Daily Archives: January 29, 2013


US pushes for criminal charges for RBS over Libor

US pushes for criminal charges for RBS over Libor

United States regulators seeking a settlement with Royal Bank of Scotland over alleged Libor manipulation want the bank to plead guilty to criminal charges in addition to paying a penalty, the Wall Street Journal reported.


Judge OKs Salvation Army lawsuit vs BNY Mellon

Judge OKs Salvation Army lawsuit vs BNY Mellon

NEW YORK, Jan 28 (Reuters) – A judge refused to throw out a lawsuit accusing Bank of New York Mellon of mismanaging The Salvation Army assets by investing nearly $22 million of the charity’s funds in mortgage-backed securities and other risky investments.

The Salvation Army, one of the largest U.S. charities, claims in its lawsuit that the bank didn’t abide by its obligation to invest in conservative assets and failed to take steps to protect the charity as market conditions deteriorated.

The charity, which filed the lawsuit in 2011 in New York State Supreme Court, is seeking damages for breach of fiduciary duty and other claims.

The Salvation Army must only “state a claim at this juncture, not prove it,” Justice Barbara Kapnick wrote in her Jan. 25 decision denying the bank’s motion to dismiss the breach of fiduciary duty claim.

Kapnick also let stand breach of contract and gross negligence claims. She dismissed a claim for negligent misrepresentation.

The judge noted the Salvation Army’s claim that the bank invested the charities’ funds in high-risk securities despite reducing its own exposure to such investments.

The bank said it abided by its securities lending agreement with The Salvation Army, according to the judge’s ruling. It urged the court to consider the entire investment portfolio which, the bank said, did well.


Court Authorizes IRS To Seek Records From UBS Relating To U.S Taxpayers With Swiss Bank Accounts

Court Authorizes IRS To Seek Records From UBS Relating To U.S Taxpayers With Swiss Bank Accounts

Monday, January 28, 2013

Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Steven T. Miller, the Acting Commissioner of the Internal Revenue Service (“IRS”) announced today that U.S. District Judge William H. Pauley III entered an order authorizing the Internal Revenue Service to issue a summons requiring UBS AG (“UBS”) to produce information about U.S. taxpayers who may hold accounts at the Swiss bank Wegelin & Co. (“Wegelin”) and other banks based in Switzerland to evade federal income taxes. Specifically, the IRS summons seeks records of Wegelin’s United States correspondent account at UBS, which will allow the United States to determine the identity of the U.S. taxpayers who hold or held interests in financial accounts at Wegelin and other Swiss financial institutions that used Wegelin’s UBS account. Wegelin pled guilty in Manhattan federal court on January 3, 2013, to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and to conceal the income they generated from the IRS. As part of its guilty plea, Wegelin agreed to pay approximately $20 million in restitution to the IRS and an additional $22.05 million criminal fine. In addition, Wegelin also agreed to a civil forfeiture of $32 million, $16.2 million of which was seized and forfeited by the Government from Wegelin’s correspondent account with UBS in Stamford, Connecticut (the “Correspondent Account”) in April 2012.

Manhattan U.S. Attorney Preet Bharara said: “Today’s summons is the latest step in our efforts to identify and prosecute U.S. taxpayers who think they can evade their legal responsibility to pay taxes by secreting their money away in anonymous off-shore accounts at Wegelin and other banks, and to recover the hundreds of millions of dollars that is owed to the IRS. Wegelin’s recent guilty plea for facilitating this conduct – the first such plea by a Swiss financial institution – made it possible for us to take this step and our work continues in earnest.”

Audit reveals $1 million revenue loss in Williamson County, possible foreclosure for homeowners

WILLIAMSON COUNTY — Williamson County homeowners could face unexpected foreclosure and those looking to buy or sell a home could face hidden headaches.

That was the warning Friday night from the Williamson County Clerk’s Office after an audit turned up some serious red flags.

After hearing of similar problems around the country, Williamson County hired DK Consultants out of San Antonio to conduct a property records audit. What they found is nearly $1 million that has been lost because of errors in the national electronic registry, meaning homeowners or people looking to buy are at risk.

“As a clerk, our duty is to maintain good records for our citizens,” said County Clerk Nancy Rister.

However, in Rister’s 14 years with the county, she said she’s never dealt with anything like this.

Read on.

JPMorgan Defends Big Banks’ Lending Levels

JPMorgan Chase (JPM) is standing up for megabanks against growing criticism and calls for their breakup.

In a paper due to be released Tuesday, a JPMorgan analyst rebuts the charge that big banks tightened up their lending too much after the financial crisis.

It’s an accusation made this month by the Federal Reserve Bank of Dallas, whose president has called for the big banks to be broken up. A recent paper from the Dallas Fed says the too-big-to-fail banks “inhibited a recovery by tightening credit standards and limiting loans” after the crisis.

But JPMorgan says that big banks have been doing their part, and then some. Large banks lend more, relative to their size, than smaller banks do, JPMorgan Chase Asset Management global head of investment strategy Michael Cembalest argues.  Large banks “have generally been providing more credit relative to their ability to do so” than small and mid-sized banks, particularly for business lending, Cembalest writes.

Read on.


This post is the second half of Part III in our Bank of America foreclosure review whistleblower series. Part III focuses on how the confusion and high cost of the foreclosure reviews weren’t simply the result of overly ambitious targets and poor design, oversight, and implementation of the reviews. These reviews never could have been done properly due to significant gaps and inaccuracies in the borrower records at Bank of America. That meant the only possible course of action was a cover-up.

Here we’ll discuss:

“Garbage in-garbage out” problem of unintegrated, unreliable records

“Fire, aim, ready” approach to launching the tests

“Garbage in-garbage out” problem of unintegrated, unreliable records

The foreclosure review revealed one of the root problems of the foreclosure crisis: unreliable, difficult to use, and in too many cases incomplete records.

Let’s start by understanding the difficulty of the task even if everything had been in good order. We’ve taken this snapshot from the Excel training model for the E and F tests, which were on fees (see here to access the full model on ScribD or scroll down to the embedded version later in this post). This shows the top part of the computer screen reviewers would use to perform their work.

Screen-shot-2013-01-27-at-12.16.47-AM (1)

Read more at http://www.nakedcapitalism.com/2013/01/bank-of-america-foreclosure-reviews-why-the-cover-up-happened-part-iiib.html#YADvTCEDderwLXoX.99




One year after President Obama launched a new task force to investigate fraud during the subprimemortgage crisis, a co-chair of the group says a desire is now growing among prosecutors for a more aggressive response to the meltdown.

New York Attorney General Eric Schneiderman says there is little question fraud played a role in the 2008 financial crisis. In October, his office filed the task force’s first case, a civil suit alleging “a systemic fraud on thousands of investors” by JPMorgan Chase between 2005 and 2007.

As FRONTLINE reported in The Untouchables, the case also marked the government’s first major fraud suit against a Wall Street bank for the crisis.

“I think what we’ve expanded and what we have done is to increase the appetite for these broader-platform cases that address systemic patterns of fraud rather than going on a deal-by-deal basis,” Schneiderman told FRONTLINE correspondent Martin Smith. “I think that’s a huge step … And that’s what we are seeking accountability for, and that’s what we’ll continue to pursue.”

Schneiderman said his investigations began with the due diligence firms that banks hired to gauge the quality of loans they were buying and packaging into mortgage-backed securities. “We found in several cases that we brought already — and we have other investigations under way — it was a sham,” he said.

This is the edited transcript of an interview conducted on Dec. 4, 2012:

Read it here…


very morning, from his desk by the bathroom at the far end of Royal Bank of Scotland Group Plc’strading floor overlooking London’s Liverpool Street station, Paul White punched a series of numbers into his computer.

White, who had joined RBS in 1984, was one of the employees responsible for the firm’s submissions for the London interbank offered rate, or Libor, the global benchmark for more than $300 trillion of contracts from mortgages and student loans to interest-rate swaps. Behind him sat Neil Danziger, a derivatives trader who had worked at the bank since 2002.

On the morning of March 27, 2008, Tan Chi Min, Danziger’s boss in Tokyo, told him to make sure the next day’s submission in yen would increase, Bloomberg Markets magazine will report in its March issue. “We need to bump it way up high, highest among all if possible,” Tan, who was known by colleagues as Jimmy, wrote in an instant message to Danziger, according to a transcript made public by a Singapore court and reported on by Bloomberg before being sealed by a judge at RBS’s request.

Rest here…


RMBS trader indicted for TARP fraud

RMBS trader indicted for TARP fraud

A 16-count indictment has been delivered against 38-year old Jesse Litvak for allegedly defrauding customers on residential mortgage-backed securities trades.

The indictment is the result of an investigation by Christy Romero, Special Inspector General for the Troubled Asset Relief Program and U.S. Attorney David Fein out of Connecticut.  

Fein is being charged with securities fraud for allegedly using his role as managing director and registered broker-dealer at Jefferies & Co. to defraud RMBS customers, SIGTARP alleges.  Some of Litvak’s victims included investment funds — six of which the Department of Treasury set up in 2009 to keep the RMBS market stable during the financial crisis.

“The charges paint a picture of Litvak shamelessly lying to dupe the government into overpaying for mortgage securities with bailout funds,” said Special Inspector General for TARP Christy Romero.

The charges relate to the Legacy Securities Public-Private Investment Program launched by the Treasury in 2009 using $22 billion in TARP bailout money to restart RMBS trading.

Litvak is accused of misrepresenting in some cases the RMBS seller’s asking price to the buyer and, in other cases, misrepresenting the buyer’s price to the sellers.