Profiteering manipulations of the California energy market, a practice Enron pioneered, this time allegedly by JP Morgan Chase. Electricity traded around via “schemes” that picked the pocket of state authorities, according to the Federal Energy Regulatory Commission. So, yet again, fast-talking, sleight of hand, contractual labyrinths and doctored documents–cautionary emails allegedly morphed into endorsements–pass for productive economic activity, which very likely earned the masterminds kudos and bonuses at the time. An empty-calorie economy!
Category Archives: Corporate Crisis Unit
Shell Game Redux
Yesterday LIBOR (see “Makers v. Fakers” below), today the Tribune Corporation. Just how many high-priced accountants and attorneys did it take to craft an impregnable income tax shield for this teetering corporation–which went bankrupt anyway. And in bankruptcy, how many more attorney/accountants did it take to wipe the corporation’s debt slate clean, largely at the expense of the “owner workers,” whose role from the get-go seemed more about exploiting tax loopholes than running the show? And finally, after the bankruptcy, how many more lawyers and CPAs did it take to come up with a sale structured to avoid and/or defer for years any taxes on the capital gains realized by the key investors who apparently did run the show? Shell games, indeed, though it looks as if the IRS is ready to pounce–but, of course, the attorneys and accountants stand ready to bill more high-priced hours fighting back.
Makers vs. Fakers?
So this fellow, and others like him, allegedly found ways to fudge the London Interbank Offered Rate, one of many widgets in the global financial system. LIBOR, however, acts as a base rate for such a multitude of financial products that its manipulation could inflate a bank’s profit at the expense of its lenders, as the bank passed on illusory “increased borrowing costs.” Such illusions are enabled by the financial sector’s thick web of extremely complex financial instruments whose hidden, often unintended, levers await discovery and manipulation by ambitious functionaries looking to make a name, and a bonus, for themselves. There was less room for this when we had our economy centered on making things.
A Billion Arrivederchi
So, as the world’s financial system teetered on the brink and with Bear Stearns about to drop like the canary in the coal mine, an august Italian bank ponies up $12 billion to buy a bank that changed hands for $8 billion just months before, a sweet 50% premium. You’d think this is about Italian bankers except that Bank of America pretty much did the same thing with respect to Countrywide Finance at the same time. Without study of decision-making in the executive suite that is neither indictment nor testimonial, such bad bets will be no less likely to occur in the future. http://www.nytimes.com/2013/02/07/business/global/monte-dei-paschi-di-siena-admits-985-million-in-losses-from-secret-deals.html?smid=pl-share
March 7 Update: Bank Exec Leaps to Death; Then Covers Himself with Tarp; + Update 2
Building Strong Organizations
Defining the values that energize an organization, not a bad idea. As this executive notes, when small an organization may manage this by osmosis but, as it grows, the values governing how the organization is run need to be made explicit. http://www.nytimes.com/2013/01/27/business/victoria-ransom-of-wildfire-on-instilling-a-companys-values.html?smid=pl-share
Irish Hovels: Custom-Built
Where to start? How about what happens when you buy totally into deregulation by leaving it all to the industry–builders in this case? Or what happens when starry-eyed governments let banks off the hook for the economic collapse their financial excesses did much to bring about? What happens is folks owe 350K on condos they can’t even enter. Restrain me! It’ll be easier than restraining the seething Irish if they lose it. http://www.nytimes.com/2012/09/04/world/europe/in-ruined-apartments-symbol-of-irelands-fall.html?smid=pl-share
Why Overseers Need Travel $$$
The fallout from Ireland’s economic collapse continues five years out. This story about clawing back money from a once major economic force reveals that Irish investigators may have to travel to Ukraine, Russia, India and Belize to unravel where assets may be. http://www.nytimes.com/2012/08/31/business/global/deadline-looms-in-irish-bank-case.html?smid=pl-share
North American Firms, Bribes Abroad
So, if you run an international business anchored legally in both the U.S. and Canada, there is a lot of law to pay attention to when some country’s Commerce Minister suggests that she’ll have no time to consider letting in your factory because she is too preoccupied with finding financing for that new addition to her house. Interesting from a compliance angle. http://www.acfcs.org/shared-border-and-close-ties-aside-canada-and-us-differ-on-global-anti-corruption-laws/
Auto-Trades: Hi, Hal; Bye Dave
So adrenalized Wall Street computers trading madly due to programming glitches lost a brokerage a half billion in a flash! Leaving the firm floating, nearly lifeless, into space, hoping for rescue. http://www.nytimes.com/2012/08/02/business/unusual-volume-roils-early-trading-in-some-stocks.html?smid=pl-share
Firm guilty but “nobody did nuthin!”
Talk about accountability, or lack thereof. http://www.nytimes.com/2012/08/08/business/more-fraud-settlements-for-companies-but-rarely-individuals.html?smid=pl-share