Banks Promise Not to Commit Fraud … Until Next Time

November 17, 2011 by · Leave a Comment 

By John Reeves

As part of a settlement with the SEC last month, Citigroup (NYSE: C) promised it would never again, as The New York Times put it, “violate one of the main antifraud provisions of the nation’s securities laws.” That seems like a noble aim, and we’d love to believe that Citigroup means what it says.

Unfortunately, Citigroup made a similar pledge in July 2010, according to the Times. Oh, wait, and there were other agreements in May 2006, March 2005, and April 2000. When it comes to financial fraud, it seems, you can have five strikes, and still be up at the plate.

And Citi isn’t the only one. According to the Times’ study, during the last 15 years, there were “at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach.” Here is a complete list of 16 of those companies that declined to comment on the findings:

American International Group (NYSE: AIG)
Ameriprise
Bank of America (NYSE: BAC)
Bear Stearns
Columbia Management
Credit Suisse
Deutsche Asset Management
Goldman Sachs (NYSE: GS )
JPMorgan Chase (NYSE: JPM )
Merrill Lynch
Morgan Stanley (NYSE: MS )
Putnam Investments
RBC Dain Rauscher
Raymond James
UBS
Wells Fargo/Wachovia (NYSE: WFC )

This is pretty outrageous even by Wall Street standards, and it tells us a lot about our current regulatory system. If financial firms know that their promises to “not commit fraud” are meaningless, then we’ve created a culture where there is very little downside to unethical behavior and the aggressive pursuit of dubious new products.

The SEC seems to be saying, “Hey, our lawyers are overmatched vis-a-vis these big firms. The best we can do is try to squeeze out a token settlement every once in a while, and call it a day.” Surely our financial institutions know this, and probably view the occasional SEC wrist slap as the part of the price of doing business.

All hope is not lost, however. Just the other day a federal judge called into question the toothless practice of asking firms to make meaningless pledges to not break securities laws in the future. U.S. District Judge Jed Rakoff asked the SEC if these agreements were “just for show.” He also made it clear that he had very serious concerns about the settlement between the SEC and Citi. He has yet to decide whether or not to approve the deal.

One way or another, we need to ensure that in the future, financial fraud is treated like the serious crime that it is. Maybe the fines should include a few more zeroes at the end of them, and then double from there for future infractions. Remember the “zero tolerance” policy toward petty crime in New York City in the late 1980s and 1990s? Maybe we need “zero tolerance” for financial fraud on Wall Street in 2011 and beyond. Anything would be better than the current “zero effectiveness” approach. We can do better than this.

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US Anger at Election Claims Prompt Karzai Call

April 8, 2010 by · Leave a Comment 

Agencies

2010-04-07T124306Z_01_BTRE63417OR00_RTROPTP_3_INTERNATIONAL-US-AFGHANISTAN-KARZAI

Afghan President Hamid Karzai speaks during a shura, or meeting, in Kandahar city April 4, 2010.

REUTERS/Golnar Motevalli

The United States has rejected President Hamid Karzai’s anti-foreigner outburst as “troubling” and “preposterous”, prompting a hurried effort by the Afghan leader to make amends, Agence France-Presse reported.

Officials said Karzai did not specifically apologise during a telephone conversation with Secretary of State Hillary Clinton on Friday, but expressed “surprise” at the furor over his claim that foreigners orchestrated election fraud.

The row came just a few days after President Barack Obama made an unannounced trip to Kabul to press Karzai on tackling corruption and to demand progress on good governance, as Washington’s troop surge strategy unfolds against the Taliban.

The new confrontation will only raise doubts about the fragile relationship between the Obama administration and Karzai, whom Washington is forced to consider a partner despite distaste for his political record.

Obama spokesman Robert Gibbs called Karzai’s comments “troubling” and “cause for real and genuine concern”. Gibbs noted the huge US military and political resources – and sacrifices – committed to Afghanistan.

State Department spokesman Philip Crowley, meanwhile, described Karzai’s intervention as “preposterous”. US Ambassador to Kabul Karl Eikenberry also met with Karzai in person to seek clarification on his comments on Thursday.

The Afghan leader then initiated the call to Clinton and expressed “surprise that his comments had created what he called a stir,” a US official told AFP on condition of anonymity.

“Generally we were happy with the call and we’re moving on,” the official added.

Crowley called the conversation a “constructive” one as Washington and Kabul seek to defuse tense relations.

“President Karzai reaffirmed his commitment to the partnership between our two countries, and expressed his appreciation for the contributions and sacrifices of the international community,” he said, adding that Karzai and Clinton “pledged to continue working together in a spirit of partnership”. But the Obama administration scrapped a planned Karzai visit to Washington last month after he gave himself full control over the electoral commission. In another snub to the United States, he then invited Iranian President Mahmoud Ahmadinejad to visit Afghanistan.

The Afghan leader drew fierce global condemnation for his speech on Thursday.

“There was fraud in presidential and provincial council elections – no doubt that there was a very widespread fraud, very widespread,” Karzai told Afghan election commission workers in Kabul.

“But Afghans did not do this fraud. The foreigners did this fraud,” he added, accusing other countries of interfering in his country’s domestic affairs.

He also claimed that such moves risked the 126,000 foreign troops in Afghanistan being seen as “invaders” – terminology used by the Taliban – and the nine-year insurgency as “a national resistance”. Afghan analysts suggested Karzai had lost control after being criticised by Obama and angered by the Afghan parliament, and noted the statements could signal a shift in foreign policy.

Afghan soldiers killed

German troops based in north Afghanistan mistakenly killed at least five Afghan soldiers, NATO forces said on Saturday, hours after the Germans lost three of their own soldiers in a gunfight with insurgents, Reuters reported.

A statement from NATO said that on Friday evening a unit of German soldiers was approached by two unmarked civilian vehicles which failed to stop when troops signalled them “using a variety of methods” in the northern province of Kunduz.

“The force eventually fired on the vehicles killing at least five Afghan soldiers … Initial reports indicate that the two civilian cars were part of an Afghan national army patrol en route to Kunduz,” NATO-led forces said in a statement.

A NATO spokesman later said it was unclear if the vehicles were civilian and the alliance was investigating the matter.

Hours before the incident, three German soldiers were killed in a gunfight with insurgents. The unit of German troops that killed the Afghan soldiers were on their way to the scene of that gunfight, when they came across the Afghan soldiers, NATO said.

Earlier, the governor of Kunduz province, Mohammad Omar, said he had been to a hospital in the province and saw the bodies of six Afghan soldiers who had been killed in the incident, which happened near Char Dara district.

Opinion polls show most Germans oppose Berlin’s involvement in the Afghan war.

Opposition spiked after a German-ordered US air strike in a village in Kunduz in September killed scores of people, at least 30 of them civilians according to the Afghan government, the deadliest incident involving German troops since World War II.

Germany is the third-largest NATO contributor to the war with some 4,300 troops in Afghanistan, most in northern Kunduz where Taliban attacks and strength have increased over the past year. Germany’s parliament has agreed to send a further 850 soldiers.

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The Great American Fraud

November 19, 2009 by · Leave a Comment 

By Sumayyah Meehan, Muslim Media News Service (MMNS) Middle East Correspondent

money-stacks2 The U.S. Chief District Attorney, this week, revealed a conspiracy by a Kuwaiti owned and operated food company to bilk the American government out of $8.5 billion in contracts to provide food for troops in Kuwait, Jordan and Iraq. It took the Atlanta-based Grand Jury no time at all to indict the Kuwaiti company. According to the indictment, Agility (formerly known as the Public Warehousing Company) was charged with a veritable ‘laundry list’ of crimes related to defrauding the U.S. Government. Agility provided food for U.S. troops from 2003-2005. The conspiracy was uncovered during a probe into unethical business practices of Middle East vendors.

According to court documents, Agility took painstaking measures to get away with the fraud. Some of the charges include submitting falsified documents, overinflating prices to sometimes triple the local Kuwaiti market value, making false statements and wire fraud. Most damaging is perhaps the revelation that Agility ordered it’s own suppliers to reduce the size of packages so that twice the number of packages would be delivered to unsuspecting U.S. military bases.

Agility is not taking the charges sitting down and has already come out ‘swinging’ and leveling their own verbal barrage at the U.S. government. In a recently released statement to the press, Agility has vehemently denied any wrongdoing and says that the charges are baseless. The company also says that ongoing contracts with the US government, which are not part of the current indictment, remain in tact. However, Agility has been barred from bidding on new contracts with the US until the pending indictment is either proven or dismissed. The press release also went on to say that Agility is putting its’ full confidence in the US system of justice to prove its’ innocence, “An indictment and a complaint are merely allegations. PWC is confidant that once these allegations are examined in court, the will be found to be without merit.” Agility also revealed that the prices it charges for its’ goods and services were predetermined and approved by the U.S. government and that company heads are “surprised and disappointed” by the charges.

This case is only one out of several that have been launched against contractors hired by the U.S. government over the past several years. The most notable is a case of fraud leveled against KBR, which is a subsidiary of Halliburton. The company has been charged with overcharging the U.S. government for oil and other military supplies. Since the news of the Agility fraud broke, the company has ceased all trading in the Kuwait stock market which has seen an 8% drop in its stocks. However, on the Dubai market, Agility continues to rally without incident.

Agility stands to lose plenty if it is found guilty of the charges of fraud. According to a recent report by Goldman Sach’s, the company’s annual revenue is comprised of a meaty 37% of American contracts. A guilty verdict would result in Agility being put on probation and having to repay either twice the gain they received from the contracts or twice the loss that the U.S. government incurred. The U.S. government has promised to deal swiftly with those seeking to defraud it and that the charges against Agility are “only the first step” in dealing with dishonest contractors.

In the meanwhile, Agility continues to look for new ways to break the chains of reliance upon the U.S. government for it’s daily ‘bread’. Agility has diversified itself across the board. The company now sells real estate and even provides freighter service for gold mining companies in Papua New Guinea. However, their new business ventures may prove to be exercises in futility as the U.S. government is unlikely to back down as it relentlessly seeks justice.

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Karzai Defends Afghanistan Election

September 10, 2009 by · Leave a Comment 

By Maria Golovnina, Reuters

2009-09-09T071319Z_01_KAB04_RTRMDNP_3_AFGHANISTAN

An Afghan man rides on his donkey-cart past a poster of President Hamid Karzai in Kabul September 9, 2009. Afghan election returns on Tuesday put Karzai on course for a first-round victory, but a watchdog that can veto the outcome said it had found "clear and convincing evidence of fraud" and ordered a partial recount.

REUTERS/Ahmad Masood

KABUL (Reuters) – Incumbent Hamid Karzai defended last month’s Afghan presidential election as honest on Wednesday, a day after returns showed him on course to win in a single round and a U.N-backed panel ordered a partial recount.

The standoff has alarmed Western leaders who have risked their own political capital to send troops on what is becoming an increasingly unpopular mission.

Preliminary election results issued on Tuesday gave Karzai more than 54 percent of valid votes tallied, putting him above the 50 percent threshold needed to avoid a runoff with his closest rival, former foreign minister Abdullah Abdullah.

But the independent Electoral Complaints Commission (ECC), appointed mainly by the United Nations, said it had found “clear and convincing” evidence of fraud and ordered a partial recount.

On Wednesday, Karzai praised the conduct of the vote.

“The president praised the (election officials) for holding the election with honesty and impartiality despite all the difficulties,” the presidential palace said in a statement.

Abdullah says Karzai’s backers have attempted to steal the August 20 election by stuffing ballots on a massive scale.

Early vote tables, which have been removed from the election commission’s website without explanation, showed whole villages in which Karzai received every single ballot cast, sometimes with exactly 400 or 500 votes.

For now, Western officials have put their confidence in the watchdog ECC, which can overturn the result and must sign off on the outcome before it is final.

Diplomats say they are uneasy but resigned to the possibility of the U.N.-backed body reversing a result released by Afghanistan’s own election authorities.

The West originally hailed the vote as a success, largely because the Taliban failed to disrupt it. Those assessments have became increasingly muted as evidence of fraud has mounted.

In central Kabul, hundreds of people gathered to mourn the death of Tajik anti-Taliban hero Ahmed Shah Masood who was killed on September 9, 2001, by al-Qaeda — a crucial rallying day for half-Tajik Abdullah who was part of Masood’s inner circle.

Addressing the rally, Abdullah made no direct mention of the election but played up his link to the iconic commander.

“Masood fought for this country and died for this country,” said Abdullah, whose supporters have threatened to hold protests if their election concerns were not heard. “He fought to bring peace and security to this country.”

Speaking alongside Abdullah in a city festooned with Masood posters, ex-president and key ally Burhanuddin Rabbani added: “The election result must be cleaned or Afghanistan will face chaos and big challenges.”

Karzai, an ethnic Pashtun who draws much of his support from his ethnic heartland, did not attend the ceremony.

Locking Afghanistan into a further period of uncertainty, the ECC ordered Afghan officials to recount results from polling stations where one candidate received more than 95% of the vote or more votes were cast than the expected maximum of 600.

Election officials say that could take weeks or even months. British ambassador to Afghanistan Mark Sedwill said it was too early to judge the authenticity of the vote before the ECC had finished its process of screening ballots for fraud.

“We have to see the result of their investigations,” he told BBC radio. “We always knew there would be fraud in this election, a lot of irregularities, I’m afraid that was inevitable, and we talked about that before the election.”

Facing an increasingly skeptical public opinion over its role in Afghanistan, Britain on Wednesday offered to host a global conference to set targets for handing over security commitments from foreign troops to Afghan forces.

Raid frees reporter

Before dawn, NATO troops stormed a Taliban hideout in the north of the country to release New York Times reporter Stephen Farrell of Britain and his Afghan colleague Mohammad Sultan Munadi who were kidnapped by insurgents at the end of last week.

Farrell was freed but Munadi was killed in the rescue, along with a British soldier and at least one civilian.

The two had been headed to cover the aftermath of a NATO air strike called in by German troops that killed scores of people. The strike took place in an area controlled by the Taliban and fueled anger among its mainly Pashtun local people.

NATO has confirmed that some civilians may have been killed and ordered a formal investigation into the air strike — the deadliest incident involving German troops since World War Two.

(Additional reporting by Hamid Shalizi and Sayed Salahuddin in KABUL, Mohammad Hamed in KUNDUZ, and Avril Ormsby in LONDON; Writing by Maria Golovnina)

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