This page has been archived and commenting is disabled.

Philip A. Falcone and Harbinger Charged With Securities Fraud - Full Release

Tyler Durden's picture





 

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."

From the SEC

The Securities and Exchange Commission today filed fraud charges against New York-based hedge fund adviser Philip A. Falcone and his advisory firm, Harbinger Capital Partners LLC for illicit conduct that included misappropriation of client assets, market manipulation, and betraying clients. The SEC also charged Peter A. Jenson, Harbinger’s former Chief Operating Officer, for aiding and abetting the misappropriation scheme. Additionally, the SEC reached a settlement with Harbinger for unlawful trading.

In a separate, settled action, the SEC charged Harbert Management Corporation, whose affiliates served as the managing members of two Harbinger-related entities, as a controlling person in the market manipulation.

The SEC alleges that Falcone used fund assets to pay his taxes, conducted an illegal “short squeeze” to manipulate bond prices, secretly favored certain customers at the expense of others, and that Harbinger unlawfully bought equity securities in a public offering, after having sold short the same security during a restricted period.

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.  “Clients and market participants alike were victimized as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favored some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales.”

The SEC filed actions in U.S. District Court for the Southern District of New York against Falcone, Jenson, and Harbinger, and, in connection with the illegal trading scheme, separately instituted and settled administrative and cease-and-desist proceedings against Harbinger.

In particular, the SEC alleges that:

  • Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes;
  • Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal “short squeeze;”
  • Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors; and
  • Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period.

“Not only are hedge fund managers expected to be savvy investors, they are supposed to serve the interests of their clients. Here, in addition to raiding a fund for personal benefit and cutting secret deals with favored investors, Falcone then lied to investors about what he had done,” said Bruce Karpati, Chief of the Asset Management Unit in the SEC’s Division of Enforcement.

Describing the illegal short squeeze, Gerald W. Hodgkins, Associate Director of the SEC’s Division of Enforcement said, “After he took control of an entire issue of high-yield bonds, Falcone kept buying with an eye toward rigging the market and punishing short sellers to settle a score. In the process, Falcone hijacked the market for the bonds and illegally manipulated their price and availability. The Division will continue to police the bond market to make sure it operates as an efficient market, free of the corrosive effects of manipulators such as Falcone.”

Misappropriation Scheme

In the misappropriation scheme, the SEC alleges that Falcone unlawfully used fund assets to pay his personal taxes. In 2009 Falcone owed federal and state authorities $113.2 million in taxes. Declining to pursue other financing options, such as pledging his personal assets as collateral for a bank loan, Falcone elected instead to take a $113.2 million loan from the Harbinger Capital Partners Special Situations Fund, L.P. – the same fund from which Harbinger had earlier suspended investors from redeeming.

Falcone authorized the transfer of fund assets to himself in a transaction that Jenson helped structure. Falcone and Harbinger never sought or obtained consent from investors prior to using the fund's assets to benefit Falcone.

As part of the misappropriation scheme, the SEC alleges that Falcone and Harbinger, aided by Jenson, made several material misrepresentations and omissions in seeking legal advice regarding the loan and in subsequent communications with investors, including, among other things:

  • the financing alternatives available to Falcone;
  • the circumstances that led to Falcone’s need for the loan;
  • the ability of the Special Situations Fund to furnish the loan, without disadvantaging investors;
  • the terms and conditions of the loan, including the interest rate charged and the amount of collateral posted by Falcone; and
  • the role of Harbinger’s outside legal counsel in vetting the transaction.

The SEC also alleges that Falcone and Harbinger delayed disclosing the loan for approximately five months because of their concern that disclosure of Falcone’s financial condition might have a negative impact on investor withdrawals and on Falcone’s ability to attract more investments for other Harbinger funds. Falcone repaid the loan in 2011, after the Commission commenced its investigation.

Market Manipulation / Illegal Short Squeeze

In a separate civil action, the SEC alleges that from 2006 through early 2008 Falcone and two Harbinger investment management entities manipulated the market in a series of distressed high-yield bonds issued by MAAX Holdings Inc. In this fraudulent scheme, Falcone and the Harbinger entities allegedly orchestrated an illegal “short squeeze” – a market manipulation scheme in which an investor constricts the supply of a security, through large purchases or other means, with the intent of forcing settlement from short sellers at arbitrary and inflated prices.

The SEC’s complaint alleges that at Falcone’s direction, Harbinger purchased a large position in the MAAX bonds during April and June of 2006. After hearing rumors that a Wall Street financial services firm was shorting the MAAX bonds and also encouraging its customers to do the same, Falcone decided to seek revenge. In September 2006, Falcone directed the Harbinger-managed funds to buy every available bond in the market, often purchasing the bonds from short sellers. Ultimately, Falcone raised the funds’ stake to approximately 13 percent more than the available supply of the MAAX bonds.

At one point, Harbinger had purchased 22 million more bonds than MAAX had ever issued. Contemporaneously with these purchases, Falcone locked up the MAAX bonds the Harbinger funds had purchased in a custodial account at a bank in Georgia to prevent his brokers from lending out the bonds to sellers seeking to deliver the bonds to purchasers after short sales.

Having seized control of the supply of the MAAX bonds, Falcone then demanded that the Wall Street firm and its customers settle their outstanding MAAX short sales, not disclosing that it would be virtually impossible to find bonds available for delivery. The Wall Street firm bid daily for the bonds, which quickly doubled in price. Then, Falcone engaged in a series of transactions with certain short sellers at arbitrary, inflated prices, while at the same time valuing the funds’ holdings on his books at a small fraction of the prices he charged the covering short sellers.

Preferential Redemption Scheme

In its action alleging misappropriation, the SEC also alleges that in a further breach of Falcone and Harbinger’s fiduciary duties to their clients, Falcone and Harbinger engaged in unlawful preferential redemptions for the benefit of certain favored investors.

In 2009, while soliciting required investor approval to restrict withdrawals from another Harbinger fund, Falcone and Harbinger secretly exempted certain large investors that Falcone deemed to be strategically important from soon-to-be imposed liquidity restrictions – provided those investors voted to approve restrictions that would temporarily stabilize the decline in Harbinger’s assets under management.

Ultimately, pursuant to these ‘vote buying’ agreements, Falcone and Harbinger allegedly permitted these investors who were connected to certain favored institutional investors to withdraw a total of approximately $169 million. Harbinger concealed these quid pro quo arrangements from the independent directors and from fund investors.

Other Illegal Trading by Harbinger

In a separate administrative and cease-and-desist proceeding, the SEC found that between April and June 2009, Harbinger violated Rule 105 of Regulation M of the Securities Exchange Act of 1934 (Exchange Act). Rule 105 is an anti-manipulation rule that prohibits short selling securities during a restricted period and then purchasing the same securities in a public offering.

The Commission’s Order censures Harbinger and requires the firm to cease and desist from committing or causing any violations of Rule 105 now or in the future. Harbinger will pay disgorgement in the amount of $857,950, prejudgment interest in the amount of $91,838, and a civil monetary penalty in the amount of $428,975. Harbinger consented to the issuance of the Order without admitting or denying any of the Commission’s findings.

Settlement with Harbert Management Company

In a separate complaint also filed in U.S. District Court for the Southern District of New York, the SEC filed a settled civil action against Harbert and two related investment entities – HMC-New York Inc. and HMC Investors, LLC – for their role in the illegal short squeeze described above.

The SEC alleges in its complaint against Harbert that during the entire period of the short squeeze, Defendants Harbert, HMC-NY and HMC Investors, directly or indirectly, possessed the power to control Falcone and the investment managers through which he operated. HMC-NY and HMC Investors, two entities controlled by Harbert, served as the managing members of two limited liability companies that acted as the general partners of the funds advised by Falcone.

Harbert and its affiliates also provided hedge fund administrative, legal, compliance, risk assessment and other services to the funds. In these capacities, Harbert, HMC-NY and HMC Investors knew of Falcone’s trades in the MAAX bonds, but failed to take appropriate steps to address Falcone’s manipulative conduct. The SEC charged the Harbert defendants as controlling persons pursuant to Section 20(a) of the Exchange Act, alleging that they are jointly and severally liable for Falcone’s and the Harbinger investment managers’ violations of the antifraud provisions of the Exchange Act.

Without admitting or denying the allegations of the complaint, Defendants Harbert, HMC-NY and HMC Investors have agreed to pay a civil penalty in the amount of $1 million. The Harbert defendants also have consented to the entry of a judgment enjoining them from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The proposed settlement with Harbert is subject to approval by the court.

In the pending federal court actions concerning the first three fraudulent schemes described above, the Commission seeks a variety of sanctions and relief including injunctions against Falcone and Harbinger from violations of the anti-fraud provisions of the Securities Act of 1933, the Exchange Act, and the Investment Advisers Act of 1940.

In addition, the Commission seeks to enjoin Harbinger and Falcone from controlling any person who violates the anti-fraud provisions of the Exchange Act. As for monetary relief, the Commission seeks disgorgement of ill-gotten gains, prejudgment interest, and civil money penalties from Falcone and Harbinger. The Commission further seeks to prohibit Falcone from serving as an officer and director of any public company. Against Jenson, the Commission seeks to enjoin Jenson from aiding and abetting future violations of the anti-fraud provisions of the Exchange Act and Advisers Act and seeks to obtain monetary penalties.

The SEC’s investigation was a coordinated effort between teams from the SEC’s headquarters and the New York Regional Office, including Conway T. Dodge, Jr., Robert C. Besse, Ken C. Joseph, Mark Salzberg, Brian Fitzpatrick, and David Stoelting. Messrs. Joseph, Salzberg, and Fitzpatrick are members of the Enforcement Division’s Asset Management Unit. Mr. Stoelting and David Gottesman will lead the SEC’s litigation team.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/27/2012 - 14:10 | Link to Comment battle axe
battle axe's picture

The guy is a scumbag....

Wed, 06/27/2012 - 14:18 | Link to Comment greased up deaf guy
greased up deaf guy's picture

“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully..."

so there's a course for that? too bad there's no course for surfing the web for transvestite porn.

Wed, 06/27/2012 - 14:19 | Link to Comment Pladizow
Pladizow's picture

A mere token!

Wed, 06/27/2012 - 14:20 | Link to Comment Xibalba
Xibalba's picture

And Corzine is free?  

Wed, 06/27/2012 - 14:28 | Link to Comment Bam_Man
Bam_Man's picture

Corzine is "TCTJ".

(Too Connected To Jail)

Wed, 06/27/2012 - 14:36 | Link to Comment nope-1004
nope-1004's picture

Is that Phil?  Or John Lennon?  LOL. 

Wed, 06/27/2012 - 14:53 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

'The Smallcheese Falcone'.

The Sequel.   A novel of Wall Street mafiaesque intrigue, by Dashiell Hammett Jr.

Wed, 06/27/2012 - 15:10 | Link to Comment Paul Atreides
Paul Atreides's picture

The SEC doesn't do shit against criminals these days unless it is politically motivated take Egan Jones and Jon Corzine as pretext. I am skeptical of the web site The White Hat Reports but if you read the reports it chimes in as to why TPTB are attacking the Falcone family through the SEC in an attempt to discredit and ruin them.

You can view some of the files in the Ed Falcone case here, here and here.

Wed, 06/27/2012 - 17:37 | Link to Comment phyuckyiu
phyuckyiu's picture

A $1 million dollar fine against two companies worth a billion each. I'm sure they had their day ruined with that one. Good Work! Where's the Intrade bet on whether Falcone does time? I'll bet everything on NO. You should pile on that one before it becomes obvious that's the outcome.

Wed, 06/27/2012 - 15:00 | Link to Comment 12ToothAssassin
12ToothAssassin's picture

Was his Hedge Fund successful or not? I dont see the issue here, isnt this how the game is played now?

Wed, 06/27/2012 - 15:01 | Link to Comment malikai
malikai's picture

Falcone should have been a good bundler.

Thu, 06/28/2012 - 02:09 | Link to Comment mr_T
mr_T's picture

What did he do different than JPM GS ?

I thought jail was only for Sri Lankan hedge fund managers.

A generous campaign contribution with his clients money could clean up this snafu.

Wed, 06/27/2012 - 14:49 | Link to Comment Floordawg
Floordawg's picture

Exactly. Fuck the privately run, inept SEC that claims to:

"protect investors, maintain market integrity and facilitate capital formation."

Fail, fail and fail miserably on all three counts. Not that I condone anything dishonest that ANY hedge fund manager has perpetrated, but the SEC deserves ZERO credit for anything "decent" it may do... it has far too much catch-up to do in the area of prosecution to be considered relevant.

Anyway, makes me wonder who this douche pissed off enough to foster the SEC's attention away from their online porn?

Wed, 06/27/2012 - 15:25 | Link to Comment luckylogger
luckylogger's picture

Looks to me that he corzined the Corzine's.

Guess that was his crime.

Wed, 06/27/2012 - 17:39 | Link to Comment Stackers
Stackers's picture

SEC "civil" case here.

Think we'll see a DOJ "criminal" case ? Probably not.

Wed, 06/27/2012 - 22:12 | Link to Comment Freddie
Freddie's picture

Falcone is a good friend of Obama like Corzine.  Scumbags.

Thu, 06/28/2012 - 05:59 | Link to Comment icanhasbailout
icanhasbailout's picture

Obviously Falcone didn't pay the right people - or didn't pay them enough.

Wed, 06/27/2012 - 15:12 | Link to Comment bdc63
bdc63's picture

Alas, he broke the only hard and fast rule on Wall Street ... Don't get caught ...

Wed, 06/27/2012 - 22:22 | Link to Comment Freddie
Freddie's picture

Falcone is not a tribe member. Nor was Raj and Rajit.

Wed, 06/27/2012 - 14:36 | Link to Comment scaleindependent
scaleindependent's picture

Asness is next, unless he is TBTF, or too connected.

Thu, 06/28/2012 - 03:05 | Link to Comment Buck Johnson
Buck Johnson's picture

Which I love to do (mostly Transsexuals but Transvestites if they are real cute).  We knew for over 2 years that Falcone was doing shady things with his fund and now the SEC is doing something.  This is a joke, something must have happened.

Wed, 06/27/2012 - 14:19 | Link to Comment Doña K
Doña K's picture

And... If any other hedge fund manager that does not cooperate with the FED and deviates from the story line will be facing the same.

If they buy gold, sell or short stocks, increase cash position or badmouth the economy, they are dead meat.

Wed, 06/27/2012 - 14:47 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

...a market manipulation scheme in which an investor constricts the supply of a security, through large purchases or other means, with the intent of forcing settlement from short sellers at arbitrary and inflated prices.

How, exactly, is this illegal Ms. Shapiro?  Because, if it is, then there are some folks at 33 Liberty you must also investigate.  You can start with this guy...

Brian P. Sack is the executive vice president of the Markets Group at the Federal Reserve Bank of New York [The PPT]. He is also the Manager of the System Open Market Account for the Federal Open Market Committee (FOMC). The Markets Group oversees domestic open market and foreign exchange trading operations and the provisions of account services to foreign central banks.

http://www.newyorkfed.org/aboutthefed/orgchart/sack.html

 

 

 

Wed, 06/27/2012 - 14:50 | Link to Comment ebworthen
ebworthen's picture

Exactly.

And the J.P. Morgue, and Citibunk, and Bunk of Amurika, and...

Wed, 06/27/2012 - 14:59 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

...and isn't POMO an acronym for large purchases and inflated prices?

Purchases Over Market Operations

Wed, 06/27/2012 - 15:21 | Link to Comment ebworthen
ebworthen's picture

Yes.

And somewhow, the FED front-buying bonds from the Treasury supports employment, controls inflation, and is deemed "legal" (*cough*).

http://www.zerohedge.com/news/absurdity-continues-fed-buys-30-year-bonds-two-hours-treasury-sells-30-year-bonds

Wed, 06/27/2012 - 14:54 | Link to Comment vast-dom
vast-dom's picture

ad hominem: naive man, everyone knows...micro to the macro and vice-versa.

Wed, 06/27/2012 - 17:10 | Link to Comment long-shorty
long-shorty's picture

Falcone may or may not be a bastard, but this "market manipulation" allegation by the SEC is such bullshit.

the SEC itself and Citi orchestrated a massive short squeeze during the Citi preferred--->common exchange offer.

how do you charge someone with a crime for buying 113% of the outstanding of a security? isn't the crime on the part of the people who SOLD the 13% that didn't exist in the first place?

the current crony capitalism + abuse of executive power in America reminds me of my visit to Moscow in 1997. except ours is larger in scale.

 

Wed, 06/27/2012 - 14:20 | Link to Comment slaughterer
slaughterer's picture

Now Lisa is ALLLLLLLLLLLL MINE!

Wed, 06/27/2012 - 14:25 | Link to Comment ReallySparky
ReallySparky's picture

LOL. I hope you have a big checkbook cuz that girl likes bling and expensive artistic hobbies.

Wed, 06/27/2012 - 22:18 | Link to Comment GMadScientist
GMadScientist's picture

I hope you have a paper bag...cuz that surgery went wrong.

Wed, 06/27/2012 - 21:44 | Link to Comment jez
jez's picture

Finally someone mentions the lovely Lisa.

 

Who cares about all this SEC stuff? What we want to know is: has the lovely Lisa bought any more highly tasteful new outfits lately?

Wed, 06/27/2012 - 22:20 | Link to Comment GMadScientist
GMadScientist's picture

Looks like someone beat you to that punch.

Wed, 06/27/2012 - 22:36 | Link to Comment jez
jez's picture

Bad case of the ol' redeye, except that the redness is on her eyelids. What an odd photo.

Wed, 06/27/2012 - 14:28 | Link to Comment Stoploss
Stoploss's picture

Straight. Up. Fucked.

Wed, 06/27/2012 - 14:55 | Link to Comment vast-dom
vast-dom's picture

micro to The Fed's macro.

Wed, 06/27/2012 - 14:59 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

A Harbinger of things to come?  Unfortunately no.

Wed, 06/27/2012 - 15:17 | Link to Comment Animal Cracker
Animal Cracker's picture

"Short Squeeze" would be a solid prison nickname for this fine gentleman.

Wed, 06/27/2012 - 14:09 | Link to Comment VulpisVulpis
VulpisVulpis's picture

One step for civilized society.

Wed, 06/27/2012 - 14:11 | Link to Comment FL_Conservative
FL_Conservative's picture

And Corzine is next, right?  Beuller....Beuller....Beuller....

Wed, 06/27/2012 - 14:18 | Link to Comment RacerX
RacerX's picture

Obviously Falco forgot to write a check to Our Dear Leader's reelection campaign.

Wed, 06/27/2012 - 14:29 | Link to Comment El Oregonian
El Oregonian's picture

Corzine is like Corexit, a dispersant for breaking up oily slick Banksters. That is why they will not release him. Too dangerous...

Wed, 06/27/2012 - 14:37 | Link to Comment Bastiat
Bastiat's picture

Can we liquify him and pump him into the Gulf of Mexico or is he too toxic?

Wed, 06/27/2012 - 14:42 | Link to Comment Jonas Parker
Jonas Parker's picture

Hell, the sharks wouldn't even eat Corzine! He'd give them terminal indigestion!

Wed, 06/27/2012 - 15:02 | Link to Comment 12ToothAssassin
12ToothAssassin's picture

Or its just professional courtesy

Wed, 06/27/2012 - 22:14 | Link to Comment Bunga Bunga
Bunga Bunga's picture

That would be a worse desaster than Deepwater Horizon.

Wed, 06/27/2012 - 14:11 | Link to Comment q99x2
q99x2's picture

Maybe they'll make him pay a fine.

Wed, 06/27/2012 - 14:12 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Wake me, when the SEC actually goes after the big perps of fraud, someone is actually put in a real prison for life (or hung), and all the funds are recovered with interest from the private wealth of the perps and management.

Otherwise, more circuses to go with your bread, enjoy.

Wed, 06/27/2012 - 14:20 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

Hope you have an extra supply of Ambien....it's gonna be a while. 

Wed, 06/27/2012 - 14:12 | Link to Comment cougar_w
cougar_w's picture

By any chance is Falcone a big Obama donor? Or a friend of Corzine? Or TBTF in any way?

Did he get those spiffy Presidential Seal cuff links like that smarmy fucker Dimon?

I just want to set my expectations here.

Wed, 06/27/2012 - 14:58 | Link to Comment MsCreant
MsCreant's picture

I just had a good laugh. I saw your avatar, unfed for three days, placed in a locked room with John, Jamie, and Lloyd. A fair fight, right?

Wed, 06/27/2012 - 15:07 | Link to Comment cougar_w
cougar_w's picture

See you have to understand how this works in nature.

On day one, one of them would die. Kitty goes to a corner of the room to eat, happy now for a few days. Two of those guys are left screaming with terror and trying to figure out how to jump the kitty. You go first. No you go. I'm richer than you, you go. Fuck you I've got Presidential fucking cufflinks you fucker you go. Hopefully someone is recording all this for YouTube.

On day three, another one is eaten. Kitty likes this gig, back to the same corner gnawing on bones and sleeping. The guy that remains is mute with terror, huddles in a corner gibbering to himself. Mind is gone all he can do is talk about how powerful he is. Twit.

On day seven, he's dead.

On day ten, kitty lets himself out via the cat door. Those guys never even thought about how that worked. They didn't have anyone around to tell them how to save themselves.

Wed, 06/27/2012 - 15:37 | Link to Comment MsCreant
MsCreant's picture

Nice short story. cougar_w never disappoints.

Wed, 06/27/2012 - 17:34 | Link to Comment cougar_w
cougar_w's picture

Thank you. But you know what, with material like this the stories practically write themselves.

Wed, 06/27/2012 - 14:12 | Link to Comment j0nx
j0nx's picture

Musta forgot to grease some politician's palm.

Wed, 06/27/2012 - 14:14 | Link to Comment darteaus
darteaus's picture

And Corzine?

Wed, 06/27/2012 - 14:15 | Link to Comment Peter Pan
Peter Pan's picture

He should have changed his name to Corzine whie he still had a chance and avoid all the problems. By the way where IS Corzine?

Wed, 06/27/2012 - 14:32 | Link to Comment ATG
ATG's picture

Buying a non-extraditable French Chateau next to Jamie boy wonder?...

Wed, 06/27/2012 - 22:24 | Link to Comment GMadScientist
GMadScientist's picture

Non-extraditable, but plenty flammable.

Wed, 06/27/2012 - 14:33 | Link to Comment espirit
espirit's picture

This is just a replay of the "Dumb and Dumber" Crook Reality TV Series.

If you're dumb enough to get caught, even the Banksta's won't help you.

Wed, 06/27/2012 - 14:15 | Link to Comment cougar_w
cougar_w's picture

Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully

See that? I knew all along they taught this shit in college. Fucking MBAs have ruined the nation.

Wed, 06/27/2012 - 14:32 | Link to Comment centerline
centerline's picture

I hope people appreciate the degree of truth expressed in that last statement.  I dont know of a single honest industry that has not been compromised on some level by MBA mentality.  Is a perfect example of productive capacity being choked to death by non-productive.

Wed, 06/27/2012 - 14:15 | Link to Comment PicassoInActions
PicassoInActions's picture

what's up with pornoSEC? they start working?

Wed, 06/27/2012 - 14:29 | Link to Comment NotApplicable
NotApplicable's picture

Election year, duh.

Wed, 06/27/2012 - 14:16 | Link to Comment PSEUDOLOGOI
PSEUDOLOGOI's picture

He must not have donated enough to politicians.  Silly wabbit...

Wed, 06/27/2012 - 14:18 | Link to Comment TWSceptic
TWSceptic's picture

Yes he looks like a fraudster to me.

Wed, 06/27/2012 - 14:18 | Link to Comment azzhatter
azzhatter's picture

Doucher must not have been in the club

Wed, 06/27/2012 - 14:30 | Link to Comment NotApplicable
NotApplicable's picture

I'd say his trial membership expired, and his privileges revoked.

 

Wed, 06/27/2012 - 14:20 | Link to Comment TheCanadianAustrian
TheCanadianAustrian's picture

The SEC reminds me of the people who try to convince others they're good humanitarians by occasionally buying a carton of ice cream with a pink breast cancer ribbon on it.

Wed, 06/27/2012 - 14:37 | Link to Comment NotApplicable
NotApplicable's picture

I like to explain to those people how cancer isn't even a disease, but rather a symptom of many others, and instead of curing a symptom, we should be trying to prevent it by focusing on curing the underlying disease.

After a few seconds of blank stares, I point out that the greatest killer in the world is diarrhea. Then I ask if we should be trying to cure it, or what causes it.

Then they mumble something and go off looking for someone else to guilt into "doing good."

Lesson learned?

wishful thinking > logic

Wed, 06/27/2012 - 22:26 | Link to Comment Freddie
Freddie's picture

Cartons of ice cream can give you man boobs.

Wed, 06/27/2012 - 14:21 | Link to Comment Flakmeister
Flakmeister's picture

What? Are you implying that Wall St. is nothing but insider driven grifting???

While it is encouraging to see these small time con artists get investigated, I want to see some whales get what is their due....

Wed, 06/27/2012 - 14:21 | Link to Comment YesWeKahn
YesWeKahn's picture

When he gets ass raped in jail, he should remember that only Bernanke has the rights to manipulate the stock market.

Wed, 06/27/2012 - 14:24 | Link to Comment realitybiter
realitybiter's picture

Barclays just proved that all manipulations are for sale.

Wed, 06/27/2012 - 14:36 | Link to Comment otto skorzeny
otto skorzeny's picture

why is "getting ass raped in jail" acceptable punishment? guys that say that kind of shit are closet fags

Wed, 06/27/2012 - 14:58 | Link to Comment YesWeKahn
YesWeKahn's picture

Oh sorry, did you get a punishment like that?

Wed, 06/27/2012 - 16:35 | Link to Comment steelhead23
steelhead23's picture

Dude, this is not a criminal indictment - it is a civil suit.  They don't want to put him in jail, they want him to write a check.  A very big check - but probably not big enough to correct Lisa Falcone's buying habits.

Wed, 06/27/2012 - 14:22 | Link to Comment realitybiter
realitybiter's picture

"“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."

Khuzami continued, "Falcone obviously didn't study.  His big mistake was he never became a political bundler.  Sheesh, even that doofus with that prison pussy on his face, Corzine, knows that!"


Wed, 06/27/2012 - 14:24 | Link to Comment dwdollar
dwdollar's picture

Don't worry... I'm sure he's the only one breaking laws.

Wed, 06/27/2012 - 14:34 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

the SEC has condensed their mandate down to "So much porn, so little time,  oh and we also occasionally prosecute securities crimes if our internet goes down"

Wed, 06/27/2012 - 14:39 | Link to Comment otto skorzeny
otto skorzeny's picture

they 'prosecute securities crimes" when one of the oligarchs steps out of line or pisses off the 12 Tribesman than run shit here in "Israel West"

Wed, 06/27/2012 - 18:04 | Link to Comment Grinder74
Grinder74's picture

"we also occasionally prosecute securities crimes if our internet goes down"

Seeing as how the SEC doesn't actually have the power to prosecute crimes, at all, I think they're stuck with just "so much porn, so little time".

Wed, 06/27/2012 - 14:25 | Link to Comment Nobody For President
Nobody For President's picture

Wasn't Falcone the bad guy in Batman Begins?

Wed, 06/27/2012 - 14:32 | Link to Comment A Lunatic
A Lunatic's picture

Of course, and probably the the primary consideration in this investigation since the name resonates with enough sheeple for them to know that "someone is finally doing something" to end the corruption.

Wed, 06/27/2012 - 14:26 | Link to Comment robertocarlos
robertocarlos's picture

As long as the prison has a hockey team he'll be fine.

Wed, 06/27/2012 - 14:28 | Link to Comment sells2soon
sells2soon's picture

Someone sold at least 22 million more bonds than MAAX had ever issued - but that's not a crime?

Wed, 06/27/2012 - 14:34 | Link to Comment Calculated_Risk
Calculated_Risk's picture

See COMEX

Wed, 06/27/2012 - 14:30 | Link to Comment A Lunatic
A Lunatic's picture

A mere pimple on the ass of corruption.

Wed, 06/27/2012 - 14:32 | Link to Comment MsCreant
MsCreant's picture

Okay. I am serious here. Are there any honest financial companies at all out there? Cause, see, I'm reading this shit here on my lap top, in my office, on Main Street USA, and I'm getting the impression the answer is NO. 

If I was an honest hedgefund manager, banker, etc. I'd want to clean this shit up to spare my own reputation.

I know dude is a little fish (okay, not in my personal book but we are talking scale here) ...but you get my drift.

Wed, 06/27/2012 - 14:36 | Link to Comment centerline
centerline's picture

There must be.  But very likely in the minority.  Every day that this goes on it become so apparent the scale of this finacial free-for-all is massive.  We all knew it anyhow - but seeing it first hand is painful nonetheless.

 

Wed, 06/27/2012 - 18:50 | Link to Comment Clycntct
Clycntct's picture

Your comment brought a song to mind.

Truth Hurts by J Giles band.

Thu, 06/28/2012 - 05:59 | Link to Comment Ghordius
Ghordius's picture

MsCreant, one of the biggest problems is not honesty per se, it's the incentives in the financial industry. just wrote something about it here 2567590

Thu, 06/28/2012 - 06:44 | Link to Comment i-dog
i-dog's picture

It's not just the finance industry. I've noticed a complete absence of morality in big corp CEOs in the last few years. It's as if they all know that the jig is up (particularly those that are "connected") and that they therefore need to grab everything they can before the house burns down. There is no medium or long range planning, or relationship building, at all now.

Wed, 06/27/2012 - 14:39 | Link to Comment SWCroaker
SWCroaker's picture

Decades back, I used to work for Edward D. Jones.  Their business model revolved around placing solo broker reps in small and mid-sized towns across the country.  You don't last long in a small town if you stick it to your neighbors.

They're commission based, and have all of the old-fashioned conflicts of interest that any salesman would have, but that modest degree of self-interest is looking almost saintly these days...

Wed, 06/27/2012 - 14:45 | Link to Comment nope-1004
nope-1004's picture

Who was it that said "Money is the root of all evil?"  I forget.... but I think that will answer your own question with clarity.

Thu, 06/28/2012 - 05:35 | Link to Comment Lebensphilosoph
Lebensphilosoph's picture

Nobody did. It's the LOVE of money, not money.

Thu, 06/28/2012 - 09:12 | Link to Comment MsCreant
MsCreant's picture

Excellent catch!

Wed, 06/27/2012 - 15:01 | Link to Comment fuu
fuu's picture

And yet people insist that believing there is manipulation of markets, doctoring of metrics, and conspiracy to commit fraud is  tin foil hatter territory.

Wed, 06/27/2012 - 17:20 | Link to Comment long-shorty
long-shorty's picture

MsCreant,

if you are a small fish manager, there is nothing you can do. if you are a big fish, there is still nothing you can do, but you have even more to lose and are thus more a captive of the system.

plus the financial services industry, on average, is particularly full of people who mostly care about their own well-being and don't score so high in concern for other considerations.

there are plenty of honest community bankers out there, plenty of small hedge fund managers doing good, honest work. people have to work to find them. if you go based on some TV commercial, you end up banking with Ally.

 

Wed, 06/27/2012 - 17:42 | Link to Comment cougar_w
cougar_w's picture

particularly full of people who mostly care about their own well-being and don't score so high in concern for other considerations

Then they also don't score too high on general tests for intelligence. Because just about anyone who can fog a mirror can see that the this behavior is destroying the entire financial industry and could very well lead to the "untimely" demise of many of it's playerz.

Short drop and a sudden stop. Coming to a lamp post near you.

Thu, 06/28/2012 - 00:12 | Link to Comment Hulk
Hulk's picture

See Bill Black. Illegal behavior drives out legal behavior completely. Once  ill gotten gain starts, everyone else has to adopt the illegal behavior to keep up or else,be squashed...

Thats why it is important that the system catch illegal activity immediatley

Thu, 06/28/2012 - 09:17 | Link to Comment MsCreant
MsCreant's picture

Everyone had great answers to my question. There is truth in all of them. Thanks.

Wed, 06/27/2012 - 14:32 | Link to Comment Calculated_Risk
Calculated_Risk's picture

So he's on his way to become the next president....

Wed, 06/27/2012 - 14:32 | Link to Comment JR
JR's picture

And now, for those who would like to do something about the real criminals behind America’s financial crisis:

Ron Paul’s latest Audit the Fed has passed the House oversight committee without any oral objection. It’s now likely to go to the full House in July.

As I understand it, this would make changes in the other bill that Ron Paul has proposed .

 

Ron Paul's Latest "Audit the Fed" Bill Passes Committee Unanimously

Brian Doherty | June 27, 2012

This morning, the U.S. House of Representatives Oversight and Government Reform Committee unanimously passed Ron Paul's latest "Audit the Fed" bill, H.R. 459.

The bill would eliminate certain restrictions that now exist on any audits done on the Federal Reserve from 31 U.S.C. 714, such as:

Audits of the Board and Federal reserve banks may not include—

(1) transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization;

(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations; 

(3) transactions made under the direction of the Federal Open Market Committee; or

(4) a part of a discussion or communication among or between members of the Board and officers and employees of the Federal Reserve System related to clauses (1)–(3) of this subsection.

Again, the above are the existing restrictions that H.R. 459, if it eventually passes the full House and then becomes law in unaltered or unamended form, will eliminate from Fed audits. By the time his last try at this got in some form into a final bill, even Ron Paul himself wouldn't vote for that whole bill

http://reason.com/blog/2012/06/27/ron-pauls-latest-audit-the-fed-bill-pass

Wed, 06/27/2012 - 14:39 | Link to Comment NotApplicable
NotApplicable's picture

Once again, election year.

RINOs riding on Ron's coattail, trying to gain some street cred.

Wed, 06/27/2012 - 15:23 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Take notice of how every single "representative" votes, then you will know precisely who they speak for.

Wed, 06/27/2012 - 14:32 | Link to Comment zilverreiger
zilverreiger's picture

When are Corzine Blankfein and Dimon going down?

Wed, 06/27/2012 - 14:44 | Link to Comment MsCreant
MsCreant's picture

I think they have others going down on them... just sayin'.

Wed, 06/27/2012 - 14:33 | Link to Comment El
El's picture

I guess he didn't bundle enough for Obama's campaign.

Wed, 06/27/2012 - 14:33 | Link to Comment caimen garou
caimen garou's picture

ok, ok, so the sec is able to fry a minnow but they are not able to even get a nibble with the big fish!

Wed, 06/27/2012 - 14:33 | Link to Comment Zola
Zola's picture

Mhh can we please now sue Bernanke ? He manipulates the market on a daily basis...

Wed, 06/27/2012 - 14:34 | Link to Comment otto skorzeny
otto skorzeny's picture

"It's a big Hebe club-and you and I and Falcone ain't in it"-paraprhrasing Carlin

Wed, 06/27/2012 - 14:37 | Link to Comment williambanzai7
williambanzai7's picture

This guy is obviously scum, peripheral scum, but scum. Why is it that the only targets they go after are peripheral?

No need to answer.

Wed, 06/27/2012 - 15:13 | Link to Comment ebworthen
ebworthen's picture

SEC assiduously pulling one or two lamprey off the Great White Sharks that are eating little old ladies and toddlers in the shallows.

Holding up with one hand the little critter:  "The danger has passed, we have the beast, it is now safe to go back in the water."

Wed, 06/27/2012 - 14:39 | Link to Comment Euro Monster
Euro Monster's picture

Send him to Guantanamo Bay please

Wed, 06/27/2012 - 14:38 | Link to Comment midgetrannyporn
midgetrannyporn's picture

The squid does most of that shit every day.

Wed, 06/27/2012 - 15:30 | Link to Comment Blankenstein
Blankenstein's picture

Lloyd has been laying low recently.  Probably part of the strategy designed by the pr firm Goldman's hired to repair their tarnished image. 

We must continue to counter their efforts. 

Wed, 06/27/2012 - 14:42 | Link to Comment oleander garch
oleander garch's picture

These are merely the charges in the criminal action against Mr. Falcone.

Please note that the civil 'penalty' assessed against the co-conspirator Habert is a grand total of one million dollars.  There are no criminal charges.  The 'penalty' is all that this set of financial engineers will face.

Angelo Mozilo had a similar set of criminal charges against him and a far more impressive array of financial engineering.  He, too, paid a fine and faced no criminal penalties.

Here is your SEC enforcement in a nutshell: Shocker headline.  Yawner result.  

 

Wed, 06/27/2012 - 16:24 | Link to Comment Grinder74
Grinder74's picture

SEC doesn't file criminal charges.  US Attorney/DoJ does.

Thu, 06/28/2012 - 00:46 | Link to Comment moonstears
moonstears's picture

Guess we can't bitch about the SEC, doin' nothin' as a "taxpayer burden", et al. Seems this is how they get their funding??

Wed, 06/27/2012 - 14:43 | Link to Comment Dave Thomas
Dave Thomas's picture

So is this guy going to actually go to jail and all? Or is this just a charge?

 

Wed, 06/27/2012 - 15:17 | Link to Comment ebworthen
ebworthen's picture

"Bad boy!" (hand-slap) "Now give us a couple hundred million and go work for the DNC."

Wed, 06/27/2012 - 16:23 | Link to Comment Grinder74
Grinder74's picture

SEC is civil cases.  They can and often do refer to DoJ for criminal.

Wed, 06/27/2012 - 14:44 | Link to Comment Spore
Spore's picture

And still nothing for Corzine and MF Global.....

Wed, 06/27/2012 - 14:45 | Link to Comment yogibear
yogibear's picture

The SEC took a break from the porn sites and decided to snatch someone. In the mean time blatant trades that post and disappear to bait traders.

There is so much  obvious fraud it's sickening to someone trying to do it the honest way. Where's Corzine?

Wed, 06/27/2012 - 14:50 | Link to Comment monopoly
monopoly's picture

What a pathetic country we have become. Fraud, deceit, and it is all about ME! One or two get caught and thousands more go free because Obama says "what they did was immoral, not illegal." What an absurd comment from a one time senator. Makes me sick.

Thu, 06/28/2012 - 08:14 | Link to Comment Offthebeach
Offthebeach's picture

Where's Old Joe Kennedy when we need him?

( /sarcasm )

Wed, 06/27/2012 - 14:50 | Link to Comment buzzsaw99
buzzsaw99's picture

He will probably post bail with stolen funds. ha ha

Wed, 06/27/2012 - 16:22 | Link to Comment Grinder74
Grinder74's picture

Civil case, not criminal.  It's just that the SEC stooges like to pretend they're cops.

Wed, 06/27/2012 - 18:57 | Link to Comment Clycntct
Clycntct's picture

I do question your "probably".

Wed, 06/27/2012 - 14:55 | Link to Comment fuu
fuu's picture

DIAF Phil.

Wed, 06/27/2012 - 14:55 | Link to Comment Benjamin Glutton
Benjamin Glutton's picture

Too bad we shot and killed the face eating guy...could have put one of these W/S scumbags in a cell with him every day until they get the message.

 

Oh, toss in a bottle of Bollinger as well. After all it's important to remain civilized.

Wed, 06/27/2012 - 15:33 | Link to Comment GMadScientist
GMadScientist's picture

<clink>

Wed, 06/27/2012 - 14:58 | Link to Comment ebworthen
ebworthen's picture

"Messrs. Joseph, Salzberg, and Fitzpatrick are members of the Enforcement Division’s Asset Management Unit."

Hey Boys, two names for you if you have the balls; Corzine and Dimon.

The Untouchables did it to Al Capone so grow a set and get busy.

Wed, 06/27/2012 - 15:01 | Link to Comment lolmaster
lolmaster's picture

Don't forget the subtext here: Falcone in addition to being a dirtbag was a Bush/CIA guy. So he gets jail time while Obama guys like Goldman go free

Wed, 06/27/2012 - 15:04 | Link to Comment Seasmoke
Seasmoke's picture

very sorry for your loss Lisa

Wed, 06/27/2012 - 15:05 | Link to Comment Carl Spackler
Carl Spackler's picture

"As my client's testimony will show, he is innocent of all charges and an upstanding citizen and philanthropist in the City of New York."   /sarc/

  • Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes;

"But, ladies and gentlemen of the jury, I was gonna pay it back, and my ownership stake in the fund was greater than the loan, so it was mine own money I was borrowing."

  • Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal “short squeeze;”

"We sold and bought bonds. That is our firm's business.  In fact, we provided LIQUIDITY to a marketplace is distress, which is really a social benefit to society. How is it wrong to help out society?"

  • Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors; and

"We were protecting against a run on the bank, which would hurt all of our investors. It's just like inthe U.S. Congress, we had to offer something to get the votes we needed to protect our investors. "

  • Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period.

"Again, we sold and bought bonds. That is our firm's business.  In fact, we provided more LIQUIDITY to a marketplace is distress, which is really a social benefit to society. How is it wrong to help out society?"

Wed, 06/27/2012 - 15:09 | Link to Comment atomicwasted
atomicwasted's picture

No wonder naked shorting is legal and encouraged, when you can't restrict lending out of your own securities that are being shorted, and you get charged for squeezing shorts.

Wed, 06/27/2012 - 15:12 | Link to Comment Seasmoke
Seasmoke's picture

i guess Falcones God is not as good as Lloyds God

Wed, 06/27/2012 - 16:30 | Link to Comment CCanuck
CCanuck's picture

I'm thinking this guy just secured himself a Job at GOD'S Bank...as soon as he gets out.

Cc

Wed, 06/27/2012 - 15:15 | Link to Comment maximusplugis
maximusplugis's picture

Where there external administrators for any of these guys funds? 

Wed, 06/27/2012 - 16:26 | Link to Comment Grinder74
Grinder74's picture

Apparently no: "Harbert and its affiliates also provided hedge fund administrative, legal, compliance, risk assessment and other services to the funds. In these capacities, Harbert, HMC-NY and HMC Investors knew of Falcone’s trades in the MAAX bonds, but failed to take appropriate steps to address Falcone’s manipulative conduct."

Wed, 06/27/2012 - 15:32 | Link to Comment GMadScientist
GMadScientist's picture

Fat Fuck Phil Falcone Fully Fingered From Fed For Financial Fraud.

 

Wed, 06/27/2012 - 16:27 | Link to Comment CCanuck
CCanuck's picture

+1...Phuc'n Phunny!

Wed, 06/27/2012 - 15:33 | Link to Comment WTF_247
WTF_247's picture

The thing that stood out for me was the fact he was able to buy 22mil more bonds than were ever issued.  If we have a fair settlement process this should not be possible.  For someone to buy, someone else has to sell.

The new rules are supposed to guarantee delivery.  It would appear that naked shorting is still alive and well on Wall St.  Of course none of the big firms that enabled clients to naked short the bonds will ever even be called in for questioning.  None of the compliance departments will be called into question about how they did not catch that clients were rampantly naked shorting with no affirmative borrow.

Once again the only one that gets screwed by the rules are the little guys.  The institutions can do as they please with no regard for the rules.

They accuse him of "large purchases designed to push the price up" - what about the "large shorts" that were in the name trying to push the price down by naked shorting???  For him to make large purchases would require "large selling" also.  My guess is the large shorts = Goldman, Morgan Stanley, JP Morgan etc so they get a complete pass.

Wed, 06/27/2012 - 16:00 | Link to Comment q99x2
q99x2's picture

Wake me when they get Dimon or Blankfein. I'll buy the drinks when they pull in the Bernank.

Wed, 06/27/2012 - 16:19 | Link to Comment Grinder74
Grinder74's picture

Or Corzine or Solyndra.

Wed, 06/27/2012 - 16:16 | Link to Comment SmackDaddy
SmackDaddy's picture

This sounds like rich-on-rich crime.  In other words, I dont give a fuck.

Wed, 06/27/2012 - 16:19 | Link to Comment Grinder74
Grinder74's picture

"In its action alleging misappropriation, the SEC also alleges that in a further breach of [Solyndra and the Department of Energy's] fiduciary duties to their clients, [Solyndra] engaged in unlawful preferential redemptions for the benefit of certain favored investors."

 

FIFY.

Do NOT follow this link or you will be banned from the site!