Daily Archives: April 7, 2015


Troubled banking giant HSBC continues to face questions about its ability to block transactions that facilitate law breaking.

The challenges faced by the bank were highlighted in a report by the Guardian based on comments allegedly made in the last three months by HSBC’s global head of sanctions, Lee Hale, who reportedly conceded that further regulatory breaches were likely.

The Guardian said it had heard audio of a confidential meeting Hale had with independent lawyers monitoring HSBC as part of a 2012 deal with the U.S. Department of Justice, which allowed the bank to pay a $1.9 billion fine and submit to monitoring in exchange for deferred prosecution for the actions of its Mexican branch in laundering millions of dollars in drug cartel money.

According to the Guardian, HSBC said in a statement that it did not recognize the comments in the recording and also said the comments had been taken out of context.

Though Hale said the bank had made progress in updating compliance procedures and strengthening report and financial controls, according to the Guardian he also said that “given the size and scale of HSBC,” in his view, “it is a cast-iron certain[ty] this will happen, at some point in the future we’re going to have some big breach, some regulatory breach.” He added, “I hope it doesn’t happen, but it is likely.”

The Guardian story appeared just a day after the Justice Department filed its summary of findings by Michael Cherkasky, the independent monitor appointed to keep an eye on HSBC’s operations after the 2012 plea deal. The letter filed in federal court in Brooklyn was signed by U.S. Attorney Loretta E. Lynch, who is awaiting confirmation as President Barack Obama’s choice to be U.S. Attorney General. The letter noted improvements at the bank. But the letter also said, “in certain instances, the Monitor believes that HSBC Group’s progress has been too slow.”

The letter noted that Cherkasky identified two of the biggest barriers to change as “its corporate culture and its compliance technology.”

Read on.

A look at Berkshire Hathaway’s response to ‘mobile home trap’ investigation

After The Seattle Times and The Center for Public Integrity published their investigation of Berkshire Hathaway’s mobile-home business, Berkshire sent a statement to a newspaper it owns, calling the story “misleading.” It did not point to any factual inaccuracies.

For months, Berkshire Hathaway and Clayton Homes, its mobile-home subsidiary, had ignored or declined reporters’ requests to discuss the company’s treatment of consumers.

Here’s a look at the company’s statement, published by the Omaha World-Herald, and the credibility of its claims:

CLAIM: “Clayton Homes’ policies, procedures and training are designed to ensure that customers have a choice of lenders. A list of all available lenders is posted and provided in company-owned retail locations.”

FACTS: Customers historically have not been given a choice of lenders, according to customers interviewed for this report. In early 2015, a reporter visited Clayton-owned and -affiliated dealerships in eastern Tennessee, and saw large, house-sized banners promoting Clayton loan products. There were no comparable signs related to other lenders. Promotional materials related to other lenders at one dealership consisted of small, trifold brochures located on a side table in one room of the dealership.

CLAIM: “Customers are encouraged to select more than one lender so they can compare options – and select the loan program that best serves their needs.”

FACTS: Numerous customers interviewed for this story said they were told that Clayton lenders were the only option or the best option. Some did not realize, nor were they told, they said, that the home dealers and lenders were part of the same company. They said they were never encouraged to explore alternatives.

Read on.

Wells Fargo employee who emailed CEO about pay resigns

A Wells Fargo employee who made national news last year when he copied thousands of his co-workers on an email asking CEO John Stumpf to give all of them a raise is moving on.

Tyrel Oates, who worked in Oregon processing Wells Fargo customer requests to stop debt-collection calls, said he emailed Stumpf a letter of resignation on Friday. Oates, 31, told the Observer he is leaving the bank so he can devote more time to studying for a planned career in agriculture.

In his resignation letter, Oates criticizes the company for its “complacent stance” on his request last fall that the San Francisco-based bank give each of its employees a $10,000 raise. According to the resignation letter, about 5,000 people, including Wells Fargo employees and customers, signed a petition supporting his proposed raises.

“The only responses that have been provided thus far is the bank simply defending its compensation philosophy with no attempt to compromise, as well as limiting who we can and cannot email within the organization,” Oates says in his resignation letter. “These are not acceptable responses.”

Bank of America Settles RMBS Suit

On April 2, 2015, plaintiffs BNP Paribas Mortgage Corporation and BNP Paribas and defendant Bank of America filed a Joint Stipulation of Dismissal with Prejudice stating that both parties had reached an agreement to settle claims arising out of Bank of America’s handling of $480.7 million worth of mortgage-backed notes issued by Taylor Bean and Whitaker’s Ocala Funding LLC. Plaintiffs Complaint alleged that Bank of America, which served as agent, custodian, depositor, and Indentured Trustee of the Ocala facility, failed to live up to its contractual obligations to secure and protect the cash and mortgage loans collateralizing the notes. The details of the settlement are not yet public. Joint Stipulation.

Source: JDSupra

TelexFree class action names Bank of America, PricewaterhouseCoopers

A lawyer representing victims of the alleged TelexFree Inc. fraud in a class-action lawsuit has named numerous defendants in the case, including Bank of America Corp. and the audit firm PricewaterhouseCoopers.

According to the lawsuit, which consolidated the civil complaints of at least 780,000 alleged victims, Bank of America and PricewaterhouseCoopers did business with TelexFree even after learning the company had been shut down in Brazil under allegations it was conducting a pyramid scheme.

TelexFree purported to be a seller of cheap long-distance phone service, out of an office in Marlborough. But prosecutors allege that in reality, the company took in more than $1 billion from participants in 18 months by promising them quick investment returns in exchange for promoting the company.

Read on.

Mission Accomplished? ISIS Leaders Are All Ex-Saddam Hussein Army Officers

Almost all the top leaders in the Islamic State are former officers in the Iraqi army. As WaPo reports, the current leader, Abu Bakr al-Baghdadi, reshaped the original al-Qaeda affiliate by recruiting from Saddam Hussein’s disbanded army…

Read on.

New Residential terminates merger agreement with HLSS; purchases company instead

New Residential Investment (NRZ) will not be merging with Home Loan Servicing Solutions (HLSS).

After HLSS was unable to meet the previously announced merger conditions, the companies terminated the merger agreement, which would have seen New Residential acquire all of HLSS’ outstanding shares for $18.25 per share in cash.

Instead, the companies entered into a purchase agreement, under which New Residential acquired “substantially all of (HLSS’) assets” and assumed “substantially all of the liabilities of HLSS,” in exchange for a purchase price of approximately $1.2 billion, or $17.08 per HLSS share on 71 million HLSS shares.

Under the terms of the deal, New Residential paid a total purchase price of approximately $1.4 billion for HLSS, with adjustment for cash and repayment of HLSS’ debt. The purchase amount was comprised of approximately $1 billion of cash and 28.2 million newly issued shares of New Residential, the companies said in a release.

“Despite our efforts to pursue the merger as initially planned, certain circumstances prompted HLSS to pursue an asset purchase agreement with New Residential,” John Van Vlack, chief executive officer of HLSS said. “We believe this alternative transaction structure made the most sense for us as it allowed HLSS to file its financial results without a going concern qualification and provide the greatest certainty on funding new servicing advances. This transaction will also enable our shareholders to maximize value for their shares.”

The companies made the announcement late Monday in a release, as well as in HLSS’ much-delayed 2014 annual report, which HLSS filed Monday with the Securities and Exchange Commission.

Read on.