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 »

Barclays ex-chief operating officer, Jerry del Missier, contradicted Robert Diamond, saying his former boss told him to submit artificially low Libor rates, and blamed compliance managers for failing to act. Del Missier, 50, told Parliament’s Treasury Committee today that he received an instruction from Diamond, then chief executive officer, that he took to have come from the Bank of England. He said he then “passed the instruction along” to Mark Dearlove, head of the bank’s money-markets desk, to lower its contributions for the London interbank offered rate… [Bloomberg, related]

Matt and Ben. Penn and Teller. Bert and Ernie. Gary and Lloyd. As those who keep up on the bromances of Wall Street know, Lloyd Blankfein and Gary Cohn are the absolute best of buds. While their relationship started out as a work thing back in 1990, when Cohn was hired as a metals trader and “became Blankfein’s corporate problem solver,” in the twenty plus years since it’s moved far beyond that to include hanging on weekends, family vacations, and wives who are also tight. According to a 2010 profile, Cohn isn’t so much LB’s righthand man as he is a part of him, having been introduced to people on at least one occasion as simply “Lloyd’s best friend.” And while their bond was no doubt strengthened by weathering the financial crisis and the Goldman haters together, as bosom buddies who are always there for each other and would do anything for one another, be it taking a bullet, donating a kidney, or just calling to talk about nothing, lately there has supposedly been a little friction. Read more »

One of the most wonderful aspects of the hedge fund industry is that because it attracts the brightest minds, said minds are constantly coming up with new and outside-the-box ways of doing things. Eventually the innovation catches on and before you know it, something that might initially seem crazy eventually becomes best practice at firms worldwide. Take Alphonse “Buddy” Fletcher Jr, for example. The hedge fund manager is the subject of a Wall Street Journal profile today that highlights what the paper describes as Fletcher’s “unorthodox practices.” While it’s clear that some people are passing judgment on Buddy’s ways of doing things, his wiser colleagues in the field will immediately recognize the genius found within and start furiously implementing his methods today. Such as:

Dealing with redemption requests: As many of you may have learned first hand, investors get fairly bent out of shape when you tell them they can’t have their money back. But if you don’t have the cash on hand, what’s the alternative? One hedge fund manager recently said he would pay clients back not in actual money but in illiquid shares of a firm called LightSquared and in what seems to have come as a surprise to him, they didn’t like that either. How does Fletcher deal with such issues?

Last month, after two of the pension boards sought to withdraw some of their cash, Fletcher instead sent them promissory notes “in satisfaction of this redemption request” that pledged payment within two years.

For those taking careful notes the steps are as follows: Step One: redemption request. Step Two: redemption granted. Step Three: investor says “what?”. Step Four: manager says “What are you ‘what’ing? You’re getting your money, just later.”

Let’s continue. Read more »

Nails laid it all out on the table during an interview with Howard Eskin, who he last told, “I’m a lightning rod for money; after we’re done talking today when you’re walking to your car you’ll probably find 100 bucks.” Read more »

  • 19 Jan 2011 at 4:27 PM

Danielle Chiesi Stands By Her Man

Her man being Raj Rajaratnam, and not Bob Moffat, the guy who twice cried over Chiesi in public before accepting that she’d just been “playing” him for tips. Read more »

  • 04 Aug 2010 at 5:03 PM

Jamie Dimon, Cover Your Ears

Michael Barr, assistant secretary of the U.S. Treasury: “I have no idea if the president has a favorite banker or who he might be.” [HAVING SAID THAT!] “I’ve met Brian Moynihan, he’s a delightful guy. I would say that Moynihan stepped up to the table and was very involved in trying to make progress on financial reform. We didn’t always agree but he was quite thoughtful and engaged.” [Charlotte Observer]

  • 24 May 2010 at 9:00 AM

Lloyd Blankfein, Jamie Dimon Keep The Yuks Coming

Without question, it’s been a difficult year and a half for Lloyd Blankfein and Jamie Dimon. While they may not have had to deal with the abysmal failures of some of their peers, they’ve had to grapple with something perhaps even more difficult: being punished for their manifold success. Peasants with pitchforks, deranged Rolling Stone writers, college-coeds, Washington– they’ve all dished the hate and dished it hard. It’s been pretty tough to take but rather than commiserate, rather than stroke each others’ hair/shining pate, consoling one another with the fact that people will always try to tear down those who are richer and better looking than them, the two have displayed some signs turning on the other. Jamie has expressed to those close to him that nothing has grinded his gears more these last few months than being compared to that guy, who’s demonstrated what some believe to be a deaf ear to the populist, anti-Wall Street sentiment, which James has never done. And Lloyd, while it’s yet to show up in the papers, has surely spent many an evening bitching to Gary Cohn about the fact that Mr. Dimon could clown-face the a homeless guy and receive a standing ovation for his seed-spreading generosity and commitment to the arts. And while an anecdote from this week’s New York cover story could be interpreted as further signs of tension, of animosity between the two, all we see is progress. Read more »