Daily Archives: August 13, 2015

‘London Whale’ Appeal Mired by Murky Laws

(CN) – Delaware law does not offer clear direction on how to judge whether JPMorgan Chase’s board adequately investigated its executives’ actions and alleged misstatements in the London Whale debacle, the Second Circuit said.
Bruno Iskil, the former head of Chase’s Synthetic Credit Portfolio, earned the London Whale nickname when he was blamed for $6.3 billion in losses in 2012, stemming from bad bets on credit default swaps he made for the bank.
The bank paid $920 million to U.S. and U.K. regulators in 2013 for its “unsafe and unsound practices” that led to the scandal.
Shareholders, led by Ernesto Espinoza, sued JPMorgan derivatively, seeking to hold its board liable for failing to oversee its traders.
Espinoza challenges JPMorgan’s decision not to take any further action against the alleged wrongdoers, contending that the board’s investigation into his demand was unreasonably narrow.
“Specifically, Espinoza alleges that the board’s investigation only looked into the underlying trading losses, but did not explore certain alleged misstatements that JPMorgan executives made about those losses. Espinoza asserts that these misstatements exposed JPMorgan to significant liability, and should have led the board to take action against the executives involved,” according to the appeal court’s Wednesday opinion.
In particular, CEO James Dimon stated in April 2012 that the media’s attention on the losses were a “complete tempest in a teapot.” Espinoza asserts that this misstatement exposed JPMorgan to litigation, regulatory liability, and inflated the bank’s share price by misleading investors about the scope of JPMorgan’s risk exposure.
Espinoza argues that because the board never investigated the misstatements made by Dimon and others, it never exercised any business judgment that could be entitled to protection under the business-judgment rule.

Read on.

Florida Man Spends 17 Years Challenging Debt He Never Owed In The First Place

Imagine you wake up one day to find out that you suddenly owe nearly $100,000 on a house you’ve never owned, in a city where you’ve never resided. Should be easy enough to sort that out, right? Tell that to the Florida man who has spent the better part of two decades trying to convince creditors he didn’t buy property in Philadelphia when he was 12 years old.

The man’s saga, according to the Philadelphia Inquirer, goes back to 1998, when he learned of a $98,293 judgement against him from a bank. The money was related to a property in Northeast Philadelphia that had gone into foreclosure.

The building had apparently been purchased by someone with a similar name, but in 1972, when the alleged debtor wasn’t even a teenager, let alone trying to invest in real estate.

He was the victim of lazy “skip tracers,” who do their best to connect names and dates and locations in the hopes of tracking down the correct person, but who sometimes fail miserably by, for example, not taking into account that this man could not possibly have ever owned this property.

Through a little research on his own, the man believes he may have found the correct debtor with his same name. Unfortunately, that man died back in the 1970s.

Read on.

Florida Man Spends 17 Years Challenging Debt He Never Owed In The First Place

Ex-NFL star and his 74-year-old mother convicted of mortgage fraud

Irving Fryar, who spent 16 years in the National Football League, starring for the New England Patriots, Miami Dolphins and Philadelphia Eagles during his career, was convicted last week of mortgage fraud along with this 74-year-old mother.

According to various reports (including NJ.com), Fryar and his mother, Allene McGhee, were found guilty of conspiracy and theft of deception for their parts in a scheme that involved six home equity loans taken out on McGhee’s home.

According to a release from the state of New Jersey, five of the six loans taken out on McGhee’s home were taken out within a six-day period.

Four of the loans closed on the same day, Dec. 21, 2009.

The scheme defrauded several financial institutions of $1.2 million.

Read on.

Ocwen survives Wells Fargo vote on termination of servicing rights

Ocwen Financial’s (OCN) journey out of the woods continues, with the company surviving a vote by Wells Fargo (WFC) certificate holders to terminate Ocwen’s servicing rights on 12 deals.

All 12 deals failed to garner enough support to transfer servicing from Ocwen, though one came close to the majority vote needed.

Read on.

Don’t Stay Silent: Stand up and Raise Your Hand!

Greed, corruption, & power have overruled the accepted standards of what we define as #ethics. ~ @RichardMBowen

Last Sunday, I told my American Accounting Association audience (AAA) that I tell my accounting students that at some point in their careers they may be asked to do something, or not do something, that makes them very uncomfortable, that makes them feel that something is not quite right. If so, then they need to raise their hand and ask questions.
Ideally, the leaders in the company they are with will explain why their concern is unfounded, or the company will question the situation and take appropriate steps. I mentioned that I tell my students that if they are told to shut up and go back to work, they need to carefully think this through.
Continuing to ask questions may cost them their job. But if they choose not to ask questions, then they could become complicit in the wrong doing. Witness what happenedto Helen Sharkey of Dynegy Energy, who I have spoken of in an earlier talks. Unsure in her new position of what was the right thing, she did not question, became complicit in securities fraud and went to prison for not speaking up. It cost her her job and her career.

Ex-JPMorgan Banker’s Dad Cops To Insider Trading Scheme

Law360, New York (August 12, 2015, 11:34 PM ET) — The father of a former JPMorgan Chase & Co. investment banker pled guilty Wednesday to trading on stock tips his son provided ahead of five health care industry mergers in which he was involved.

Robert Stewart, the father of Sean Stewart, a former vice president in JPMorgan’s health care group and most recently a managing director at Perella Weinberg Partners LP, was allegedly tipped off by his son about the deals, allowing him and his business associate to reap more than $1 million in illegal profits….

Source: Law360