Daily Archives: December 30, 2014

BP says reviewed forex desk in light of regulatory probe

(Reuters) – BP reviewed the activities of its in-house foreign exchange traders, the British oil and gas group said on Tuesday, after the Financial Times reported that BP was investigating whether its traders were involved in rigging the currency market.

The newspaper’s report cited a person familiar with the matter as saying BP’s internal review of its currency trading operations in London was “ongoing.”

The FT reported that the investigation, which is not being carried out by any financial regulator, was prompted after a Bloomberg report cited undated messages sent to BP’s employees by a network of foreign-exchange traders at four major banks about planned currency trades “sometimes hours before they happened.”

Asked to comment on the FT report, BP issued an emailed statement that said: “Following regulatory market (not into BP) investigations regarding the FX markets, we conducted a review into our activities in this area. BP’s FX desk has relationships (as a customer) with 26 relationship banks, including JP Morgan, Citibank and Barclays.”

Read on.

The Rigging Triangle Exposed: The JPMorgan-British Petroleum-Bank Of England Cartel


A quick reminder on the “Cartel”:

The four banks in the Cartel controlled about 45 percent of the global spot-currency market, according to a survey by Euromoney Institutional Investor Plc, so information about their plans was valuable. Some days they worked together to push around the 4 p.m. fix, settlements with the banks show.

The Cartel chat room was started by Usher as early as 2009, according to a person with knowledge of the matter. Usher had risen quickly to the top of his profession. After joining HBOS Plc in 2001, he was hired by Royal Bank of Scotland Group Plc in 2003 and a year later collected an industry award on his employer’s behalf…. The four members of the chat room ribbed each other like high school buddies. Usher was referred to as Feston because he resembled an overweight version of British chef Heston Blumenthal, according to people who have seen the chats. Matt Gardiner, a UBS trader based in Zurich, was called Fossil because he was a few years older than the others. Rohan Ramchandani, Citigroup’s cricket-loving head of spot trading, was called Ruggy, while Chris Ashton, the last one to join, was dubbed Robocop.

From Bloomberg:

Copies of messages sent to BP traders over the course of a year were provided to Bloomberg News by a person with access to the online conversations. The person, who redacted the names of banks sending the messages and dates of conversations, said they came from firms whose senior foreign-exchange traders belonged to a chat room called “The Cartel” that was set up by Usher and included dealers at JPMorgan, Citigroup Inc., Barclays Plc and UBS Group AG.

The information offered an insight into currency moves minutes, sometimes hours before they happened. The messages could drag the U.K.’s biggest energy company into a scandal that has enveloped 11 banks and led to more than 30 traders from London to Singapore losing or being suspended from their jobs. Last month six banks were fined $4.3 billion for passing along information about their clients and working together to rig foreign-exchange markets.

On a side note: Usher is Dick Usher. Who is Dick Usher?:

The name Dick Usher is familiar to regular readers: he was the head of spot foreign exchange for JPMorgan, and the bank’s alleged chief FX market manipulator, who was promptly fired after it was revealed that JPM was the bank coordinating the biggest FX rigging scheme in history, as initially revealed in “Another JPMorganite Busted For “Bandits’ Club” Market Manipulation.” Subsequent revelations – which would have been impossible without the tremendous reporting of Bloomberg’s Liam Vaughan – showed that JPM was not alone: as recent legal actions confirmed, virtually every single bank was also a keen FX rigging participant. 

However, the undisputed ringleader was always America’s largest bank, which would make sense: having a virtually unlimited balance sheet, JPM could outlast practically any margin call, and make money while its far smaller peers were closed out of trades… and existence.

But while the past year revealed that FX rigging was a just as pervasive, if not even more profitable industry for banks than the great Libor-fixing scandal (for details see “How To Rig FX Like A Pro “Bandit”, And Make Millions In The Process“), the conventional wisdom was that it involved almost exclusively bankers at the largest global banks including JPM, Goldman, Deutsche, Barclays, RBS, HSBC, and UBS.

Now, courtesy of some more brilliant reporting by Vaughan, we can finally link banks with the other two facets of what has emerged to be an unprecedented FX-rigging “triangle” cartel: private sector companies that have no direct banking operations yet who have intimate prop trading exposure, as well as central banks themselves.

By “banks” we, of course, refer to the ringleader itself: JP Morgan, and its former head of spot forex trading in London, Dick Usher. As for the company that benefited from its heretofore secret participation in the biggest FX rigging scandal in history, it is none other than British Petroleum.

We learn about all this thanks to a story that begins with, of all thing, a story about freshwater fishing at a lake in Essex called “Wharf Pool.”

As Bloomberg reports, “an hour away by train, in London’s financial district, the lake’s owners ply their trade. Wharf Pool was purchased for about 250,000 pounds ($388,000) in 2012 by Richard Usher, the former JPMorgan Chase & Co. trader at the center of a global investigation into corruption in the foreign-exchange market, and Andrew White, a currency trader at oil company BP Plc.


Suit After Saddled With Bad Chase Mortgages

MANHATTAN (CN) – A Florida man who bought defaulted home loans from J.P. Morgan Chase, then worked with borrowers to avoid foreclosure, sued the bank for allegedly saddling him with bad mortgages it needed to get off its books as the country’s housing crisis deepened.
Laurence Schneider, of Boca Raton, filed the suit for punitive damages on Christmas Eve in New York County Supreme Court. J.P. Morgan Chase & Co., subsidiary J.P. Morgan Chase Bank NA, and mortgage servicer Chase Home Finance, which merged with the subsidiary in 2011, are all named as defendants. He says their fraud, breach of contract, defamation, racketeering and other offenses “destroyed” his businesses.
For years, Schneider’s two businesses in suburban Coconut Creek, Fla., purchased hundreds of first- and second-lien residential mortgages from Chase, according to the 69-page complaint.
Repayment plans that the Schneider businesses, S&A Capital Partners Inc. and 1st Fidelity Loan Servicing, worked out on the defaulted loans allowed borrowers to stay in their homes and rebuild their credit. Schneider says his businesses, named as plaintiffs, stayed afloat by increasing the value of the loans above their purchase price.
Schneider’s third business, Mortgage Resolution Servicing, is also named as a plaintiff. He says it was created to purchase a large pool of loans – more than 3,500 – that Chase wanted to get off its books.

Read on.

Accounting fraud is ripe for fresh scrutiny

Dodgy numbers will replace insider trading as Wall Street watchdogs’ preferred prey in 2015. New auditing and analytics have already given the U.S. Securities and Exchange Commission a head start, even if the 2002 Sarbanes-Oxley reforms make cases of accounting fraud harder to track down.

American enforcers have racked up hefty settlements and priceless publicity pursuing the likes of SAC Capital for trading illegally on secrets. The SEC alone filed 52 such cases in fiscal 2014, near the 2006 high of 61.

Meanwhile, the number of accounting fraud actions has fallen about 60 percent since peaking at 219 in 2007. SarbOx’s strict rules on internal company controls and officer responsibility deserve some credit: Far fewer listed firms restate their financials now than a decade ago, the SEC says.

Yet the watchdog may also have missed some serious misconduct. None of the five enforcement units it created in 2010 focused on accounting. And big cases like intentional financial statement errors at American Realty Capital Properties emerged only after being reported by the companies themselves.

The SEC seems determined to do better. It says a new audit task force is using software to analyze annual reports for accounting red flags. The “management’s discussion and analysis” section, for example, can signal trouble with certain words or too much talk about minor matters. The task force’s “accounting quality model” also sifts company filings for unusual numbers, auditor changes and off-balance-sheet transactions – which Enron, Lehman Brothers and other failed firms used to conceal debt and inflate profits.

The efforts are already bearing fruit. The watchdog touts 2014 accounting fraud actions against Bank of America, Diamond Foods and CVS Caremark as well as smaller companies like Arizona-based JDA Software.

Read on.

Credit Suisse plans to fight $10 billion toxic mortgage lawsuit

Credit Suisse (CS) is planning to fight a $10 billion lawsuit brought against the bank by the State of New York, alleging the bank of misleading investors in the mortgage-backed securities it issued in the run-up to the financial crisis.

According to a report from Reuters, New York Attorney General Eric Schneiderman said that investors lost $11.2 billion by investing in Credit Suisse mortgage bonds backed by toxic mortgages.

From the Reuters report:

A New York State Supreme Court justice last week rejected the Zurich-based bank’s request to dismiss the case, in which New York Attorney General Eric Schneiderman accuses the bank of misrepresenting the quality of loans underlying residential mortgage-backed securities sponsored and underwritten by Credit Suisse in 2006 and 2007.

“We will appeal this particular decision and continue to defend ourselves in this case,” Credit Suisse said in a statement to Reuters.

A recent report from Bloomberg sheds a little more light on the lawsuit. According to Bloomberg, Credit Suisse argued that New York’s lawsuit, filed in 2012, exceeded the statute of limitations to file the lawsuit. Credit Suisse said that New York only had three years to file the suit, while New York claimed that it was allowed six years to file the suit.

The judge ruled in New York’s favor and now the lawsuit will proceed.

In March, Credit Suisse reached an agreement with the Federal Housing Finance Agency to pay $885 million to resolve claims related to mortgage-backed securities.

Under the agreement, Credit Suisse was ordered $234 million to Fannie Mae and $651 million to Freddie Mac.

According to the Reuters report, Credit Suisse added $395 million to its litgation provisions in the third quarter, but did not say what the money was going to be used for.

Source: Reuters

Q&A with Steve Scalise: Louisiana GOP congressman responds to news he spoke to white supremacist group

The gift that keeps on giving. First, Congressman and now felon Michael Grimm and now House Majority Congressional Whip Steve Scalise is the new scandal…

He speaks: I can’t remember:

Here’s the Q&A with Scalise Monday:

Please walk me through how you came to appear at the white nationalist event. 

“I don’t have any records from back in 2002, but when people called and asked me to speak to groups, I went and spoke to groups. It was myself and [former state Sen.] James David Cain who were opposed to the Stelly tax plan.

I was the only legislator from the New Orleans area who was opposed to the plan publicly, so I was asked to speak all around the New Orleans region. I would go and speak about how this tax plan was bad.

I didn’t know who all of these groups were and I detest any kind of hate group. For anyone to suggest that I was involved with a group like that is insulting and ludicrous.

I was opposed to a lot of spending of spending at the state level. When people asked me to go speak, I went and spoke to any group that called.”

You don’t remember speaking at the event? 

“I don’t. I mean I’ve seen the blog about it. When you look at the kind of things they stand for, I detest these kinds of views. As a Catholic, I think some of the things they profess target people like me. At lot of their views run contradictory to the way I run my life. 

I don’t support some of the things I have read about this group. I don’t support any of the things I have read about this group, but I spoke to a lot of groups during that period. I went all throughout South Louisiana. 

I spoke to the League of Women Voters, a pretty liberal group. … I still went and spoke to them. I spoke to any group that called, and there were a lot of groups calling. 

I had one person that was working for me. When someone called and asked me to speak, I would go. I was, in no way, affiliated with that group or the other groups I was talking to. “

You don’t remember speaking to a group affiliated with David Duke? 

David Duke was never at any group I spoke to.” 

And here is the part that is hilarious. Scalise said that he didn’t have google in 2002:

What types of safe guards do you have in place now [to make sure you don’t speak to a group like this again]? 

“There is a lot more vetting that goes into setting my appointments. I have a scheduler. I didn’t have a scheduler back then. I was without the advantages of a tool like Google. It’s nice to have those. Those tools weren’t available back then.”

 lol! Consider Scalise’s response as a fail. Google was launched in 1998!

Congressman Michael Grimm has decided to resign from Congress days after pleading guilty: sources


And it didn’t take that long for the Grimmster to resign from Congress after pleading guilty to perjury and 1 count of tax fraud last week from his 20 indictment count announced in April. This is no lost seat for Congress as Congress is still Republican controlled. With this political move, I will not be surprised if Grimm is used political pull for Congress as an ex-lawmaker. Grimm only hope is that he is not convicted by the judge in his upcoming sentencing court hearing in June.

WASHINGTON — Rep. Michael Grimm has decided to resign from Congress in the wake of his guilty plea on a felony tax evasion charge, sources told the Daily News Monday night.

Grimm (R-S.I.) said after he entered his plea last week that he planned to continue serving in the House.

But he reversed course after speaking Monday to House Speaker John Boehner (R-Ohio), who has taken a hard line on GOPers facing ethics charges.

Grimm plans to announce his resignation on Tuesday or Wednesday, sources said.

Read on.