On Tuesday, Deutsche Bank agreed to a $55 million SEC settlement tied to allegations it hid billions in losses by mismarking its crisis-era derivatives book. The bank has always contended its valuation methodologies were sound. Here is the real story...
Back on January 26, a 58-year-old former senior executive at German investment bank behemoth Deutsche Bank, William Broeksmit, was found dead after hanging himself at his London home, and with that, set off an unprecedented series of banker suicides throughout the year which included former Fed officials and numerous JPMorgan traders. Following a brief late summer spell in which there was little if any news of bankers taking their lives, as reported previously, the banker suicides returned with a bang when none other than the hedge fund partner of infamous former IMF head Dominique Strauss-Khan, Thierry Leyne, a French-Israeli entrepreneur, was found dead after jumping off the 23rd floor of one of the Yoo towers, a prestigious residential complex in Tel Aviv. Just a few brief hours later the WSJ reported that yet another Deutsche Bank veteran has committed suicide, and not just anyone but the bank's associate general counsel, 41 year old Calogero "Charlie" Gambino, who was found on the morning of Oct. 20, having also hung himself by the neck from a stairway banister,
It remains to be seen if frontrunning the general public on collusive, material, non-public information that a strategic would be about to announce a bid for Allergan is indeed "completely lawful", however we do have a question: now that the SEC is formally investigating Ackman for what may be a massive frontrunning scam, is it also looking at all the other hedge funds which reported brand new stakes (some of which also entirely in the form of calls) in Allergan in the second quarter?
The name Robert Khuzami is well-known to Zero Hedge readers: the former top SEC enforcer is perhaps best known not for what he did (judging by how many Wall Street bank executives ended up in jail following the Great Financial Crisis, very little), but for what he didn't - namely pursue any action against his former employer, Deutsche Bank, where he was a general counsel and where under his watch Greg Lippmann was "shorting your house." The reason, among others, extensive deferred comp linked to DB stock as we reported all the way back in May 2010. But Bob didn't care about what he did, or didn't do at the SEC - he was much more interested in what he would do after he left the regulator, which he did in January of this year. Because Bob, courtesy of his DB days, realized the massive paycheck potential of a revolving door job at the head of the government's enforcement unit. Sure enough, as the NYT reports, he has capitalized on just that following a $5 million a year contract (with a 2 year guarantee) with legal behemoth Kirkland & Ellis where he will be a partner and "will represent some of the same corporations that the S.E.C. oversees."
It is refreshing to see that the SEC has taken a much needed break from its daily escapades into midgetporn.xxx and is focusing on what is truly important, such as barring outspoken rating agency Egan-Jones from rating the US and other governments. From the SEC: "EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken." Hopefully the world is no longer insolvent in July of 2014 when this ban runs out.
- Obama Picking Lew for Treasury Fuels Fight on Budget (BBG)
- Deutsche Bank Bank Made Huge Bet, and Profit, on Libor (WSJ)
- Spain Beats Maximum Target in First 2013 Debt Sale (BBG) - In other news, the social security fund is now running on negative?
- "Icahn is also believed to have taken a long position in Herbalife" (NYPost) - HLF +5% premarket
- Lew-for-Geithner Switch Closes Era of Tight Fed-Treasury Ties (BBG)
- Turkey Beating Norway as Biggest Regional Oil Driller (BBG)
- Greek State Firms are Facing Closure (WSJ)
- Draghi Spared as Confidence Swing Quells Rate-Cut Talk (BBG)
- China’s Yuan Loans Trail Estimates (BBG)
- SEC enforcement chief steps down (WSJ)
- CFPB releases new mortgage rules in bid to reduce risky lending (WaPo)
- Japan Bond Investors Expect Extra Sales From February (BBG)
- This is signal, the rest is noise: Russia's Putin set for stand-off with EU on Syria, energy (Reuters)
- Boehner's Budget 'Plan B' Collapses (WSJ)
- Boehner has few options in "fiscal cliff" mess (Reuters)
- Maya "end of days" fever reaches climax in Mexico (Reuters)
- Monti Praised by Merkel Favored Less by Taxed Italians (BusinessWeek)
- China probes Yum Brands' KFC over safety of chicken productsa (Reuters)
- Looting in Aregentina: 400 Border Guard officials deployed to Bariloche over looting (BAH)
- Regulatory 'Whale' Hunt Advances - Comptroller Expected to Take Formal Action Regarding JPM's Trading Fiasco (WSJ) - but no punishment
- U.K. Banks Seen Sacrificing Lending to Meet BOE Demand (Bloomberg)
- US banks face rise in bad loans cover (FT)
- Daily Gun Slaughter in U.S. Obscured by Newtown Rampage (BBG)
- China Restricts Bond Sales by Risker Companies (BBG)
Forget the perfectly anticipated Greek (selective) default. This is the real deal. The FT just released a blockbuster that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time!
Two Years Too Late SEC Wakes Up To Chinese Reverse Merger Fraud; Closing Chinese Fraudcap Basket With 40% ProfitSubmitted by Tyler Durden on 12/03/2012 14:28 -0400
Moments ago the SEC, with about a two year delay, decided to finally act tought, and in a parting present to the most ineffective and clueless chairman of the coopted and corrupt organization ever seen, that would be Mary Schapiro of course, lashed out at Chinese affiliates of Big Four accounting firms as well as BMO, for refusing to produce audit work papers and other documents related to China-based companies under investigation by the SEC for potential accounting fraud against U.S. investors. Of course, readers of Zero Hedge will recall what we dubbed the formation of a cottage industry exposing Chinese fraudcaps back in November of 2010 when we warned that virtually every reverse merger out of China will soon prove to be a fraud, but because of the listing fees that US exchanges would get as a result of local listing, nobody cared, and only that now extinct class of gullible and naive investors would lose their entire investments. It is now two years and one month later, and the SEC has finally acted on it.
Game Over for the once high flying hedge fund manager: "“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” said Robert Khuzami, Director of the SEC’s Division of Enforcement."
US To Settle Fraudclosure For $25 Billion Even As It Channels Fake Tough Guy In Meaningless Lawsuit Against Very Same BanksSubmitted by Tyler Durden on 02/08/2012 23:08 -0400
Remember robosigning and the whole fraudclosure scandal? In a few days you can forget it. Because in America, the cost of contractual rights was just announced, and it is $25 billion: this is the amount of money that banks will pay to settle the fact that for years mortgages were issued and re-issued without proper title and liens on the underlying paper, courtesy of Linda Green et al. Why is this happening? Because staunch hold outs for equitable justice (at least until this point), the AGs of NY and California folded like cheap lawn chairs (we can't wait to find what corner office of Bank of America they end up in), but not before the one and only intervened. From the WSJ: "The Obama administration made a full-court press over the past four days to secure the support of key state attorneys general, including those from Florida, California and New York." Nothing like a little presidential persuasion to help one with overcoming one's conscience. Because in America the push to abrogate the very foundation of contractual agreements comes from the very top. But wait, there's more - just to wash its hands of the guilt associated with this settlement which shows once and for all that the Democratic administration panders as much if not more to the banking syndicate as any republican administration, as it announces one settlement with one hand, with the other the US will sue banks over the mortgage reps and warranties issue covered extensively here, in the most glaringly obtuse way to distract that it is gifting trillions worth of contingent liabilities right back to the banks, not to mention discarding the whole concept of justice. From the WSJ: "Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said." Wait, let us guess -that particular lawsuit will end up in a... settlement? Ding ding ding. We have a winner. All today's news succeed in doing is finally wrapping up any and all legal loose ends, so that banks can finally wrap all outstanding litigation overhangs at pennies on the dollar. And if at the end of the day, they find themselves cash strapped, why the US will simply loan them more cash of course.
Listen to the Landlord in Chief lay out his REO to LBO plan live and in stereo. Since everyone will end up paying for it, directly or indirectly, sooner or later it probably is relevant.
Is The Criminal Case Against Goldman About To be Reopened, As Robert Khuzami's "Ethical" Reputation Lies In RuinsSubmitted by Tyler Durden on 01/11/2011 20:09 -0400
After a few days ago we described in detail the facts behind the ACA lawsuit against Goldman, we were left scratching our heads how it could be that the SEC could ever possibly scuttle this criminal case which was obviously a slam dunk through court, and which based on the disclosures presented by ACA, is a blatant violation case of 10(b)-5 securities fraud and underwriter representation. We asked: did the SEC hide a key piece of the case against Goldman to fast track a settlement process? We concluded that even the SEC's otherwise completely inexperienced legal team should have been able to get this case through the finished line without the need to settle. Two developments today may allow us to postpone the head scratching for at least a bit. According to the FT, the Senate permanent subcommittee on investigations is about to issue a report which "will press the SEC to reopen its investigation into the bank." And in a completely separate report, we learn from Bloomberg that the SEC's top enforcement official, Robert Khuzami, who settled the SEC case with Goldman, is now being probed for his role in Citi's abrupt settlement over the summer. According to Bloomberg disclosures in a letter that served to open the probe "Khuzami ordered his
staff to drop the claims after holding a “secret conversation,
without telling the staff, with a prominent defense lawyer who
is a good friend” of his and “who was counsel for the company,
not the individuals affected.” We hope readers are able to put two and two together, and ask: just why is Robert Khuzami, former General Counsel for Deutsche Bank, still pretending to represent investor interests, when he obviously has far more powerful (and rich) interests to answer to?
When the SEC'a Robert Khuzami recently recused himself of pursuing an investigation against Deutsche Bank in regard to potential CDO malfeasance, a bank where it is common knowledge the CDOs flowed (and were shorted "where appropriate" by Mr. Lippmann and his henchmen) like manna from heaven, we were curious just how large the conflict of interest must be for him to not pursue hisofficial duty. Luckily, we were able to answer this question when we recently encountered Mr. Khuzami's Public Financial Disclosure Report for Executive Branch Personnel. It appears that Mr. Khuzami, who from 2002 to 2009 worked at DB, most recently as General Counsel, might have directly profited quite handsomely from the very activity he is now prosecuting Goldman, and other banks very likely soon, for engaging in. How handsomely? His 2007 bonus, 2008 salary and bonus, and 2009 salary added up to $3,804,537. This works out to about $1.9 million in comp per year. And let's not forget that 2006/2007 was the peak years for DB's CDO issuance. It sure seems Mr. Khuzami benefited nicely as a participant in precisely the kind of CDO gimmickry that he is currently all over Goldman for. Yet most ironic, is that Robert is expecting to receive between $100,001 and $250,000 in vested deferred stock comp from Deutsche Bank in August 2010. Should he, or someone else at the SEC, commence an investigation into Khuzami's former employer, the SEC's Director of Enforcement is sure to lose a substantial amount of money tied into the absolute value of Deutsche Bank stock.