Credit Where Credit Is Due: Peregrine Financial Once Won The "Iowa Character Award"

You know those letters that go out from banks and brokerage firms a couple days after a financial disaster has hit the news? They usually begin with “Dear Valued Customer,” and they assure freaked-out investors that that sort of thing would never happen here. Like this one, published November 1, 2011, the day after MF Global filed for bankruptcy. “Dear PFGBEST customers,” it began. Those rogues at MF Global might have lost track of a billion dollars or so of their customers’ money, but PFG clients could count on “the absolute dedication of PFGBEST to protect you and your PFGBEST accounts.” The soothing dispatch was signed by Russell Wasendorf, Jr., president and chief operating officer and son of the CEO Russell Wasendorf, Sr. It pledged that PFG was “compliance-focused,” and said the principled firm was in communication with regulators “to assist in any way” after the purloining of MF Global’s clients. Well, you can’t argue that the senior Wasendorf didn’t assist his regulators. The CEO of PFG Best, aka Peregrine Financial Group, even sat on an advisory committee of the National Futures Association. On that “compliance-focused” part, though, the your-money-is safe-with-us vow didn’t turn out to be so reliable. Eight months after the “Dear customer” letter, PFG filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on July 10 -- a day after the NFA said the Cedar Falls, Iowa futures brokerage firm was short about $200 million in its customer accounts. That would be the same NFA whose board had on three occasions – in 2004, 2007 and 2009 -- voted to put Wasendorf, Sr. on its Futures Commission Merchant advisory committee that weighed in on new rules. NFA spokesman Larry Dyekman declined to comment. Russ Senior today is in the Linn County jail in Cedar Rapids, Iowa, having been charged with making false statements to regulators about the value of his customers’ accounts. His bail hearing is on Friday. Junior hasn’t been accused of wrongdoing and his lawyer told The Wall Street Journal that the younger Wasendorf is cooperating with regulators to track down assets. Neither man’s lawyers returned phone calls. The elder Wasendorf tried to commit suicide on July 9 and left a note saying he’d been stealing from customers for 20 years. “I had no access to additional capital and I was forced into a difficult decision,” he wrote. “Should I go out of business or cheat?” Well, we know the answer to that one. During the years he was dipping into customers’ funds, Wasendorf was honored with awards for his charity, his patriotism, and his devotion to green initiatives. The firm received accolades, too. Last year, it was among 13 winners of the “Iowa Character Award.” Spokeswoman Amy Smit of “Character Counts in Iowa” said in an email that PFG won for its “extensive community involvement,” including research for pediatric diseases and support to tornado victims. Futures magazine called it “one of the nation’s Top 50 Brokers” for 13 years in a row. Ginger Szala, group editorial director at Summit Business Media, which publishes Futures, said in an email that the list is based on “customer equity reports” that the magazine gets from the Commodity Futures Trading Commission. The CFTC gets those from the firms. “We rely on the regulator to confirm the amount as accurate, and of course, that now is under question,” she said. Oh yeah, that. We could take a little comfort if it had all come as a surprise – the cagey guy who’d never given the regulators a clue. No such luck. While he was picking up his trophies over the years, Wasendorf was running companies that waved red flags. He owned a securities firm, Peregrine Financials & Securities Inc., that first registered with Finra in 1998. That firm wound up terminating its registration in June of 2004, just two months after Finra fined it $251,000 for “unfair and excessive” commissions and for failing to keep proper records of emails. A year before that, in February of 2003, Finra said Peregrine had filed inaccurate reports and had failed to maintain the minimum required net capital. Peregrine also lost arbitrations with customers in 2001 (for breach of contract) and 2004 (for misrepresentation and “fraudulent activity.”) His separate futures trading company, PFG, had its own set of problems. In 2009, an administrative law judge said it had failed to investigate numerous questionable activities in the account of a 73-year-old retiree, adding that PFG had shown “a reckless disregard” for its duties. Ten years before, the Commodity Futures Trading Commission said the firm had failed on several occasions to report that it had fallen below minimum financial requirements, and that it had been showing receivables as current assets in its reports to the regulator. There is more, but you get the idea. Wasendorf thought regulators were kind of dumb, and while he may be a big-time liar, you can’t argue with him on that one. It was “relatively simple” to trick regulators, he said in his suicide letter. At a hearing of the House Committee on Agriculture Wednesday, amid talk about how to prevent future MF Global and Peregrine-style fiascos, witnesses from the financial industry made the familiar business lobby pitches that regulations can kill competition, stifle innovation, and lead to firms leaving the futures business altogether. The carrying on could almost have been scripted by Wasendorf himself. When the CFTC was proposing increased margin rules for foreign exchange traders in 2010, Wasendorf said in a press release that the changes would send thousands of U.S. jobs overseas. “Congress made it clear that the industry was to be policed, not abolished,” he said at the time. Even if this guy gets stuck doing a couple years in prison, there’s got to be a financial lobbying job in his future. Susan Antilla is a columnist for Bloomberg View.
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You know those letters that go out from banks and brokerage firms a couple days after a financial disaster has hit the news? They usually begin with “Dear Valued Customer,” and they assure freaked-out investors that that sort of thing would never happen here.

Like this one, published November 1, 2011, the day after MF Global filed for bankruptcy.

“Dear PFGBEST customers,” it began. Those rogues at MF Global might have lost track of a billion dollars or so of their customers’ money, but PFG clients could count on “the absolute dedication of PFGBEST to protect you and your PFGBEST accounts.”

The soothing dispatch was signed by Russell Wasendorf, Jr., president and chief operating officer and son of the CEO Russell Wasendorf, Sr. It pledged that PFG was “compliance-focused,” and said the principled firm was in communication with regulators “to assist in any way” after the purloining of MF Global’s clients.

Well, you can’t argue that the senior Wasendorf didn’t assist his regulators. The CEO of PFG Best, aka Peregrine Financial Group, even sat on an advisory committee of the National Futures Association.

On that “compliance-focused” part, though, the your-money-is safe-with-us vow didn’t turn out to be so reliable. Eight months after the “Dear customer” letter, PFG filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on July 10 -- a day after the NFA said the Cedar Falls, Iowa futures brokerage firm was short about $200 million in its customer accounts.

That would be the same NFA whose board had on three occasions – in 2004, 2007 and 2009 -- voted to put Wasendorf, Sr. on its Futures Commission Merchant advisory committee that weighed in on new rules. NFA spokesman Larry Dyekman declined to comment.

Russ Senior today is in the Linn County jail in Cedar Rapids, Iowa, having been charged with making false statements to regulators about the value of his customers’ accounts. His bail hearing is on Friday. Junior hasn’t been accused of wrongdoing and his lawyer told The Wall Street Journal that the younger Wasendorf is cooperating with regulators to track down assets. Neither man’s lawyers returned phone calls.

The elder Wasendorf tried to commit suicide on July 9 and left a note saying he’d been stealing from customers for 20 years. “I had no access to additional capital and I was forced into a difficult decision,” he wrote. “Should I go out of business or cheat?”

Well, we know the answer to that one.

During the years he was dipping into customers’ funds, Wasendorf was honored with awards for his charity, his patriotism, and his devotion to green initiatives.

The firm received accolades, too. Last year, it was among 13 winners of the “Iowa Character Award.” Spokeswoman Amy Smit of “Character Counts in Iowa” said in an email that PFG won for its “extensive community involvement,” including research for pediatric diseases and support to tornado victims. Futures magazine called it “one of the nation’s Top 50 Brokers” for 13 years in a row. Ginger Szala, group editorial director at Summit Business Media, which publishes Futures, said in an email that the list is based on “customer equity reports” that the magazine gets from the Commodity Futures Trading Commission. The CFTC gets those from the firms. “We rely on the regulator to confirm the amount as accurate, and of course, that now is under question,” she said.

Oh yeah, that.

We could take a little comfort if it had all come as a surprise – the cagey guy who’d never given the regulators a clue. No such luck. While he was picking up his trophies over the years, Wasendorf was running companies that waved red flags. He owned a securities firm, Peregrine Financials & Securities Inc., that first registered with Finra in 1998. That firm wound up terminating its registration in June of 2004, just two months after Finra fined it $251,000 for “unfair and excessive” commissions and for failing to keep proper records of emails. A year before that, in February of 2003, Finra said Peregrine had filed inaccurate reports and had failed to maintain the minimum required net capital. Peregrine also lost arbitrations with customers in 2001 (for breach of contract) and 2004 (for misrepresentation and “fraudulent activity.”)

His separate futures trading company, PFG, had its own set of problems. In 2009, an administrative law judge said it had failed to investigate numerous questionable activities in the account of a 73-year-old retiree, adding that PFG had shown “a reckless disregard” for its duties. Ten years before, the Commodity Futures Trading Commission said the firm had failed on several occasions to report that it had fallen below minimum financial requirements, and that it had been showing receivables as current assets in its reports to the regulator.

There is more, but you get the idea.

Wasendorf thought regulators were kind of dumb, and while he may be a big-time liar, you can’t argue with him on that one. It was “relatively simple” to trick regulators, he said in his suicide letter.

At a hearing of the House Committee on Agriculture Wednesday, amid talk about how to prevent future MF Global and Peregrine-style fiascos, witnesses from the financial industry made the familiar business lobby pitches that regulations can kill competition, stifle innovation, and lead to firms leaving the futures business altogether.

The carrying on could almost have been scripted by Wasendorf himself. When the CFTC was proposing increased margin rules for foreign exchange traders in 2010, Wasendorf said in a press release that the changes would send thousands of U.S. jobs overseas. “Congress made it clear that the industry was to be policed, not abolished,” he said at the time. Even if this guy gets stuck doing a couple years in prison, there’s got to be a financial lobbying job in his future.

Susan Antilla is a columnist for Bloomberg View.

Related

The Securities And Exchange Commission Requests A Little Credit Where Credit Is Due, Please!

Yesterday, the Wall Street Journal ran a front page story reporting that the Securities and Exchange Commission had "blown" the cover of whistleblower Peter C. Earle. The article claimed that Earle, a former employee of Pipeline Trading Systems turned government informant, had his identity "inadvertently" revealed through a "gaffe" on the part of an SEC lawyer, who showed a Pipeline exec "a notebook from the whistleblower filled with jottings about trades, calls and meetings." The executive was said to have recognized Earle's handwriting and told his colleagues, who had previously suspected but did not know for sure that "Pete's the whistleblower." The story was easy to believe because if you've been keeping up with the SEC over the last number of years, you know that this sound exactly like something they'd accidentally do. Except that whereas the regulator fully copped to, for example, missing Madoff while trying to access ladyboyjuice.com 385 times/day, it says that this accusation? Is bull shit. It did not "inadvertently" "blow" anyone. Here's its strongly worded letter to the Journal saying as much: The Securities and Exchange Commission in no way exposed Peter Earle as a whistleblower, and our use of his notebooks in an investigative deposition was neither "inadvertent" nor a "breach" or "gaffe" ("Source's Cover Blown by SEC," Page One, April 25). It was a deliberate decision, which SEC lawyer Daniel Walfish discussed in advance with his supervisor, who was present for the deposition in which the notebooks were exhibited. Nor did the fully authorized use of the notebooks in any way compromise Mr. Earle or the integrity of the SEC's investigation of the Pipeline Trading Systems matter. Although it was widely known among executives of Pipeline and Milstream Strategy Group that Mr. Earle had approached the SEC after he was terminated from Milstream—a fact volunteered by several witnesses and acknowledged by Mr. Earle long before any use of his notebooks—the SEC declined to confirm his identity and still treated his status as a cooperating witness as confidential. The SEC made sure to obtain all of the notes of the approximately six Milstream traders, and in the SEC's deposition of Gordon Henderson (the supervisor of Mr. Earle and the other traders), the SEC used other traders' notes along with those of Mr. Earle. The use of these traders' notes—highly relevant evidence prepared in the ordinary course of their work at Milstream—in no way revealed whether Mr. Earle or any other trader was or was not cooperating with the SEC. George S. Canellos Director New York Regional Office U.S. Securities and Exchange Commission New York SEC Did Not Blow Source's Cover [WSJ] Earlier: SEC Burns Whistleblower In The Most SEC Way Possible

Russell Wasendorf Didn't Mean "I have embezzled millions of dollars from Customer accounts at Peregrine Financial" In A Literal Sense

Remember Russell Wasendorf? CEO of collapsed brokerage firm Peregrine Financial Group? Dirty blonde hair, about yea high? Opened his (attempted) suicide note with the words "I have committed fraud" and then went on to detail said fraud, writing: "Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc. The forgeries started nearly twenty years ago and have gone undetected until now. I was able to conceal my crime of forgery by being the sole individual with access to the US Bank accounts held by PFG. No one else in the company ever saw an actual US Bank statement.The Bank statements were always delivered directly to me when they arrived in the mail. I made counterfeit statements within a few hours of receiving the actual statements and gave the forgeries to the accounting department.” Using a combination of Photo Shop, Excel, scanners, and both laser and ink jet printers I was able to make very convincing forgeries of nearing every document that came from the Bank. I could create forgeries very quickly so no one suspected that my forgeries were not the real thing that had just arrived in the mail." ...apparently he was just kidding about all that and/or intended it to be read in more of an If I Did It style. The chief executive of Peregrine Financial Group Inc. on Friday pleaded not guilty to all 31 charges he faced of misleading federal market authorities as part of a long-running alleged fraud. Russell Wasendorf Sr., the head of the collapsed U.S. futures and currency brokerage, was formally charged this past week with 31 counts of misleading regulators, offenses that carry a maximum sentence of 155 years. It is one of the heaviest penalties sought in the wake of the last financial crisis. No further questions. Peregrine's Wasendorf Pleads Not Guilty [WSJ]

Opening Bell: 07.10.12

Diamond To Forgo Deferred Bonuses (WSJ) Former Barclays Chief Executive Robert Diamond has given up bonuses of up to £20 million ($31 million) in an apparent effort to shield the lender as the bank looks to defuse anger following the rate-fixing scandal...According to Mr. Diamond's contract, he will receive up to 12 months' salary, pension allowance and other benefits. Barclays Chairman Marcus Agius said that this amounts to around £2 million. Paulson Funds Fell In June As Rally Undercut Euro Wager (Bloomberg) The $22 billion firm had losses in all its funds last month as stock markets rose. The losses were led by a 7.9 percent drop in his Advantage Plus Fund, according to an update to investors obtained by Bloomberg News. That leaves the fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, down 16 percent this year. Einhorn says Fed stimulus counterproductive (Reuters) "I think it's actually counterproductive," Einhorn said of the stimulus program, adding that it lowers the standard of living and drives up food and oil prices. He said he would suggest a rise in interest rates on U.S. Treasury bonds to "a reasonable level" of 2 to 3 percent. Einhorn said Apple, which he praised at this year's Ira Sohn investing conference, was "the best big-growth company we have." "We're two, three years into the Apple investment, and the way it seems headed it's likely we'll be there for a good while longer," he said. "I think the stock is very very substantially undervalued." He said Amazon.com Inc was "tough on its competitors" because it does not "feel the need to make a profit." "It's very hard to compete against somebody who doesn't feel the need to make a profit," he said, adding that he is not "short" Amazon. Investment Bankers Face Termination As Europe Fees Fall (Bloomberg) Credit Suisse and UBS face the most pressure to boost efficiency as that country runs ahead of others in introducing tougher capital and liquidity rules to curtail risk-taking, making some businesses unviable...While the situation may be most acute at the Swiss banks, similar dynamics are at work at other firms as the debt crisis drags on, capital requirements ratchet higher and economic growth grinds to a halt. “Bankers are really gloomy and a lot of people are worried about their jobs,” said Edward Cumming-Bruce, a partner at London-based advisory firm Gleacher Shacklock LLP who has more than 20 years’ experience. “Banks are under remorseless pressure to cut costs and balance sheets as we witness a significant change in the way the financial industry works.” Sitting for More Than Three Hours a Day Cuts Life Expectancy (WSJ) Sitting down for more than three hours a day can shave a person's life expectancy by two years, even if he or she is physically active and refrains from dangerous habits like smoking, according to a study to be published on Tuesday in the online journal BMJ Open. Watching TV for more than two hours a day can exacerbate that problem, decreasing life expectancy by another 1.4 years, said the report, which analyzed five underlying studies of nearly 167,000 people over a range of four to 14 years. Futures Broker Freezes Accounts (WSJ) Peregrine, based in Cedar Falls, Iowa, couldn't be reached for comment on the NFA action, but in an earlier statement to clients said "some accounting irregularities are being investigated regarding company accounts." "What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds," said PFGBest in its statement. Also in the statement, the firm said Russell R. Wasendorf Sr., its founder, chairman and chief executive, had experienced a "recent emergency" and described it as a "suicide attempt." A spokeswoman for PFGBest said Mr. Wasendorf was in critical condition in a hospital. Four Companies Break Through IPO Drought (WSJ) What do two fast-growing technology companies, an iconic guitar maker and a skin-infection specialist have in common? All four aim to break the latest dry spell in the IPO market. Fender Musical Instruments Corp., which has supplied guitars to rock artists from Buddy Holly to Kurt Cobain and John Mayer, network-security firm Palo Alto Networks Inc., travel website Kayak Software Corp. and pharmaceutical firm Durata Therapeutics Inc. said Monday that they plan to push ahead with initial public offerings in coming weeks. JPMorgan Silence On Risk Model Spurs Calls For Disclosure (Bloomberg) The U.S. Securities and Exchange Commission is probing JPMorgan’s belated May 10 disclosure that a change to its mathematical model for gauging trading risk helped fuel the loss in its chief investment office. While the SEC would have to prove that the biggest U.S. bank improperly kept important information from investors, regulators probably will press Wall Street firms to tell more about the risks they’re taking, three former SEC lawyers said. Would You Stress Over A Millionaire Wife? (CNBC) The study, conducted by SEI and Phoenix Marketing, found that a third of the women who are the financial leads in millionaire households say their partner feels “stressed” by their financial roles. By contrast, only 14 percent of males in male-led millionaire households said they feel tension from their partner. Actor who kicked in doors to Ed Sullivan theater escapes jail time (NYDN) The struggling actor who kicked in the glass doors to the Ed Sullivan Theatre and urinated on the lobby floor last year got lucky with a no-jail sentence Monday. But he had to pay $7,377.28 in restitution. James Whittemore, 23, who now deejays in Massachusetts under the name DJ Nutron, never formally apologized to David Letterman face to face, but he said he'd like to..."Someone stole my iPhone, I quit my job, my girlfriend broke up with me, I was having a rough day," he said.

Opening Bell: 07.11.12

Claw Is Out For 'Whale' Officials (WSJ) The nation's biggest bank is expected to claw back compensation from individuals including Ina Drew, who ran the company's Chief Investment Office, according to people familiar with the bank's plans. Dimon Risk Reputation On Line As JPMorgan Faces Analysts (Bloomberg) In a departure from his customary earnings-day conference call, Dimon will meet analysts for two hours on July 13 at the bank’s New York headquarters to field questions about the loss and what he’s doing to contain the damage. Scandal Shakes Trading Firm (WSJ) The firm, Peregrine Financial Group Inc., filed Tuesday evening in Chicago to liquidate under Chapter 7 of the bankruptcy code. Earlier in the day, the Commodity Futures Trading Commission filed a lawsuit in federal court in Chicago accusing Peregrine Financial and its founder, Russell Wasendorf Sr., of fraud, customer-funds violations and making false statements. The CFTC said shortfalls may have been present since at least February 2010. A spokeswoman for the FBI said it has also begun an investigation into the company, also known as PFGBest. Brokerage and retail customers had their accounts frozen as regulators began looking into the company's books. Police in Cedar Falls, Iowa, said they found Mr. Wasendorf, 64, in his silver Chevrolet Cavalier Monday morning outside the company headquarters, with a hose running from the car's tailpipe. His son, company President Russell Wasendorf Jr., told the company's roughly 200 employees late Monday that his father had left behind a note alluding to "a crime that had been committed," according to one employee. Diamond Rebuts Claims By UK Lawmakers (WSJ) Former Barclays CEO Robert Diamond hit back at allegations he had misled U.K. lawmakers when giving evidence over an interest-rate scandal, calling them "unfair and unfounded." HSBC Is Sorry (WSJ) will apologize at a U.S. Senate hearing for its lax efforts to prevent money laundering, the London-based lender's chief executive said in an internal memo. "Between 2004 and 2010, our anti-money-laundering controls should have been stronger and more effective and we failed to spot and deal with unacceptable behaviour," Stuart Gulliver said in the memo, sent to employees Tuesday. Tigers Kill Man Who Scaled Fence At Danish Zoo (Reuters) A man was killed by tigers at a zoo on Wednesday after he scaled a fence and crossed a moat to get into their enclosure in the Danish capital Copenhagen, police said. The man, in his early 20s, was savaged by three tigers after he broke into Copenhagen Zoo in the early hours. He was dead when staff arrived for work. "We received an emergency call at about 7:30 a.m. that a person had been found lying in the tiger pen and that three tigers were surrounding that person," police Superintendent Lars Borg told Reuters. "The tigers attacked him and killed him. It is likely that a bite to the throat was the primary reason for his death," Borg said. Australia Is No Spain, Says Official (CNBC) Australia’s Deputy Prime Minister and Treasurer Wayne Swan has denied that Australia’s economy is at risk of a Spain-like economic crisis, calling the thesis put forth by the former chief Asia-Pacific economist for Morgan Stanley, Andy Xie “absurd”. “Let’s go through the fundamentals," Swan said. "Bringing our budget back to surplus in 2012-2013, low unemployment, strong job creation over time, a record investment pipeline in resources – half a trillion (dollars). What planet does he live on?” San Bernardino Becomes Third California City Seeking Bankruptcy (Reuters) The decision by the leaders of San Bernardino, a city of about 210,000 residents approximately 65 miles east of Los Angeles, followed a report by city staff that said the city faced an imminent financial crisis. The report said the city had exhausted its reserves and projected spending would exceed revenue by $45 million in the current fiscal year which started on July 1. Dalio Hits Midyear Off 2.7% (NYP) After leaving its rivals in the dust for the past two years with mouth-watering double-digit returns, Bridgewater is now trailing them. Its flagship fund, Pure Alpha, fell 2.7 percent in 2012’s first half. Wildebeest takes on 18ft killer crocodile (DM) As regular as the seasons themselves, herds of wildebeest make an annual migration across east Africa - following rainfall and the growth of new grass. Exploiting this predictability, each year predators lay in wait until the migrating beasts come into their killing zone. Day or night, death can come to the young, sick or simply unlucky members of the herd - swiftly from a single cheetah, or without mercy from a pride of lions or pack of hyenas. For one young male, the end came not on the plains but in one of Kenya's heaving rivers - delivered by one of nature's apex killing machines. Like all in his herd, the doomed wildebeest was taking his chances crossing the Mara River in the Masai Mara reserve in Kenya. Unfortunately for him, he walked straight into the path of an 18ft Nile crocodile - a species of predator so efficient that it has barely changed throughout evolution. The crocodile used its huge weight and strength to attack the beast as it was already caught off balance by the rushing water and uneven footing. Its enormous jaw span virtually took in the entire wildebeest's body as the victim attempted in vain to escape the attack.

Opening Bell: 07.17.12

Goldman Sachs Profit Falls 11%, Beating Estimates (Bloomberg) Net income slid 11 percent to $962 million, or $1.78 a share, from $1.09 billion, or $1.85, a year earlier, the New York-based company said today in a statement. Earnings surpassed the highest estimate among 25 analysts surveyed by Bloomberg. Goldman Sachs’s second-quarter revenue from asset management rose 5 percent to $1.33 billion, exceeding the $1.18 billion average estimate of seven analysts. Chief Executive Officer Lloyd C. Blankfein, 57, who has run the company for six years, last month blamed a temporary reaction to the financial crisis for a slowdown that reduced Goldman Sachs’s first-half revenue to the lowest since 2005. Goldman Builds Private Bank (WSJ) The New York securities firm, known for its aggressive trading and big corporate deal-making, is ramping up its activities to become a private bank to serve wealthy customers around the world. The new unit will also lend more directly to corporations, some of whom already make investments and do business with Goldman. Executives have set a goal of $100 billion in loans, up from $12 billion at the end of March. Gross Says U.S. Nearing Recession (Bloomberg) The U.S. is “approaching recession when measured by employment, retail sales, investment, and corporate profits,” Gross, who manages the $263 billion Pimco’s Total Return Fund, wrote on Twitter yesterday. Senate Probe Faults HSBC (WSJ) Executives of HSBC ignored warnings for years that the bank's far-flung operations were being used by money-launderers and potential terrorist financiers, according to a Senate investigation. King Defends BOE Libor Role After Scrutiny On Geithner Memo (Bloomberg) King told Parliament’s Treasury Committee today in London that the e-mail sent by the then president of the Federal Reserve Bank of New York included recommendations rather than allegations at a time when global regulators were expressing concern on the quality of the borrowing benchmark. “Mr. Geithner was sending that to us as a suggestion for how these rules should be constructed and we agreed with him, but neither of us had evidence of wrongdoing,” King said. “The first I knew of any alleged wrongdoing was when the reports came out two weeks ago.” Jonah Falcon, Man With World's Largest Penis, Frisked By TSA At California Airport (HP) Jonah Falcon was stopped and frisked by the TSA at the San Francisco International Airport on July 9 because of a bulging package hidden in his pants. But the 41-year-old New Yorker wasn't packing a dirty bomb, drugs or a Costco-sized tube of toothpaste. The New Yorker has the world's largest recorded penis. "I had my 'stuff' strapped to the left. I wasn't erect at the time," said Falcon, whose penis is 9 inches flaccid, 13.5 inches erect. "One of the guards asked if my pockets were empty and I said, 'Yes.'" Falcon said he knew that his interview was about to get a lot more personal when he was led through one of the X-ray body scanners and passed a metal detector. "Another guard stopped me and asked me if I had some sort of growth," Falcon said, laughing. By the age of 18, Falcon knew he had something special when his manhood reached a whopping 12 inches. His family jewel was hailed as the world's largest on record after an HBO documentary featured him in 1999. S&P 500 Nears ‘Ultimate’ Death Cross: SocGen (CNBC) The S&P 500 index is on the verge of hitting an “ultimate” death cross, where the market’s 50-month moving average falls below the 200-month average, according to a research note by Societe Generale...In the Societe Generale note, published on Monday, strategist Albert Edwards said the last time the S&P 500 came close to a monthly death cross was in 1978, “towards the end of the 1965-82 secular bear market.” CFTC's Gensler acknowledges failure in Peregrine's oversight (Reuters) The U.S. futures regulator acknowledged on Tuesday that the regulatory system "failed" the customers of Peregrine Financial Group, which collapsed last week as its founder admitted he had committed a $100 million fraud that spanned two decades...The stunning downfall of Peregrine Financial Group, or PFGBest, and its founder Russell Wasendorf Sr is another blow to the futures industry after regulators estimated that roughly $200 million in customer money might be missing. It comes just months after MF Global Holdings Ltd's bankruptcy, which left customers with a $1.6 billion shortfall and which is still being investigated. For Olympic Athletes, 45 Minute Bus Trip Turns Into Fiasco (NYT) By the end of the day, organizers were struggling to explain how three buses carrying dozens of athletes, officials and journalists to the Olympic Village from Heathrow Airport lost their way in the maze of London’s streets, causing one American medal hopeful, the 400-meter hurdler Kerron Clement, to post a Twitter message in desperation after four hours aboard a bus that should have made the distance in 45 minutes. “Athletes are sleepy, hungry and need to pee. Could we get to the Olympic Village please,” Mr. Clement wrote as the driver, struggling to understand the route given by the bus’s GPS device, finally abandoned repeated forays up dead-end streets and pulled out a map. “Um, so we’ve been lost on the road for 4hrs. Not a good first impression London,” he added.

Opening Bell: 09.12.12

German court seen okaying EU bailout fund, strings attached (Reuters) Germany's Constitutional Court is expected to give its approval on Wednesday to the euro zone's new bailout fund while insisting on guarantees to safeguard German parliamentary sovereignty and limit Berlin's financial exposure. Exchanges Plot Fixes For Their Glitches (WSJ) One proposal under discussion involves implementing so-called "kill switches" between brokers and exchanges, according to people involved in the discussions. Kill switches, which are common in futures trading but not in the U.S. stock market, allow exchanges to automatically shut off customers from trading once they hit a preset limit, such as one based on the total dollar amount of the firm's trades in a set time frame. Moody's Warns On US Rating (WSJ) Moody's Investors Service, in the latest reminder of the tense fiscal negotiations looming for Congress and the White House, said it could downgrade the U.S. government's credit rating next year if steps aren't taken to tackle the rising debt. Specifically, it said if Congress repeals looming spending cuts and tax increases set to begin next year and doesn't replace them with large-scale deficit-reduction measures, the government would lose its top-notch rating. Deutsche Bank Overhaul Leaves Firm Trailing Peers on Capital (Bloomberg) Deutsche Bank plans to boost core tier 1 capital to at least 8 percent of assets weighted by risk under Basel III rules by the end of March 2013, and to more than 10 percent two years later, co-CEOs Anshu Jain and Juergen Fitschen said in Frankfurt yesterday. Its biggest competitors will reach similar levels months or years sooner, based on forecasts from the banks. Deutsche Bank is winding down assets deemed among its riskiest under rules devised to prevent a repeat of the bank rescues that followed the 2008 collapse of Lehman Brothers Holdings Inc. Jain said yesterday that while capital concerns have had an effect on the stock, tapping shareholders would be “irresponsible” without pursuing other options first. Pittsburgh professor who invented emoticons hates the little yellow icons they have become (Independent via BB) To some, an email isn't complete without the inclusion of :-) or :-(. To others, the very idea of using "emoticons" – communicative graphics – makes the blood boil and represents all that has gone wrong with the English language. Regardless of your view, as emoticons celebrate their 30th anniversary this month, it is accepted that they are here stay. Their birth can be traced to the precise minute: 11:44am on 19 September 1982. At that moment, Professor Scott Fahlman, of Carnegie Mellon University in Pittsburgh, sent an email on an online electronic bulletin board that included the first use of the sideways smiley face: "I propose the following character sequence for joke markers: :-) Read it sideways." This weekend, the professor, a computer science researcher who still works at the university, says he is amazed his smiley face took off: "This was a little bit of silliness that I tossed into a discussion about physics," he says. "It was ten minutes of my life. I expected my note might amuse a few of my friends, and that would be the end of it." But once his initial email had been sent, it wasn't long before it spread to other universities and research labs via the primitive computer networks of the day. Within months, it had gone global. Nowadays dozens of variations are available, mainly as little yellow, computer graphics. There are emoticons that wear sunglasses; some cry, while others don Santa hats. But Professor Fahlman isn't a fan. "I think they are ugly, and they ruin the challenge of trying to come up with a clever way to express emotions using standard keyboard characters. But perhaps that's just because I invented the other kind." Peregrine CEO Enters Plea Deal (WSJ) Under the agreement, Russell Wasendorf Sr. would plead guilty to charges of embezzlement and mail fraud alongside two counts of lying to government regulators, assistant U.S. attorneys said in a Cedar Rapids, Iowa, court Tuesday. The development comes more than two months after Mr. Wasendorf, founder of Peregrine and a business leader in his adopted hometown of Cedar Falls, attempted suicide outside his firm's headquarters, leaving behind what authorities called a confession detailing a yearslong scheme to defraud his investors. Facebook Taking Steps to Address Mistakes in Mobile Products (Bloomberg) “Now we are a mobile company,” Zuckerberg said in an on- stage interview at the TechCrunch Disrupt conference in San Francisco today. “Over the next three to five years I think the biggest question that is on everyone’s minds, that will determine our performance over that period, is really how well we do with mobile.” Zuckerberg, who appeared at ease while trading laughs with his interviewer, for the first time elaborated on technical struggles that have impeded Facebook from creating a user- and advertiser-friendly mobile application. The company spent too long trying to build mobile products using a programming language known as HTML5, Zuckerberg said. Navistar vs. Icahn gets ugly in Illinois (NYP) Embattled truck and diesel engine maker Navistar International yesterday poured gasoline on the fire ignited Sunday when billionaire investor Carl Icahn called the company’s board a “poster child for abysmal business decisions and poor corporate governance.” Less than a day after the billionaire investor blasted the Warrenville, Ill., company for not consulting shareholders on its new CEO hire, Navistar dismissed his complaints as “unproductive tactics of threats, attacks and disruption.” Legg Mason CEO To Step Down (WSJ) Facing pressure from activist investor Nelson Peltz's Trian Fund Management LP and battling investor outflows, Legg Mason Inc. said Chairman and Chief Executive Mark Fetting will step down Oct. 1. The Baltimore-based money manager faces a Nov. 30 deadline after which Trian, Legg Mason's largest shareholder, will be free to raise its 10.5% stake in the firm, potentially giving Mr. Peltz more influence. Man Shot Uncle To Death Over Pork Steaks (STLT) The shooting stemmed from an argument between Lowe and Cunningham over whether the cuts of meat they were planning to cook were pork steaks or pork chops, police say. Cunningham said they were pork steaks, police said. Lowe disagreed. After the argument became physical about 1 a.m. Monday, the two had to be separated by someone else in the home, police say. Cunningham went to another part of the home, grabbed a shotgun and shot Lowe, police said. Lowe died later at Barnes-Jewish Hospital. Cunningham, who was correct about the meat, was taken into custody.