NakedShorts

On hiatus

NakedShorts will be on hiatus for the next several weeks (all the while reserving the right to resurface intermittently). Play nice. 

Swamp creatures latest

While the rattle of jangling handcuffs filled the streets of downtown New York yesterday as a whole new band of (cough) alleged hedge | fund | managers | miscreants were hauled in on wire and securities fraud charges, sort-of breaking news arrives on the sort-of pioneering Bayou family. 

After the jump:

Scammy back in court Friday

Marino’s appeal denied

Marino brother’s sentencing deferred

Fortress’s other poo problem

Fortress Investment Group is intimately acquainted with the figurative poo generated by credit market excesses, which may or may not be fully priced into the 95 per cent poopage in its stock price from the top tick recorded on its Feb. 2007 IPO. Now, a subsidiary of RailAmerica, Fortress’s short-line railroad operation, is having its own literal poo issues. 

BAKERSFIELD, Calif. - A California short line shut down last week owing to an unusual problem: Three feet of cow manure had drifted across its main line. Wind gusts of 40 to 60 mph blew the excrement from an adjacent dairy farm across the San Joaquin Valley Railroad’s main line to a depth of three feet.

It was “like a snowdrift, but it was cow manure,” SJV assistant general manager Patrick Kerr told TRAINS News Wire. “In all my years of railroading, I’ve had snowdrifts, I’ve had sand drifts, I’ve had rockslides, but I’ve never had a line shut down by poo.”

While the idea of Wes Edens having to grab a shovel holds a certain appeal, not so much.

Kerr said the manure was dry, so it didn't smell as bad as one might imagine. The owner of the dairy farm, who had the proper equipment for removing the drift, helped clean it up.

Maybe they should get someone with the proper equipment to help clean up that other somewhat stickier manure pile. 

Manure fouls California short line [$$]

Trains News Wire Feb. 23 2009

Money hole is shovel-ready

A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The US government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidMonity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.

Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve
Feb 23 2008

AIG in talks with US goverment, sees $60 billion loss

by Paritosh Bansal

Reuters Feb. 23 2009

Citi in talks over bigger U.S. stake - report

CNN Money Feb. 23 2009

So farewell then, Andrew Vollmer

We thought the enemy was Mr Madoff. 
I think it’s you

Gary Ackerman (D-NY) Feb. 8 2009

Last seen “fumbling through make believe answers” at the recent House Financial Services Committee Madoff hearing.

 

Vollmer will return to the private sector, an entirely more appropriate venue for exercising his skills in the defense of lying dirt-bags, with more Queen Mary comedy ringing in his ears:

“The Commission has benefited from Andy's commitment to investor protection, rigorous legal analysis, and concern for fairness,” said SEC Chairman Mary Schapiro. “The nation's investors and markets are fortunate to have had his sound advice and judgment.” 

Not exactly, but Mary will take any distraction from her own Madoff Maelstrom culpability where she can get it.

Acting General Counsel Andrew Vollmer to Leave SEC

Press release Feb. 18, 2009 

Regulators: An apology

Readers of these and other pixels may have garnered the entirely mistaken impression that US financial industry regulators demonstrated stunning incompetence in their non-pursuit of various allegedly fraudulent investment schemes.

Such attacks, including the vicious assault by former SEC chairman Christopher Cox involving the word “Madoff” and the phrases “deeply troubling,” “credible and specific allegations,” “repeatedly brought to the attention of SEC staff,” and “apparent multiple failures over at least a decade to thoroughly investigate,” were, in light of new information, unfair, unsubstantiated, inappropriate and defamatory. Specifically: 

NEW YORK (AP) — The trustee in charge of untangling the mess left behind by Bernard Madoff told a packed auditorium Friday there was no indication the disgraced money manager had bought securities for his clients for over a decade.

“We have no evidence to indicate securities were purchased for customer accounts” in the past 13 years, said Irving Picard, the court-appointed trustee overseeing the liquidation of Bernard L. Madoff Investment Securities LLC.

Obviously, neither FINRA (Queen Mary Schapiro, chief executive or similar since 1996 (13 years, if you’re counting)) nor the SEC (Queen Mary, chairman) have jurisdiction over a business that does not purchase securities for customer accounts.

Further, this information provides a full and satisfactory explanation of the allegations by purported whistleblower Harry Markopolos that, inter alia, Madoff’s trading of his customer funds was invisible to the markets.  

Any implication that the loyal, hard working and intellectually gifted staff of both FINRA and the SEC could not pour piss out of a boot if the instructions were written on the heel is unreservedly withdrawn with our deepest apologies for any distress that may have been caused. 

Trustee: No evidence Madoff bought any securities

by Tom Hays

AP via Breitbart Feb 20 2009

Madoff creditors get first report 

by Beth Healy

The Boston Globe Feb. 21 2009

Related

SEC Chief Pursues Tougher Enforcement

by Stephen Labaton

The New York Times Feb. 22 2009

The SEC Watchdog Who Missed Madoff

Don’t Blame Me: Cheung

by Lorena Mongelli and Dan Mangan

The New York Post Jan. 7 2009

Statement Regarding Madoff Investigation

Dec. 16 2008

Psychosociopathology 101

The thief and his fat idiot enabler

In the sublime structure Ezra Merkin had built for himself, money was the mother of beauty and refinement. The actual business of making it amounted to a kind of plumbing, a slightly unseemly necessity, about which it was best not to go into details. Men like Teicher, or Bernie Madoff, could roll up their sleeves and make it flow, and you could take your cut, without getting your fingernails dirty. The details mattered less as long as the money kept flowing. The fact that Ezra had a blind spot for the way his money was actually being made—and in this he was not so different from many others during the boom years, even his own clients—functioned as a kind of soft corruption, which could enable the hard corruption of Bernie Madoff. 

The Monster Mensch

by Steve Fishman

New York Feb. 22 2008

 

An illustrated TARP

Doing the rounds...

Wash. Lather. Rinse. Repeat. [Original source].

Thanks, JH.

Queen Mary, comic for the ages

Mary Schapiro gave her first speech as chairman of the US Securities and Exchange Commission in Washington DC today, stepping out as quite the cut-up at the Practicing Law Institute’s 2009 ‘SEC Speaks’ conference. 

Thank you for that kind introduction, [SEC enforcement director] Linda [Thomsen].  It is great to be with you today...

Guess Linda was so busy updating her resume and ignoring whistleblower tips that she missed The New York Post before preparing the kind introduction. 

Newly installed SEC boss Mary Schapiro is quietly searching to replace Linda Thomsen, the agency's embattled enforcement chief, with a prosecutor's Street cred, according to people familiar with the situation...

...As the head of the unit responsible for ferreting out securities fraud, Thomsen has been at the center of a public flogging over allegations the agency was asleep at the switch while Bernie Madoff allegedly perpetrated his $50 billion Ponzi scheme.

But back to Her Majesty:

While so much has changed in our markets and at the commission over the past decade and a half [most of which I’ve spent getting bribed over-compensated by FINRA for looking the other way], some things at the SEC have thankfully remained constant. 

Wait for it. 

Above all, the quality and caliber of the
SEC’s professional staff has
remained at the same exceptionally high level

Moving right along, she’s on a roll. 

On this note, I’d like to take a moment to recognize the many members of the SEC staff who are in attendance today, and thank each and every one of you for your tremendous contributions to public service and investor protection, during extraordinary times.  If you’re a part of the SEC staff, will you please stand so we can thank you for all that you do.  

Appropriate sound effect 

SEC’s Blind Spot

by Kaja Whitehouse

New York Post Feb. 6 2009

Mary Schapiro

Address to Practising Law Institute

Feb. 6 2009

Weekend Madoffs

The mostly complete Markopolos

It’s long – 375 pages, including his testimony before the House Financial Services Committee this week — and occasionally repetitive, but the documentation of would-be Madoff whistleblower Harry Markopolos’s near decade-long attempt to have somebody, anybody, pay attention is well worth a browse. 

Especially if you enjoy survivor-free train wrecks.

Testimony of Harry Markpolos

House Committee on Financial Services

Feb. 4 2009

Hours of harmless fun

A searchable index of the 10,000 individuals and accounts identified in court documents as victims of the $50 Billion Hedge Fund swindle perpetrated by Bernie Madoff. The database consists of names and addresses which are linked here to satellite images of the identified property locations. 

Madoff victims by geography

Sorry, this one is far superior. Hat tip to commenter below. 

And the list.

Queen Mary is revolting

After watching the Cox-era cretins who constitute her senior staff pilloried at yesterday’s House Financial Services Committee Madoff hearing, US Securities and Exchange Commission chairman Mary Schapiro suddenly feigns interest. 

Dear Chairman Kanjorski and Ranking Member Garrett:

Today’s hearing before your Subcommittee cannot have been satisfactory for you.  The Commission’s staff and I understand that you must have adequate information to fulfill your oversight responsibilities.  There needs to be a full accounting, both of Mr. Madoff’s activities and why we did not detect the fraud, which we truly regret.

The Commission’s staff and I believe that it is possible to serve those interests while not impeding the integrity of ongoing civil and criminal investigations.  For that reason, I hope that I can set up a prompt meeting with you so that we can determine a course forward that will meet all of our interests.

We at the SEC are committed to looking at all aspects of our examinations and investigations of Mr. Madoff and his firm and making changes that will enhance our ability to detect similar frauds.

I am available to meet with you at your earliest convenience.

And what suddenly got Her Majesty’s attention?

Probably the statement by would-be whistle blower Harry Markopolos, in response to a question as to why he didn’t take his Madoff allegations to FINRA, or its predecessor, NASD-Regulation (former chief executive officer, Queen Mary):

I wouldn’t take the case to FINRA.
FINRA is corrupt.
The SEC is merely incompetent.

Or words to similar effect. Betcha that the sudden interest in “a prompt meeting [to] meet all of our interests” has more to do with tossing sand in the eyes of anybody with ideas about belatedly inspecting the barnacles encrusting Queen Mary’s bottom than either providing “adequate information to fulfill your oversight responsibilities” or “a full (fool, surely? — Ed) accounting.”  

Queen Mary didn’t get where she is today by either being an honest steward of investors’ interests, or losing vicious bureau-political dogfights. Keeping attention focused on the SEC will divert The Fooles on The Hill from the vast failings of FINRA which was, for more than 20 years, Madoff’s principal regulator.

Goldman gets the memo

This party-pooping business is getting out of hand, with innocent hedge fund managers and investors now being victimized:

Goldman Sachs called off its big Miami hedge-fund conference scheduled for the first week of March, telling clients that going ahead with the normally posh event there could cause image problems for the firm at a time of intense scrutiny over banks' spending habits...

...The Goldman conference, which was to be held March 2-4 at the Fairmont Turnberry Isle Resort & Club in Miami, typically draws a who’s who of hedge-fund managers and rich investors. It’s usually one of the two highest-profile U.S. prime-brokerage conferences of the year, along with Morgan Stanley’s, which was held as planned last week in Florida. Both conferences bring together bank executives with many of their most-valued hedge-fund clients for panel discussions and business-strategy talks, cocktail parties and rounds of golf, according to people who’ve attended.

Goldman’s upcoming US Hedge Fund Symposium was titled “Industry Leaders Discuss the Lessons of 2008 and the Opportunities of 2009.”

The trade is probably a bit crowded by now, but one of “the Opportunities of 2009” is shorting luxury resorts. At least until Goldman pays back that $10 billion in TARP funds crammed down its neck by the former chairman (then d/b/a Secretary of the Treasury), just a few days after he had taken care of its “immaterial” AIG exposure.

Postponed parties and a slightly dented stock price notwithstanding, it’s still good to be a Goldman.

Goldman Cancels Miami Fund Conference

by Jenny Strasburg and Aaron Lucchetti

The Wall Street Journal Feb. 4 2008

Goldman Sachs Would Like to Repay Treasury, CFO Says

by Christine Harper

Bloomberg Feb. 4 2009

Rep. Ackerman is cranky

Just. Spectacular. Rep. Gary Ackerman (D-NY) lays into the US Securities and Exchange Commission staffers at the House Financial Services Committee meeting yesterday. 

Metastasizing in Massachusetts

Fund of funds are a cancer on the institutional-investor world. They facilitate the flow of ignorant capital. If an investor can't make an intelligent decision about picking managers, how can he make an intelligent decision about picking a fund-of-funds manager who will be selecting hedge funds? 

David Swenson, Chief Investment Officer
Yale University

---

The Massachusetts Pension Reserves Investment Management excised a couple of tumors yesterday, firing Ivy Asset Management for general uselessness, and Austin Crapital (not a typo) Mismanagement (not a typo) for lying about its due-diligence process. 

Austin’s promise to visit its underlying hedge fund managers at least once a year was part of a risk regime that had convinced PRIM to award the firm $170 million in September, but PRIM subsequently learned that Austin hadn’t visited Madoff’s firm since 2005, CIO Stan Mavromates told fund trustees. 

The $37.8 billion PRIM lost just $12 million in Austin’s Madoff plunge; Ivy missed that bus but three years of lousy performance and “persistent high-level turnover” — e.g. four chief investment officers in two years — led to its $430 million account being snatched away. So far, so good.

Hang on. What’s this?

Eventually, that money will be distributed to the two other managers PRIM hired along with Austin in August: Blackstone Alternative Asset Management and EIM.

Let’s just hope it’s a different EIM.

Bernard Madoff’s alleged Ponzi scheme, which might have cost investors $50 billion, couldn’t have been carried out alone, said Arpad ‘Arki’ Busson, chairman and founder of Swiss investment firm EIM SA...

...EIM, which manages accounts for mostly institutional clients, invested with funds that had managed accounts overseen by Madoff. EIM will likely write down its stake [reported elsewhere to exceed $200 million] to zero, Busson said.

MassPRIM axes Austin, Ivy

by Douglas Appell

Pensions & Investments Feb. 3 2008

Massachusetts Pension Fires Austin, Ivy Hedge Funds

by Sree Vidya Bhaktavatsalam

Bloomberg Feb. 3 2008

Madoff Scheme Was ‘Impossible’ to Do Alone, Says EIM’s Busson

by Tom Cahill and Stephanie Baker

Bloomberg Dec. 16 2008

Related

Yale’s Investor Keeps Playbook

by Craig Karmin

The Wall Street Journal Jan. 13 2008

The Markopolos Testimony

Would-be Madoff whistleblower Harry Markopolos is up before the House Financial Services Committee tomorrow to explain that

As currently staffed, the SEC would
have trouble finding first base at
Fenway Park if seated in the Red Sox
dugout and given an afternoon. . . 

And that is one of the more flattering comments on both individuals and the institution. (Not that the assignment editors at The Wall Street Journal come out of this smelling like roses either.) 

Also on parade: five senior US Securities and Exchange officials (pictured, above, prepping for the hearing) including Linda Chatman Thomsen, enforcement director, and Lori ‘Teflon’ Richards, director of the Office of Compliance Inspections and Examinations, who distinguished themselves at a Senate hearing last week. Dress code for the staff will be performance-appropriate clown suits and big red floppy-toed shoes. With paper bags over their vacant heads.

House Financial Services Committee

Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises

Assessing the Madoff Ponzi Scheme and Regulatory Failures
Feb. 4 2008

Prepared testimony of Harry Markopolos

(via The Wall Street Journal)

Joint testimony of SEC staff

(via The Wall Street Journal)

Unsolicited comment: This is EXTREMELY boring. Please avoid unless in need of a nap.

Earlier on NakedShorts

Madoff inquiry: Animal indignities edition

Jan. 27 2009

Madoff’s balls (Small world edition)

UPDATE:

From: Sandra L. Manzke
Sent: Tuesday, February 03, 2009 13:27
To: Greg Newton
Subject: RE: Sleazeball of the Month: Bernie Madoff

My son came up with this idea and has rented space from my office to pursue.  He is working on tennis balls, racquet balls, baseballs etc.  I do think it is a good idea to shame a lot of sleazeballs.  S.

---

From the purported Sleazeballs LLC, a perfect gift for the Madoff victims who can still afford a round:

More amusingly, for the easily amused, the precise correlation between the purported street address of Sleazeballs LLC, and Madoff ‘victim’ Sandra Manzke’s Maxam Capital Management LLC (composite image). 

Sleazeballs

Earlier on NakedShorts

Madoff, as consistent a golfer. . .
Dec. 14 2008

Great days in securities fraud

Mark-to-market. Mark-to-mystery. Now, Mark-to-Madoff.

The Obama administration is close to deciding on a plan to purchase bad — or non-performing and illiquid — assets from banks, according to industy (sic) sources. The plan could be announced early next week.

The so-called “bad bank” plan, would address the key problem of how to price the assets by using a model-pricing mechanism. The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the (sic) them with cheap funding. 

Result: the government might end up paying more
than current market prices for the securities. 

Another triumph for The Price Discovery Suppression Society. And, no matter what, the crookes will be paid. Again. 

Plan for Banks’ Toxic Debt May Be Unveiled Next Week

by Steve Liesman

CNBC Jan. 27 2009

FDIC May Run ‘Bad Bank’ in U.S. Plan to Remove Toxic Assets 

by Robert Schmidt and Alison Vekshin

Bloomberg Jan. 27 2009

A new era error in regulation

Queen Mary Schapiro (right) was sworn in yesterday as chairman of the US Securities and Exchange Commission by commissioner Elisse B. Walter (left). In an unrelated development, operators of the federal employees’ health plan confirmed that it would in future cover counseling and medications prescribed for the treatment of Stockholm Syndrome.

“Having seen what happened during Henry Paulson’s reign at Treasury, most especially the billions in TARP funds shoveled in the general direction of Goldman Sachs’ and its counterparties, and the ever-expanding bailout of AIG (to which Goldman had no...cough...material exposure) we have come to understand that, untreated, this disease can have severely negative ramifications for the commonweal.

“While we do not comment on individual cases, we note that the American Psychiatric Association has identified ‘revolving door disorder’ as a complicating factor in this very serious illness.”