Absolute Power Absolute Corporuption

Hagens Berman Investigates Groupon Following Restatement of Financial Results and Admitted Material... -- BERKELEY, Calif., March 30, 2012 /PRNewswire/ --

The company has admitted that in connection with its year end close, just weeks after its Initial Public Offering it:

• failed to maintain a financial closing process and procedures that were adequately designed, documented and executed to support the accurate and timely reporting of financial results;
• failed to maintain effective controls to provide reasonable assurance that accounts were complete and accurate and agreed to detailed support, and that account reconciliations were properly performed, reviewed and approved;
• failed to have adequate policies and procedures in place to ensure the timely, effective review of estimates, assumptions and related reconciliations and analyses, including those related to customer refund reserves.

Groupon admits that these weaknesses were material. "It defies credibility that the admitted internal control deficiencies existed just at year end," said Mr. Kathrein. "Disclosure of any such weaknesses in the prospectus and registration statement would have likely driven investors away."

via www.prnewswire.com

Investors who purchased or otherwise acquired shares of Groupon common stock and who suffered losses exceeding $100,000 are encouraged to contact Hagens Berman Partner Reed Kathrein by calling (510) 725-3000. Mr. Kathrein is leading Hagens Berman's investigation. Investors may also contact the firm via email at GRPN@hbsslaw.com or by visiting www.hbsslaw.com/GRPN.

Groupon Forced to Revise Results, Reveals Weak Controls - WSJ.com

Groupon's stumbles come as Congress advanced a bill, known as the Jobs Act, that would ease the regulatory burdens on fast-growing businesses.

Under the act, fast-growing companies with less than $1 billion in revenue would be entitled to immunity from annual audits of internal accounting controls.

The Jobs Act would loosen companies' duties "over exactly the type of controls that it was deficient in," said John Coffee, a law professor at Columbia University.

via online.wsj.com

Clearly Groupon was not ready to go public--and that was before the proposed Jobs Act. If the Jobs Act is enacted we can expect more Groupons and worse.

JOBS Act Fleecers Will Be Self-Policed - NYTimes.com

Representative Patrick McHenry, a North Carolina Republican who worked on the crowd-funding portion of the bill in the House, said that the market would have sufficient incentive to police itself.

“We don’t want any fraud in this space because fraud will prevent more people from participating,” Mr. McHenry said. “You can have crowd-funding take place with minimal amounts of fraud and illegality.”

Crowd-funding markets, which have to register with the S.E.C., Mr. McHenry said, “will be incentivized, if they want to stay in existence, to root out fraud.”

via www.nytimes.com

Yes, But Sanford and Madoff were also self-policing! Staying in business is not the concern of bucket-shop operators  and ponzi schemers, nor is it the concern of the small time burgler who wants to take the money and run. And then, how do you compensate those who lose their life saving to the "minimal amounts of fraud and illegality? Seems Patrick Henry does not live in the real world, or is comfortable enough to not care.

Council of Institutional Investors Blasts Senate Failure to Add Investor Protections to Jobs Bill

The Council of Institutional investors, is a nonprofit, nonpartisan association of pension funds and other employee benefit funds, foundations and endowments with combined assets that exceed $3 trillion, and a leading voice for good corporate governance and strong shareowner rights. On March 22, it blasted the Senate for not providing protection for investor...but rather rushed to deregulation of a bill designed for election year votes. The Council's full statement:

Council Statement on Senate Passage of Jobs Bill

Washington, D.C, March 22, 2012 — The Council of Institutional Investors today issued a statement in response to Senate passage this afternoon of a bill aimed at increasing jobs by making it easier for companies to raise money:

"We are disappointed that the Senate failed to include investor protections in a bill that would make it easier for companies to raise money," said Council Executive Director Ann Yerger. "While it's not at all clear that the legislation will create jobs, it will create greater risks for investors and ultimately could erode confidence in our capital markets. The bill dismantles many investor protections Congress put in place a decade ago after accounting scandals at Enron, WorldCom and other companies. Now that the bill is headed back to the House of Representatives, we hope that, at a minimum, the House will carefully consider adding critical disclosure and oversight requirements to guard against fraud and abuse."

via www.cii.org

JOBS Act Wins Senate Approval - NYTimes.com

Some Democrats, who made up all the opposing votes to the bill, and consumer-advocacy organizations were less optimistic about the effect of a law that rolls back regulations on corporate financial disclosure. Pension funds, lobbying organizations like AARP and the chairwoman of the S.E.C. have also opposed the bill.

“Hasty deregulation has repeatedly been the source of financial crises — the savings and loan crisis, the Enron-era crisis and the Great Recession of 2008, to name a few,” said Senator Jack Reed, a Rhode Island Democrat who voted against the measure after his effort to substitute a rewritten bill failed earlier this week. “I believe history will judge this misnamed bill quite harshly.”

Under the JOBS bill, companies with up to $1 billion in annual revenue would be free to ignore — for their first five years as a public company — regulations that were put into place after the end of the dot-com bubble and the collapse of Enron. Among them are requirements to hire an independent outside auditor to attest to a company’s internal financial controls, and restrictions on how financial analysts interact with investment bankers in promoting a company’s stock.

The bill also allows some companies to advertise for investors in almost any medium, a provision that skeptical regulators contend will mainly benefit the sale of worthless securities by bucket-shop brokerage firms.

Companies that wish to avoid registering with the S.E.C. will be able to do so for longer because the bill raises the threshold for private firms to a maximum of 2,000 shareholders, up from 500. In recent years, several markets for the trading of shares of privately held companies have begun operating, and the bill is expected to help those markets continue to grow.

via www.nytimes.com

This is an incredilby bad bill for the small investor. Moreover, the frauds that it will allow to be created will be too small for most investor to afford a lawyer, most lawyers will refuse to take the cases on a contingency basis, and the fraudsters will have no meaningful money to cover the frauds.

Reuters-Goldman loses bid to end lawsuit over risky CDO | Reuters

Goldman Sachs Group Inc lost its bid to dismiss a lawsuit accusing it of defrauding investors by selling risky debt linked to subprime mortgages that it planned to bet against.

The decision by U.S. District Judge Victor Marrero in New York keeps alive a hedge fund's claims over a $2 billion offering of collateralized debt obligations, amid intense scrutiny over Goldman's activities before and after the 2008 financial crisis.

Marrero said the hedge fund Dodona I LLC may pursue nearly all its claims against Goldman, including that the Wall Street bank recklessly or intentionally sold the Hudson Mezzanine Funding CDOs to offload subprime risk on unsuspecting investors.

"Goldman's sudden -- and prescient -- shift to reducing subprime risk supports the inference that it possessed some unique insight" about the "bittersweet potion" of CDOs it was selling, Marrero wrote in a 64-page decision.

via www.reuters.com

Great decision by a great Judge. Victor Marrero see's through the charade that is often called a disclosure. Goldman tried to argue that it's lists of risks were adequate disclosure, but Marrero saw those disclores as speculative in nature. We all know the sun may not come up tomorrow...

Bloomberg: MF Global’s Corzine Ordered Funds Moved to JPMorgan, Memo Says - Bloomberg

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. (JPM) accounts in London, according to an e-mail sent by a firm executive.

Edith O’Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was “Per JC’s direct instructions,” according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News.

via www.bloomberg.com

It's sad that morality on Wall Street starts with saving your own skin first. I hate to keep pointing to Goldman, but Corzine spent time as Goldman's CEO and you have to ask whether the culture there just fostered corruption, or fosters a belief that you have absolute power which corrupts absolutely.

Forget Greg Smith. For Goldman expose, read Hudson CDO ruling

Goldman's sweep for internal emails containing client insults like "muppet," a scoop by my Reuters colleague Lauren LaCapra, got lots of well-deserved snark as the bank's latest too-little-too-late response to Greg Smith's "Why I Am Leaving Goldman Sachs" op-ed. In case you're just returning from a vacation in Antarctica, which is pretty much the only way you could have avoided the financial world's equivalent of Kim Kardashian's divorce, Smith, a London-based Goldman executive director, said he was sick and tired of the bank's callous treatment of its clients. "It's purely about how we can make the most possible money off of them," Smith wrote in the New York Times. "If you were an alien from Mars and sat in on one of these meetings, you would believe that a client's success or progress was not part of the thought process at all."

Why Smith's piece was considered a revelation is mystifying, given Goldman's starring role in last April's 635-page Senate report on Wall Street and the financial crisis. We all know about the Securities and Exchange Commission scrutiny of the Abacus deal, in which Goldman permitted hedge fund manager John Paulson to pick underlying mortgages that doomed the collateralized debt obligation it was hawking to clients, and the famous "one shitty deal" otherwise known as the Timberwolf mortgage-backed CDO. As the Senate report explains, both were part of Goldman's institutional effort to secretly reverse its own long position in residential mortgage-backed securities even as it marketed MBS investments to clients.

That's the campaign U.S. District Judge Victor Marrero of federal court in Manhattan detailed in a 64-page ruling Wednesday that greenlights most securities and common law fraud claims by investors in two other rigged-to-fail CDOs, Hudson 1 and Hudson 2. (Here's Jon Stempel's Reuters story on the ruling.) Marrero's decision doesn't have the freewheeling rhetorical flair (or 1980s pop references) of Delaware Chancellor Leo Strine's much-discussed opinion on Goldman's conflicts in Kinder Morgan's proposed acquisition of El Paso Corporation, but in a way it's a much more devastating ruling. Marrero portrays a sweeping, months-long effort, initiated by Goldman CFO David Viniar, to shed the bank's exposure to subprime mortgages in mortgage-backed securities -- and simultaneously to take advantage of clients who were slower to perceive the looming MBS market collapse.

As I read through Marrero's decis

via newsandinsight.thomsonreuters.com

Read all of Alison Frankel's article in here regulatr "On TheCase" Column. She follows the legal battles in the MBS debacle better than anyone. Once again, Goldman's conduct is highlighted, and I can't help but get mad that they benefitted so much from the bailout. When will criminal prosecutions follow?

Ohio funds replace BNY Mellon, State Street

Ohio funds replace BNY Mellon, State Street

3/20/2012 COMMENTS (0)

NEW YORK, March 19 (Reuters) - Four Ohio pension funds are cutting ties on Monday with Bank of New York Mellon Corp and State Street Corp, which have come under investigation for defrauding customers in currency exchange transactions.

BNY Mellon and State Street, which had been appointed as custodians to hold approximately $41 billion for Ohio public-pension funds, would be replaced by JP Morgan Chase Bank NA and Citibank NA, Ohio state Treasurer Josh Mandel announced.

Ohio Attorney General Mike DeWine filed a $16 million lawsuit against BNY Mellon on March 12, accusing the bank of overcharging it for foreign currency exchange transactions. The U.S. Department of Justice and several other states have sued State Street alleging similar misconduct.

"I have been fighting against abuse and corruption in banks that serve as international custodians for Ohio pension funds for the last two years, and as treasurer I feel that I have a duty to end custodial agreements with banks being sued for defrauding taxpayers," Mandel said in a statement.

via newsandinsight.thomsonreuters.com

We have been wondering why State penison funds would continue to do business with those they have accused to have defrauded them. Maybe the funds will finally turn to the investment bankers too. Perhaps if there were more choice, smaller banks and more of them, the choice would be easier. But "too big to fail" unfortunately also meand "too big to fire."

Class-actions by Allen Stanford investors revived

March 19 (Reuters) - Victims of Allen Stanford's estimated $7 billion Ponzi scheme won a victory when a federal appeals court said they may pursue class-action litigation against third parties they believe aided in the now-convicted swindler's fraud.

The 5th U.S. Circuit Court of Appeals in New Orleans reversed on Monday a 2011 lower-court ruling and cleared the way for state court cases against brokerages, lawyers and others accused of helping Stanford.

U.S. District Judge David Godbey in Dallas had ruled that the federal Securities Litigation Uniform Standards Act, or SLUSA, barred the state cases in Louisiana and Texas because they were related to securities fraud.

But the three-judge appeals court panel said that law was only "tangentially related" to the fraud alleged by the plaintiffs, the sale of bogus certificates of deposit issued by Stanford's Antigua-based Stanford International Bank Ltd.

Among the defendants was SEI Investments Co, which was accused of inducing investors to move retirement funds into the CDs, and the insurance brokerage Willis Group Holdings.

Both were accused of misrepresenting the CDs as good investments and of misrepresenting the soundness and competency of Stanford International Bank. Lawyers for the bank were also accused of aiding and abetting the fraud.

"The heart, crux, and gravamen of their allegedly fraudulent scheme was representing to the (plaintiffs) that the CDs were a 'safe and secure' investment that was preferable to other investments for many reasons," Judge Edward Prado wrote for the 5th Circuit panel.

via newsandinsight.thomsonreuters.com

This case is a huge victory for investors, but a change in the law is needed. Madoff victims cannot sue aiders and abettors because of SLUSA which preempts state law claims involving the purchase and sale of securities. Courts have interpreted that to mean even stating you will purchase a security but never do. SLUSA let's those who aid the Ponzi Schemers walk.