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I don’t know much about this Autonomy thing – in brief, Hewlett-Packard acquired British software company Autonomy last year for $10.3 billion and today wrote that investment down by $8.8 billion, blaming $5 billion of that on “accounting improprieties, misrepresentations and disclosure failures” at Autonomy – but this sure sounds fake doesn’t it?

Today, Autonomy is firmly established as the leading provider of Pan-Enterprise Search and Meaning Based Computing (MBC) solutions. Autonomy’s unique Intelligent Data Operating Layer (IDOL) platform enables organisations to harness the full richness of human information by extracting meaning from the mass of unstructured information they handle every day, which analysts estimate to constitute over 80% of all enterprise data.

That’s from Autonomy’s last annual report as an autonomous company1 before HP bought it. Retrospective red flag perhaps? I would be wary of companies whose business involves “extracting meaning.” Meaning doesn’t come from software.2

Now of course HP is going to sue everyone and demand fraud investigations on two continents. Many people look bad here – HP first of all, whether or not its claims are true, then (if they’re true) Autonomy, Deloitte (Autonomy’s auditors), E&Y (HP’s auditors), HP’s bevy of bankers and others involved in due diligence who seem to have been unduly undiligent, and to some extent Autonomy’s bankers who marketed it to HP.3 I have plenty of sympathies with both sets of bankers, of course; their job is mainly to harness the full richness of human information by extracting meaning from the mass of stuff that companies make public, not to know whether that stuff is true.4 Bankers are an intelligent data operating layer; if you give them bad data then their operating layer is less intelligent. It’s possible that some of those words mean things. Read more »

Over the past several years, much has been made about the supposed incompetence of the Securities and Exchange Commission. The regulator failed to realize Bernie Madoff had been running an illegitimate Ponzi scheme, despite more or less being told by Bernie Madoff himself, “I am running an illegitimate Ponzi scheme.” It went after David Einhorn, when it should have been going after Allied Capital, the company the hedge fund manager told them was committing fraud. Its proposal for stepping up investigators’ games was to start a Fraud College.* Until recently, it employed individuals in the office responsible for “ensuring exchanges follow guidelines concerning…computer audits, security, and capacity” who had “little or no experience with exchange technical matters.” At this point, there have been so many stories about the SEC getting things wrong that the default is to assume it fucked up, even when that is not actually the case. What’s more, even when Team Schapiro is on top of its game, resources are so strained that many scams that should be caught fall through the cracks. So you can maybe understand why a group of “high school buddies,” along with a few other guys they recruited at wine club, who were engaged in securities fraud for several years, weren’t too worried about getting caught.

The group, which included three health-care executives, a chiropractor and the owner of a spa-supply company called Yeah Baby, allegedly made more than $1.7 million by passing on secret information about mergers and acquisitions and earnings announcements of at least seven pharmaceutical companies, according to prosecutors and the Securities and Exchange Commission. The alleged scheme included high-school friends of Mr. Lazorchak, his former boss and members of his former boss’s wine-making club. Those charged are: Mr. Lazorchak, who was the director of financial reporting at Celgene; Mark Cupo, Mr. Lazorchak’s former boss at Sanofi-Aventis, where he was director accounting and reporting; Michael Castelli, Mr. Cupo’s friend from his wine-making club; Michael Pendolino, Mr. Lazorchak’s high-school friend who now works as a chiropractor in New Hampshire; Mark Foldy, a former marketing executive at StrykerCorp.; and Yeah Baby owner Lawrence Grum who was introduced to Mr. Cupo by Mr. Castell. Mr. Lazorchak, 42 years old, attended Colonia High School in Colonia, N.J., along with Messrs. Pendolino, 43, and Foldy, 42, according to the criminal complaint. Messrs. Castelli, 48, and Grum, 48, were classmates at another unnamed high school, according to the SEC…As recently as two months ago, one of the alleged members of the scheme was confident that investigators would fall short of cracking the case. “If they ever come to me, I know what I’m doing,” Mr. Grum told another person involved in the alleged scheme who had agreed to cooperate with criminal investigators, according to the complaint…Ultimately, Mr. Grum said the SEC wouldn’t come after them. “The SEC’s got to pick their battle because they have a limited number of people and huge numbers of investors to go after,” he said.

Another reason for Grum’s cockiness? The code words and phrases he and his buds used that they were prettay, prettay, prettay sure no one could crack. Read more »

Former SAC Capital Advisors LP portfolio manager Mathew Martoma was charged in what U.S. prosecutors called “the most lucrative insider-trading scheme ever,” netting as much as $276 million while at the hedge fund. Prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan today unsealed a complaint charging Martoma with trading on illicit tips about Alzheimer’s disease drug-trial results from 2006 to 2008. Martoma is accused of arranging trades in shares of Wyeth LLC and Elan Corp., making $220 million in profits and avoiding $56 million in losses for an unnamed hedge fund. Martoma is charged with one count of conspiracy and two counts of securities. Mathew Martoma, 38, of Boca Raton, Florida, worked for CR Intrinsic Investors in Stamford, Connecticut, a unit of SAC Capital, according to a civil complaint lawsuit filed against him by the U.S. Securities and Exchange Commission. Martoma allegedly engaged in the misconduct while at CR Intrinsic, according to the SEC complaint. [Bloomberg, WSJ, Complaint]

Opening Bell: 11.20.12

Former UBS Trader Found Guilty (WSJ)
Former trader Kweku Adoboli was found guilty on one count of fraud in connection with a $2.3 billion loss the Swiss bank suffered last year, as the jury in the alleged rogue-trading case continued to deliberate on five other counts he was charged with. The partial verdict comes nearly a week after the jury began deliberating following a roughly eight-week trial. It is unclear when the jury might reach verdicts on the other five counts or when sentencing might take place. Mr. Adoboli pleaded not guilty to all six counts.

Shakeup At Credit Suisse (WSJ)
Credit Suisse said Tuesday that it will combine the Swiss bank’s asset management unit with its private bank, but stopped short of announcing the more drastic revamp analysts expected after crosstown rival UBS decided to fire 10,000 bankers. Robert Shafir, who currently heads the U.S. business of Credit Suisse, will take the helm of a new private banking and wealth management division jointly with Hans-Ulrich Meister, who has run the private banking business, the bank said. At the investment bank, Gael de Boissard is being promoted to co-head of the division, jointly with incumbent Eric Varvel. Following the revamp, Credit Suisse will have only two units—wealth management and investment banking–which are distinctly separate from each other, a move that is “in alignment with the new regulatory reality,” Chairman Urs Rohner said.

Greece Waits Nervously For Vital Bailout Funds (Reuters)
Officials familiar with preparations for the finance ministers’ meeting expect a “political endorsement in principle” on unfreezing loans to Athens, after Greece completed almost all the reforms that were required of it in exchange for funding. The final go-ahead from the ministers is likely to come only once the remaining few Greek reforms are in place and once there is agreement in the euro zone on how to reduce the country’s huge debt and secure extra financing while it is being done.

French Downgrade Widens Gulf With Germany as Talks Loom (Bloomberg)
France’s loss of the top credit rating at Moody’s Investors Service may weaken President Francois Hollande’s leverage in European budget talks and deepen concern in Germany over its neighbor’s lagging competitiveness. The downgrade late yesterday of Europe’s second-biggest economy underscores the concern expressed by allies of German Chancellor Angela Merkel that the Socialist Hollande’s failure to recognize the urgency of France’s woes risks a deepening of Europe’s slump. “This downgrade will certainly increase pressure on France big-time,” Jan Techau, director of the Carnegie Endowment for International Peace office in Brussels, said today in a phone interview. “It gives Germany more of an edge over France.”

‘Tide Turning’ Against France, Say Economists (CNBC)
“The tide is turning for France. Although the country’s bond market is likely to remain resilient — the yield on 10-year paper is little changed [Tuesday] morning and still stands a whisker above its record low of 2.06 percent on July 19 — French debt looks more and more overvalued relative to fundamentals,” Nicholas Spiro, Managing Director of Spiro Sovereign Strategy, said in a note on Tuesday. France has enjoyed low borrowing costs as investors have viewed the country as a safe haven in comparison with its southern European cousins. The downgrade of France to AA1 with a negative outlook by Moody’s has thrown its “deteriorating fundamentals….into sharp relief” Spiro said.

New York Prepares Lawsuit Against Credit Suisse (Reuters)
The New York attorney-general is preparing to file a civil lawsuit against Credit Suisse for misleading investors who lost billions of dollars on mortgage-backed securities, according to a source familiar with the matter. The lawsuit, which is expected to be filed on Wednesday, will allege that Credit Suisse misrepresented the quality of loans packaged in securities, according to the source.

Petraeus Mistress Paula Broadwell To Jill Kelley: ‘I can make you go away’ (NYDN)
The notes Paula Broadwell sent to Jill Kelley were far more sinister than previously reported and seemed like the rantings of someone “clearly unhinged,” a close friend of Kelley said Monday. “This wasn’t just a catfight. Any normal person who got emails like that would have immediately called the police,” said the friend. She said Kelley read her the emails when she called, panic-stricken and seeking advice in the days before the scandal became a stunning public spectacle and led to Petraeus’ resignation as CIA director. The friend, who did not want to be identified, said Kelley saw the emails as death threats, specifically one in which Broadwell vowed to “make you go away.” [Meanwhile,] Broadwell…bloodied a female news photographer’s forehead Monday in a confrontation outside the biographer’s Charlotte, N.C., home. Broadwell smacked the photographer with the driver’s-side door of her Nissan Pathfinder SUV. “I had my camera and in all the chaos the door slammed and I got hit in the head with the flash,” said Nell Redmond, a freelancer for The Associated Press. Redmond suffered a small cut and is not pressing charges. Read more »

Write-Offs: 11.19.12

$$$ Moody’s downgrades France’s government bond rating to Aa1 from Aaa, maintains negative outlook [Moody's]

$$$ Hostess, Bakers Union Agree to Mediation [WSJ]

$$$ SEC Rocked By Lurid Sex-and-Corruption Lawsuit [Matt Taibbi]

$$$ SEC Charges Ring of High School Buddies with Insider Trading in Health Care Stocks [SEC]

$$$ “If I am captured, this blog will continue. I have pre-written enough material to keep this blog alive for at least a year. In addition, the administrator, Chad, will continue to monitor comments.” [WhoIsMcAfee]
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What’s good about the dismissal of Hank Greenberg’s AIG lawsuit today is that there’s all this roiling weirdness under the basic story of:

  • The government seized AIG because it was garbage,
  • AIG shareholder, ex-CEO, and general fanboy Hank Greenberg sued the government for destroying the valuable valuable value of his AIG stock, and
  • he lost.

Duh he lost! It’s AIG, it’s become a byword for financial failure. “Don’t pull an AIG,” bankers say to each other, in my lazy imagination. You don’t need to be a lawyer to know that a lawsuit claiming that the government’s bailout stole massive value from AIG shareholders was not going to work. It didn’t! The end.

But there actually was all sorts of crazy nefarious stuff going on; your sympathies may vary but I was ever-so-slightly moved by two of Greenberg’s claims: Read more »

David Einhorn, Greenlight Capital: “Cranberry sauce — not from the can, just cranberries and sugar.” Julian Robertson, Tiger Management: “Wild rice.” Gary Cohn, Goldman Sachs: “Oysters — not shucked by me.” Glenn Dubin, Highbridge Capital Management: “I love turkey. I would love to eat turkey all year round, because I’m a chicken person.” David Hasselhoff, actor: “I miss the dish my mother used to make: it was green beans, with a layer of marshmallows, and corn flakes on top.” [Bloomberg via LaurenTaraLaCapra, RELATED]

  • 19 Nov 2012 at 5:51 PM

New JPMorgan CFO Is A Female Jamie Dimon, Says Person

J.P. Morgan named finance executive Marianne Lake to succeed Douglas Braunstein as chief financial officer of the largest U.S. bank. The appointment makes Ms. Lake one of the most powerful women on Wall Street as the New York company shuffles its leadership and recovers from a massive trading loss. The 43-year-old Ms. Lake currently is chief financial officer for the bank’s consumer unit. J.P. Morgan said that Mr. Braunstein will become a vice chairman of the company following Ms. Lake’s transition to the CFO position in first quarter 2013…Ms. Lake is known within the company as smart and assertive in the style of Mr. Dimon. “She talks so fast because she knows her numbers so well,” said a person close to the bank.  [WSJ]