a firm absorbed by Merrill Lynch & Co., Silverman has had a front-row seat for some of Wall Street's more spectacular ups and downs. After a stretch in the 1970s with his own mergers firm, he spent the 1980s mastering leveraged buyouts at the feet of Reliance Group Holdings Inc. Chairman and CEO Saul Steinberg. Silverman says the legendary financier taught him how to manage in a ''no excuses'' environment.

Indeed, Silverman makes no excuses for his own failures. While at Reliance, for instance, he studied demographic trends, then created a broadcasting venture for the Spanish-speaking American market, Telemundo Group Inc. The network built enviable ratings, but advertisers turned up their noses. ''It was racial prejudice,'' grouses Silverman. He wound up getting out of Telemundo, now a profitable public company.

Silverman's dealmaking education at Reliance--and later at Blackstone Group--set him on the path to HFS. He and colleagues at Reliance snapped up the Days Inn motel chain for $590 million in 1984 and sold it five years later at a $125 million profit. In 1992, after the chain slipped into bankruptcy, he and Blackstone bought the franchise system, without the real estate, for $259 million. Days Inn fit nicely with Ramada and Howard Johnson, chains he had acquired for $170 million in 1990, when he launched what he saw as a franchised hotel empire, originally called Hospitality Franchise Systems Inc. He first tended to the company while at Blackstone, which he left in late 1991.

Silverman's approach: pick up tarnished brand-name chains, improve them, then collect franchise fees and modest royalties on revenues. He used borrowed money, which he repaid out of cash flow and the proceeds of four public offerings--two for equity and two in convertible debt....

Silverman, after all, is a dealmaker, not a hotelier. And some of his diversifications have backfired. In 1992, he moved into gambling, backing casino projects in several states.

The venture lost money – in part, Silverman says, because politicians didn't deliver on promises to legalize gaming.

He folded, at a loss he figures at about $25 million.

He now avoids regulated industries....

See also: Cendant Corporation


 

ImClone Systems - Another clone of Wall Street’s Greed.

June 12, 2002

Securities Fraud Charges For CEO

NEW YORK - The former CEO of ImClone Systems was arrested Wednesday and charged with conspiracy to commit securities fraud for allegedly tipping off two people to sell stock in the biotech company the day before federal regulators rejected its application for a cancer drug.

FBI agents arrested Samuel Waksal at his home at 6:30 a.m., said Waksal's spokesman, Scott Tagliarino. Justice Department spokesman Bryan Sierra confirmed Waksal's arrest. Securities regulators also brought a civil case against Waksal on Wednesday.

According to the complaint unsealed Wednesday, Waksal is accused of tipping off an unidentified person in Florida to sell 50,000 shares of ImClone stock on Dec. 27, one day before the Food and Drug Administration told the company it would not consider its application for Erbitux, a highly touted cancer drug. Waksal also is charged with allegedly tipping off a second person that same day who later sold nearly 40,000 shares.

Waksal, who was replaced as ImClone CEO by his brother, Harlan, on May 22, is also charged with perjury for allegedly lying to the Securities and Exchange Commission about conversations he had with the people who received the tips.

Before the rejection was announced Dec. 28, four of Sam Waksal's relatives sold a total of $400,000 in company stock. Additionally, one of his daughters reportedly reaped $2.5 million from selling shares. His friend Martha Stewart, the domestic lifestyle businesswoman, also shed her remaining stake of 3,000 shares on Dec. 27.

Stewart's spokesman had said she received no inside information on ImClone.

ImClone's fortunes are totally dependent on Erbitux, an experimental cancer drug that initially garnered the company widespread praise and enthusiastic investors who drove up the stock price. The shares have plummeted by 90 percent since December because of the FDA's decision and because of the investigations into possible insider trading.

ImClone stock was down 22 cents to $7.33 early Wednesday afternoon on the Nasdaq Stock Market.

In addition to the criminal charges, the SEC filed insider-trading charges Wednesday against Sam Waksal, alleging that he learned of the Erbitux rejection on Dec. 26. In a civil lawsuit filed in federal court in Manhattan, the SEC said Waksal gave the negative information to family members who sold ImClone stock before it became public and Waksal himself tried to sell 79,797 shares worth nearly $5 million before the information became public.

It said Waksal was unable to do so because two brokerage firms wouldn't execute his sell order.

The family members sold more than $10 million of ImClone stock over two days, according to the SEC, which didn't specify the family members.

The SEC wants Waksal to be required to pay back "several million dollars" in losses it says were avoided by the family members he tipped, and also is seeking a civil fine against him and an order barring him from serving as an officer or director of any publicly traded company.

A subcommittee of the House Committee on Energy and Commerce is looking at ImClone and whether the FDA's secretive approval process for new drugs makes it easier to manipulate stocks.

Ken Johnson, a spokesman for the committee, said that based on the federal complaint, it appears that Sam Waksal lied to congressional investigators. He said the panel expected Waksal to appear as scheduled Thursday unless he was in jail.

"We are giving him the chance to set the record straight under oath," Johnson said.

Waksal was subpoenaed by the committee last week. As of Wednesday, his lawyers were still deciding whether he would invoke his Fifth Amendment right to avoid self-incrimination....

$ $ $

February 21, 2002

U.S. OKs Icahn Bid For ImClone

Forbes.com

Corporate raider Carl Icahn doesn't sulk when a plan sours--he finds a new one. Mere days after withdrawing his bid from Shelbourne Properties, he's on the hunt; and U.S. antitrust enforcers said they will not obstruct Icahn's bid to buy a hefty stake in ImClone Systems . Recently, he filed with U.S. securities regulators to acquire $500 million of ImClone's shares, or nearly 40% of the company.

Icahn, 66, is known for his attempts to take over or force the breakup of companies such as Nabisco Group Holdings and now-defunct Trans World Airlines. A long-time friend of ImClone Chief Executive Samuel Waksal, the raider bought a 5% stake in the medical company in 1999.

The bid comes at a crucial time: currently, ImClone is battling drug giant Bristol-Myers Squibb for control of their Erbitux cancer drug....

For more biotech schemes and scams, GO TO > > > The Biotech Birds


 

Integrated Resources - From Den of Thieves, by Pulitzer Prize winner, James B. Stewart: . . . As Frederick H. Joseph wrestled with mounting administrative problems, more threatening trends appeared in Michael Milken’s vast junk-bond empire. . . . Any crack in the junk-bond facade had dire potential, because Milken’s big clients – from savings and loans like Columbia to insurance companies like Executive Life – were already so loaded with junk paper that any decline in the value of their junk portfolios would curb their ability to absorb more.

The crack, when it came, was an earthquake.

Just days after Milken’s formal resignation in June, Integrated Resources, a seller of tax-shelter partnerships that had diversified with $2 billion in Milken-financed junk bonds into a $15 billion insurance and real estate empire, defaulted on its interest payments. The quintessential Milken success story, Integrated had loyally issued junk bonds, invested in them, and become one of Milken’s biggest captive clients.

Integrated had attracted millions of dollars, the savings of unwitting investors, in its financial products. Its stock price had soared from $7 in 1981 to $46 in 1983. Even though the tax reform act of 1986 had curbed its profits on sales of tax shelters, Milken debt had propelled it into new lines of business. Top executives and major owners – members of the Zises family – had paid themselves huge salaries.

But with its underlying business eroding, Integrated was a house of cards, a microcosm of the whole junk-bond empire. Infusions of new debt could mask its financial deterioration for only so long....

In February 1990, Integrated would file for bankruptcy, wiping out the value of all of its junk bonds, including a sizable position held in Drexel’s own inventory.

Among the victims were thousands of investors, policyholders, and employees – a broad cross section of Americans, most of whom never knew Integrated had any connections to Drexel....


 

Investcorp - Investcorp is a leading global investment group with offices in London, New York and Bahrain. Since 1982, it has completed transactions in North America and Western Europe, with a total acquisition value of approximately $19 billion....

For much more, GO TO > > > Investigating Investcorp


 

Investors Equity Life Insurance Company - From the Honolulu Star-Bulletin, 10/14/96: . . . The State of Hawaii will become the owner of thousands of acres of Colorado real estate, in its ongoing effort to recover assets for the 13,000 policy-holders of failed Investors Equity Life Insurance Co....

Gary Vose, who was chairman of Investors Equity when the state took it over in June 1994, has agreed to hand over The Meadows, a 4,000-acre subdivison at Castle Rock, Colo, to Hawaii Insurance Commissioner Wayne Metcalf....

Metcalf and the previous insurance commissioner, Lawrence Reifurth, have been working to recover assets since the state seized the insurance company after its management had run up a $60 million deficit. . . . The deficit, which has since grown to more than $90 million, was incurred largely because Vose lost policy-holders’ money in highly speculative leveraged investments known as derivatives, the state charges....

Vose’s agreement to transfer The Meadows and a smaller subdivision settles the state’s lawsuit against him, Eugene Sprague, an attorney in Denver representing the Hawaii Insurance Division, said today....

* * *

From the website posting Derivatives Links Page: . . . Derivatives, in part, have created a new world order. Not only do regulators not have easy access to all the participants, but there are participants that clearly are outside of the regulator’s reach, either because they are in a different industry, or are in a different country....

Michael Metz, chief investment strategist of Oppenheimer and Co. ... in trying to explain the dramatic fall in Wall Street on 27 October 1989, Metz highlighted the role of speculation caused by funds dealing with derivatives:

“These derivatives have too much leverage,” he said. “They are uncontrolled. With $4,000 under them, they can control $80,000 worth of stocks. This is crazy. This causes enormous risks and it is highly speculative. This situation is due to deregulation.”...

“Total global derivative trading comes to $55 trillion, more than the GDP of the world. It’s absolutely terrifying because we just don’t know what’s out there. And yet, how often do you hear about that on the evening news?”...

Investors Equity Life Insurance Co., in Hawaii lost $80 million in 3 days.

Other banks such as Drexel-Burham and the Bank of England have also incurred losses....

By the end of 1994, derivatives losses were estimated to be more than $10 billion....

* * *

[A little bird told me: Controlling interest in Honolulu Federal Savings & Loan (HonFed) was purchased in the early 90's, by Bishop Estate and former U.S. Sec. of Treas. William Simon. HonFed was marketing variable annuities through Investors Equity, largely to elderly people as part of their retirement plans. Such high risk derivatives were generally considered inappropriate investments for life insurance companies by the Hawaii Insurance Commissioner’s office. According to a reliable source, however, Investors Equity had obtained a letter from then-Insurance Commissioner, Robin Campiano, giving the o’k to Investors Equity/HonFed to invest in these instruments. Shortly after leaving his government position, Campiano would be hired as president of AIG Hawaii, a subsidiary of American International Group. Investors Equity purchased these derivatives through Goldman Sachs, among others. Bishop Estate was a major investor in Goldman Sachs. HonFed was sold to Bank of America in the mid-90's, and Bishop Estate and Simon made millions. Bank of America got caught holding the hot potato, however, since they had purchased HonFed’s liabilities along with the assets.]

~ o ~

[Catbird Ponderings: . . . Isn’t it a little strange that the State of Hawaii settled its case against Gary Vose so quickly by agreeing to accept The Meadows property — which had been purchased with investors’ money to begin with? And since the state was accusing Vose of racketeering, fraud and other misconduct, why was this only a civil suit, with no criminal charges ever being made? And isn’t it odd that there was a confidentiality agreement in this case, when it involved policy-holders’ and taxpayers’ money? Obviously, the value of The Meadow’s property was insufficient to cover Investors Equity’s losses, but why keep the value secret? And why settle with Vose when the recovery process from Goldman Sachs and others had barely begun? Hmmmm.]

~ o ~

For more, GO TO > > > Vultures in the Meadows


 

Ivan F. Boesky Company - From Den of Thieves, by James B. Stewart: . . . At his peak, arbitrageur Ivan Boesky controlled $3 billion worth of stock-purchasing power, enough to strike terror into almost any corporation with a single phone call.

“Greed is all right,” he advised graduates of the University of California in 1985, coining a slogan for a decade. . . .

Boesky was appointed to the faculty of the New York University business school and he became a lecturer at Columbia University . . . Boesky received so many speaking invitations that he had to turn many down. It wasn’t unusual ... for him to receive standing ovations.

In these appearances, Boesky portrayed himself as more than an arbitrageur. He coined a new phrase, venture arbitrage, for the practice of buying large blocks of stock as a tactic to pressure companies into buyouts or takeovers. . . .

Boesky’s vehicle for achieving his new ambitions was going to be a savings and loan: Financial Corporation of Santa Barbara.

Michael Milken and James Dahl had brought the possible acquisition to him, excited by the potential in the newly deregulated savings and loan industry. Previously restricted to taking deposits and making home loans and other real estate loans, savings and loans had been liberated to invest anywhere. They attracted deposits with high interest rates. For depositors and savings and loans owners, risks were minimal because the government insured all deposits up to $100,000.

It seemed almost as if the government wanted S&L owners to speculate.

To pay such rates, the savings and loans had to generate even higher returns with their own investments. Junk bonds, with their higher rates, seemed ideal. Milken and Drexel had already transformed once-sedate institutions like Centrust, Columbia, Financial Corporation of America, and American Savings into huge buyers of its junk bonds. Boesky and Financial Corporation of Santa Barbara could be a similar vehicle. . . .

~ ~ ~

ABOVE THE LAW . . .

As he had vowed, Boesky “retired” in early 1981, liquidating his interest in Ivan F. Boesky Co. Having failed to persuade any of his senior employees to take over (most had been fired or quit), he had recruited an arbitrageur from Morgan Stanley, Steve Royce, to take over the entity, renamed Bedford Partners.

The largest investor was (his wife) Selma, who rolled about $8 million of her share of Boesky Co. into the reconstituted partnership. Though Boesky had none of his own money in Bedford, he was on the phone to Royce every day ... making investment decisions as though he were still in charge. . . .

In Nov, 1986, Ivan F. Boesky agreed to pay a $100 million penalty to settle SEC charges of insider trading. . . .

In Oct, 1987, the stock market crashes. . . .

In Dec, 1987, Boesky is sentenced to three years in prison. . . .

In Oct, 1989, the junk-bond market collapses. . . .

On Dec 15, 1989, Ivan Boesky was released from Lompoc prison after serving two years of his three year term . . .

Since his release, Boesky seems to have been trying to find himself. He has approached potential investors about forming an offshore investment limited partnership. . . .

Boesky has been spending much of his time in France . . . Boesky still arrives at meetings in chauffeured limousines and dines at expensive restaurants in Paris and New York. . . .

In an April 1992 deposition in a civil case, Boesky refused to say where he lived or reveal his net worth.

But when asked by an opposing lawyer if he had a chauffeur for his car, he paused and then said, "No. Do you want the job?"

~ ~ ~

For more on Bedford Partners, GO TO > > > Dirty Gold, Dirty Politics and Bishop Estate


 

JP Morgan Chase - J. P. Morgan passed away decades ago. But his money and his legacy live on.

March 6, 2002

Insurers accuse Morgan Chase of fraud

David Teather in New York, The Guardian (UK)

JP Morgan Chase, the battered Wall Street investment bank, was delivered another blow last night when it lost an attempt to force 11 insurance companies to honour $965m (£678m) in bonds related to failed firm Enron.

US district judge Jed Rakoff sided with the insurance firms, some of which have launched a countersuit against JP Morgan alleging fraud.

The insurers claim the oil and gas contracts against which they issued the surety bonds masked straightforward loans. The contracts were between Enron and Mahonia, a JP Morgan affiliate.

Judge Rakoff said the insurers had provided enough evidence that the bonds "were the product" of fraud by the second-largest bank in the US, to deny JP Morgan immediate payment.

"These arrangements now appear to be nothing but a disguised loan - or at least have sufficient [indications] thereof that the court could not possibly grant summary judgment to the plaintiff."

A JP Morgan spokesman said: "This is a case about a commitment made by the insurance companies and a commitment not kept. We expect to prevail on the merits of our arguments." A trial has been set for December 2.

JP Morgan fell $325m into the red during the most recent quarter as a result of bad debts. The bank wrote off $456m of trading losses and loans to Enron and still has exposure to potential losses of $2.1bn.

It emerged yesterday that a second analyst claims he was fired for issuing a sell recommendation on Enron. Chung Wu, former financial adviser at the Houston office of UBS PaineWebber, said he was fired after emailing the advice to more than 10 clients in August.

In a filing to the National Association of Securities Dealers, Mr Wu wrote: "Enron management was not pleased and due to the employee stock option relationship UBS PaineWebber has with them, the pressure came from my corporate office to dismiss me."

UBS said Mr Wu was fired for failing to obtain approval before sending firm correspondence to clients.

For more, GO TO > > > The Story of Enron


 

KeyCorp - Cleveland-based KeyCorp is one of the nation’s largest bank-based financial services companies, with assets of approximately $90.7 billion. Key companies provide investment management, retail and commercial banking , consumer finance, and investment banking products and services to individuals and companies throughout the United States, and for certain businesses, internationally.

March 11, 2005

KeyCorp to pay $275,000 to settle fund timing case

Reuters

WASHINGTON - KeyCorp broker-dealer unit McDonald Investments Inc. will be censured and pay a $275,000 fine to settle allegations it failed to maintain sufficient processes to prevent market timing and late trading in mutual funds, the company said in a regulatory filing on Friday....

Over the past 18 months, in revelations coming chiefly from New York Attorney General Eliot Spitzer, investigators have exposed numerous cases of market-timing by hedge funds and intermediary traders, such as brokerages and pension plan managers that handle most buying and selling of fund shares.

Timers trade quickly in and out of funds to lock in arbitrage profits from brief differences between the values of stocks in funds’ portfolios and the values of funds’ shares.

Some of these trading abuses occurred with the help of mutual fund managers, but many were hidden from funds inside large orders handled for hedge-fund timers by intermediaries.

See also: Amway Corp


 

Lazard Freres & Co. - From www.lazard.com: 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.

$ $ $

Aug 9, 1996

Investment adviser guilty in
fraud and corruption trial

Associated Press

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....

$ $ $

Dec 4, 1997

Former Clinton Fund-Raiser
Indicted in Bribery Case

CNN.com

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

www.phillipsandcohen.com

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

TheStreet.com

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

Press Release

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....

~ ~ ~

For some poop on another former Lazard Freres player, Joshua Gotbaum, GO TO > > > Hawaiian Airlines: Flying with the Bankruptcy Buzzards

~ ~ ~


 

Lucent Technologies - From CNN.com, 2/9/01: LUCENT TARGETED BY SEC - Telecom equipment maker says it’s cooperating with accounting probe.

Lucent Technologies is cooperating with a Securities and Exchange Commission investigation of possible fraudulent accounting practices during its last fiscal year, the company said Friday.

The SEC probe is focusing on whether Lucent improperly booked $679 million in revenue during its 2000 fiscal year, the Wall Street Journal reported...

Lucent in December adjusted its revenue statement for the fiscal fourth-quarter, deducting the $679 million, after its own investigation....

Shares of Lucent, which have been on a steady downslide since last summer, were down $1.93 at $14.96 . . . Over the past year, Lucent’s shares have underperformed the S&P’s 500 index by about 70 percent....

John Hynie, an SEC spokesman, declined comment on the newspaper’s report....

PricewaterhouseCoopers, which is the company’s auditor, also declined comment....

On top of earnings warnings, Lucent has faced job cuts, profit shortfalls and product development missteps in the past year.

* * *

Press Release, 3/12/97: Lucent provides equipment for military communications upgrade in Hawaii...

Lucent Technologies announced today it has sold $16 million in network switching equipment to Wheat International for an upgrade of military communications systems in Hawaii....

Lucent Technologies was formed as a result of AT&T’s restructuring and became a fully independent company, separate from AT&T, on Sept 10, 1996....

See also: Pricewaterhouse Coopers

For more on Wheat International, GO TO > > > The Sinking of the Ehime Maru


 

Maxxam Group Inc. - From Den of Thieves, by Pulitzer Prize Winner, James B. Stewart:

Above the Law

The double threat of Michael Milken information and Ivan Boesky buying power may have reached its apogee in the takeover of Pacific Lumber Co., the country’s largest owner of redwood forests, by Drexel client Maxxam Group, Inc., a real estate developer whose rise had been fueled by Milken’s junk bonds.

MGM/UA had at least wanted a merger with Ted Turner. Pacific Lumber, on the other hand, fought vigorously for its independence. Milken demonstrated the futility of its resistance.

Maxxam announced its bid for Pacific Lumber at the end of Sept 1985, and on the same day, retained Milken and Drexel to handle the financing. As soon as the bid was announced, Milken directed Boesky to begin massive purchases of Pacific Lumber shares in anticipation of higher offers and as a tactic to pressure Pacific Lumber into accepting the Maxxam bid.

As before, Milken retained a 50% interest in Boesky’s Pacific Lumber position. By Oct 22, when Pacific Lumber finally capitulated, Boesky had bought more than 5% of the company’s shares, helping to drive up the stock price. Maxxam responded by raising its bid twice, on Oct 2 and 22, ultimately settling on $40 a share....

Pacific Lumber, under Maxxam control, soon aroused the ire of conservationists by felling tracts of redwood forest to meet its debt obligations.

* * *

From LEGACY OF LUNA: The Story of a Tree, a Woman, and the Struggle to Save The Redwoods, by Julia Butterfly Hill:

Tree-sitting is a last resort.

When you see someone in a tree trying to protect it, you know that every level of our society has failed. The consumers have failed, and the government has failed. Friends of the forests have gone to the courts, activists have tried to make consumers aware, but with no results. Corporations have neglected their responsibility as landowners, while the government has refused to enforce its laws. Everything has failed, so people go into the trees....

From the very start, sitting in Luna gave me a sense of purpose. Here was something I could do to make a difference. Of course, I had no idea that this would mean abandoning the ground for two years.

And I had no idea what the forces of nature – and a company called Pacific Lumber/Maxxam – would soon unleash upon by head.

Had Pacific Lumber remained the family-owned and operated mill it was for over one hundred years, there probably would have been no need for a Luna tree-sit. From 1885 to 1985, everyone who worked for the mill was either family, friends, or neighbors. The Murphy family who owned it also owned Scotia, the town directly north of Stafford where the mill is located, and the company had operated under a policy of long-term sustainable forestry. They knew that if they cut too much, they would be cutting their grandchildren out of a job and a future. So they cut at a modest rate, taking large trees but leaving a diversity of plants and trees, which allowed for those trees that were left to thrive in the sunlight and the forest ecosystem.

By the fall of 1985, mostly because of their sustainable logging practices, Pacific Lumber still had an incredible amount of assets in standing timber. Enter Charles Hurwitz, a Texan who heads Maxxam Corporation and is notorious according to press accounts for taking over businesses with undervalued stock, then liquidating their assets.

With the help of Drexel Birnbaum, Michael Milken, and Ivan Boesky, who were later sent to jail for insider trading, he financed high-interest junk bonds, which he used in a leveraged buyout.

Hurwitz incurred an $800 million debt in his takeover of Pacific Lumber, which up to that point had been virtually debt free. To pay that debt, he sold off many of the company’s assets, and aggressively stepped up the rate of cutting, thereby destroying the sustainability of the forest, harming the environment, and threatening many of the species – including humans – who lived there. He also used a $60 million dollar pension fund to pay off junk bond debts and faced charges from pensioners alleging he had taken their money.

Pacific Lumber’s press releases claim that they are taking good forestry into the 21st century. But it is documented thoroughly that the practice of clear-cutting takes away nature’s ability to absorb water and lock in precious soil. So the water saturates the ground, which no longer has all those wonderful root systems and trees to suck it up like sponges and to hold the ground structure together. Steep hillsides then wash away in walls of mud that destroy streams – and species like the coho salmon, which is threatened with extinction because the silt-congested streams choke them and their eggs – or in slides that wipe out hillsides and towns like Stafford.

To Hurwitz and his bondholders, though, trees and land are simply potential dollars, and anything that threatens those dollars, like laws or environmental activists, are seen simply as hindrances....


 

Merrill Lynch - One of the nation’s largest investment firms.

April 9, 2002

Merrill Lynch Told
to Reform Practices

Company is accused of deceiving clients for its own benefit

Associated Press

NEW YORK – Merrill Lynch & Co., Inc., one of the nation’s largest investment firms, was ordered yesterday to reform its business practices after being accused of giving advice that hurt clients but enriched the company.

New York Attorney General Eliot Spitzer said he got a court order after a 10-month investigation showed that Merrill Lynch’s employees lied to clients and recommended stocks that they knew were probably bad investments.

“This was a shocking betrayal of trust by one of Wall Street’s most trusted names,” Spitzer said.

“This case must be a catalyst for reform throughout the entire industry.”

Merrill Lynch said in a statement that there is “no basis for the allegations made today by the New York attorney general.”

“His conclusions are just plain wrong,” the statement said. “We believe these allegations are baseless, and we will defend ourselves vigorously.”

Spitzer said he did not know how much money customers lost as a result of the 112-year-old firm’s alleged practices, but he said he believes the clients “number in the hundreds of thousands, if not millions.”

Merrill Lynch’s Web site says it has 900 offices in 43 countries and controls more than $1.5 trillion in customer assets. It says it manages the assets of 3 percent of American households.

Merrill Lynch pushed certain companies’ stock, even after it got poor ratings from its own research analysts, because the firm wanted to keep the companies’ lucrative contracts for investment banking services, Spitzer said.

Spitzer said investigators obtained many memos and e-mails that showed that analysts, whose research was supposed to be independent and objective, were in effect acting as salesmen for client companies.

They were doing so because the pay for analysts was based in large part on their contributions to bringing in investment banking business, the attorney general said. He said this was contrary to Merrill Lynch’s own written policy.

Merrill Lynch said in its statement by spokesman Timothy Cobb, that it was “confident that a fair review of the facts will show that Merrill Lynch has conducted its research with independence and integrity.”

“We have been a leader in practices to assure the independence of our highly regarded research group,” the statement said.

* * *

July 7, 2000

Bloomberg News: . . . Merrill Lynch & Co., moving to reduce costs, may cut as many as 2,000 from its brokerage unit, or about 5.4 % of the total, the Wall Street Journal reported today.

The biggest U.S. broker would eliminate marketing, strategy and technology jobs from the unit ... The cuts would exceed earlier estimates for several hundred job losses and could save the firm as much as $150 million a year.

“They’ve got to boost profits out of this business, the easiest way to do that is to make job cuts,” said Ken Worthington, an analyst . . .

Eliminating 2,000 jobs would be the biggest reduction since 1998, when Merrill slashed 3,400 positions following Russia’s default and the near-failure of the hedge fund, Long-Term Capital Management.

* * *

October 20, 2000

From www.moneylaundering.com: . . . A front-page article in the Oct 20, 2000 edition of the Financial Times reports that the London branches of some of the world’s largest banks played a key role in what is believed to be a $4 billion international money laundering operation involving former Nigerian dictator Sani Abacha.

The Times says 15 banks, including Citigroup, Merrill Lynch, Barclays, HSBC, Standard Chartered, and Australia and New Zealand Banking Group, handled transactions for the Abacha Family and their collaborators.

The transactions allegedly involved funds looted from Nigeria’s central bank and other corruption proceeds. The Times says British officials have been slow to respond to requests by the new government of Nigeria for assistance in that country’s investigation of Abacha. . . .

* * *

See also: VMS Realty

For much more on Merrill Lynch, GO TO > > > BEWARE! This Bull is for The Birds!


 

Mid Ocean Reinsurance Co. - In 1993, Bishop Estate invested $30 million in Mid Ocean Reinsurance, a Bermuda company, with partners J. P. Morgan, Marsh & McLennan, and Texas deal maker, Richard Rainwater. Bishop Estate’s trustee, Henry Peters, was appointed a director of Mid Ocean. In 1998, Exel Ltd, a Bermuda insurer, acquired the 75% of Mid Ocean Ltd. it didn’t already own in a stock swap valued at $2.2 billion. The transaction was negotiated for Mid Ocean by J.P. Morgan & Co. while Goldman Sachs advised Exel.

* * *

Equity No. 2045 - 2nd Amended Petition of the Atty Gen to Remove and Surcharge Trustees:

... In 1992, the Trust invested approximately $31 million in Mid Ocean, Ltd., a Bermuda-based insurance company, and acquired 310,000 Mid Ocean Class A shares....

In 1993, when Matsuo Takabuki retired as a Trustee of the Trust, (Henry) Peters succeeded to Takabuki’s seat as a director of Mid Ocean. ... Peters’ service as a Mid Ocean director fell within his duties as Trustee and was a Trust opportunity.... Peters used Trust personnel to prepare him for Mid Ocean directors’ meetings....

While a director of Mid Ocean, Peters received substantial director’s retainers and attendance fees and acquired shares of Mid Ocean stock through a stock and deferred compensation plan for non-employee directors....

The Mid Ocean fees and stock options are assets that belong to the Trust and not to Peters individually... Peters has enriched himself at the expense of the Beneficiaries by retaining the fees and stock options for his personal benefit...

* * *

For more GO TO > > > Broken Trust; Claims By Harmon; Dirty Gold in Goldman Sachs?; Dirty Money, Dirty Politics and Bishop Estate; The Marsh Birds


 

Morgan Stanley - From the Preface of F.I.A.S.C.O., by Frank Partnoy:

BLOOD IN THE WATER ON WALL STREET

From 1993 to 1995, I sold derivatives on Wall Street. During that time, the seventy or so people I worked with in the derivatives group at Morgan Stanley in New York, London, and Tokyo generated total fees of about $1 billion–an average of almost $15 million a person. We were arguably the most profitable group of people in the world....

The managers in my group received millions and millions in bonuses; even our lowest level employees had six-figure incomes. And many of us, including me, were still in our twenties....

This was not the Morgan Stanley of yore. In the 1920s, the white-shoe investment bank developed a reputation for gentility and was renowned for fresh flowers and fine furniture, an elegant partner’s dining room, and conservative business practices. The firm’s credo was: “First class business in a first class way.”

However, during the banking heyday of the 1980s, the firm faced intense competition from other banks and slipped from its number one spot. In response, Morgan Stanley’s partners shifted their focus from prestige to profits–and thereby transformed the firm. By the time I arrived in 1994, Morgan Stanley had swapped its fine heritage for a slick sales-and-trading operation–and a lot more money.

Other banks–including First Boston, where I worked before I joined Morgan Stanley–could not match Morgan Stanley’s aggressive new sales tactics. By every measure the firm had been recast....

Aggressive business practices inspired a new credo: “First class business in a second class way.” After decades of politesse, there were savages at Morgan Stanley.

The derivatives group received its marching orders from the firm’s leader, John Mack. Mack had worked his way up from the depths of the trading floor, where he still was known as “Mack the Knife.” On his desk, Mack kept a large metal spike, upon which, it was rumored, he would threaten to impale inept employees. . . .

Following Mack’s lead, my ingenious bosses became feral multimillionaires: half geek, half wolf. When they weren’t performing complex computer calculations, they were screaming about how they were going to “rip someone’s face off” or “blow someone up.” Outside of work they honed their killer instincts at private skeet-shooting clubs, on safaris and dove hunts in Africa and South America, and at the most important and appropriately named competitive event at Morgan Stanley: the Fixed Income Annual Sporting Clays Outing – F.I.A.S.C.O. for short.

The annual skeet-shooting tournament set the mood for the firm’s barbarous approach to its clients’ increasing derivatives losses. After April 1994, when these losses began to increase, John Mack’s instructions were clear: “There’s blood in the water. Let’s go kill someone.”

We were prepared to kill someone, and we did. The battlefields of the derivatives world are littered with our victims. As you may have read in the newspapers, at Orange County and Barings Bank and Daiwa Bank and Sumitomo Corporation and perhaps others no one knows about yet, a single person lost more than a billion dollars.

At some companies it took more than one person to lose a billion dollars. Dozens of household names, including Procter & Gamble and numerous mutual funds, lost hundreds of millions each, billions total, on derivatives. The $50 billion Mexican currency debacle included its share of derivatives victims, too. ... If you owned stocks or mutual funds during the past few years, a portion of the real money lost on derivatives very likely was yours.

Derivatives have become the largest market in the world. The size of the derivatives market, estimated at $55 trillion in 1996, is double the value of all U.S. stocks and more than ten times the entire U.S. national debt.

Meanwhile, derivative losses continue to multiply....

~ ~ ~

A MEXICAN BANK FIESTA

Until March, 1994, most of Morgan Stanley’s Mexican derivatives deals had been directed at getting U.S. institutions to buy Mexican government bonds. That strategy had generated millions in profits....

At the time, many U.S. bankers regarded the Mexican banks as cash pinatas and were eager to smash them open. Mexico had protected its state-owned banks from foreigners for decades. The Mexican government began privatizing its banks in 1992, but it permitted only Mexicans to own banks and continued to impose severe restrictions on foreigners. While the U.S. was assembling an army to keep illegal immigrants from crossing the Rio Grande, Mexico had built its own, much more effective, banking border patrol. It was easier for a Mexican farmworker to cross into the U.S. than it was for a U.S. bank to cross into Mexico....

Years of profits had fattened the Mexican banks a little, but recent changes, including NAFTA, had made foraging for banking profits in Mexico more competitive. Our plan was to fatten the banks some more. If these banks were still hungry, we should feed them, not fight them....

What would we feed the Mexican banks? Obviously, it should be high margin and high volume. We wanted to make as much money as we could. It should be addictive, too, so the banks would gorge themselves. Once the banks were bloated and couldn’t eat another bite, it would be easy to bat them down. Then, at the appropriate moment one little nudge could cause the entire Mexican banking system to topple like Humpty Dumpty.

In 1994 Morgan Stanley was in a position to feed the Mexican banks anything it wanted. During the previous year, the firm had achieved legendary status after it successfully completed its first “PLUS Notes” transaction. “PLUS” was another acronym–for Peso-Linked U.S. Dollar Secured Notes–and since March 1993 PLUS Notes had been the rage in Mexico. PLUS Notes were Mexican derivatives denominated and payable in U.S. dollars, and offered both Mexican banks and U.S. buyers an investment they never imagined was possible....

The firm’s first Mexican derivatives transaction–the $500 million PLUS Capital Company, Ltd., known in the market simply as PLUS I–had been pathbreaking and was cited in countless seminars as a nearly perfect derivatives deal. Though this deal may seem too esoteric for the average individual investor, it isn’t. In fact, if you owned a mutual fund in the past five years, especially one that invested internationally, it’s very likely that YOU owned a piece of either this Mexican deal or one just like it.

~ ~ ~

The saga of PLUS 1 began in early 1993, when the Mexican banking equivalent of Citicorp, Banco Nacional de Mexico, known as Banamex, asked several U.S. investment banks whether it could remove some undervalued and illiquid inflation-linked bonds from its balance sheet without actually selling them....

These inflation-linked bonds were called Bonos Ajustables del Gobierno Federal–more commonly known as Ajustabonnos (translated literally, “adjustable bonds”)–and were peso-dominated obligations othe the United Mexican States, the Mexican government...

It appeared that Banamex was looking to do the impossible: sell bonds into a market that didn’t want the bonds ... Of all the derivatives groups on Wall Street, only Morgan Stanley’s DPG said it could accomplish this impossible mission....

The DPG salesmen knew that many U.S. buyers were permitted to buy only investment-grade U.S. dollar debt, which at this point did not exist in Mexico. ... If DPG could create a new Mexican derivative backed by Ajustabonos that U.S. buyers could buy, then, risky or not, they would buy....

DPG needed a little magic, and some financial alchemy, to create the new derivatives. The first trick was to split the Ajustabonos into two pieces. The most basic way to do this was to form a new company to buy the Ajustabonos and then have the company issue two new securities linked to the Ajustabonos.

To create such a company without incurring the wrath of Mexican and U.S. regulators, Morgan Stanley looked to sunny Bermuda. Bermuda was know as a haven for all kinds of dysfunctional financial behavior and money laundering, first by drug dealers, then by the Mafia, and last by investment banks, including Morgan Stanley. Getting into bed with Drexel in the 1980s had pushed Morgan Stanley down a slippery slope. Now the firm was operating in Bermuda and behaving like the mob.

Bermuda would protect DPG, but only at a price, and DPG had to play by Bermuda’s rules. First, Morgan Stanley hired several politically connected Bermuda lawyers to incorporate a special Bermuda company. These lawyers would serve on the company’s board of directors and provide crucial political contacts while the company was issuing its special bonds.

Next, to avoid negative tax consequences, Morgan Stanley needed to find an appropriate charitable institution to purchase the company’s stock. Bermuda law required that the owner of the new company’s stock be a qualified tax-exempt entity. Fortunately, Morgan Stanley discovered The Capital Trust, a Bermuda charitable trust. . . . Morgan Stanley, through its investors, would give the charitable the $12,000 required to purchase the company’s stock.

Finally, the newly formed company had to obtain the permission of the Bermuda Monetary authority to issue $1.5 billion of bonds backed by the Ajustabonos. The $12,000 stock had been created merely to satisfy a Bermuda technicality. It was this company’s new bonds, not the stock, that Morgan Stanley was planning to sell to investors. To get permission for the company to issue these bonds, Morgan Stanley–again through its investors–had to commit to pay $1,600 per year to the Bermuda government. From an outsider’s perspective, these payments looked like kickbacks. Overall, Morgan Stanley’s actions were barely distinguishable from those of a drug kingpin seeking an appropriate tax haven to launder money....

Once the Bermuda regulatory details were under control, Morgan Stanley would need to arrange with at least one of the ratings agencies to receive an investment-grade rating for the new Bermuda company’s bonds. There are two primary ratings agencies, Moody’s Investor Services and Standard and Poor’s, and numberous secondary agencies. I always found Moody’s analysts to be more intelligent and creative than analysts at any other agency. However, when you really needed a rating, the was only one choice: Standard and Poor’s, known as S&P.

It might surprise you that private entities can pay for their credit ratings. Most people assume that credit rating agencies are principled and accurate, and that S&P in particular is above reproach because it is at least partially accountable to the federal government. Certainly S&P and Moody’s Investors Services are two of the premiere ratings agencies in the United States, and the Securities and Exchange Commission regulates each as a Nationally Recognized Statistical Ratings Organization. However, it’s also true that although ratings agencies once provided information about particular debt issues without charging the issurer of the debt, today–and for the past two decades–such agencies have been collecting credit rating fees from issuers, simply for telling investors what credit rating they assign to that issurer’s debt.

A rating isn’t cheap either. Fees typically range from $30,000 on up, more for large and complicated deals such as PLUS Notes. Because S&P also had to preserve its reputation, for some deals you simply could not buy a rating. For a while these Bermuda bonds appeared to be one of those deals, and it looked as if Morgan Stanley might not be able to obtain an investment-grade rating at any price.

Although Morgan Stanley tried to persuade S&P that the new company’s bonds were entitled to a rating of AA-, the same rating as the Ajustabonos, there were problems with Morgan Stanley’s argument. The company’s bonds would be issued in U.S. dollars, and similar Mexican U.S. dollar bonds carried much lower ratings. . . .

Morgan Stanley offered two key concessions that persuaded S&P to give the new bonds a AA- rating. First, the company would issue two classes of bonds, and S&P would rate only the much safer of the two. Banamex would keep the riskier unrated class of bonds, to serve as a cushion to protect the safer bonds, providing greater assurance that the rated bonds would be repaid in full. The company would also purchase some U.S. Treasury bonds, as additional protection. The safer, rated bonds were the bonds actually called PLUS Notes.

Second, Morgan Stanley also agreed that the company would commit in advance to execute a foreign currency transaction in which Morgan Stanley would convert the peso payments on the Ajustabonos into U.S. dollars. S&P must have been suspicious that Morgan Stanley would try to market these new bonds as denominated in U.S. dollars, not pesos. As a compromise, S&P required that Morgan Stanley advertise the new bonds with a caveat. The Offering Memorandum for the bonds had to include a disclaimer: “This rating does not reflect the risk associated with fluctuations in the currency exchange rate between Dollars and New Pesos.”

With this warning, and a huge fee, S&P finally was satisfied and agreed to rate the new bonds AA-. . . .

These PLUS Notes were an exciting security that previously had not existed in the marketplace: They were rated AA-, they paid a high interest rate in U.S. dollars, and they were protected by a 20 percent cushion. For a large conservative buyer, such as a big-name mutual fund, PLUS Notes became the perfect entree into Mexico.

PLUS Notes proved so successful for Banamex and other clients that Morgan Stanley eventually sold more than $1 billion worth. . . . The buyers were a virtual Who’s Who of the investing community, including the largest U.S. investment funds (Alliance, Scudder, TCW, Merrill Lynch Asset Management, Van Kampen), numerous insurance and pension companies (Cigna, AFLAC, Arco), the largest Japanese and European companies (Alps, Hanwa, Aoyama, Olivetti), and even the State of Wisconsin.

One odd fact about derivatives was that whenever you sold a new one, some stray state investment board always seemed to tag along.

The most surprising aspect of PLUS Notes was not how much these funds and companies liked them; it was how little they told their investors and shareholders about the nature of the investment. Often, there was no requirement that a fund or company describe in detail its investment in PLUS Notes, other than to disclose that they were AA- bonds issued by a Bermuda company. As a result, many mutual fund owners, pensioners, shareholders, and even a few Wisconsin residents had no idea what the funds and companies they owned were buying.

PLUS Notes enabled certain fund managers to hide many of their Mexican positions from investors. They allowed supposedly low-risk funds who could only buy highly rated U.S. dollar bonds to invest in Mexico, even though their underlying investment really was a Mexican peso-denominated bond. They allowed even the State of Wisconsin to bet on the Mexican peso.

What would Joe and Mary investor do when they learned the short-maturity AA- bonds listed as “PLUS Notes” in their retirement portfolio actually were Mexican peso-backed inflation-linked derivatives issued by a Bermuda tax-advantaged company? What would Wisconsin dairy farmers do when they discovered the Badger State was speculating south of the border? What would YOU do when you realized your retirement savings, which you had assumed was safely tucked away in a highly regarded mutual fund, was being invested in PLUS Notes?

The only thing you could do was get angry because you probably wouldn’t learn about your investment in Mexico until it was too late–after you had lost money. Because of their high rating, PLUS Notes were a permissible investment, and your mutual fund wouldn’t have to tell you much about them. It was astonishing, but as long as the Mexican peso didn’t collapse, you might never know your retirement money was being gambled on Mexico....

THE TEQUILA EFFECT

On Tuesday, December 20, 1994, the Mexican peso crashed. The Central Bank of Mexico stunned the financial world by approving an immediate 12.7% devaluation in the peso. Without the Central Bank’s support, the peso plunged through its trading band, dropping from 3.46 pesos to the dollar to 3.92 pesos to the dollar in two minutes. The Mexican stock market collapsed along with the currency, and Mexican interest rates spiked upward. After the peso fell, it fell some more, and then some more–about 40% in a few days.

We called our clients at the various Mexican banks, but many of them couldn’t even speak. One was sobbing uncontrollably. The peso’s drop had pushed the fattened Mexican banks over the edge, and they now fell to pieces like Humpty Dumpty....

The next day, the peso dropped below four pesos to the dollar down toward five pesos to the dollar....

The Wall Street Journal reported that Morgan Stanley had been among the largest sellers of Mexican derivatives to these funds. ... The managing director of one hedge fund told the press that there was “blood on the street.”

The ratings agencies scrambled to downgrade every Mexican bond they could find. Standard & Poor’s downgraded numerous issues, including the PLUS Notes due to be repaid on January 15....

The spillover from Mexico into other Latin American countries–the “tequila effect” we had feared–was quick and pronounced. Argentina’s stock market fell 8%; Brazil’s dropped 6%. The rout spread to every emerging markets country that had issued Brady Bonds, including Argentina, Brazil, Nigeria, and Poland. Other countries, including China, also were hit.

Investors were baffled as to why a currency devaluation in Mexico might cause completely unrelated markets halfway around the world to crash. One explanation was that when the owners of emerging markets mutual funds began selling, the fund managers had to sell something to repay them, so they sold the investments that were dropping the least. This downward pressure spread tens of thousands of miles.

Like Morgan Stanley, the tequila effect had gone global....

~ ~ ~

From the Epilogue: What lessons did I draw from my experience selling derivatives? I believe derivatives are the most recent example of a basic theme in the history of finance: Wall Street bilks Main Street.

Since the introduction of money thousands of years ago, financial intermediaries with more information have been taking advantage of lenders and borrowers with less....

If anything, the financial-services industry is flourishing, despite the recent scandals, and bankers continue to capture the information advantage. Investment banks’ recent appetite for mutual funds is telling. Morgan Stanley, not content to sell sophisticated financial instruments to insurance companies and state pension funds, is now seeking out even less-sophisticated investors – you, for example – by agreeing to merge with Dean Witter.

Other banks are engaging in similar mergers or cooperative agreements.

Dean Witter’s huge U.S. retail client base will be fish in a barrel for Morgan Stanley’s marksmen. That merger– and similar combinations sure to follow – will create more profit opportunities for derivatives salesmen, more dangers for investors, and, if the dozens of derivatives victims in recent years are at all representative, more blood.

That, too, will mean more money for Morgan Stanley....

###

 


 

 

TO SEE MORE VULTURES STRUTTING
DOWN THE STREET

\/

PART I - PART III

~ ~ ~

...or take a look at the poop in these gilded cages...

ACE UP THE SLEEVE

AIG: THE AMERICAN IDOL OF GREED

AIPAC

THE POOP ON AON

APCOA: VULTURES IN THE PARKING LOT

APOLLO ADVISORS

ARTHUR ANDERSEN

BANK OF HAWAII

BANK OF HONOLULU

BEWARE! THIS BULL IS FOR THE BIRDS!

BIRDS IN THE LOBBY

BIRDS THAT DRINK FROM CESSPOOLS: THE CARLYLE GROUP

THE BLACKSTONE GROUP

BLOWBACK!

THE BRIBES & BOONDOGGLES OF BOEING

BUZZARDS IN THE HALLS OF JUSTICE

BUZZARDS IN THE HALLS OF PUNAHOU

CENTRAL PACIFIC BANK

CESSPOOL

THE CHUBB GROUP

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

DIRTY GOLD IN GOLDMAN SACHS

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

FLYING HIGH IN HAWAII: THE RON REWALD SAGA

THE FREEDOM TO SING

THE GLOBAL FUND

THE INDONESIAN CONNECTION

INVESTIGATING INVESTCORP

MARSH & McLENNAN: THE MARSH BIRDS

MERRILL LYNCH: BEWARE THIS BULL IS FOR THE BIRDS!

NESTS IN THE PENTAGON

PARADISE PAVED

PRICEWATERHOUSECOOPERS

PRUDENTIAL: A NEST ON SHAKY GROUND

P-S-S-T, WANNA BUY A GOOD AUDIT?

THE PUNA CONNECTION

THE ACCOUNTANTS’ HOEDOWN

THE GREAT NEST EGG ROBBERIES

THE STORY OF ENRON

TRACKING THE TYCO FLOCK

VAMPIRES IN THE CITY

VULTURES IN THE HALLS OF JUSTICE

VULTURES IN THE NATURE CONSERVANCY

VULTURES IN THE PEREGRINE FUND

WHAT PRICE WATERHOUSE?

THE XEROX CONSPIRACY

 


 

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Originally posted: February 28, 2001, by The Catbird

 

CHRONOLOGY

February 28, 2001: Originally posted on www.the-catbird-seat.net.

March 13, 2007: The U.S. Dept of Justice obtains Order from Judge David A. Ezra to shut down website.

March 19, 2009: Latest update on new site www.kycbs.net

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