Yes, the Obama administration IS going after the financial fraudsters Part 2

So, you've heard the Obama administration  "hasn't gone after, arrested the financial fraudsters". You've heard they are only the "little fish". Wrong on all counts. It's complicated and the tentacles of the Justice Department's insider trading investigations are many. 

Galleon Group LLC co-founder Raj Rajaratnam, who was found guilty of all 14 criminal counts against him by a jury in May, lost a bid to have his convictions thrown out.

That doesn't seem like an important statement but this is a historic conviction. Even the WSJ admitted in 2009   "Where insider trading is concerned, the SEC always seems to (insert link to little fish).  But if the regulator’s allegations today result in any convictions, it will have reeled in a very big fish indeed,Raj Rajaratnam, founder of hedge fund Galleon Group." 


Note , this is from a WSJ blog, not an article-although the WSJ was a premier financial news source in its time, since Newscorp became the majority shareholder -it's understandably not  as reliable and not the best place to find kudos to the Obama administration for an amazing investigation.


You likely see articles that insider trading doesn't "hurt anyone" but picture this: Mr. Rajaratnam’s rise to wealth was driven by the technology stock boom of the 1990s. As the Nasdaq stock market soared, many hedge funds turned in extraordinary returns, including Galleon, whose main fund rose 93 percent in 1999. Among other funds, Galleon gained a reputation as a momentum investor that tried to ride rising stocks to their peak.  Imagine all of these hedge funds and other players engaged in insider trading that most certainly creates a volatile market that means a constant pattern of boom and bust. 


Raj Rajaratnam was #236 on the Forbes richest Americans List in 2009. He was born in Sri Lanka in 1957, earned an undergrad degree in engineering from the University of Sussex in 1980 and an MBA from the University of Pennsylvania in 1983. Soon after, he joined Needham & Company, where he became Chief Operating Officer. Needham & Company, is an independent investment bank and asset management firm specializing in advisory services and financings for "growth" companies.  Needham & Company is a wholly owned subsidiary of The Needham Group, which also operates a private equity investment business and an investment management business. Needham Investment Management, another wholly owned subsidiary of The Needham Group, offers mutual funds and hedge funds, most notably, The Needham Growth Fund (NEEGX), which has been rated a top-performing mutual fund in the past. Needham Asset Management, another affiliate, controls Needham Capital Partners, which manages private equity funds that invest primarily in growth companies.


You can see, at the very simplest level, how easy it is to get lost in all the holding companies and connections. It's also obvious that these various holding companies made so the parent company doesn't need customers-they sell to each other!  But, back to Raj. 


 In 1997, he founded Galleon, which "invested mainly in technology stocks." according to many sorces. They don't say when Galleon LLC and others were formed. Raj ran a hedge fund for Needham & Co and one article says he bought it, several say he started it....hard to find the truth.   But it's easy to see that it's complicated. Galleon is closed. The connections are many.


In the fall of 2008, as the financial world was in meltdown, Goldman received a $5 billion cash infusion from the celebrated investor Warren Buffett. Blankfein said he informed board members about it in a conference call on October 23, and expected them to keep the information secret. Sixteen seconds after that call ended, one board member, Rajat Gupta, got on the phone with Rajaratnam. Then, just before the closing bell, Rajaratnam purchased $43 million of Goldman stock.   


And, from Reuters - Goldman Sachs Chief Executive Lloyd Blankfein has hired high-profile Washington defense attorney Reid Weingarten, according to a government source, as the Justice Department continues to investigate the bank......"Why do you bring in someone like that?" said the source, who was not authorized to speak publicly, about Weingarten. "It says one thing: that they're taking it seriously."   


I want to note that many of the links I provide play down insider trading and the case. They do provide a few nice tidbits.


Since August 2009, prosecutors have charged at least 52 traders, company insiders and others. All but three of these have been convicted at trial or pleaded guilty. There are new ones daily, if you search for insider trading arrests  or trials. Here are just a few interested parties that I've found:

A US market regulator said former Goldman Sachs Group Inc and Procter & Gamble Co board member Rajat Gupta tipped Galleon hedge fund founder Raj Rajaratnam in phone calls about confidential company information. Gupta's lawyer said the allegations are baseless. (It was on tape)

Prosecutors also charged Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., International Business Machines Corp. executive Robert Moffat, and former officials at Bear Stearns Asset Management Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s $1 billion New Castle Partners.

Roomy Khan, one of the key witnesses in the government’s insider trading case against the former hedge fund manager Raj Rajaratnam, has agreed to pay nearly $1.9 million to settle civil fraud charges filed against her, according to a court document. Ms. Khan, a former employee of Mr. Rajaratnam’s at the Galleon Group, has already pleaded guilty to criminal fraud and conspiracy charges and is cooperating with federal prosecutors. 

Danielle Chiesi, the former beauty queen turned stock trader was just sentenced to 30 months in prison by Judge Richard Holwell in Manhattan Federal court. Chiesi, who was once had the ear of hedge fund billionaire Raj Rajaratnam, pled guilty last January to three counts of conspiracy to commit securities fraud. (several others as well)

"I was pretty scared, pretty paranoid," testified Mark Anthony Longoria, a former AMD manager. "I thought I was the individual giving out information that they were referring to."

Longoria, who pleaded guilty in June and is cooperating with the U.S., is testifying at the insider-trading trial of James Fleishman, a Primary Global Research LLC executive. The Mountain View, California-based firm, also known as PGR, matches employees of public companies with fund managers for a fee.

Richard Choo=Beng Lee, a former hedge fund manager implicated in the Galleon case who 

, founded the California-based hedge fund Spherix Capital, had a relationship with Primary Global and 

began cooperating with authorities in April 2009.

More here. Exhausting although there are many more. The next time you see an article stating one or two got a slap on the wrist, remember there are many more that don't make the headlines. And many more to come. 

Did I mention GS Lloyd Blankfein just hired a lawyer?  I did? Well, you can't mention that too many times. 

The Other September 11th The Chilean Coup

We all remember where we were on September 11th, 2001. But how many of us remember September 11th, 1973? Chile-we hardly could find it on a map. The Vietnam War, Watergate...the US backed military coup was lost in all of that. 


The most striking part of it to me is that we share September 11th, as well as the amount of people killed, around 3,000 in both cases.


In both instances, they were followed by heavy privatization (Walter Reed, our US military, the post office, etc., etc.) and the socialization of private debt.   Jose Pinera was in charge of the large majority of privatization and is writing glowing reports at The Cato Institute and never mentioning these were undertaken under a military dictatorship. A 17 year dictatorship. He neglects to mention the bailout President Bachelet gave to pensions. Or the commission expense ratios that take advantage of people. 


Some interesting background here or here.  It would take many books to really cover the topics, most won't be read because that is too time consuming of course. But if you can spare a few minutes to understand something of what has happened in Chile and the US and understand our commonalities, perhaps we can better predict our futures. 


Many husbands and wives and children also kissed each other for the last time that day. But their days were followed by many more ofdetainment,  torture and murder.

The US Post Office Problems and What's Really Causing Them.

I'm sure you've all heard the US Post Office is on the brink of default. Of course, they've been trying to privatize it for many years. But few people really know the US Post Office history. 


In 1775, Benjamin Franklin was the  first Postmaster General under the Continental Congress. It was established according to the postal clause in article one of the US Constitution and became the Post Office Department. It operated in much the same way until 1971. 


The Postal Reorganization Act of 1970 abolished the United States Post Office Department, a part of the US cabinet, and created the United States Postal Service, a corporation-like independent agency.  Pub.L  91-375 was signed by President Nixon on August 12, 1970. The Act also called for the Post Office to be self supporting. So, it has been since that time. 


Going back to 1969, there was an outcry that the postal service spent too much money, needed to "run like a business" they said....you know the drill. So they changed all that but they're ready to take it to next level.  Instead of a quazi-governmental agency, they would like to fully privatize it now. And people would always believe it's government run.  Think of all the other quazi-governmental agencies like Fannie Mae, now completely private corporations. That didn't go well at all, let's not do it to USPS. 


The recent problems with money-where did those come from? Well, it made sense when people said "email and the internet" but wait a minute. Under G.W. Bush in 2004, it was mandated that USPS pre-fund 75 years of retirement contributions in 10 years. Think about that. Imagine your employer said you must fund your entire retirement in 10 years. My retirement calculator won't allow a 75 year timeline so I chose 40. To save $500,000 in 40 years at 5%, you would need to deposit $338.81 a month. Now, just changing the timeline to 10 years-you would need to deposit $3,342.63  a month. And then it would sit there and gain more interest because you don't need it for many more years. Fredric Rolando said on PBS:

During the last four fiscal years, the Postal Service, with the recession that we have been through, the worst recession in 80 year, and the Internet diversion, still showed an operational profit of almost $700 million during that period of time. The $20 billion-plus dollars that you read about in losses is nothing more than a congressional mandate that requires the Postal Service, required the Postal Service to take all of their cash and put it into a pre-funding account.

The Postal Service actually has somewhere between $50 billion and $125 billion in their other funds that is not taxpayer money. They haven't used a dime of taxpayer money in over 30 years. And the Congress just needs to act responsibly and quickly to give them access to that -- those funds. 


And then I thought I'd check to see what the salary might be of our illustrious Postmaster general. You might be surprised to know he makes more than $800,000.  Senator Jon Tester in Montana would like to know why. (He is facing a Senate battle against money and power).  


 (U.S. SENATE) – U.S. Senator Jon Tester is demanding to know why the head of the U.S. Postal Service made $800,000 in total compensation while eliminating local Montana positions as the organization is dealing with a multi-billion-dollar shortfall. 


I would love to know why, myself. More than the President....turns out the "Postmaster" is actually a CEO, with "additional compensation". $


As a US expat in  Chile for three years, I can tell you Chile's privatized, Friedmanesque, "free market" experiment  failed and is especially evident in their post office (Correos). Some expats there did a little experiment and it took three weeks to send a package from one end of the country to the other. Do expats recommend Fedex or UPS in Chile-NO! They are predictably terrible there. Since there is no competition from the post office there, they are the only game in town. 


I asked a Chilena friend about the post office and mailing a package and she exclaimed "Oh Laura-no one uses the post office here! Send it on a bus". (People go to the bus and pick up packages). Expect things to go that way here as well. Not quite the Pony Express but rather close.  


One more thing, I loved my letter carriers both here in the US and in Chile. Jorge on his little red motorcycle (you have to pay for your mail there so give them a tip!). My mail carrier here brings the package to the door, with a smile and remarks I have a new cat. Letter carriers have saved lives-they are the ones walking the neighborhood. I'm not kidding, google 'letter carrier saves life' and you will find 2 million results. 

No, Obama didn't "Cave" on EPA Smog Rules

I'm only tired of defending the President because I shouldn't have to....why people so easily jump to the conclusion the president "caved"-without even looking for facts-is beyond me. 


I saw this on Raw Story  under the headline "Obama kills EPA smog ruling" followed by many angry comments. He caved, they proclaim....etc., etc...so I googled just a little and found a BBC article (and seriously, I have to look to the BBC to find reliable US news?). It states "Mr Obama asked EPA administrator Lisa Jackson to withdraw the draft rules, saying in a statement on Friday: "I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover."

Continue reading the main story

“Start Quote

This is a new low for President Obama”

Kieran SucklingCenter for Biological Diversity

"The EPA estimated a new smog standard would cost up to $90bn (£55bn) a year - opponents said it would cost more."

Obama on Friday said that the EPA should wait to revise the rule until the next scheduled round of review is due in 2013. Industry groups had made the same argument.

Then I found an article on Politico which adds "

“Work is already under way to update a 2006 review of the science that will result in the reconsideration of the ozone standard in 2013,” Obama said. “Ultimately, I did not support asking state and local governments to begin implementing a new standard that will soon be reconsidered.”

Okay, let's consider that for a minute. We are, I assume you know, in a difficult economy. The rules would cost $90 billion annually  to implement. And there are new rules coming in 2013. 

I imagine this from a workplace standpoint. Imagine your workplace decides on new rules that everyone has to learn but just for 18 months-at which time you and everyone else will have to learn a different set of rules. This will cost a lot of money at a time the company is struggling. 

Does that make any sense at all? The President made the correct decision. Again.

Don't become the monster my friends. They don't need your help.

Texas and other states seek new Reality production of The Scarlet Letter

I think a lot of people just don't realize that the Texas sonogram requirement included one for the transvaginal probe....I'm not kidding. Especially for the earliest abortions. You would think that the earliest stages would be best but folks-any abortion for any reason-and even birth control would be outlawed. Women who are victims of rape and incest must attest to such in writing. Thus, they have a list. Almost like the Scarlet Letter-(free on Kindle) and you thought we were past that. Eighteen other states have laws regarding the requirement on sonograms. 


Judge Sparks noted that he was especially disturbed by the provision that women could avoid the fetal heartbeat requirement only if they signed a statement saying they were victims of rape or incest. Overall, as he stated in his ruling, he found it "difficult to avoid the troubling conclusion that the Texas Legislature either wants to permanently brand women who choose to get abortions, or views these certifications as potential evidence to be used against physicians and women."


If I were in Texas or one of the other states, I'd require Dr. certification that the prospective male partner has zero sperm count-or become a a lesbian.  Perhaps The Handmaid's Tale is not far off at all.

Yes, the Obama administration IS going after the financial fraudsters...and there's a New sheriff in Town

Not a day passes that I don't see comments like these:  "Why has NO ONE been arrested?" or "Eric Holder doesn't do ANYTHING" or "Why haven't I seen ANY CEOs in prison jumpsuits?' 


Here's one:  Nice photo-Farkas in his prison garb. Gone are his houses and toys...From June 2011,  "A federal judge on Thursday sentenced Lee B. Farkas, a former mortgage industry executive accused of masterminding one of the largest bank fraud schemes in history, to 30 years in prison. "


"As chairman of Taylor Bean, Mr. Farkas orchestrated a plot that caused the demise of Colonial Bank and cheated investors and the government out of billions of dollars, prosecutors say." 


Then the story goes on say "Still, Taylor Bean was a minor financial firm based in Florida, and the crimes of Mr. Farkas began well before the crisis struck.. "  This is where I wish they'd done their homework. Exploring a little more we find  that Taylor Bean Whitaker was the largest "private" lending corporation in the USA. From Forbes (certainly not a liberal publication)


Lee Farkas, former chairman of Taylor Bean & Whitaker Mortgage Corp., was found guilty of all charges after a two week trial that had Farkas testifying on his own behalf."

In an unusual move by a defense team in a white-collar crime, they allowed Farkas to take the stand.  His testimony was that he was only trying to help keep his company stay afloat and that he did not believe that what he was doing was wrong.  What he was doing was essentially bundling and selling the same mortgages that his firm had originated twice.  Well the jury helped Farkas understand that what he did was wrong and found him guilty on all charges presented by the prosecution.  When sentenced on July 1^st, Farkas (58), who was taken into custody after the verdict, could be in prison for the remainder of his life.  His lawyers have asked for a hearing next week to allow Farkas to be out until his sentencing.

Lee Farkas built TBW from a small mortgage brokerage firm in 1991 into one of the biggest players in mortgages in the country. "

He also had to turn over $38 million in assets....the forfeiture of about eight properties in Florida, Maine and Georgia properties and nearly a dozen luxury cars as a substitute in partial payment for the money judgment against the convicted mortgage lender. He brought down TCW and Colonial bank-at one time, TBW was one of the largest privately held mortgage lending companies in the United States and Colonial Bank was one of the 25 largest banks in the United States.  

The fraud began in 2002, when Taylor Bean overdrew its main account with Colonial by several million dollars. Midlevel executives at Colonial agreed to transfer money into Taylor Bean's accounts at the end of each day to avoid generating overdraft notices, a process known as "sweeping."

As the hole grew to well over $100 million, Taylor Bean and a handful of Colonial executives concocted a scheme in which Taylor Bean sold hundreds of millions in worthless mortgages to Colonial - mortgages that had already been sold to other investors. More than $1 billion in such phony mortgages were eventually sold to Colonial, which listed them on its books and on its quarterly reports as legitimate assets, prosecutors alleged.

Six others have also pleaded guilty in the fraud scheme. As I see it, the mortgage and bank fraudsters are just like the mafia. And Eric Holder is using the same tactics as Eliot Ness. You catch the little ones and then the bigger ones. We are far from finished with this as more connections are made.

 The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else. Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, determined over the next two years that more than 200 loans acquired from Taylor Bean were bogus, non-performing or lacked critical components such as mortgage insurance.

Fannie Mae CEO Daniel Mudd received $12.2 million in total compensation last year, down 15 percent from 2006, the government-sponsored enterprise said on Wednesday. Mudd's pay included his $990,000 salary, a $2.23 million bonus and a $9 million "long-term incentive" award, the company said.

And Fannie Mae is a private corporation. They knew and said nothing....but Lee Farkas is proof that even if you resign, the Eric Holder Justice Department may be on your trail...

He who fights with monsters might take care....

He who fights with monsters might take care lest he thereby become a monster. And if you gaze into an abyss, the abyss gazes also into you . -Friedrich Nietzsche 


Why do I love that quote and think it's the perfect quote for much of what is happening in politics today? Because, quite frankly there are some leftists who look a lot like the tea party. Anything that President Obama and the democrats in congress do, I know will soon be attacked by certain parties on the left in minutes, no doubt. I agree with much of what they are saying...but they tend to speak and write before they have the facts. They have fought with monsters and the abyss is gazing back. Their responses are emotional and they are battle worn and have lost hope. I want to write about facts and hope and why the emotional responses from far left are too much like the emotional responses from the tea party-and both sides lose the facts in the process. 


The debt ceiling compromise is a perfect example. I'm sure you've heard that the Democrats "caved" to the Republicans-that there are big cuts in medicare and social security. 


But it's simply not true. 


"Barack Obama ate John Boehner's lunch, and then he turned Boehner out to go preach to his conservative colleagues that this eating of the lunch by Obama is actually politically good for them.."  as the Peoplesview stated.   


Here's a summary:  

• A down payment on deficit reduction with historic long-term spending restraint: Nearly $1 trillion in spending cuts -- done in a way to not harm the economic recovery, are balanced between domestic and pentagon spending, and protects critical initiatives like aid for college students;
• Expedited process for balanced deficit reduction: Puts in place a longer term process for additional $1.5 trillion in deficit reduction through a committee structure that will put everything on the table, including tax and entitlement reform. To prevent either side from using procedural tricks to prevent Congress from acting, the committee’s recommendations will receive fast track authority, which means they can’t be amended or filibustered.   
• Sets the stage for a balanced package, including revenues: The American people and a growing number of Republicans agree that any deficit reduction package must be balanced and included revenue.
  • If the Committee does not succeed in meaningful balanced deficit reduction with revenue-raising tax reform on the most well-off by the end of 2012, the President can use his veto pen to raise nearly $1 trillion from the most well-off by vetoing any extension of the Bush high income tax cuts.
• A proven enforcement mechanism: An enforcement mechanism that will compel painful enough cuts to both sides that it will force congress to act. Enforcement mechanisms by their very nature should include measures that neither side supports so as to ensure action.
  
  
  Here's the important part:
  • If Congress fails to act, beginning in 2013 there will be $1.2 trillion in spending cuts through 2021 – 50 percent from domestic spending and 50 percent from defense spending.  Low income programs, including Medicaid, and Social Security and Medicare benefits would be exempted.  Medicare cuts would be capped, limited to the provider side. 

    
    

    Exempted except for the provider side. People like Marcus Bachmann are worried. Those "non-profit" hospitals are worried. But you should not be. Leftists, Democrats should not be. I did run over to a right wing site just to see what they were saying. 

    
    

    They hate it that there will defense cuts...They say things like "The 'joint commission' is one of the worst ideas to come down the pike in a while."  They hate the super committee...because they know they can't agree and if they don't, there will be deep defense cuts which are equally divided with domestic programs-and "entitlement programs are exempt.  Remember the last Republican debate when all the candidates were asked if they would accept a deficit reduction deal that favored spending cuts over raising tax revenue by 10-1 and were asked to raise their hand if 10-1 was unacceptable. All eight raised their hands.  Of course they hate the triggers and the deficit committee....

    
    

    Even Kissinger said Obama is like a chess player....and so have others. I agree. So, my leftist and moderate friends, be careful fighting with monsters, lest you become one.