Posts filed under “Legal”

Steel Owes Thain a Royalty Payment

Correct me if I am wrong, but I do believe Robert Steel of Wachovia owes a royalty payment to John Thain of Merrill Lynch.

Why? For for this manuevuer:

"Wachovia Corp increased its previously reported second-quarter loss
to $9.11 billion to cover costs to settle a probe of auction-rate
securities sales, and said it will cut more jobs as the housing market

The fourth-largest U.S. bank is now reporting a loss of $4.31 per
share, up from the $8.86 billion, or $4.20 a share, it reported on July
22, according to its quarterly report filed on Monday with the U.S.
Securities and Exchange Commission.

Wachovia also now plans to cut 6,950 jobs, 600 more than it had
disclosed, with the additional cuts coming from mortgage operations,
spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8
percent of Wachovia’s 120,000-person workforce. Wachovia also is also
eliminating 4,400 open positions…

The quarter marks the second in a row when Charlotte, North
Carolina-based Wachovia revised results to increase the size of its
reported loss. Wachovia increased its first-quarter loss to $708
million from an original $393 million because of a write-down tied to
life insurance policies."

Let’s see, July 22 to August 11 is less than 3 weeks . . . 250 million dollar bump . . . Yes, that fits the technical rules for licensing. The 393M to 708M last quarter is clearly

I am quite nearly positive Thain owns the copyright on this, and is entitled to standard ASCAP licensing fees on this bit of post earnings write-down sleight of hand. .

Of course,t here is no reason for the SEC to be investigating this, as over lunch I heard several people discussing why some company’s stock was going down. That is without any shadow of a doubt a far more worthwhile usage of SEC manpower (and the Ken doll that runs the place) than any of this foolishness where investors are losing money due to fraud, malfeasance and theft. 


UPDATE: Aug 13, 2008 5:02am

Add JPM to the list of royalty payees:

J.P. Morgan Chase & Co. is taking another $1.5 billion write-down as a result of the subprime mortgage mess at the bank, but the bank appears to be trying to keep the disclosure off the radar.

The bank disclosed Monday in its quarterly filing with the Securities and Exchange Commission that it’s taken an additional $1.5 billion in losses on the portfolio at its investment banking arm, and there could be more to come.
J.P. Morgan (JPM) had $19.5 billion exposure in Alt-A mortgages, $1.9 billion in subprime mortgage exposure and $11.6 billion in commercial mortgage-backed securities. For these securities, though hedged, "the trading conditions have substantially deteriorated," the bank said.

Throughout the credit crisis, when banks have taken losses, no matter how grudgingly, they’ve made the effort to spell it out to the market through public announcements. That’s why J.P. Morgan’s decision to slip this disclosure on page 10 of a federal filing smells fishy.
Shhh…another write-down at J.P. Morgan


Wachovia boosts loss to $9.11 bln, cuts more jobs
Jonathan Stempel
Reuters Aug 11, 2008 7:02pm EDT

Shhh…another write-down at J.P. Morgan
Dimon & Co. keep noise on latest loss to a minimum
MarketWatch,  10:45 a.m. EDT Aug. 12, 2008

Category: Corporate Management, Credit, Earnings, Legal, Valuation

Slowing Foreclosures?

Category: Credit, Data Analysis, Legal, Real Estate


Category: Corporate Management, Credit, Derivatives, Legal, Valuation

Bear Trap, part II

Category: Corporate Management, Financial Press, Legal, M&A

Suing, Threatening Analysts

Category: Credit, Legal

Bear Hunt

Category: Credit, Legal, Markets, Politics, Short Selling, Taxes and Policy

FASB: OK For USA to Turn Japanese

Category: Derivatives, Legal, Valuation

Look Who’s Twittering: S.E.C.

Category: Legal, Web/Tech

My Experience at Indy Mac: Fraud, Corruption, Criminality

Long time readers are familiar with my fascination with antique sports cars. One of my pals, Jan, is a well known Porsche collector who is also affiliated with the International Automotive Appraisers Association (IAAA). Its a hobby for him, and he specializes in the rehabilitation and appraisal of antique sports cars. He has rebuilt and appraised everything from celebrity Bugattis to classic Ferraris to modern supercars.

I call Jan "landed gentry" — he’s owned a major car rental firm (sold it), develops real estate, buys/sells land and houses. He is quasi-retired, leaving him plenty of time to play with his many fine automobiles — and for us to discuss the housing market collapse.

Amongst our many discussions, we have gone over the issue of housing appraisal fraud. So when the IAAA newsletter sent out the tale (below) to its members as a warning against fraud, conflict of interest, and corruption, it got his attention — and he forwarded it to me. His comments were: "This is even worse than the nightmare of corruption you described."

Let me hasten to add that many appraisers were offended by the corruption of colleagues in their industry, especially those greased by the worst elements among mortgage brokers and real estate agents. In 2005, more than 8,000 appraisers — roughly 10 percent of the industry — signed a petition asking the federal government to take action; the White House and Federal agencies demurred, and appraisal fraud continued unabated. Eventually, Phony and Fraudy cut a deal with NYS AG Cuomo to stop enabling the appraisal fraud.

Which brings us to the now defunct Indy Mac, and the below diatribe about the criminality, corruption, and rampant appraisal fraud that was the CountryWide spinoff’s stock in trade.

The original piece was published by Vernon Martin at the Appraiser’s Forum ( His story is utterly fascinating, and it deserves wider distribution.

Martin was the chief commercial appraiser for Indy Mac from October 15, 2001, to when he was terminated six months later for failing to look the other way or actively engage in fraud. Most of the details below are culled from the public record of his wrongful termination litigation, which was eventually settled in Martin’s favor.

My quick overview of the conflicts, fraud, and criminality at Indy Mac —


• Underwriting loans based on appraised values well above purchase prices;

• Fabricating rent rolls for commercial properties to be appraised;

• Over-stating Construction work as 80% complete versus 15% in actuality;

• Attempting to change discounted cash flow models for subdivisions in order to increase appraised value;


• Attempted intimidation of Appraisers;

• Providing false information to appraisers;

Conflict of interests:

• Appraising a development where the land was being purchasing from David Loeb, IndyMac’s Chairman of the Board;

• On one transaction, the CEO’s father and father-in-law were
commercial construction inspectors for the firm; the loan officer was
the CEO’s brother (a former police officer with no loan experience);

That’s just the overview.

Amazingly, these events took place before the enormous Housing and Construction boom from 2003-06. One is left to imagine just how insane the place must have been during that period. I’d love to find the details, and given the enormous lending losses — $8B and counting — we can only begin to imagine what sort of rampant fraud took place. I hope the FDIC releases a full report of their investigation of the collapse of Indy Mac. (Gee, I wonder how Senator Schumer caused THOSE problems back in 2001? CNBC should know better than to publish trash such as this.)   

You really need to read the entire piece to get a feel as to just how much of a criminal enterprise Indy Mac was before it went under.Is it any surprise the entire firm, and not just any individuals, are under FBI investigation for Fraud?


These things have a tendency to disappear, so I am capturing a PDF and the text (after the jump) in case it somehow vanishes.



Idiots Fiddle While Rome Burns (July 2008)

My experience at IndyMac
Vernon Martin, Certified General Appraiser
Appraiser’s Forum, 07-14-2008, 12:41 AM

Appraisal fraud: your home at risk
Appraisers say they’re being pressured by lenders to inflate their estimates of home values
Sarah Max
CNN/Money  June 2, 2005: 9:56 AM EDT

Fannie Mae, Freddie Mac agree to new appraisal standards
Walter Hamilton
L.A. Times, March 04, 2008

My experience at IndyMac- General Real Estate, Mortgage, and Economic Discussions – Appraisers Forum PDF  Download my_experience_at_indymac.pdf

IndyMac fraud probe launched; FBI looking into firm, not individuals
Lara Jakes Jordan, The Associated Press 07/16/2008 09:08:13 PM PDT

Read More

Category: Credit, Legal, Real Estate

BankAtlantic DESERVES to Go Belly Up

Category: Contrary Indicators, Corporate Management, Credit, Legal, Trading