Daily Archives: September 2, 2014

Credit Suisse : says investigating allegations of employee misconduct

Credit Suisse said it was investigating allegations of trader misconduct reported in The Wall Street Journal on Tuesday.

The Wall Street Journal, citing sources familiar with the matter, said the Swiss bank had suspended an employee as part of an internal probe into electronic communications.

The newspaper said Zoe Henderson, a trader on the European equities sales desk in London, was alleged to have improperly shared client information with her husband, Toby Henderson, a trader at rival bank RBC Capital Markets.

Read on.

MERS wins again; this time in Pennsylvania

MERSCORP Holdings secured another court victory in a suit brought against the company by a disgruntled mortgagor that claimed MERS didn’t have the authority to assign a mortgage.

The Superior Court of Pennsylvania has affirmed a lower court’s ruling that showed that MERS had the authority to assign a mortgage and rejected the mortgagor’s wrongful foreclosure claims.

The mortgagor, Matthew Gibson, sued Bank of America(BAC), claiming that the bank did not hold the note securing his mortgage and therefore had no rights to foreclose.

Gibson also claimed that MERS did not have the authority to assign the mortgage.

The lower court initially ruled that Bank of America did hold the note on the mortgage and that MERS did indeed have the right to assign the mortgage.

In the lower court’s ruling, Victor Stabile wrote, “Appellant’s mortgage granted MERS the right to exercise ‘any and all’ interests incidental to legal title. Those rights include the ability to assign the mortgage.”


Read on.

Bank of America Said Selling Debt Second Time After Fine

Bank of America Corp. is planning to sell $3 billion of debt, its second trip to the market since agreeing to pay almost $16.7 billion in fines for faulty mortgage practices that contributed to the credit crisis.

The second-biggest U.S. lender is offering $2 billion of benchmark perpetual shares that it can repurchase after 10 years, according to a person familiar with the transaction. The securities, with face values of $1,000 each, are offered at an initial fixed interest rate of 6.25 percent until 2024, said the person, who asked not to be identified citing lack of authorization to discuss the deal. The rate floats after that, the person said.

The bank also plans to sell $1 billion of perpetual preferred stock with a face value of $25 and a coupon of 6.625 percent, according to the person. The securities can be called after five years.

Read on.

New York AG accuses Evans Bank of redlining

Drawn in thick marker along the map of upstate New York, the line snaked down the Niagara River and zigzagged east to outline a swath of Buffalo and its surrounding neighborhoods.

But one area of the city — neighborhoods in east Buffalo, where more than 75 percent of the city’s African-American population lives — was explicitly excluded, cut off from access to mortgage credit.

That map, ringed by a line, is at the center of a sweeping investigation by the New York attorney general, Eric T. Schneiderman, into whether banks are “redlining” — deliberately choking off mortgage lending to predominantly minority communities.

The investigation reached its first target on Tuesday, with Mr. Schneiderman’s office taking aim at Evans Bank, a regional lender whose business in the Buffalo area dates to 1920, accusing it of denying mortgages to African-Americans regardless of their credit.

The case, accusing Evans Bank of violating the Fair Housing Act — a federal law intended to ensure equal access to credit — is a harbinger of other lawsuits that could be brought against some of the nation’s largest banks, several people briefed on the investigations said.

In the suit, filed in state court, prosecutors outlined how, since 2009, Evans Bancorp has created a map that defined the “trade area,” places in the Buffalo metropolitan region where the bank would make mortgages and other loans. The bank, prosecutors contend, deliberately excised much of Buffalo’s East Side.

Rival banks, the authorities said, lent to neighborhoods on the East Side at a far higher rate than Evans Bank, suggesting that the lending patterns did not stem from a dearth of willing minority borrowers.

Read on.

Eric Cantor sold for $3.4 Million: Joins M&A investment bank as Vice Chairman

And Cantor and the investment firm have known each other for quite some time….


The rest of the story is well-known, and was extensively covered here previously: “Mr. Cantor has long been seen as a liaison of sorts between the GOP and Wall Street, which also has been a big campaign contributor. Since 2012, he has raised nearly $1.4 million from financial firms and their employees, according to the Center for Responsive Politics, the most of any industry. Big donors to the former congressman include investment bank Goldman Sachs Group Inc. and private-equity firm Blackstone Group LP.


During his congressional tenure, Mr. Cantor cultivated close ties with the heads of several large companies, including in the financial sector.


Moelis & Co. is coming of age as more mergers-and-acquisitions business is migrating away from larger firms such as UBS AG, where Mr. Moelis was an executive, and toward a newer crop of smaller investment banks that pitch themselves as independent of the conflicts of interest that can arise at larger institutions competing in multiple lines of business.


Mr. Moelis took his firm public in April, and in a sign of investors’ enthusiasm for the boutique model, its shares have risen nearly 40% since then, giving it a market value of nearly $2 billion.


Messrs. Moelis and Cantor, who have known each other for more than three years, began discussing the possibility of working together shortly before July Fourth, Mr. Cantor said. They were having brunch with their wives in Los Angeles and Mr. Moelis, also a Republican, was giving Mr. Cantor career advice when it occurred to him that the two should work together.


The talks intensified in late July, said Mr. Cantor, who noted that he held discussions about joining several other organizations—on Wall Street and off—though none as serious as those with Moelis.


Mr. Cantor, who will continue to live in Virginia, will open a new office for the firm in Washington, in addition to having an office at the company’s headquarters in New York City. His compensation wasn’t immediately known.

The final question – how much:


Group LP has agreed to pay Mr. Cantor an annual base salary of $400,000. Group LP has also agreed to pay Mr. Cantor an initial cash amount of $400,000 and grant Mr. Cantor $1,000,000 in initial restricted stock units (“RSUs”), based on the average closing price of the Company’s common stock on the five trading days prior to his start date. The initial RSUs will generally vest in equal installments on each of the third, fourth and fifth anniversaries of his start date. For calendar year 2015, Group LP has agreed to pay Mr. Cantor minimum incentive compensation of $1,200,000 in cash and $400,000 in incentive RSUs, payable in equal quarterly installments. The incentive RSUs will generally have the same vesting schedule as incentive RSUs granted to Group LP’s other Managing Directors.

The revolving door: DOJ Fraud Section Chief join Simpson Thacher Bartlett

Jeffrey H. Knox, a senior federal prosecutor who butted heads with a number of Wall Street banks, is switching sides.

The Justice Department announced on Tuesday that Mr. Knox, chief of its fraud section, was leaving the government. In turn, the law firm Simpson Thacher & Bartlett released its own announcement: Mr. Knox will join the firm as a partner in Washington.

The move by Mr. Knox, which caps more than a decade-long prosecutorial career, comes just as one of his biggest Wall Street cases nears a turning point. The Justice Department, along with regulators in Washington and London, is closing in on actions against some of the world’s biggest banks for suspected manipulation of foreign currencies.


SEC adopts tighter securitization, ratings agency rules

The U.S. Securities and Exchange Commission adopted tighter rules for asset-backed securities and credit rating agencies in order to better protect investors. The new rules finally tackle two issues at the core of the financial crisis after years of delays. Per Reuters UKHedgeworld:

Banks will need to give far more transparency about ABS products under the new rules, and have to publicly disclose a raft of information about the thousands of car, home or other loans that underlie such securities.

And credit rating agencies will be required to erect strict boundaries between sales staff and employees handing out ratings to the securities, as part of an effort to prevent firms from luring clients with the prospect of favorable ratings.

Source: Hedgeworld

Countrywide’s CEO Mozilo speaks: “We didn’t do anything wrong”

Now that is the joke of the day…


Six years after the financial crisis and the government is still seeking justice for the financial pain and meltdown of America’s economy.  

But according to an article in Bloomberg, the Countrywide CEO Angelo Mozilo, seen as one of the main culprits behind the subprime crisis and speaking in a rare interview, is baffled by a new effort to punish him.

Remorse for heading a company that made so many bad loans? Not a chance.

Instead, Mozilo said he is proud of his past triumphs and it his critics who are misguided:

“You’ll have to ask those people, ‘What do you have against Mozilo, what did he do?’” Countrywide Financial co-founder Angelo Mozilo said.  “Countrywide didn’t change. I didn’t change. The world changed.”

“No, no, no, we didn’t do anything wrong,” he said, adding that a real estate collapse was the root of the crisis. “Countrywide or Mozilo didn’t cause any of that.”

Countrywide, which was acquired by Bank of America (BAC) after the crisis, did $408 billion of originations in 2007 and had a $1.5 trillion servicing portfolio.

In August and more than 12 months after the deadline passed to file criminal charges, U.S. attorneys in Los Angeles announced they are preparing a civil lawsuit against Mozilo and as many as 10 other former Countrywide employees.

But this time the government is going with a different tactic, using a 25-year-old law that has helped the Justice Department win billions of dollars from Wall Street banks.

Source: Bloomberg

Insight – Burger King has maneuvered to cut U.S. tax bill for years

Burger King may have taken a lot of flack in the past week for a deal that should curb its U.S. tax bill but in many ways it is consistent with the burger chain’s aggressive tax-reduction strategies in recent years.

Some U.S. lawmakers and other critics attacked the company that is the home of the Whopper for deciding to move its tax base to Canada from the U.S. through its proposed purchase of Oakville, Ontario-based coffee and doughnut chain Tim Hortons (>> Tim Hortons Inc.). They say it will allow Burger King (>> Burger King Worldwide Inc) to avoid paying some U.S. taxes.

That would be nothing new. A Reuters analysis of Burger King’s regulatory filings in the U.S. and overseas, which was also reviewed by accounting experts, shows that it has been making major efforts to reduce its U.S. tax bill for some time.

Read on.

Ex-Arthrocare CEO Gets 20 Years In $756M Fraud Case

Law360, Los Angeles (August 29, 2014, 9:48 PM ET) — A Texas federal judge on Friday sentenced the former CEO of Arthrocare Corp. to 20 years in prison and the company’s ex-CFO to 10 years after they were convicted of perpetrating a securities fraud that is now estimated at about $756 million, according to authorities.

Former Arthrocare CEO Michael Baker and former CFO Michael Gluk were sentenced by U.S. District Judge Sam Sparks in the Western District of Texas. The U.S. Department of Justice had sought a 30-year sentence for Baker and a 20-year sentence for..

Source: Law360