~ PART III ~
Sightings from The Catbird Seat
~ o ~
THE CORRUPTION OF RICHES
Go to now, ye rich men, weep and howl for your miseries that shall come upon you.
Your riches are corrupted, and your garments are motheaten.
Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days.
Behold the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, crieth; and the cries of them which have reaped are entered into the ears of the Lord of sabaoth.
Ye have lived in pleasure on the earth, and been wanton; ye have nourished your hearts, as in a day of slaughter....
– James 4: 1-5
~ ~ ~
CONTINUING OUR WALK DOWN WALL STREET
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N - O - P - Q - R - S - T - U - V - W - X - Y - Z
National Foreign Trade Council - From Corporate Predators, 5/10/98:
When the People Speak, the Corporations Squeak -
Having learned from the South African divestment movement that local actions can help stop egregious human rights abuses and bring democracy to countries around the world, citizens across the United States are increasingly mobilizing in support of state and local sanctions against countries such as Burma, Nigeria and Indonesia, all of which are ruled by brutal dictatorships.
These sanctions typically leverage the power of government agencies as consumer, using “selective purchasing” laws to bar the government from doing business with companies that do business in the targeted country. Massachusetts and more than a dozen cities have adopted such laws. . . . The idea is to encourage corporations to stop doing business in dictatorial countries, on the theory that income from their investments helps prop up autocratic regimes. . . .
Facing a rising tide of state and local sanctions, Big Business has banded together into an outfit called USA*Engage to defeat and roll back grassroots efforts to influence where multinationals do business.
USA*Engage has more than 600 members, including Aetna, Bechtel, Cargill, Caterpillar, Exxon, Mobile, Monsanto, Pepsi, TRW and United Technologies. . . .
Now, the same band of companies is seeking to roll back Massachusetts’ selective purchasing law which targets Burma, another military dictatorship which has killed thousands, jailed the nation’s rightfully elected leader and thrives on oil money (especially from Unocal) and drug money.
Late last month, the National Foreign Trade Council, another business coalition, with 550 U.S. manufacturing company members, filed suit against Massachusetts, claiming the state’s selective purchasing law infringes on the federal government’s foreign policy-making power. . . .
But while the suit winds its way through the federal courts, it sends a powerful, chilling message to state and local officials . . . The message: states and localities that seek to enact selective purchasing proposals will face unremitting pressure from politically powerful multinational corporations. They should expect massive corporate lobbying campaigns, threats of lawsuits, pressure from a federal government which is choosing to ally itself with business interests on sanctions and the threat of suit at the World Trade Organization and other trade bodies. . . .
At root, the suit over Massachusetts’ Burma law is a clash between corporate internationalism and citizen internationalism. . . . The outcome of the clash will have huge consequences.
[In Nov 1998, a federal court ruled on behalf of the National Foreign Trade Council, finding the Massachusetts law unconstitutional. That ruling is under appeal as this book goes to press.]
NationsBank - From The Buying of the President: . . . In Dec 1994, the Wall Street Journal reported, “The Democratic party expects to close ... with a near-record financial debt ...” The debt was $5 million, the biggest debt for the party since 1968 ...
But the Center for Public Integrity has learned that the party’s debt was evident to the White House in late 1993 and ... President Clinton was “furious over the shortfall” . . .
“Fund raising is still going strong,” Terrance McAuliffe, the DNC finance chairman, told the Wall Street Journal, “and we are very optimistic about the future because of the fund-raising base, especially from the business community...”
Part of that was a $3.5 million loan from NationsBank at a very favorable rate of prime plus 1.5 percentage points.
That much-needed loan...was made two weeks before the mid-term elections, on Oct 14, 1994, and two weeks after the Democratic Congress passed the Fair Trade in Financial Services Act, signed into law on Sept 29 by President Clinton, who had worked hard for passage. Stalled for years, the new law allowed financial institutions to operate a single national bank . . .
No one wanted it more than NationsBank and its president and CEO, Hugh McColl. Indeed, NationsBank lobbyists reportedly helped to draft the legislation. McColl calculated it would save his bank $50 million a year.
Critics of the law said big banks would just swallow up small ones.
We learned that candidate Clinton’s openness to considering NationsBank’s interstate banking legislation apparently was a fundamental condition of support for McColl, who endorsed Clinton late in the 1992 campaign after the two had breakfast, and sent a personal check to the campaign for $1,000.
In 1992, prior to the breakfast, Clinton campaign officials had unsuccessfully solicited a major Democratic party contribution from NationsBank representatives . . .
McColl has become one of Clinton’s closest advisors on banking issues and Clinton has called McColl “the most enlightened banker in America.”
On July 15, 1993 ... McColl spoke at a White House media event to promote Clinton’s community development lending program. An American Banker editorial at the time groused that McColl had appointed himself banking’s “official mouthpiece . . . on behalf of bankers everywhere, he endorsed the lending plan, which is about as bank-friendly as John Dillinger ... McColl would endorse any half-baked Clinton idea in return for the White House’s support for interstate branching legislation.”
McColl left nothing to chance with Congress either. NationsBank significantly increased its PAC contributions, giving $626,800 to congressional candidates in 1993-94 . . .
When McColl and Clinton were seen sitting together in the NationsBank box at the 1994 Arkansas-Duke NCAA basketball finals in Charlotte, NC, one banking industry commentator said of McColl, “Based on what the president has done for him lately, I would have expected to see Hugh sitting on his lap . . . In days gone by, political quid pro quos were usually paid off with stuffed ballot boxes. Laws were passed to stop that sort of chicanery. Now it’s done with money.”
While the interstate bill was moving through conference, on Aug 23, 1994, Clinton and McColl 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.
* * *
At the same time the interstate branch legislation was being lobbied by McColl and NationsBank, in May 1994 Clinton White House Senior Adviser George Stephanopoulos, who makes $125,000 a year, received a controversial 25-year, $668,000 loan at 6.375 percent interest from NationsBank. . . .
* * *
The NationsBank relationship with Clinton is just one example of what to look for with respect to the financial industry’s influence on the president and his party generally in 1996.
In 1992, the Clinton/Gore campaign received more than $800,000 from financial interests.
Nauru - From About.com by Linda DeLaine, 11/23/99: Nauru, Hiding Place for Russia.
Nauru is a 21 sq. mile Pacific island located south of the Marshall Islands. It is surrounded by sandy beaches which rise to raised coral reefs with a phosphate plateau in the center. The primary industry has been phosphate mining, conducted primarily by England, Australia, and New Zealand. This has turned about 90% of the island into a wasteland. Revenues from over 90 years of mining are expected to be exhausted by the year 2000.
For a time, Nauru enjoyed the highest income per capita in the world and lived the indulgent life-style that goes with wealth. The other two main industries are financial services and coconut products. . . .
It seems that Nauru has, not only figured out how, but has implemented a way to bolster its economy and Russian citizens are, allegedly, helping. Nauru, as an off-shore banking center, has been one of the best kept secrets, up to now. . . .
According to Victor Melnikov, deputy chairman of the Central Bank of Russia, roughly $70 billion was transferred from Russian banks to accounts chartered in Nauru, in 1998 alone.
The primary purpose was to avoid taxes. In reality, the money never transits the island. It is moved from the Russian account to the Nauru account and then to accounts which the Nauran banks have at other foreign financial institutions. Nauru is using its state of independence to charter accounts and offer clients anonymity as they wheel and deal in the international financial system. . . .
The number of such accounts, registered on Nauru, is impossible to determine. These, so called, banks exist only on a ledger. There are no buildings, bank tellers, safes, etc. Working within the international banking system, funds are electronically transferred to and from accounts registered with the Nauru banks and other financial centers, such as New York. . . . Nauru exercises stricter secrecy than even the well known Swiss bank accounts enjoy. . .
Nigeria - 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.
* * *
From Oil & Gas Journal, 8/29/00:
U.S. TDA To Assist Nigeria With Energy Infrastructure Projects
During U.S. President Clinton’s trip to Nigeria, U.S. Trade and Development Agency Director J. Joseph Grandmaison announced Aug. 27 in Abuja the agency’s approval of $1.605 billion in grant assistance [aka US taxpayers money] for priority infrastructure projects in the country.
These grants are the first offered since TDA officially opened in Nigeria following the country’s successful transition to a democratically elected government in 1999.
Among the grants are two related to the energy industry. The first, a $400,000 grant to Nigeria Gas Corp., will provide funds for a feasibility study on the domestic use of natural gas, the country’s dominant energy resource. . . . Also in the energy sector, TDA announced its recent approval of a $360,000 grant to the Warri Refining & Petrochemical Company to fund a premium gasoline and aviation fuel feasibility study in Nigeria. . . .
Nomura Securities Group - From Sydney Morning Herald - 12/11/98 by Ben Hills —
The Financial Monster That Tried to Eat Australia
The world’s oldest and largest financial conglomerate broke the law when it attempted to ambush the Australian Stock Exchange and wipe $15 billion off the value of Australia’s public companies, the Federal Court ruled yesterday. . . .
Justice Ronald Sackville found, “Nomura engaged in deliberately misleading conduct designed to achieve illegitimate ends.”
Nomura International is a division of the scandal-plagued, Tokyo-based Nomura Securities Group, founded in 1872, which has $151 billion in assets. ...
The verdict is expected to trigger action against Nomura in the two cities from which the “sting” was organised — London, and in Hong Kong where legal action has been launched by the local securities regulators.
The decision followed a trail that ran for 16 days in the Federal Court and involved millions of documents, electronic records, and taped telephone calls. It represents a major victory for the ASIC. . . .
Mr. Cameron said it was a “landmark” decision that “...will help establish the boundaries of acceptable trading strategies not only in Australian boundaries but also for players in the international securities and futures markets.”
The case focused on the drama of March 28, 1996, when Nomura tried to destroy billions of dollars of the value of the Australian Stock Exchange by dumping a portfolio of shares worth $600 million — more than the normal total daily turnover — in the closing minutes of trading.
The court was told that Nomura executives and traders in London and Hong Kong laughed and joked about what they were doing as they faxed instructions to 10 different brokers, hoping to drive the stock exchange’s All Ordinaries index of 353 stocks down by as much as 10 per cent.
This would have destroyed $15 billion of the value of Australia’s major public companies, with devastating consequences to pension funds and hundreds of thousands of individual shareholders. . . .
This is the latest of a series of adverse findings against the world’s largest stockbroker. In June last year, the Tokyo District Prosecutors’ office filed charges against the company and two former managing directors accusing them of paying a sokaiya (racketeer) $625,000 to ensure that a shareholders’ meeting was not disrupted. The company was also banned from trading on its own account on the Tokyo Stock Exchange for four months for compensating a gangster for trading losses.
In July last year, Nomura agreed to pay $94 million to Orange County, south of Los Angeles, in settlement of an action over the biggest bankruptcy in US municipal history.
Nomura was one of the brokers the county used in gambling on high-risk securities which cost it nearly $3 billion....
* * *
For more, GO TO > > > Yakuza Doodle Dandies
Overseas Private Investment Corporation (OPIC) - From The Buying of the President (1996):
The Ron Brown trade missions would not have been so successful for some U.S. corporations if it had not been for the special government financing and support available to them from two government-backed entities: The Export-Import (Ex-Im) Bank of the United States and the Overseas Private Investment Corp. (OPIC).
Ex-Im and OPIC provided a total of $39.8 billion in financial backing in 1993 and 1994. President Clinton appointed long-time Arkansas political supporters to both organizations. . . .
Lottie Shackelford, a former mayor of Little Rock, is one of the members of the OPIC board of directors appointed by Bill Clinton in 1993. During the 1992 Clinton-Gore campaign, Shackelford held the position of deputy campaign manager . . .
Today she is a vice chairman of the DNC. Since April 1994, Shackelford has also worked as a lobbyist and registered foreign agent for the Washington-based firm, Global U.S.A. The firm is also registered to represent the Westinghouse Corporation. As it turns out, Westinghouse is listed as a client of OPIC for 1994. . . .
OPIC provides loans and loan guarantees for U.S. companies unable to obtain conventional funding for foreign projects. OPIC’s 1994 annual report says direct loans are “reserved for small businesses and cooperatives and generally ranging from $2 million to $30 million.”
OPIC, however, financed loans to major American corporations for much more than the stated $30 million high end. A joint venture by GTE Corporation and AT&T got $200 million loan from OPIC to finance a cellular telephone services deal in Argentina. . . .
* * *
WorldNetDaily, by Charles Smith, Softwar, 7/14/98, via Clinton’s Rogues Gallery: The Nov, 1994 Commerce Dept advocacy document shows the Indonesian Paiton project encountered difficulties with financing because the Asian Development Bank (ADB) knew it contained a Suharto family kick-back. Suharto’s son-in-law, according to the U.S. government advocacy document, was known to be a share holder in P.T. Batu. . . .
Commerce documents show that Lippo business partner Mission Energy (now named Edison Mission Energy) received strong Clinton administration support for the Paiton project. One 1994 document ... noted the Indonesian government-backed project had “state-of-the-art emissions-control technology ... by using low-sulfur Indonesian coal”. ...
In 1996, President Clinton created the 1.7 million-acre Grand Staircase-Escalante National Monument in Utah, placing off-limits the world’s largest deposit of low-sulfur coal.
The Lippo Group is the primary owner of the only other supply of low-sulfur coal in the world, located in Indonesia. Clinton’s move left the only remaining low-sulfur coal supply in Lippo hands, creating a Riady monopoly. The move vastly increased the dollar value of Riady’s low-sulfur coal reserves in a single stroke of Clinton’s pen. . . .
The questionable parts of the Paiton project are not only centered around coal from Riady. For example, Senator Tom Harkin has a close connection. It just happens that Ruth Harkin, Sen. Harkin’s wife, was also 1994 head of the U.S. Government’s Overseas Private Investment Corporation (OPIC), a major Paiton financial backer.
Ms. Harkin approved the OPIC financing for Paiton in 1994. Harkin, a former partner in the law firm Akin, Gump, Strauss, Hauer & Feld, is a close Clinton friend. Harkin’s partnership in the powerful D.C. based law firm also included other Clinton friends Robert Strauss and Vernon Jordan. . . .”
Pacific Islands - From Pacific Islands Report, by Pacific Islands Development Program/East-West Center - Center for Pacific Islands Studies/University of Hawai`i at Manoa:
RUSSIAN MAFIA USING PACIFIC REGION TO LAUNDER MONEY: OECD
Paris, France (Feb. 14, 1999 - AFP) — Russian organized crime is increasing using the Pacific region as a base for laundering its ill-gotten gains, the Organization of Economic Cooperation and Development (OECD) Financial Action Task Force (FARF) said last week.
“A heavy concentration of financial activity related to Russian organized crime has been observed, specifically in (Western) Samoa, Nauru, Vanuatu and the Cook Islands,” the FATF said in an annual report on money laundering.
It cited “an increasingly common scheme whereby apparently American middlemen are used to open accounts or charter banks in one of the locations” to hide the Russian origin of the money after local authorities became suspicious at the high level of Russian activity in the region.
The Russian mafia are also looking for “potential alliances” with drug traffickers in Central and South America and the Caribbean . . .
There is also concern over the rise in internet gambling, which generates nearly $1.5 million dollars a month in the Pacific region and is seen as “another potential vulnerability for money laundering and financial crime.”
Such electronic casinos offer clients virtual anonymity, making the source of their cash all the harder to trace.
Elsewhere in the Asia-Pacific region, the report said, the principal sources of criminal funds are human trafficking, drug trafficking, gambling and organized crime.
South Asia is a particular focus for money laundering activities as it is home to several major international banks as well as being a transshipment point for drugs from Afghanistan, Iran, Myanmar, Thailand and Laos.
In South Asia, money laundering through gold transactions is particularly popular, either through a gold dealer who provides gold in exchange for cash and checks received by the presenter, or through a cash transaction in one country which is completed by a gold deposit to the owner in another country.
But as elsewhere in the world, electronic payment transactions are also a cause for concern, along with the increasing use of accountants and lawyers to help set up and manage accounts set up to launder the proceeds of criminal activity. . . .
For more, GO TO >>> Broken Trust
Panin Group - From The Honolulu Star-Bulletin, 10/29/97, by Rick Daysog: Bishop, partners alter Chinese bank plan. . . .
The turmoil in Hong Kong’s stock market may hamper plans by Bishop Estate and its partners to take a mainland Chinese bank public. . . . With the benchmark Hang Seng index losing more than a fifth of its value during the past weeks, analysts said that a proposal to list shares of Xiamen International Bank on the Hong Kong Stock Exchange could be put on hold.
The development underscores Bishop Estate’s growing exposure to global economic trends. It also calls attention to the $10 billion trust’s high-risk, high-reward investment strategy. . . . Bishop Estate, the state’s largest private landholder, owns nearly 5 percent of Xiamen, which last year applied with the People’s Bank of China to list its shares on the Hong Kong Stock Exchange.
Henry Peters, a Bishop Estate trustee and a member of Xiamen’s board of directors, conceded that the volatile Hong Kong market may delay Xiamen’s initial public offering. But he said the bank’s partners are committed to taking it public, which would greatly enhance the estate’s investment. . . .
Critics say the trust should not be investing in exotic companies such as Xiamen. They argue that the nonprofit foundation — which finances Kamehameha Schools — should avoid high-risk ventures in emerging markets such as China. . . .
The list of Xiamen International Bank’s investors reads like a who’s who of Wall Street and Pacific Rim finance. They include former U.S. Treasury Secretary William Simon, Manila-based Asian Development Bank and Long-Term Credit Bank of Japan Ltd. . . .
The largest shareholder is Min Xin Holdings Ltd., formerly the Panin Group, which owns 36.75 percent of the bank. An affiliated company, Panin Bank, formed Xiamen in 1985.
Panin was founded by Indonesian businessman Mu’min Ali Gunawan, a brother-in-law of Indonesian banking tycoon Moshtar Riady . . .
Riady, who heads the Lippo Group, is at the center of the campaign finance scandal plaguing the Clinton administration. . . .
Peters said he was unaware of the relationship between Panin Bank and the Riady family. ...but investments of Simon, Panin and the estate have been linked for years.
The estate was a big shareholder in First Interstate Bank of Hawaii Inc. when Simon sold the local bank to First Hawaiian Inc in 1991. Simon, in turn acquired much of his stake in First Interstate in the mid-1980s from Panin Bank executives...
Peters was a director of the local affiliate Panin North America Inc. in 1983 when he was a legislator, according to filings with the state Ethics Commission. . . .
For more, GO TO > > > The Indonesian Connection
PNC Financial Services - Bank headquartered in Pittsburg, PA.
July 19, 2002
U.S. Accuses PNC Bank of Concealing Bad Loans
by Ken Berzof, The Courier-Journal
PNC Financial Services has been accused of hiding $762 million in bad loans through questionable accounting practices that inflated profits.
The bank company was ordered by the U.S. Securities and Exchange Commission to “rigorously comply” with accounting standards. Failure to do so could subject PNC to criminal action.
Its stock immediately dropped 30 percent on news of the SEC action yesterday. . . .
Yesterday’s action by the SEC is its first enforcement action since the Enron scandal involving misuse of so-called special purpose entities. Those are companies that can be misused to appear that a company has unloaded its liabilities on someone else.
In PNC’s case, these were subsidiary companies responsible for trying to recover bad loans, or with other poorly performing investments....
In January, PNC recalculated its profits. . . .
“This falls on my watch, and I regret the impact it had on our employees and investors,” said James Rohr, PNC’s chairman, president and chief executive.
“But it does not affect our ability in any material way to perform for our customers or businesses.” . . .
Priceline.com - The company you know and trust – as pitched by William Shatner.
November 22, 2000
Priceline Forgives $3M Loan To Ex-Exec
Clare Saliba, E-Commerce Times
Claims that a CFO left on her own raise questions about the decision not to collect on the loan. Despite a string of well-publicized financial reversals, name-your-own price e-tailer Priceline.com has agreed to forgive a US$3 million loan it extended to a former top executive and will incur a roughly $3.3 million charge in the fourth quarter as a result.
According to published reports, the loan was made to Heidi Miller, who served as a senior executive vice president and chief financial officer until she left the company earlier this month. A highly regarded finance chief who had come to the company from Citibank, Miller departed after Priceline announced it was slashing 16 percent of its workforce in its continuing bid to trim operating costs.
"In connection with Ms. Miller's separation, the company will record a charge of approximately $3.3 million in the fourth quarter 2000, primarily as the result of the forgiveness of a loan pursuant to the terms of Ms. Miller's employment agreement," said the filing. . . .
Public Relations Fiascoes
The murky reason for Miller's departure is the latest in a string of recent public relations fiascoes for Norwalk, Connecticut-based Priceline.
Last week, it was reported that Priceline founder Jay Walker had sold 2.1 million Priceline shares for tax purposes. Earlier this month, another top executive left the firm, slamming the e-tailer's car sales model as a failure.
The company has also been hit with numerous class action suits from investors alleging that company directors misled shareholders about Priceline's growth potential.
Bad Times
In addition, Priceline's membership in the Connecticut Better Business Bureau has been yanked. Connecticut attorney general Richard Blumenthal is investigating the company after receiving more than 100 complaints.
Although the company did have some positive news in its third quarter earnings report, these incidents have left many investors skittish and sent Priceline stock into the throes of a market meltdown.
Wednesday morning, shares were trading at a 52-week low level of $2.25.
© Copyright 1998-2002 NewsFactor Network. All rights reserved.
PricewaterhouseCoopers - SEC News Release 01/06/00: Independent Consultant Finds Widespread Independence Violations at PricewaterhouseCoopers:
The staff of the SEC today made public the report by independent consultant Jess Fardella, who was appointed by the Commission in March 1999 to conduct a review of possible independence rule violations by the public accounting firm PricewaterhouseCoopers arising from ownership of client-issued securities. The report finds significant violations of the firm’s, the professionals, and the SEC’s auditor independence rules. . . .
The independent consultant’s report discloses that a substantial number of PwC professionals, particularly partners, had violations of the independence rules, and that many had multiple violations. . . .
A year ago, the firm agreed in a settlement to conduct the review and create a $2.5 million education fund after the SEC alleged that some of its accountants compromised their independence by owning stock in corporations they audited. As a result of the review, five partners of the firm and a number of other employees had been dismissed.
The independent consultant’s report found that nearly half the firm’s 2,698 partners reported having committed at least one violation of the auditor independence rules, while 153 of them admitted to more than 10 each. Of a total 8,064 violations reported by those involved, 81.3% were by partners and 17.4% by managers.
Almost half the reported violations involved direct investments by the PwC professionals in securities, mutual funds, bank accounts or insurance products related to client companies . . .
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From Business Week, 09/25/00:
ACCOUNTING WARS . . .
Powerful consultants are the targets of Arthur Levitt’s crusade
It’s a pitched battle the likes of which Washington and Wall Street have never seen before. Largely out of the public eye, a morality play is being acted out, and the plot involves power and greed.
On one side: Arthur Levitt, Jr., chairman of the Securities & Exchange Commission, convinced that greed and arrogance have diverted the accounting profession from its mission of providing sound financial reports for shareholders. ...
Levitt is determined to halt a wave of auditing failures— breakdowns that have cost investors $88 billion in the past seven years— by ending what he sees as a massive conflict of interest between accountants’ duties as auditors and the profits they earn as consultants to the same corporate clients. . . .
THE SEC SAYS:
Audit Quality. Audit failures are soaring: 362 companies have restated annual financials since 1997. ... Cost to investors in just 9 cases: $41 billion ...
Consulting Services. Accounting firms that consult for audit clients aren’t truly independent. Firms should be banned from selling their audit clients a wide range of consulting services, including acting as an advocate for clients. SEC says its proposal mainly clarifies existing ethics rules.
Disclosure. Companies should disclose consulting fees paid to their auditing firm. Boards and audit committees must spell out steps taken to ensure the audit wasn’t compromised.
Investment Conflicts. Strict rules that now bar accountants and their families from owning stock, even indirectly through a retirement plan, in any of their firms’ audit clients should be relaxed.
New rules should apply mainly to firm members who can influence a client’s audit. . . .
* * *
See also: Bank of Credit & Commerce International; Cisco Systems; Lucent Technologies
For more, GO TO >>> What Price Waterhouse?
Providian Financial Corp. - From (AP) 12/30/00, by Michael Liedtke: Providian Agrees to Settle Lawsuit for $105 Million....
Credit card giant Providian Financial Corp has disclosed a $105 million settlement of a class-action lawsuit alleging that the lender duped customers into buying products and services they didn’t want.
The settlement ... covers millions of consumers who used Providian credit cards dating to March 1995. . . .
Providian is the nation’s fifth largest issuer of Mastercard and Visa cards.
The lawsuits alleged that Providian misled customers into buying a hodgepodge of products and services, such as credit protection. The lawsuits also alleged that Providian then gouged them with fees that were difficult to remove from their charge accounts.
Consumers won’t receive the entire $105 million settlement– five law firms involved in the case will draw legal fees from the pool. . . .
With the settlement, San Francisco-based Providian will close the books of a legal onslaught that cast the company as an abusive lender that prospered by exploiting unsophisticated, credit-strapped consumers. . . .
In June, Providian agreed to pay more than $300 million to close investigations by the San Francisco district attorney, Connecticut’s attorney general and the U.S. Comptroller of the Currency.
Providian hasn’t admitted any wrongdoing . . .
The settlement will result in a one-time charge of $22 million against Providian’s fourth quarter profit.
Still, Providian expects its earnings to live up to Wall Street expectations of 71 cents to 73 cents a share.
Prudential Insurance Company - From Los Angeles Times, 10/1/93, by Scott Paltrow:
Prudential Securities Payout Due
Seeking to end a swarm of government fraud investigations, Prudential Securities has tentatively agreed to pay at least $45 million in fines and an unlimited amount of restitution to customers . . .
A restitution fund will be established with an initial commitment from Prudential of $320 million . . .
The money will go mainly to several hundred thousand investors nationwide, who put up $7.7 billion in dozens of limited partnership programs that Prudential marketed aggressively throughout the 1980s.
Sources close to the negotiations said the SEC is expected to continue with a second phase of its investigation focusing on possible action against individual executives, including some who are still senior officials at Prudential, the nation’s fourth-largest brokerage.
Several states, too, are likely to bring civil disciplinary charges against current and former Prudential executives . . .
As is common in SEC settlements, Prudential will not be required to admit any wrongdoing. . . .
No punitive damages will be paid, but investors could receive back their out-of-pocket losses plus interest, depending on the facts of their individual claims, sources said. . . . SEC enforcement officials declined to answer any questions about the settlement or investigation. . . .
The fines and initial payments to the restitution fund total $345 million, making the package the third largest securities fraud settlement in U.S. history. Drextel Burnham Lambert paid $500 million in 1989 to settle charges related to its junk bond operation, and former Drexel executive Michael Milken paid $600 million in 1990.
The impact on Prudential will be eased by the fact that whatever it pays out in restitution will be tax deductible . . .
Nearly all the partnership programs involved in the investigations and settlement were unsuccessful, with investors’ losses estimated in the billions of dollars.
But the partnerships were extremely profitable for Prudential, bringing in well over $1 billion in commission revenue and management fees.
In numerous civil lawsuits, Prudential has been accused of misleading small investors by claiming that partnership units were as safe as insured bank certificates of deposit and of engaging in financial manipulations to hide losses from investors.
* * *
Some other Prudential Insurance connections worthy of note:
>> Prudential Insurance Co. is the 4th largest institutional investor in Chubb Group.
>> Prudential Securities is the 6th largest institutional investor in Putnam, a Marsh & McLennan subsidiary.
>> Prudential Insurance Co. is the 6th largest institutional investor in AXA Financial.
>> AXA Financial is the #1 institutional investor in Goldman Sachs.
>> AXA Financial is the 3rd largest institutional investor in Citigroup.
>> AXA Financial is the 3rd largest institutional investor on American International Group.
>> AXA Financial is the 8th largest institutional investor in scandal-ridden Columbia/HCA
>> AXA Financial is the #1 institutional investor in Loral Space.
>> Prudential Insurance Co. is the 6th largest institutional investor in Loral Space.
>> Prudential Insurance Co. is the 4th largest institutional investor in Columbia/HCA
>> Columbia/HCA’s financial restructuring was handled by Goldman Sachs.
>> Bishop Estate invested millions in Columbia/HCA.
>> Bishop Estate owned approximately 10% of Goldman Sachs before Goldman’s IPO.
>> Bishop Estate was the #1 institutional investor in Underwriters Capital (Merritt) Bermuda.
>> Prudential handles Bishop Estate’s pension plan.
>> Putnam (Marsh & McLennan) is the 2nd largest institutional investor in Chubb Group.
>> Putnam is the 6th largest institutional investor in Citigroup.
>> Putnam is the 5th largest institutional investor in AXA Financial.
>> Putnam is the 3rd largest institutional investor in Starwood Hotels.
>> Goldman Sachs is the 10th largest institutional investor in Starwood Hotels.
>> Wellington Management Co. is the 9th largest institutional investor in Starwood Hotels.
>> Wellington Management Co. is the #1 institutional investor in Marsh & McLennan.
>> Putnam (M&M) is the #1 institutional investor in Harrah’s Enterprises.
>> Putnam (M&M) is the 6th largest institutional investor in Isle of Capri Casinos.
>> Goldman Sachs is the 3rd largest institutional investor in Isle of Capri Casinos.
>> etc., etc., etc.
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For much more, GO TO > > > Prudential: A Nest on Shaky Ground
Putnam Mutual Funds Corp - Putnam is just one of the huge corporations anxious to sink their talons into