SAC Capital Advisors, the hedge fund owned by the billionaire investor Steven A. Cohen, told its investors on Friday that it was no longer cooperating unconditionally with the government’s insider trading investigation. “In the past we have tried to be as transparent with you as possible about the state of the investigation while balancing our desire for transparency with the need to keep the details of a sensitive investigation confidential,” said the letter. “While we have in the past told you of our cooperation with the government’s investigation our cooperation is no longer unconditional and we do not intend to give updates in this area going forward.” [Dealbook]
SAC Capital Will No Longer Provide Investors With Updates On Its Unconditional Cooperation With The Government’s Investigation, Which Oh, By The Way, Ain’t So Unconditional AnymoreBy Bess Levin
The Financial Industry Regulatory Authority accused Washington-based Success Trade Securities and its 45-year-old founder, Fuad Ahmed, of lying to 58 investors — most of them current and former NFL and NBA players — about how he planned to use their money. Ahmed sold $18 million in promissory notes to investors without telling them how he was spending it, including a $1,300-a-month lease for his Range Rover and an $82,000 interest-free loan for his brother, according to a complaint. Finra slapped the securities firm with a temporary cease-and-desist order while it investigates. [NYP]
House Subcommittee Has Some Suggestions For The Next Time Jon Corzine Runs A Financial Services CompanyBy Matt Levine
This House Financial Services investigations subcommittee hatchet job on MF Global is, I don’t know, pretty reasonable and not-that-hatchety? It’s 100 pages and not exactly full of new news, but it’s a good read, stuff happens, there’s a clear story arc, heros and villains (kidding, just villains), you’re in suspense until the end. There’s some law of narrative that demands that every financial disaster be a parable for something, and the Fall of the House of Corzine obliges nicely. It reads like the sort of fairy tale where three whatevers come to the guy and tell him “repent repent a thing will happen” and each time he’s like “naaaah” but the third time the thing happens and he’s all “huh, wish I’d repented.”
The thing that was going to happen – which has the benefit of being inevitable in this report though I guess maybe not in real time – was that MF Global’s inventory of fairly short-dated peripheral Eurozone sovereign bonds, which it had bought and then financed via repo-to-maturity transactions, were going to be the death of it. And people kept telling Corzine that and he was all “I SAID NAAAAAH.” And then they were the death of it.
The first people who told him were his auditors at PwC in late 2010, who were troubled by how MF Global was accounting for the repos-to-maturity.1 The RTMs were accounted for as a sale plus a derivative purchase liability; the forward was required to be marked to market but MF Global used its own models to determine that the mark-to-market was so small as to be immaterial because Corzine was pretty sure the chances of default were low. PwC were unamused and advocated a mark-to-market that marked more to the actual market.
A fourth London-based JPMorgan Chase trader is under scrutiny in the investigation by U.S. authorities into the bank’s nearly $6 billion trading loss, according to sources familiar with the situation. Julien Grout, a trader who joined JPMorgan Chase in 2009, is drawing attention because he worked in the bank’s Chief Investment Office and reported to Bruno Iksil, the French credit trader who is a central figure in the federal probe, said the two sources. U.S. authorities are trying to determine whether traders in the bank’s London office, including Iksil, took steps to try and hide some of the losses the bank was incurring on a series of complex derivatives trades. In the trading community in London, Iksil became known as the London Whale because of the large positions he and his colleagues were taking on. Grout, who is also French, is still working for JPMorgan, according to a bank spokeswoman. [Reuters]
CFTC’s Exhaustive Internal Review To Determine Whether Or Not Jon Corzine And Chairman Gary Gensler Had A “Too Close” Relationship Reveals Corzine Was The Kind Of Guy To Make A Big Show Of Signing Up For Athletic Events And Coming Up With An Excuse Not To Do Them At The Last Minute, While Gensler Was The Kind To Smirk And Passive Aggressively Ask If You Were “Actually” Going To Do It This TimeBy Bess Levin
The memo even explored why Gensler ran the New York Marathon with Corzine’s number more than 20 years ago. According to the report, Gensler learned that Corzine had registered to run the 1991 race. Gensler asked Corzine’s secretary if Corzine was actually going to run. Several weeks later, the secretary informed Gensler that Corzine had decided against running and wouldn’t need the number, the memo said. The secretary gave the number to Gensler. [Bloomberg via DI]
Got an unhappy employee (or former employee) on your hands who’s decided to channel his or her anger by penning an Op-Ed in a major publication detailing egregious acts being committed at your firm and/or going to the Feds with allegations of fraud? Not sure how to handle the fallout? Why not take a page from Donald Trump’s playabook? He found himself in a similar situation with regard to Sheena Monnin, a first-year Miss Pennsylvania who “resigned her crown” over the weekend, claiming that the Miss USA pageant is “rigged.” Here’s how Don dealt with the matter and how anyone thinking about taking a more hands-on approach to dealing with disgruntled employees might too:
Threaten to sue.
“We’re going to bring a lawsuit against this girl,” Trump, who co-owns the Miss Universe Organization with NBCUniversal, told NBC’s “Today” show co-anchor Ann Curry on a phone interview; he used similar language in a phoner with George Stephanopoulos on ABC’s “Good Morning America.”
Do you know what time it is? Nearly 1PM, EDT. The significance? That it is over an hour past the deadline hedge fund manager Dan Loeb put the Yahoo board on to fire CEO Scott Thompson and director Patti Hart for being résumé con artists. (Thompson, Loeb revealed last week, lied in SEC filings about having a computer science degree from Stonehill College, while Hart claimed to have graduated from Illinois State University with degrees in marketing and economics when, in fact, she merely earned a bachelors in business administration and specialized in marketing and econ). On Friday, Loeb demanded that the C.V. frauds be terminated for cause given their “demonstrable unsuitability” to continue their roles with the company. Clearly that did not happen, so now this is: Read more »
Fox Business Senior Email Correspondent: Thousands Of Goldman Employees Saw Muppet Movie, Wanted To Talk About It The Next DayBy Bess Levin
Late last week, investigative reporter Charlie Gasparino came out with a bombshell story: after reading former employee Greg Smith’s allegation that he’d seen and heard colleagues refer to clients as “muppets,” the British term for stupid people, the firm launched an investigation into the claim (e.g. searched emails for said word). On Friday, Gasparino breathlessly reported that while Goldman did find some muppet mentions, they referred to the Jason Segal film and were not malicious in their intent (quoth CG: “GS found no evidence of malicious muppet talk in emails”). While a lesser journalist would have been content to take the source at his or her word, Charles Gasparino is no such journalist. He get kept digging on this one and now, amazingly, has more to add: Read more »
this is important
Earlier this week, a man named Greg Smith resigned from Goldman Sachs. Smith informed his bosses of his decision to quit around 6:40 AM local (London) time and, a few hours later, circled in the rest of the world with an Op-Ed in the New York Times, which he penned not out of a desire to violate his (former) employer in the most gruesome fashion possible in front of clients and other interested parties but because he believed it to be the right, nay, the only thing to do. In the piece, Greg explained that his decision to leave the firm after 12 years of service did not come easily. But, after months of beating down a nagging little voice, a moment of truth presented itself that he could not deny. During rehearsals for the college recruiting video he starred, Greg realized that the lines he was delivering re: Goldman being a great place to work were a lie. A bald-faced one, in fact. Goldman had changed in the years since the Greg-ster arrived, and whereas it once felt like home and the people in it family, he’d come to regard it as a den of evil, run by monsters. Monsters who called clients “muppets”; who only cared about making money; who valued “shortcuts” over “achievement.” Of the latter, Greg spoke from plenty of experience. Though his personal achievements are too numerous to mention in full, they include being named a Rhodes scholar (finalist), learning to tie his shoes at the age of 22, winning third place for table tennis at the Maccabiah Games, and being named captain of the South African national table tennis team. OR WAS HE? Read more »
Market Apparently Shocked To Find Out Goldman Sachs CEO Takes Investigations Seriously, Hires Best Lawyers Money Can BuyBy Bess Levin
Goldman Sachs Chief Executive Lloyd Blankfein has hired Reid Weingarten, a high-profile Washington defense attorney whose past clients include a former Enron accounting officer, according to a government source familiar with the matter…The move to retain Weingarten comes as investigations of Goldman and its role in the 2007-2009 financial crisis continue. The Securities and Exchange Commission scored a $550 million settlement against the bank in a fraud lawsuit in July 2010, but other investigations continue. “Why do you bring in someone like that?” said the source, who was not authorized to speak publicly. “It says one thing: that they’re taking it seriously.” [Reuters]