Daily Archives: May 13, 2013

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The LIBOR price-fixing scam has cost at least $110 million — in the state of Oregon alone!

The LIBOR price-fixing scam has cost at least $110 million — in the state of Oregon alone!

Just as you’re struggling to finance a summer vacation, or simply to pay the freaking rent, how would you like to open your wallet and hand over a wad of cash to a gang of international con artists who commit fraud as casually as they order a five-course dinner?

Really? That’s how you feel about it? Well, tell it to the U.S. Department of Justice, because that’s just what’s going down as a result of the LIBOR scandal.

To recap: Bank hustlers manipulated the world’s most important set of benchmark interest rates and thereby impacted the prices of upward of $500 trillion worth of financial instruments. The LIBOR scam devastated state and municipal budgets, squeezed pension yields and ripped off bank shareholders. In a case of jaw-dropping fraud, greedy traders rigged up the benchmark so that they could cash in on bets on derivatives, while banks submitted fake numbers to make themselves look financially healthier. One Barclays official was fond of fudging numbers in exchange for champagne. “Dude…I owe you big time!” gushed a trader in an email to Barclays’ Mr. Fix-It. “Come over one day after work and I’m opening a bottle of Bollinger.”

That’s right. A bottle of bubbly for a scam that screwed your grandma on her retirement savings.  Retail bank certificates of deposit, you see, are very popular with senior citizens, and they are priced based on LIBOR benchmarks. As Alexander Arapoglou and Jerri-Lynn Scofield have explained on AlterNet, that alone could cause Grandma’s income to drop by as much as 2 percent. It ain’t like she didn’t need the money! That’s not even counting what happened to her pension — or yours.

LIBOR was, in the opinion of many, the con of the century. But is it a crime without punishment?

About a month ago, the Wall Street Journal reported that a federal court judge had let several banks off the hook, dismissing claims that 16 banks targeted by lawsuits had broken federal antitrust laws by rigging LIBOR. As Matt Taibbi explained in his must-read article on the banking scandal, the federal judge bought the banks’ ridiculous blame-the-victim story that if cities and towns and other investors lost money over LIBOR rigging, it was their own fault. Why would they think the banks were competing, rather than, um, “collaborating”? A collaborative cheer sounded in bank boardrooms around the world, because unless the plaintiffs can win on appeal, the ruling significantly reduces what banks would potentially have to pay for wrongdoing.

Some people in the state of Oregon are feeling just a bit riled by this state of affairs.

New research shows that the state of Oregon alone lost at least $110 million as a result of the LIBOR scam. The research on Oregon is based on an analysis of monthly investment data provided by State Street Bank, the custodian bank for the State of Oregon. On Friday, the Oregon Working Families Party joined a coalition of labor and community leaders to call on Governor John Kitzhaber to sue the Wall Street banks responsible for the costly fraud. According to a statement from the WFP, Oregon has not filed a single lawsuit in connected to LIBOR. The governor remains mute on the issue.

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Barclays wins dismissal of U.S. shareholder lawsuit over Libor

Barclays wins dismissal of U.S. shareholder lawsuit over Libor

Barclays Plc , the first bank to settle with authorities over alleged manipulation of the Libor interest rate, on Monday won the dismissal of a U.S. lawsuit by shareholders who claimed they lost money because of the British bank’s activity.

U.S. District Judge Shira Scheindlin in Manhattan said investors who owned Barclays’ American depositary shares did not show that Barclays and other defendants, including former Chief Executives John Varley and Bob Diamond, misled them about Libor or took too long to reveal potential liabilities.

She also said the investors failed to show that alleged Libor manipulation between August 2007 and January 2009 caused them to lose money through June 2012, when Barclays reached a $453 million settlement with U.S. and European regulators.

Read more: http://www.foxbusiness.com/news/2013/05/13/barclays-wins-dismissal-us-shareholder-lawsuit-over-libor/#ixzz2TDDDqmMF

Fla. foreclosure workgroup questioned, called bias

A handful of foreclosure defense attorneys are raising issues with the foreclosure reduction plan recommended by the Foreclosure Initiative Workgroup.

Some said they were unaware the workgroup of judges and court administrators had even been assembled and are concerned they weren’t given a chance to have input about the report.

Find the report here.

Royal Palm Beach-based foreclosure defense attorney Tom Ice said there were a few items in the report that struck him as “wrong-minded,” including an assertion that dismissing a foreclosure that isn’t ready for a hearing is only a temporary fix.

Read on.

~ LENDER PROCESSING SERVICES (LPS) AGREES TO $14M SECURITIES FRAUD SETTLEMENT

NEW YORK (Reuters) – Mortgage servicing company Lender Processing Services Inc has agreed to pay $14 million to settle claims the company misled investors about improper practices underlying its business model, including the “robo-signing” documents, in connection with foreclosures.

The company’s settlement, disclosed in papers filed last week in U.S. District Court in Jacksonville, Florida, marked the latest securities class action settlement to spill out of the U.S. housing market crash and subsequent financial crisis.

Filed in 2010, the lawsuit accused Lender Processing and several executives of making false or misleading statements related to an alleged practice of improper “fee splitting” and of engaging in illegal document-filing practices related to foreclosures.

Following a series of disclosures about its allegedly improper business practice, Lender Processing’s stock fell 18 percent from April 2009 to October 2010.

The settlement, disclosed May 6, represents a “decent chunk of estimated damage in the case,” said lead plaintiffs’ counsel Jonathan Gardner of Labaton Sucharow, though he declined to say how much that totaled.

More here…

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Activists target JPMorgan Chase CEO Dimon

Activists target JPMorgan Chase CEO Dimon

Activist shareholders of JPMorgan Chase ($49.30 0.339%) set out on a political campaign to weaken the authority of the mega-bank’s CEO Jamie Dimon, an article in The Wall Street Journal reported.

Dimon just resurfaced from last year’s “London Whale” trades, which cost the bank more than $6 billion, the article states. 

According to the report, activists think the bank would be better off bringing in an independent chairman, splitting up Dimon’s dual role of CEO and chairman. 

The activists include Sen. Carl Levin, D-Mich., and advisory firms like Institutional Shareholder Services.

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Foreclosure settlement processor Rust Consulting reportedly facing Congressional scrutiny

Foreclosure settlement processor Rust Consulting reportedly facing Congressional scrutiny

Rust Consulting is known in the servicing industry as the firm selected to handle the mass mailing of payments impacted by the $9.3 billion foreclosure settlement.

The payout to borrowers, which equals about $3.6 billion, has been peppered with a few issues, including bounced checks early on and payments that fell short their intended amounts in one of the mass mailings.

The Wall Street Journal says lawmakers and federal bank regulators are increasing their scrutiny of Rust Consulting.

Executives with the firm are reportedly scheduled to meet with Congressional staffers from the office of Rep. Elijah Cummings, D-Md., this week, the publication reports.  

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3 Reasons To Separate CEO And Chairman Positions

3 Reasons To Separate CEO And Chairman Positions

Executive Compensation
One of the events that gets the most attention from a company’s shareholders is an increase in executive pay. Increases come at the expense of shareholder profits, although most understand that competitive pay helps to keep talent in the business. However, it is the board of directors that votes to increase executive pay. When the CEO is also the chairman, a conflict of interest arises, as the CEO is voting on his or her own compensation. Although a board is required by legislation to have some members who are independent of management, the chair can influence the activities of the board, which allows for abuse of the chair position.

Corporate Governance
One of the board’s main roles is to monitor the operations of the company and to ensure that it is being run in conjunction with the mandate of the company and the will of the shareholders. As the CEO is the management position responsible for driving those operations, having a combined role results in monitoring oneself, once again opening the door for abuse of the position. A board led by an independent chair is more likely to identify and monitor areas of the company that are drifting from its mandate and to put into place corrective measures to get it back on track.

Audit Committee Independence
In 2002, the Sarbanes-Oxley Act, legislated as a response to several high-profile corporate failures, set out stronger regulations for corporate oversight, including a requirement that the audit committeeconsist of only external board members. This means that no member of management can sit on the audit committee. However, because the committee is a sub-group of the board of directors and reports to the chair, having the CEO in the chair role limits the effectiveness of the committee.

This is especially true for the whistleblower clause. Sarbanes-Oxley requires that the audit committee puts in place a procedure where employees and other connected individuals can report fraud and other abuse directly to the committee without reprisal. When the board is led by management, employees may be less likely to report such activities and the audit committee may be less likely to act on such reports.