Archive for November 2011

Get in at the ground floor. Read more »

Remember, back in April, when a bunch of UBS employees, were escorted out of the building and told not to come back, “pending an internal review into their conduct”? At the time we knew all four worked in operations and that they “were responsible for securities movements and payments,” and speculated that perhaps this was another RBS/Jim Glover-esque incident. Today, some other details have been filled in.

Reilly, 34, of Congers, N.Y., was sentenced today by Senior United States District Judge Warren W. Eginton in Bridgeport to 33 months of imprisonment, followed by three years of supervised release, for stealing more than $673,000 from UBS, his employer. According to court documents and statements made in court, from 1999 to April 2011, Reilly was employed at UBS in various positions. Most recently, Reilly worked at the Stamford office of UBS Securities, LLC, a wholly owned subsidiary of the parent company. From November 2007 through January 2010, Reilly held the position of director within the settlements group and, as such, was responsible for overseeing various activities, including managing and maintaining suspense accounts and making sure that accurate payments were made to and by UBS on a daily basis. From approximately February 2009 to April 2011, Reilly was responsible for approximately 84 fraudulent wire transfers that caused more than $673,000 of company funds to be transferred to his own personal accounts…Reilly used his position as a director in the settlements group to cause subordinates to make false journal entries and fraudulent wire transfers without them knowing that the entries were false and that the transfers were going to Reilly’s personal accounts. Today, Reilly was ordered to pay restitution in the amount of $673,447.47.

According to the sentencing memo, Reilly stole from the good people at UBS to feed a gambling addiction that often found him sports-betting on the job (by his own estimation, at the height of his problem Reilly would spend “8 hours gambling and 2 hours working”) and sometimes on cruise ships. Read more »

  • 29 Nov 2011 at 6:35 PM

The OCC And I Work Hard To Guarantee Investment Returns

This is shaping up to be CFA week for me, and with my impending triumph/humiliation I’ve pretty much stopped thinking about much else. I’ve also stopped reading about much else, putting aside Trotsky temporarily to focus on those six stupid books. Yesterday was corporate finance – I can now unlever and relever betas like a champ – and portfolio management, which I got about halfway through before falling asleep. Today is equity and fixed income. The end is in sight!

But there’s still occasionally time to think about blast-from-the-past favorite topics, like the slow-motion disaster that is the US regulatory effort to end official reliance on ratings agencies. The latest is the OCC, which released a proposed rule today that will change the definition of “investment grade” securities, which banks can invest in, from “rated in one of the four highest rating categories by two or more NRSROs” to this: Read more »

John Paulson Is Sorry

Hedge fund legend John Paulson apologized to investors for what he is calling a year that has been “the worst in the firm’s 17 year history.” “We are disappointed and apologize,” the Paulson Funds said in a letter to investors obtained by CNBC. Hedge fund legend John Paulson apologized to investors for what he is calling a year that has been “the worst in the firm’s 17 year history.” “For 17 years, we have been generally correct in these macro assessments. This year we were clearly wrong in our judgment regarding the potential for the negative conditions mentioned above to create a toxic mix of fear in the markets,” the report says. The hedge fund company is now “wholly focused” on returning investors to their high-water marks. The report says Paulson is confident that “many of our position will recover as fear subsides.” [NetNet]

  • 29 Nov 2011 at 3:01 PM

Layoffs Watch ’11: Citi

The aforementioned cuts have apparently begun. Read more »

  • 29 Nov 2011 at 1:52 PM

College Students Hesitant To Reveal Scarlet ‘B’

Time was, landing an offer from an investment bank in the fall of one’s senior was something to be proud of. Secured employment at Goldman/JPMorgan/Lehman Brothers et al for the following year was something you didn’t try to hide and you’d happily join Facebook groups started around the common cause of spending one’s signing bonus on kegs and in some cases, perhaps used it as a way of facilitating the bedding of chicks. Back then, a simple “I need to find a place before my job at [insert firm of choice here] starts” more than lubricated the situation in your favor and the notion of not whipping it out in social situations, with members of the opposite sex and otherwise, would’ve sounded crazy. Now? You keep that shit under wraps. Read more »

  • 29 Nov 2011 at 12:30 PM

Connecticut Powerball “Winners” Go The Extra Mile

Yesterday afternoon, three Greenwich men came forward with a winning Powerball ticket worth $254 million. Lottery officials had been searching for nearly a month to find them, posting billboards all over Connecticut “urging” the ticket holder to reveal him or herself and claim the prize. But when Gregg Skidmore, Tim Davidson, and Brandon Lacoff finally did, it was not how people pictured it. Frank Farricker, for one, was very disappointed. He’d expected the men to be more excited, more celebratory, more over the top pumped about their windfall. Frank didn’t get that, though. Instead he got three guys who seemed at best embarrassed and at worst pained to be collecting, after taxes, a lump sum of $103.5 million. At the time, some speculated that the reason the trio, Skidmore in particular, looked like they were about to have a group colonoscopy rather than take home a bag of cash, was that they were worried how it would appear, given that they are not just Gold Coast residents but money managers in Belpoint Capital, and you know how the general public feels about those types. Today, however, another theory has emerged. Read more »

Opening Bell: 11.29.11

How Paulson Gave Hedge Funds Advance Word (Bloomberg Markets)
On the morning of July 21, 2008, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets. At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure. Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs, of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC. After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets. Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said. The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

Corzine Pushed Bet On Euro Debt To $11.5 Billion (Bloomberg)
Was that wrong?

Money Found In Britain May Belong To MF Global (Dealbook)
About $200 million in customer money that vanished from MF Global is believed to have surfaced at JPMorgan Chase in Britain, according to people briefed on the matter. The discovery could be the most significant breakthrough in a monthlong hunt for the missing funds…The authorities believe MF Global failed to give JPMorgan full documentation for the cash, the people briefed on the matter said. But the bank’s concerns hardly mattered because the money had already been transferred to the account in Britain. It is unclear whether investigators can recover the $200 million.

Jim Rogers: Gold Due For Correction (CNBC)
“I own gold and I’m not selling my gold,” Rogers said, but pointed out that the price of the commodity has been up for 11 years in a row. He advised that a drop in price wouldn’t be such a bad thing. “Somewhere down the line gold will have a correction. Gold will continue to do what gold does best. Just give it a chance.” If the gold price retreats towards $1,200 per ounce, Rogers said he would get “extremely excited.”

S&P May Cut France Rating Outlook (Reuters, related)
Economic and financial daily La Tribune said S&P — which on Friday cut Belgium’s credit rating to AA from AA+ — had planned to make an announcement on France the same day but postponed it for unknown reasons. “It could happen within a week, perhaps 10 days,” La Tribune quoted a diplomatic source as saying of a change to the outlook.

Vermont Artist: I’ll fight Chick-fil-A for my kale (AP)
A folk artist expanding his home business built around the words “eat more kale” says he’s ready to fight root-to-feather to protect his phrase from what he sees as an assault by Chick-fil-A, which holds the trademark to the phrase “eat mor chikin.” Bo Muller-Moore uses a hand silkscreen machine to apply his phrase, which he calls an expression of the benefits of local agriculture, on T-shirts and sweatshirts. But his effort to protect his business from copycats drew the attention of Chick-fil-A, the Atlanta-based fast-food chain that uses ads with images of cows that can’t spell displaying their own phrase on message boards. In a letter, a lawyer for Chick-fil-A said Muller-Moore’s effort to expand the use of his “eat more kale” message “is likely to cause confusion of the public and dilutes the distinctiveness of Chick-fil-A’s intellectual property and diminishes its value.” Read more »