Daily Archives: May 22, 2013

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Shuttered FrontPoint hedge funds sue Libor banks for $250 mln fraud

Shuttered FrontPoint hedge funds sue Libor banks for $250 mln fraud

Last month, right after U.S. District Judge Naomi Reice Buchwald of Manhattan dismissed class action antitrust and racketeering claims against the global banks that supposedly colluded to manipulate the benchmark London Interbank Offered Rate (Libor), Daniel Brockett of Quinn Emanuel Urquhart & Sullivan politely said, “I told you so.” Brockett had been pushing an alternate theory of liability against the Libor banks, focused on securities and common-law fraud, not on antitrust violations. And even in the Libor litigation wreckage that resulted from Buchwald’s ruling, he said, fraud claims like those filed in March by Freddie Mac’s conservator against a dozen Libor banks were still viable. The only catch was that plaintiffs would have to be able to show that they relied on misrepresentations by panel banks, so cases would probably have to be brought by individual investors with big enough losses in Libor-pegged financial instruments to justify the cost of solo litigation. Nevertheless, Brockett told me he believed those investors were out there.

On Tuesday, one of them surfaced. Brockett filed a 106-page complaint in New York State Supreme Court for Salix Capital, which owns claims belonging to several shuttered hedge funds that once operated under the FrontPoint umbrella. Salix alleges that in 2007 and 2008, the FrontPoint funds engaged in Libor-pegged interest rate swaps with Libor panel banks as part of complex, multi-security deals known as corporate bond basis packages. The swaps were supposed to be a hedge against a global banking crisis, since Libor should have increased as it became more expensive for banks to borrow from one another. Instead, the complaint alleges, the panel banks artificially suppressed Libor, undermining the trading strategy of the FrontPoint funds.

The funds “relied on the integrity of how Libor was set and the truthfulness of defendants’ representations about how Libor was set in entering into these transactions,” the complaint said. “By suppressing Libor, defendants artificially lowered the amount they were contractually obligated to pay to the funds under the interest rate swaps, while still demanding that the funds make the contracted-for (comparatively high) fixed-rate payments. In marketing the basis packages, defendants misrepresented Libor and omitted to disclose their manipulation of Libor.”

Hearing: “Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?” 5/22 @2pm

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Monitor Checking Into Violations of Mortgage Settlement

Monitor Checking Into Violations of Mortgage Settlement

The monitor of a $25 billion national mortgage settlement with the five largest mortgage servicers said Tuesday he’s looking into potential violations of the agreement.

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AGs Give Banks Passing Grade in Foreclosure Settlement, Rebuff N.Y.

AGs Give Banks Passing Grade in Foreclosure Settlement, Rebuff N.Y.

The rift involves a disagreement over how aggressively to enforce servicing standards contained in the multi-state mortgage settlement.

Homeowners Protest At Justice Department: Hold Banks Accountable

Deadly Clear

PROTESTERS DEMANDING PROSECUTIONS OF WALL STREET ARRESTED OUTSIDE DEPARTMENT OF JUSTICE

FORECLOSE ON BANKS“Initial report from Grace and Vivian of SF ACCE from the Occupation today of the Justice Department demanding that Attorney General Eric Holder jail the banksters:

Between 400 and 500 protesters rallied at the Department of Justice (DOJ), closing Constitution Avenue and the three main entrances to DOJ.  Folks demanded that Attorney General Eric Holder “Jail the Banksters” and “Not to Big to Jail.”

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Dimon dodged the bullet in having his two jobs split from JP Morgan shareholders meeting

Without further adieu, here is the results of Tuesday’s JP Morgan Chase shareholders meeting. Live blog from WSJ:

All directors were elected.

Bell 93.5%

Bowles: 91.5%

Burke 97.7%

Cote 59.3%

Crown: 57.4%

Dimon: 98.0%

Flynn: 99.4%

Futter: 53.1%

Raymond: 95.0%

Jackson: 91.7%

Weldon: 96.7%

  • Separating Chairman and CEO: 32.2%

    • 8:48 am
    • Split vote did worse than last year
    • by David Benoit
    • Add a Comment

    In most surprising vote, the vote on splitting the chairman and director got a lesser percentage than last year. The vote garnered 32.2% versus 40% last year.

    Here are the tallies on the other votes:

    Independent Public Accounting Firm – 97.1%
    Say on Pay – 92.2%
    Action by Written Consent – 97.0%
    Key Executive Performance Plan – 92.6%
    Stock Retention – 8.2%
    Procedures to Avoid Investments that Contribute to Human Rights Violations – 8.1%
    Lobbying Disclosure – 8.2%

    My commentary to the shareholders who voted for Dimon not to split his two jobs and who voted for the entire board to return: The choice and choices that you make come with consequences, for the good or bad. It is frightening to see and hear how Wall Street needs Jamie Dimon to run JP Morgan Chase with two conflict of interest positions, a man who is just an overpaid job holder and doesn’t own the company. No one man or woman is bigger than a company and that is what Wall Street created with Jamie Dimon and what he has become. My message to shareholders who voted business as usual that there will be more shoes to drop from JP Morgan Chase. Lessons will never be learned. The same crimes that JP Morgan Chase paid their way out of jail time will come back and continue to haunt the bank. And more investigations and more bad images to come for the bank. And when that happens, the only person to blame is the person who cast his or her vote on the proxy to continue business as usual.