Daily Archives: August 1, 2012

Squatters Were Able To Steal This Man’s House From Under His Nose

Two Colorado squatters managed to skirt around a court-ordered eviction notice by filing personal bankruptcy, according a local CBS affiliate.

Last month, a judge ordered the pair, Veronica Fernandez-Beleta and Jose Rafael Leyva-Caraveo,  to turn the property over to the rightful owners. 

But before the county sheriff could evict them, they used the one loophole they had left: filing bankruptcy.

“The sheriff’s office will not proceed with an eviction if there is a bankruptcy in question,” Arapahoe County Undersheriff David Walcher told CBS.

It’s another blow for the original owners, Troy Donovan and his wife, who came home after an extended trip to find the house taken over by a new family.

Read more: http://www.businessinsider.com/troy-donovan-still-cant-get-the-squatters-out-of-his-home-2012-8#ixzz22KXgQCda

Underwater homeowners face a tax time bomb

The letter from Bank of America Home Loans got right to the point. “We are pleased to inform you that we have approved your Home Equity Account for participation in a principal forgiveness program offered as a result of the Department of Justice and State Attorneys General global settlement with major mortgage servicers.” In the letter, which I obtained from an anti-foreclosure activist, Bank of America offered the homeowner full forgiveness of their entire home equity loan balance of over $177,000. But then Paragraph 5 came with an ominous warning: “Please be aware that we are required to report the amount of your cancelled principal debt to the Internal Revenue Service.”

Under current law, a principal reduction like this would be exempted from tax liability. However, that law, the Mortgage Forgiveness Debt Relief Act, expires at the end of the year, and after that, any mortgage debt forgiveness provided to a borrower will count as gross income for tax purposes, potentially costing millions of families several billion dollars. In the above case, the borrower would be required to pay taxes on the entire $177,000 amount forgiven by the bank, as if it were earned income. And that’s money that struggling homeowners simply don’t have.

“They wouldn’t be able to handle it,” said Peggy Mears of the Alliance of Californians for Community Empowerment, a community organizing group in California that has worked extensively on foreclosure issues. “If they could handle it, they wouldn’t be in arrears with their house notes. They don’t have that kind of money.”

Read on.

Shareholders can pursue securities fraud claims even if they miss a chance to sell shares at a profit

Thomson Reuters News & Insight.


In a victory for investors, a federal appeals court said shareholders may still pursue damages for securities fraud even if they miss a chance to sell shares at a profit after the alleged misconduct is revealed.

The 2nd U.S. Circuit Court of Appeals in New York revived a lawsuit accusing China North East Petroleum Holdings Ltd, a crude oil production company in northern China, of misleading investors about its financial health and prospects.

While not ruling on the merits of the claims, the court said U.S. District Judge Miriam Goldman Cedarbaum in Manhattan erred in dismissing the case last October because the lead plaintiff failed to cash out of the stock when the price rebounded.

Wednesday’s decision “is significant for investors because it means temporary inflation in a stock price does not reduce damages,” said Jeremy Lieberman, a partner at Pomerantz Haudek Grossman & Gross in New York representing lead plaintiff Acticon AG, a European real estate consulting firm.

North Carolina homeowner uses a securitization audit to obtain a foreclosure dismissal in court

In North Carolina, Andrew Carlton was summoned to court for foreclosure proceedings on his $1.5 million refinance of his residence.  Using a secret weapon called a “securitization audit”, provided by Paladin Securitization Auditors, Carlton’s attorney was able to use the audit to show that,

“GMAC Mortgage acted in breach of Good Faith, caused undo duress, inflicted emotional distress, failed to negotiate fairly and acted with incompetence.”

GMAC, the purported current Note holder, originally had the homeowners apply for a HAMP loan modification.  This is a government funded program which provides assistance to homeowners seeking mortgage refinancing.  However, eligibility for this program can be found on the websiteand limits the loan amount to $729,750. The representatives at GMAC should certainly know that a 1.5 million dollar loan would not qualify for a HAMP modification. The securitization audit stated:

“GMAC subjected the borrowers to unnecessary duress by having them apply for a program they could not be approved for. I have no idea how much time and grief this caused the Carlton’s, but it was shear incompetence to tell the borrowers to jump through hoops submit paperwork for months to cure a 1.5 million dollar mortgage with a program that doesn’t do 1.5 million dollar modifications.”

More importantly, the securitization audit also illustrated that GMAC failed to show standing with respect to ownership of the debt, and may have attempted to deceive the homeowner by not disclosing the true owner of the debt.  Paladin Securitization Auditor’s audit provided evidence so significant that GMAC’s foreclosure attorney voluntarily dismissed the foreclosure proceedings on April 20, 2012.  Click here for the Notice of Voluntary Dismissal.

Read on.

The Cartel: Behind the Scenes in the Libor Interest Rate Scandal

Eduard Pomeranz and Rolf Majcen are small fish in the shark tank of international high finance. Their hedge fund, FTC Capital, is headquartered in tranquil Vienna and manages only €150 million ($189 million) in assets. But now Pomeranz, the founder, and Majcen, the head of the legal department, have been able to strike fear in the hearts of the big fish.

“The Libor manipulation is presumably the biggest financial scandal ever,” says Majcen, a man with slightly disheveled-looking hair and Viennese sarcasm. Yes, he says, it did shock him that something like this was even possible, namely that a group of international banks had been manipulating interest rates for years. But Majcen takes a matter-of-fact approach to it all. As a financial professional, he is only one of many who want to get back the money that they feel they’ve been cheated out of.

At the end of June, British and American regulators imposed a $500 million fine on Barclays, the major British bank, and forced its CEO Bob Diamond to resign. Since then, a war of sorts has erupted in the financial sector. Investigators are attacking presumed offenders, banks that are involved are denouncing others in the hope of mitigating their own penalties, and small investors like Majcen are inundating Libor banks with lawsuits.

Deutsche Bank and more than a dozen other financial giants have come under sharp criticism due to the alleged manipulation of the Libor ( London Interbank Offered Rate), a benchmark interest rate. Some are even referring to the banks that are instrumental in calculating that rate a cartel, the sort of vocabulary not normally associated with the financial industry.

Regulators are using terms like “organized fraud.” European Justice Commissioner Viviane Reding has suggested that bankers ought to be called “banksters.” But in the case of some agencies, especially in New York and London, the outcry is also convenient; it diverts attention away from their own failures. For years, regulators overlooked what was happening right in front of their eyes.

Read on.

Banks seek leniency in EU Euribor probe

Several banks under investigation for suspected rigging of euro interest rates have joined Deutsche Bank in giving information to EU antitrust regulators in the hope of lower fines if they are found guilty, two people familiar with the matter said yesterday.

The European Commission is investigating possible manipulation of the Euro Interbank Offered Rate (Euribor) benchmark rate at which banks lend in euros to each other.

The EU watchdog has not disclosed the names of the banks being investigated. They face fines of up to 10% of their global revenues if found to have breached EU antitrust rules.

Deutsche Bank, which sources say is already co-operating with the authorities, had revenues last year of €33.2bn.

“Several banks have come forward with information to the Commission,” said one of the sources, who declined to be identified because of the sensitivity of the matter. This person declined to provide more details.

The second person said there could be at least two banks, besides Deutsche Bank, which have sought leniency under the European Commission’s scheme to encourage whistleblowers.

Read on.

Deutsche Bank confirms the involvement of employees in the case of Libor

Le Monde newspaper (translated in English):

After weeks of silence on the scandal of handling interbank rate LIBOR (London Interbank Offered Rate), Deutsche Bank confirmed Tuesday, July 31 that some of its employees were involved in the case but said they had “acted on their own. “

These employees “did not respect the rules of the bank” and “action taken” against them, the group said in a letter to his staff, leaving hear they have already been fired. “No board member, former or current position “is implicated in the affair, according to preliminary results of an investigation ongoing internal, the letter adds.

Barclays has opened Pandora’s box by revealing June 27 it would pay about 360 million euros to put an end to investigations of British and U.S. regulators in a case of manipulation of UK Libor interbank rates EURIBOR between 2005 and European and 2009.

Italian police have raided Barclays’ Milan office as part of an investigation into the alleged rigging of Euribor

Italian investigators have seized documents from the Milan offices of Barclays as the bank was raided in connection with allegations it was involved in rigging Euribor borrowing rates.

Police took away “numerous documents, computer information and emails” from the bank’s office, according to a statement from the authorities, who are investigating whether Barclays manipulated Euribor “just as it did with Libor”.

The Italian police investigation follows complaints by consumer groups, which have claimed that more than 2m families in the country could have been affected by the rigging of Euribor, amid estimates that the scandal could have cost about €1,200 (£934) per household.

Barclays declined to comment.

Read on.

Class warfare: In JPMorgan CIO case, lead counsel fight gets ugly

Thomson Reuters News & Insight.


Remember how I said the securities class action accusing JPMorgan of lying to investors about the multibillion-dollar losses of its chief investment office would hinge on when the alleged fraud began? Early filings in the case asserted an unusually short class period, claiming the bank’s misrepresentations began only a few months before it revealed its initial $2 billion loss in May. But the first institutional investor to join the fray claimed a much earlier start date, citing the bank’s statements and filings from back in 2010. I said the subtext to these different class definitions was who would lead the case, since investor losses depend on the particular class definition and judges typically appoint the shareholder with the biggest losses as lead plaintiff.

That is no longer subtext. In briefs filed Monday night, the only two remaining candidates — a union fund represented by Robbins Geller Rudman & Dowd and a coalition of public pension funds represented by Bernstein Litowitz Berger & Grossmann, Grant & Eisenhofer and Kessler Topaz Meltzer & Check — each accused the other of manipulating the class period to win control of the case. Lead counsel fights are always a chance to see how the securities class action bar operates, but the sort of naked maneuvers alleged in these filings are rarely exposed to public view.

Robbins Geller’s brief claims that the pension fund coalition didn’t lose money at all in JPMorgan trades in the relevant time frame. According to the brief, the public pension funds actually made $25 million in profits in the months between the bank’s first assurances that its CIO trading positions weren’t overly risky and its admission of losses. And the only reason the public pension funds claim that JPMorgan’s fraud dates back to 2010, the Robbins Geller brief said, is because they can’t claim losses in the true class period.

The megabillions tax claims facing Fannie Mae and Freddie Mac

Thomson Reuters News & Insight.

There’s another tranche of litigation that’s gotten much less attention but could result in billions of dollars for state and county governments, courtesy of Fannie Mae and Freddie Mac, the government-sponsored mortgage guarantors that have taken ownership of thousands and thousands of foreclosed homes. The Judicial Panel on Multidistrict Litigation is weighing a motion to consolidate 23 suits from around the country that claim Fannie and Freddie owe real estate transfer taxes on foreclosed homes they resold. The total exposure for Fannie and Freddie, which are now in federal conservatorship, hasn’t been publicly tabulated, but in the two cases that sparked the MDL motion, the Michigan attorney general and the county government of Oakland, Michigan, claimed that Fannie and Freddie owe millions in transfer taxes just to Oakland County. Class actions already on the dockets have asserted claims on behalf of 13 states, but according to a consolidation motion filed by Genesee County, Michigan, 35 states have real estate transfer tax statutes that could be asserted against Fannie and Freddie. I’d be surprised if most of them (including California and Nevada, which haven’t yet brought cases) don’t end up filing claims.

Fannie and Freddie, which are represented at the JPMDL by King & Spalding, Foley & Lardner and Arnold & Porter, argued in the Michigan litigation that they are exempt from all state taxes by the federal charters that created them. But in a summary judgment ruling in March, U.S. District Judge Victoria Roberts of Detroit said the transfer tax is an excise fee that’s not covered by the charter exemption. She also said Fannie and Freddie are not “federal instrumentalities,” so they’re not shielded by a Michigan law exempting government entities from taxation. The judge granted the county and state summary judgment on Fannie and Freddie’s excise tax liability. (Lawyers for Fannie and Freddie have asked the 6th Circuit Court of Appeals to take an interlocutory appeal of the ruling.)

It’s easy to see why Fannie and Freddie oppose consolidation of the transfer tax cases — especially because Genesee County’s lawyers suggested that the MDL panel move all of the cases to federal court in Detroit, where the mortgage guarantors’ liability has already been decided. Fannie and Freddie called the motion “a brazen attempt to forum shop,” but also said that even if they lose on the threshold issue of their exemption from transfer taxes, their liability depends on state and local statutes.