Daily Archives: June 6, 2015

What Would You Do?

The room filled with almost 300 bankers plus was very quiet. The 60 Minute interview with Steve Kroft, which told about what I had experienced at Citi, had just finished playing.

There was a collective sigh when the clip stopped and I asked, “What would you do?,” if you had experienced widespread fraud, corruption and cover ups in your bank that put the company and your customers at risk?

What would you do if you knew that by speaking out and exposing the fraud you could lose your job, some of your colleagues could lose their jobs, and some could even go to jail?

The attendees, bankers from all over the southwest were attending the Southwestern Graduate School of Banking (SWGSB). Many, in key positions, could, in fact, experience some of the same challenges in their career which I had.

I told them that I was only doing my job as a Citigroup Business Chief Underwriter overseeing a division of the business which purchased and sold over $90 billion annually of mortgage loans. Granted, these bankers were independent bankers from much smaller community banks, still what I had observed and blew the whistle on, could happen anywhere.


U.S. Prosecutors Did Not Question Goldman Sachs on Financial Crisis in 2010 Meeting


Are you surprised? I think not!

In early 2010, with the financial crisis still reverberating through the economy, a top Justice Department official arranged a meeting with executives from Goldman Sachs and some of his prosecutors, a document shows.

But the hourlong meeting at the Justice Department in Washington had nothing to do with the financial crisis or with Goldman’s role in marketing securities backed by mortgage loans made to borrowers with shaky credit histories, said a person briefed on the matter who spoke on condition of anonymity.

Instead, the gathering, organized by Lanny A. Breuer, then the assistant attorney general for the criminal division, focused exclusively on the subject of terrorism financing.

Several people from the general counsel’s office at Goldman attended the March 5, 2010, meeting, including David N. Lawrence, who at the time was global head of the company’s business intelligence group.

Mr. Breuer arranged the meeting to sound out Mr. Lawrence’s views on how best to combat terrorism financing, given his experience in working with Wall Street banks to develop systems to prevent money laundering, the person briefed on the matter said.

The email invitation for the meeting surfaced as a result of a Freedom of Information Act request to review Mr. Breuer’s electronic calendar. The agency was asked for a list of meetings between him and representatives of Goldman, JPMorgan Chase, Bank of America and the American International Group — institutions that played significant roles in the occurrences leading up to the financial crisis.

The Justice Department’s Freedom of Information Office said that after a five-month search, it could find no other recorded meeting between the assistant attorney general and representatives from those big financial institutions. It is possible the search overlooked meetings that did not contain search terms identifying participants as members of those banks.

The meeting with the Goldman representatives may revive questions about the Justice Department’s priorities after the financial crisis. Mr. Breuer’s tenure, which ended in early 2013, was marked by criticism that prosecutors working for him did not file criminal charges against prominent Wall Street bankers in connection with the crisis.

Read on.

Deutsche Bank probes $6 billion suspected money laundering – source

(Reuters) – Deutsche Bank AG is looking into possible money laundering transactions by some of its clients in Russia which could exceed $6 billion (£4 billion), a source familiar with the matter told Reuters on Friday.

Transactions conducted over a period of years are being investigated, and the sum could exceed $6 billion, the source said, adding that the internal probe of the possible abuse being conducted by Deutsche Bank is in its initial stages.

Deutsche Bank repeated a statement from May 20, saying it had suspended a small number of traders in Moscow and was conducting an internal review, but gave no details of the reason for the suspension.

“We have pledged to uphold the highest standards in combating suspicious activities and will take tough measures if we find evidence of wrongdoing,” the statement said. Up to three staff have been laid off by the bank, the source said.

“The misconduct was on the part of the client. The bank got used. The internal probe will try to determine how the bank got used,” the source said.

Read on.

Abacus Federal Savings Bank found not guilty of defrauding Fannie Mae

A jury ruled that New York-based Abacus Federal Savings Bank and two of its senior officers are not guilty of defrauding Fannie Mae, bringing some closure to a case that began in 2012 and a trial that began four months ago.

Just over two years ago, Manhattan District Attorney Cyrus Vance filed charges against Abacus Federal and 19 individuals associated with the bank, accusing the bank of selling fraudulent loans to Fannie Mae. The bank and its employees stood accused of inflating the income of loan applicants and falsifying documents.

According to a report from the New York Times, a New York jury found Abacus not guilty of charges including grand larceny, conspiracy, falsifying business records and residential mortgage fraud.

From the New York Times report:

Ten of the defendants pleaded guilty, and some of those agreed to testify for the prosecution against their superiors.

But the bank’s chief credit officer, Yiu Wah Wong, and Raymond Tam, who was the loan origination supervisor, went to trial in late January, along with the bank itself, as a corporate entity. Seven former employees still await trial.

Mr. Wong and Mr. Tam were found not guilty of all charges against them, including grand larceny, conspiracy, falsifying business records and mortgage fraud. They argued at trial that they were unaware of the fraudulent documents being created by loan originators, who earned commissions and had a financial incentive to burnish the borrower’s credentials.

According to the Times report, Abacus is a small bank that has a “major presence” among New York City’s Chinese population.

Again from the Times:

From the start, it was a difficult case for prosecutors to prove. Loan originators and borrowers testified they had colluded on loan after loan — evidence related to 32 mortgages was presented — to overstate the income and exaggerate the job titles of mortgage applicants. Yet few of the bank’s loans went into default. The bank’s default rate was 0.3 percent during the period covered by the indictment, from May 2005 to February 2010 — far below the national average.