What were AIG employees doing in April 2008? Carelessly writing CDS on enormous quantities of mortgage-backed securities and (allegedly) laying the groundwork for being sued over “racist [and sizeist] taunts,” apparently. Read more »
Things AIG Employees Say: “Make sure you grab a bite to eat before this one does! He’s been known to clean out a Danish platter!”By Bess Levin
Has the profitability of your company come into question of late? Have you been sued many, many times, typically for sexual harassment? Want to set the record straight but are unsure of what to say? Perhaps Dov Charney can help. In an interview with CNBC today, Charney told Jane Wells that any suggestion that American Apparel can’t turn a profit on its mesh unitards, gold lamé leggings, and fishnet bodysuits is totally off base. “I think you’re casting [the business] in the wrong light to say it’s unprofitable,” Charney said. “From an accounting perspective, from 20 feet up, yeah, it’s unprofitable. But if you get down to the numbers…we’re getting our groove back…[we'll return to profitability] probably maybe next year.” There was also this exchange. Read more »
Court Finds That UBS Exploited Clients And Tricked Them Into Overpaying For Toxic Securities, But In A Legal WayBy Matt Levine
This is kind of exciting: a bank won a CDO case! Or: something nice happened for UBS!
So the story goes like this (from the court opinion): in March 2002, UBS did a synthetic CDO deal called North Street 2002-4 with Landesbank Schleswig-Holstein, a German landesbank, where LSH (now called HSH, due to mergers probably caused in part by this unpleasantness) sold $500mm of protection on a $3bn portfolio “comprised predominantly of assets linked to the United States real estate market (for example, mortgage-backed securities and instruments issued by real estate investment trusts).” The protection attached after $74mm of losses (i.e. UBS bought the most subordinated $74mm of notes) and UBS could manage the stuff in the pool of reference assets:
Under the credit default swap at issue here, [North Street], as protection seller, in exchange for UBS’s agreement to pay premiums, agreed to make certain payments to UBS, as protection buyer, upon the occurrence of defined adverse “credit events” affecting securities in the aforementioned reference pool. While the securities in the reference pool were required to meet certain ratings specifications, UBS selected the initial securities for the pool, and also had the right to substitute assets in and out of the pool during the life of the credit default swap, within defined parameters and through the use of internal procedures specified in a reference pool side agreement between UBS and HSH. The governing documents required that by March 2004, 70% of the reference pool would be comprised of asset-backed securities, real estate investment trust assets, and commercial mortgage-backed securities.
The landesbanks were kind of famous for being muppets back before being a muppet was cool, and this was a pretty muppety deal. Which they’ve now figured out, and sued UBS in New York state court, claiming that UBS was selling them the deal based on the ratings of the underlying securities but actually stuffing North Street with the worst available securities with those ratings: Read more »
I’ve had some fun these last few days proposing counterintuitive theories for why Citi might not suck as much as you probably think it does and it’s nice to see others joining in the pastime, even if this sounds a little far-fetched:
The district court’s logic appears to overlook the possibilities (i) that Citigroup might well not consent to settle on a basis that requires it to admit liability, (ii) that the S.E.C. might fail to win a judgment at trial, and (iii) that Citigroup perhaps did not mislead investors.
That piece of rank conjecture is from the Second Circuit’s opinion on an appeal* of Judge Rakoff’s rejection of the settlement between the SEC and Citi over some mortgage-backed securities. Here’s DealBook: Read more »
Delaware Chancellor Leo Strine has a bright future in blogging if chancelling doesn’t work out for him. Here’s how he describes Kinder Morgan’s negotiations to buy El Paso, specifically KMI CEO Rich Kinder’s price retrade with EP CEO Doug Foshee:
Kinder said “oops, we made a mistake. We relied on a bullish set of analyst projections in order to make our bid. Our bad. Although we were tough enough to threaten going hostile, we just can’t stand by our bid.”
Instead of telling Kinder where to put his drilling equipment, Foshee backed down.
I umm … I’m pretty sure that that quote from Kinder is approximate.
Anyway, this is from Strine’s opinion refusing to block the KMI-EP merger from proceeding even though he is pretty pissed about some of the apparent conflicts of interest in the deal, including that Goldman Sachs owns almost 20% of KMI while also advising EP, that the lead GS banker owned some KMI stock that he didn’t disclose, and that Foshee negotiated the merger single-handed while also maybe thinking about possibly LBOing EP’s E&P business for his own self.
Lucrative though my current pseudoprofession is, I suspect that if Strine ever leaves the chancelling racket he’d probably prefer to try his hand at merging and/or acquiring. Certainly he is fond of dispensing tactical advice: Read more »
Remember Adriana Ferreyr? To recap, she’s a woman with whom George Soros either conducted “a serious meaningful relationship” that lasted five years or had an “on-again, off-again and non-exclusive intimate relationship,” depending on who you ask. Last August, Ferreyr sued the billionaire for $50 million based on the promise he allegedly made to buy her a “dream home” at 30 East 85th Street, before “heartlessly” dumping her a few days after the contract was signed. Ferreyr was pretty pissed about the situation but, as these things go, the duo “briefly reconciled for a romantic night together” during which Jorge supposedly had the Soroses to “whisper in her ear” that he’d given the keys to her dream house to another one of his gal-pals. Adriana also claimed that after she aired her displeasure with Soros’ decision to give away her apartment, he slapped her across the face and ”proceeded to put his hands around her neck in an attempt to choke her…then allegedly tempted to strike her with a glass lamp narrowly missing though cutting her foot.” From the beginning, Soros’s lawyers have denied almost all of Ferreyr’s account, from the characterization of their relationship to the bit about him assaulting her with his hands and furniture. They did admit that there was a promise of an apartment but 1) the couple broke up so no deal and 2) the way they see it, Ferreyr’s “baseless” lawsuit is simply the manifestation of her “disappointment that Soros moved onto other women.”
Now, one would think Soros would want all of this to go away, as, true or not, most individuals prefer not to be publicly accused of pelting people with lamps, etc. And yet today we were given a hint that GS is actually enjoying all this and, on the contrary, doesn’t want it to go away quietly but rather get real bad, real fast, as evidenced by his attorneys’ latest statement. Read more »
Remember the Paulson & Co Sino-Forest investment? Turned out to be one of the fund’s less than stellar ideas? Will get you an hour in the office hole for mentioning it? Most people affected by the trade have so far been willing to let it slide, perhaps preferring to focus their energies on bigger beefs with JP (such as why only the Platinum Level P&C Members got a check to cover their 2012 losses), and probably also chalking it up to Paulson having an unfortunate brain freeze for the majority of last year. Hugh F. Culverhouse, not so much. The former investor, who filed suit against the hedge fund today, senses something more nefarious at play, the basis for his reasoning being that he doubts Paulson could be that stupid. Read more »