Thursday, August 18, 2011

Those who aren't fools are probably crooks

The great lie of the financial community is that everyone can get rich and no one will get hurt.  Put your faith in the system, they tell us, and the magical money unicorns will do the rest.

Of course, the truth is that millions of people WILL get hurt, most of the players will NOT get rich, and there are no magical money unicorns.  So since reality conspires to foil the true believers in "free markets", anyone who claims to produced the economic returns promised by your basic hack stock pimp is going to have to cheat.  And cheat they do--regularly and often.

S.E.C. Files Were Illegally Destroyed, Lawyer Says
By EDWARD WYATT   Published: August 17, 2011

WASHINGTON — An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators.

The destroyed files comprise records of at least 9,000 preliminary inquiries into matters involving notorious individuals like Bernard L. Madoff, as well as several major Wall Street firms that later were the subject of scrutiny after the 2008 financial crisis, including Goldman Sachs, Lehman Brothers, Citigroup and Bank of America. 
The S.E.C. is the very agency that is charged with making sure that Wall Street firms retain records of their own activities, and has brought numerous enforcement cases against firms for failing to do so. 
The agency’s records were routinely destroyed under an S.E.C. policy, since changed, that called for the disposal of records of a preliminary inquiry that was closed if it did not get upgraded to a formal investigation, according to Congressional records and people involved in inquiries into the matter. The agency believes that both the original policy and the new rules comply with federal document-retention laws. 
John Nester, an S.E.C. spokesman, said that while the agency was not required to retain all documents, it changed its policy last year regarding destruction of files for “matters under investigation,” the category of initial inquiry by the S.E.C.’s enforcement division that is the subject of the current scrutiny.  more
Taibbi has done serious work on this subject.  The whole thing is up at Rolling Stone but here is a sample.
Is the SEC Covering Up Wall Street Crimes? 
A whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals.

AUGUST 17, 2011 8:00 AM ET

Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital. more
And from the department of "you cannot make this shit up", we see that one criminal enterprise might be charge with finding corruption in another.
S&P under investigation over US downgrade

Published: 12 August, 2011, 19:38

Following a series of attacks from filmmaker Michael Moore and Senator Al Franken, the US Securities and Exchange Commission is now investigating allegations of illegal practices from within the wall of Standard & Poor’s. 
A week after downgrading the United States’ credit rating, Standard and Poor’s is now facing scrutiny from the SEC over allegations that S&P’s employees conducted insider trading before the US debt downgrade was officially announced. 
On Monday, Michael Moore tweeted that President Barack Obama should “show some guts” and arrest the CEO of S&P, writing that “these criminals brought down the economy in 2008” and warning that they “will do it again.” That same day, Sen. Al Franken (D-Minn.) gave an interview to The National Memo in which he said that misconduct happening within the ratings agencies served as a catalyst for the catastrophe that came following S&P’s downgrade of the US debt. 
Now it looks like Obama might have listened to them, as the SEC is now investigating if members of S&P received prior knowledge of the downgrade before it was published to the public last Friday, allowing them to participate in financial transactions before what turned out to be a week of bizarre market fluctuations. As part of their probe, the SEC is asking to see a list of S&P employees who were made aware of the downgrade before it happened.  more 

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