Over the past few months, we have learned about extraordinary levels of excessively bad corporate behavior.

As bad as the Bailouts were from an economic, wealth transfer, and moral hazard perspectives, it turns out that the grim reality was an order of magnitude worse than previously believed.

We have since learned that many TARP recipients, bailed out banks and other ne’er-do-wells were actively engaged in cooking their books. I don’t mean various FASB 157 permission to lie, and other legal but nefarious activities. I am referring to the 2002-2007 era of scams, frauds, and outright theft.

The public’s righteous indignation over the lack of just desserts for the perpetrators of these frauds has morphed since September 2008 into an unresolved, unfocused anger. When this all plays out, we might very well see bonus clawbacks, fines and penalties, disgorgement of ill gotten gains, and criminal arrests for some of the major names at the biggest brokerage houses.

Why do I think that 2 years later, some justice might be done? The truth is slowly coming out, as insiders provide testimony, release papers, and even offer up recordings of conversations to various investigators and prosecutors.

• Lehman Brothers: used “Repo 105 transactions” to remove $50 billion of liquid assets from the balance sheet at quarter-end in 2008 in order to mislead investors as to Lehman’s net leverage. It also hid from view billions of dollars worth of troubled assets. The latest reveal is that Lehman CEO Dick Fuld was aware of this accounting technique. Do not be surprised to see some form of indictment of Dick Fuld over the next 12 months;

Merrill Lynch: Engaged in a different but just as nefarious technique to hide leverage and losses , thereby to misleading public investors, the NYT reported yesterday:

“Pyxis was created at the height of the mortgage mania as a sink for subprime securities. Intended for one purpose and operated off the books, this entity and others like it at Merrill helped the bank obscure the outsize risks it was taking.”

This took place during the riegn of Stan O’Neal, who left Mother Merrill with an egregious $161.5 million in severance.

Citigroup: Similarly shifted CDO risks and leverage off its books, failing to disclose them to investors and regulators during the era of Citi with Chuck Prince as CEO (who walked away with over $40 million in severance).

Morgan Stanley, Bear Stearns, Wells Fargo, Wachovia, Wamu, B of A: What of the rest of the major banks and investment houses? I recently asked a very savvy credit analyst about who else engaged in these SIVs, swaps, off balance transactions, and other fraud with the intent to deceive investors and regulators.

His answer?

“Pretty much all of them. The only exceptions are probably Goldman Sachs and JP Morgan (I have no evidence they did this). The rest of the Street either are known to, or are unknown but likely to have engaged in the same behavior. Morgan Stanley, Bear Stearns, Wells Fargo, Wachovia, Wamu, B of A, all of them.”

Lacking evidentiary proof, I was not permitted to quote him by name.

~~~

I have long believed that the general anger of the public about the bailouts were about the inherent injustice in bailing out incompetent bankers who made tidy profits and huge bonuses through their own incompetence.

It turns out that this was more than mere incompetence, this was a malicious fraud, a full on intent to deceive the investing public in order to grab huge bonuses, economic consequences tot he nation be damned.

But the noose is slowly tightening. The FCIC has undercovered documented illegal behavior, while a newly revitalized SEC opens more cases.

In the post Sarbanes-Oxeley era, where CEOs signed off on their accounting statements and quarter earnings release, that calls for investigation, prosecution, confiscation — and jail time. As much as the public has been frustrated, they may very well see some justice soon . . .

Category: Bailouts, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

61 Responses to “Coming Soon: Bank CEO Perp Walks, Jail Time”

  1. The following paragraph from Louis Story’s NYT article demanded reproduction:

    “In forming Pyxis and other programs, Merrill guaranteed the notes they issued by agreeing to take back any securities put in the programs that turned out to be of poor quality. In other words, these vehicles were essentially buying pieces of C.D.O.’s from Merrill using the proceeds of notes guaranteed by Merrill and leaving Merrill on the hook for any losses.”

    How could that possibly go wrong?

  2. HEHEHE says:

    Can you promise this will happen?:)

  3. Mark Down says:

    Bad Bankers ,that was so yesterday. Get with it Ritholtz.

  4. ancientone says:

    While perp walks and clawbacks will make some people feel better, will it really change how Wall Street works? Really?

  5. well, there are mid-terms (Elections) coming up..

    prob., as good a time as any for some add’l GS/Blankfein-style ‘Show Trials’..

  6. wisedup says:

    I’ll riff from the statement “as insiders provide testimony, release papers, and even offer up recordings of conversations to various investigators and prosecutors.”
    OK, so there are lot of mid-level managers who can see that the gravy train is not going to stop for them this time around and the only way to get ahead is to shaft the guys above them.
    for ancientone, yeah, for a couple of years if we are lucky.

  7. dead hobo says:

    BR daydreamed:

    As much as the public has been frustrated, they may very well see some justice soon . . .

    reply:
    ————-
    I love the smell of hopium in the morning. More realistically define “some justice”. In the real world, the best you will see is a minor flunky being chastised in the papers or on the web about a snarky email relating to one of these subjects that was unfortunately discovered.

    I could go on and on but why bother. Nothing is going to happen to 99.9% of these people and they know it. Uncle Stupid has unending excuses about not getting involved beyond the dog and pony show hearings.

    ~~~

    BR: Care to make it interesting?

    I bet you a C-level exec from a major finance institution is indicted over the next 18 months.

    How about betting me Family Guy – The Total World Domination Collection (Stewie Head Packaging) ?

  8. philipat says:

    In the case of “Repo 105″, I am yet to be convinced that this was not a complete shell game with no actual cash committed by any third parties. AT that point in time, what third party would commit real cash to any transaction with LEH against a whole load of cr*p securities and why?

    Follow the money?

  9. Kort says:

    I am glad you specifically focused the timeframe on “2001-2008″ because I keep forgetting we haven’t had any fraudulent banker activity before or after.

  10. To be more precise, I should have said 2002-07.

    The CDO boom did not take hold until after the housing spiral began in earnest in ’02. From 2008 forward, the banks were too busy writing down billions in bad debt to worry about hiding anything

    This is not about fraud in general or scams over history — i am referencing the specific Housing/securitized debt/derivitive hiding/leverage criminilatiy of the last boom and bust.

    Try to keep up . . .

  11. d4winds says:

    you’re in la la land

  12. mark says:

    Just a reminder: The Pecora Commission was the fourth attempt at investigation into Wall Street’s evil ways back in the day. There were indictments and trials into the late ’30s. Barry’s right, there’s lots more to come especially if we have a double dip with equities hitting new lows.

  13. KidDynamite says:

    BR – how do you feel about Citi getting off with a slap on the wrist after defrauding shareholders to the tune of $40 billion? especially in light of GS’s hefty fine for a crime which, well, I’ll argue at length was much less egregious. And no – this is not an attempt to restart the GS guilty/innocent debate – only to point out that the Citi escape has gone largely unnoticed, while their crime (lying on a much larger scale to a much less sophisticated counterparty) was much greater.

  14. NoKidding says:

    “I am referring to the 2001-2008 era of scams, frauds, and outright theft.”

    You believe it stopped in 2008, do you? Why would that be?

    ~~~

    BR: Once a bank collapse, it no longer has the need to hide its losses . . .

  15. super_trooper says:

    “But the noose is slowly tightening”
    At turtle speed. I bet the rabbit wins in the end.

  16. ACS says:

    One thing that could improve Obama’s standing with the public would be to start charging the corporate crooks responsible but of course that could interfere with his ability to give $100,000 speeches after leaving office!

  17. Clawback, with interest would make me feel better.
    Jail time would make me feel even better.
    But it wouldn’t do any real good.

    But what I need is for those who are responsible for saving the banks and destroying the economy to get their judgment. At the top of the list are Timothy Geithner and Larry Summers.

    What I need is for everyone ever associated with Goldman to lose his/her job with the government. This is merely a precaution against future wrongdoing. Yes, this is unfair, but we were treated unfairly first.

  18. IS_LM says:

    The public’s righteous indignation over the lack of just desserts for the perpetrators of these frauds has morphed since September 2008 into an unresolved, unfocused anger.

    Case in point: the comments in this thread, as well as those in the Gold Bug thread.

  19. b_thunder says:

    I never thought that Barry R. was such a dreamer! Perhaps that fresh air at the lake made his head spin….

    If the gov’t /SEC wanted to bring the Wall St execs on charges – they would have done so already. The time right after the financial panic would have been the perfect time to do that. However, the gov’t/Fed spent last 2.5 years trying to “extend and pretend” rather than clean up the mess. Prosecuting the individuals would paint the bailouts as cover-up for fraud (which whey were) would make Geithner, Paulson and Bernanke accomplices in fraud! It would simply undermine the entire bailout strategy! No, the idea here is not perp walks, but perhaps “golden parachute” descents.

    What do we have so far?
    Goldman? – shareholders will ahve paid the fine. Executives prosecuted or even forced to resign? Zero. Check. (Is “Fab” still on the the GS’s payroll?)
    Merrill/BofA fraudulent merger? CEO was forced out, but is still a millionaire. Check.
    “Repo 105″ – BofA admitted using similar transactions. SEC actions? Nada. Check.
    Moodys, S&P,Fitch ratings – business as usual. Check.
    2 Bear ex-hedge fund managers? even these 2 “sacrificial lambs” – acquitted. Check. Check Check.

  20. wunsacon says:

    If Obama and the Dems had prosecuted these frauds vigorously, then no matter how much money Wall Street contributes to the Reps this election cycle the American voter would’ve still turned out energized for the Dems this fall. But, as it is, I won’t be one of them. Sadly, I expect bigger crooks will enter office. Be that as it may, I can’t reward the past 1.5 years of performance with a vote.

  21. IS_LM says:

    But what I need is for those who are responsible for saving the banks and destroying the economy to get their judgment. At the top of the list are Timothy Geithner and Larry Summers.

    If we are to cast such a net, in particular for “destroying the economy,” where do the following individuals (in no particular order) find their rap sheets: Phil Gramm, Alan Greenspan, Glenn Hubbard, Greg Mankiw, Ben Bernanke, Hank Paulson, and George W. Bush?

  22. Darkness says:

    Wunsacon, you lose your right to bitch and moan the moment you opt out of voting.

    I fully agree with the point you made. Although, not sure the SEC had the staff to do that. Successful prosecuting requires 100x more effort than committing the crime. But the rhetorical space was left open so the kleptocratic think tanks had free rein to insert their idiotic meme of government is always bad for business, in all forms, taking the edge off one of the best opportunities in three decades for real reform.

  23. Robespierre says:

    “It turns out that this was more than mere incompetence, this was a malicious fraud, a full on intent to deceive the investing public in order to grab huge bonuses, economic consequences tot he nation be damned.”

    Reading your blogs for some time and knowing that you come from the law I can’t believe that you just came to that conclusion. Anyway, I’ll be surprise if anything happens to them bank syndicate types. Then again this may be the last chance for Obama to leave office in at least good moral standing. After all, he is already being burn by the syndicate:

    Wall Street-Related Political Contributions Shift Toward Republicans
    Financial firms and the people who work for them are increasingly donating their political cash to Republicans, according to a preliminary Center for Responsive Politics analysis of second-quarter federal campaign finance data.

    The Center’s preliminary study indicates that political action committees and individuals associated with the broad finance, insurance and real estate sector have given more money to federal-level Republican interests during every month since December. The gap continued to grow during that time, reaching its widest point in June.

    http://www.opensecrets.org/news/2010/08/financial-industry-related-politica.html

  24. Evoo Kermartin says:

    Putting the former heads of the Gambino family in prison will set their operations back years, YEARS I tell ya.

  25. Evoo Kermartin says:

    Like they say, take out the former head and the former body will follow.

  26. Dennis the menace says:

    Seriously, is today half wit comment day or something?

    People, stop your reflexive knee jerk idiocy and try thinking

    BR, i suggest going to full moderated comments

  27. AHodge says:

    good stuff

    For over a century there often jail time, lynching, suicide for corp execs who grossly enrich themselves while bankrupting their corporation. Your analyst right about GS and JPM. Only big guys who know how to keep their books– even for themselves. Others have lieutenants telling CEOS how much they made. But CEOS were in on some of these corp level scams you describe, so easy justice about lying accounting starts there.

    Actually not so easy. Lets all lean in a shoulder and push.

  28. solanic says:

    Wow Barry – “But the noose is slowly tightening. The FCIC has undercovered documented illegal behavior, while a newly revitalized SEC opens more cases.”

    Didn’t you once say “After all, they are at least as important as that kid you use to have whizzing contests with in camp int he 3rd grade.”
    http://www.ritholtz.com/blog/2010/02/my-newest-facebook-friend-fcic/#comment-256897

    :-)

  29. I did.

    But that was before the FCIC Lehman Report, where they revealed Lehman’s ginormous Repo 105 fraud. (Full report here)

    They get major props for that, and got a whole lot of new respect from em.

  30. hammerandtong2001 says:

    Jail time? Clawbacks? Any, all of that?

    I dunno. I think it’s a little different now.

    To get all that rage going, “the people” have to be angry. I ould see raft of headline prosecutions, and some political types slamming the tables and all that. And I’m sure there are angry people out there that this plays to.

    But really — what’s different now is that too many people aren’t angry — they’re scared. Regular people walking around, going to work if they have a job, trying to figure out how they’re going to pay $150K for junior’s college, and no equity in the house to borrow against to do it. And all the rest with little or nothing in the bank and on and on and on.

    Being scared puts you in a different place than being angry.

    When you’re scared, you just want what’s scaring you to go away. To get fixed. To stop.

    I think more people would choose getting all this financial mess FIXED, than would choose throwing Dick Fuld in jail.

    .

  31. wunsacon says:

    Darkness, I’m torn between your logic and Carlin’s:

    “I don’t vote, because I firmly believe that if you vote, you have no right to complain. I know some people like to twist that around and say, “If you don’t vote, you have no right to complain.” But where’s the logic in that? Think it through: If you vote, and you elect dishonest, incompetent politicians, and you screw things up, then you’re responsible for what they’ve done. You voted them in. You caused the problem. You have no right to complain.”

    ;-)

  32. AHodge says:

    H&T
    the fixing and jail time are linked.
    If the accounting is fixed and understood– it will be obvious jail time is due.

  33. dead hobo says:

    BR challenged:

    BR: Care to make it interesting?

    I bet you a C-level exec from a major finance institution is indicted over the next 18 months.

    How about betting me Family Guy – The Total World Domination Collection (Stewie Head Packaging) ?

    reply:
    ————
    One whole perp out of the two or three who caused this entire mess??? You think??? That sounds serious!! “C” level … isn’t that the manager level like the guy on the Scott Trades commercial who thinks his driver is a huckleberry?? Shit … my sincere apologies … this is going to be rough for Wall Street and a real feather in the cap for Uncle Stupid. I’ll just buy you the son of a bitch thing from Amazon to show you how sorry I am for being so unsupportive towards your keen insights about the effectiveness of federal securities law and federal prosecutors. I feel much safer now.

    ~~~

    BR: Ahem . . .Cough *PUSSY* Cough

  34. dead hobo says:

    PS, I think I get the sarcasm. Your set-ups are just too good to ignore.

  35. call me ahab says:

    Wunsacon, you lose your right to bitch and moan the moment you opt out of voting.

    where is it written that if you don’t vote you can’t bitch and moan?

  36. James says:

    It turns out that this was more than mere incompetence, this was a malicious fraud, a full on intent to deceive the investing public in order to grab huge bonuses, economic consequences tot he nation be damned.

    —-

    Bravo. I don’t think there’s any doubt people want blood, some satisfaction that justice will be done for the state this country has been placed in. However, let’s not stop at the bankers. There were plenty of willing participants in other industries and in government who had a role in the debacle in one way or another. And frankly, I, like many people, have serious doubts whether that much has really changed.

  37. dead hobo says:

    Oh, you weren’t being sarcastic. C-level as in CEO level, not A-B-C level. My bad.

    Who’s going to draw the short straw? Will the other 1001 perps even notice? Oh, Boy … I’m getting my partly filled thimble full of flesh flakes. This is true satisfaction; time to buy the shit out of stocks. The big eyed friendly unicorn patrol is keeping us safe! Wall street is cowering, I am quite sure! One whole perp is going down eventually!

  38. jjay says:

    The Federal Government wants all the big players intact to work their magic in the markets.
    All the crimes Barry is describing are Government sanctioned, and the perps are “too big to jail”
    We are at about the same level of Stalin’s Russia only with the Corporations calling the tune the Government dances to, while Politicians act concerned for the proles on MSM sound bites.
    More and more Americans will drift into third world poverty while the Ministry of Truth proclaims endless good news.
    The Treasury market is orchestrated like a Beethoven Symphony.
    I am certain the auctions and bids are all pre arranged with the big players and the Fed.
    There will never be any “failed” auctions or “bond vigilantes” driving up interest rates.
    Those days are in the past, we are in the world of “1984″ now.

  39. ACS says:

    You should vote for a candidate who reflects your positions and whom you really want in office. Voting just to pick a winner or for the lesser of two evils just perpetuates the status quo. If enough people stop voting for the garbage candidates the two parties keep putting up then maybe things will actually change. Of course before that happens the two parties will make voting mandatory.

  40. ACS says:

    When the lowest lying fruit (the crooks at AIG) hasn’t been picked then don’t expect any apple pie.

  41. Transor Z says:

    Aw come on, DH, the Family Guy set only costs $120 — don’t be a wimp!

  42. Mbuna says:

    Show trials or some wrist slapping fines, maybe. Wall St. calls the shots, not the regulators-this has already been demonstrated in spades IMO. The balance has been tipped- the corporate world AND the government are now more corrupt than not. Therefore you have this country being run by an “aristocratic criminal class”. The odds of another lump sum transfer of wealth from the taxpayers to the aristocratic criminals are far greater than any justice being done.

    I agree with ACS. Anyone who votes for a Democrat or a Republican is just asking for more trouble.

  43. obsvr-1 says:

    “To Big To Jail” was the most relevant post as to why we will be disappointed by the lack of justice in the way of perp walks, disgorgement of fraudulent and unjust enrichment, debarment from the industry, closing the revolving door between wall street and G-street etc…

    @hammerandtong2001 …I think more people would choose getting all this financial mess FIXED, than would choose throwing Dick Fuld in jail…. CERTAINLY – but to fix this financial mess is to remove those who cause (orchestrate) it !!!

    You would think that the SCARED, those trying to keep their jobs and for keeping some handle on an optimistic viewpoint would become more ANGRY knowing that the position they are in and the losses they have suffered (the loss of home equity being just one asset that got stripped) ended up as bonuses and excessive compensation across the financial sector.

    We can hope for more prosecutions, unfortunately is appears our only solace will be knowing that the road to HELL will be paved with these greedy bastards.

  44. advocatusdiaboli says:

    They will never be brought to justice because those who would have to do it have the power to stay that act and they’ll do that to save themselves. Two presidents, Congress, two regimes at Treasury, and one at the Fed all pushed for record breaking bailouts that these institutions have squandered on the self-enrichment of their executives and putting back to work through financial speculation while the deb tto pay for it rests on the working people of this country and their heirs. If those in power were to indict these criminals, they themselves would be shown to have been complicit so they’ll continue to whistle past the graveyard of the American Middle Class and the faltering economy and praise this shame “recovery”. Not long a go Obama praised Wall Street and bank bonuses as free enterprise at work. He won’t eat crow and allow them to be shown as thieves. It will never happen.

  45. Lugnut says:

    I’m skeptical that the governement has the cajones to go after ‘systematic’ organizations that the Fed is still trying to provide liquidity and assitance to.

    But assuming for a moment that populist sentiment forces the relevant prosecutorial attorneys to awaken from their long nap, I forsee only large fines as the end result. They have no fervent interest in perp walks of politically connected C-level donors as long as the offending firm is willing to cut a pre-sentencing deal and make a large donation of their ill gotten gains back to the government. Banks take from the people, get caught, government takes its vig from the banks. Thats how it rolls. Everyones happy (except the folks who were wronged at the bottom of the food chain).

    In times of economic stress and deficits in excess fo 40% of tax revenue, and potential budget cuts, these ‘invisible tax’ type settlement offers will always be given a serious look. No different than cops who seize your house and cash it in to their budget over a 1 ounce pot bust. Money trumps righteous law enforcement.

  46. advocatusdiaboli says:

    Further evidence of my point: General Motors. GM received a huge bailout and what did they do with it? They invested it overseas not here. They now employ nearly as many Chinese workers as Americans workers (~46k Chinese and ~58k Americans) and sell more cars in China than in the US. Sow American taxpayers get the bill and GM will likely not repatriate most of the profits. And yet there was Obama praising the over-priced Volt that tax payers will have to subsidize 25% of as a great comeback. He knows the truth–he has to know–but he’ll never tell it. We all jsut smile and pretend. But reality is out there and it will bite and bites back hard. And soon.

    ~~~

    BR: They were forced into bankruptcy — how does that not warrant mention ?

  47. gordo365 says:

    DH – you know wall street would never let a CEO go down. Take the bet!

  48. wngoju says:

    BR, what a very hopeful post. Could it be? wahoo (lower case…)

  49. ps_fedex says:

    I’m still reeling from the slam dunk case and the badass lawyer. I better get my expectations low on this.

    ~~~

    BR: And who turned out to be correct on that one . . . ?

  50. flipspiceland says:

    And Joe Cassano flies away, as free as a vulture.\

    The biggest fish in the ocean, and he gets a pass.

  51. dsawy says:

    Just out of curiosity, what is the statute of limitations on any charges that might be supported by the evidence you’re talking about?

    ie, will it take the government so long to collect evidence that the C-level execs get away?

    I seem to recall that SarbOx has a limitation of two years after the facts are discovered or five years after the securities fraud is committed. Seems to me that we’re quickly running out of time here for charges under SarbOx…

  52. krsone says:

    It has been theorized that many CEO’s are clinical psychopaths, lacking conscience or empathy. A fascinating read on how to root them out of the corporate structure can be read here in an interview with Dr. Robert Hare, the leading expert in psychopathy.

    http://www.fraud-magazine.com/article.aspx?id=404

  53. ACS says:

    Flipspiceland

    Not just free as a vulture, but also rich as Croesus.

  54. Stevie says:

    Hey Ritholtz! Isn’t there a wordpress plug in you can install that filters out douchbaggery?

    get that on the TTD tech list right away

  55. AHodge says:

    ACS and Flip
    agree with all
    of course AIG Cassano a posterboy
    but the inquiry commission didnt lay a glove on him, tho some wanted.
    he just lied and denied said it was liquidity
    said if he was left in charge it would have all sorted out.

    AIG all about CDS accounting. Think prosecuters go there when right now BOTH BUYER and SELLER of a CDS claim it as an “asset” or asset enhancement?

  56. I’m still amazed Dick Fuld hasn’t been brought up on perjury charges after lying under oath before Congress ON CAMERA. Unreal.

    http://blogs.reuters.com/felix-salmon/2010/04/29/fulds-perjury/

    Here’s hoping you’re right, Barry.

  57. Shadowfax says:

    The much maligned Sarbanes-Oxley Act makes these prosecutions much more likely. Under Sarbox, every quarter, CEO’s and CFO must attest that the financial statements are accurate. Since each of the top 5 investment banks (Goldman, Lehman, Merill, Bear, Morgan-Stanley) all said their financial statements were accurate, then reported massive sudden losses in one or more quarters that followed (or collapsed/required Fed lifeline) there is probably some illegality out there, but it will be tough to prove they acted knowingly. The tried and true method (go after the low-level guys first and let them turn on their bosses) will help here. Michael Lewis’ book shows pretty clearly folks in the trenches new bad things were happening in 2005-2006, long before the massive write-downs of 2007 and 2008.

    Unfortunately, taking enormous risk (e.g., high leverage ratios, excess reliance on short-term financing, using new instruments like CDO’s, derivatives, aggressive off-balance sheet financing, etc.) is not illegal. What should be illegal is not understanding the risks they take…CFO’s, CEO’s and boards need to understand their businesses or take less risk. Sarbanes-Oxley is an accounting standard, not a risk management standard.

  58. Louise Story says:

    Gem of a guy:

    For $10, Fuld Sold Florida Mansion to His Wife

    Housing prices are falling around the country, but this one sounds hard to believe: A seaside mansion on Jupiter Island in Florida, bought for more than $13 million five years ago, was just sold for $10.

    That’s right, 10 bucks. But in this case, the transaction is likely to raise eyebrows for reasons other than the price. The seller, according to county records, was Richard S. Fuld Jr., the former chairman and chief executive of Lehman Brothers. The buyer was his wife, Kathleen.

    The motivation is unclear, but Mr. Fuld has been under intense scrutiny since Lehman declared bankruptcy in September.

    The longtime leader of the brokerage firm is at the center of a federal investigation into whether Lehman executives misled investors about the state of the company. And he was grilled by lawmakers at a Congressional hearing in October.

    Mr. Fuld said in sworn testimony before a Congressional panel last year that while he took full responsibility for the debacle, he believed that all his decisions “were both prudent and appropriate” given the information he had at the time.

    The couple jointly bought the home in Hobe Sound, Fla., for $13.75 million in March 2004, and the sale to Mrs. Fuld on Nov. 10 was first reported by Cityfile.com. It is possible that he is now transferring properties because of his fears of investor lawsuits or a possible bankruptcy, lawyers in Florida said.
    -snip-

    “This is the oldest trick in the books” said Eric S. Ruff, a lawyer with Ruff & Cohen in Gainesville, Fla. “It’s common when you hear the feet of your creditors approaching to divest yourself.”

  59. Marc P says:

    True, S-O increased the likelihood of liability for top execs. However, it still requires a prosecution and the willingness to go all the way. Look at recent settlements:

    Citibank’s former CFO Gary Crittenden settled for $100,000, and its former head of investor relations, Arthur Tildesley, agreed to pay $80,000. How does this compare to the $40 billion in fraud? How does this compare to their compensation?

    Goldman’s fine was $550M but with that Goldman got a pass on everything else it did. The SEC has issued a press release stating that it does not anticipate any other action against Goldman.

    I won’t take BR’s bet about whether some C-level gets indicted in the next two years. I will take a bet on whether a C-level exec for a primary dealer actually serves more than 60 days in jail (not suspended sentence, not probation, not house arrest, not confined to the property of the George V, but physically behind bars in a federal penitentiary).

  60. toddie.g says:

    I can just hear Fox News and various CNBC air personalities bitching about the witch hunt, and the illegal clawback of hard-earned bonuses. Michelle Caruso Cabrera most assuredly will be leading the charge, just like her whining about the Obama Administration going after tax cheats with accounts at UBS and elsewhere. Michelle bleated in her best imitation of the classic youtube meltdown….”Leave Luxembourg alone !!” Way to go defending tax cheats, Michelle ! I’m sure Dick Fuld and Stan O’Neill will appreciate your support.