4/23/13

George v $WFC Part One, Scene Two; Hartzman emails to @MTaibbi on $JPM's #JamieDimon, with some Bloomberg's @bobivry

From: George Hartzman... To: Matthew Taibbi, Rolling Stone Magazine

"Insider Trading

"Insider trading" is a term that most investors have heard and usually associate with illegal conduct.

...Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.

...Examples of insider trading cases that have been brought by the SEC are cases against:

...Government employees who learned of such information because of their employment by the government; and

Other persons who misappropriated, and took advantage of, confidential information from their employers."

http://www.sec.gov/answers/insider.htm
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Go to "company list" at the bottom of the page.

click on "search insider by company"

http://www.insider-monitor.com/trader/cik1195345.html

2009-01-16 JPM Co Purchase 500,000 22.93 11,464,500
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"Stock Trading History of Dimon James

The following table details the trading activities (stock purchases, stock sales, and stock option exercises) reported to the Securities and Exchange Commission (SEC) by insider Dimon James since year 2005.

The trader's CIK number is1195345.

At the time of this reporting, Dimon James is the Chairman & CEO of Co .
(stock ticker symbol JPM)…

Stock purchases, sales, and option exercises reported by insider Dimon James since 2005.

Trade Date Symbol Company Name (Issuer) Trade Type Shares Price ($) Value ($)
2012-07-19 JPM Co Purchase 235,000 34.44 $8,092,930
2012-07-20 JPM Co Purchase 265,000 34.02 9,014,770
2012-07-19 JPM Co Sale 12,142 1,110.00 13,477,620
2012-03-02 JPM Co Option Exercise 462,000 31.22 14,423,640
2012-01-13 JPM Co Option Exercise 97,852 .00 0
2007-09-04 JPM Co Purchase 666 45.02 29,983
2011-01-19 JPM Co Option Exercise 231,725 42.62 9,876,119
2010-03-25 JPM Co Option Exercise 862,835 42.62 36,774,027
2010-02-03 JPM Co Option Exercise 1,864,486 29.46 54,927,757
2009-07-17 JPM Co Option Exercise 660,000 29.96 19,773,600
2009-01-16 JPM Co Purchase 500,000 22.93 $11,464,500
2008-10-21 JPM Co Purchase 12,475 842.22 10,506,694
2006-04-20 JPM Co Option Exercise 1,994,520 23.30 46,472,316
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From Littler Mendelson's Greg Keating on Wells Fargo Advisors v Hartzman;


"The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3."

Bloomberg's Mark Pittman, Bob Ivry and Alison Fitzgerald
November 10, 2008
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From Bloomberg's Nov 27, 2011 7:01 PM ET; "Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress"

"The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates...

...details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown... “There are lawmakers in both parties who would change their votes now.”

The size of the bailout came to light after Bloomberg... won a court case against the Fed and a group of the biggest U.S. banks ...to force lending details into the open.

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP.

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility... He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.

...By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.

The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.

The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.

The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed...

The six -- JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley -- accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms

Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.

“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.

“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”

The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010.

TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.

“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.

Lawmakers knew none of this.

Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.

“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan

...Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.

“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.

JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed....

Geithner helped design and run the central bank’s lending programs.

The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.

The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.

The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed.

“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”

Bloomberg's Bob Ivry, Bradley Keoun, and Phil Kuntz
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From Rolling Stone's Matt Taibbi "Secret and Lies of the Bailout";

"...The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us.

...There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout.

...instead of using the bailout money as promised – to jump-start the economy – Wall Street used the funds to make the economy more dangerous. From the start, taxpayer money was used to subsidize a string of finance mergers, from the Chase-Bear Stearns deal to the Wells Fargo­ Wachovia merger to Bank of America's acquisition of Merrill Lynch.

...A joint statement by Paulson, Bernanke and FDIC chief Sheila Bair praised the nine leading banks as "healthy institutions" that were taking the cash only to "enhance the overall performance of the U.S. economy."

...government-endorsed, fraudulent health ratings magically became part of its bailout.

...They're building an economy based not on real accounting and real numbers, but on belief.

...The bailout ended up being much bigger than anyone expected, expanded far beyond TARP to include more obscure (and in some cases far larger) programs with names like TALF, TAF, PPIP and TLGP.

...at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large. ...Jamie Dimon bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans.

...The stock purchases by America's top bankers raise serious questions of insider trading. Two former high-ranking financial regulators tell Rolling Stone that the secret loans were likely subject to a 1989 guideline, issued by the Securities and Exchange Commission in the heat of the savings and loan crisis, which said that financial institutions should disclose the "nature, amounts and effects" of any government aid. At the end of 2011, in fact, the SEC sent letters to Citigroup, Chase, Goldman Sachs, Bank of America and Wells Fargo asking them why they hadn't fully disclosed their secret borrowing. All five megabanks essentially replied, to varying degrees of absurdity, that their massive borrowing from the Fed was not "material," or that the piecemeal disclosure they had engaged in was adequate. ...According to the banks, it's none of your business if those same CEOs are making use of a secret $50 billion charge card from the Fed.

...The broader and more pressing concern is the clear implication that by failing to act, federal regulators­ have tacitly approved the nondisclosure.

...The bailout has ...made lying on behalf of our biggest and most corrupt banks the official policy of the United States government."

Matt Taibbi
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The Sarbanes-Oxley Act of 2002, which I have taught in ethics courses for CPAs and attorneys among others over the last 10 years, requires executive officers and directors to personally attest that SEC securities filings have been personally reviewed and financial statements fairly present, in all material respects, a company’s financial condition. Financial information in press releases or other public disclosures must not “contain an untrue statement” or omit a statement of material fact necessary to make statements not misleading.

If the executive officers of the above companies didn't disclose material facts necessary to make statements not misleading, they and their auditors violated Sarbanes-Oxley.  It doesn't matter if the Federal Reserve gave them permission or not.  It doesn't matter if the Treasury Department gave them permission or not.  It doesn't matter if the Attorney General won't prosecute.  It doesn't matter if the President of the United States of America thinks it's ok to break the law if he says so.

I believe Wachovia, Wells Fargo, accounting firm KPMG, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Federal Reserve amongst others, illegally misled Wachovia’s and other firm’s shareholders.

If Wells Fargo's contention is my filing has no standing under Sarbanes-Oxley, why did the Securities Division of the North Carolina Department of the Secretary of State investigate and refer the matter to the SEC, and why would Wells hire an "independent" outside investigator?
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"Mr. Hartzman's complaint of Wells Fargo's alleged violations of the Sarbanes-Oxley Act are also better addressed by the SEC."

Sincerely,

Tasha W. Sheehy
Enforcement Attorney
State of North Carolina Department of the Secretary of State

 cc: George Hartzman (without Enclosure)
 cc: Daniel J. Stefek, Director, FINRA District 7 - Atlanta

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