Archive for the ‘Law’ Category

New York’s AG Schneiderman Expands Financial Crimes Unit

Sunday, January 19th, 2014 Leave a comment

New York Attorney General Eric Schneiderman is expanding an existing criminal bureau to focus more on financial wrongdoing. Gary Fishman, 44, a former state prosecutor in the Manhattan District Attorney’s Office, will serve as chief of the Criminal Enforcement and Financial Crimes Bureau, an expansion of the Criminal Prosecutions Bureau.

Here are more details regarding the new bureau from USA Today:

The attorney general’s new bureau will focus on fighting complex financial crimes in banks and financial institutions, as well as securities and investment fraud, money laundering, mortgage fraud, investment schemes and insurance fraud. It will probe “illicit financial activities” and track the flow of suspicious funds to identify trends and help investigators, according to the statement.

Schneiderman’s office has the power to initiate criminal investigations and prosecutions on its own or at the request of the government or state agencies such as the Department of Financial Services, according to its website.


Source: USA Today

J.P. Morgan, U.S. Reach $13 Billion Settlement

Wednesday, November 20th, 2013 Leave a comment

From WSJ:

J.P. Morgan Chase & Co. and the Justice Department agreed to a landmark $13 billion settlement that resolves a number of legal headaches for the largest U.S. bank and ends months of wrangling between the government and the nation’s largest bank by assets.

The deal, announced Tuesday, came after the final piece holding up the agreement, terms of $4 billion worth of aid to distressed homeowners, was completed Monday.

The historic settlement ends a number of investigations and lawsuits targeting soured mortgage bonds issued before the financial crisis and amounts to the biggest combination of fines and damages extracted by the U.S. government in a civil settlement with any single company.


Here is a breakdown of the $13 billion settlement:

$9 billion will go to pay federal and state civil lawsuit claims over residential-backed mortgage securities. Of that $9 billion, the bank will pay:

  • $2 billion as a civil penalty to the Justice Department;
  • $1.4 billion to settle federal and state claims by the National Credit Union Administration;
  • $515 million to settle Federal Deposit Insurance Corp. claims;
  • $4 billion to settle Federal Housing Finance Agency claims;
  • Nearly $300 million to settle claims by California state officials;
  • Nearly $20 million to settle claims by Delaware;
  • $100 million to settle claims from Illinois;
  • $34 million to settle claims by Massachusetts; and
  • Nearly $614 million to settle claims by New York State.

The remaining $4 billion will be in the form of programs aimed at helping homeowners who were harmed.


So what now for JPMorgan? The largest U.S. bank is not out of the woods just yet. Reuters notes:

But even after the settlement, the bank faces at least nine other government probes, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate. It may still also face criminal charges linked to mortgage matters. The bank said last month it had set aside $23 billion to cover litigation expenses. (emphasis added)



J.P. Morgan, U.S. Settle for $13 Billion (WSJ)

JPMorgan says ‘mea culpa’ in $13 billion settlement with U.S. (Reuters)

SAC to Pay $1.2B Penalty for Insider Trading

Tuesday, November 5th, 2013 Leave a comment

SAC Capital Advisors, run by billionaire investor Steven A. Cohen, has agreed to pay a record $1.2 billion fine and to plead guilty to five counts of insider trading, thereby becoming the first major Wall Street firm to admit criminal misconduct in a generation.

The penalty adds to the $616 million that SAC has said it would pay to the SEC for similar civil charges. The deal marks a major victory for the government and the climax of an 11-year investigation that started with the simple question: how come SAC’s investment returns were so good?

Here are more details about the deal via DealBook:

The guilty plea and fine paid by SAC are part of a broader plea deal that will impose a five-year probation on the fund and require it to hire an outside monitor. SAC must also terminate its business of managing money for outside investors, a largely symbolic blow, as it already faces an exodus of client money.

It will still most likely continue to manage Mr. Cohen’s vast fortune, a move that would help maintain its influence on Wall Street.


Source: After a Decade, SAC Capital Blinks (DealBook)

Breakdown of TARP Spending, Five Years Later

Saturday, November 2nd, 2013 Leave a comment

When the Troubled Asset Relief Program (TARP) was signed into law on October 3, 2008, the U.S. economy had just experienced the largest bankruptcy in American history (Lehman Brothers) and was on the verge of collapse. Against this backdrop, and reflecting on the government program that was created in an attempt to curb the 2008 U.S. Financial Crisis, where did all the money that Congress was authorized to spend exactly go?

Timothy Taylor from the Conversable Economist breaks down the numbers:

TARP was authorized to spend $700 billion. What did it actually do? The money went five places: 1) $68 billion to the insurance company AIG; 2) $80 billion to the auto companies; 3) $245 billion to bank investment programs; 4) $27 billion to credit market programs; and 5) $46 billion to housing programs. The other $235 billion in spending authorization was cancelled.



To read Mr. Taylor’s analysis in full, click here.

Federal Reserve Toughens Requirements For Biggest Banks

Saturday, October 26th, 2013 Leave a comment

This past Thursday, the Federal Reserve proposed a measure that requires big financial institutions to have enough cash and easy-to-sell securities to withstand a 30-day run on the bank.

According to Huff Post Business, the introduction of the “liquidity coverage ratio,” or LCR, marks the first time U.S. regulators have required banks to have a specific amount of liquid assets in order to withstand a run on the bank or a credit crunch. U.S. financial regulation for years has focused on capital, or the ratio of equity-to-debt that a bank uses to fund its loans and securities.

While global regulators have already agreed to stricter liquidity rules as part of the Basel III banking accords, the Fed’s version is tougher, underscoring the central bank’s concern that the nation’s largest banks still pose great risk to the U.S. financial system.

Here are other highlights regarding the Fed’s proposal:

  • Much of Wall Street and some Obama administration officials have feared that the proposed rule, with its incentive for banks to hold substantial amounts of U.S. Treasuries, risks creating a situation in which the demand for safe securities outstrips supply, leading to a shortage of so-called safe assets.
  • The Fed’s proposal is now open for public comment. The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, the two other federal bank regulators, also will propose the rule in the coming weeks.
  • The U.S. proposal is likely to be met with stiff resistance from financial companies, which have been lobbying regulators to relax the proposal ahead of its formal introduction.


Source: Huff Post Business


JPMorgan Reaches Tentative Record $13 Billion U.S. Settlement

Sunday, October 20th, 2013 Leave a comment

JPMorgan Chase has reached a tentative $13 billion settlement with the Justice Department over a number of investigations related to to the bank’s residential mortgage-backed securities business. The deal is expected to end U.S. probes of JPMorgan’s mortgage-bond sales and free the nation’s largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.

Here are other highlights of the tentative record deal, as noted by Bloomberg:

  • The tentative pact with the Department of Justice increased from an $11 billion proposal last month and would mark the largest amount paid by a financial firm in a settlement with the U.S.
  • The deal wouldn’t release the bank from potential criminal liability, at the insistence of U.S. Attorney General Eric Holder, according to terms described by a person familiar with the talks.
  • The agreement, which isn’t yet final, includes $4 billion in relief for unspecified consumers and $9 billion in payments and fines, according to another person briefed on the terms.
  • The settlement would amount to more than half of JPMorgan’s record $21.3 billion profit last year, or 1.5 times what the firm’s corporate and investment bank set aside to pay employees during this year’s first nine months.
  • The outline of the tentative accord was reached during a telephone call between Holder, JPMorgan CEO Jamie Dimon, JPMorgan General Counsel Stephen Cutler and Associate U.S. Attorney General Tony West. The settlement’s statement of facts is still being negotiated.


See also:

JPMorgan agrees to tentative $13 billion settlement with U.S. over bad mortgages (The Washington Post)

Most Uninsured Americans Don’t Know Exchanges Open On October 1, 2013

Saturday, September 28th, 2013 Leave a comment

The Affordable Care Act, better known as “Obamacare,” is supposed to provide more opportunities for the uninsured to get affordable health care insurance. However, according to a recent Kaiser Family Foundation poll, it appears that nearly three-quarters of the uninsured are unaware of the fact that health care exchanges will open up on October 1st.



So this is evidence that Obamacare is a law destined to fail then, right? Well, one can view the above-referenced poll in at least two ways. Sarah Kliff from the Wonkblog explains:

There are two ways to think about these poll numbers. One is that they’re a disaster: The White House has had more than three years now to talk about the Affordable Care Act, hype its benefits and get the word out about a sweeping new legislative accomplishment. If people are this uninformed right now, how are they ever going to hit projections of 7 million people enrolling in the first year?

That’s the pessimistic take. But there’s also a more optimistic case I hear when I talk to people running these marketplaces — who, it’s fair to say, have a vested stake in staying optimistic about these things. They contend that knowing that the exchanges launch on Oct. 1 is essentially meaningless for the people they’re trying to reach. Those people could sign up on Oct. 1 or Dec. 1 and still access exactly same benefits under the health-care law, since coverage purchased on the marketplaces doesn’t start until January.


Bottom line: It’s way too early to tell whether Obamacare will be a success. That said, the White House has done a terrible job at explaining the basics of the law to the general public.

Source: Three-quarters of the uninsured don’t know when Obamacare starts (Wonkblog)

Tally of the Biggest J.P. Morgan Settlements (Sept. 2011 – Sept. 2013)

Wednesday, September 25th, 2013 Leave a comment

This morning, the Wall Street Journal reported that J.P. Morgan offered $3 billion for a global settlement of its legal hurdles.

Here’s a tally of the biggest J.P. Morgan settlements in the past few years:

Sept. 19, 2013 — $920 million – In settlements with the OCC, the SEC, the Fed and the U.K. Financial Conduct Authority, J.P. Morgan agreed to pay a total of $920 million to settle all claims about its management and oversight of traders involved in the London Whale debacle. The bank also admitted wrongdoing in the matter, a trade that cost the bank more than $6 billion.

Sept. 19. — $389 million – The bank paid $80 million in fines and refunded $309 million to credit-card customers to settle regulators’ charges that it harmed consumers by allegedly making errors in hundreds of thousands of debt-collection lawsuits and leading more than two million credit-card customers to buy services they didn’t want.

July 2013 — $410 million – FERC alleged J.P. Morgan Ventures Energy Corp. traders gamed rules that help set the cost of electricity in California and the Midwest with 12 manipulative trading schemes starting in 2010. The DOJ is now investigating the claims. The $410 million included a $285 million fine and the bank agreed to give back $125 million in profits.

January 2013 — $1.8 billion – In two separate agreements, the bank contributed $1.8 billion to the nationwide bank settlement on allegations the banks improperly carried out foreclosures during the housing crisis, including employing so-called robo-signers. The bank also agreed to contribute $3.7 billion in aid to troubled homeowners and nearly $540 million in refinancing. The first part was reached in a nationwide settlement in February 2012.

November 2012 — $269.9 million – The bank settled with the SEC over the creation and underwriting of mortgage-backed securities.

August 2012 — $1.2 billion – The bank disclosed in a filing its share of a broad settlement over interchange allegations against the banks and Visa and Mastercard.

April 2012 — $20 million – CFTC alleged that JPM counted Lehman’s futures customers’ accounts in calculations used to determine the firm’s intra-day credit, even though the money belonged to customers.

July 2011 — $228 million – The SEC had alleged that from 1997 to 2005, the bank rigged municipal bond auctions.

June 2011 — $153.6 million – The SEC alleged that JP Morgan sold synthetic CDOs to investors in 2007 without telling them that hedge fund Magnetar Capital LLC helped pick the underlying products and bet against them.

April 2011 — $27 million – J.P. Morgan agreed to settle class-action lawsuit that it overcharged thousands of active-duty military members and wrongly foreclosed on 18, breaking rules that.

Source: J.P. Morgan’s Legal Headaches: A Tally (WSJ)

“Astroturfers” Settle With NY’s AG Office

Tuesday, September 24th, 2013 Leave a comment

There is nothing wrong with companies looking for ways to improve their overall reputation and online presence. However, these companies should be aware that “Astroturfing” is NOT a legitimate means of accomplishing that goal.

More than a dozen firms that produce fake online reviews of businesses agreed to stop the practice under a settlement with New York Attorney General Eric T. Schneiderman, who called the scam “Astroturfing.” Apparently, the state of New York is taking the recent sham tactic seriously.

From Bloomberg:

The attorney general’s office said yesterday that 19 companies involved in producing bogus reviews will also pay $350,000 in penalties. An undercover probe dubbed “Operation Clean Turf” turned up evidence that the companies were paid by local businesses to flood the Internet with comments on websites including Yelp, Google Local and CitySearch, the office said.

“‘Astroturfing’ is the 21st century’s version of false advertising, and prosecutors have many tools at their disposal to put an end to it,” Schneiderman said in a statement.

The companies were also accused of violating state laws against deceptive business practices.

Chairman White: SEC ‘Renewing Focus’ on Frauds

Tuesday, September 24th, 2013 Leave a comment

SEC Chairman Mary Jo White commenting on the SEC’s renewed focus on accounting and financial reporting fraud:


For more videos from Bloomberg TV, click here.