Dienstag, 11. Dezember 2012

HSBC will pay $1.9 billion for money laundering

December 11, 2012
By Kevin McCoy
British banking giant HSBC agreed to pay a record $1.92 billion settlement Tuesday after a broad investigation by U.S. federal and state authorities found the bank violated federal laws by laundering money from Mexican drug trafficking and processing banned transactions on behalf of Iran, Libya, Sudan and Burma.

The settlement, a combination of forfeitures and civil penalties, shows the London-headquartered financial powerhouse for years deliberately channeled hundreds of millions of dollars of the prohibited transactions through its U.S. arm.

"HSBC is being held accountable for stunning failures of oversight - and worse - that led the bank to permit narcotics traffickers and others to launder millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries," said U.S. Assistant Attorney General Lanny Breuer in announcing the largest settlement of its kind.

"The record of dysfunction that prevailed at HSBC for many years was astonishing," said Breuer.

The settlement, part of a deferred prosecution agreement filed in Brooklyn federal court, means HSBC avoids a criminal conviction on money laundering and other major charges - which could have amounted to a financial death sentence by blocking the bank's access to the U.S. banking system.

The settlement is the latest and largest of several deals U.S. authorities have reached with other banks over similar allegations. Federal and state prosecutors retain legal power to prosecute HSBC if the bank fails to comply with banking and oversight reforms included in the agreement, including the appointment of an independent monitor.

"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," HSBC Group Chief Executive Stuart Gulliver said in a statement earlier Tuesday.

Adding that the bank had cooperated with U.S. investigators, Gulliver said "we have been taking concrete steps to put right what went wrong."

He said the deferred prosecution agreement notes that in recent years the bank has increased spending and staffing on money-laundering prevention and beefed up know-your-customer efforts.

HSBC spent more than $290 million to improve its money-laundering prevention policies, terminated 109 banking correspondent relationships considered potential money laundering risks and required a number of senior bank officers to return previously paid bonuses, Gulliver said.

The agreement covers an investigation that involved the Department of Justice, the Manhattan District Attorney in New York, the Federal Reserve, the Treasury Department's Office of Foreign Assets Control and its financial crimes enforcement unit, and the Comptroller of the Currency.

HSBC shares were up 0.5% to $51.82 in afternoon trading Tuesday. The shares also traded higher in London.

"Obviously, $1.9 billion is a very large number, but it's very manageable" without affecting HSBC's bottom line, said Ian Gordon, head of bank research for Investec Securities in London. "It's clearly within market expectations."

Some legal analysts questioned U.S. authorities' failure to force HSBC to plead guilty to criminal charges. Although federal officials said the settlement was based on the bank's cooperation and renewed efforts to fight money laundering, the analysts said a criminal plea would have sent a powerful deterrence message to the banking industry.

"It's fine that HSBC's CEO talked about accepting responsibility, but when will he be held accountable for this tremendous breach of trust?" asked Mark Rifkin, a New York shareholder rights attorney and partner at the Wolf Haldenstein Adler Freeman & Herz law firm.

The federal court filings outlined the prohibited transgressions in dramatic detail.

Between 2006 and 2010, the Mexico's Sinaloa Cartel, Colombia's Norte del Valle Cartel and other alleged drug traffickers laundered at least $881 million in illegal proceeds through accounts in HSBC's U.S. arm, the filings show.

"These traffickers didn't have to try very hard," said Breuer. "They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico's branches."

Similarly, HSBC bankers as far back as 2001 cleared U.S. dollar transactions through the bank's U.S. arm while hiding the fact that the money was linked to Iran's Bank Melli. A June 2001 email from an HSBC relationship manager in Europe wrote that Bank Melli had been instructed not to input an "Iranian referenced customer name" with the transaction, thus avoiding any sign of a U.S. legal breach.

The details echoed findings of a July report by the Senate Permanent Subcommittee on Investigations. The panel found evidence that two HSBC affiliates routed nearly 25,000 Iran-linked transactions involving $19.4 billion through the bank's U.S. arm over a seven-year period. Those transactions violated U.S. and British law.

The panel's report criticized U.S. regulators for failing to take action despite knowledge that HSBC's money-laundering safeguards were inadequate. But the subcommittee's chairman, Sen. Carl Levin, D-Mich., hailed Tuesday's settlement, saying it "sends a powerful wakeup call to multinational banks about the consequences of disregarding their anti-money laundering obligations."

Under the deferred prosecution agreement, HSBC won't be prosecuted if it meets certain conditions, including stronger internal controls to prevent money laundering. Such agreements have been used often by the Department of Justice to settle allegations of foreign bribery charges against large corporations.

Money laundering by banks has become a priority target for U.S. law enforcement. In another case Monday, British bank Standard Chartered, accused of scheming with the Iranian government to launder billions of dollars, signed an agreement with New York regulators to pay $340 million to settle money laundering charges.

Since 2009, foreign banks with U.S. arms, including Credit Suisse, Barclays and Lloyds, have made payments to settle allegations they moved money for people or companies that were on a U.S. sanctions list. Because these banks had U.S. subsidiaries, they are subject to U.S. laws and regulations.

In his statement Tuesday, HSBC's Gulliver said: "The HSBC of today is a fundamentally different organization from the one that made those mistakes. Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters."

HSBC announced Monday that Robert Werner, a former head of the Treasury Department agencies responsible for sanctions against terrorist financing and money laundering, will begin a new role at HSBC as head of financial crime compliance and become the bank's money-laundering reporting officer. Werner has been head of global standards assurance since August.

In January, HSBC hired Stuart Levey, a former Treasury undersecretary for terrorism and financial intelligence, as chief legal officer. And a former policy adviser in the Obama administration, Preeta Bansal, in October became HSBC's global general counsel for litigation and regulatory affairs.

More Info: http://sivg.org/article/2012_HSBC_will_pay_billions_for_money_laundering.html

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Freitag, 7. Dezember 2012

Judge approves Stanford class action lawsuit

December 7, 2012
A civil suit by 86 defrauded investors was certified by a Baton Rouge judge Wednesday as a class action against Louisiana's regulator of financial institutions and a Pennsylvania company that compiled customer financial statements on behalf of convicted swindler Robert Allen Stanford.

The ruling by state District Judge R. Michael Caldwell could open the door for some 1,000 investors damaged by Stanford's fraudulent $7.2 billion scheme to join the suit. Those people now have the option to join the original plaintiffs in seeking judgments against the Louisiana Office of Financial Institutions, or OFI, and the financial services firm of SEI Investments Co.

If investors win that suit, OFI and SEI could share liability for as much as $1 billion in losses in Louisiana, according to estimates by their attorneys.

SEI took investment-performance information from Stanford, now serving a prison term of 110 years, and used it for financial statements that went to investors. But both the Pennsylvania firm and OFI deny failing any obligations to investors.

"I do certify this lawsuit as a class action," Caldwell told a courtroom populated by former Stanford investors and attorneys for all sides in the litigation.

The judge noted his decision merely opens the door for more defrauded investors to join the lawsuit against OFI and SEI. Additional litigation will be needed to determine whether those investors are entitled to recover any money from the two defendants for allegedly failing an obligation to warn them of indicators of fraud on Stanford's part.

Many people lost their money, Caldwell said, adding that there were more than 1,000 investor accounts at Stanford Trust Co. in Baton Rouge.

Additional investors' money was drawn into the scheme through Stanford Group Co.

"Some of them lost all of their money," Caldwell said of the victims. "Some of them lost hundreds of thousands of dollars, and some of them lost millions."

Phil Preis, lead attorney for the plaintiffs, said Caldwell's ruling "affords the people of Louisiana their day in court." Preis said his clients "are overjoyed."

Zachary resident and Stanford victim Kathy Mier said, "I am very, very, very excited, very happy. Someone has listened, and I'm ready to go on."

Mier and her husband, Louis Mier, lost $240,000 of their retirement nest egg to Stanford, 62.

"For the first time in a long time, I felt like someone really listened to us, and we're moving forward with our fight," Kathy Mier said.

Debbie and Ken Dougherty, of Central, recovered their principal investment in Stanford's certificates of deposit at his bank on the Caribbean island of Antigua before federal officials shut down his operations in February 2009. But they continue to face demands from a court-appointed receivership in Dallas for return of more than $100,000 in profits.

"I know this is just one hurdle, but it's huge," Debbie Dougherty said after Caldwell's certification of the class action lawsuit. "If we can get something for those folks who got nothing, then this (court fight) will be worth it."

Attorneys for OFI and SEI, however, said long before Caldwell's ruling that the government agency and financial services corporation did not violate any obligations to investors and will fight investor claims in court.

"The role of OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal actions," OFI attorney David Latham wrote in one court filing.

In May 2011, however, former Stanford employee-turned-whistleblower Charles W. Rawl testified in Washington, D.C., before the House Financial Services Subcommittee on Oversight and Investigations. Rawl told members of Congress that he advised OFI officials of corrupt Stanford practices in 2008.

In late summer 2008, Rawl testified, OFI officials blocked future sale of additional Stanford bank certificates of deposit into Individual Retirement Accounts at Stanford Trust Co.

Preis said after Caldwell's ruling: "The state examined the trust company. For a period of four years, we allege, they (OFI officials) knew of (Stanford's) Ponzi scheme."

A Ponzi is not a legitimate investment program. From beginning to end, it is intended to do nothing more than drain money from investors and transfer those assets to criminals. Early investors are paid dividends in order to attract new investors, whose money prolongs the scheme.

Both the Securities and Exchange Commission and the U.S. Attorney's Office in Houston alleged in 2009 that Stanford's operations were fraudulent from the beginning. Federal judges in Dallas and Houston have since agreed with that assessment.

But those court rulings have yet to benefit any defrauded investors. And they did not target any blame toward OFI and SEI.

SEI attorney J. Gordon Cooney Jr. told Caldwell two months ago that SEI did not falsify any information in investors' financial statements, which routinely showed healthy profits, even as Stanford's worldwide empire was collapsing.

All financial information used in those statements was provided by Stanford or his employees, Cooney added. He said SEI did not knowingly participate in the dissemination of false information to investors.

More Info: http://sivg.org/article/2012_Judge_approves_Stanford_class_action.html

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Freitag, 16. November 2012

Allen Stanford receiver sues Greenberg Traurig, Hunton & Williams and YOLANDA SUAREZ

November 16, 2012
By Terry Baynes
A representative for the victims of Allen Stanford's estimated $7 billion Ponzi scheme is suing two law firms he says helped the now-convicted swindler perpetrate his fraud.

The court-appointed receiver, the Official Stanford Investors Committee and individual investors sued Greenberg Traurig and Hunton & Williams on Thursday, claiming that lawyer Carlos Loumiet, who worked for both firms, was instrumental in Stanford's scheme.

"Stanford could not have perpetrated this global mass fraud on his own. He needed corrupt regulators in his chosen offshore jurisdiction of Antigua, shady accountants, and skilled and complicit lawyers to help him," the complaint said.

The lawsuit said Stanford relied on Loumiet, a Miami international banking lawyer who was Stanford Financial Group's outside counsel from 1988 to 2009. For the first 13 of those years, Loumiet was a partner at Greenberg Traurig before moving to Hunton & Williams in 2001.

Loumiet helped Stanford set up a safe haven in Antigua and established U.S. offices that sold certificates of deposit to Latin American investors, the complaint said. He also helped Stanford invest his profits in Caribbean real estate, venture capital investments and an unsuccessful movie project, it said.

"Loumiet counseled Stanford for over twenty years on how to evade U.S. laws and regulations while still operating primarily from U.S. soil," the suit said. He also recommended fellow lawyer Yolanda Suarez, who went on to become the general counsel of Stanford Financial Group. Suarez, but not Loumiet, is named as a defendant in the suit.

A lawyer for Yolanda Suarez did not immediately respond to requests for comment.

Loumiet said in an emailed statement that he has never helped any client commit any wrongdoing nor represented anyone he knew was engaged in illegal activity.

"After years of investigations by the federal government and months of trials involving Allen Stanford and his co-defendants, I have not been implicated in any wrongdoing," he said.

The law firms also denied having any responsibility for Stanford's fraud.

Hunton & Williams called the suit "an overreach by Stanford Financial Group's understandably frustrated investors attempting to recoup their unfortunate losses."

Greenberg Traurig said its work for Stanford occurred prior to 2001, three years before the sale of the CDs at the center of the suit.

"This is merely plaintiffs' newest attempt to pry open a deep pocket," Greenberg Traurig's lawyer Jim Cowles said in an emailed statement, noting 63 other individual lawsuits and 15 pending class action claims, including against other large law firms and accounting firms.

Similar suits against law firms Proskauer Rose and Chadbourne & Parke and insurance broker Willis Group Holdings Ltd are currently on appeal before the U.S. Supreme Court. The firms claim that the class actions brought under state law are barred by federal securities law. They say investors should not be able to go after deep-pocketed third parties only tangentially related to the fraud. The 5th U.S. Circuit Court of Appeals in New Orleans had allowed the cases to proceed in March.

A lawyer for the investors, Edward Snyder of Castillo Snyder, said in an email that Loumiet "worked hand in hand" with Stanford and others to design the basic architecture of the Ponzi scheme. Snyder also represents investors in the lawsuits against Proskauer and Chadbourne.

The latest suit alleges violations of the Texas Securities Act and claims over $1.8 billion in losses to the investor committee and at least $7 billion to the entire investor class, as well as punitive damages to be determined at trial.

Stanford was convicted in March of 13 charges including fraud and conspiracy for selling certificates of deposit from his bank in Antigua to thousands of investors in the United States and Latin America. He had already spent some of those proceeds on yachts, girlfriends, sponsorship of a cricket tournament and other accoutrements of a high-rolling life.

Stanford was sentenced to 110 years in prison in June.

The case is Janvey et al v. Greenberg Traurig et al, U.S. District Court, Northern District of Texas, No. 12-4641.

More Info: http://sivg.org/article/2012_Lawsuit_Greenberg_Hunton_SUAREZ.html

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Freitag, 7. September 2012


September 7, 2012
By Dr. Gaytri D. Kachroo
THIS MATTER is before the Court on the Defendant's Motion to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) (ECF No. 12). For the reasons explained in this Order, the Motion to Dismiss is granted in part and denied in part.

A. The Plaintiffs Have Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty to Report Stanford's Company To The Securities Investor Protection Corporation, Pursuant to 15 U.S.C. § 78eee(a)(1).

B. The Plaintiffs Have Not Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty Regarding Stanford's Company Re-Registration As an Investment Advisor, Pursuant to 15 U.S.C. § 80b-3(c).

While the determination of whether a broker/dealer is in or approaching financial difficulty is inherently discretionary, once the SEC concludes that a broker/dealer is in or approaching financial difficulty a nondiscretionay duty to report this information to the SIPC arises. However, the SEC's treatment of an investment advisor's amendment to its Section 80b-3 registration application involves an element of judgment grounded in policy considerations, and thus falls under the discretionary function exception of the FTCA.

For the reasons detailed in this Order, the Defendant's Motion to Dismiss (ECF No. 25) is DENIED in part with regard to the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 78eee(a)(1). The Motion to Dismiss is GRANTED in part regarding the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 80b-3(c). The Plaintiffs shall file an Amended Complaint on or before September 21, 2012, consistent with this Order. The Defendant's answer is due fourteen days after the Plaintiffs' Amended Complaint is filed.

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Mittwoch, 5. September 2012

How Wall Street Made A Muppet Of The SEC, Mary Schapiro And Dodd Frank

September 5, 2012
By Tyler Durden
That the SEC is the most incompetent, corrupt, irrelevant and captured organization "serving" the US public is known by everyone. And while the details of the SEC's glaring lack of capacity to do anything to restore investor confidence in the capital markets, which has become a casino used exclusively by Wall Street to defraud any retail investor still stupid enough to play (which lately a moot point as there have been no material retail inflows into mutual funds in over three years), are scattered, courtesy of Bloomberg we now have the best summary of just how the utterly clueless SEC is a muppet plaything of Wall Street, and together with it, the "grand regulation" that was supposed to keep Wall Street in check, is nothing but what Wall Street demand it to be, and forced the SEC, way over its head on regulation, to accept every change, that the very banks that are supposed to be regulated, demands as part of Dodd-Frank reforms. In short: everything we know about Wall Street 'regulation' has been a farce, and a lie, exclusively thanks to corruption rampant at the now documentedly incompetent Securities And Exchange Commission.

Bloomberg has the smoking gun.

It had been two days since U.S. lawmakers negotiated all night to finish rules that would reshape the business of Wall Street. The 20-hour session left legislators, aides, lobbyists and regulators exhausted. Almost no one had a grip on all the details.
Then Annette Nazareth stepped in. That Sunday morning, she e-mailed a dozen Securities and Exchange Commission officials about the bill that would become the 2,300-page Dodd-Frank Act.

Who is Annette Nazareth?

Nazareth, herself a former SEC commissioner, represents the biggest banks and securities firms as a partner in the Washington office of Davis Polk & Wardwell LLP. She attached an annotated copy of the measure to her June 27, 2010, e-mail, marking changes made during the wee hours. It could be an invaluable tool for an agency hard-pressed to analyze the bill on a tight deadline.

Nazareth was the good Wall Street funded Samaritan that stepped into bail out the SEC in its moment of need.

"In case you would find it helpful," Nazareth wrote to the group, many of them ex-colleagues.
Two hours later, SEC Chairman Mary Schapiro responded: "Thanks. We have our work cut out for us."

And who is Davis Polk:

With Nazareth on board, Davis Polk was hired as outside counsel on Dodd-Frank by the six largest U.S. banks and the Securities Industry and Financial Markets Association, the Wall Street trade group, according to the law firm's website. The firm also performed work for foreign lenders including Credit Suisse Group AG (CS) and Deutsche Bank AG.

As for Dodd Frank it needs no introduction: it is the Wall Street sponsored abortion that assures nothing has changed on the TBTF front, that banks can do whatever they wish, and that the SEC is powerless to intervene even when necessary. As Elliott management said, Dodd Frank is the one piece of legislation that has assured the Lehman failure was merely an appetizer to the main course when massively undercatpitalized banks will be tumbling like dominoes in a centrally-planned world.

How did Bloomberg get its information:

Nazareth's e-mails to Schapiro and then-SEC General Counsel and Senior Policy Director David Becker, obtained through a Freedom of Information Act request filed by Bloomberg News, demonstrate how lobbyists and lawyers draw on bonds they formed in government service to gain access for clients, and how they work to maintain those ties.

Everyone knows about the SEC's revolving door policy where former SEC workers go to Wall Street to aid and abet their clients to skirt the law, and avoid SEC entangements. It is rare however to see a double revolving door participant such as Nazareth:

Officials routinely leave federal agencies, Congress and the White House to work for the industries they once supervised. While that path is well-trod and legal -- with some time restrictions -- it still provokes handwringing in Washington. Nazareth's communications provide an inside look at what happens when the revolving door spins.
Nazareth, 56, declined to discuss specific e-mails. She said that people like herself who have worked for both sides are valuable because they can "better translate to their clients" what the SEC is trying to achieve.
"It's unfortunate where we are in an environment now where everybody thinks that is nefarious," Nazareth said.
Nazareth added that she "absolutely" doesn't get favorable treatment.
"I am not batting a thousand, let's put it that way," she said. "And I respect that"

And here we get to the meat of things: Wall Street, via Davis Polk, and its "liason" lawyer, manipulated everyone like docile little muppets.

Nazareth and her colleagues at Davis Polk played a central role as the financial industry shaped its Dodd-Frank priorities, helping write more than 80 comment letters to regulators. The firm's clients, including Sifma, JPMorgan Chase & Co. (JPM) and Bank of America Corp., targeted rules such as the so-called Volcker ban on proprietary trading, arguing it could create excessive burdens on banks, choke off business and hurt the economy.
The Volcker rule has yet to be completed, along with other key Dodd-Frank components such as swap-trading and mortgage regulations, meaning the success of the banking pushback won't be fully measured until next year at the earliest.
In May, Nazareth was named as the top woman lawyer in financial regulation at the Americas Women in Business Law awards in New York. Public disclosures from the SEC also underline her clout. In 2009 and 2010, she attended 11 meetings with Schapiro -- twice as many as any single competitor in the law and lobbying business -- according to the chairman's appointment calendar. Since Dodd-Frank was enacted, Nazareth has taken executives from firms including Goldman Sachs Group Inc. (GS) and Credit Suisse to the SEC, agency memos show.

Manipulating the SEC was not enough, Wall Street also had its tentacles at the CFTC, best known for such humiliations as MF Global and Peregrine Financial:

Nazareth has also attended meetings at the Federal Reserve and represents clients at the Commodity Futures Trading Commission, where she has met with Chairman Gary Gensler among other officials, according to public disclosures.
Lynn Turner, a former SEC chief accountant who is critical of the banks' agenda, said that Nazareth is "at the top of that list of influential attorneys" who have access to regulators as former SEC officials.
John Nester, an SEC spokesman, said those who used to work at the commission don't get special access to the chairman. Schapiro "knows a lot of people in government, law, academia and consumer advocacy" and it's not surprising that she e-mails and meets with some of them, he said.
"In the end, whether she or anyone in the agency agrees with a particular viewpoint or a specific request depends on whether it furthers the mission of the agency," Nester said.

Nazareth's M.O. is well known to those who have worked on Wall Street - hollow empathy and pandering, just to gain the trust, allowing full out manipulation to ensue:

In her e-mails, Nazareth blended the personal and professional. For instance, she sympathized with Schapiro over a "frustrating" New York Times article in one message, and in another offered to sell the SEC a Davis Polk Web product "at an appropriate government rate."
The overlap was sometimes evident in Nazareth's salutations, which varied from "Dear SEC friends" and "Dear Mary and David" to "Hello All." On March 10, 2010, for example, she wrote to "Chairman Schapiro" asking if she'd take a meeting with Credit Suisse "to discuss the SEC's concept release on equity market structure." After Schapiro agreed, Nazareth wrote back: "Fantastic, Mary!"
Schapiro answered the e-mails in a business-like way. The more numerous exchanges between Nazareth and Becker, who are friends, display an easy banter and a familiarity developed over the years.
Becker, now a partner at the Cleary Gottlieb Steen & Hamilton LLP law firm in Washington, declined to comment for this story. His biography on the firm's website says he was "intimately involved" in financial regulatory reform at the SEC and "served a central role in the commission's efforts to implement the Dodd-Frank Act."
Early in the Dodd-Frank debate, in November 2009, Nazareth forwarded a summary of a Senate proposal to Becker, who noted that the actual text ran to 1,100 pages. "More nap time for me," he wrote.
That prompted Nazareth to ask, "Yea, but what about me? No rest for the outside counsel."

There is much more in the full Bloomberg expose which is merely the latest nail in the coffin of the manipulated, coopted farce known as the SEC, which probably more than anything, is the reason why investors have now shunned the centrally planned capital marekts entirely. That Mary Schapiro is still employed as the SEC's head after years and years of abysmal decisions, of policy failures, of having done nothing to restore confidence in the market is, quite simply, a joke. This latest narrative will merely confirm it.

Sadly, in this banana republic which employs such banana agencies as the SEC to do the bidding of the banana elite that matters: not democrats, not republicans, but Wall Street's banks full of money (most of it from the trillions in 2008/9 taxpayer funded bailouts), nothing will ever change, until the next and final crash wipes out everything with it and forces the system to start afresh. Only by eliminating the status quo, its insidious tentacles, and the enture existing generation of corrupt, criminal, co-opted regulators, can there be a chance to restore some semblance of fair and efficient markets.

Until then, enjoy the farce of the broken Wall Street casino until trading volumes finally hit zero. It won't be long. At that point it will be too late.

More Info: http://sivg.org/article/2012_Wall_Street_Muppet_SEC_Schapiro_And_Dodd_Frank.html

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Mittwoch, 22. August 2012


August 22, 2012
By Matthew T. Martens
Applicant U.S. Securities and Exchange Commission ("SEC" or "Commission") respectfully submits this memorandum of law in response to Robert Cheatham's Motion To Intervene and To Suspend the Memorandum Opinion and Order of July 3, 2012 ("Motion To Intervene").

Mr. Cheatham contends that he may intervene as of right in this proceeding pursuant to Federal Rule of Civil Procedure 24(a)(2). That provision states that intervention must be granted as of right, "[o]n timely motion," to anyone who "claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest." In other words, the right of a party to intervene depends on the following four factors:

(1) the timeliness of the motion; (2) whether the applicant "claims an interest relating to the property or transaction which is the subject of the action"; (3) whether "the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest"; and (4) whether "the applicant's interest is adequately represented by existing parties.".

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Mittwoch, 8. August 2012


August 8, 2012
Ralph S. Janvey, in his capacity as the Court-Appointed Receiver for the Stanford Receivership Estate, and the Official Stanford Investors Committee file this First Amended Complaint (the "Complaint") against Defendants PROSKAUER ROSE, LLP, CHADBOURNE & PARKE, LLP, and THOMAS V. SJOBLOM (collectively, the "Defendants").

Defendant Proskauer Rose, LLP ("Proskauer") is a limited liability partnership organized under the laws of the State of New York. Defendant Proskauer has already appeared in this action.

Defendant Chadbourne & Parke, LLP ("Chadbourne") is a limited liability partnership organized under the laws of the State of New York. Defendant Chadbourne has already appeared in this action.

Together, Defendants Proskauer and Chadbourne are collectively referred to as the "Law Firm Defendants".

Defendant Thomas V. Sjoblom ("Sjoblom") is an individual who currently resides in the State of Virginia. Defendant Sjoblom has already appeared in this action.

Defendants Proskauer and Chadbourne are liable for the tortious acts of their employee, Defendant Sjoblom. From the time that Sjoblom joined the conspiracy described herein in June 2005 until sometime in August 2006, Sjoblom was employed by Chadbourne. Thereafter, from August 2006 through late 2009, Sjoblom was an employee of Proskauer. Sjoblom was acting within the course and scope of his respective employments with Proskauer and Chadbourne, and in furtherance of said law firms' respective businesses, when he engaged in the wrongful conduct described herein.

The Stanford Financial companies, and therefore the Receiver and/or the Committee, have suffered the loss of billions of dollars in assets that were proximately caused by the wrongful conduct of Defendants and their conspiracy with Allen Stanford and others as described herein. In the alternative, Defendants Chadbourne, Proskauer and Sjoblom are liable for all damages caused to Stanford Financial, and therefore to the Receiver and/or the Committee, during the time period from 2005 to 2009 when the Defendants participated in the conspiracy to obstruct the SEC investigation of Stanford Financial's, SIBL's, and SGC's fraudulent sales practices. In addition, the Receiver and/or the Committee are entitled to recover their just and reasonable attorneys' fees, subject to Court approval, for it would be inequitable not to award such fees to them. The Receiver and/or the Committee have retained the undersigned attorneys and have agreed to pay them a reasonable attorneys' fee for their work.

The Receiver and the Committee request that the Defendants be summoned to answer this Complaint, that the case be tried before a jury, and that upon final judgment the Receiver and the Committee recover their damages as alleged herein, including their actual damages, punitive damages, and their costs and expenses of suit, including reasonable attorneys' fees. The Receiver and the Committee pray for such other relief to which they may be justly entitled.

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Montag, 30. Juli 2012

Order re. Chapter 15 / COMI

July 30, 2012
By U.S. District Judge David C. Godbey
The Court grants the Joint Liquidators' motion for substitution as Plaintiff nunc pro tunc to June 8, 2010 and grants in part and denies in part their request that the Court take judicial notice. The Court overrules the parties' objections to each others' evidence. Finally, because the Stanford Entities' COMI is in the United States and they have an establishment in Antigua, the Court grants the Antiguan Proceeding foreign nonmain recognition, granting in part and denying in part the Joint Liquidators' petition for recognition. The Court grants the Joint Liquidators limited, conditional relief under Chapter 15.

In accordance with this Order, the Court orders the Clerk of the Court to terminate Peter Wastell and Nigel Hamilton-Smith as Plaintiffs and add Marcus Wide and Hugh Dickson as Plaintiffs.

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Dienstag, 24. Juli 2012

Motion To Intervene and To Suspend the Memorandum Opinion and Order of July, 3, 2012

July 24, 2012
By Richard R. Cheatham
Pursuant to Fed. R. Civ. P. 24 Richard R. Cheatham moves to intervene in this action in order to protect his interest in the subject of the action and pursuant to Fed. R. Civ. P. 59 to suspend the Court's Memorandum Opinion and Order of July, 3, 2012 pending reconsideration in light of the facts presented in connection Intervener's Motion to Intervene.

In support of this motion, Richard R. Cheatham relies on the Court's Memorandum Opinion and Order of July, 3, 2012 and his Memorandum In Support of Motion To Intervene and To Suspend Memorandum Opinion and Order of July, 3, 2012.
SENATE and HOUSE letter to Schapiro
On July 24, 2012, Richard Cheatham filed a motion to intervene and to "suspend" the Court's July 3 Opinion—three weeks after the fact. Although he provides no documentary evidence in support of his assertions, Cheatham contends that brokers from the Stanford Group Company ("SGC") purchased Stanford International Bank, Ltd. ("SIBL") CDs for him without his knowledge, and that the SEC failed to consider the "atypical" nature of these CD purchases in pursuing its case. The Court should reject Cheatham's thirteenth-hour motion for three separate and independent reasons...

Read more: http://sivg.org/article/2012_Motion_To_Intervene_and_Suspend_SIPC_Opinion_Order.html

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Dienstag, 17. Juli 2012

HSBC lapses left US economy exposed to exploitation by terrorists - Senate report

July 17, 2012
By Richard Blackden
HSBC left America's financial system exposed to exploitation by drug cartels and terrorist organisations due to its failure to comply with anti-money laundering laws, according to a damning US Senate report.

These are two of the findings in a 340-page study from the US Senate that accuses Britain's biggest bank of a series of compliance lapses between 2004 and 2010.

HSBC, the only British bank with a branch network in America, failed to properly staff its compliance department and wrongly designated Mexico as a "low-risk" country.

The findings are a major embarrassment for HSBC, some of whose senior executives will appear before the Senate committee tomorrow to explain the failings.

In one of the more damaging accusations, the report says HSBC resumed providing banking services to a Saudi Arabian bank despite speculation it had links to financing terrorism.

In an emailed statement, HSBC said the Senate report had provided "important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system".

The bank said it is spending more money on compliance and has become more coordinated in policing high-risk transactions.

HSBC is also criticised by the committee for designating Mexico as "low-risk" despite the widespread use of the country's banking system by drug cartels. The decision made it easier for money to be moved between HSBC's affiliate bank in Mexico and its network in the US. Its Mexican bank should have been treated as a "high-risk correspondent client subject to enhanced due diligence and monitoring," the report said.

The report also contained strong criticism of the Office of the Comptroller of the Currency, a top US bank regulator, saying the regulator failed to crack down on the bank despite multiple red flags, allowing money laundering issues "to accumulate into a massive problem".

HSBC has warned investors that it could face a significant fine in the US, with some analysts speculating the penalty could reach $1bn.

"Accountability is essential and that is what has been missing here," said Carl Levin, the chairman of the committee on permanent investigations. HSBC said last night that it had taken several steps to improve its compliance, including doubling its spend on compliance and enforcing standards globally.

Read more: http://sivg.org/article/2012_HSBC_drug_cartels_and_terrorist_organisations.html

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Donnerstag, 12. Juli 2012

Bill Cassidy request that SEC file an appeal

July 12, 2012
By Bill Cassidy
Dear Chairwoman Schapiro,
I write to respectfully request that the Securities & Exchange Commission (SEC) file an appeal with the U.S. Court of Appeals, District of Columbia Circuit, seeking to overturn the July 3, 2012 ruling by U.S. District Court Judge Robert L. Wilkins in the matter of SEC v. Securities Investors Protection Corporation (SIPC), Civil Action No. 11-mc-678.

As you know, this case involves the matter of restitution for the victims of the former Stanford Financial Group under the Securities Investor Protection Act (SIPA) of 1972. In July of 2011, in its capacity as the regulator of SIPC, the SEC ordered a liquidation and payment under SIPA to certain affected customers of the former Stanford companies. SIPC however, refused to comply with the SEC’s order, which led to the court proceedings and ultimately, the decision rendered by Judge Wilkins denying SIPA coverage for the Stanford victims.

In the Sixth Congressional District of Louisiana and throughout the country, financial restitution under SIPA represents the last hope for many of Stanford’s victims to regain that which was taken from them more than three years ago. All I ask on behalf of these American citizens is for the SEC to honor the commitment they made back in July of 2011 by continuing to pursue all legal avenues which could result in the determination by the SEC that Stanford’s victims are entitled to SIPC coverage.

As the United States Representative for the area perhaps hardest hit by this tragedy, I have been confronted almost daily since my service began in 2009 with the heartbreaking stories and tragic outcomes that have befallen my constituents affected by Stanford. Enclosed with this letter is a message sent to me by one of those Louisiana citizens, Jean Ann Mayhall, who speaks both of the devastating impact of this ruling and offers a number of compelling arguments for the SEC to consider as you to decide whether to pursue an appeal. Ms. Mayhall’s words undoubtedly represent the hopes of thousands of Stanford victims who will quite literally see any chance for strongly consider those views during your deliberative process.

Once again, I ask you to continue to pursue the course of action that began when the SEC declared, rightfully, that many of the Stanford victims are entitled to coverage from SIPC by filing to appeal the ruling by Judge Wilkins. If I can provide any assistance or support to you or the SEC, please contact me at 202-225-3901. Thank you.

Bill Cassidy
Member of Congress

Read more: http://sivg.org/article/2012_Cassidy_request_SEC_appeal.html

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Dienstag, 3. Juli 2012


July 3, 2012
By U.S. District Judge ROBERT L. WILKINS
The Court is truly sympathetic to the plight of the SGC clients who purchased the SIBL CDs and now find themselves searching desperately for relief. Robert Allen Stanford's 110 year sentence may bring some measure of justice to the SGC clients, but it will not make them financially whole. But this Court has a duty to apply the SIPA statute as written by Congress, and, as other courts have done, this Court also has a duty to construe narrowly the "customer" definition of the statute. For the foregoing reasons, the SEC has failed to meet its burden, by a preponderance of the evidence, of proving that SIPC has "refus[ed] . . . to commit its funds or otherwise to act for the protection of customers of any member of SIPC." Indeed, because the issue turns on uncontested facts and an interpretation of law10, the Court holds that the SEC would have failed to meet even the lesser burden of probable cause. The Application of the SEC is therefore denied. An Order accompanies this Memorandum.
Upon consideration of the Application of the Securities and Exchange Commission to compel Respondent, Securities Investor Protection Corporation, to commence a liquidation proceeding (Docket No. 1), the oppositions and replies thereto, and oral argument, and for the reasons set forth in the accompanying Memorandum Opinion, it is hereby ORDERED, that:
The Application of the Securities and Exchange Commission is DENIED; and it is, FURTHER ORDERED that this case is dismissed with prejudice.

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Government accused of negligence in suit

July 3, 2012
By Edward J. Gonzales III
Seven Baton Rouge residents and firms are suing the federal government for negligence and misconduct they say caused their loss of approximately $3.5 million to the massive Ponzi scheme operated by Houston entrepreneur Robert Allen Stanford.

"You can't sue the government simply for making mistakes," attorney Edward J. Gonzales III said; "You can sue the government for negligence and deliberate misconduct," Gonzales added.

It is clear that the OIG report found violations of federal laws and regulations by Barasch. He violated those rules and duties to the investing public in general and to these plaintiffs in particular. In addition, Barasch may have committed multiple criminal violations of 18 U.S.C. § 1519 as well as other violations that facilitated Stanford's crimes and obstructed federal investigations. Had Barasch not done as he did, none of the plaintiffs would or even could have invested with SIBL - it's doors would have been shut - and the damages suffered by the plaintiffs would have been completely avoided. Like the federal employees in Limone v United States, 497 F. Supp. 2d 143 (D. Mass 2007); 579 F 3d 79 (2d 2009), who engaged in subordination of perjury and obstruction of justice in the course of their duties as federal agents, Spencer Barasch has by his conduct rendered the United States liable to the plaintiffs.

Alternatively, the conduct of Spencer Barasch referred to herein was negligent.

Additionally, the failure of Barasch's superiors to properly review and supervise his conduct - simply put, to find out that he was not making outside referrals as he said he was - was negligence, not an exercise of law enforcement discretion or policy discretion. They did not "decide to allow" this conduct. Rather, they should have discovered it and negligently failed to do so. Had they identified Barasch's misconduct, there is no doubt that the SEC and other agencies would then have acted differently and effectively against Stanford.

The plaintiffs purchased their investments, which have been determined to be without value by the Stanford Receiver. The government is therefore liable to the plaintiffs in the amounts they purchased. As further damages for loss of their opportunities to earn on their investments, the plaintiffs also claim as damages the interest that investments in legitimate CD accounts would have earned since the date the receivership was filed, until paid.

Plaintiffs bring this case on behalf of themselves and on behalf of all persons or entities, who have suffered losses of investments with Stanford International Bank, and file administrative response, excluding any class member who timely elects to be excluded from the Class ("the Class"). Plaintiffs allege that all such class members were damaged or sustained investment losses as a proximate cause and result of the negligence and deliberate misconduct by Spencer Barasch and the negligent supervision of Barasch by the SEC.

As of the present date, the United States of America has the administrative ability to identify all members of the Class, as it has received their claims.

Membership in the Class is so numerous as to make it impractical to bring all Class Members before the Court. The exact number of Class Members is unknown, but can be determined from the United States of America's claim records. Plaintiffs reasonably estimate and believe that there are approximately two thousand (2,000) in the Class. Although Plaintiffs do not presently know the names of all Class Members, their identities and addresses can be readily ascertained from the United States of America's records.

Plaintiffs and all Class Members have suffered similar damages as a result of the negligence and intentional misconduct of the United States of America's employee, Spencer Barasch, as well as the negligent supervision of its employees of the U.S. Government.

Read more: http://sivg.org/article/2012_Government_accused_of_negligence.html

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Montag, 18. Juni 2012

Stanford Officer to Plead Guilty

John Ellis Bush June 18, 2012

Stanford Financial Group's top investment executive, Laura Pendergest-Holt, is expected to plead guilty to obstruction of justice Thursday for her alleged role in a $7 billion Ponzi scheme that was among the largest frauds in U.S. history, a person familiar with the case said.

A spokeswoman for the Justice Department declined comment.

The expected plea by Ms. Pendergest-Holt, Stanford's chief investment officer, follows the sentencing last week of convicted Ponzi schemer R. Allen Stanford to 110 years in prison.

That punishment amounts to a life sentence for Mr. Stanford, 62 years old, who for years enjoyed the life of a billionaire aboard jets, yachts and in homes around the globe.

He remains in federal custody until the U.S. Bureau of Prisons decides where he will serve the time.
Laura Pendergest-Holt
A Federal Bureau of Investigation affidavit filed in U.S. District Court in Dallas had alleged that Ms. Pendergest-Holt misled Securities and Exchange Commission investigators who took her testimony in the probe of alleged fraud at Stanford International Bank, Mr. Stanford's Antigua-based offshore bank.

Ms. Pendergest-Holt was scheduled to go on trial in September.

An obstruction charge can carry a three-year sentence.

Read more: http://sivg.org/article/2012_Stanford_Officer_Plead_Guilty.html

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Donnerstag, 14. Juni 2012

Stanford sentenced to 110 years over Ponzi scheme

June 14, 2012
By The Wall Street Journal
R. Allen Stanford, the once-highflying financier convicted of masterminding a $7 billion Ponzi scheme, was sentenced Thursday to 110 years in federal prison.

The punishment amounts to an effective life sentence for Stanford, who is 62 years old and used to live extravagantly aboard yachts, jets and homes around the world.

"I didn't run a Ponzi scheme, I didn't defraud anybody and there was never any intent to defraud anybody," Stanford, wearing a green prison jumpsuit, told US District Court Judge David Hittner before he was sentenced.

In a rambling statement, marked with long pauses as he choked up and wiped away tears, Stanford accused the government of using "Gestapo tactics" and blamed it for the billions of dollars in losses to his investors.

Stanford's sentence was 40 years less than the prison term given to Bernard Madoff, but 100 years more than his lawyers had asked for.

The sentence ends the three-year criminal prosecution of Stanford, who in March was convicted by a federal jury on 13 of 14 counts including fraud, obstructing investigators and conspiracy to commit money laundering.

Though investors continue to seek hundreds of millions of dollars from Stanford in a civil proceeding, the end of the criminal case closes a chapter on one of the most flamboyant figures in the annals of white-collar crime.

Read more: http://sivg.org/article/2012_Stanford_sentenced_to_110_years.html

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Montag, 14. Mai 2012

Investors Sue Auditor BDO for Stanford Ponzi Fraud

May 14, 2012
Investors defrauded by Allen Stanford's $7 billion Ponzi scheme say in court that the fund's auditor knowingly participated in the fraud.

The Official Stanford Investors Committee filed the federal complaint against BDO USA, and related entities BDO International, BDO Global Coordination and Brussels Worldwide Services. The complaint abbreviates Stanford Group Co. as SGC.

"Despite the pervasive fraud that infected Stanford Financial Group's operations, BDO USA repeatedly issued unqualified audit opinions on its Stanford clients' annual financial statements," the complaint states. "BDO USA's audit opinions on SGC's financial statements were critical to Stanford Financial Group's success."

In March, Stanford was found guilty of one count of conspiracy to commit mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct a U.S. Securities and Exchange Commission investigation, and one count of obstruction of an SEC proceeding. He was acquitted of one wire fraud charge.

"Allen Stanford and his co-conspirators used the promise of SIBL CDs to lure investor money into Stanford Financial Group and then stole billions of dollars in assets from Stanford Financial Group companies for their own personal benefit," the complaint states, abbreviating Stanford International Bank Ltd. certificates of deposit.

"Substantial sums of these stolen funds were used to: (i) support the lavish lifestyles of Allen Stanford and his Ponzi insiders; (ii) issue bogus, unsecured personal "loans" to Allen Stanford; (iii) capitalize other entities wholly owned by Allen Stanford; and (iv) fund investments in speculative, illiquid, and high-risk assets, including private equity holdings and massive investments in Antiguan real estate."

Investors say BDO USA provided critical services to Stanford Financial Group for over a decade, auditing the annual financial statements of Stanford Group Co., a Houston-based broker-dealer and investment adviser that recommended and sold SIBL CDs to investor.

BDO USA also allegedly audited the annual financial statements of Stanford Trust Company (Louisiana), which served as trustee and custodian to hold the SIBL CDs that SGC sold for its investors' IRA accounts. And it audited the annual financial statements of Stanford Group Holdings, a holding company for the broker-dealer arm of Stanford Financial Group, including SGC and STC, according to the complaint.

BDO allegedly played a significant role in weakening banking laws in Antigua, where SIBL was based. When Antigua came under increased scrutiny from foreign regulators, Stanford formed a task force to rewrite the country's banking laws, according to the complaint.

The task force allegedly succeeded both in weakening regulations, and in effectively eliminating SIBL's Antiguan competitors, making Stanford the country's de facto offshore banking regulator.

"The smashing success of the Stanford task force and its misleading regulatory 'reforms' were rooted in its exclusive nine-person membership," the complaint states. "Every firm represented on the Task Force provided crucial services to Stanford Financial Group, and every individual member of the Task Force was personally appointed by Stanford himself. ... BDO USA's partners and associates comprised nearly half of the Stanford Task Force's members, more than any other firm represented on the Task Force."

The key initiative of the task force was to amend Antigua's Money Laundering Act to ensure that "fraud" and "false accounting" were not included as violations, investors say.

BDO USA allegedly had some of the most important responsibilities in completing the initiative, including reviewing and advising on Antigua's banking laws, and making recommendations to Antigua's regulatory authorities, including procedures for supervising and examining international banks.

BDO USA's service on the task force completely undermined its independence from SFG and, and as a result, violated generally accepted auditing standards by issuing unqualified audit opinions on its Stanford clients' annual financial statements during the years that BDO USA served on the Stanford Task Force, the complaint says.

Investors also accuse BDO USA's audit engagement partner, Carlos Ancira, of concealing critical, material information from his own audit engagement team.

"Ancira knew that SGC was under increasing scrutiny from the SEC years before the U.S. Government seized Stanford Financial Group in February 2009," the complaint states. "Shockingly, however, Ancira reassured SGC in a February 28, 2007 email that '[d]ue to the sensitivity of the situation,' no other members of BDO USA's audit engagement team would be told about the SEC's investigation of SGC for possible securities fraud. Furthermore, Ancira's email permitted SGC's outside legal counsel to omit any discussion of the SEC investigation in its audit response letter."

For every year BDO USA audited SGC's annual financial statements, it failed to confirm that SGC remitted investor funds to purchase SIBL CDs and failed to properly modify its audit opinions, the complaint alleged. It also stated that BDO USA failed to properly consider and apply consolidation principles, failed in its role as a public watchdog and issued unqualified audit opinions in spite of knowing its Stanford clients "substantially" depended on SIBL CDs.

The investors seek actual and punitive damages for negligence, civil conspiracy, breach of fiduciary duty, fraud and conversion. They are represented by Guy Hohmann with Hohmann, Taube & Summers in Austin.
Read the complete CLASS ACTION COMPLAINT here!

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