Morgan Stanley Real Estate Acquires Crescent Real Estate Equities

Morgan Stanley Real Estate Acquires Crescent Real Estate Equities (CEI) for $22.80/Sh
May 22, 2007 5:04 PM EDT

Crescent Real Estate Equities Company (NYSE: CEI) entered into a definitive agreement pursuant to which funds managed by Morgan Stanley Real Estate will acquire Crescent in an all cash transaction for $22.80 per share and the assumption of liabilities for total consideration of approximately $6.5 billion. Shares of Crescent Real Estate Equities closed at $21.62 today.

Toxic Corporate Real Estate

This occurred in 2007?

Morgan Stanley Real Estate announced today that it has completed the previously announced acquisition of Crescent Real Estate Equities Company (CEI) for $6.5 billion.

All of Crescent’s outstanding shares of common stock have been converted to the right to receive $22.80 per share in cash without interest and less any applicable withholding for each share of common stock.

“We are excited to acquire the unique portfolio of properties that Crescent put together,” said Michael Franco, Managing Director, Morgan Stanley Real Estate. “We believe that the depth and breadth of our real estate investing platform will enable us to maximize the value of the diverse holdings of office, destination resorts and resort residential.”

With the acquisition of Crescent, Morgan Stanley Real Estate adds to its portfolio 54premier office buildings totaling 23 million square feet located in select markets across the United States with major concentrations in Dallas, Houston, Denver, Miami, and Las Vegas. In addition, it gains investments in resort residential developments in locations such as Scottsdale, AZ; Vail Valley, CO; and Lake Tahoe, CA and in the wellness lifestyle leader, Canyon Ranch®.

Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day acting as legal counsel. Greenhill & Co., LLC acted as the financial advisor to Crescent with Pillsbury Winthrop Shaw Pittman LLP acting as legal counsel.

Morgan Stanley Real Estate is comprised of three major global businesses: Investing, Banking and Lending. Since 1991, Morgan Stanley Real Estate has acquired $121.5 billion of real estate assets worldwide and currently manages $55.6 billion in real estate assets on behalf of its clients. A complete range of market-leading investment banking services for real estate clients include advice on strategy, mergers, acquisitions and restructurings, as well as underwriting public and private debt and equity financings. As a global leader in real estate lending, Morgan Stanley has offered approximately $156.0 billion of CMBS through the capital markets since 1997, including $35.5 billion in 2006. For more information about Morgan Stanley Real Estate, please visit www.morganstanley.com/realestate.

Morgan Stanley (MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 32 countries. For further information about Morgan Stanley, please visit

www.morganstanley.com.

Contacts:

For Morgan Stanley Real Estate

Media Relations:
Alyson D’Ambrisi, 212-762-7006

Rainwater's 'Single Worst Investment' Toxic Real Estate

Renowned investor Richard Rainwater saw 70% of the value drain out of his $100 million investment in Thornburg Mortgage

by Christopher Palmeri

Sometimes even billionaires make bone-headed moves. Richard Rainwater, the legendary Fort Worth investor, has seen a 70% decline in just two months on some $100 million he put into troubled home lender Thornburg Mortgage (TMA). Rainwater calls it the "the single worst investment of my career."

The 65-year-old-financier, with a fortune estimated at $3 billion by Forbes magazine, told BusinessWeek.com he was watching TV last year when he saw Thornburg's chief executive, Larry Goldstone, speaking about the mortgage crisis. "He seemed like a bright guy," Rainwater recalls. Rainwater says he then checked with some of his investment industry sources who said they considered Thornburg a "capable group."

Buying into the Jumbo MarketIn January Rainwater plunked down about $100 million to buy roughly 5 million shares of the Santa Fe (N.M.) company's preferred stock. Rainwater bought shares both in a public offering that Thornburg had arranged and on the open market. He says his average cost was 21.45 a share. The preferred stock trades today at 6.25 per share; Thornburg common shares closed Mar. 13 at 2.26, down from 28 in May.

Filings with the Securities & Exchange Commission show that Rainwater and his wife, Darla Moore, own preferred stock convertible into 9.3 million shares of Thornburg's common stock, about 6% of the company's shares outstanding. By the time Rainwater invested, Thornburg was already in trouble. That was reflected in the fact that Thornburg was offering a dividend on the preferred shares of 10%. The company declined to comment on the issue.

Founded in 1993 by the current chairman, Garrett Thornburg, the company specializes in making "jumbo" single-family home loans to what it calls "superprime" customers. Those are individuals with credit scores of 744 or higher. Some 97% of its investments are in loans rated AA or higher by ratings agencies. Thornburg says just 0.4% of its loans are delinquent, compared to an industry average of more than 4%.

Rainwater says it was the high-end nature of Thornburg's business that attracted him to the company. "Housing values are suffering everywhere," he says. "But at the high end things are holding up better." On its Web site Thornburg is offering mortgage rates as low as 7.9%.

Crumbling Credit Markets
Last summer Thornburg averted greater financial difficulties by selling $20 billion of its assets. In recent weeks, though, its problems have escalated as lenders began requiring the company to put up more capital to back its mortgage investments. The company says it is presently negotiating with creditors who want $600 million in additional financing.

The problem, says Keefe, Bruyette & Woods (KBW) analyst Bose George, is that Thornburg has been funding its business with short-term loans. That worked when capital was easy to find. "They have one of the best balance sheets on the asset side," George says. "The problem is in the market—it's hard to borrow money." George says he sees the market shifting away from independent lenders such as Countrywide Financial (CFC) and Thornburg. In the future, "mortgage lending is going to be done by banks," he says. "Nonbanks have turned out to be extremely vulnerable to this kind of downturn."

Win Some, Lose Some
Rainwater is famous for scooping up assets in troubled companies. As a chief adviser to Fort Worth's billionaire Bass brothers in the 1980s, he directed the family to invest in then-floundering Walt Disney (DIS). That company went on to great success under Chief Executive Michael Eisner. In the 1990s, Rainwater plunged into oil and gas companies then struggling with low commodities prices. He invested in the Hunt brothers' bankrupt Penrod Drilling, since merged into Ensco International (ESV), and T. Boone Pickens' Mesa Petroleum, now a part of Pioneer Natural Resources (PXD). "Oil I understand," Rainwater says. "Interest rates…?"

Last August Rainwater sold Crescent Real Estate Equities to Morgan Stanley (MS) for $6.5 billion. Crescent was a big owner of office buildings. Rainwater sold at what now looks to have been the peak of the recent commercial real estate cycle. "It just seemed like the right time to do it," he says, with the prices paid for office property working out to yield just 4% to 5% for buyers.

Rainwater says his portfolio is still up for the year thanks to his energy holdings, which include blue chip oil and gas companies such as Chevron (CVX) and ConocoPhillips (COP).

Nonetheless, he says, the losses so far on Thornburg "still don't feel good."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau

Here come the Real Estate Toxic Mortgages...

Crescent Real Estate Equities Co. (NYSE: CEI) has finally found a buyer, and one that seems to like its mixed-use approach. Morgan Stanley Real Estate has agreed to acquire the Fort Worth, Texas-based REIT for a deal that totals $6.5 billion, including the assumption of debt.

Crescent, a mixed-use REIT owned by Texas billionaire Richard Rainwater, was in the midst of morphing itself into a pure-play office REIT. After evaluating its strategic options, the company came to the conclusion that it could "take advantage of the void left by rabid industry consolidation" as a remade office REIT. More likely, it was positioning itself better for an outright sale.

The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.

There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.

Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal

Prior to the deal with Morgan Stanley, Crescent had set into motion a series of deals, including the $550 million sale of its six hotels plus the 343,664-square-foot Austin Centre office building for $75.5 million to Walton Street Capital LLC in March. It also struck a deal recently to sell a portfolio of Dallas-area office assets to a venture between Trimarchi Management and UBS for about $420 million, according to published reports. Crescent also sold the historic Exchange Building in Seattle for $80.6 million to a joint venture between GE Asset Management and The Ashforth Co.

The REIT was preparing to shop its resort and residential development business through JP Morgan and was still evaluating plans for Canyon Ranch, a wellness lifestyle company owned in partnership with Mel Zuckerman and Jerry Cohen.

It's not clear what Morgan Stanley will do with the various pieces of Crescent going forward. The financial services firm considers Crescent's "unique" platform complimentary to its own wide range of business lines.

Morgan Stanley has certainly cast a wide net for real estate acquisitions, gobbling up properties and real estate companies in all sectors of the industry, and has been a major force in the take-private deals that have fueled the hot investment sales market over the past two years.
Last year, it acquired Town and Country Trust, an apartment REIT, through a venture with Onex Real Estate and Sawyer Realty Holdings LLC, in a deal valued at $1.5 billion. Also in 2006, it paid $1.9 billion to acquire Glenborough Realty Trust, a San Mateo, CA-based office REIT. It recently acquired CNL Hotels & Resorts for about $6.6 billion, including the sale of a portion of the properties to Ashford Hospitality Trust.

The financial firm has also reached into its deep pockets for a plethora of property acquisitions lately. It recently paid about $2.43 billion to buy a portfolio of former EOP assets in San Francisco from Blackstone. It also acquired a 28-story office tower at 2 Park Ave. in Manhattan for $519 million. On the retail side, Morgan Stanley recently formed a joint venture with Inland Western Retail Real Estate Trust Inc. to acquire and manage retail properties in target markets across the U.S. with a goal of building a billion-dollar portfolio.

The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.

There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.

Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal counsel. Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day providing legal counsel.

Bigger than Enron ..just this alone is 2 Billion

Isn't that funny.....all the ignorant reporters kept writing 1.9 Billion Fraud!

Now they are going after 2 Billion from one investment bank> What gives?

Credit Suisse played an important part in an alleged fraud ?

What about JPMorgan, Chase, Citi, blah blah blah....


Investors in the failed National Century Financial Enterprises Inc. aren’t the only ones going after Credit Suisse, the investment bank that issued the Dublin company’s AAA-rated notes.

U.S. District Judge James Graham in Columbus this month allowed a litigation trust formed in the wake of National Century’s bankruptcy to pursue about $2 billion in claims against Credit Suisse. The company had been seeking to dismiss the case.

The trust has alleged Credit Suisse played an important part in an alleged fraud that led to about $2 billion in investment losses and sparked bankruptcy for its subsidiaries.

A federal probe into National Century has led to convictions of or guilty pleas from 10 of 11 former executives targeted in the investigation. The company bought lump sums of unpaid bills from health-care companies and sold the receivables as securities to be backed by the collections, but the probe found National Century executives were taking money for personal use by investing in uncollectible or nonexistent receivables.

While the criminal case against several former executives was pending, Graham in December 2007 refused to dismiss most claims against Credit Suisse from institutional investors who had alleged the investment bank knew the notes it marketed and sold were worthless.

The bank in the action filed by the litigation trust unsuccessfully argued the National Century fraud did harm only to investors represented in the other lawsuit, leaving the trust with no grounds for its claims.

Credit Suisse has argued it wasn’t liable because it didn’t make misrepresentations to clients and didn’t have knowledge of the fraud. Officials for the company declined to comment for this report.

Robert Madden, a partner at Houston-based Gibbs & Bruns LLP representing the trust and the largest group of investors within the related suit, said both cases are now running on roughly parallel tracks after the latest refusal to dismiss the suit. Discovery is complete for both cases and, barring a summary judgment, they’ll be headed to trial.

November 28, 2006 - Bigger Than Enron

"...spying of former Hewlett-Packard (HP) Chair Patricia Dunn on H-P board members and high tech journalists..."

"...antics of Enron bad boys Andrew Fastow and Jeffrey Skilling, but it's depth and breadth are unsurpassed by anything that happened at Enron or HP."

THIS WAS NOTHING!!

November 28, 2006 by Christine Zibas
"...What is the problem so pervasive that it is overtaking these corporate nosedives? It's stock option backdating, and according to the "Wall Street Journal" in its "scandal scorecard," the number of companies now facing federal investigation is at least 130: the number reporting internal probes: 153; the number of executives or directors resigning or being fired: at least 42, including 10 CEOs; the number criminally charged: 5; and the amount of misstated profits from misdated options: $5.3 billion from more than 60 companies."

"...US Attorney's Office for the Northern District of California formed a special force of prosecutors and FBI agents. According to Lynn Turner, a former chief accountant at the SEC, "The sheer magnitude of the numbers of companies, executives, and corporate boards that have disclosed options-related investigations in mind-boggling...." Add to that the millions of dollars being spent in the corporate sector by more than 100 companies, and you have a corporate scandal many times larger than anything cooked up by Enron or HP."



Bigger Than Enron? There's a New Corporate Scandal Brewing
Stock Option Backdating Leads to Federal Scrutiny of More Than 130 Companies


Although much recent attention has been given to the spying of former Hewlett-Packard (HP) Chair Patricia Dunn on H-P board members and high tech journalists, a far greater scandal has been brewing that has flown largely under the public's radar. It's not as tawdry as the Hewlett-Packard scandal, and it does not have the cheekiness of the antics of Enron bad boys Andrew Fastow and Jeffrey Skilling, but it's depth and breadth are unsurpassed by anything that happened at Enron or HP. What is the problem so pervasive that it is overtaking these corporate nosedives? It's stock option backdating, and according to the "Wall Street Journal" in its "scandal scorecard," the number of companies now facing federal investigation is at least 130: the number reporting internal probes: 153; the number of executives or directors resigning or being fired: at least 42, including 10 CEOs; the number criminally charged: 5; and the amount of misstated profits from misdated options: $5.3 billion from more than 60 companies. No small potatoes here.

This dirty little secret has been gracing the pages of the "Wall Street Journal" and other business media, but gone largely unnoticed by the general media. Yet this scandal has rocked some of the most successful companies in the American vernacular: Apple, Home Depot, UnitedHealth Group, and a stunning number of Silicon Valley companies, where backdating one's stock options was a "no brainer."

Stock Option Backdating Leads to Federal Scrutiny of More Than 130 Companies
The current investigation by the Securities and Exchange Commission (SEC) has become so large that it is now relying on internal investigations by companies to determine just which companies to pursue on federal indictments. What is this scandal all about? In a nutshell, this story centers on the practice of corporate executives improperly affording themselves undeserved wealth through the process of backdating stock options to dates when a company's stock price is low, giving the grant recipient an instant paper profit. Stock options, part of the typical corporate executive's pay pack, allow the executive to buy company stock at a fixed price on a certain, pre-determined date, allowing the executive to profit if the stock rises in value from the date of purchase. How to win at this game? Pick the date with the lowest stock price. How can the executive know that date? Only through backdating, an illegal practice that now has some 70 companies scrambling to restate or reduce their profits because of said illegal practice.

This problem first came to the attention of the federal government more than 3 years ago, when Stephen Cutler, then an enforcement officer at the SEC read an account suggesting that executives has issued options just prior to the release of news so favorable that it caused a significant rise in the company's stock price. Today, the problems are so large that the SEC, Federal Bureau of Investigation (FBI), the US Postal Service, and 9 US attorney offices have largely come to rely on corporate self-policing, stepping in when they feel internal probes are skirting serious issues, such as in the case of Affiliated Computer Services, Inc. (ACS). At ACS, the odds of the chosen dates for option granting were determined to be 300 billion to 1 against being randomly selected.

Backdating options are clearly illegal if not reported to shareholders, causing serious accounting and tax problems for companies and their executives. The SEC, which is leading the federal investigation, has more than 150 lawyers and accountants working on the scandal, despite the number of companies conducting their own internal examinations and turning the results over to federal authorities. The situation in Silicon Valley is so serious that the US Attorney's Office for the Northern District of California formed a special force of prosecutors and FBI agents. According to Lynn Turner, a former chief accountant at the SEC, "The sheer magnitude of the numbers of companies, executives, and corporate boards that have disclosed options-related investigations in mind-boggling...." Add to that the millions of dollars being spent in the corporate sector by more than 100 companies, and you have a corporate scandal many times larger than anything cooked up by Enron or HP.
The scandal is now so large that the SEC must let the fox watch the hen house, relying on self-reporting of a practice that has become so common in corporate America as to overwhelm federal investigative resources. Clearly some companies will escape prosecution altogether, while many will be let off the hook for their good effort for restating financials and self-correcting internally. The sheer number of companies conducting such internal investigations, to the tune of several million dollars in legal fees, is unprecendented. Yet, it is clearly not enough and raises questions of fairness for those who choose not to conduct internal reviews, instead taking the gamble such practices will not be discovered. Although the SEC now has put in place measures to evaluate the outside investigators, this is a problem now so widespread that nothing like its magnitude has been seen since the 1970s when the overseas bribery scandal rocked the financial pages of newspapers everywhere.

Stock option backdating may not have the audacity of the Enron scandal or the intrigue of the HP debacle, but it has a serious impact on the earnings of many, many US corporations and the ability of the top 1 percent of wage earners to profit at the expense of us all. Isn't that a scandal you should know about?

JPMorgan Chase, Citi, Bank of America, Goldman Sachs, ....

MORE PONZI SCHEMES? THIS NEEDS TO END! WAKE UP AMERICA!
JPMorgan and CITI were found GUILTY of contributing to the ENRON PONSI SCHEME.
JPMORGAN CHASE and CITI PAID GOVERNMENT SETTLED AGREEMENTS FOR FRAUD in our nation's “LARGEST ‘PRIVATE’ FINANACIAL FRAUD CASE “ in our history! National Century Financial Enterprises, Inc. (NCFE) Federal prosecutors proclaimed “no one has ever heard of” this case. I believe that was intentional. (DOJ case ended 2008)

This month, FEBRUARY ‘09, although the DOJ’s NCFE case ended in December 2008, we now have ‘Credit Suisse Securities LLC has asked the court overseeing litigation over the collapse of health care lender National Century Financial Enterprises Inc. to sanction Lloyds TSB Bank PLC for allegedly hiding a deal with Moody's Investor Services Inc…’

December 2008, at the last trial of NCFE in Columbus, Ohio, ALL executives EXCEPT ONE, was acquitted. Funny, Mr. Happ was the last executive to go on trial, even after the so-called master mind, CEO Lance Poulsen.

Mr. James K Happ, the ONE and ONLY EXECUTIVE acquitted in this trial that NO ONE HAS EVER HEARD OF. Who is Mr. James K Happ?

Mr. James K Happ was the CFO at Richard Rainwater's Columbia Homecare Group prior to arriving at National Century Financial Enterprises, Inc. (NCFE)

As CFO at Columbia Homecare Group, Mr. James K. Happ was responsible for divesting the ‘losing assets’ of a publicly traded company’s homecare segment via NCFE's financing. The alleged divestiture was a sale to a 'PRIVATE' company, Medshares, Inc. Medshares was a healthcare company that was already under investigation for MEDICARE/MEDICAID FRAUD. Medshares acquired this divestiture and six months or so later, filed bankruptcy.

Associated Press - February 21, 2008
COLUMBUS, Ohio (AP) - A former executive of NCFE says the company withheld financial information from its investors. Sherry Gibson testified Thursday in federal court in the government's securities fraud case against five former owners and executives of National Century Financial Enterprises.
The government alleges the five schemed to defraud investors of $1.9 billion.
A guilty executive told jurors she told investors "absolutely nothing" about National Century's practices of advancing cash to Memphis, Tenn.-based Medshares, a home-health care provider.

National Century executives also had voting control of Medshares stock. National Century wired that company $93 million without receivables during that same time frame.

The last trial in the “LARGEST ‘PRIVATE’ FINANACIAL FRAUD CASE “in our history, the one and only executive, James K Happ gets his acquittal. According to the jurors, “The PROSECUTOR did not do his JOB!”

The LARGEST CORPORATE BANKRUPTCY ever filed in Memphis, TN was filed by Medshares, Inc. in 1999.

If one searches the court records, the outcry from so many lawyers of fraud were only to be scolded by the judge and warned not to use the "F" word in her court.

HARRY MARKOPOLOS....look at the publicly traded companies dumping the losing assets into private companies....

THIS NEEDS TO END! WAKE UP AMERICA! MORE PONZI SCHEMES?
JPMorgan and CITI were found GUILTY of contributing to the ENRON PONSI SCHEME. Both JPMORGAN CHASE and CITI PAID GOVERNMENT SETTLED AGREEMENTS FOR FRAUD in our nation's “LARGEST ‘PRIVATE’ FINANACIAL FRAUD CASE “ in our history! National Century Financial Enterprises, Inc. (NCFE) Federal prosecutors proclaimed “no one has ever heard of”. I believe that was intentional.
In the trial in Columbus, ALL executives except one, was acquitted. Who was this one and only executive acquitted? James K Happ. Mr. James K Happ was the CFO at Richard Rainwater's Columbia Homecare Group before arriving at National Century Financial Enterprises, Inc. NCFE.
BUT HOLD ON......Now, FEBRUARY 2009, even though NCFE case was supposedly CLOSED by the DOJ in the BUSH ADMINISTRAION, in 2008, is now back in the INVESTIGATIN OF :
Credit Suisse Seeks Sanctions against Lloyds
Law360, New York (February 03, 2009) -- Credit Suisse Securities LLC has asked the court overseeing litigation over the collapse of health care lender National Century Financial Enterprises Inc. to sanction Lloyds TSB Bank PLC for allegedly hiding a deal with Moody's Investor Services Inc. in order to manipulate a deposition in its favor.Credit Suisse, which is accused by Lloyds and others of committing fraud as an agent for National Century's note offerings, said in a motion filed Friday that Lloyds concealed an...

WAKE UP AMERICA! Credit Suisse Securities LLC investigates NCFE...

THIS NEEDS TO END! WAKE UP AMERICA! MORE PONZI SCHEMES?
JPMorgan and CITI were found GUILTY of contributing to the ENRON PONSI SCHEME. Both JPMORGAN CHASE and CITI PAID GOVERNMENT SETTLED AGREEMENTS FOR FRAUD in our nation's “LARGEST ‘PRIVATE’ FINANACIAL FRAUD CASE “ in our history! National Century Financial Enterprises, Inc. (NCFE) Federal prosecutors proclaimed “no one has ever heard of”. I believe that was intentional.
In the trial in Columbus, ALL executives ECCEPT ONE, was acquitted. Who was this one and only executive acquitted? James K Happ. Mr. James K Happ was the CFO at Richard Rainwater's Columbia Homecare Group before arriving at National Century Financial Enterprises, Inc. NCFE.
BUT HOLD ON......Now, FEBRUARY 2009, even though NCFE case was supposedly CLOSED by the DOJ in the BUSH ADMINISTRAION, in 2008, is now back in the INVESTIGATIN OF :
Credit Suisse Seeks Sanctions against Lloyds
Law360, New York (February 03, 2009) -- Credit Suisse Securities LLC has asked the court overseeing litigation over the collapse of health care lender National Century Financial Enterprises Inc. to sanction Lloyds TSB Bank PLC for allegedly hiding a deal with Moody's Investor Services Inc. in order to manipulate a deposition in its favor.Credit Suisse, which is accused by Lloyds and others of committing fraud as an agent for National Century's note offerings, said in a motion filed Friday that Lloyds concealed an...

Important information on a National Century Financial Enterprises Inc. computer system was either lost or tampered with

Wednesday, March 5, 2008
IT expert: National Century computer system unreliable
Business First of Columbus - by Kevin Kemper Business First

Important information on a National Century Financial Enterprises Inc. computer system was either lost or tampered with, a computer expert testified for the defense, however the government did its best to call the witness's testimony into question.

Jon Bryant, an information technology computer consultant that used to work at National Century, told jury members on Tuesday and Wednesday that the AS/400 mainframe computer used by National Century to track accounts receivable was missing information after a crash that left nine of its hard drives inoperable.

The crash occurred, Bryant said, sometime after he stopped working for National Century in 2001, possibly when the government gained control of the system during its investigation.

Defense attorneys hired Bryant as an expert witness in 2007 to conduct an analysis of the information contained on National Century's AS/400 system. When Bryant conducted his analysis, he found that there was $300 million in accounts receivable missing from the system due to the crash.

The government has used information from the AS/400 to allege to the jury that millions of dollars went missing from the National Century's accounts.

Dublin-based National Century was a financier of last resort for health-care providers. The firm specialized in buying receivables from medical businesses at a discount, giving them cash up front so they could pay their bills. It then packaged the receivables as asset-backed bonds and sold them to investors.

Five of the company's former executives - Rebecca Parrett, Donald Ayers, Roger Faulkenberry, Randolph Speer and James Dierker - are facing charges of fraud, conspiracy and money laundering for their alleged involvement in National Century's nearly $3 billion collapse and bankruptcy in 2002.

They have all pleaded not guilty to the charges.

When the government got its chance to cross-examine Bryant, Assistant U.S. Attorney Douglas Squires did his best to call Bryant's word into question.

Squires first attempted to show that Bryant was not an information technology expert.

Squires asked Bryant about memos that circulated among National Century executives that suggested computer programs Bryant wrote did not work properly.

Bryant said he was not familiar with those memos.

Squires then asked Bryant about his relationship with Parrett. When Bryant admitted the two are friends, Squires suggested Bryant might lie for her. Bryant said he would not.

Squires also asked Bryant about statements Bryant made to the FBI in 2002. Bryant admitted he told the FBI that the company tried to deceive auditors and that funds were moved among accounts to hide shortfalls.

Squires also suggested that Bryant was disgruntled when he worked for National Century and that he volunteered to be a government witness in the case.

Bryant said neither was true.

Defense attorneys called their third witness after Bryant, a securitizations expert named Gregory Gac.

Gac, owner of Shorewood, Minn.-based Quadrant Financial Group LLC, was hired by the defense at a rate of $450 an hour to analyze the documents that governed National Century's bond funds.

The government has alleged that because the defendants allowed reserve funds for National Century bonds to be depleted, they had committed securities fraud. But Gac said National Century's bond reserve funds were allowed to fluctuate.

Under cross-examination, he admitted that he had sat in on earlier testimony in the trial when the government's star witness said she was behind a massive and ongoing fraud at the company. Gac said he found her testimony, "appalling," and that her behavior gives everyone in the finance industry a black eye.

The defense also called two character witnesses on behalf of Dierker, in advance of his expected testimony on Thursday. Barry Salmons, a friend and vice president of marketing at Huntington National Bank, testified that Dierker was a man of character, integrity and honesty. Susan Horn, a former executive vice president of marketing at Victoria's Secret, said that when Dierker worked for her, he was an outstanding employee with great morals and if she heard him testify she would believe what he said.

MISSED THE BIGGER PICTURE FOLKS!!!!

"Happ’s trial is expected to last most of December..."
The ONLY EXECUTIVE TO WALK AWAY....hmmm.....

Really? Funny how that LAST trial went to fast? Did not matter that Happ came from HCA ---RICHARD RAINWATER'S 'pet' Columbia Homecare Group...he dumped those into the Bankruptcy Court 6 mos prior in Western Tennessee's Medshares PONZI SCHEME!!!

What a bunch of CRAP!!!


Monday, December 1, 2008
NCFE’s Happ starts his day in courtBusiness First of Columbus - by Kevin Kemper




The fourth and final criminal trial involving a former executive of National Century Financial Enterprises Inc. began Monday at U.S. District Court in Columbus as lawyers picked jurors to decide the fate of James Happ.

The government has accused Happ of a count each of conspiracy and money laundering conspiracy plus three counts of wire fraud.

He has pleaded not guilty to all of the charges.

The former executive vice president of Dublin-based National Century is standing trial on accusations he was part of an executive-level cabal at the medical financing company that defrauded investors out of $2.84 billion.

Happ’s trial began at 9 a.m. with jury selection, which was expected to last the day. It will be followed by opening arguments from government attorneys and then defense lawyers, likely to begin Tuesday.

Happ becomes the seventh National Century executive to stand trial on fraud charges and the 11th to be charged with crimes. Six other former executives, including company founders Lance Poulsen, Rebecca Parrett and her ex-husband Donald Ayers, were found guilty by juries earlier in the year.

A financier for health-care providers like doctors’ offices and hospitals, National Century’s bread and butter was buying accounts receivable from care providers at a discount, then securitizing the receivables into AAA-rated bonds for sale to investors. At its peak, the company employed more than 350 workers at its office campus in Dublin while recording annual revenue of more than $250 million.

The government has alleged the company collapsed into bankruptcy in 2002 after running a sophisticated pyramid scheme that fell apart.

In addition to purchasing legitimate accounts receivable, the government alleged National Century funded companies owned by its founders without getting receivables in return, effectively making risky unsecured loans with investor cash. The company charged its clients for those advances, the government has said, which inflated National Century’s revenue and generated bonuses for senior executives.

Happ’s trial is expected to last most of December.

Fortune's 1999 list of the 50 most powerful women.....CREATOR of DIP FInanace

Moore -- president of the private investment firm Rainwater Inc. -- was recently named to Fortune's 1999 list of the 50 most powerful women. Along the way she has notched three different careers and earned such distinctions as "the queen of DIP" (debtor-in-possession financing, which Moore pioneered during her highly successful tenure at Chemical Bank), "the toughest babe in business" (emblazoned on a Fortune magazine cover story), and "the best investment I ever made" (attributed to husband Richard Rainwater).

2004 decision was aimed at easing regulatory burdens that the European Union was about to impose on the foreign operations of United States investment

The Reckoning
Agency’s ’04 Rule Let Banks Pile Up New Debt

By STEPHEN LABATON
Published: October 2, 2008
“We have a good deal of comfort about the capital cushions at these firms at the moment.” — Christopher Cox, chairman of the Securities and Exchange Commission, March 11, 2008.

As rumors swirled that Bear Stearns faced imminent collapse in early March, Christopher Cox was told by his staff that Bear Stearns had $17 billion in cash and other assets — more than enough to weather the storm.

Drained of most of its cash three days later, Bear Stearns was forced into a hastily arranged marriage with JPMorgan Chase — backed by a $29 billion taxpayer dowry.

Within six months, other lions of Wall Street would also either disappear or transform themselves to survive the financial maelstrom — Merrill Lynch sold itself to Bank of America, Lehman Brothers filed for bankruptcy protection, and Goldman Sachs and Morgan Stanley converted to commercial banks.

How could Mr. Cox have been so wrong?

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.

A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.

One commissioner, Harvey J. Goldschmid, questioned the staff about the consequences of the proposed exemption. It would only be available for the largest firms, he was reassuringly told — those with assets greater than $5 billion.

“We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.”

Mr. Goldschmid, an authority on securities law from Columbia, was a behind-the-scenes adviser in 2002 to Senator Paul S. Sarbanes when he rewrote the nation’s corporate laws after a wave of accounting scandals. “Do we feel secure if there are these drops in capital we really will have investor protection?” Mr. Goldschmid asked. A senior staff member said the commission would hire the best minds, including people with strong quantitative skills to parse the banks’ balance sheets.

Annette L. Nazareth, the head of market regulation, reassured the commission that under the new rules, the companies for the first time could be restricted by the commission from excessively risky activity. She was later appointed a commissioner and served until January 2008.

“I’m very happy to support it,” said Commissioner Roel C. Campos, a former federal prosecutor and owner of a small radio broadcasting company from Houston, who then deadpanned: “And I keep my fingers crossed for the future.”

The proceeding was sparsely attended. None of the major media outlets, including The New York Times, covered it.

After 55 minutes of discussion, which can now be heard on the Web sites of the agency and The Times, the chairman, William H. Donaldson, a veteran Wall Street executive, called for a vote. It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.

With that, the five big independent investment firms were unleashed.

In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms’ own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves.

Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.

The 2004 decision for the first time gave the S.E.C. a window on the banks’ increasingly risky investments in mortgage-related securities.

But the agency never took true advantage of that part of the bargain. The supervisory program under Mr. Cox, who arrived at the agency a year later, was a low priority.

The commission assigned seven people to examine the parent companies — which last year controlled financial empires with combined assets of more than $4 trillion. Since March 2007, the office has not had a director. And as of last month, the office had not completed a single inspection since it was reshuffled by Mr. Cox more than a year and a half ago.

The few problems the examiners preliminarily uncovered about the riskiness of the firms’ investments and their increased reliance on debt — clear signs of trouble — were all but ignored.

The commission’s division of trading and markets “became aware of numerous potential red flags prior to Bear Stearns’s collapse, regarding its concentration of mortgage securities, high leverage, shortcomings of risk management in mortgage-backed securities and lack of compliance with the spirit of certain” capital standards, said an inspector general’s report issued last Friday. But the division “did not take actions to limit these risk factors.”

Drive to Deregulate

The commission’s decision effectively to outsource its oversight to the firms themselves fit squarely in the broader Washington culture of the last eight years under President Bush.

A similar closeness to industry and laissez-faire philosophy has driven a push for deregulation throughout the government, from the Consumer Product Safety Commission and the Environmental Protection Agency to worker safety and transportation agencies.

“It’s a fair criticism of the Bush administration that regulators have relied on many voluntary regulatory programs,” said Roderick M. Hills, a Republican who was chairman of the S.E.C. under President Gerald R. Ford. “The problem with such voluntary programs is that, as we’ve seen throughout history, they often don’t work.”

As was the case with other agencies, the commission’s decision was motivated by industry complaints of excessive regulation at a time of growing competition from overseas. The 2004 decision was aimed at easing regulatory burdens that the European Union was about to impose on the foreign operations of United States investment banks.
The Europeans said they would agree not to regulate the foreign subsidiaries of the investment banks on one condition — that the commission regulate the parent companies, along with the brokerage units that the S.E.C. already oversaw.

A 1999 law, however, had left a gap that did not give the commission explicit oversight of the parent companies. To get around that problem, and in exchange for the relaxed capital rules, the banks volunteered to let the commission examine the books of their parent companies and subsidiaries.The 2004 decision also reflected a faith that Wall Street’s financial interests coincided with Washington’s regulatory interests.

“We foolishly believed that the firms had a strong culture of self-preservation and responsibility and would have the discipline not to be excessively borrowing,” said Professor James D. Cox, an expert on securities law and accounting at Duke School of Law (and no relationship to Christopher Cox).

“Letting the firms police themselves made sense to me because I didn’t think the S.E.C. had the staff and wherewithal to impose its own standards and I foolishly thought the market would impose its own self-discipline. We’ve all learned a terrible lesson,” he added.

In letters to the commissioners, senior executives at the five investment banks complained about what they called unnecessary regulation and oversight by both American and European authorities. A lone voice of dissent in the 2004 proceeding came from a software consultant from Valparaiso, Ind., who said the computer models run by the firms — which the regulators would be relying on — could not anticipate moments of severe market turbulence.

“With the stroke of a pen, capital requirements are removed!” the consultant, Leonard D. Bole, wrote to the commission on Jan. 22, 2004. “Has the trading environment changed sufficiently since 1997, when the current requirements were enacted, that the commission is confident that current requirements in examples such as these can be disregarded?”

He said that similar computer standards had failed to protect Long-Term Capital Management, the hedge fund that collapsed in 1998, and could not protect companies from the market plunge of October 1987.

Mr. Bole, who earned a master’s degree in business administration at the University of Chicago, helps write computer programs that financial institutions use to meet capital requirements.

He said in a recent interview that he was never called by anyone from the commission.

“I’m a little guy in the land of giants,” he said. “I thought that the reduction in capital was rather dramatic.”

Policing Wall Street
A once-proud agency with a rich history at the intersection of Washington and Wall Street, the Securities and Exchange Commission was created during the Great Depression as part of the broader effort to restore confidence to battered investors. It was led in its formative years by heavyweight New Dealers, including James Landis and William O. Douglas. When President Franklin D. Roosevelt was asked in 1934 why he appointed Joseph P. Kennedy, a spectacularly successful stock speculator, as the agency’s first chairman, Roosevelt replied: “Set a thief to catch a thief.”

The commission’s most public role in policing Wall Street is its enforcement efforts. But critics say that in recent years it has failed to deter market problems. “It seems to me the enforcement effort in recent years has fallen short of what one Supreme Court justice once called the fear of the shotgun behind the door,” said Arthur Levitt Jr., who was S.E.C. chairman in the Clinton administration. “With this commission, the shotgun too rarely came out from behind the door.”

Christopher Cox had been a close ally of business groups in his 17 years as a House member from one of the most conservative districts in Southern California. Mr. Cox had led the effort to rewrite securities laws to make investor lawsuits harder to file. He also fought against accounting rules that would give less favorable treatment to executive stock options.

Under Mr. Cox, the commission responded to complaints by some businesses by making it more difficult for the enforcement staff to investigate and bring cases against companies. The commission has repeatedly reversed or reduced proposed settlements that companies had tentatively agreed upon. While the number of enforcement cases has risen, the number of cases involving significant players or large amounts of money has declined.

Mr. Cox dismantled a risk management office created by Mr. Donaldson that was assigned to watch for future problems. While other financial regulatory agencies criticized a blueprint by Mr. Paulson, the Treasury secretary, that proposed to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency.

In the process, Mr. Cox has surrounded himself with conservative lawyers, economists and accountants who, before the market turmoil of recent months, had embraced a far more limited vision for the commission than many of his predecessors.

‘Stakes in the Ground’

Last Friday, the commission formally ended the 2004 program, acknowledging that it had failed to anticipate the problems at Bear Stearns and the four other major investment banks.

“The last six months have made it abundantly clear that voluntary regulation does not work,” Mr. Cox said.

The decision to shutter the program came after Mr. Cox was blamed by Senator John McCain, the Republican presidential candidate, for the crisis. Mr. McCain has demanded Mr. Cox’s resignation.

Mr. Cox has said that the 2004 program was flawed from its inception. But former officials as well as the inspector general’s report have suggested that a major reason for its failure was Mr. Cox’s use of it.

“In retrospect, the tragedy is that the 2004 rule making gave us the ability to get information that would have been critical to sensible monitoring, and yet the S.E.C. didn’t oversee well enough,” Mr. Goldschmid said in an interview. He and Mr. Donaldson left the commission in 2005.

Mr. Cox declined requests for an interview. In response to written questions, including whether he or the commission had made any mistakes over the last three years that contributed to the current crisis, he said, “There will be no shortage of retrospective analyses about what happened and what should have happened.” He said that by last March he had concluded that the monitoring program’s “metrics were inadequate.”

He said that because the commission did not have the authority to curtail the heavy borrowing at Bear Stearns and the other firms, he and the commission were powerless to stop it.

“Implementing a purely voluntary program was very difficult because the commission’s regulations shouldn’t be suggestions,” he said. “The fact these companies could withdraw from voluntary supervision at their discretion diminished the mandate of the program and weakened its effectiveness. Experience has shown that the S.E.C. could not bootstrap itself into authority it didn’t have.”

But critics say that the commission could have done more, and that the agency’s effectiveness comes from the tone set at the top by the chairman, or what Mr. Levitt, the longest-serving S.E.C. chairman in history, calls “stakes in the ground.”

“If you go back to the chairmen in recent years, you will see that each spoke about a variety of issues that were important to them,” Mr. Levitt said. “This commission placed very few stakes in the ground.”

A version of this article appeared in print on October 3, 2008, on page A1 of the New York edition.

USA : Financial meltdown! CHASE-DIP FINANCE-CORPORATE BANKRUPTCY

"...bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser."
Citigroup Saw No Red Flags Even as It Made Bolder Bets
A Financial Supermarket Exposure to obscure mortgage instruments from Citigroup’s trading operations has taken a severe toll on the company, which provides financial services ranging from retail banking to advising companies on mergers.

“Our job is to set a tone at the top to incent people to do the right thing and to set up safety nets to catch people who make mistakes or do the wrong thing and correct those as quickly as possible. And it is working. It is working.”


A Blind Eye Articles in this series are exploring the causes of the financial crisis.

Charles O. Prince III, Citigroup’s chief executive, in 2006

In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.

For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.

Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

Today, Citigroup, once the nation’s largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses. More than half of that amount stems from mortgage-related securities created by Mr. Maheras’s team — the same products Mr. Prince was briefed on during that 2007 meeting.

Citigroup’s stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a work force that numbered about 375,000 a year ago.

Burdened by the losses and a crisis of confidence, Citigroup’s future is so uncertain that regulators in New York and Washington held a series of emergency meetings late last week to discuss ways to help the bank right itself.

And as the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.

While much of the damage inflicted on Citigroup and the broader economy was caused by errant, high-octane trading and lax oversight, critics say, blame also reaches into the highest levels at the bank. Earlier this year, the Federal Reserve took the bank to task for poor oversight and risk controls in a report it sent to Citigroup.

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.
Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

And since joining Citigroup in 1999 as a trusted adviser to the bank’s senior executives, Mr. Rubin, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has been roiled by one financial miscue after another.

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Citigroup was ensnared in murky financial dealings with the defunct energy company Enron, which drew the attention of federal investigators; it was criticized by law enforcement officials for the role one of its prominent research analysts played during the telecom bubble several years ago; and it found itself in the middle of regulatory violations in Britain and Japan.
For a time, Citigroup’s megabank model paid off handsomely, as it rang up billions in earnings each quarter from credit cards, mortgages, merger advice and trading.

But when Citigroup’s trading machine began churning out billions of dollars in mortgage-related securities, it courted disaster. As it built up that business, it used accounting maneuvers to move billions of dollars of the troubled assets off its books, freeing capital so the bank could grow even larger. Because of pending accounting changes, Citigroup and other banks have been bringing those assets back in-house, raising concerns about a new round of potential losses.

To some, the misery at Citigroup is no surprise. Lynn Turner, a former chief accountant with the Securities and Exchange Commission, said the bank’s balkanized culture and pell-mell management made problems inevitable.

“If you’re an entity of this size,” he said, “if you don’t have controls, if you don’t have the right culture and you don’t have people accountable for the risks that they are taking, you’re Citigroup.”

Questions on Oversight

Though they carry less prestige and are paid less than Wall Street traders and bankers, risk managers can wield significant clout. Their job is to monitor trading floors and inquire about how a bank’s money is being invested, so they can head off potential problems before blow-ups occur. Though risk managers and traders work side by side, they can have an uncomfortable coexistence because the monitors can put a brake on trading.

That is the way it works in theory. But at Citigroup, many say, it was a bit different.

David C. Bushnell was the senior risk officer who, with help from his staff, was supposed to keep an eye on the bank’s bond trading business and its multibillion-dollar portfolio of mortgage-backed securities. Those activities were part of what the bank called its fixed-income business, which Mr. Maheras supervised.

One of Mr. Maheras’s trusted deputies, Randolph H. Barker, helped oversee the huge build-up in mortgage-related securities at Citigroup. But Mr. Bushnell, Mr. Maheras and Mr. Barker were all old friends, having climbed the bank’s corporate ladder together.

It was common in the bank to see Mr. Bushnell waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.

Because Mr. Bushnell had to monitor traders working for Mr. Barker’s bond desk, their friendship raised eyebrows inside the company among those concerned about its controls.

After all, traders’ livelihoods depended on finding new ways to make money, sometimes using methods that might not be in the bank’s long-term interests. But insufficient boundaries were established in the bank’s fixed-income unit to limit potential conflicts of interest involving Mr. Bushnell and Mr. Barker, people inside the bank say.

Indeed, some at Citigroup say that if traders or bankers wanted to complete a potentially profitable deal, they could sometimes rely on Mr. Barker to convince Mr. Bushnell that it was a risk worth taking.

Risk management “has to be independent, and it wasn’t independent at Citigroup, at least when it came to fixed income,” said one former executive in Mr. Barker’s group who, like many other people interviewed for this article, insisted on anonymity because of pending litigation against the bank or to retain close ties to their colleagues. “We used to say that if we wanted to get a deal done, we needed to convince Randy first because he could get it through.”

Others say that Mr. Bushnell’s friendship with Mr. Maheras may have presented a similar blind spot.
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“Because he has such trust and faith in these guys he has worked with for years, he didn’t ask the right questions,” a former senior Citigroup executive said, referring to Mr. Bushnell.

Mr. Bushnell and Mr. Barker did not return repeated phone calls seeking comment. Mr. Maheras declined to comment.

For some time after Sanford I. Weill, an architect of the merger that created Citigroup a decade ago, took control of Citigroup, he toned down the bank’s bond trading. But in late 2002, Mr. Prince, who had been Mr. Weill’s longtime legal counsel, was put in charge of Citigroup’s corporate and investment bank.

According to a former Citigroup executive, Mr. Prince started putting pressure on Mr. Maheras and others to increase earnings in the bank’s trading operations, particularly in the creation of collateralized debt obligations, or C.D.O.’s — securities that packaged mortgages and other forms of debt into bundles for resale to investors.

Because C.D.O.’s included so many forms of bundled debt, gauging their risk was particularly tricky; some parts of the bundle could be sound, while others were vulnerable to default.

“Chuck Prince going down to the corporate investment bank in late 2002 was the start of that process,” a former Citigroup executive said of the bank’s big C.D.O. push. “Chuck was totally new to the job. He didn’t know a C.D.O. from a grocery list, so he looked for someone for advice and support. That person was Rubin. And Rubin had always been an advocate of being more aggressive in the capital markets arena. He would say, ‘You have to take more risk if you want to earn more.’ ”

It appeared to be a good time for building up Citigroup’s C.D.O. business. As the housing market around the country took flight, the C.D.O. market also grew apace as more and more mortgages were pooled together into newfangled securities.

From 2003 to 2005, Citigroup more than tripled its issuing of C.D.O.’s, to more than $20 billion from $6.28 billion, and Mr. Maheras, Mr. Barker and others on the C.D.O. team helped transform Citigroup into one of the industry’s biggest players. Firms issuing the C.D.O.’s generated fees of 0.4 percent to 2.5 percent of the amount sold — meaning Citigroup made up to $500 million in fees from the business in 2005 alone.

Even as Citigroup’s C.D.O. stake was expanding, its top executives wanted more profits from that business. Yet they were not running a bank that was up to all the challenges it faced, including properly overseeing billions of dollars’ worth of exotic products, according to Citigroup insiders and regulators who later criticized the bank.

When Mr. Prince was put in charge in 2003, he presided over a mess of warring business units and operational holes, particularly in critical areas like risk-management and controls.

“He inherited a gobbledygook of companies that were never integrated, and it was never a priority of the company to invest,” said Meredith A. Whitney, a banking analyst who was one of the company’s early critics. “The businesses didn’t communicate with each other. There were dozens of technology systems and dozens of financial ledgers.”

Problems with trading and banking oversight at Citigroup became so dire that the Federal Reserve took the unusual step of telling the bank it could make no more acquisitions until it put its house in order.

In 2005, stung by regulatory rebukes and unable to follow Mr. Weill’s penchant for expanding Citigroup’s holdings through rapid-fire takeovers, Mr. Prince and his board of directors decided to push even more aggressively into trading and other business that would allow Citigroup to continue expanding the bank internally.

One person who helped push Citigroup along this new path was Mr. Rubin.

Pushing Growth

Robert Rubin has moved seamlessly between Wall Street and Washington. After making his millions as a trader and an executive at Goldman Sachs, he joined the Clinton administration.

Mr. Weill, as Citigroup’s chief, wooed Mr. Rubin to join the bank after Mr. Rubin left Washington. Mr. Weill had been involved in the financial services industry’s lobbying to persuade Washington to loosen its regulatory hold on Wall Street.

Page 4 of 5)

As chairman of Citigroup’s executive committee, Mr. Rubin was the bank’s resident sage, advising top executives and serving on the board while, he insisted repeatedly, steering clear of daily management issues.

“By the time I finished at Treasury, I decided I never wanted operating responsibility again,” he said in an interview in April. Asked then whether he had made any mistakes during his tenure at Citigroup, he offered a tentative response.

“I’ve thought a lot about that,” he said. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.”

Besides, he said, it was impossible to get a complete handle on Citigroup’s vulnerabilities unless you dealt with the trades daily.

“There is no way you would know what was going on with a risk book unless you’re directly involved with the trading arena,” he said. “We had highly experienced, highly qualified people running the operation.”

But while Mr. Rubin certainly did not have direct responsibility for a Citigroup unit, he was an architect of the bank’s strategy.

In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business.

Former colleagues said Mr. Rubin also encouraged Mr. Prince to broaden the bank’s appetite for risk, provided that it also upgraded oversight — though the Federal Reserve later would conclude that the bank’s oversight remained inadequate.

Once the strategy was outlined, Mr. Rubin helped Mr. Prince gain the board’s confidence that it would work.

After that, the bank moved even more aggressively into C.D.O.’s. It added to its trading operations and snagged crucial people from competitors. Bonuses doubled and tripled for C.D.O. traders. Mr. Barker drew pay totaling $15 million to $20 million a year, according to former colleagues, and Mr. Maheras became one of Citigroup’s most highly compensated employees, earning as much as $30 million at the peak — far more than top executives like Mr. Bushnell in the risk-management department.

In December 2005, with Citigroup diving into the C.D.O. business, Mr. Prince assured analysts that all was well at his bank.

“Anything based on human endeavor and certainly any business that involves risk-taking, you’re going to have problems from time to time,” he said. “We will run our business in a way where our credibility and our reputation as an institution with the public and with our regulators will be an asset of the company and not a liability.”

Yet as the bank’s C.D.O. machine accelerated, its risk controls fell further behind, according to former Citigroup traders, and risk managers lacked clear lines of reporting. At one point, for instance, risk managers in the fixed-income division reported to both Mr. Maheras and Mr. Bushnell — setting up a potential conflict because that gave Mr. Maheras influence over employees who were supposed to keep an eye on his traders.

C.D.O.’s were complex, and even experienced managers like Mr. Maheras and Mr. Barker underestimated the risks they posed, according to people with direct knowledge of Citigroup’s business. Because of that, they put blind faith in the passing grades that major credit-rating agencies bestowed on the debt.

While the sheer size of Citigroup’s C.D.O. position caused concern among some around the trading desk, most say they kept their concerns to themselves.

“I just think senior managers got addicted to the revenues and arrogant about the risks they were running,” said one person who worked in the C.D.O. group. “As long as you could grow revenues, you could keep your bonus growing.”

To make matters worse, Citigroup’s risk models never accounted for the possibility of a national housing downturn, this person said, and the prospect that millions of homeowners could default on their mortgages. Such a downturn did come, of course, with disastrous consequences for Citigroup and its rivals on Wall Street.

Even as the first shock waves of the subprime mortgage crisis hit Bear Stearns in June 2007, Citigroup’s top executives expressed few concerns about their bank’s exposure to mortgage-linked securities.

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In fact, when examiners from the Securities and Exchange Commission began scrutinizing Citigroup’s subprime mortgage holdings after Bear Stearns’s problems surfaced, the bank told them that the probability of those mortgages defaulting was so tiny that they excluded them from their risk analysis, according to a person briefed on the discussion who would speak only without being named

Later that summer, when the credit markets began seizing up and values of various C.D.O.’s began to plummet, Mr. Maheras, Mr. Barker and Mr. Bushnell participated in a meeting to review Citigroup’s exposure.

The slice of mortgage-related securities held by Citigroup was “viewed by the rating agencies to have an extremely low probability of default (less than .01%),” according to Citigroup slides used at the meeting and reviewed by The New York Times.

Around the same time, Mr. Maheras continued to assure his colleagues that the bank “would never lose a penny,” according to an executive who spoke to him.

In mid-September 2007, Mr. Prince convened the meeting in the small library outside his office to gauge Citigroup’s exposure.

Mr. Maheras assured the group, which included Mr. Rubin and Mr. Bushnell, that Citigroup’s C.D.O. position was safe. Mr. Prince had never questioned the ballooning portfolio before this because no one, including Mr. Maheras and Mr. Bushnell, had warned him.

But as the subprime market plunged further, Citigroup’s position became more dire — even though the firm held onto the belief that its C.D.O.’s were safe.

On Oct. 1, it warned investors that it would write off $1.3 billion in subprime mortgage-related assets. But of the $43 billion in C.D.O.’s it had on its books, it wrote off only about $95 million, according to a person briefed on the situation.

Soon, however, C.D.O. prices began to collapse. Credit-rating agencies downgraded C.D.O.’s, threatening Citigroup’s stockpile. A week later, Merrill Lynch aggressively marked down similar securities, forcing other banks to face reality.

By early November, Citigroup’s anticipated write-downs ballooned to $8 billion to $11 billion. Mr. Barker and Mr. Maheras lost their jobs, as Mr. Bushnell did later on. And on Nov. 4, Mr. Prince told the board that he, too, would resign.

Although Mr. Prince received no severance, he walked away with Citigroup stock valued then at $68 million — along with a cash bonus of about $12.5 million for 2007.

Putting Out Fires

Mr. Prince was replaced last December by Vikram S. Pandit, a former money manager and investment banker whom Mr. Rubin had earlier recruited in a senior role. Since becoming chief executive, Mr. Pandit has been scrambling to put out fires and repair Citigroup’s deficient risk-management systems.

Earlier this year, Federal Reserve examiners quietly presented the bank with a scathing review of its risk-management practices, according to people briefed on the situation.

Citigroup executives responded with a 25-page single-spaced memo outlining a sweeping overhaul of the bank’s risk management.

In May, Brian Leach, Citigroup’s new chief risk officer, told analysts that his bank had greatly improved oversight and installed several new risk managers. He said he wanted to ensure “that Citi takes the lessons learned from recent events and makes critical enhancements to its risk management frameworks. A change in culture is required at Citi.”

Meanwhile, regulators have criticized the banking industry as a whole for relying on outsiders — in particular the ratings agencies — to help them gauge the risk of their investments.

“There is really no excuse for institutions that specialize in credit risk assessment, like large commercial banks, to rely solely on credit ratings in assessing credit risk,” John C. Dugan, the head of the Office of the Comptroller of the Currency, the chief federal bank regulator, said in a speech earlier this year.

But he noted that what caused the largest problem for some banks was that they retained dangerously big positions in certain securities — like C.D.O.’s — rather than selling them off to other investors.

“What most differentiated the companies sustaining the biggest losses from the rest was their willingness to hold exceptionally large positions on their balance sheets which, in turn, led to exceptionally large losses,” he said.

Mr. Dugan did not mention any specific bank by name, but Citigroup is the largest player in the C.D.O. business of any bank the comptroller regulates.

For his part, Mr. Pandit faces the twin challenge of rebuilding investor confidence while trying to fix the company’s myriad problems.

Citigroup has suffered four consecutive quarters of multibillion-dollar losses as it has written down billions of dollars of the mortgage-related assets it held on its books.

But investors worry there is still more to come, and some board members have raised doubts about Mr. Pandit’s leadership, according to people briefed on the situation.

Citigroup still holds $20 billion of mortgage-linked securities on its books, the bulk of which have been marked down to between 21 cents and 41 cents on the dollar. It has billions of dollars of giant buyout and corporate loans. And it also faces a potential flood of losses on auto, mortgage and credit card loans as the global economy plunges into a recession.

Also, hundreds of billions of dollars in dubious assets that Citigroup held off its balance sheet is now starting to be moved back onto its books, setting off yet another potential problem.

The bank has already put more than $55 billion in assets back on its balance sheet. It now says an added $122 billion of assets related to credit cards and possibly billions of dollars of other assets will probably come back on the books.

Even though Citigroup executives insist that the bank can ride out its current difficulties, and that the repatriated assets pose no threat, investors have their doubts. Because analysts do not have a complete grip on the quality of those assets, they are warning that Citigroup may have to set aside billions of dollars to guard against losses.

In fact, some analysts say they believe that the $25 billion that the federal government invested in Citigroup this fall might not be enough to stabilize it.

Others say the fact that such huge amounts have yet to steady the bank is a reflection of the severe damage caused by Citigroup’s appetites.

“They pushed to get earnings, but in doing so, they took on more risk than they probably should have if they are going to be, in the end, a bank subject to regulatory controls,” said Roy Smith, a professor at the Stern School of Business at New York University. “Safe and soundness has to be no less important than growth and profits but that was subordinated by these guys.”


By ERIC DASH and JULIE CRESWELL
Published: November 22, 2008
A version of this article appeared in print on November 23, 2008, on page A1 of the New York edition.

June 2, 2006...Treasury Secretary John Snow sees only good news

June 2, 2006, 10:42 am
outgoing Treasury Secretary John Snow Says the Glass Is Full

Today’s report is good news for American families. It shows that our economy is on solid footing and that we are heading in the right direction, giving Americans a renewed sense of optimism.


Although employers added only 75,000 jobs in May — widely seen as a sign of slowdown in economic growth — outgoing Treasury Secretary John Snow sees only good news, highlighting a decline in the jobless rate of one-tenth of a percentage point and ignoring the news that average wages barely budged.

“With unemployment at a remarkable 4.6%, this month’s employment report shows continued strength in the U.S. labor market and an economy moving in the right direction, he said. “Today’s report is good news for American families. It shows that our economy is on solid footing and that we are heading in the right direction, giving Americans a renewed sense of optimism.
“I am pleased to note that virtually everywhere one looks there is good economic news, he added.

But Bernard Baumohl of the Economic Outlook Group, read the numbers differently: Today’s weak employment report represents one of the more concrete signs that we are about to enter a sustained economic slowdown in the second half.

So did PNC economist Richard Moody. “The May employment report brought cheer to the bond market, he said. After all, the only thing a bond trader dislikes more than seeing someone get a job is seeing someone get a raise.” –Deborah Solomon

Sprinkled among the doctors, lawyers and society people...

"lots of pushing and shoving." The couple had to leverage big deals with little equity value. "It was an enormous amount of work."


The gift was made after a lunch meeting that included Moore and her husband and top Bank of America executives William "Hootie" Johnson and Hugh McCall, Moore said.

She attended the lunch at the Florence Country Club because she was excited to meet Johnson, she said. She did not foresee the request that would come after a long, friendly conversation.

Editor's note: This is the first of two stories on one of the most influential women in South Carolina.

The pragmatic Grande Dame of South Carolina receives her guests by the Steinway & Sons grand piano, nestled in a front parlor niche of her luxurious South of Broad home.

She introduces her husband, Richard Rainwater, as "Dr. Doom." He is holding a can of soda, chatting and a little self-deprecating, full of praise for the lady of the house, worried that the economic downturn could mean utter disaster. A platter of hors d'oeuvres slides through.

Sprinkled among the doctors, lawyers and society people are those affiliated with the agriculture business who are in Charleston to attend the third-annual AgSummit, hosted by the Palmetto Institute.

The institute is the all-business, no-nonsense expression of Darla Moore's central passion: to raise the per-capita income of the state. And agriculture, South Carolina's No. 1 economic driver, offers one way to achieve her goal.

The guests enjoy drinks on the porch. The November night is crisp and clear, like Moore. She talks about the big plans for her hometown of Lake City. She shows off her extraordinary rare book collection in the warm, art-furnished library.

The house is decorated with objects and furniture Moore selected herself, and it intentionally resembles the décor one would have found in a 19th century Charleston residence. The reception is reminiscent of that era's society parties, except that modern farmers have replaced plantation owners. The conversation is probably similar, talking about new crops, cooperatives, marketing initiatives and a desire for more government support.

The next morning at the Francis Marion Hotel, summit attendees get serious.

Moore welcomes attendees and summarizes her goals: "We've got to think innovatively," she says. We've got to reinvigorate rural areas, boost research then commercialize its discoveries.

State Agriculture Commissioner Hugh Weathers says Moore's enthusiasm "gets other people off the bench."

"She's saying the status quo is not satisfactory in a whole host of things. I agree it can be better," Weathers says.

Fenton Overdyke, vice president of MarketSearch, which was hired by the Palmetto Institute to study the agriculture sector in the state, notes that agriculture is a $30 billion industry that employs 188,000 people. More than 90 percent of farmland is owned by individuals or families, not large-production companies, Overdyke says. More than half of all farms are fewer than 100 acres.

In advocating for improved agribusiness, Moore is thinking of Lake City, her beloved hometown, site of the family farm and repository of childhood memories.

"This is special to me," she tells the audience. "I consider myself one of you."

Funding big ideas

It can be difficult to pin down Moore. She constantly is working, traveling and speaking at Rotary Clubs, conferences and universities. She is a loyal capitalist and tireless advocate of economic improvement. She is pushing for tax reform, for farming clusters, for competitive international trade, for more and better research, for recruitment of top-drawer thinkers to the state. She is determined to succeed. She is not one to throw her hands in the air and move on before the current issue is addressed satisfactorily and assigned a management team. And even then, she keeps a hand in it.

Jim Fields, director of the Columbia-based Palmetto Institute, is Moore's go-to man, the one who manages the schedule, helps set the agenda, explains the mission, protects her interests and shields her from unwanted exposure. She has a habit of calling him only by his last name.

"Fields, what's next on the schedule?" "Fields! Tell them I'm not interested."

Fields is a reliable and trusted ally. Once affiliated with the McNair Law Firm, he specialized in state and local government affairs. He was counsel to the state Senate Judiciary Committee, then served as Clerk of the South Carolina Senate before being elected to head the Government Issues Committee of the National Conference of State Legislatures.

These days, he devotes himself to Moore and the mission of the Palmetto Institute.

In 1998, Moore gave $25 million to the University of South Carolina's College of Business Administration, which was renamed in her honor. The school, reputed to have one of the world's best programs in international business, is for Moore the launching pad to grow and propel innovative business enterprise throughout the state.

The gift was made after a lunch meeting that included Moore and her husband and top Bank of America executives William "Hootie" Johnson and Hugh McCall, Moore said.

She attended the lunch at the Florence Country Club because she was excited to meet Johnson, she said. She did not foresee the request that would come after a long, friendly conversation.
"We're here," Johnson finally said, "because we'd like to propose naming a business school at the university for Darla." It would be a first. Business schools had never been named for a woman before.

"Richard and I were dumbstruck. We just stared at him," Moore said. "Then he said it would cost $25 million."

Moore turned to Rainwater and said, "What do you think?"

Sitting there sipping coffee, Rainwater took a brief moment to think.

"Well, I think you should do it," he said.

It was a done deal. But the flattery only went so far. Soon Moore discovered that her no-strings-attached approach needed revising: All was not as rosy as it seemed.

"Fields, have I just flushed $25 million down the toilet?" she asked.

She hired a consulting firm to evaluate the school's performance. She wanted it to be a factory producing bright business minds that glowed with creativity and financial know-how. She would settle for nothing less.

"I was going to invest in South Carolina, that was a given," she said. And one of the most important assets in the state was its premier institution of learning, meant to be an engine that keeps the economy growing, she thought. This was more than a gift and a name on the side of a building, more than a good deed.

This was critical.

So Moore did what she always does when faced with a challenge. She got involved. She pushed for a revised curriculum. She consulted with school officials. She allocated some endowment money to a fellowship program that covered expenses for up to 30 students each year. She instigated a search for a new dean, then found one in Hildy Teegan. And she advocated for the recruitment of new faculty.

In 2003, Moore and Rainwater gave $10 million to the School of Education at Clemson University in honor of her father, Eugene Moore Jr., a Clemson alumnus and former public school teacher, coach and principal who died in October 2008.

Then in 2004, she pledged an additional $45 million to renovate the Hipp-Close building at USC and bolster the endowment, challenging the administration to match the gift.

Finding a dean

By 2007, the dream house Teegan and her husband were building on the edge of the Shenandoah National Park was ready to be occupied. Teegan was happily teaching international business at Moore's alma mater, George Washington University, and had no thoughts of becoming a dean, she said.

The force of Moore's charisma and vision, combined with a perceived opportunity, convinced Teegan to abandon her Washington life and take a new course.

"Her reputation is very strong," Teegan said of Moore. "She is associated with the mavericks of Wall Street. … She is the uber role model for many women in business. … She was known for a series of great choices made in somewhat adverse circumstances."

And there was her tenacity, her history of leveraging events to her advantage, her grand vision. "She is a bright light in the state," Teegan said.

Now, Teegan is making adjustments, some large some subtle, so that academia and enterprise work together, so that agribusiness in the state can be exported more and intellectual properties developed, so that ideas fueled in the classroom can be transformed into market solutions.

By nuturing great minds in business enterprise, Teegan hopes some of them will stay in South Carolina and help realize Moore's vision. It's about leverage, about transforming something small and powerful into something big. Or as Teegan put it, "to take limited investment and get a multiplier."

There is a vehicle for achieving these mostly abstract goals. It's called Innovista, a public-private research and development project sponsored by USC, local and state government and business leaders. Innovista is a $250 million idea factory that officials, including Moore and Teegan, hope will serve as an economic catalyst for the state, adding knowledge-based businesses and high-paying jobs.

"Great ideas spring forth," Teegan said of the academic environment, "but the missing link is the transition to commercial applications. … Some of the most difficult problems can't be solved by government alone, or civil society alone. You've got to have the private sector engaged."

Harris Pastides, who became president of USC this year and who is one of the forces behind the Innovista project, said he works closely with Moore, who sits on the university's board, and appreciates her influence.

"What else do you have if you don't have job creation coming out of research institutions?" he asked. Tourism appears to be in decline, at least for now. Agriculture is important, but its growth potential is questionable. The manufacturing sector is a disaster. "Knowledge. That one is a level playing field."

But getting the state and its institutions to fully endorse and fund the public-private research initiative and the ideas it is meant to explore has been slow going, Pastides said. Moore's participation has been invaluable.

"When Darla speaks, people listen," Pastides said. "When a university president speaks, some people listen, some people run away."

Rolling tobacco

Born at the height of summer in 1954, Moore grew up on a tobacco plantation in Lake City when the town was still a hub of rural South Carolina, a crossroads through which trains passed carrying bean and tobacco crops to markets far and wide. The property, which had been in the family for generations, remains the site of Moore's primary residence.

Besides tobacco, the farm grew cotton and soy beans. Moore remembers the sharecroppers who worked the crops and cured and classified the huge tobacco leaves in the pack house. Sometimes she would pitch in a little, earning 10 cents a day.

Productivity. Getting things done. Markets. Trade. It shaped the worldview of a young, pretty, determined girl.

In the 1970s, an affluent Lake City began its slow, painful decline. Tobacco was vilified. Farmers struggled. Moore knew she could not go far by staying home. She wanted to make a mark somehow, to make a name for herself. In 1979, Moore left for Washington to work for the Republican National Committee on behalf of Ronald Reagan in his run for president.

She discovered, however, that power born through politics was transient and fickle. In 1981, she graduated with an MBA from George Washington University, and the next year she moved to New York and joined a training program at Chemical Bank. She set her sights on the leveraged buyout business, which was all the rage on Wall Street then. Mergers and acquisitions. Big money. Influence. Wealth.

"There wasn't a snowball's chance in hell that a female from the rural Deep South would be invited or embraced by that LBO environment," she told an audience at the Wharton School of the University of Pennsylvania in 2000. "Historically no major players in the LBO business were women."

So someone suggested the bankruptcy business. If the leveraged buyout market was the top of the skyscraper, bankruptcy was the basement. Or, to use Moore's metaphor: "I ended up on the dark side of the moon."

She was buried in failed companies, working in relative isolation to manage reorganizations and liquidations. She learned a lot and became an expert at dealing with companies in crisis mode. She earned a guaranteed fee, which was paid first, before any creditors received a dime, before the company could spend money on its restructuring. The dark side of the moon proved lucrative.

Then, suddenly, came economic crisis.

The peak of the merger period had been reached and markets were contracting. The savings and loan fiasco made headlines. Businesses were tumbling from the top of the skyscraper into the basement, and Moore, efficient and ruthless, processed them one by one.

"It was manna from heaven," she said. "I was unassailable at the time, they couldn't touch me."

And she played up her Southern belle charm, which transformed from a liability into an asset. She was polite and sweet, even as she demanded of humbled executives that they do as she told them. The business provided "an incredibly high return on incredibly low risk," she said. And the chaos didn't faze her. "I could see the end game through the smoke."

This was her professional life for 13 years. She became the highest paid woman in banking. In 1991, she married Texas investment tycoon Richard Rainwater. In 1993, she left her job at the bank in New York to become president of Rainwater Inc. She was 39 and on the verge of a new career, still in the "get-rich" phase of her life.

Rainwater was a successful funds manager-turned-private investor from Fort Worth, Texas, who had gained a reputation for taking big risks that paid off handsomely. He bought 15 million square feet of real estate in Houston and Dallas after an episode of panic selling in the mid-1990s. Then he caught wind of the "peak oil" theory, which says that there is a possible peak in worldwide oil production, and decided to invest heavily while prices were low.

With Moore at the helm of the company, Rainwater focused on raising money. She steered the ship. It was a period of "high-wire acts," Moore said, with "lots of pushing and shoving." The couple had to leverage big deals with little equity value. "It was an enormous amount of work."
But the wealth amassed, and after some years Moore was entering the "stay-rich" phase when priorities shifted.

She would settle back into the family home in Lake City. It would become her base, even as she maintained other homes in New York, California and Charleston. Lake City, this washed-out farming town in Florence County, was the community in which she would pay her taxes.

And restoring it to its former grandeur would become her passion.

Next: Moore's vision for Lake City, her efforts as chairwoman of the Palmetto Institute and her rare book collection.

Reach Adam Parker at 937-5902 or aparker@postandcourier.com.