Monday, April 20, 2015

Sputter THIS

[T]he resolution of two cases last week clearly indicates that enforcement actions for conduct leading up to the crisis are pretty much done, with no real finding of liability for violations.

When the fourth estate is so firmly wrapped in the arms of EM08, it's little wonder the biggest crime spree in history was successful. I've written about how the sin of omission is the msm press' main act, but here's one I'd never anticipated: the truth! By coming out and telling us that those entrusted with protecting us are basically done, well, how can we argue with that, right? Let's just move on now, shall we? Like leaving the Lakers game after a loss. There's always tomorrow. Between this nonsense and the statute of limitations, EM08 puts another feather in its cap, and the evil empire can get back to yachting in the south of France.


One bit of important data emerged: Ernst & Young will go stand in the corner for a minute for its role as Lehman's accountant. Since Enron, this has been a topic never broached in either the msm or indies: who were the banks' accountants? GM's?  Chryslers? AIG's? Fannie's?

Once again, the blogosphere beat the press. "Beat the Press" ... has the ring of a show.

Oh, Ernst & Young's fine? $10 mil. It's just more cause for national embarrassment and shame, at least for those of us who can still feel.

NYT's Dealbook

Financial Crisis Cases Sputter to an End

April 20, 2015


Yogi Berra once said that “it ain’t over ‘til it’s over.” Unlike the final out or winning run in a baseball game, determining when cases arising from the 2008 financial crisis will end is a bit harder to discern. But the resolution of two cases last week clearly indicates that enforcement actions for conduct leading up to the crisis are pretty much done, with no real finding of liability for violations.

In one case, the Securities and Exchange Commissionresolved fraud charges against Richard F. Syron, the former chief executive of the mortgage giant Freddie Mac, and two other senior executives related to statements regarding the company’s exposure to subprime mortgages. The case did not even end with the usual settlement in which the defendants neither admitted nor denied liability. Instead, it concludedonly with an acknowledgment “that no party is the prevailing party.”

In the other case, the New York State attorney general, Eric T. Schneiderman, reached a $10 million settlement of accounting fraud charges against Ernst & Young for its role as the auditor for Lehman Brothers, whose collapse in September 2008 in the largest bankruptcy in American history ignited the near meltdown of the financial system. Although Mr. Schneiderman asserted that the resolution showed that auditors can be held accountable for violations, DealBook reported the accounting firm’s statement that “after many years of costly litigation, we are pleased to put this matter behind us, with no findings of wrongdoing by E.Y. or any of its professionals.”

Both cases took direct aim at conduct at the center of the financial crisis, and neither yielded anything close to a finding of actual wrongdoing.
The S.E.C. dropped its investigation into Lehman Brothers in 2012 despite an extensive report by Anton R. Valukas that concluded that management was aware of accounting maneuvers used to make its finances look stronger than they were. No one at the firm ever faced a civil action, much less criminal charges, and the modest payment by Ernst & Young looks more like a nuisance settlement.

In addition to the Freddie Mac defendants, three Fannie Mae executives, including its former chief executive, Daniel H. Mudd, were charged by the S.E.C. in December 2011 with the same type of violations regarding the company’s exposure to subprime loans. These were among the few cases to take aim at the management of a top player in the subprime mortgage market for its role in the financial crisis.

The problem the S.E.C. faced in the Freddie Mac case was that there was no accepted definition of a subprime mortgage, so proving that Mr. Syron and others intentionally made misstatements about the effect of those loans on the company’s portfolio was almost impossible. The case against the Fannie Mae defendants remains outstanding, but it is unlikely the S.E.C. will obtain much more than what it obtained from the Freddie Mac executives, which included total payments of $350,000 that were covered by the company’s insurance policy.

Prosecutors have been successful in using a provision of the Financial Institutions Reform, Recovery and Enforcement Act, better known as Firrea, to pursue civil cases against banks for violations of the mail and wire fraud statutes for misstatements about subprime loans bundled into securities that were sold to investors. JPMorgan Chase, Bank of America and Citigroup all paid multibillion-dollar settlements for Firrea violations. The law carries a 10-year statute of limitations, so cases from the financial crisis remain viable.

In February, Attorney General Eric H. Holder Jr. said in a speech at the National Press Club that he had given federal prosecutors 90 days to decide whether to file charges against executives for misconduct related to mortgage-backed securities. That deadline is fast approaching, and there has been no indication yet that a case will be filed against any individuals.
Banks have been willing to settle with hefty payments, but to date only one individual, a former executive at Countrywide Financial, has been found liable for a violation. Although Firrea remains a potent tool, evidence from the financial crisis is undoubtedly becoming stale because fraud cases, unlike fine wine, do not age well.

DealBook reported last November that prosecutors were considering filing civil charges against Angelo R. Mozilo, Countrywide’s former chief executive, but nothing has materialized. Mr. Holder’s 90-day deadline may push prosecutors to file a few cases against individuals, but the likelihood of any being pursued against a top Wall Street executive looks to be almost nil.

For all the billions of dollars paid in penalties by banks and Wall Street firms, the sense of dissatisfaction with how prosecutors investigated those involved in the financial crisis remains pervasive, especially when companies enter into multiple agreements that allow them to avoid charges for repeated misconduct but no individuals are named. The Justice Department has threatened to “tear up” a deferred or nonprosecution agreement if a company commits additional violations, but whether that will happen remains to be seen.

Even that shift drew a rebuke from Senator Elizabeth Warren, who described it in a speech last week as a “timid step.” For corporate misconduct, she said, “no firm should be allowed to enter into a deferred prosecution or nonprosecution agreement if it is already operating under such an agreement — period.”

With the era of financial crisis cases drawing to a close, the main lesson the Justice Department seems to have taken away is that the focus should be more on individuals who cause corporations to engage in misconduct rather than just the organizations themselves. In a speech last Friday at New York University, the head of the Justice Department’s criminal division, Leslie R. Caldwell, reiterated the point that the primary target will be those inside the company who are responsible for wrongdoing.

Federal prosecutors expect cooperation for corporate misconduct, but self-reporting will no longer be enough to consider a company to be cooperative. “True cooperation, however, requires identifying the individuals actually responsible for the misconduct — be they executives or others — and the provision of all available facts relating to that misconduct,” Ms. Caldwell said.

If anyone still had a notion that companies should be loyal to their employees, the Justice Department is trying to send a message that such feelings should fall by the wayside as prosecutors focus on culpable individuals in organizations. For companies, the dissatisfaction with the lack of signature cases from the financial crisis means increased pressure to cooperate, lest they be made an example of a new “get tough” policy.

Saturday, April 11, 2015

Bureaucrooks Gone Wild, The Taming Episode

The lifestyle that Robert Rizzo enjoyed during his run as Bell city manager included a stable full of thoroughbreds, among them a gelding named Depenserdel'argent — French for "spend money."

And Rizzo had plenty to spend, with an annual compensation package that swelled to $1.5 million in one of Los Angeles County's poorest cities.
--LA Times 

Beyond the trillions hoovered up by psycho bankers and bureaucrooks, there's perhaps the question of EM08: Why has no one gone to jail? 

Well, if "EM08" is used as I define it -- government and corporate psychopaths preying on the underclass -- then ex City of Bell city manager Robert Rizzo and his cohorts sitting on ice is a lesson.

Now, Bell is in the east portion of LA, southeast to be more precise. It's a tiny, about 40k populated city, all brown, blue collar. That these bureaucrook scums, some of whom were brown, speaks to just how seductive money is. When you jack anyone innocent it's bad, but when you jack your own kind, well, speaks for itself. Ask Jews about Bernie Madoff, Muslims about Boko Haram or ISIS, or Koreans about kid slob in Pyongyang.

Critics of the death penalty say that it's not a deterrent, and, in fact, statistically, that's apparently true. But that's for capital crimes. EM08 is in another category. Rather than bore you I think what I'll do is make an index of crimes and players, as extensively as I can, in another post. But that's a big project.

For now, let's be content with the following story below. We can't say for sure whether jailing Rizzo and his shithead cohorts was the catalyst for change, but it sure seems coincidental coming a year after jailing those psychos.

And now, faces of evil:

Asian sellout? NAH! It's love, even if he woulda been bricklaying.
Extra chili on the fries. Oh, and Skittles. Lots an lots a Skittles.
Bureaucrooks as only crazy LA can do, in white and now new LA brown.
Yes, my cell mate was Bubba, and yes, I ate him. I am sahwee.

Public CEO at: publicceo.com/2015/04/city-of-bell-scores-top-grades-for-open-data-access-one-year-after-trials-conclude

City of Bell Scores Top Grades for Open Data Access One Year After Trials Conclude

By Bill Britt.

One year ago this month, former Bell City Manager Robert Rizzo was sentenced to 12 years in prisonfor his role in what became known as The Bell Scandal. Five former elected Bell officials were convicted of corruption for paying themselves salaries of up to $100,000 a year for part-time positions.

In a city where one-quarter of the residents live below the poverty line, their elected officials not only bilked the city out of millions, they left it unable to afford the experienced administrators and staff who are now needed to replace them.

But first, the good news: The City of Bell now boasts one of the more open municipal websites when it comes to accessing data. Not only are city procedures and salaries posted, but Mayor Nestor Enrique Valencia points says the names of the people earning those salaries are listed as well. “Before the scandal was exposed, we didn’t even have a website. For years, if you clicked on it, it was the same online picture of a little girl and boy with the caption, ‘Website under construction.’ Our new Finance Director has since turned things around.”

That would be Josh Betta. He’s so good at his job that, during his tenure as Finance Director for the City of Glendora, he received the Certificate of Achievement, the highest form of recognition for governmental accounting and financial reporting from the Government Finance Officers Association of the United Stated and Canada. He regarded Bell as a city worth saving.

“The idea of having a useful and viable website is simply good business,” said Betta. “The challenge is letting people know it exists. After they find it, the challenge for users is perspective. Sure, you can see our salaries but if you want to know whether a salary or increase is appropriate, you have to find the contract pertaining to that union. It’s also on the website, but you’ve got to do the work. It’s not all laid out for you.”

Which is why Mayor Valencia wants to take the website a step further by at least making that contract easy to find. “Visually,” Valencia says, “I’d like to see a tab where people go right to the specific things they’re looking for, but personally, mindful of those fake bonus rewards that were exposed in the scandal, I want us to post total compensation. Not just salaries but pensions, health care benefits and any potential, legitimate bonuses as well.”

While Betta boasts that the city’s website earned an A-minus grade in 2013 from the Sunshine Review, an organization that evaluates the transparency of government websites, Valencia points out that Bell has replaced one image problem for another: It can’t afford to hire quality administrators and support staff. Valencia says the city’s interim city manager has moved on, and both Financial Director Betta, and the Community Development Director are also leaving.

“Our current city manager did great work,” said Valencia. “Our Finance Director, who was key to this turnaround, is moving on. They’ve done their work and other cities are able to pay them more money. We just don’t have the funds to compete.”

And that fact alone causes the mayor to wonder if Bell can survive as a city. “If you can’t hire the right people and they won’t stay for whatever reason, it questions the sustainability of a city. We need good, dedicated professionals with proven experience. Right now, I’m proud of what we’ve done to turn things around. We’ll continue making data easily available online and other cities should follow as well.”