JPMorgan Chase insiders raised concerns about how the Galleon Group was being run as far back as 2001, according to media reports.
An internal note from a JPMorgan Chase analyst suggested that its alternative asset management arm should lower its allocation in Galleon's technology fund, because of "more negative news about Raj and his cohorts", reports the Financial Times.
Raj Rajaratnam, the founder of the Galleon hedge fund, was arrested earlier this month along with five alleged co-conspirators in what is reported to be the biggest insider trading scandal in history.
The JPMorgan note went on to allege that Mr Rajaratnam and his hedge fund were operating in ethical grey areas.
"If these allegations are true, there are some serious issues about business conduct," it said.
Earlier this week, Hector Ruiz, the former CEO of Advanced Micro Devices (AMD), was implicated in the scandal after it was alleged he had passed on inside information about a new venture AMD was about to start with the Abu Dhabi government.
Saturday, October 31, 2009
Unemployment rate by state (as of end of August 2009)
| State | Aug. 2009 Rate | Aug. 2008 Rate | Change from year earlier |
| Alabama | 10.4% | 5.2% | 5.2 |
| Alaska | 8.3% | 6.7% | 1.6 |
| Arizona | 9.1% | 5.9% | 3.2 |
| Arkansas | 7.1% | 5.1% | 2.0 |
| California | 12.2% | 7.6% | 4.6 |
| Colorado | 7.3% | 4.9% | 2.4 |
| Connecticut | 8.1% | 6.1% | 2.0 |
| Delaware | 8.1% | 5.1% | 3.0 |
| District of Columbia | 11.1% | 7.2% | 3.9 |
| Florida | 10.7% | 6.5% | 4.2 |
| Georgia | 10.2% | 6.4% | 3.8 |
| Hawaii | 7.2% | 4.2% | 3.0 |
| Idaho | 8.9% | 5.2% | 3.7 |
| Illinois | 10.0% | 6.7% | 3.3 |
| Indiana | 9.9% | 6.0% | 3.9 |
| Iowa | 6.8% | 4.2% | 2.6 |
| Kansas | 7.1% | 4.4% | 2.7 |
| Kentucky | 11.1% | 6.7% | 4.4 |
| Louisiana | 7.8% | 4.8% | 3.0 |
| Maine | 8.6% | 5.4% | 3.2 |
| Maryland | 7.2% | 4.5% | 2.7 |
| Massachusetts | 9.1% | 5.4% | 3.7 |
| Michigan | 15.2% | 8.6% | 6.6 |
| Minnesota | 8.0% | 5.4% | 2.6 |
| Mississippi | 9.5% | 7.3% | 2.2 |
| Missouri | 9.5% | 6.2% | 3.3 |
| Montana | 6.6% | 4.6% | 2.0 |
| Nebraska | 5.0% | 3.3% | 1.7 |
| Nevada | 13.2% | 7.0% | 6.2 |
| New Hampshire | 6.9% | 3.9% | 3.0 |
| New Jersey | 9.7% | 5.7% | 4.0 |
| New Mexico | 7.5% | 4.3% | 3.2 |
| New York | 9.0% | 5.7% | 3.3 |
| North Carolina | 10.8% | 6.6% | 4.2 |
| North Dakota | 4.3% | 3.3% | 1.0 |
| Ohio | 10.8% | 6.7% | 4.1 |
| Oklahoma | 6.8% | 3.9% | 2.9 |
| Oregon | 12.2% | 6.5% | 5.7 |
| Pennsylvania | 8.6% | 5.5% | 3.1 |
| Rhode Island | 12.8% | 8.3% | 4.5 |
| South Carolina | 11.5% | 7.3% | 4.2 |
| South Dakota | 4.9% | 3.1% | 1.8 |
| Tennessee | 10.8% | 6.6% | 4.2 |
| Texas | 8.0% | 5.0% | 3.0 |
| Utah | 6.0% | 3.4% | 2.6 |
| Vermont | 6.8% | 4.7% | 2.1 |
| Virginia | 6.5% | 4.1% | 2.4 |
| Washington | 9.2% | 5.4% | 3.8 |
| West Virginia | 9% | 4.2% | 4.8 |
| Wisconsin | 8.8% | 4.7% | 4.1 |
| Wyoming | 6.6% | 3.4% | 3.2 |
| Puerto Rico | 15.1% | 12% | 3.1 |
Source: Bureau of Labor Statistics
Nasdaq delays entry into equity-clearing business
When Nasdaq OMX acquired the Boston Stock Exchange and its clearinghouse last year, the group said it would rename the clearer as Nasdaq Clearing Corp. and challenge The Depository Trust & Clearing Corp. The trans-Atlantic exchange group said recently it will "continue to explore the U.S. equity-clearing space for opportunities to bring benefits to the industry," but it is "suspending" the launch of its equity clearing because of competitive moves by DTCC.
Friday, October 30, 2009
Feds pursue fund manager they say stole $1M
A federal judge froze the assets of an $8.3-million Chicago-based hedge fund after a federal regulator sued the fund’s manager for misappropriating $1 million from his investors.
Richmond H. Hamilton Jr., who manages Raleigh Capital Management Inc. from his home in Morocco, diverted the money to pay for personal expenses including an airplane and the lease on a car in the U.S., according to a complaint filed Wednesday in Chicago by the Commodity Futures Trading Commission. Mr. Hamilton also faked real estate sales to the fund and withdrew money to pay himself for the sham property sales, regulators say.
Mr. Hamilton’s alleged misdoings date back to 2004, but were only discovered in June after the Chicago-based National Futures Assn. opened an audit in response to an investor complaint that Mr. Hamilton had blocked withdrawals from the fund, according to an affidavit in the case.
Raleigh Capital had 28 investors at the end of December, the CFTC says.
Paladyne Systems Partners with RiskMetrics Group to Provide Risk Reports to Hedge Funds
New York, NY - October 2009
Paladyne Systems, Inc., a leading provider of technology and services to the global hedge fund industry, today announced a strategic partnership with RiskMetrics Group, a leading provider of risk management and corporate governance services to the global financial
community, to provide intra-day, daily and monthly risk reports to hedge funds and service providers. Paladyne has tightly integrated RiskMetrics’ RiskManager, the industry standard tool for analyzing, measuring and monitoring risk, with Paladyne Analytics Master, a data aggregation warehouse, custom reporting, and reconciliation tool. Both firms’ clients now have a two-way connection enabling them to seamlessly communicate position data to RiskManager and receive back a full-set of risk analysis reports within Paladyne Analytics Master.
Additionally, hedge funds that use Paladyne Analytics Master as a firm-wide custom reporting solution not only have access to RiskMetrics’ risk analytics and investor reporting platform, but also accounting, position, P&L, and investor information. The partnership will enable RiskMetrics’ to easily provide its hedge fund clients’ access to Paladyne Analytics Master.
“Our hedge fund clients now have the ability to effectively manage their investment risk on a timely basis using RiskMetrics’ analytics combined with Paladyne,” said Sameer Shalaby, Chief Executive Officer of Paladyne Systems. “This partnership adds a critical risk component to our integrated front-to-back office product suite and adds significant operational value to our clients.”
“Many of our hedge fund clients are collaborating with us to further develop market standards in independent risk management, transparency, and investor communication to ensure their solutions are optimized for robust position modeling with minimal operational overhead,” said Brian Schmid, Head of RiskMetrics’ Alternative Investments Business. “This strategic partnership will deliver on both fronts to mutual clients.”
Paladyne Systems, Inc., a leading provider of technology and services to the global hedge fund industry, today announced a strategic partnership with RiskMetrics Group, a leading provider of risk management and corporate governance services to the global financial
community, to provide intra-day, daily and monthly risk reports to hedge funds and service providers. Paladyne has tightly integrated RiskMetrics’ RiskManager, the industry standard tool for analyzing, measuring and monitoring risk, with Paladyne Analytics Master, a data aggregation warehouse, custom reporting, and reconciliation tool. Both firms’ clients now have a two-way connection enabling them to seamlessly communicate position data to RiskManager and receive back a full-set of risk analysis reports within Paladyne Analytics Master.
Additionally, hedge funds that use Paladyne Analytics Master as a firm-wide custom reporting solution not only have access to RiskMetrics’ risk analytics and investor reporting platform, but also accounting, position, P&L, and investor information. The partnership will enable RiskMetrics’ to easily provide its hedge fund clients’ access to Paladyne Analytics Master.
“Our hedge fund clients now have the ability to effectively manage their investment risk on a timely basis using RiskMetrics’ analytics combined with Paladyne,” said Sameer Shalaby, Chief Executive Officer of Paladyne Systems. “This partnership adds a critical risk component to our integrated front-to-back office product suite and adds significant operational value to our clients.”
“Many of our hedge fund clients are collaborating with us to further develop market standards in independent risk management, transparency, and investor communication to ensure their solutions are optimized for robust position modeling with minimal operational overhead,” said Brian Schmid, Head of RiskMetrics’ Alternative Investments Business. “This strategic partnership will deliver on both fronts to mutual clients.”
Thursday, October 29, 2009
Tom Petters trial set to begin
Jury selection is due to begin in the trial of Minnesota businessman Tom Petters, who stands accused of conducting a $3.65 billion Ponzi scheme.
Mr Petters is pleading not guilty to more than 20 different charges, which include allegations of money laundering, obstruction of justice and fraud.
A 16-member jury is to be selected today (Wednesday 28th October 2009) for the case, which is expected to run for up to six weeks.
Prosecutors claim that Mr Petters and his associates convinced investors to loan them money to purchase electronic goods to sell on to large retailers.
But the money being paid back to clients in return for their investments actually came from funds from new investors, while Mr Petters reportedly used the cash to fund a lavish lifestyle.
Five of his ex-colleagues have already pled guilty to their part in the scheme.
Earlier this year, Bernard Madoff, who masterminded a global $65 billion Ponzi scheme, was sentenced to 150 years in jail.
Mr Petters is pleading not guilty to more than 20 different charges, which include allegations of money laundering, obstruction of justice and fraud.
A 16-member jury is to be selected today (Wednesday 28th October 2009) for the case, which is expected to run for up to six weeks.
Prosecutors claim that Mr Petters and his associates convinced investors to loan them money to purchase electronic goods to sell on to large retailers.
But the money being paid back to clients in return for their investments actually came from funds from new investors, while Mr Petters reportedly used the cash to fund a lavish lifestyle.
Five of his ex-colleagues have already pled guilty to their part in the scheme.
Earlier this year, Bernard Madoff, who masterminded a global $65 billion Ponzi scheme, was sentenced to 150 years in jail.
Hector Ruiz implicated in Galleon insider trading scandal
Hector Ruiz, the former chief executive officer of technology company Advanced Micro Devices (AMD), has been implicated in the Galleon insider trading scandal, according to media reports.
Earlier this month, Raj Rajaratnam, the billionaire founder of the Galleon hedge fund, was arrested over allegations he had masterminded the biggest insider trading scam in history.
Five others were arrested with him and in the complaint filed against one of them, Danielle Chiesi, prosecutors alleged an unnamed AMD executive was guilty of passing on secret information in order to trade stocks.
According to prosecutors, the unnamed executive told Ms Chiesi in August 2008 that AMD's manufacturing operation was about to enter into a venture with the Abu Dhabi government.
The partnership between Abu Dhabi and AMD, which was announced to the public in October 2008, led to the foundation of technology manufacturer Globalfoundaries.
An anonymous source has revealed Mr Ruiz, who is now chairman of Globalfoundaries, to be the unnamed executive.
Mr Ruiz is not a defendant in the case but his alleged involvement in the scam, which has been denied by all of the arrested parties, is sure to damage his considerable reputation.
He took the top job at AMD in 2002 and under his tenure the company made gains against Intel, its largest competitor in the sector.
But the purchase of graphics-chip maker ATI Technologies for $5.4 billion left AMD heavily in debt and by 2008 Intel had re-established its market dominance over his firm.
The formation of Globalfoundaries was a key part of Mr Ruiz's strategy to recover market position.
Both Galleon and hedge-fund New Castle, where Ms Chiesi worked, bought shares in AMD before the transaction was announced on October 7th 2008, an announcement date that Mr Rajaratnam had predicted to Ms Chiesi a week before.
Earlier this month, the Sri Lankan government said that Mr Rajaratnam had used the money he made through the scheme to help fund the Tamil Tigers, a terrorist organisation operating in his home country.
Earlier this month, Raj Rajaratnam, the billionaire founder of the Galleon hedge fund, was arrested over allegations he had masterminded the biggest insider trading scam in history.
Five others were arrested with him and in the complaint filed against one of them, Danielle Chiesi, prosecutors alleged an unnamed AMD executive was guilty of passing on secret information in order to trade stocks.
According to prosecutors, the unnamed executive told Ms Chiesi in August 2008 that AMD's manufacturing operation was about to enter into a venture with the Abu Dhabi government.
The partnership between Abu Dhabi and AMD, which was announced to the public in October 2008, led to the foundation of technology manufacturer Globalfoundaries.
An anonymous source has revealed Mr Ruiz, who is now chairman of Globalfoundaries, to be the unnamed executive.
Mr Ruiz is not a defendant in the case but his alleged involvement in the scam, which has been denied by all of the arrested parties, is sure to damage his considerable reputation.
He took the top job at AMD in 2002 and under his tenure the company made gains against Intel, its largest competitor in the sector.
But the purchase of graphics-chip maker ATI Technologies for $5.4 billion left AMD heavily in debt and by 2008 Intel had re-established its market dominance over his firm.
The formation of Globalfoundaries was a key part of Mr Ruiz's strategy to recover market position.
Both Galleon and hedge-fund New Castle, where Ms Chiesi worked, bought shares in AMD before the transaction was announced on October 7th 2008, an announcement date that Mr Rajaratnam had predicted to Ms Chiesi a week before.
Earlier this month, the Sri Lankan government said that Mr Rajaratnam had used the money he made through the scheme to help fund the Tamil Tigers, a terrorist organisation operating in his home country.
CME profit dips 20%, still beats Street
(Reuters) — CME Group Inc. said on Thursday its adjusted quarterly profit dropped 20 percent, beating expectations, as cost-cutting helped the big derivatives exchange operator stem slumping volumes.
Expenses fell 10 percent in the third quarter, while average daily volume dropped 23 percent, CME said, adding foreign exchange and energy contracts have so far made October a "strong volume month."
"As the economy continues to stabilize, there is room for further organic growth in our core business," CME Executive Chairman Terry Duffy said in a statement.
The world's top derivatives exchange is sensitive to a possibly big regulatory revamp of markets. Its shares, which were little changed before the open, could benefit as more over-the-counter contracts are exchange-traded and cleared, but could be hurt if U.S. regulators impose new commodity-market position limits.
Adjusted to exclude $21 million in one-time items, CME earned $223 million, or $3.35 per share, in the quarter that ended Sept. 30, down from $278 million, or $4.13 per share, in the same period a year earlier.
Analysts on average expected the Chicago-based company to earn $3.29 per share, according to Thomson Reuters I/B/E/S. Revenue fell 17 percent to $650 million, meeting expectations.
Including one-time items, CME 's profit was $202 million, or $3.04 per share.
Derivatives volumes continued a multiquarter slump on the heels of the financial crisis. Clearing and transaction fees, accounting for more than 80 percent of the company's total revenue, dropped 18 percent from a year ago, but edged slightly higher from the previous quarter.
The closely watched rate-per-contract figure was 83 cents in the quarter, in line with expectations.
CME stock was trading down $3.02, or just under 1 percent, at $305.00 Thursday morning.
This Day in Wall Street History 1929: The Great Crash of 1929
Oct. 29, 1929, is a day like no other in Wall Street history.
Black Tuesday, the day of the Great Crash, was a day of frenzied, panic-fueled trading, as investors struggled desperately to avoid financial ruin.
When the dust settled, 16 million shares had been sold on the New York Stock Exchange. Stock prices had plummeted and the nation was sent spiraling toward the Great Depression.
It wasn't supposed to happen this way. During the three-year bull market that had kicked off in 1927, the nation's economy was booming -- convincing even some of the most-cynical souls that America's economy was a powerful machine, capable of spreading wealth and prosperity to the farthest reaches of the land.
But, by the fall of 1929, the capitalist engine had begun to sputter. Steel and automobile production was waning, while the rest of the economy showed signs of decline.
The Bull Run, which had been built out of the smoke and mirrors of over-extended credit, was on the verge of collapse, as investors were increasingly hard-pressed to pay back their loans.
A few days before the crash, a coterie of wealthy financiers tried to stave off disaster by snapping up stocks. Unfortunately for the millions of Americans devastated by the crash, the move proved to be fruitless.
Source: History.com
Black Tuesday, the day of the Great Crash, was a day of frenzied, panic-fueled trading, as investors struggled desperately to avoid financial ruin.
When the dust settled, 16 million shares had been sold on the New York Stock Exchange. Stock prices had plummeted and the nation was sent spiraling toward the Great Depression.
It wasn't supposed to happen this way. During the three-year bull market that had kicked off in 1927, the nation's economy was booming -- convincing even some of the most-cynical souls that America's economy was a powerful machine, capable of spreading wealth and prosperity to the farthest reaches of the land.
But, by the fall of 1929, the capitalist engine had begun to sputter. Steel and automobile production was waning, while the rest of the economy showed signs of decline.
The Bull Run, which had been built out of the smoke and mirrors of over-extended credit, was on the verge of collapse, as investors were increasingly hard-pressed to pay back their loans.
A few days before the crash, a coterie of wealthy financiers tried to stave off disaster by snapping up stocks. Unfortunately for the millions of Americans devastated by the crash, the move proved to be fruitless.
Source: History.com
Tuesday, October 27, 2009
SEC looks into effects of high-frequency trading
The Securities and Exchange Commission is looking into how high-frequency trading, which some estimate accounts for 50% or more of all equity trading in the U.S., affects markets, sources said. As lawmakers are scrutinizing the trading practice and other market developments, the SEC is not expected to publish a discussion paper on the strategies until December at the earliest. A congressional committee will discuss high-frequency trading, dark pools and other developments on Wednesday.
Goldman Sachs defends market practices in report to SEC
In a lengthy report to the Securities and Exchange Commission, Goldman Sachs Group defended high-frequency trading, dark pools, short-selling and other market strategies. "The investing community (especially retail) has benefited from the evolving market structure and industry competition," Goldman said in the report. Lawmakers have criticized the practices and are looking into ways to increase their transparency.
Monday, October 26, 2009
Bank of America and Citigroup execs paid average $18m in 2008
Top executives at Bank of America and Citigroup earned an average salary of $18.2 million in 2008, according to records released by US pay czar Kenneth Feinberg.
Despite receiving around $90 billion in government bailouts, the two banks paid out almost double the average amount paid to managers at the other five bailed-out US companies.
At Bank of America, 13 executives shared almost $230 million between them, an average pay packet of $17.5 million.
Citigroup paid out $390 million to 21 top employees, $18.6 million each.
The records do not include managers who have left the two banks since 2008.
Mr Feinberg has already told the companies to cut their wage bills by 50 per cent in 2009, resulting in Citigroup chief executive Vikram Pandit volunteering to accept only one dollar in pay for this year.
In 2008, Mr Pandit took home almost $11 million.
Earlier this month, Citigroup reported third-quarter losses of more than $100 million, while Bank of America announced a net loss of $1 billion.
Despite receiving around $90 billion in government bailouts, the two banks paid out almost double the average amount paid to managers at the other five bailed-out US companies.
At Bank of America, 13 executives shared almost $230 million between them, an average pay packet of $17.5 million.
Citigroup paid out $390 million to 21 top employees, $18.6 million each.
The records do not include managers who have left the two banks since 2008.
Mr Feinberg has already told the companies to cut their wage bills by 50 per cent in 2009, resulting in Citigroup chief executive Vikram Pandit volunteering to accept only one dollar in pay for this year.
In 2008, Mr Pandit took home almost $11 million.
Earlier this month, Citigroup reported third-quarter losses of more than $100 million, while Bank of America announced a net loss of $1 billion.
Sunday, October 25, 2009
Madoff associate Jeffry Picower dies at 67
Jeffry Picower benefited greatly from Ivan Boesky's fraud in 1980s and made about $6 billion from Bernie Madoff's scheme.
Picower's wife discovered his body and pulled him from the water with help from a housekeeper, authorities said. He was pronounced dead at Good Samaritan Medical Center at about 1:30 p.m.
Palm Beach police are investigating the death as a drowning, but have not ruled out anything on the cause of death.
Picower suffered from Parkinson's disease and had "heart-related issues," said family attorney William D. Zabel. He described Picower's health as "poor."
Picower's body showed no visible injuries, said Joseph Sekula, spokesman for the Palm Beach Fire Department.
"There wasn't anything noted as far as trauma or anything to the body," he said, adding that "it did appear that he was swimming because he was wearing swimming trunks."
Detectives were still at the home more than six hours after the initial 911 call. The iron gate to his long driveway was open and several Palm Beach police cars were parked near the mansion. The home and property is worth more than $33 million, according to the county property appraiser's records.
Picower had been accused by jilted investors of being the biggest beneficiary of Madoff's schemes.
In a lawsuit to recover Madoff's assets, trustee Irving Picard demanded Picower return more than $7 billion in bogus profits. In an e-mailed statement Sunday, Picard said only that "litigation will continue."
Zabel, the Picower family attorney, said in a statement that "there was progress towards a settlement with the trustee."
Picower and his wife started the Picower Foundation in 1989, which has given millions to the Massachusetts Institute of Technology, Human Rights First and the New York Public Library. It also funded diabetes research at Harvard Medical School.
The foundation, whose assets were managed by Madoff, said in its 2007 tax return its investment portfolio was valued at nearly $1 billion.
After the Madoff scandal broke in December, the Picower foundation said it would have to cease grant-making and would be forced to close.
But the trustee's lawyer said Picower's claims that he was a victim "ring hollow" because he withdrew more of other investors' money than anyone else during three decades and should have noticed signs of fraud.
According to the lawyers, Picower's accounts were "riddled with blatant and obvious fraud," and he should have recognized that because he was a sophisticated investor.
Picower had asked that the lawsuit be dismissed, saying it was unsupported by the facts.
Madoff is serving a 150-year prison sentence after he admitted losing billions of dollars for thousands of clients over a half-century career that saw him rise to be a Nasdaq chairman. Madoff's attorney, Ira Sorkin, did not respond to a request for comment.
Jonathan Landers, an attorney representing a large group of victims, said in an e-mail that it was impossible to tell what effect Picower's death would have on efforts to recover funds lost in Madoff's massive Ponzi scheme.
"While there are allegations regarding his knowledge of the Madoff fraud and his possible liability to investors, none have been proven," he wrote. Landers added that even if such facts could be proved, Picower's "death could make it easier or more difficult to obtain and collect on claims."
"It may cause those who have control of his assets to fight harder because there is no longer any personal dignity or desire to settle and move on," he wrote.
Jerry Reisman, another attorney representing about 26 victims, said that Picower's death does make it more difficult for the trustee to recoup some of the money for the victims.
"We won't be able to hear from his own words whether he was complicit," Reisman said.
Jeffry Picower, a philanthropist accused of profiting more than $7 billion from the investment schemes of his longtime friend Bernard Madoff, was found at the bottom of the pool at his oceanside mansion and died Sunday, police said. He was 67.
Picower's wife discovered his body and pulled him from the water with help from a housekeeper, authorities said. He was pronounced dead at Good Samaritan Medical Center at about 1:30 p.m.
Palm Beach police are investigating the death as a drowning, but have not ruled out anything on the cause of death.
Picower suffered from Parkinson's disease and had "heart-related issues," said family attorney William D. Zabel. He described Picower's health as "poor."
Picower's body showed no visible injuries, said Joseph Sekula, spokesman for the Palm Beach Fire Department.
"There wasn't anything noted as far as trauma or anything to the body," he said, adding that "it did appear that he was swimming because he was wearing swimming trunks."
Detectives were still at the home more than six hours after the initial 911 call. The iron gate to his long driveway was open and several Palm Beach police cars were parked near the mansion. The home and property is worth more than $33 million, according to the county property appraiser's records.
Picower had been accused by jilted investors of being the biggest beneficiary of Madoff's schemes.
In a lawsuit to recover Madoff's assets, trustee Irving Picard demanded Picower return more than $7 billion in bogus profits. In an e-mailed statement Sunday, Picard said only that "litigation will continue."
Zabel, the Picower family attorney, said in a statement that "there was progress towards a settlement with the trustee."
Picower and his wife started the Picower Foundation in 1989, which has given millions to the Massachusetts Institute of Technology, Human Rights First and the New York Public Library. It also funded diabetes research at Harvard Medical School.
The foundation, whose assets were managed by Madoff, said in its 2007 tax return its investment portfolio was valued at nearly $1 billion.
After the Madoff scandal broke in December, the Picower foundation said it would have to cease grant-making and would be forced to close.
But the trustee's lawyer said Picower's claims that he was a victim "ring hollow" because he withdrew more of other investors' money than anyone else during three decades and should have noticed signs of fraud.
According to the lawyers, Picower's accounts were "riddled with blatant and obvious fraud," and he should have recognized that because he was a sophisticated investor.
Picower had asked that the lawsuit be dismissed, saying it was unsupported by the facts.
Madoff is serving a 150-year prison sentence after he admitted losing billions of dollars for thousands of clients over a half-century career that saw him rise to be a Nasdaq chairman. Madoff's attorney, Ira Sorkin, did not respond to a request for comment.
Jonathan Landers, an attorney representing a large group of victims, said in an e-mail that it was impossible to tell what effect Picower's death would have on efforts to recover funds lost in Madoff's massive Ponzi scheme.
"While there are allegations regarding his knowledge of the Madoff fraud and his possible liability to investors, none have been proven," he wrote. Landers added that even if such facts could be proved, Picower's "death could make it easier or more difficult to obtain and collect on claims."
"It may cause those who have control of his assets to fight harder because there is no longer any personal dignity or desire to settle and move on," he wrote.
Jerry Reisman, another attorney representing about 26 victims, said that Picower's death does make it more difficult for the trustee to recoup some of the money for the victims.
"We won't be able to hear from his own words whether he was complicit," Reisman said.
Saturday, October 24, 2009
Renaissance Institutional Equities Fund's -12.6% first half 2009
Renaissance Institutional Equities Fund's -12.6% return in the first half this year sharply lagged behind the S&P 500's 3.19% for the same period. The second quarter was especially bad: The long-short equity fund returned -4.73%, versus the index's 15.93%, according to performance data from eVestment Alliance LLC.
The RIEF strategy is designed to outperform the S&P 500, gross of fees, by 400 to 600 basis points over a rolling three-year period, with lower volatility (10.5, versus the S&P 500's historical volatility of 15 to 16).
RenTech — best known for its fabulously successful $10 billion Medallion Fund, a hedge fund that reportedly returned 80% last year and has been closed to external investors for years — simply didn't have to offer investors transparency.Morgan Stanley to sell investment management business for $1.5bn
Morgan Stanley is to sell its retail investment management business, including leading global company Van Kampen Investments, for $1.5 billion to Invesco, the mutual fund business.
The deal will see Morgan Stanley receive around $500 million in cash and $1 billion worth of stock, giving the company a 9.4 per cent stake in Invesco.
It means Morgan Stanley will become the company's largest shareholder.
Invesco will take almost $120 billion worth of client assets from Morgan Stanley's investment operations as part of the agreement.
James Gorman, co-president of Morgan Stanley, said he was looking forward to Morgan Stanley's partnership with Invesco and that the prospects for Van Kampen were good.
"The combination of Invesco's strong and diversified product portfolio with Van Kampen's own product strengths and leading distribution capabilities will create a formidable new contender in the retail space," he added.
Morgan Stanley recently restarted making political donations following the repayment of its government bailout funds, reports Bloomberg.
The deal will see Morgan Stanley receive around $500 million in cash and $1 billion worth of stock, giving the company a 9.4 per cent stake in Invesco.
It means Morgan Stanley will become the company's largest shareholder.
Invesco will take almost $120 billion worth of client assets from Morgan Stanley's investment operations as part of the agreement.
James Gorman, co-president of Morgan Stanley, said he was looking forward to Morgan Stanley's partnership with Invesco and that the prospects for Van Kampen were good.
"The combination of Invesco's strong and diversified product portfolio with Van Kampen's own product strengths and leading distribution capabilities will create a formidable new contender in the retail space," he added.
Morgan Stanley recently restarted making political donations following the repayment of its government bailout funds, reports Bloomberg.
This Day in Wall Street History 1869: NYSE seats up for sale
On this day, the New York Stock Exchange put memberships up for sale for the first time in its 77-year history.
Source: History.com
Source: History.com
Friday, October 23, 2009
Ponzi schemer Richard Piccoli gets 20-year term
Victims of a multimillion-dollar Ponzi scheme who wanted the man who robbed them severely punished got their wish Wednesday when a judge sentenced the 83-year-old businessman to a 20-year prison term.
"You operated without a conscience. You are a wolf in sheep's clothing," the judge told the grandfatherly Piccoli, who walked slowly to the podium and put eyeglasses on before addressing the court.
"I know I'm going to jail, and I deserve it," said Piccoli, whose scheme lasted nearly 30 years. "I let so many people down."
Assistant U.S. Attorney Gretchen Wylegala said authorities estimate Piccoli and his Gen-See Capital Corp. took in $31 million in investments between 2002 and 2009 and that about $7 million was available to partially reimburse victims, many of whom lost tens of thousands of dollars saved over a lifetime of work.
More than 800 people invested with Piccoli, authorities said, and about 500 lost money as he paid earlier investors with money collected from those who came later.
At least 100 people said their finances were ruined, Skretny said.
Defense attorney Joel Daniels said that while defendants in similar cases, including Bernard Madoff, had been driven by greed, Piccoli "was a saver, not a spender," always in search of a good business deal that would let him straighten things out.
"He didn't have any Palm Beach condos. He didn't have any boats," Daniels said. Piccoli, a widower, drove a leased Toyota Camry, which he turned in last week to raise money for restitution, Daniels said, and sold off four parcels of real estate for a total of less than $400,000.
"He's broke. He doesn't have two nickels to rub together, literally," Daniels said.
Investor Lu Tracy of Rochester said she was forced to give up plans to buy a lakeside home in Atlanta after learning the tens of thousands of dollars she had given Piccoli, based on an ad she picked up in a nursing home, were gone. Piccoli, she said, had shaken her faith in mankind.
"I can't relocate or travel or enjoy my retirement," the 69-year-old former manufacturing supervisor said.
Victim Harold DiMarco, 79, of Buffalo said he suffered a heart attack in January and blamed the stress of losing his own investments and "anguish" over steering others, including three who have died, to Piccoli.
Skretny sentenced Piccoli to 20 years for a mail fraud charge and imposed a five-year concurrent sentence for tax evasion. Piccoli pleaded guilty to the charges in June.
Investors, who will receive an undetermined percentage of their money back, were told they would not receive anything until after investigators had finalized the amount available, likely sometime next year.
Thursday, October 22, 2009
Regulating derivatives could do more harm than good
Rep. Eric Cantor, R-Va., writes that lawmakers are focusing on an easy target -- the derivatives market -- rather than identifying and tackling the root causes of the global financial crisis. Cantor, the Republican whip, warns that new regulations being considered by Congress could do irreparable damage to businesses and consumers. "Rather than the tool for gross financial manipulation it is portrayed to be, the derivatives market plays a very important role in solidifying the competitiveness of American businesses," Cantor writes.
This Day in Wall Street History 1914: Nation's first income tax
The passage of the anti-protectionist "Underwood-Simmons Act" took a bite out of the nation's pocketbook. To compensate for the lost income, Congress passed the "Revenue Act" on Oct. 22, 1914, mandating the first tax on incomes over $3,000.
Source: History.com
Source: History.com
CME sees launch of CDS clearing in December
(Reuters) — CME Group expects to launch its clearing house for the $26 trillion credit default swap market in mid-December, as a deadline for dealers to offer clients access to clearing for the contracts comes due, CME chief executive Craig Donohue said on Wednesday.
The exchange has been testing its clearing house with seven or eight CDS dealers and around 10 buyside firms, to prepare for the launch, Donohue said in an interview with Reuters.
The group is "going through all of the different issues that we have to have them operationally ready to begin clearing trades with us by mid-December," Donohue said. "We're making a lot of progress."
A group including 14 of the largest CDS dealers in June told regulators including the New York Federal Reserve that they would offer buyside market participants access to all viable clearing CDS solutions by December 15.
Central clearing, in which the exchange stands between the two counterparties on the contract and assumes the risk of the failure of a trading partner, is viewed as key to removing systemic risks posed by derivative contracts.
American International Group needed a government bailout in September of last year after it sold hundreds of billions of dollars of protection on risky assets using CDS, and did not have adequate capital to back up its commitments.
Credit default swaps are used to protect against a borrower defaulting on their debt or to speculate on their credit quality.
Wednesday, October 21, 2009
Signs Show Hot Money Flooding Back Into China
Signs point to hot money once again flooding into China, amid expectations that returns can be made from a strengthening of the yuan or from rising asset markets.
Last week, for instance, we learned China's reserves hit another record high of $2.27 trillion, despite lower trade surpluses.
One reason pressure is building on China's currency to rise is that its peg to the weakening U.S. dollar has seen it undergo a substantial devaluation against other currencies, despite China being one of the few areas of strength in the world economy.
We now appear to have a turning point in exports and money flows, which could add momentum to asset bubbles, while posing new challenges for policy makers.
After retreating in the first six months of the year, hot money is now heading back to China. Standard Chartered said recent data show bank inflows unexplained by valuation effects, trade, and foreign direct investment amounted to $15.4 billion in July, $5.6 billion in August, and $19.7 billion in September
As well as money inflows, Standard Chartered believe onshore fund movements also are driving this phenomenon, due to surging dollar borrowing seen in rising foreign-currency loans.
This, they note, last happened in late 2007, when expectations of yuan appreciation were at their highest. The banks said that in the fourth quarter of 2007 and first quarter of 2008, onshore banks lent out U.S. dollars worth the equivalent of 420 billion yuan ($61.5 billion). Now in just the four months from May to August, banks have loaned CNY560 billion - twice as much on a monthly basis.
The explanation for the focus on the yuan is the effective devaluation it has seen in the past year, as authorities kept it roughly pegged to the U.S. dollar in the face of an export collapse. As the greenback has fallen against the likes of the yen, euro and Aussie dollar, so too has the yuan. For example, the yuan has now lost roughly 25% against the Australian dollar in the past year.
Now we could be at a turning point. September figures show exports are recovering, meaning there is less need to hold the currency back to gain a trading advantage. Last Wednesday, China released figures showing exports in September were up 12% from the previous month, and almost 30% higher than the levels of six months earlier.
At the same time, there is new evidence money-supply growth in China is accelerating, boosted by swelling foreign exchange reserves. From August to September, new loans rose from CNY410.5 billion to CNY516.7 billion - ahead of expectations - while money-supply levels of M0, M1 and M2 sped their growth, respectively, from 11.5%, 27.7% and 28.5% in August to 16.0%, 29.5% and 29.3% last month.
Attention is turning to China's likely response. Standard Chartered said regulators may have room to raise interest rates. The problem, however, is this may just act as a magnet for more hot money seeking the interest-rate differential, which will in turn generate more upward pressure on the yuan. If the yuan does not move, asset bubbles look more likely with this type of monetary growth.
As usual, if you are looking to gauge the money flood, Hong Kong is a good place to start, where we are seeing fresh signs of froth.
Hong Kong luxury property market is in overdrive. Last week an apartment went for 71,280 Hong Kong dollars ($9,197) per square foot, for a total of HK$439 million, notching up a new world record. It was also reported that the proportion of mainland Chinese buyers in Hong Kong property is at an all-time high. While the numbers are huge, there is speculation that these stratospheric prices are not necessarily straight transactions, with perhaps other assets thrown in or cash refunds.
We are also hearing unconfirmed reports of a new phenomenon of property-swapping to help mainland Chinese buyers get round restrictions on yuan convertibility. This works where a mainlander and a Hong Kong resident come to a gentleman's agreement, whereby the Hong Kong resident buys a local property on behalf of the mainlander, who also buys a property in China for the equivalent amount for the Hong Kong resident.
Last week, the spiraling price of property also made it to the Hong Kong Legislative Council debates, although Chief Executive Donald Tsang said he's not worried, so long as it remains in the luxury sector. (In Hong Kong, 1,000 square feet is classified as luxury.)
Still, if not in Hong Kong, there must be a rising possibility authorities will need to introduce new policy measures to contain this hot money.
Last week, Guangdong provincial introduced new curbs on visitors to Macau. And at the weekend, there were new media reports that Beijing was preparing for an exit strategy for its easy money policy.
Last week, for instance, we learned China's reserves hit another record high of $2.27 trillion, despite lower trade surpluses.
One reason pressure is building on China's currency to rise is that its peg to the weakening U.S. dollar has seen it undergo a substantial devaluation against other currencies, despite China being one of the few areas of strength in the world economy.
We now appear to have a turning point in exports and money flows, which could add momentum to asset bubbles, while posing new challenges for policy makers.
After retreating in the first six months of the year, hot money is now heading back to China. Standard Chartered said recent data show bank inflows unexplained by valuation effects, trade, and foreign direct investment amounted to $15.4 billion in July, $5.6 billion in August, and $19.7 billion in September
As well as money inflows, Standard Chartered believe onshore fund movements also are driving this phenomenon, due to surging dollar borrowing seen in rising foreign-currency loans.
This, they note, last happened in late 2007, when expectations of yuan appreciation were at their highest. The banks said that in the fourth quarter of 2007 and first quarter of 2008, onshore banks lent out U.S. dollars worth the equivalent of 420 billion yuan ($61.5 billion). Now in just the four months from May to August, banks have loaned CNY560 billion - twice as much on a monthly basis.
The explanation for the focus on the yuan is the effective devaluation it has seen in the past year, as authorities kept it roughly pegged to the U.S. dollar in the face of an export collapse. As the greenback has fallen against the likes of the yen, euro and Aussie dollar, so too has the yuan. For example, the yuan has now lost roughly 25% against the Australian dollar in the past year.
Now we could be at a turning point. September figures show exports are recovering, meaning there is less need to hold the currency back to gain a trading advantage. Last Wednesday, China released figures showing exports in September were up 12% from the previous month, and almost 30% higher than the levels of six months earlier.
At the same time, there is new evidence money-supply growth in China is accelerating, boosted by swelling foreign exchange reserves. From August to September, new loans rose from CNY410.5 billion to CNY516.7 billion - ahead of expectations - while money-supply levels of M0, M1 and M2 sped their growth, respectively, from 11.5%, 27.7% and 28.5% in August to 16.0%, 29.5% and 29.3% last month.
Attention is turning to China's likely response. Standard Chartered said regulators may have room to raise interest rates. The problem, however, is this may just act as a magnet for more hot money seeking the interest-rate differential, which will in turn generate more upward pressure on the yuan. If the yuan does not move, asset bubbles look more likely with this type of monetary growth.
As usual, if you are looking to gauge the money flood, Hong Kong is a good place to start, where we are seeing fresh signs of froth.
Hong Kong luxury property market is in overdrive. Last week an apartment went for 71,280 Hong Kong dollars ($9,197) per square foot, for a total of HK$439 million, notching up a new world record. It was also reported that the proportion of mainland Chinese buyers in Hong Kong property is at an all-time high. While the numbers are huge, there is speculation that these stratospheric prices are not necessarily straight transactions, with perhaps other assets thrown in or cash refunds.
We are also hearing unconfirmed reports of a new phenomenon of property-swapping to help mainland Chinese buyers get round restrictions on yuan convertibility. This works where a mainlander and a Hong Kong resident come to a gentleman's agreement, whereby the Hong Kong resident buys a local property on behalf of the mainlander, who also buys a property in China for the equivalent amount for the Hong Kong resident.
Last week, the spiraling price of property also made it to the Hong Kong Legislative Council debates, although Chief Executive Donald Tsang said he's not worried, so long as it remains in the luxury sector. (In Hong Kong, 1,000 square feet is classified as luxury.)
Still, if not in Hong Kong, there must be a rising possibility authorities will need to introduce new policy measures to contain this hot money.
Last week, Guangdong provincial introduced new curbs on visitors to Macau. And at the weekend, there were new media reports that Beijing was preparing for an exit strategy for its easy money policy.
Tuesday, October 20, 2009
IBM's Robert Moffat placed on leave following insider trading arrest
IBM senior executive Robert Moffat has been placed on leave by the company following his arrest for insider trading last week.
The charges relate to a hedge fund run by billionaire businessman Raj Rajaratnam.
Mr Moffat, who a the senior vice president and head of IBM's systems and technology group, has been charged with giving insider information to Mr Rajaratnam's hedge fund, the Galleon Group.
It is alleged that Mr Rajaratnam made around $18 million from the scam.
The Sri Lankan government has also accused him of using the money to help fund the Tamil Tigers, a terrorist group.
Mr Moffat is also accused of passing on information about Sun Microsystems when he was completing due diligence on the company for IBM.
Edward Barbini, an IBM spokesman, said: "In view of a US federal investigation into his personal activities, Mr Moffat has been placed on temporary leave of absence and is no longer serving as an officer of IBM."
The company has named Rodney Adkins as acting head of the systems and technology group.
Mr Moffat denies the allegations.
The charges relate to a hedge fund run by billionaire businessman Raj Rajaratnam.
Mr Moffat, who a the senior vice president and head of IBM's systems and technology group, has been charged with giving insider information to Mr Rajaratnam's hedge fund, the Galleon Group.
It is alleged that Mr Rajaratnam made around $18 million from the scam.
The Sri Lankan government has also accused him of using the money to help fund the Tamil Tigers, a terrorist group.
Mr Moffat is also accused of passing on information about Sun Microsystems when he was completing due diligence on the company for IBM.
Edward Barbini, an IBM spokesman, said: "In view of a US federal investigation into his personal activities, Mr Moffat has been placed on temporary leave of absence and is no longer serving as an officer of IBM."
The company has named Rodney Adkins as acting head of the systems and technology group.
Mr Moffat denies the allegations.
Dark Pool Trade Limit Said to Be Cut 95% in SEC Plan
The U.S. Securities and Exchange Commission will propose toughening its limits on the amount of anonymous trading carried out on stock platforms called dark pools, according to two people familiar with the deliberations.
The commission will propose lowering the amount of daily volume in a company’s shares that can be executed in private on any of the networks to 0.25 percent from 5 percent at a hearing tomorrow in Washington, said the people, who declined to be identified because the discussions weren’t public. John Nester, an SEC spokesman, declined to comment.
The rule change may curtail the number of transactions on dark pools, off-exchange platforms run by firms such as Goldman Sachs Group Inc. and Getco LLC that have drawn scrutiny from Democratic Senators Ted Kaufman of Delaware and Charles Schumer of New York. The systems usually shut down trading in a security when they approach the current 5 percent limit.
The commission will propose lowering the amount of daily volume in a company’s shares that can be executed in private on any of the networks to 0.25 percent from 5 percent at a hearing tomorrow in Washington, said the people, who declined to be identified because the discussions weren’t public. John Nester, an SEC spokesman, declined to comment.
The rule change may curtail the number of transactions on dark pools, off-exchange platforms run by firms such as Goldman Sachs Group Inc. and Getco LLC that have drawn scrutiny from Democratic Senators Ted Kaufman of Delaware and Charles Schumer of New York. The systems usually shut down trading in a security when they approach the current 5 percent limit.
ECB Gold Reserves +EUR1M
FRANKFURT (Dow Jones)--The Eurosystem's reserves of gold and gold receivables increased EUR1 million to EUR238.17 billion in the week ended Oct. 16, the European Central Bank said Tuesday.
The Eurosystem's reserves of net foreign currency decreased EUR1.2 billion to EUR177.9 billion during the period.
The ECB said cash in circulation decreased EUR1.4 billion to EUR770.9 billion.
The Eurosystem consists of the Frankfurt-based ECB and the 16 euro-zone national central banks. Slovakia joined the euro zone Jan. 1, 2009.
The Eurosystem's reserves of net foreign currency decreased EUR1.2 billion to EUR177.9 billion during the period.
The ECB said cash in circulation decreased EUR1.4 billion to EUR770.9 billion.
The Eurosystem consists of the Frankfurt-based ECB and the 16 euro-zone national central banks. Slovakia joined the euro zone Jan. 1, 2009.
Galleon’s Traders Seek Legal Advice, Update Resumes
Galleon Group’s analysts, portfolio managers and traders in New York are seeking legal advice and updating their resumes after the arrest of Raj Rajaratnam, the hedge-fund firm’s founder, led to a flood of redemption requests, people familiar with the matter said.
Redemption requests totaled $1.3 billion, the Wall Street Journal reported yesterday. The firm has assets of $3.7 billion, including about $1 billion from Rajaratnam and employees, according to two people familiar with Galleon. Retaining clients and top managers may prove challenging as Rajaratnam fights the charges. At least two executive recruiters said they have already started talking to Galleon employees about moving to other hedge- fund shops.
Redemption requests totaled $1.3 billion, the Wall Street Journal reported yesterday. The firm has assets of $3.7 billion, including about $1 billion from Rajaratnam and employees, according to two people familiar with Galleon. Retaining clients and top managers may prove challenging as Rajaratnam fights the charges. At least two executive recruiters said they have already started talking to Galleon employees about moving to other hedge- fund shops.
Morgan Stanley sells investment-management business
Fund manager Invesco said Monday that it had agreed to buy Morgan Stanley's retail investment-management business for $1.5 billion in stock and cash. Morgan Stanley will receive $500 million in cash and $1 billion in stock, remaining the largest shareholder in the business, with a 9.4% stake. "This combines two midsize firms to create more scale in an industry where we think the largest companies are pretty well-positioned," said Jeffrey Hopson, an analyst with Stifel Nicolaus.
Monday, October 19, 2009
SEC busts a 'master of deceit' in $14M Ponzi scheme
Three men are accused of running a Ponzi scheme that scammed more than $14 million from hundreds of Haitian-American investors in South Florida and New Jersey.
In a complaint filed Friday, the Securities and Exchange Commission said Ronnie Eugene Bass Jr., Abner Alabre and Brian Taglieri promised to double their clients' money every 90 days through their HomePals Investment Club.
"The extraordinary promises made by these three men spread by word of mouth throughout a close-knit community," said Glenn Gordon, associate director of the SEC's Miami regional office. "Bass presented himself as a master trader of stock options and commodities, when in reality he was a master of deceit."
Bass, 35, of Miami, invested no more than $1.2 million of the $14.3 million collected from investors, and suffered trading losses of 20 percent, authorities said.
Bass, Alabre and Taglieri also face criminal charges of securities fraud, wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering, according to a grand jury indictment. Each faces up to 20 years in prison if convicted.
From April 2008 to December 2008, the men pitched their investments to prospective clients in their Delray Beach offices and maintained a Web site, homepalsinvestmentclub.com, authorities said.
The company's phone number has been disconnected, but its Web site was still live Saturday, complete with testimonials such as "I have never met a firm that operates with such integrity. HomePals Investments Club does what it says it will do."
HomePals raised most of its money through as many as 64 Haitian-American investment clubs, and it offered potential investors a commission for forming new clubs, according to the SEC.
Most of the money allegedly went to paying earlier investors. The men misappropriated about $668,000 for personal use, including $380,000 for a house for Bass and Alabre.
By the end of December, HomePals had only $7,300 left and stopped making payments to investors, according to the SEC complaint. Bass sent investors a letter on Dec. 26, 2008, stating that, "as a consequence of heavy losses suffered," HomePals would not be able to make the payments until March 6. The company closed its offices on March 7.
Alabre, 33, of Miramar, presented himself to investors as the company's secretary, and Taglieri, 49, of Jupiter, presented himself as HomePals' attorney, authorities said.
Bass and Alabre were being detained Saturday, with their arraignments and bond hearings scheduled for Wednesday. Bass' attorney declined comment. Alabre's attorney also declined comment, saying he had not yet been able to meet with his court-appointed client.
The SEC said Taglieri agreed to settle the charges against him without admitting guilt or denying the allegations.
It was not clear if Taglieri was represented by an attorney. Phone numbers listed for him have been disconnected.
In December, the SEC accused a Palm Beach County man of bilking more than $23 million from thousands of Haitian-Americans nationwide. George Theodule used his Haitian background to recruit investors and promised to create a "nation of Haitian millionaires," according to an attorney representing some of the scheme's victims.
In a complaint filed Friday, the Securities and Exchange Commission said Ronnie Eugene Bass Jr., Abner Alabre and Brian Taglieri promised to double their clients' money every 90 days through their HomePals Investment Club.
"The extraordinary promises made by these three men spread by word of mouth throughout a close-knit community," said Glenn Gordon, associate director of the SEC's Miami regional office. "Bass presented himself as a master trader of stock options and commodities, when in reality he was a master of deceit."
Bass, 35, of Miami, invested no more than $1.2 million of the $14.3 million collected from investors, and suffered trading losses of 20 percent, authorities said.
Bass, Alabre and Taglieri also face criminal charges of securities fraud, wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering, according to a grand jury indictment. Each faces up to 20 years in prison if convicted.
From April 2008 to December 2008, the men pitched their investments to prospective clients in their Delray Beach offices and maintained a Web site, homepalsinvestmentclub.com, authorities said.
The company's phone number has been disconnected, but its Web site was still live Saturday, complete with testimonials such as "I have never met a firm that operates with such integrity. HomePals Investments Club does what it says it will do."
HomePals raised most of its money through as many as 64 Haitian-American investment clubs, and it offered potential investors a commission for forming new clubs, according to the SEC.
Most of the money allegedly went to paying earlier investors. The men misappropriated about $668,000 for personal use, including $380,000 for a house for Bass and Alabre.
By the end of December, HomePals had only $7,300 left and stopped making payments to investors, according to the SEC complaint. Bass sent investors a letter on Dec. 26, 2008, stating that, "as a consequence of heavy losses suffered," HomePals would not be able to make the payments until March 6. The company closed its offices on March 7.
Alabre, 33, of Miramar, presented himself to investors as the company's secretary, and Taglieri, 49, of Jupiter, presented himself as HomePals' attorney, authorities said.
Bass and Alabre were being detained Saturday, with their arraignments and bond hearings scheduled for Wednesday. Bass' attorney declined comment. Alabre's attorney also declined comment, saying he had not yet been able to meet with his court-appointed client.
The SEC said Taglieri agreed to settle the charges against him without admitting guilt or denying the allegations.
It was not clear if Taglieri was represented by an attorney. Phone numbers listed for him have been disconnected.
In December, the SEC accused a Palm Beach County man of bilking more than $23 million from thousands of Haitian-Americans nationwide. George Theodule used his Haitian background to recruit investors and promised to create a "nation of Haitian millionaires," according to an attorney representing some of the scheme's victims.
ETF INVESTOR: Funds For TIPS, Commodities, Foreign Stocks Dominate
Investors fretting over a weaker U.S. dollar and the outlook for inflation have been stuffing cash into exchange-traded funds following commodities, foreign stocks and inflation-protected bonds, industry data show.
"Aside from hunting for low-duration bond ETFs in an effort to avoid excessive interest rate risk, it appears that investors are also bracing their portfolios for a potential long-term bout of inflation," said John Gabriel, ETF analyst at Morningstar Inc.
He said industrywide ETF assets topped $700 billion last month, with year-to-date inflows of $56.3 billion. "ETF industry flows have been quite strong so far in 2009, with positive flows in every month except February," Gabriel said.
So where is the money going? Into bonds, commodities and international stocks, particularly the emerging markets subcategory. Leveraged and inverse ETFs, the high-powered funds that have attracted regulatory scrutiny this year, saw positive inflows in September after investors pulled money the previous two months.
Bonding With Bonds
For the major asset classes, taxable-bond ETFs hauled in the most new money in September, according to Morningstar.
The preference for bond ETFs mirrors the buying trends in mutual funds. Many retail investors sat out the rally that started in March. Still wary of stocks after their plunge during the credit crunch, individual investors have piled into bond funds.
"The shift into fixed-income ETFs has been an ongoing theme thus far in 2009; year-to-date the category has brought in about $26.7 billion of new assets, which makes it the most popular ETF category so far in 2009," Gabriel pointed out. "For some perspective, consider that taxable-bond ETFs attracted approximately $17 billion in all of 2008."
The earliest ETFs tracked stocks, but the bond side of the business is growing. At the end of September, there were 768 U.S.-listed ETFs. Of these, 68 were fixed-income funds, with about $91 billion in total assets, according to research from State Street Global Advisors.
"From their start with a handful of options in the 1990s, ETFs have grown up around a clear value proposition, low-fee offerings that allow for diversification and/or targeted investment themes," said Nicholas Colas, ConvergEx chief market strategist.
"Their collective success is printed on the tape every day, with products like the SPDR S&P 500 ETF (SPY), PowerShares QQQ Trust (QQQQ) and Financial Select Sector SPDR Fund (XLF) at the top of the volume tables for exchanges, alternative trading venues and dark pools," he said.
In terms of size, one bond fund that has been roaring up the charts is designed to protect investors from inflation: the iShares Barclays TIPS Bond Fund (TIP). The ETF, which is indexed to a basket of Treasury Inflation-Protected Securities, has grown to nearly $17 billion in assets.
"After enjoying more than $6.5 billion in net inflows year-to-date, iShares Barclays TIPS Bond has doubled in size and currently stands at well over $16 billion in assets after closing out 2008 at roughly $8 billion," said Gabriel, the ETF analyst.
He said another bond ETF gobbling new assets is the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD), which has about $13 billion.
"This year we've also seen investors rush into junk bonds with hopes of cultivating equitylike returns and generous yields, thanks to the historic widening of yield spreads in recent months," the analyst observed.
Two of the largest ETFs in this category, which has benefited from a reappearance of investor appetite for risk, are SPDR Barclays Capital High Yield Bond (JNK) and iShares iBoxx $ High Yield Corporate Bond (HYG).
Digging Gold And Other Commodities
Inflation fears also have pushed investors into ETFs tracking gold and other commodities.
Investors can get exposure to gold prices with ETFs such as SPDR Gold Shares (GLD), which trades on the NYSE Arca exchange and charges annual fees of 0.4%. This huge ETF holds more than $37 billion in assets and has been a popular vehicle to trade the precious metal, with gold futures over $1,000.
Gabriel said strong interest in commodities markets is being driven by "tactical strategies looking to join in on the popular 'reflation' trade and more folks allocating a portion of their portfolios to commodities for the longer-term diversification benefits that this non-correlated asset class can provide."
However, some commodities ETFs that invest in futures contracts have run into trouble lately as a result of position limits imposed by the Commodity Futures Trading Commission.
Some of the funds are broad-based and hold several commodities, such as PowerShares DB Commodity Index Tracking (DBC). The ETF, with assets of nearly $4 billion, recently expanded the number of commodities it tracks as a result of the CFTC's stepped-up examination of certain ETFs.
Some ETFs like United States Oil Fund LP (USO) track individual commodities. Additionally, there are commodity-themed ETFs that invest in stocks, rather than futures.
Eyeing Emerging Markets
The big rally in emerging markets has attracted investors to this volatile sector. Two of the top-selling funds this year are the iShares MSCI Emerging Markets Index Fund (EEM) and the Vanguard Emerging Markets ETF (VWO). The latter fund recently posted a year-to-date gain of 73.5%.
ETFs targeting individual developing countries such as the iShares MSCI Brazil Index Fund (EWZ) have also garnered interest.
"With hopes of increased U.S. and European demand for commodity and other emerging markets exports bolstered by a good start to the third-quarter earnings season and the latest Chinese trade numbers, investors poured money into emerging markets equity funds during the second week of October," said investment researcher EPFR Global in its latest weekly update.
"Aside from hunting for low-duration bond ETFs in an effort to avoid excessive interest rate risk, it appears that investors are also bracing their portfolios for a potential long-term bout of inflation," said John Gabriel, ETF analyst at Morningstar Inc.
He said industrywide ETF assets topped $700 billion last month, with year-to-date inflows of $56.3 billion. "ETF industry flows have been quite strong so far in 2009, with positive flows in every month except February," Gabriel said.
So where is the money going? Into bonds, commodities and international stocks, particularly the emerging markets subcategory. Leveraged and inverse ETFs, the high-powered funds that have attracted regulatory scrutiny this year, saw positive inflows in September after investors pulled money the previous two months.
Bonding With Bonds
For the major asset classes, taxable-bond ETFs hauled in the most new money in September, according to Morningstar.
The preference for bond ETFs mirrors the buying trends in mutual funds. Many retail investors sat out the rally that started in March. Still wary of stocks after their plunge during the credit crunch, individual investors have piled into bond funds.
"The shift into fixed-income ETFs has been an ongoing theme thus far in 2009; year-to-date the category has brought in about $26.7 billion of new assets, which makes it the most popular ETF category so far in 2009," Gabriel pointed out. "For some perspective, consider that taxable-bond ETFs attracted approximately $17 billion in all of 2008."
The earliest ETFs tracked stocks, but the bond side of the business is growing. At the end of September, there were 768 U.S.-listed ETFs. Of these, 68 were fixed-income funds, with about $91 billion in total assets, according to research from State Street Global Advisors.
"From their start with a handful of options in the 1990s, ETFs have grown up around a clear value proposition, low-fee offerings that allow for diversification and/or targeted investment themes," said Nicholas Colas, ConvergEx chief market strategist.
"Their collective success is printed on the tape every day, with products like the SPDR S&P 500 ETF (SPY), PowerShares QQQ Trust (QQQQ) and Financial Select Sector SPDR Fund (XLF) at the top of the volume tables for exchanges, alternative trading venues and dark pools," he said.
In terms of size, one bond fund that has been roaring up the charts is designed to protect investors from inflation: the iShares Barclays TIPS Bond Fund (TIP). The ETF, which is indexed to a basket of Treasury Inflation-Protected Securities, has grown to nearly $17 billion in assets.
"After enjoying more than $6.5 billion in net inflows year-to-date, iShares Barclays TIPS Bond has doubled in size and currently stands at well over $16 billion in assets after closing out 2008 at roughly $8 billion," said Gabriel, the ETF analyst.
He said another bond ETF gobbling new assets is the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD), which has about $13 billion.
"This year we've also seen investors rush into junk bonds with hopes of cultivating equitylike returns and generous yields, thanks to the historic widening of yield spreads in recent months," the analyst observed.
Two of the largest ETFs in this category, which has benefited from a reappearance of investor appetite for risk, are SPDR Barclays Capital High Yield Bond (JNK) and iShares iBoxx $ High Yield Corporate Bond (HYG).
Digging Gold And Other Commodities
Inflation fears also have pushed investors into ETFs tracking gold and other commodities.
Investors can get exposure to gold prices with ETFs such as SPDR Gold Shares (GLD), which trades on the NYSE Arca exchange and charges annual fees of 0.4%. This huge ETF holds more than $37 billion in assets and has been a popular vehicle to trade the precious metal, with gold futures over $1,000.
Gabriel said strong interest in commodities markets is being driven by "tactical strategies looking to join in on the popular 'reflation' trade and more folks allocating a portion of their portfolios to commodities for the longer-term diversification benefits that this non-correlated asset class can provide."
However, some commodities ETFs that invest in futures contracts have run into trouble lately as a result of position limits imposed by the Commodity Futures Trading Commission.
Some of the funds are broad-based and hold several commodities, such as PowerShares DB Commodity Index Tracking (DBC). The ETF, with assets of nearly $4 billion, recently expanded the number of commodities it tracks as a result of the CFTC's stepped-up examination of certain ETFs.
Some ETFs like United States Oil Fund LP (USO) track individual commodities. Additionally, there are commodity-themed ETFs that invest in stocks, rather than futures.
Eyeing Emerging Markets
The big rally in emerging markets has attracted investors to this volatile sector. Two of the top-selling funds this year are the iShares MSCI Emerging Markets Index Fund (EEM) and the Vanguard Emerging Markets ETF (VWO). The latter fund recently posted a year-to-date gain of 73.5%.
ETFs targeting individual developing countries such as the iShares MSCI Brazil Index Fund (EWZ) have also garnered interest.
"With hopes of increased U.S. and European demand for commodity and other emerging markets exports bolstered by a good start to the third-quarter earnings season and the latest Chinese trade numbers, investors poured money into emerging markets equity funds during the second week of October," said investment researcher EPFR Global in its latest weekly update.
Sunday, October 18, 2009
Raj Rajaratnam arrest just the start of insider trading cases
The arrest of billionaire hedge-fund manager Raj Rajaratnam is set to be just the start of insider trading cases brought against Wall Street figures, according to media reports.
Mr Rajaratnam was arrested late last week with five others over allegations that he was part of the largest insider-trading scheme ever seen.
It is alleged that his firm made around $18 million through an insider-trading ring.
Wiretaps recording Mr Rajaratnam having conversations with alleged co-conspirators are believed to be the basis of the case against him.
The federal investigators who brought the case against him are set to make a wave of further arrests targeted at insider-trading networks, according to an unnamed source speaking to Bloomberg.
A two-year investigation has brought Securities and Exchange Commission officials to the brink of arresting a number of targets including lawyers and hedge-fund managers.
Investigators have supplemented their use of wiretaps with a complex data-mining operation, which looked into groups of people who were making suspiciously well-timed stock investments.
FBI agents were also involved in the probe into Mr Rajaratnam's activities and it is believed they had at least one informant giving them details of alleged crimes.
Bill Mateja, a former Justice Department lawyer, told Bloomberg that the use of such tactics was necessary in building a case.
"Insider-trading cases are notoriously difficult to prosecute because the evidence is often circumstantial," he said.
"If law enforcement is actively going to go out and target this with covert investigative techniques, I think it's going to keep people on their toes."
Last weekend, the Sri Lankan government claimed that Mr Rajaratnam was also involved in funding the Tamil Tigers, a group considered terrorists by the US government.
A spokesman for the Sri Lankan defence ministry told the Financial Times that it had been monitoring him for several years.
Jim Walden, Mr Rajaratnam's defence attorney, said his client denied the insider-trading charges and had no association with the Tamil Tigers.
Mr Rajaratnam was arrested late last week with five others over allegations that he was part of the largest insider-trading scheme ever seen.
It is alleged that his firm made around $18 million through an insider-trading ring.
Wiretaps recording Mr Rajaratnam having conversations with alleged co-conspirators are believed to be the basis of the case against him.
The federal investigators who brought the case against him are set to make a wave of further arrests targeted at insider-trading networks, according to an unnamed source speaking to Bloomberg.
A two-year investigation has brought Securities and Exchange Commission officials to the brink of arresting a number of targets including lawyers and hedge-fund managers.
Investigators have supplemented their use of wiretaps with a complex data-mining operation, which looked into groups of people who were making suspiciously well-timed stock investments.
FBI agents were also involved in the probe into Mr Rajaratnam's activities and it is believed they had at least one informant giving them details of alleged crimes.
Bill Mateja, a former Justice Department lawyer, told Bloomberg that the use of such tactics was necessary in building a case.
"Insider-trading cases are notoriously difficult to prosecute because the evidence is often circumstantial," he said.
"If law enforcement is actively going to go out and target this with covert investigative techniques, I think it's going to keep people on their toes."
Last weekend, the Sri Lankan government claimed that Mr Rajaratnam was also involved in funding the Tamil Tigers, a group considered terrorists by the US government.
A spokesman for the Sri Lankan defence ministry told the Financial Times that it had been monitoring him for several years.
Jim Walden, Mr Rajaratnam's defence attorney, said his client denied the insider-trading charges and had no association with the Tamil Tigers.
Saturday, October 17, 2009
Poland’s $10 Billion State Sales Draining Stock Funds
Oct. 14 (Bloomberg) -- Poland’s record $10 billion of state share sales through next year risk draining funds from the stock exchange, causing the market to underperform, according to ING PTE SA, manager of the country’s second-largest pension fund.
Warsaw’s benchmark WIG20 Index has climbed 24 percent in 2009, lagging behind the MSCI Emerging Markets Index’s 67 percent gain and the Hungarian BUX Index’s 70 percent surge. While Poland is the only European Union economy to avoid a recession this year, investors have been setting aside money for initial public offerings, Ewa Radkowska- Swieton, ING PTE’s board member in charge of investment, said in an interview in Warsaw.
“These big offerings will probably drain some funds from the market and prompt some asset reallocations,” said Radkowska, who helps manage the equivalent of $14.3 billion of assets. “It won’t be easy for the Warsaw bourse to catch up with the gains on other markets.”
Poland is offering stakes in power, oil, copper, phone and insurance companies to help plug a budget deficit that the government says will almost double next year. Shares of state- controlled coal producer Lubelski Wegiel Bogdanka SA soared 58 percent since its IPO in June, lifting the company’s valuation to 13.6 times estimated earnings from 9.4 times, according to data compiled by Bloomberg.
PGE SA, Poland’s biggest power producer, said on Oct. 12 it’s seeking to raise about 5 billion zloty ($1.7 billion) in the next two weeks for Europe’s largest IPO this year. State- controlled PKO Bank Polski SA, the country’s No. 1 lender, is selling 5.1 billion zloty of new shares this month to finance expansion. The total 30 billion zloty of share sales planned through 2010 is equivalent to almost 10 percent of the Warsaw Stock Exchange’s traded value, according to Bloomberg data.
PZU, Polkomtel
The sales may cause “temporary shocks on the investors’ side,” said Radkowska.
The government will be under pressure to offer the shares on the stock market at prices that will ensure demand, according to Radkowska. Investors expect a discount of 10 to 20 percent relative to the industry group, she said.
“The government has its back to the wall because it needs to sell assets to keep the public debt in check,” said Radkowska. “These are big, flagship companies and they can’t afford to fail.”
PZU SA, Poland’s biggest insurer, may offer a stake to the public next year after the government struck a deal over control of the company with Dutch-based Eureko BV. Mobile phone operator Polkomtel SA, controlled by state-owned companies, also is considering an IPO as two shareholders seek to sell a total stake of 46 percent.
Power Companies
Poland is targeting a total 36.7 billion zloty from selling assets through 2010, including stake disposals to strategic investors, to help finance a deficit the government estimates will reach 52.2 billion zloty next year.
Power-company shares may be a “good opportunity” for local pension funds to diversify portfolios and a “chance to earn money,” said Radkowska. Of Poland’s four power groups, only Enea SA is traded on the Warsaw Stock Exchange. Its shares have jumped 39 percent since its IPO in November.
RWE AG, which was picked for exclusive talks to take over Enea, won’t place a final bid, Polish Deputy Treasury Minister Jan Bury said in a phone interview today. The German utility probably wasn’t prepared to offer a premium for taking control of the company, Bury said. Poland will restart the sale by early December.
Enea shares advanced 0.2 percent to 21.4 zloty in Warsaw today, while the WIG20 Index jumped 3.4 percent to 2,302.54.
ING PTE, a Polish unit of ING Groep NV, the largest Dutch financial-services company, holds 27 percent of its assets in stocks, according to data on the financial-market regulator’s Web site.
To contact the reporter on this story: Pawel Kozlowski in Warsawpkozlowski@bloomberg.net
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