Independent Fiduciary Consultant, Economics and Financial Ethics

One who intends to leave others better off for his having existed.

9/1/14

How to shut someone up; prior restraint via fear of death

"I have been pronounced by the Holy Office to be vehemently suspected of heresy,
that is to say,
of having held and believed that the Sun is the center of the world and immovable,
and that the earth is not the center and moves.

Therefore, desiring to remove from the minds of your Eminences, and of all faithful Christians, this vehement suspicion, justly conceived against me, with sincere heart and unfeigned faith I abjure, curse, and detest the aforesaid errors and heresies, … and I swear that in the future I will never again say or assert, verbally or in writing, anything that might furnish occasion for a similar suspicion regarding me."

– Galileo Galilei (1564 – 1642)

Citibank CEO Vikram Pandit Securities Fraud and Insider Trading

On 2008-11-13, while Citibank was in possession of undisclosed Federal Reserve provided Term Auction Facility loans, Citibank CEO Vikram Pandit purchased 850,000 shares of Citibank stock valued at $9,633,050 without being arrested for Insider Trading and Securities Fraud.

During late 2007 and throughout 2008, unknown to shareholders but known to Citibank CEO Vikram Pandit, who certified Citibank's 2008 annual report filed with the SEC, Citibank borrowed billions from the Federal Reserve Bank's Term Auction Faciltiy on nine occations at interest rates as low as 0.42%, with up to $21.371 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed in Citibank's 2008 annual report.
           
http://www.federalreserve.gov/newsevents/reform_taf.htm
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Citibank's 2008 annual report cites the words "Term Auction" 0 times, and "TAF" 0 times, with no mention of the overall size of Citibank's Federal Reserve Term Auction Facility credit lines, interest rates and maturities, all of which were material inside information known to CEO Vikram Pandit but not Citibank shareholders, Congress, or the public.

http://www.citigroup.com/citi/fin/data/ar08c_en.pdf
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Sarbanes Oxley (SOX), which is certified in annual reports to the SEC states;

    "SEC.302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) REGULATIONS REQUIRED ...the principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, certify in each annual or quarterly report filed or submitted under either such section of such Act that--

    (2) based on the officer's knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading..."
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An SEC interpretation states: "Many financial institutions, such as thrifts and banks, are receiving financial assistance in connection with federally assisted acquisitions or restructurings...  If these or any other types of federal financial assistance have materially affected, or are reasonably likely to have a material future effect upon, financial condition or results of operations, the [Management Discussion and Analysis] should provide disclosure of the nature, amounts, and effects of such assistance..."

http://www.sec.gov/rules/interp/33-6835.htm
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I believe Citibank CEO Vikram Pandit is guilty of Securities Fraud and Insider Trading, with the consent of the Federal Reserve, the SEC etc... and the Justice Department.
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Previously;

BB&T CEO Kelly King and CFO Daryl Bible Securities Fraud

http://hartzman.blogspot.com/2014/09/bb-ceo-kelly-king-and-cfo-daryl-bible.html

Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich Securities Fraud and Insider Trading

http://hartzman.blogspot.com/2014/09/wells-fargo-ceo-john-stumpf-and.html

JPM CEO Jamie Dimon Securities Fraud and Insider Trading

http://hartzman.blogspot.com/2014/09/happy-labor-day-jpm-ceo-jamie-dimon.html

Zions Bank search for "Term Auction Facility" from thier fiscal year ended December 31, 2008 10k
http://hartzman.blogspot.com/2013/12/zion-bank-search-for-term-auction.html

BB&T CEO Kelly King and CFO Daryl Bible Securities Fraud

During late 2008 and through August 2009, unknown to shareholders but known to BB&T CEO Kelly King and CFO Daryl Bible, who certified BB&T's 2009 annual report filed with the SEC, BB&T borrowed billions from the Federal Reserve Bank's Term Auction Facility on nine occasions at interest rates as low as 0.25%, with up to $19.343 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed by BB&T's 2009 annual report.
           
http://www.federalreserve.gov/newsevents/reform_taf.htm
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BBT's annual report cites the words "Term Auction" 0 times, and "TAF" 0 times, with no mention of the overall size of BBT's Federal Reserve Term Auction Facility credit lines, interest rates and maturities, all of which were material inside information known to CEO Kelly King and CFO Daryl Bible but not BBT shareholders, Congress, or the public.

http://www.bbt.com/assets/docs/pdf/bbt-com/about/investor-relations/reports/2009-form-10k.pdf
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Sarbanes Oxley (SOX) states;

    "SEC.302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) REGULATIONS REQUIRED ...the principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, certify in each annual or quarterly report filed or submitted under either such section of such Act that--

    (2) based on the officer's knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading..."
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An SEC interpretation states: "Many financial institutions, such as thrifts and banks, are receiving financial assistance in connection with federally assisted acquisitions or restructurings...  If these or any other types of federal financial assistance have materially affected, or are reasonably likely to have a material future effect upon, financial condition or results of operations, the [Management Discussion and Analysis] should provide disclosure of the nature, amounts, and effects of such assistance..."

http://www.sec.gov/rules/interp/33-6835.htm
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I believe CEO Kelly King and CFO Daryl Bible are guilty of Securities Fraud, with the consent of the Federal Reserve, the SEC etc... and the Justice Department.
.
.
Previously;

Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich Securities Fraud and Insider Trading

http://hartzman.blogspot.com/2014/09/wells-fargo-ceo-john-stumpf-and.html

JPM CEO Jamie Dimon Securities Fraud and Insider Trading

http://hartzman.blogspot.com/2014/09/happy-labor-day-jpm-ceo-jamie-dimon.html

Matt Taibbi Emails; Wells Fargo, KPMG, Don Vaughan, BBT, Kelly King, Nido Qubein and Ally Financial

http://hartzman.blogspot.com/2013/05/matt-taibbi-emails-wells-fargo-kpmg-don.html

If Peoples Bank of North Carolina's CEO Tony Wolfe decided to sign off on SEC reports stating Federal Reserve Borrowings, did BB&T?

http://hartzman.blogspot.com/2012/10/if-peoples-bank-of-north-carolinas-ceo.html

Zions Bank search for "Term Auction Facility" from their fiscal year ended December 31, 2008 10k
http://hartzman.blogspot.com/2013/12/zion-bank-search-for-term-auction.html

Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich Securities Fraud and Insider Trading

On January 17, 2008, unknown to shareholders but known to Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich, Wells Fargo borrowed $1.666 billion from the Federal Reserve Bank's Term Auction Faciltiy at 3.95% interest, with $47.930 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed by Wells Fargo's 2008 annual report.

On May 22 2008, unknown to shareholders but known to Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich, Wells Fargo borrowed $7.5 billion from the Federal Reserve Bank's Term Auction Faciltiy at 2.1% interest, with $47.197 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed by Wells Fargo's 2008 annual report..
           
http://www.federalreserve.gov/newsevents/reform_taf.htm
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WFC's annual report cites the words "Term Auction" 0 times, and "TAF" 0 times, with no mention of the overall size of WFC's Federal Reserve Term Auction Facility credit lines, interest rates and maturities, all of which were material inside information known to Wells Fargo CEO John Stumpf and Chairman Richard Kovacevich but not WFC shareholders, Congress, or the public.

https://www08.wellsfargomedia.com/downloads/pdf/invest_relations/wf2008annualreport.pdf
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On 2008-05-15, while WFC was in possession of undisclosed Federal Reserve provided Term Auction Facility loans, Stumpf John G. purchased 1,550 of Wells Fargo stock valued at $44,841  without being arrested for Insider Trading and Securities Fraud.

On 2008-06-06, while WFC was in possession of undisclosed Federal Reserve provided Term Auction Facility loans, Kovacevich Richard M. purchased 40,398 of Wells Fargo stock valued at $1,052,367 without being arrested for Insider Trading and Securities Fraud.

http://www.insider-monitor.com/trading/cik72971-3.html   
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Sarbanes Oxley (SOX) states;

    "SEC.302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) REGULATIONS REQUIRED ...the principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, certify in each annual or quarterly report filed or submitted under either such section of such Act that--

    (2) based on the officer's knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading..."
.
.
An SEC interpretation states: "Many financial institutions, such as thrifts and banks, are receiving financial assistance in connection with federally assisted acquisitions or restructurings...  If these or any other types of federal financial assistance have materially affected, or are reasonably likely to have a material future effect upon, financial condition or results of operations, the [Management Discussion and Analysis] should provide disclosure of the nature, amounts, and effects of such assistance..."

http://www.sec.gov/rules/interp/33-6835.htm
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I believe CEO John Stumpf and Chairman Richard Kovacevich are guilty of Securities Fraud and Insider Trading, with the consent of the Federal Reserve, the SEC etc... and the Justice Department.
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From 2006 through 2008, SEC Chair Mary Jo White's husband John served as Director of the Division of Corporation Finance at the U.S. Securities and Exchange Commission, which oversees disclosure and reporting by public companies in the United States.was head of the SEC division which oversees disclosure and reporting by public companies. Mr. White played an integral role in the SEC’s response to market turmoil throughout 2008, ensuring that the Division acted swiftly and appropriately to facilitate strategic transactions and access to capital for public companies.
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Bloomberg's Bob Ivry, Bradley Keoun, Phil Kuntz, Alison Fitzgerald, Fabio Benedetti-Valentini, Noah Bhahayar, Dakin Campbell, Christopher Condon, Gavin Finch, Andrew Frye, Donal Griffin, Christine Harper, Takashiko Hyuga, Aaron Kirchfeld, Dawn Kopecki, Rachel Layne, Elena Logutenkova, John Martens, Michael J. Moore, Howard Mustoe, Hugh Son, James Sterngold, Robert Friedman, John Voskuhl and Otis Bilodeau didn't bother to follow up on the story revealing the Insider Trading and Securities Fraud, to the benefit of Bloomberg companies.

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

Happy Labor Day; JPM CEO Jamie Dimon Securities Fraud and Insider Trading

On May 22 2008, unknown to shareholders but known to JPM CEO Jamie Dimon,  J.P. Morgan Chase Bank borrowed $2 billion from the Federal Reserve Bank's Term Auction Faciltiy at 2.1% interest, with $90.536 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed.

On Nov 6 2008, unknown to shareholders but known to JPM CEO Jamie Dimon,  J.P. Morgan Chase Bank borrowed $5 billion from the Federal Reserve Bank's Term Auction Faciltiy at 0.6% interest, with $81.700 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed.

On Dec 23 2008, unknown to shareholders but known to JPM CEO Jamie Dimon,  J.P. Morgan Chase Bank borrowed $10 billion from the Federal Reserve Bank's Term Auction Faciltiy at 0.6% interest, with $81.080 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed.
http://www.federalreserve.gov/newsevents/reform_taf.htm
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JPM's annual report cites the words "Term Auction" three times, with no mention of the overall size of JPM's Federal Reserve Term Auction Facility credit lines, interest rates and maturities, all of which were material inside information known to Jamie Dimon but not JPM shareholders, the public or the SEC.

http://files.shareholder.com/downloads/ONE/3437901818x0x283416/66cc70ba-5410-43c4-b20b-181974bc6be6/2008_AR_Complete_AR.pdf
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On 2009-01-16, while JPM was in possession of an undisclosed Federal Reserve provided Term Auction Facility credit line of more than $80 billion, Jamie Dimon purchased 500,000 of J.P. Morgan stock valued at $11,464,500 without being arrested for Insider Trading and Securities Fraud.

http://www.insider-monitor.com/trader/cik1195345.html
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Sarbanes Oxley (SOX) states;

"SEC.302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

(a) REGULATIONS REQUIRED ...the principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, certify in each annual or quarterly report filed or submitted under either such section of such Act that--

(1) the signing officer has reviewed the report;

(2) based on the officer's knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;

(3) based on such officer's knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the report".
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An SEC interpretation states: "Many financial institutions, such as thrifts and banks, are receiving financial assistance in connection with federally assisted acquisitions or restructurings...If these or any other types of federal financial assistance have materially affected, or are reasonably likely to have a material future effect upon, financial condition or results of operations, the [Management Discussion and Analysis] should provide disclosure of the nature, amounts, and effects of such assistance..."

http://www.sec.gov/rules/interp/33-6835.htm
.
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I believe J.P. Morgan CEO Jamie Dimon is guilty of Securities Fraud and Insider Trading, with the consent of the Federal Reserve, the SEC etc... and the Justice Department.
.
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Bloomberg's Bob Ivry, Bradley Keoun, Phil Kuntz, Alison Fitzgerald, Fabio Benedetti-Valentini, Noah Bhahayar, Dakin Campbell, Christopher Condon, Gavin Finch, Andrew Frye, Donal Griffin, Christine Harper, Takashiko Hyuga, Aaron Kirchfeld, Dawn Kopecki, Rachel Layne, Elena Logutenkova, John Martens, Michael J. Moore, Howard Mustoe, Hugh Son, James Sterngold, Robert Friedman, John Voskuhl and Otis Bilodeau didn't bother to follow up on the story revealing the Insider Trading and Securities Fraud, to the benefit of Bloomberg News.

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

8/30/14

"Central Banks Trade S&P 500 Futures"

http://www.zerohedge.com/news/2014-08-30/its-settled-central-banks-trade-sp500-futures

"...The purpose of this Program is to incentivize Central Banks located outside of the United States to trade the products listed below on the CME Globex® Platform. The resulting increase in liquidity in the products listed below benefits all participant segments in the market...

The Exchanges’ staff identified the following Core Principles as potentially being impacted; Prevention of Market Disruption, Execution of Transactions, Protection of [the biggest] Market Participants and Compliance with Rules and Record Keeping.

...The Exchanges’ market regulation staff will monitor trading in the Program’s products to prevent manipulative trading and market abuse.

Would love to see the compliance file.





Product Scope; All CME, CBOT, and NYMEX futures and options contracts available for trading on the CME Globex Platform, and all COMEX futures products available for trading on the CME Globex® Platform (“Products”).

Eligible Participants

There is no limit to the number of participants that may participate in the Program.

All non-U.S. central banks may apply for participation.

Start date is July 1, 2013. End date is December 31, 2014.

The Exchanges shall monitor trading activity and participants’ performance"...

Meaning the Exchanges know how much of what 
has been traded by whom, and when.

http://www.cftc.gov/stellent/groups/public/@rulesandproducts/documents/ifdocs/rul012914cmecbotnymexandcomex1.pdf


http://sirt.cftc.gov/sirt/sirt.aspx?Topic=TradingOrganizationRulesAD&Key=28693

8/29/14

"SEC is ‘weak’ on enforcement — says one of its commissioners"

"The Securities and Exchange Commission has received its share of criticism for not properly policing markets. But lost amid headlines Thursday was a damning indictment from inside the agency.

[Securities and Exchange Commissioner] Luis Aguilar wasn’t willing to go along with a settlement against Kevin Kyser, the former chief financial officer of Affiliated Computer Services.

Aguilar pointed out that... Kyser himself knew what ACS was doing, was responsible for false and misleading public filings, highlighted the misleading revenue growth in earnings releases and analyst calls, failed to ensure ACS adequately disclosed the significance of these calls, signed false certifications and received an inflated bonus.

But Kyser, a CPA, wasn’t charged with fraud, Aguilar lamented.

               "Beyond this particular matter, I am concerned that the Commission is entering into a practice of accepting settlements without appropriately charging fraud and imposing Rule 102(e) suspensions against accountants in financial reporting and disclosure cases.  I am also concerned that this reflects a lack of conviction to charge what the facts warrant and to bring appropriate remedies.

                I am concerned that this case is emblematic of a broader trend at the Commission where fraud charges—particularly non-scienter fraud charges—are warranted, but instead are downgraded to books and records and internal control charges.  This practice often results in individuals who willingly engaged in fraudulent misconduct retaining their ability to appear and practice before the Commission.

                 I fear that cases in the future will continue to be weak.”

http://blogs.marketwatch.com/capitolreport/2014/08/29/sec-is-weak-on-enforcement-says-one-of-its-commissioners/
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 "S.E.C. Commissioner Rebukes His Colleagues

The Securities and Exchange Commission is the regulator that is supposed to crack down on executives who put misleading and fraudulent numbers into their financial filings.

But Luis A. Aguilar, a commissioner at the S.E.C., said on Thursday that he was concerned that the agency’s stance in such cases might be weakening. Mr. Aguilar made his comments in a surprising dissenting statement that sharply criticized an enforcement action against two senior executives who worked for an information technology company called Affiliated Computer Services.

...Mr. Aguilar also said that the S.E.C.’s enforcement orders may sometimes be “purposely vague and/or incomplete, and written in a way so as to lead the public to conclude that no fraud had occurred.” This, he added, “muzzles my voice by not allowing any statement by me (including this dissent) to include a fulsome description of facts that support the view that the commission should have brought fraud charges.”

Mr. Aguilar also cited figures showing that the S.E.C. has been bringing fewer financial disclosure cases in recent years and securing fewer executive suspensions in such cases..."

http://dealbook.nytimes.com/2014/08/29/s-e-c-commissioner-rebukes-his-colleagues/?_php=true&_type=blogs&_r=0

8/28/14

"Active managers take 100% of your gains"

"...During the 1980s and 1990s, nobody quibbled over a fee of 2% when stocks put on 18% a year. Since 2000, ...returns have averaged just 4%.

A fee of 1% is now quite a burden, a quarter of your return straight to the pockets of active managers.

...It isn't that low-cost index investing is an option you should consider. Rather, it's fast becoming the only way to invest that makes mathematical sense at all.

...Since the index investor gets the market return at the market level of risk, active managers must outperform consistently to overcome the down years they experience, times when their strategies fall out of favor.

But let's assume they do that. And let's assume that the active fund somehow beats its benchmark by 0.5%, year after year. Even so, Ellis explains, such a fund charging 1.25% in fees and a 12b-1 fee of 0.25% as a percentage subtracted from assets is in fact asking the retirement investor to accept a constant 75% hit on the return.

...The fund beats the market for years (one hopes) and, even so, you get just a quarter of the gains and they keep three-quarters of it.

Because a majority of active managers now underperform the market,
their incremental fees
are over 100% of the long-term incremental, risk-adjusted returns.

Charley Ellis

...Once, institutional investors such as banks and insurers were behind less than 10% of trades and individuals did more than 90%. Beating the market wasn't just possible, Ellis contends, it was "probable for hardworking, well-informed, boldly active professionals."

Those days are gone. "Now, more than 95% of trades in listed stocks and nearly 100% of other security transactions are executed by full-time professionals who are constantly comparison-shopping inside the market for any competitive advantage," Ellis writes.

...That the investing industry continues to promote active management raises real ethical questions, Ellis maintains, questions that retirement investors would be wise to raise with their own advisers."

http://www.marketwatch.com/story/charley-ellis-active-managers-take-100-of-your-gains-2014-08-28?page=2

8/27/14

Greensboro Councilman Tony Wilkins on Heritage House; Read the Comments

https://www.facebook.com/tony.wilkins.94/posts/10202785796066977?notif_t=comment_mention

"Keeping Corporate Lawyers Silent Can Shelter Wrongdoing"

"...Ms. [Maritza I.] Munich was a Walmart lawyer who advocated an aggressive response to investigating the scandal but has been silenced by Walmart, which has invoked the attorney-client privilege to keep her from speaking.

It’s yet another example of how companies use the attorney-client privilege to shelter potential wrongdoing, perhaps to the detriment of many people, including shareholders.

But Ms. Munich may yet have her chance to talk. A recent Delaware court decision may not only allow Ms. Munich to talk about what happened at Walmart, it may give shareholders of all companies a way to sidestep the attorney-client privilege when wrongdoing takes place.

Ms. Munich was the general counsel of Walmart’s international division when Walmart discovered that its employees might have been involved in a sweeping bribery operation in Mexico.

The full details are not known, but according to documents disclosed..., Ms. Munich led the bribery investigation as it unfolded in 2004.

Yet she was stymied in both that investigation and others.

It appears that she argued in 2004 for a fuller investigation into Walmart’s possible misconduct in Mexico and against any executive interference.

She was ignored.

...Ms. Munich resigned in 2006 in the middle of Walmart’s investigation into its Mexico operations. After a few weeks, the investigation was buried by the general counsel of Walmart’s Mexico operations, a man later implicated in the scandal...

...Walmart has asserted that attorney-client privilege. The deliberations of Ms. Munich and others have been guarded as confidential by Walmart.

...Walmart has maintained that not only does the privilege bar its lawyers from speaking, it prevents their documents from being used in court, even if they are disclosed inadvertently.

...That is where things stood until a recent Delaware decision.

The Indiana Electrical Workers Pension Trust Fund, a Walmart shareholder, has taken steps to investigate the Walmart bribery matter to decide whether directors engaged in any wrongdoing.

Robert K. Steel served as a director of Wachovia, President and Chief Executive Officer
from July 9, 2008 to December 31, 2008

As part of this suit, the pension fund issued a demand for documents that Ms. Munich had written that were either confidential or had been leaked but could not be used in court because of the privilege. This type of demand is allowed under corporate law to permit shareholders to determine whether wrongdoing has taken place.

George Hartzman was a Wachovia shareholder
from July 9, 2008 to December 31, 2008

Walmart denied the request, asserting the attorney-client privilege, among other things.

But the Delaware Supreme Court refused to side with Walmart and apply the privilege. Instead, the court said there was an exception to the privilege rule for shareholders. The court also ruled that “the allegations at issue implicate criminal conduct” ...and that the pension fund was a legitimate stockholder. Accordingly, the information “should be produced by Walmart pursuant to [an] exception to the attorney-client privilege.”

...Yet, unless a whistle-blower steps forward, the principle remains strong...

The result is that companies have a great incentive to shift anything hinting at legal trouble to their in-house counsel to ensure that it is protected from disclosure. The in-house legal department thus becomes the “cover-up and damage control” arm of the company.

And so we have a strange situation in which the privilege applies, to be used by companies, unless someone steps forward under a whistle-blower provision...

In this light, the Delaware case is yet another chip in the attorney-client privilege, a sensible one perhaps.

The privilege is important because it allows for people to freely discuss their problems and receive good legal advice. But in the corporate context, it has always been an uneasy mix because the company is owned by its shareholders. If the corporation is doing wrong, the shareholders are the ones who are harmed when they bear the costs. The Delaware court decision sides with shareholders on this matter, allowing them to be the ones to decide whether there is wrong.

...the court decision still requires that the shareholders keep what they find confidential unless the privilege is waived. For now, they can use the information only to decide whether to pursue a claim against the directors of Walmart for failing to adequately supervise the Mexican operations..."

Steven Davidoff Solomon
Professor of Law, University of California, Berkeley
August 26, 2014
http://dealbook.nytimes.com/2014/08/26/keeping-corporate-lawyers-silent-can-shelter-wrongdoing/?_php=true&_type=blogs&partner=socialflow&smid=tw-nytimesbusiness&_r=0

Previously;

An Open Letter to Wachovia and Wells Fargo Current and Former Shareholders 

http://hartzman.blogspot.com/2014/04/an-open-letter-to-wachovia-and-wells.html

SEC Whistleblower Evidence

http://hartzman.blogspot.com/2013/02/sec-and-finra-whistleblower-evidence.html

On December 8, 2011, I became a participant in an investigation of what looked like fraud on Wachovia's shareholders

http://hartzman.blogspot.com/2013/05/on-december-8-2011-i-became-participant.html


Winston Salem Journal; "Robert Steel, Wachovia executive caretaker, lands new job "

http://hartzman.blogspot.com/2014/05/winston-salem-journal-robert-steel.html

Perella Weinberg CEO Robert Steel's Securities Fraud and Insider Trading at Wachovia

http://hartzman.blogspot.com/2014/05/new-perella-weinberg-ceo-robert-steels.html

FINRA, SEC, DOL, CFPB, FTC, FRB, and PCAOB Wells Fargo Whistleblower Filing

http://hartzman.blogspot.com/2012/10/finra-sec-dol-cfpb-ftc-frb-and-pcaob.html

"Wachovia engaged Perella Weinberg" under Robert K. Steel

http://hartzman.blogspot.com/2014/06/wachovia-engaged-perella-weinberg-under.html

8/24/14

"The Rise of Corporate Impunity

"...American financial history has generally unfolded as a series of booms followed by busts followed by crackdowns. After the crash of 1929, the Pecora Hearings seized upon public outrage, and the head of the New York Stock Exchange landed in prison. After the savings-and-loan scandals of the 1980s, 1,100 people were prosecuted, including top executives at many of the largest failed banks. In the '90s and early aughts, when the bursting of the Nasdaq bubble revealed widespread corporate accounting scandals, top executives from WorldCom, Enron, Qwest and Tyco, among others, went to prison.

The credit crisis of 2008 dwarfed those busts, and it was only to be expected that a similar round of crackdowns would ensue. In 2009, the Obama administration appointed Lanny Breuer to lead the Justice Department's criminal division...

But the crackdown never happened. Over the past year, I've interviewed Wall Street traders, bank executives, defense lawyers and dozens of current and former prosecutors to understand why the largest man-made economic catastrophe since the Depression resulted in the jailing of a single investment banker — one who happened to be several rungs from the corporate suite at a second-tier financial institution.

...In the mid-'90s, white-collar prosecutions represented an average of 17.6 percent of all federal cases. In the three years ending in 2012, the share was 9.4 percent.

...the fact that the only top banker to go to jail for his role in the crisis was neither a mortgage executive (who created toxic products) nor the C.E.O. of a bank (who peddled them) is something of a paradox, but it's one that reflects the many paradoxes that got us here in the first place.

...From 2004 to 2012, the Justice Department reached 242 deferred and nonprosecution agreements with corporations, compared with 26 in the previous 12 years...

...President Obama's Fraud Enforcement and Recovery Act, which was designed to give hundreds of millions to prosecute financial criminals, was able to deliver only $65 million in 2010 and 2011. Prosecutors reporting to Breuer proposed setting up a mortgage-fraud initiative, a "Prosecutorial Strike Force," as one July 2009 memo put it, but the Justice Department dithered. Finally it set up the Financial Fraud Enforcement Task Force, an enormous coordinating committee with essentially no investigative operation. One former Justice Department official derided it as "the turtle."

...A top Treasury Department official told Breuer, in carefully couched language, that an indictment could cause broader problems in the financial system. Breuer even went as far as discussing whether banks were too big to indict with H. Rodgin Cohen, a partner at Sullivan & Cromwell, who was representing HSBC in his very own case. Cohen told Breuer that while the Justice Department can't have a rule not to indict a large bank, prosecutors should, well, take into account how the target has cooperated and what changes it has made to fix the problems.

It would be easy to blame the Justice Department's ineptitude on past mistakes alone. But again, the very ambitions of its prosecutors played a prominent role. Top governmental lawyers generally don't want to spend their entire careers in the public sector. Many want to score marquee victories and avoid mistakes and eventually leave for prominent corporate firms with starting salaries at 10 times what they make at the Department of Justice. According to numerous former criminal-division employees, Breuer almost immediately signaled his interest in bigger things. In October 2009, Steven Fagell, his deputy chief of staff and former Covington colleague, sent an email to the division. "Do you like giving toasts? Do you think it should have been you accepting the writing Emmy for '30 Rock?'" Fagell wrote. "If so, we need your wit, smarts and gift for the written word! We're putting together a speechwriting team for the assistant attorney general." Prosecutors developing cases against Mexican drug cartels and Al Qaeda members found it more than a little tone deaf. (Fagell says the email request was intended "both to foster internal morale and to send a message of deterrence to the public.")

...several former prosecutors in the office told me that going after bankers was never a real priority. "The government failed," another former prosecutor said. "We didn't do what we needed to do."

...the Justice Department never aggressively pursued what may have been the most promising angle. On Sept. 10, 2008, the chief financial officer of Lehman Brothers, Ian Lowitt, told shareholders and the public that the bank had $42 billion of available cash, or liquidity. The bank's position, Lowitt reassured, "remains very strong." Lehman would file for bankruptcy five days later. "What they were saying was not just wrong but materially wrong," Robert Byman, a Jenner & Block partner, told me.

...Of those billions, $15 billion was in the "low" category, generally because it had been pledged as collateral to other banks. One former Lehman executive told me that several other company managers understood that they could not tap much, if any, of that encumbered money. And at least two executives objected to how the bank was representing its liquidity, including its international treasurer, Carlo Pellerani, according to the Jenner & Block report. The law firm found that regulators, credit-rating agencies and Lehman's outside lawyer had no idea that the liquidity pool wasn't, in fact, all that liquid. When Lowitt came to talk to Jenner & Block, he explained that he had not fully understood the issues when he assured investors of its liquid assets. That may be a reasonable defense, but it does not appear that prosecutors and federal investigators made a serious attempt to test how much Lehman's chief financial officer knew about his own books. Three Lehman executives and one regulator at the Federal Reserve, all of whom were involved in the bank's desperate attempts to keep itself liquid, told me they were never even interviewed by any federal-government officials.

...Federal prosecutors have their own explanation for how only one Wall Street executive landed in jail in the wake of the financial crisis. The cases were complex to investigate and would have been infernally difficult to explain to juries, some told me. Much of the crisis and banker transgressions stemmed from recklessness, not criminality. They also suggest that deferred prosecutions — with their billions in settlements and additional oversights — can be stricter punishments than indictments.

...Federal prosecutors almost never bring criminal charges against top executives of large corporations, from banking to pharmaceuticals to technology..."

http://www.propublica.org/article/the-rise-of-corporate-impunity

"There Is Still Such a Thing as 'Too Big to Jail' / "Do Big Banks Have a `Get Out of Jail Free' Card?

"...the reason we know there is such a thing as "too big to jail" is that [US Attorney General Eric] Holder felt compelled to say there isn't.

It should be a given in the U.S. that no person or corporation is above the law. But the evidence to the contrary has been overwhelming. The Justice Department has entered into at least 20 non-prosecution and deferred-prosecution agreements with large financial institutions since 2009. Poor people who commit crimes aren't shown such leniency. Nor has the Justice Department hesitated to bring criminal charges against big companies in other industries.

Consider what Holder told the Senate Judiciary Committee in March 2013, when asked to explain the lack of criminal charges against large banks over offenses that include fraud, terrorist financing and money laundering.

"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy," Holder said. "And I think that is a function of the fact that some of these institutions have become too large."

"It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate," he said.

...As my Bloomberg View colleague Paula Dwyer wrote at the time, he committed a Kinsley gaffe: He accidentally spoke the truth.

...Holder, in his video, suggested that a major difference between the department's approach now and a few years ago is ... "Rather than wall off banks from prosecution, the potential for such severe consequences simply means that federal prosecutors conducting these investigations must go the extra mile to coordinate closely with the regulators that oversee these institutions' day-to-day operations," Holder said. "So long as this coordination occurs, it is fully possible to criminally sanction companies that have broken the law, no matter their size."

That part of what he said is true. I've said the same thing myself. It also is an acknowledgement that large, felonious banks will always receive special treatment. The Justice Department is willing to let the chips fall where they may for little people, but not for big banks. For big banks, prosecutors must go the extra mile. We're long past the days when prosecutors used to say, "Let justice be done, though the heavens fall."

http://www.bloombergview.com/articles/2014-05-06/there-is-still-such-a-thing-as-too-big-to-jail
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Do Big Banks Have a `Get Out of Jail Free' Card?

U.S. Attorney General Eric Holder's statement yesterday -- that some banks are too big to prosecute -- may have been a Kinsley gaffe: the kind of misstatement that accidentally reveals the truth.    

Justice Department officials for months have been denying that big banks are above the law. Then Holder told the Senate Judiciary Committee that the size of some large banks has made it difficult to bring criminal charges. He said "some of these institutions have become too large" and that their size "has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate." He added that bank size was something Congress would "need to consider."

It was quickly interpreted that Holder was giving too-big-to-fail banks a get-out-of-jail-free card. But I think Holder was making only a half-Kinsley. He was stating the obvious -- that criminal charges can threaten a bank's existence and endanger the U.S. or the global economy.

...Holder was responding to questions from Senator Charles Grassley, the Iowa Republican who, along with a growing number of senators in both parties, is especially critical of the lack of prosecutions against banks for their roles in the financial crisis.

...Sending top-ranked bankers to jail would be a more powerful deterrent than indicting a faceless corporation.

http://www.bloombergview.com/articles/2013-03-07/do-big-banks-have-a-get-out-of-jail-free-card-
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Banks Take the Economy Hostage
26 May 2, 2014 8:28 AM EDT
By Barry Ritholtz

...Former Federal Reserve lawyer Gil Schwartz warned “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank.”
U.S. Attorney Preet Bharara recounted the picture bankers painted if prosecutions occurred: “Oceans will rise; nuclear winter will be upon us; and the world as we know it will end.”

...It used to be thought that fear of indictment, personal disgrace and threat of jail would keep bankers from engaging in illegal activities. But the extraordinary intervention of the U.S. government and Federal Reserve changed the dynamics of prosecution.

...Prosecute our clients, said the bankers’ lawyers, and you risk destabilizing a fragile financial system. Put a systemically important financial institution in your cross hairs, and you put the entire global economy at risk.

The Bush and Obama administrations bought this line of reasoning.

This argument should never have carried the day. The job of a prosecutor is to prosecute, not to make economic forecasts. Convincing various governmental departments not to do their jobs was a masterful act of salesmanship, one that undercut fundamental principles of rule of law.

It isn't the role of the Justice Department, the Securities and Exchange Commission, or the U.S. attorney’s office to make assessments based on the forecasts of economists doing the bidding of their paymasters.

...For those charged with enforcing the law, it was an epic abdication of responsibility...

Ignoring fraud, perjury and other felonies was a colossal error of judgment...

As we noted last month, “The greatest innovation of the financial sector is not the ATM machine or interest-bearing checking accounts or securitization: It was convincing the powers that be that prosecuting them for their actual crimes would (once again) bring the economy to the edge of the abyss.”

...The statute of limitations is ticking and will soon place many of those responsible beyond reach. Justice denied makes it more likely we will be subjected to a future financial crisis.

http://www.bloombergview.com/articles/2014-05-02/banks-take-the-economy-hostage