Thursday, May 28, 2009
HCA International- Conservatives for Patients Rights
Conservatives for Patients' Rights commercial with the Doctor in England?
2008--- HCA International
Welcome to London's leading private hospitals- HCA International
Why we are London's No. 1 private hospital group- HCA International
� More than 3,000 top London and UK specialists in private practice- HCA International
No. 1 private hospital?- HCA International
This is what STUPID AMERICA gets:
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
1997- As part of Richard Scott's severance package from Columbia he was paid $5.13 million and given a five year consulting contract at $950,000 per year.
1997+5 years consulting =2002
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio.
National Century Financial Enterprises
Guess where ALL of Rick Scott’s Columbia homecare units were? National Century Financial Enterprises.
Largest fraud case the FBI has ever investigated-one acquittal- James K Happ, the ex-CFO of Columbia Homecare Group, Inc.
Jurors stated; "PROSECUTOR DID NOT DO HIS JOB"�hmm
Leo Wise , now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
"Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated. (Leo Wise )
The ONLY acquittal; James K Happ--the CFO of Columbia Homecare Group.
Leo Wise , (now at the ethics CBO) stated "Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated.
Then- low and behold: December 18, 2008 The ONLY acquittal; James K Happ!...belief that federal prosecutors had not done their job, the juror said.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Richard Rainwater, ex-partner of GW Bush with the Rangers
Leo Wise, now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio
"This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America," said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
Richard Scott -- sometimes called "the Bill Gates of health care" -- quit as chairman of Columbia/HCA Healthcare Corp. amid a massive federal investigation into the Medicare billing, physician recruiting and home-care practices of the nation's largest for-profit health care company.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Rainwater also owned a large stake in Magellan Health Care which controls Charter Medical. Magellan, run by Darla Moore, is the largest network of psychiatric hospitals in the country. They are becoming more and more involved in obtaining government money for services formerly not covered as health care, according to Fortune Magazine.
1997 - Columbia/HCA Healthcare Corp. - the nation's largest for-profit health care company
Showing posts with label SEC. Show all posts
Showing posts with label SEC. Show all posts
Thursday, May 28, 2009
Tuesday, March 24, 2009
The only true statement in this AP article is
Almost $400,000 seized in Ohio fraud case
By ANDREW WELSH-HUGGINS – 21 hours ago
This is misleaduing and WRONG!COLUMBUS, Ohio (AP) — A fugitive convicted in a $1.9 billion corporate fraud scheme put aside almost $400,000 in a bank account before she disappeared, money her trial attorney said he knew nothing about.
Rebecca Parrett, who has been on the lam nearly a year, gave the money to another attorney after removing it from an escrow account, according to federal court documents. But on Friday, U.S. District Court Judge Algenon Marbley said the funds should be seized from an Arizona bank account used by Parrett, 60, a former executive with National Century Financial Enterprises.
The government could use the money to provide restitution to investors who lost money.
Parrett, who will be sentenced Friday in absentia, faces up to 60 years in prison. She disappeared last March after her conviction on 13 counts of securities and wire fraud and money laundering while she worked for National Century in suburban Columbus. Prosecutors likened the fraud, which involved misleading investors and fabricating data, to the Enron or WorldCom scandals.
Arizona attorney Seymour Sacks told the U.S. marshals that Parrett had given him $350,000 from an escrow account, the warrant said. Sacks said he refused to turn the money over to Parrett's husband and son when they requested it after she disappeared, according to the warrant.
Gregory Peterson, who represented Parrett at trial, said he only learned of the money's existence after his client disappeared.
"I was not aware of any money she had anywhere," Peterson said Monday, repeating that he didn't know where his client was.
Parrett's sentencing in absentia will come a few hours before Marbley sentences Lance Poulsen, National Century's founder and former chief executive.
The sentencings are the latest chapter in the downfall of what was once the country's largest health care financing company. Since the FBI raided its offices in 2002, at least nine former executives have been convicted of corporate fraud.
At its height the company employed more than 300 people, most of them in the Columbus area. Executives made millions, with Poulsen alone earning more than $9.1 million between 1996 and 2002, according to the government.
National Century offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The company raised the money to fund its business by selling bonds to investors. It declared bankruptcy in 2002 after the FBI raid.
Copyright © 2009 The Associated Press. All rights reserved.
By ANDREW WELSH-HUGGINS – 21 hours ago
This is misleaduing and WRONG!COLUMBUS, Ohio (AP) — A fugitive convicted in a $1.9 billion corporate fraud scheme put aside almost $400,000 in a bank account before she disappeared, money her trial attorney said he knew nothing about.
Rebecca Parrett, who has been on the lam nearly a year, gave the money to another attorney after removing it from an escrow account, according to federal court documents. But on Friday, U.S. District Court Judge Algenon Marbley said the funds should be seized from an Arizona bank account used by Parrett, 60, a former executive with National Century Financial Enterprises.
The government could use the money to provide restitution to investors who lost money.
Parrett, who will be sentenced Friday in absentia, faces up to 60 years in prison. She disappeared last March after her conviction on 13 counts of securities and wire fraud and money laundering while she worked for National Century in suburban Columbus. Prosecutors likened the fraud, which involved misleading investors and fabricating data, to the Enron or WorldCom scandals.
Arizona attorney Seymour Sacks told the U.S. marshals that Parrett had given him $350,000 from an escrow account, the warrant said. Sacks said he refused to turn the money over to Parrett's husband and son when they requested it after she disappeared, according to the warrant.
Gregory Peterson, who represented Parrett at trial, said he only learned of the money's existence after his client disappeared.
"I was not aware of any money she had anywhere," Peterson said Monday, repeating that he didn't know where his client was.
Parrett's sentencing in absentia will come a few hours before Marbley sentences Lance Poulsen, National Century's founder and former chief executive.
The sentencings are the latest chapter in the downfall of what was once the country's largest health care financing company. Since the FBI raided its offices in 2002, at least nine former executives have been convicted of corporate fraud.
At its height the company employed more than 300 people, most of them in the Columbus area. Executives made millions, with Poulsen alone earning more than $9.1 million between 1996 and 2002, according to the government.
National Century offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The company raised the money to fund its business by selling bonds to investors. It declared bankruptcy in 2002 after the FBI raid.
Copyright © 2009 The Associated Press. All rights reserved.
Monday, March 16, 2009
Morgan Stanley Grabs Crescent in $6.5B Deal-Is this what AIG securitzed?
Another "Private Deals and Private Equity Boom"
Remember with National National Century Financial Enterprises (NCFE)
'The federal prosecutor noted in the NCFE case: "Ladies and gentlemen, this is a case of staggering fraud," Wise said. "It is one of the largest frauds the FBI has ever investigated."
National Century's collapse never gained much attention outside business circles, largely because it was a privately held company
May 22, 2007Morgan Stanley Grabs Crescent in $6.5B DealMove Underscores Continued Momentum for REIT Take-Private Deals and Private Equity Boom
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.
Morgan Stanley will pay $22.80 per share in cash for the REIT, which represents a 12% premium to the prior 30-day average closing price for the stock. But, the premium shrinks to just 5.4% above yesterday's close of $21.62 per share.
The deal also includes the assumption of $3.1 billion of outstanding debt and the redemption of Crescent's outstanding preferred shares. Crescent does not plan to pay any further dividends on the common share. The deal, which is expected to close in the third quarter, is subject to approval by Crescent's shareholders.
"The primary goal of the strategic plan we announced on March 1, 2007 was to maximize value for our shareholders. This transaction accelerates the realization of that goal by delivering value to our shareholders more quickly and with greater certainty. We are delighted to announce this agreement and we look forward to working closely with Morgan Stanley Real Estate on a transition that will be seamless for our customers, partners and employees," said John C. Goff, Crescent's vice chairman and CEO, in a statement.
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.
Crescent's portfolio includes 70 office properties totaling 27 million square feet, with major concentrations in Dallas, Houston, Austin, Denver, Miami and Las Vegas. It also holds a stake in AmeriCold REIT, an owner and operator of refrigerated warehousing, transportation management and other logistical services.
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.
Remember with National National Century Financial Enterprises (NCFE)
'The federal prosecutor noted in the NCFE case: "Ladies and gentlemen, this is a case of staggering fraud," Wise said. "It is one of the largest frauds the FBI has ever investigated."
National Century's collapse never gained much attention outside business circles, largely because it was a privately held company
May 22, 2007Morgan Stanley Grabs Crescent in $6.5B DealMove Underscores Continued Momentum for REIT Take-Private Deals and Private Equity Boom
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.
Morgan Stanley will pay $22.80 per share in cash for the REIT, which represents a 12% premium to the prior 30-day average closing price for the stock. But, the premium shrinks to just 5.4% above yesterday's close of $21.62 per share.
The deal also includes the assumption of $3.1 billion of outstanding debt and the redemption of Crescent's outstanding preferred shares. Crescent does not plan to pay any further dividends on the common share. The deal, which is expected to close in the third quarter, is subject to approval by Crescent's shareholders.
"The primary goal of the strategic plan we announced on March 1, 2007 was to maximize value for our shareholders. This transaction accelerates the realization of that goal by delivering value to our shareholders more quickly and with greater certainty. We are delighted to announce this agreement and we look forward to working closely with Morgan Stanley Real Estate on a transition that will be seamless for our customers, partners and employees," said John C. Goff, Crescent's vice chairman and CEO, in a statement.
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.
Crescent's portfolio includes 70 office properties totaling 27 million square feet, with major concentrations in Dallas, Houston, Austin, Denver, Miami and Las Vegas. It also holds a stake in AmeriCold REIT, an owner and operator of refrigerated warehousing, transportation management and other logistical services.
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.
Friday, March 6, 2009
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?
"...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?
Sunday, February 8, 2009
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...
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...
Sunday, December 21, 2008
E. Stanley O’Neal, the former chief executive of Merrill Lynch, was paid $46 million in 2006, $18.5 million of it in cash.
By LOUISE STORY
Ben White contributed reporting.
Published: December 17, 2008
“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.”
E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008
For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million.
The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.
Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.
But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.
Unlike the earnings, however, the bonuses have not been reversed.
As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.
Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning.
“Compensation was flawed top to bottom,” said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. “The whole organization was responding to distorted incentives.”
Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.
“That’s a call that senior management or risk management should question, but of course their pay was tied to it too,” said Brian Lin, a former mortgage trader at Merrill Lynch.
The highest-ranking executives at four firms have agreed under pressure to go without their bonuses, including John A. Thain, who initially wanted a bonus this year since he joined Merrill Lynch as chief executive after its ill-fated mortgage bets were made. And four former executives at one hard-hit bank, UBS of Switzerland, recently volunteered to return some of the bonuses they were paid before the financial crisis. But few think others on Wall Street will follow that lead.
For now, most banks are looking forward rather than backward. Morgan Stanley and UBS are attaching new strings to bonuses, allowing them to pull back part of workers’ payouts if they turn out to have been based on illusory profits. Those policies, had they been in place in recent years, might have clawed back hundreds of millions of dollars of compensation paid out in 2006 to employees at all levels, including senior executives who are still at those banks.
A Bonus Bonanza
For Wall Street, much of this decade represented a new Gilded Age. Salaries were merely play money — a pittance compared to bonuses. Bonus season became an annual celebration of the riches to be had in the markets. That was especially so in the New York area, where nearly $1 out of every $4 that companies paid employees last year went to someone in the financial industry. Bankers celebrated with five-figure dinners, vied to outspend each other at charity auctions and spent their newfound fortunes on new homes, cars and art.
The bonanza redefined success for an entire generation. Graduates of top universities sought their fortunes in banking, rather than in careers like medicine, engineering or teaching. Wall Street worked its rookies hard, but it held out the promise of rich rewards. In college dorms, tales of 30-year-olds pulling down $5 million a year were legion.
While top executives received the biggest bonuses, what is striking is how many employees throughout the ranks took home large paychecks. On Wall Street, the first goal was to make “a buck” — a million dollars. More than 100 people in Merrill’s bond unit alone broke the million-dollar mark in 2006. Goldman Sachs paid more than $20 million apiece to more than 50 people that year, according to a person familiar with the matter. Goldman declined to comment.
Pay was tied to profit, and profit to the easy, borrowed money that could be invested in markets like mortgage securities. As the financial industry’s role in the economy grew, workers’ pay ballooned, leaping sixfold since 1975, nearly twice as much as the increase in pay for the average American worker.
“The financial services industry was in a bubble," said Mark Zandi, chief economist at Moody’s Economy.com. “The industry got a bigger share of the economic pie.”
A Money Machine
Dow Kim stepped into this milieu in the mid-1980s, fresh from the Wharton School at the University of Pennsylvania. Born in Seoul and raised there and in Singapore, Mr. Kim moved to the United States at 16 to attend Phillips Academy in Andover, Mass. A quiet workaholic in an industry of workaholics, he seemed to rise through the ranks by sheer will. After a stint trading bonds in Tokyo, he moved to New York to oversee Merrill’s fixed-income business in 2001. Two years later, he became co-president.
Even as tremors began to reverberate through the housing market and his own company, Mr. Kim exuded optimism.
After several of his key deputies left the firm in the summer of 2006, he appointed a former colleague from Asia, Osman Semerci, as his deputy, and beneath Mr. Semerci he installed Dale M. Lattanzio and Douglas J. Mallach. Mr. Lattanzio promptly purchased a $5 million home, as well as oceanfront property in Mantoloking, a wealthy enclave in New Jersey, according to county records.
Merrill and the executives in this article declined to comment or say whether they would return past bonuses. Mr. Mallach did not return telephone calls.
Mr. Semerci, Mr. Lattanzio and Mr. Mallach joined Mr. Kim as Merrill entered a new phase in its mortgage buildup. That September, the bank spent $1.3 billion to buy the First Franklin Financial Corporation, a mortgage lender in California, in part so it could bundle its mortgages into lucrative bonds.
Yet Mr. Kim was growing restless. That same month, he told E. Stanley O’Neal, Merrill’s chief executive, that he was considering starting his own hedge fund. His traders were stunned. But Mr. O’Neal persuaded Mr. Kim to stay, assuring him that the future was bright for Merrill’s mortgage business, and, by extension, for Mr. Kim.
Mr. Kim stepped to the lectern on the bond trading floor and told his anxious traders that he was not going anywhere, and that business was looking up, according to four former employees who were there. The traders erupted in applause.
“No one wanted to stop this thing,” said former mortgage analyst at Merrill. “It was a machine, and we all knew it was going to be a very, very good year.”
Merrill Lynch celebrated its success even before the year was over. In November, the company hosted a three-day golf tournament at Pebble Beach, Calif.
Mr. Kim, an avid golfer, played alongside William H. Gross, a founder of Pimco, the big bond house; and Ralph R. Cioffi, who oversaw two Bear Stearns hedge funds whose subsequent collapse in 2007 would send shock waves through the financial world.
“There didn’t seem to be an end in sight,” said a person who attended the tournament.
Back in New York, Mr. Kim’s team was eagerly bundling risky home mortgages into bonds. One of the last deals they put together that year was called “Costa Bella,” or beautiful coast — a name that recalls Pebble Beach. The $500 million bundle of loans, a type of investment known as a collateralized debt obligation, was managed by Mr. Gross’s Pimco.
Merrill Lynch collected about $5 million in fees for concocting Costa Bella, which included mortgages originated by First Franklin.
But Costa Bella, like so many other C.D.O.’s, was filled with loans that borrowers could not repay. Initially part of it was rated AAA, but Costa Bella is now deeply troubled. The losses on the investment far exceed the money Merrill collected for putting the deal together.
So Much for So Few
By the time Costa Bella ran into trouble, the Merrill bankers who had devised it had collected their bonuses for 2006. Mr. Kim’s fixed-income unit generated more than half of Merrill’s revenue that year, according to people with direct knowledge of the matter. As a reward, Mr. O’Neal and Mr. Kim paid nearly a third of Merrill’s $5 billion to $6 billion bonus pool to the 2,000 professionals in the division.
Mr. O’Neal himself was paid $46 million, according to Equilar, an executive compensation research firm and data provider in California. Mr. Kim received $35 million. About 57 percent of their pay was in stock, which would lose much of its value over the next two years, but even the cash portions of their bonus were generous: $18.5 million for Mr. O’Neal, and $14.5 million for Mr. Kim, according to Equilar.
Mr. Kim and his deputies were given wide discretion about how to dole out their pot of money. Mr. Semerci was among the highest earners in 2006, at more than $20 million. Below him, Mr. Mallach and Mr. Lattanzio each earned more than $10 million. They were among just over 100 people who accounted for some $500 million of the pool, according to people with direct knowledge of the matter.
After that blowout, Merrill pushed even deeper into the mortgage business, despite growing signs that the housing bubble was starting to burst. That decision proved disastrous. As the problems in the subprime mortgage market exploded into a full-blown crisis, the value of Merrill’s investments plummeted. The firm has since written down its investments by more than $54 billion, selling some of them for pennies on the dollar.
Mr. Lin, the former Merrill trader, arrived late to the party. He was one of the last people hired onto Merrill’s mortgage desk, in the summer of 2007. Even then, Merrill guaranteed Mr. Lin a bonus if he joined the firm. Mr. Lin would not disclose his bonus, but such payouts were often in the seven figures.
Mr. Lin said he quickly noticed that traders across Wall Street were reluctant to admit what now seems so obvious: Their mortgage investments were worth far less than they had thought.
“It’s always human nature,” said Mr. Lin, who lost his job at Merrill last summer and now works at RRMS Advisors, a consulting firm that advises investors in troubled mortgage investments. “You want to pull for the market to do well because you’re vested.”
But critics question why Wall Street embraced the risky deals even as the housing and mortgage markets began to weaken.
“What happened to their investments was of no interest to them, because they would already be paid,” said Paul Hodgson, senior research associate at the Corporate Library, a shareholder activist group. Some Wall Street executives argue that paying a larger portion of bonuses in the form of stock, rather than in cash, might keep employees from making short-sighted decision. But Mr. Hodgson contended that would not go far enough, in part because the cash rewards alone were so high. Mr. Kim, for example, was paid a total of $116.6 million in cash and stock from 2001 to 2007. Of that, $55 million was in cash, according to Equilar.
Leaving the Scene
As the damage at Merrill became clear in 2007, Mr. Kim, his deputies and finally Mr. O’Neal left the firm. Mr. Kim opened a hedge fund, but it quickly closed. Mr. Semerci and Mr. Lattanzio landed at a hedge fund in London.
All three departed without collecting bonuses in 2007. Mr. O’Neal, however, got even richer by leaving Merrill Lynch. He was awarded an exit package worth $161 million.
Clawing back the 2006 bonuses at Merrill would not come close to making up for the company’s losses, which exceed all the profits that the firm earned over the previous 20 years. This fall, the once-proud firm was sold to Bank of America, ending its 94-year history as an independent firm.
Mr. Bebchuk of Harvard Law School said investment banks like Merrill were brought to their knees because their employees chased after the rich rewards that executives promised them.
“They were trying to get as much of this or that paper, they were doing it with excitement and vigor, and that was because they knew they would be making huge amounts of money by the end of the year,” he said.
Ben White contributed reporting.
Published: December 17, 2008
“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.”
E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008
For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million.
The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.
Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.
But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.
Unlike the earnings, however, the bonuses have not been reversed.
As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.
Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning.
“Compensation was flawed top to bottom,” said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. “The whole organization was responding to distorted incentives.”
Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.
“That’s a call that senior management or risk management should question, but of course their pay was tied to it too,” said Brian Lin, a former mortgage trader at Merrill Lynch.
The highest-ranking executives at four firms have agreed under pressure to go without their bonuses, including John A. Thain, who initially wanted a bonus this year since he joined Merrill Lynch as chief executive after its ill-fated mortgage bets were made. And four former executives at one hard-hit bank, UBS of Switzerland, recently volunteered to return some of the bonuses they were paid before the financial crisis. But few think others on Wall Street will follow that lead.
For now, most banks are looking forward rather than backward. Morgan Stanley and UBS are attaching new strings to bonuses, allowing them to pull back part of workers’ payouts if they turn out to have been based on illusory profits. Those policies, had they been in place in recent years, might have clawed back hundreds of millions of dollars of compensation paid out in 2006 to employees at all levels, including senior executives who are still at those banks.
A Bonus Bonanza
For Wall Street, much of this decade represented a new Gilded Age. Salaries were merely play money — a pittance compared to bonuses. Bonus season became an annual celebration of the riches to be had in the markets. That was especially so in the New York area, where nearly $1 out of every $4 that companies paid employees last year went to someone in the financial industry. Bankers celebrated with five-figure dinners, vied to outspend each other at charity auctions and spent their newfound fortunes on new homes, cars and art.
The bonanza redefined success for an entire generation. Graduates of top universities sought their fortunes in banking, rather than in careers like medicine, engineering or teaching. Wall Street worked its rookies hard, but it held out the promise of rich rewards. In college dorms, tales of 30-year-olds pulling down $5 million a year were legion.
While top executives received the biggest bonuses, what is striking is how many employees throughout the ranks took home large paychecks. On Wall Street, the first goal was to make “a buck” — a million dollars. More than 100 people in Merrill’s bond unit alone broke the million-dollar mark in 2006. Goldman Sachs paid more than $20 million apiece to more than 50 people that year, according to a person familiar with the matter. Goldman declined to comment.
Pay was tied to profit, and profit to the easy, borrowed money that could be invested in markets like mortgage securities. As the financial industry’s role in the economy grew, workers’ pay ballooned, leaping sixfold since 1975, nearly twice as much as the increase in pay for the average American worker.
“The financial services industry was in a bubble," said Mark Zandi, chief economist at Moody’s Economy.com. “The industry got a bigger share of the economic pie.”
A Money Machine
Dow Kim stepped into this milieu in the mid-1980s, fresh from the Wharton School at the University of Pennsylvania. Born in Seoul and raised there and in Singapore, Mr. Kim moved to the United States at 16 to attend Phillips Academy in Andover, Mass. A quiet workaholic in an industry of workaholics, he seemed to rise through the ranks by sheer will. After a stint trading bonds in Tokyo, he moved to New York to oversee Merrill’s fixed-income business in 2001. Two years later, he became co-president.
Even as tremors began to reverberate through the housing market and his own company, Mr. Kim exuded optimism.
After several of his key deputies left the firm in the summer of 2006, he appointed a former colleague from Asia, Osman Semerci, as his deputy, and beneath Mr. Semerci he installed Dale M. Lattanzio and Douglas J. Mallach. Mr. Lattanzio promptly purchased a $5 million home, as well as oceanfront property in Mantoloking, a wealthy enclave in New Jersey, according to county records.
Merrill and the executives in this article declined to comment or say whether they would return past bonuses. Mr. Mallach did not return telephone calls.
Mr. Semerci, Mr. Lattanzio and Mr. Mallach joined Mr. Kim as Merrill entered a new phase in its mortgage buildup. That September, the bank spent $1.3 billion to buy the First Franklin Financial Corporation, a mortgage lender in California, in part so it could bundle its mortgages into lucrative bonds.
Yet Mr. Kim was growing restless. That same month, he told E. Stanley O’Neal, Merrill’s chief executive, that he was considering starting his own hedge fund. His traders were stunned. But Mr. O’Neal persuaded Mr. Kim to stay, assuring him that the future was bright for Merrill’s mortgage business, and, by extension, for Mr. Kim.
Mr. Kim stepped to the lectern on the bond trading floor and told his anxious traders that he was not going anywhere, and that business was looking up, according to four former employees who were there. The traders erupted in applause.
“No one wanted to stop this thing,” said former mortgage analyst at Merrill. “It was a machine, and we all knew it was going to be a very, very good year.”
Merrill Lynch celebrated its success even before the year was over. In November, the company hosted a three-day golf tournament at Pebble Beach, Calif.
Mr. Kim, an avid golfer, played alongside William H. Gross, a founder of Pimco, the big bond house; and Ralph R. Cioffi, who oversaw two Bear Stearns hedge funds whose subsequent collapse in 2007 would send shock waves through the financial world.
“There didn’t seem to be an end in sight,” said a person who attended the tournament.
Back in New York, Mr. Kim’s team was eagerly bundling risky home mortgages into bonds. One of the last deals they put together that year was called “Costa Bella,” or beautiful coast — a name that recalls Pebble Beach. The $500 million bundle of loans, a type of investment known as a collateralized debt obligation, was managed by Mr. Gross’s Pimco.
Merrill Lynch collected about $5 million in fees for concocting Costa Bella, which included mortgages originated by First Franklin.
But Costa Bella, like so many other C.D.O.’s, was filled with loans that borrowers could not repay. Initially part of it was rated AAA, but Costa Bella is now deeply troubled. The losses on the investment far exceed the money Merrill collected for putting the deal together.
So Much for So Few
By the time Costa Bella ran into trouble, the Merrill bankers who had devised it had collected their bonuses for 2006. Mr. Kim’s fixed-income unit generated more than half of Merrill’s revenue that year, according to people with direct knowledge of the matter. As a reward, Mr. O’Neal and Mr. Kim paid nearly a third of Merrill’s $5 billion to $6 billion bonus pool to the 2,000 professionals in the division.
Mr. O’Neal himself was paid $46 million, according to Equilar, an executive compensation research firm and data provider in California. Mr. Kim received $35 million. About 57 percent of their pay was in stock, which would lose much of its value over the next two years, but even the cash portions of their bonus were generous: $18.5 million for Mr. O’Neal, and $14.5 million for Mr. Kim, according to Equilar.
Mr. Kim and his deputies were given wide discretion about how to dole out their pot of money. Mr. Semerci was among the highest earners in 2006, at more than $20 million. Below him, Mr. Mallach and Mr. Lattanzio each earned more than $10 million. They were among just over 100 people who accounted for some $500 million of the pool, according to people with direct knowledge of the matter.
After that blowout, Merrill pushed even deeper into the mortgage business, despite growing signs that the housing bubble was starting to burst. That decision proved disastrous. As the problems in the subprime mortgage market exploded into a full-blown crisis, the value of Merrill’s investments plummeted. The firm has since written down its investments by more than $54 billion, selling some of them for pennies on the dollar.
Mr. Lin, the former Merrill trader, arrived late to the party. He was one of the last people hired onto Merrill’s mortgage desk, in the summer of 2007. Even then, Merrill guaranteed Mr. Lin a bonus if he joined the firm. Mr. Lin would not disclose his bonus, but such payouts were often in the seven figures.
Mr. Lin said he quickly noticed that traders across Wall Street were reluctant to admit what now seems so obvious: Their mortgage investments were worth far less than they had thought.
“It’s always human nature,” said Mr. Lin, who lost his job at Merrill last summer and now works at RRMS Advisors, a consulting firm that advises investors in troubled mortgage investments. “You want to pull for the market to do well because you’re vested.”
But critics question why Wall Street embraced the risky deals even as the housing and mortgage markets began to weaken.
“What happened to their investments was of no interest to them, because they would already be paid,” said Paul Hodgson, senior research associate at the Corporate Library, a shareholder activist group. Some Wall Street executives argue that paying a larger portion of bonuses in the form of stock, rather than in cash, might keep employees from making short-sighted decision. But Mr. Hodgson contended that would not go far enough, in part because the cash rewards alone were so high. Mr. Kim, for example, was paid a total of $116.6 million in cash and stock from 2001 to 2007. Of that, $55 million was in cash, according to Equilar.
Leaving the Scene
As the damage at Merrill became clear in 2007, Mr. Kim, his deputies and finally Mr. O’Neal left the firm. Mr. Kim opened a hedge fund, but it quickly closed. Mr. Semerci and Mr. Lattanzio landed at a hedge fund in London.
All three departed without collecting bonuses in 2007. Mr. O’Neal, however, got even richer by leaving Merrill Lynch. He was awarded an exit package worth $161 million.
Clawing back the 2006 bonuses at Merrill would not come close to making up for the company’s losses, which exceed all the profits that the firm earned over the previous 20 years. This fall, the once-proud firm was sold to Bank of America, ending its 94-year history as an independent firm.
Mr. Bebchuk of Harvard Law School said investment banks like Merrill were brought to their knees because their employees chased after the rich rewards that executives promised them.
“They were trying to get as much of this or that paper, they were doing it with excitement and vigor, and that was because they knew they would be making huge amounts of money by the end of the year,” he said.
Friday, September 26, 2008
National Century Financial Enterprises, Inc., J.P. Morgan Chase, Morgan Chase and Bank One
"...two executives of J.P. Morgan Chase, which controls 16% of the company through its Beacon Group III private equity fund. In addition, Morgan Chase and Bank One are trustees for NCFE's bond trusts."
NCFE: Death-Dealing Side of the Bubble
by John Hoefle
As a private company not required to make public filings with the Securities and Exchange Commission, much about NCFE remains shrouded in secrecy. But one can tell a lot by looking at its board, which consisted of four of the company's founders and two executives of J.P. Morgan Chase, which controls 16% of the company through its Beacon Group III private equity fund. In addition, Morgan Chase and Bank One are trustees for NCFE's bond trusts. All in all, NCFE appears to fit the profile of a looting operation, whose existence served mainly to divert a portion of the health-care income stream into the pockets of some of the biggest financial
I believe someone needs to address the' PONZI Scheme' that was created with Health care finance.
NCFE, National Century Financial Enterprises, Inc., was a private Healthcare FINANCIAL company, the largest 'private' bankruptcy and dubbed by Federal Prosecutors in Columbus Ohio 'larger than Enron'.
NCFE: Death-Dealing Side of the Bubble
by John Hoefle
As a private company not required to make public filings with the Securities and Exchange Commission, much about NCFE remains shrouded in secrecy. But one can tell a lot by looking at its board, which consisted of four of the company's founders and two executives of J.P. Morgan Chase, which controls 16% of the company through its Beacon Group III private equity fund. In addition, Morgan Chase and Bank One are trustees for NCFE's bond trusts.
NCFE: Death-Dealing Side of the Bubble
by John Hoefle
As a private company not required to make public filings with the Securities and Exchange Commission, much about NCFE remains shrouded in secrecy. But one can tell a lot by looking at its board, which consisted of four of the company's founders and two executives of J.P. Morgan Chase, which controls 16% of the company through its Beacon Group III private equity fund. In addition, Morgan Chase and Bank One are trustees for NCFE's bond trusts. All in all, NCFE appears to fit the profile of a looting operation, whose existence served mainly to divert a portion of the health-care income stream into the pockets of some of the biggest financial
I believe someone needs to address the' PONZI Scheme' that was created with Health care finance.
NCFE, National Century Financial Enterprises, Inc., was a private Healthcare FINANCIAL company, the largest 'private' bankruptcy and dubbed by Federal Prosecutors in Columbus Ohio 'larger than Enron'.
NCFE: Death-Dealing Side of the Bubble
by John Hoefle
As a private company not required to make public filings with the Securities and Exchange Commission, much about NCFE remains shrouded in secrecy. But one can tell a lot by looking at its board, which consisted of four of the company's founders and two executives of J.P. Morgan Chase, which controls 16% of the company through its Beacon Group III private equity fund. In addition, Morgan Chase and Bank One are trustees for NCFE's bond trusts.
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