In 2010, The Securities and Exchange Commission (SEC) which was created in 1934 & which holds the primary responsibility for enforcing federal securities law and regulating the securities industry in America, charged Goldman-Sachs with the structuring & marketing of CDO’S that hinged on the performance of RMBS. The SEC alleged that Goldman & Fabrice Tourre a top executive at Goldman, had violated anti-fraud provisions by structuring & marketing these complex products, in particular failing to disclose essential information to investors. Some of the breaches included a failure to disclose the role Paulson & Co Inc. a major hedge fund played in the portfolio selection process and the fact that Paulson and Sachs had taken a short position against the CDO , essentially they believed that the value of the portfolio would go down. This was a clear conflict of interest as Paulson were allowed to choose the sub-prime mortgages to be thrown into the Abacus. Paulson had inside information and were able to bet against the RMBS to the detriment of Goldman’s clients. Clients & investors included ACA : a third party with experience analysing credit risk in RMBS, IKB : a commercial bank in Germany, who lost $150m in to the Abacus , ABN AMRO : one of the largest banks in Europe before it was acquired by RBS . These investors were provided with misleading information and were not notified of the fact that Goldman and Paulson Inc.; who was involved in the structuring of the security were betting against these securities and actually profited from them at the expense of Goldman’s clients . This behaviour was criminal and fraudulent, it showed clear conflicts of interest, a lack of duty of care for investors and mostly results in a lo... ... middle of paper ... ...ewed 8 March 2014. The Abacus SCDO explained: video http://www.youtube.com/watch?v=5bS6UsWKMuk. Lasted Accessed 8th March 2014. http://www.ifre.com/1997-jp-morgan%E2%80%99s-us$700m-bistro-bond-the-first-cdo/21102932.article . Accessed 12th March 2014. George Soros; CDOs And CDSs Must Be Regulated Because They Have No Social Benefit: http://www.businessinsider.com/george-soros-cdos-are-dangerous-and-must-be-regulated-2010-4#ixzz2vkpn3ad7 http://www.businessinsider.com/george-soros-cdos-are-dangerous-and-must-be-regulated-2010-4 . Accessed 12th March 2014. https://mostlyeconomics.wordpress.com/2010/04/30/understanding-the-goldman-abacus-issue/ .Accessed 12th March 2014. Transcripts of thw white house report on the Volcker Rule http://www.whitehouse.gov/photos-and-video/video/volcker-rule-financial-institutions#transcript . Accessed 11th March 2014.
While the widely exposed and discussed trials of WorldCom's and Tyco's top executives were all over the media, one of the most interesting cases of securities fraud was happening without any public acknowledgement.
This case was very interesting and I am really glad I chose it for my paper. Its amazing to me how one man with the right connections and social standing can get away with so much for so long. Nobody ever suspected him because he was the father of the NASDAQ, he couldn’t scam people for billions of dollars. And not just any random people, Mad off targeted his own people, the Jews and groups affiliated with him. He was very picky and pretended like he didn’t want to let anyone in on what he was doing which in turn made more people want to get involved and give him even more money, that’s just human
This case is based on Mrs. Jennifer Sharkey, who sued J.P. Morgan & Co. (JCMC), Mr. Kenny, Mr. Green, and Mrs. Lassiter, alleging breach of contract and violations of the SOX anti-retaliation statute. The facts started when Mrs. Sharkey was assigned to a Suspect Client 's account where members of JPMC expressed to her their concern regarding to this account because they suspected that the Suspect Client was involved in illegal activities. After Mrs. Sharkey’s investigation, she claimed that she informed her conclusions to superiors Mr. Kenny, Mr. Green, and Mrs. Lassiter, of the Suspect Client 's potential unlawful activities, such as: money laundering, mail fraud, bank engaged in fraud, and violations of federal securities laws. After
Most of Scrushy’s alleged misconduct occurred prior to the enactment of Sarbanes-Oxley (SOX). To sum...
Overview of the Case: The Securities and Exchange Commission claims Mark D. Begelman misused proprietary information regarding the merger of Bluegreen Corporation with BFC Financial Corporation. Mr. Begelman allegedly learned of the acquisition through a network of professional connections known as the World Presidents’ Organization (Maglich). Members of this organization freely share non-public business information with other members in confidence; however, Mr. Begelman allegedly did not abide by the organization’s mandate of secrecy and leveraged private information into a lucrative security transaction. As stated in the summary of the case by the SEC, “Mark D. Begelman, a member of the World Presidents’ Organization (“WPO”), abused his relationship of trust and confidence and misappropriated material, non-public information he obtained from a fellow WPO member about the pending merger. It was the specific written policy of the WPO that matters of a confidential nature were to be kept confidential (Securities and Exchange Commission). Mr. Begelman maintained a relationship with a fellow WPO member, an insider with BFC Financial, who provided access to non-public information regarding the merger. Mr. Begelman used this information to purchase 25,000 shares of Bluegreen stock prior to the announcement of the acquisition. After the merger was made official and disclosed to the street, Mr. Begelman sold his stake for a net gain of $14,949. He maintained ownership of Bluegreen securities for fifteen days (Gehrke-White).
...the man for whom the scheme is named. It was also the largest investment fraud by a single person. The most important effect of the Madoff scandal is the reformation that occurred in the SEC afterward amid shock at their inability to catch Madoff in the act during their investigation. The enforcement division was revamped to focus on more concerning markets and was more heavily staffed with market experts. The Office of Market Intelligence was created with the responsibility of managing tips. The SEC began to employ more undercover agents and advocate for a protection program for whistleblowers. Back-office personnel oversight was enacted. Additional funding was approved for the SEC. Surprise examinations were approved to ensure the existence of reported assets. In general, the regulating power of the SEC was vastly expanded to prevent similar crimes from occurring.
Pitzer, Matt. "The Case Against Goldman Sachs." Last modified 04/21/2010. Accessed October 5, 2011. http://www.business.missouri.edu/ifmprogram/reports/2010WS/GS.doc
Whether this was deliberate or willful blindness Avellino and Bienes were not innocent in their actions. They allowed money to cloud their judgement and didn’t ask important questions. They knew they were misleading investors but as long as they got a fat pay check didn’t care about the people they were lying to. Bienes knew that he should have been licensed and that investment advisors need to register with the SEC. But, he admitted to asking Madoff about it and being told not to register or get licensed. So, shouldn’t this have raised a red flag that something wasn’t right? If everything was legal why wouldn’t you want to register or get yourself licensed? These are just a few questions I think anyone would ask but Bienes and Avellino chose to leave them unasked in order to keep making easy money. Bienes admitted to paying millions on a house and famous paintings and doing very little for the money he was making. All he had to do was dupe people out of their money and he would continue to live a life of luxury. Later when Avellino and Bienes had to shut down their small investment firm, this didn’t even show up as a blip for Madoff to stop his shady business
Why didn’t the SEC accuse Mark Cuban of traditional insider trading considering he was the largest individual share...
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
Ivan Boesky pleaded guilty to the biggest insider-trading scheme discovered by the United States Securities and Exchange Commission (SEC). He made 200 million dollars by profiting from stock-price volatility on corporate mergers. What he actually did was cheat by using illegally obtained secret information about impending mergers to buy and sell stock before mergers became public knowledge/ Although insider trading is nothing new, the SEC knows it has become a threat to the public’s confidence, and they must enforce regulations to stop criminal activity. The SEC has put pressure on managers to regulate information leaks, promising strict legal enforcement if a business fails to police misuse of privileged employee information.
In 1995 The Bayou Hedge Fund Group, referred to as the fund, was founded by Samuel Israel III in Stamford, Connecticut with the intention to produce high returns for investors. Good intentions were not enough when the fund began to experience losses almost immediately and Mr. Israel resorted to fraudulent activities to keep the appearance of success alive. The resulting life of the fund was filled will illegal, fraudulent, and unethical activities that finally brought the fund to bankruptcy and landed Mr. Israel and some of his key associates in prison. The objective of this paper is to overview the history of the case and to highlight some of the major issues that should have alerted investors and other outside parties to the wrongdoings being perpetrated.
For those who do not know what fraud is, it’s basically deception by showing people what they want to see. In business it’s the same concept, but in a larger scale by means of manipulating figures that will be shown to shareholders and investors. Before Sarbanes Oxley Act there was “Enron Corporation”, a fortune 500 company that managed to falsify their statements claiming revenues over 101 billion in a span of 15 years. In order for us to understand how this corporation managed to deceive the public for so long, the documentary or movie “Smartest Guys in the Room” goes into depth by providing viewers with first-hand information from people that worked close with or for “Enron”.
Eight years ago, the world economy crashed. Jobs were lost, families misplaced, hundreds of thousands of people left shocked and confused as they watched the security of their world fall to pieces around them. In, “The Big Short,” a film directed by Adam McKay and based on the book written by Michael Lewis, viewers get an inside perspective on how the financial crisis of 2008 really happened. Viewers learn the truth about the unethical actions and irrational justifications made by those who unwittingly set the world up for failure. Two main ethically tied decisions are brought into question when watching the film: how could anyone conscionably make the decision to mislead investors by misrepresenting mortgage backed securities (MBS), and why
The first issue that makes the fall of Enron was special-purpose entities problem. Between 2008, the mark-to-market practice led to schemes that