Search This Blog

This is a photo of the National Register of Historic Places listing with reference number 7000063

Tuesday, November 30, 2010


Too often people have the misconception that those who are extremely rich made their fortunes by building “a better mouse trap”. In fact, after watching all these fantastical frauds which are only now being exposed by the SEC it might seem that most people who make vast fortunes make their money through some sort of fraudulent scheme. The following release from the SEC goes into depth regarding a family of alleged fraudsters who use a legitimate position in a legitimate company to swindle honest investors out of their hard earned savings. The following is an excerpt from the SEC web page:

“SEC Charges Deloitte Partner and Wife in International Insider Trading Scheme
Nov. 30, 2010 — The Securities and Exchange Commission today charged a former Deloitte Tax LLP partner and his wife with repeatedly leaking confidential merger and acquisition information to family members overseas in a multi-million dollar insider trading scheme.

The SEC alleges that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte's clients to Annabel's sister and brother-in-law in London. After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan's clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans. Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.
The UK Financial Services Authority (FSA) has announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm. Sanders's tippees and clients made approximately $20 million in U.S. dollars by trading on the inside information.
"The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong," said Robert Khuzami, Director of the SEC's Division of Enforcement. "In this day and age, whether it's across oceans or across markets, the SEC and its domestic and foreign law enforcement partners are committed to identifying and prosecuting illegal insider trading."
Marc J. Fagel, Director of the SEC's San Francisco Regional Office, added, "Deloitte and its clients entrusted Arnold McClellan with highly confidential information. Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple's own benefit and their family's enrichment."
According to the SEC's complaint, Arnold McClellan had access to highly confidential information while serving as the head of one of Deloitte's regional mergers and acquisitions teams. He provided tax and other advice to Deloitte's clients that were considering corporate acquisitions.
The SEC alleges that between 2006 and 2008, James Sanders used the non-public information obtained from the McClellans to purchase derivative financial instruments known as "spread bets" that are pegged to the price of the underlying U.S. stock. The trading started modestly, with James Sanders buying the equivalent of 1,000 shares of stock in a company that Arnold McClellan's client was attempting to acquire. Subsequent deals netted significant trading profits, and eventually James Sanders was taking large positions and passing along information about Arnold McClellan's deals to colleagues and clients at his trading firm as well as to his father.
Among the confidential impending transactions allegedly revealed by McClellan:
Kronos Inc., a Massachusetts-based data collection and payroll software company acquired by a private equity firm in 2007.
aQuantive Inc., a Seattle-based digital advertising and marketing company acquired by Microsoft in 2007.
Getty Images Inc., a Seattle-based licenser of photographs and other visual content acquired by a private equity firm in 2008.
The SEC's complaint alleges the following chronology involving insider trading around the Kronos transaction:
November 2006: Arnold McClellan begins advising Deloitte client on planned Kronos acquisition.
Jan. 29, 2007: McClellan signs confidentiality agreement.
Jan. 31, 2007: Following call from Annabel's cell phone, James Sanders begins buying Kronos spread bets in his wife's account.
March 11, 2007: Arnold McClellan has two-hour cell phone call with client to discuss acquisition. Less than an hour later, call from same cell phone to Annabel's family.
March 12-14, 2007: James Sanders increases size of Kronos bets.
March 16, 2007: James Sanders informs another family member that Annabel is the source of his tips; describes his agreement to split profits with her 50/50.
March 23, 2007: Deloitte client publicly announces Kronos acquisition. Kronos stock price increases 14 percent; James Sanders and other tippees reap approximately $4.9 million in U.S. dollars.
The SEC's complaint charges Arnold and Annabel McClellan with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties.
The SEC's case was investigated by Victor W. Hong, Monique C. Winkler, Alice L. Jensen, and Jina L. Choi of the San Francisco Regional Office. The Commission would like to thank the UK Financial Services Authority, the U.S. Attorney's Office for the Northern District of California, and the Federal Bureau of Investigation for their assistance in this matter.”

The above case shows how manipulated our securities markets have become over the last several years. At one time the SEC and others would pounce on people who did anything that was remotely inappropriate. However, over the years market manipulation was looked upon as a good business practice by at least the last two presidential administrations (One democrat and one republican). The SEC under this current administration is at least trying to control the use of fraud as a legitmate part of finance.

Sunday, November 28, 2010


The SEC has published their first report on their quest to develop global accounting standards. The following is an excerpt from the SEC web site:

Washington, D.C., Oct. 29, 2010 — The Securities and Exchange Commission's Office of the Chief Accountant and Division of Corporation Finance today published their first progress report on the Work Plan related to global accounting standards.

The Commission directed agency staff earlier this year to execute the Work Plan to provide the information needed to evaluate the implications of incorporating International Financial Reporting Standards (IFRS) into the financial reporting system for U.S. issuers. The Commission indicated that following successful completion of the Work Plan and the convergence projects of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), it will be in a position in 2011 to determine whether to incorporate IFRS into the U.S. financial reporting system.

"The staff has invested significant time and effort in executing the Work Plan, and we've made great progress to date," said SEC Chief Accountant Jim Kroeker. "This progress report emphasizes the importance of transparency in the staff's activities, and can help the public's understanding of the magnitude of this project and the staff's progress."

The Work Plan addresses six key areas:

Sufficient development and application of IFRS for the U.S. domestic reporting system.
The independence of standard setting for the benefit of investors.
Investor understanding and education regarding IFRS.
Examination of the U.S. regulatory environment that would be affected by a change in accounting standards.
The impact on issuers both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
Human capital readiness.
The SEC staff expects to continue to report periodically on the status of the Work Plan in 2011."

Global Accounting Standards seems like something every would agree is needed in a global economy. The establishment of enforced Global Accounting Standards would in theory save governments and businesses a tremendous amount of money. Getting some nations to sign on to such standards might be a problem since every nation thinks that their way at doing anything is the best way. Changing accounting practices in the U.S. to reflect the practices in other nations might in fact be difficult since we have such a huge economy.


This week the FBI raided at least three corporate locations where evidence of insider trading might be located. It was widely circulated amongst news agencies that the locations were addresses for Level Global Investors LP, Diamondback Capital Management LLC and, Loch Capital Management LLC. The FBI has an ongoing investigation therefor, they will not give specifics.

If the companies mentioned above are under investigation then this is important news. The SEC has been investigating and prosecuting several companies for various crimes however, the SEC can only fine criminals but, the FBI can put them in jail.

There arm many on Wall Street that believe that insider trading should be just another money making tool for wealthy individuals and companies. The problem with insider trading can best be illustrated with companies that seem healthy according to all available information but, suddenly the company is shorted over the course of a few trading days into having a nearly worthless stock. Then the bad news known only by a lucky few becomes public and the honest investor has lost and the inside trader walks away with all the money. In short, insider trading is anything but a victimless crime.

Sunday, November 21, 2010


Mary Shapirro and the SEC has made perhaps the boldest move yet in trying to impliment reforms to get some of the corruption out of our government. The following is an excerpt from the SEC meeting held on June 30, 2010:

Good Morning. This is an open meeting of the U.S. Securities and Exchange Commission on June 30, 2010.

Today we consider adopting rules that would significantly curtail the corrupting influence of "pay to play." Pay to play is the practice of making campaign contributions and related payments to elected officials in order to influence the awarding of lucrative contracts for the management of public pension plan assets and similar government investment accounts.

Pay to play distorts municipal investment priorities as well as the process by which investment managers are selected. It can mean that public plans and their beneficiaries receive sub-par advisory performance at a premium price.

The cost of this practice is borne by retired teachers, firefighters and other government employees relying on expected pension benefits, or by parents and students counting on a state-sponsored college savings account. And, ultimately, this cost can be borne by taxpayers, who may have to make up shortfalls when vested obligations cannot be met.

An unspoken, but entrenched and well-understood practice, pay to play can also favor large advisers over smaller competitors, reward political connections rather than management skill, and — as a number of recent enforcement cases have shown — pave the way to outright fraud and corruption.

There should be no place for such practices in an investment advisory industry subject to high fiduciary standards. The selection of investment advisers to manage public plans should be based on the best interests of the plans and their beneficiaries, not kickbacks and favors.

The rules we consider today will help level the playing field, allowing advisers of all sizes to compete for government contracts based on investment skill and quality of service.

When the Commission first considered a proposal to curb adviser pay to play practices in 1999, it was, in part, motivated by widespread media accounts of dubious arrangements between fund managers and municipal officials.

In the years since, the amount of money at stake — and the incentive for inappropriate conduct — has ballooned. Public pension plans now represent one-third of all U.S. pension assets, with more than $2.6 trillion in assets under management.

Additionally, state-sponsored higher education savings plans — commonly known as "529s" — now hold approximately $100 billion in assets. These plans were in their infancy when the Commission first took up this issue in 1999.

The SEC has brought a series of enforcement actions charging investment advisers with participating in pay to play schemes. Most recently, we brought a civil action involving allegations of unlawful kickbacks paid in connection with investments by the New York State Common Retirement Fund.

In recent years, civil and criminal authorities also have brought cases in California, New York, New Mexico, Illinois, Ohio, Connecticut, and Florida, charging the same or similar conduct.

Our recent cases may represent just the tip of the iceberg. I fear that many other efforts to influence the selection of advisers to manage government plans pass unnoticed or — though highly suspect — cannot be proven to have crossed the line into actionable behavior.

Not surprisingly, parties to these suspect transactions take care to blur their motives, to hide their actions and to conceal their connections, making it difficult to prove a direct quid-pro-quo or an intent to curry favor in a specific case. The prophylactic rules we consider today are designed to eliminate this legal and ethical gray area.

Elements of the Rule
The rule we consider today has three key elements:

First, it would prohibit an adviser from providing advisory services for compensation — either directly or through a pooled investment vehicle — for two years, if the adviser or certain of its executives or employees make a political contribution to an elected official who is in a position to influence the selection of the adviser.
Second, the rule would prohibit an adviser and certain of its executives and employees from soliciting or coordinating campaign contributions from others — a practice referred to as "bundling" — for an elected official who is in a position to influence the selection of the adviser. It also would prohibit solicitation and coordination of payments to political parties, when the adviser is pursuing business from public entities.
Finally, and very importantly, the rule would prohibit an adviser from paying third-party solicitors who are not "regulated persons" subject to prohibitions against making contributions. Such "regulated persons" would be limited to registered investment advisers and to broker-dealers subject to pay to play restrictions.
Third party placement agents have been involved in some of the most egregious pay to play activities in recent years, and their activities should not continue unabated. The approach we are taking is a strong step toward eliminating the corruptive influence that can result from the use of third party placement agents.

It will greatly improve the status quo by banning payments to third parties who solicit government clients, unless they are "regulated persons" subject to pay to play restrictions comparable to the rule we are considering for adoption today.

This approach provides far greater protection of public pension plans and their beneficiaries than is currently the case, as third party placement agents come under the regulatory umbrella and, for the first time, become subject to meaningful federal pay to play restrictions.

This approach should effectively eliminate the opportunity for abuse that currently exists from third party placement agents. However, if the Commission determines that third party placement agents continue to inappropriately influence the selection of investment advisers for government clients — even under our enhanced rules — I expect that we would consider the imposition of a full ban on the use of these third parties.

Let me end by underscoring once again why we are here today. Pay to play practices are corrupt and corrupting. They run counter to the fiduciary principles by which funds held in trust should be managed. They harm beneficiaries, municipalities and honest advisers. And they breed criminal behavior. I hope my colleagues will join me today in striking a blow against a practice that has no legitimate place in our markets.

Before we hear more details about the rules we are considering for adoption, let me first offer my thanks to the individuals — representing a cross-section of four divisions and numerous offices — for their help in bringing to the table today a truly thoughtful, impressive and potent example of rulewriting."


Sunday, November 14, 2010


The SEC released its settlement details with the former CEO of Countrywide Financial. Although this is just a punishment which amounts to a fine at least the SEC has done something whereas, the rest of the government is worried about cutting social programs for the elderly and even our veterans. The people who served our country directly though military service and those who worked hard all their lives and supported the government by paying social security and medicare taxes are again those who will have to pay the price for rampant fraud and abuse by con-men and paid off government officials.

The following is an excerpt from the SEC web pages regarding it's settlement with Countrywide Financial:

"Washington, D.C., Oct. 15, 2010 — The Securities and Exchange Commission today announced that former Countrywide Financial CEO Angelo Mozilo will pay a record $22.5 million penalty to settle SEC charges that he and two other former Countrywide executives misled investors as the subprime mortgage crisis emerged. The settlement also permanently bars Mozilo from ever again serving as an officer or director of a publicly traded company.

Mozilo’s financial penalty is the largest ever paid by a public company's senior executive in an SEC settlement. Mozilo also agreed to $45 million in disgorgement of ill-gotten gains to settle the SEC’s disclosure violation and insider trading charges against him, for a total financial settlement of $67.5 million that will be returned to harmed investors.

Former Countrywide chief operating officer David Sambol agreed to a settlement in which he is liable for $5 million in disgorgement and a $520,000 penalty, and a three-year officer and director bar. Former chief financial officer Eric Sieracki agreed to pay a $130,000 penalty and a one-year bar from practicing before the Commission. In settling the SEC’s charges, the former executives neither admit nor deny the allegations against them.

The penalties and disgorgement paid by Sambol and Sieracki will also be returned to harmed investors.

“Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite — a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model,” said Robert Khuzami, Director of the SEC's Division of Enforcement.

John McCoy, Associate Regional Director of the SEC’s Division of Enforcement, added, “This settlement will provide affected shareholders significant financial relief, and reinforces the message that corporate officers have a personal responsibility to provide investors with an accurate and complete picture of known risks and uncertainties facing a company.”

The settlement was approved by the Honorable John F. Walter, United States District Judge for the Central District of California in a court hearing held today.

The SEC filed charges against Mozilo, Sambol, and Sieracki on June 4, 2009, alleging that they failed to disclose to investors the significant credit risk that Countrywide was taking on as a result of its efforts to build and maintain market share. Investors were misled by representations assuring them that Countrywide was primarily a prime quality mortgage lender that had avoided the excesses of its competitors. In reality, Countrywide was writing increasingly risky loans and its senior executives knew that defaults and delinquencies in its servicing portfolio as well as the loans it packaged and sold as mortgage-backed securities would rise as a result.

The SEC’s complaint further alleged that Mozilo engaged in insider trading in the securities of Countrywide by establishing four 10b5-1 sales plans in October, November, and December 2006 while he was aware of material, non-public information concerning Countrywide’s increasing credit risk and the risk regarding the poor expected performance of Countrywide-originated loans.

In addition to the financial penalties, Mozilo and Sambol consented to the entry of a final judgment that provides for a permanent injunction against violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Mozilo also consented to the entry of a permanent officer and director bar, and Sambol consented to the entry of a three-year bar.

Sieracki agreed to a permanent injunction from further violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, and consented to a one-year bar under the Commission’s Rule of Practice 102(e)(3).

The SEC investigation that led to the filing and settlement of this enforcement action was conducted by Michele Wein Layne, Spencer E. Bendell, Lynn M. Dean, Paris Wynn, and Sam Puathasnanon. Together with Associate Regional Director John M. McCoy, that same team has been handling the SEC’s litigation.

The SEC has filed many other enforcement actions involving mortgage-related securities and mortgage-related products linked to the financial crisis, including:

American Home Mortgage (4/28/2009)
Reserve Fund (5/05/2009)
Evergreen (6/08/2009)
New Century (12/07/2009)
Brookstreet (12/08/2009)
Goldman Sachs (4/16/2010)
Farkas/Taylor, Bean & Whitaker (6/16/2010)
ICP (6/21/2010)
Citigroup (7/29/2010)"

Angelo Mazilo was for many people in the press the very face of the slick, fast talking salesman and con-man who helped to fuel the housing bubble by making loans to everyone. Mr. Mazilo was in fact just one of many thousands of people who made millions by tweaking the truth. In fact, there have been so many big businessmen who committed fraud in this country that capitalism is becoming as big a failure here as communism was in the old Soviet Union. Our free enterprise system has been replaced by some toxic form of economics which rewards liars and frauds and punishes honest men of good character because they will not pay government officials for the right to conduct an honest business in the United States of America.

Sunday, November 7, 2010


Misrepresentation of facts has always been a real problem in the securities field. I've misrepresentations made by real estate companies, insurance companies and securities firms. I certainly have been duped by misrepresentations of various companies both as a client and as an agent of such businesses. As an agent of one such business I sold hundreds of thousands of dollars of fraudulent single premium life insurance policies along with IRAs. When the company in question was shut down I was devastated because I had been acting I thought in the best interests of my clients however, the corporate managers did not have such a lofty ambition in regards to being a good fiduciary of other peoples money.

It is good to see some criminal charges being filed in this case by the U.S. Attorney's office. However, it is unfortunate to see that like most Wall Street fraud schemes, the crimes only come to light when a company fails and litigants get access to the real financial statements.

Although these traders, if guilty, are clearly at fault for the fraud investors also must share some blame for their own losses. Various schemes to make lots of money with little risk are out there and can be perpetuated by anyone but, the old motto "Too Good to Be True" should be the first thing that comes into the mind of an investor when a Wall Street person comes to call on you.

The following is a case brought by the SEC against two Forex currency trader who allegedly mislead investors as to the safety of their principal. In addition, the SEC alleged that investor funds were diverted for personal use by the two traders. The following is an excerpt from the SEC governmental posting:

"Washington, D.C., Oct. 28, 2010 — The Securities and Exchange Commission today charged two foreign currency traders and their Boston-based company with operating a fraudulent scheme in which they sent investors misleading account statements while stealing their funds and incurring major trading losses.

Litigation Release No. 21712
SEC Complaint

The SEC alleges that Craig Karlis of Hopkinton, Mass., and Ahmet Devrim Akyil formerly of Hingham, Mass., fraudulently raised approximately $40 million from approximately 750 investors in a purported foreign currency (Forex) trading venture through their firm Boston Trading and Research LLC (BTR). Investors were falsely promised that BTR had a system in place to limit trading losses. BTR also falsely claimed to investors that "we do not profit unless you do" while in reality Karlis and Akyil were illegally diverting investor money for their own personal use as well as to fund BTR's operations and pay expenses for other companies with which they were associated.

"The bait was the promise by Akyil and Karlis to limit investor risk, and the switch was the theft and unauthorized trading that cost investors 90 percent of the invested funds," said Robert Khuzami, Director of the SEC's Division of Enforcement. "If you don't deliver what you promise and violate the securities laws, we will hold you accountable."

David Bergers, Director of the SEC's Boston Regional Office, added, "Akyil and Karlis secretly enriched themselves while many of the defrauded investors lost their retirement savings and financial security."

According to the SEC's complaint filed in federal court in Boston, for a minimum investment of $10,000, investors could deposit money with the BTR program. BTR used a website, sales representatives and live presentations by Karlis and Akyil to solicit funds from investors around the world. Investors provided Akyil with a limited power of attorney that granted him the right to direct the trading of their funds in the Forex market.

The SEC alleges that BTR's misrepresentations to investors included the following:

Investors would have 100 percent transparency about what was going on in their accounts through daily and monthly account statements and 24-hour access to real-time information about the trading Akyil was doing on their behalf.

Investors, through draw-down agreements, could lose no more than an agreed-upon percentage (typically 30 percent) of their investment.
The BTR trading system included an automatic stop-loss program that would curtail losses once they reached a certain percentage.

BTR and its principals would be paid from profits only.
The SEC alleges that BTR, through Akyil and with Karlis's knowledge, traded funds differently from what was disclosed in daily account statements to investors. The balance and equity positions that BTR provided investors on their account statements did not show that their funds had been diminished through BTR's use of investor money for undisclosed purposes. Meanwhile, Akyil and Karlis depleted the investment pool through misappropriation and trading losses far past the stop loss limits promised to investors. BTR collapsed in September 2008 and ultimately distributed the remaining funds to investors, which amounted to approximately 10 percent of their account balances.

The SEC's complaint charges Akyil, Karlis, and BTR with violating the antifraud and registration provisions of the federal securities laws, and seeks civil injunctions, the return of ill-gotten gains, and financial penalties.

Separately, the U.S. Attorney's Office for the District of Massachusetts today unsealed an indictment charging Akyil and Karlis with criminal violations based on the same misconduct. The SEC also acknowledges the assistance of the Commodity Futures Trading Commission."

It is good to see some criminal charges being filed in this case by the U.S. Attorney's office. However, it is unfortunate to see that like most Wall Street fraud schemes, the crimes only come to light when a company fails and litigants get access to the real financial statements.

Although these traders, if guilty, are clearly at fault for the fraud investors also must share some blame for their own losses. Various schemes to make lots of money with little risk are out there and can be perpetuated by anyone but, the old motto "Too Good To Be True" should be the first thing that comes to mind of an investor when a Wall Street person comes to call on you.
a href="">Furniture Event - Save up to 50% at