Wednesday, January 7, 2009

CRIMINAL FRAUD Sin verificacion de documento!" translates as, 'Income tax forms are not required, nor are immigration papers.' "

good OLE' bANK OF aMERICA...UNREAL...ABSOLUTELY INCREDIABLE...FORWARD TO EVERYONE!!! I MEAN EVERYONE tv RADIO NEWSPAPER FRIENDS CO WORKERS everyone!!! YOU HERE ME!!!!

report on the rapidly expanding illegal-alien home-loan racket. These false LOANS are FELONIES!!!!!
EACH LOAN FALSIFIED CITIZENSHIP, INCOME VERIFICATION, SOCIAL SECURITY, AND MUCH MUCH MORE!!! FELONIES EACH COUNT!!!!
THIS IS CRIMINAL...HELLO!!!!! MAJOR FRAUD FOR QUICK PROFITS..THIS IS FELONIES WHERE BY SUBMITING FALSE PAPERWORK TO OBTAIN FED BACKED MORTGAGE LOAN MONEY, HELLO!!!!! ..A FEDERAL OFFENSE..WHERE ARE THE ARRESTS?


Bush: His lax policies enabled fraud.


September 24, 2008
AS panicked politicians prepare to fork over $1 trillion in taxpayer funding to rescue Wall Street, they've fingered regulation, deregulation, Fannie Mae and Freddie Mac, the Community Reinvestment Act, Jimmy Carter, Bill Clinton, both Bushes, greedy banks, greedy borrowers, greedy short-sellers and minority-home-ownership promoters for blame. SOMEONE NEEDS TO GO TO JAIL!!!!!!! WOW!!!!
But there's one villain that has slipped notice: how illegal immigration, crime-enabling banks and open-borders Bush policies fueled the mortgage crisis. It's no coincidence that the areas hardest hit by the foreclosure wave - Loudoun County, Va., California's Inland Empire, Stockton and San Joaquin Valley, and Las Vegas and Phoenix - also happen to be some of the nation's largest illegal alien sanctuaries. Half of the mortgages to Hispanics are subprime. A quarter of all those subprime loans are in default and foreclosure.
Regional reports across the country have decried the subprime meltdown's impact on illegal-immigrant "victims." A July report showed that in seven of the 10 metro areas with the highest foreclosure rates, Hispanics were at least one-third of the population; in two of those areas - Merced and Salinas-Monterey, Calif. - Hispanics comprised half the population. The National Council of La Raza and its Development Fund have received millions in federal funds to "counsel" their constituents on obtaining mortgages with little to no money down; the group almost succeeded in attaching a $10 million earmark for itself in one of the housing bills passed this spring.
For the last five years, I've reported on the rapidly expanding illegal-alien home-loan racket. The top banks clamoring for their handouts as their profits plummet, led by Wachovia and Bank of America, launched aggressive campaigns to woo illegal-alien homebuyers. The quasi-governmental Wisconsin Housing and Economic Development Authority guaranteed home loans to illegal immigrants.
The Washington Post noted in 2005: "Hispanics, the nation's fastest-growing major ethnic or racial group, have been courted aggressively by real-estate agents, mortgage brokers and programs for first-time buyers that offer help with closing costs. Ads proclaim: "Sin verificacion de ingresos! Sin verificacion de documento!" - which loosely translates as, 'Income tax forms are not required, nor are immigration papers.' "
Fraudsters also have engaged in house-flipping rings using illegal aliens as straw buyers. Among many examples the FBI cites: a conspiracy in Las Vegas involving a former Nevada First Residential Mortgage Company branch manager who directed loan officers and processors in the origination of 233 fraudulent Federal Housing Authority loans valued at over $25 million. The defrauders made and submitted false employment and income documentation for borrowers; most were illegal immigrants from Mexico. To date, the FBI reported, "Fifty-eight loans with a total value of $6.2 million have gone into default, with a loss to the Housing and Urban Development Department of over $1.9 million."
It's the tip of the iceberg. Thanks to lax Bush administration policies allowing illegal aliens to use "matricula consular cards" and taxpayer-identification numbers to open bank accounts, mortgage fraud has grown. Money-lenders still have no access to a verification system to check Social Security numbers before approving loans.
In an interview about rampant illegal-alien home-loan fraud, a spokeswoman for the US General Accounting Office told me five years ago: "Considering the size of Los Angeles, New York, Chicago, Houston and other large cities throughout the United States known to be inundated with illegal aliens, I don't think the federal government is willing to expose this problem for financial reasons as well as for fear of political repercussions."
The chickens are coming home to roost. Law-abiding taxpayers are going to pay for it.

Days After U.S. bailout, AIG execs hit L.A. resort spending

Taxation Without Representation.. ENOUGH IS ENOUGH!!!!

it’s time to call a spade a spade. Forgive me James Carville, but, it’s not the economy, stupid. It’s the stupidity, stupid!!

You hopeless Americans! It is you who are the problem! You, by virtue of your incorrigibility, are not worthy of being anything but slaves!

Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.

Astonished!!! exec tricks? on AIG spending $440,000 on luxury retreat days after government bailout......6 Days after getting 85 Billion Taxpayer Dollars

The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.
Invoices obtained by Waxman's committee showed that AIG spent $139,375.30 on rooms, $147,301.71 for "banquets,'' and $1,488 at the resort's Vogue Salon, which offers manicures, pedicures and hairstyling. The group spent $6,939.09 on golf, $2,949 for gratuities, $5,016.32 at the StoneHill Tavern and $3,064.71 for in-room dining and the lobby lounge.
The group booked the resort's 3,100-square-foot presidential suite for $1,600 a night for five nights, a discount from the standard rate of $3,200 a night, a hotel document released by the committee showed. It also paid $1,075 in "no-show fees.''
"Have you heard of anything more outrageous?''
The taxpayer is burdened by another $250 billion rescue of mortgage giants Fannie Mae and Freddie Mac. On Sept. 7, Secretary of the Treasury Henry Paulson led federal efforts to seize control of these government sponsored entities that own or back half of the nation's mortgages The champagne bottle corks were popping as Treasury Secretary Henry Paulson announced his trillion-dollar bailout for the banks, buying up their toxic mortgages
$524.6 Billion Tax payer bailout of financial institutions payed from 1986-1996, ridiculous.
Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims.
That half of you Americans are considering voting for a ticket whose VP candidate supports creationism, in this 2008, who opposes abortions even in the case of rape or incest, and who has literally boasted of her foreign experience primarily because Russia shares a border with her state, simply boggles the mind. Yes, let’s forget Reason, forget common sense, forget science, forget critical thought which without progression, technology, modern civilization, wouldn’t exist, and let’s vote for a creationist! And a female one to boot! Your cant is beyond frightening. If Hockey Mom’s values are that precious to your hearts, or if it’s her gender that blows your whistle that much, why do you even bother, for example, going to the doctor when your kid is sick? Just go to church or a feminist group meeting instead! You stupid seventy million plus neurologically diseased Baptist Americans! Even God Himself would struggle to make you see! Didn’t Jesus profess that truth is better than untruth? How is it that you care so little about wisdom, about truth, about humaneness, about the most meaningful values there can be in this life? Is it because you are simply awaiting, as your Holy Bible describes, the next one? Do us agnostics a favor and take the trip already!

“We the People” have been supplanted by “We the Lawyers.” We the People can’t read and understand our own Constitution. We have to have it explained to us by the professionals. Moreover, if the Court enjoys oracular status, it can’t really be criticized, because it can do no wrong. We may dislike its results, but future rulings will have to be derived from them as precedents, rather than from the text and logic of the Constitution. And notice that the “conservative” justices appointed by Republican presidents have by and large upheld not the original Constitution, but the most liberal interpretations of the Court itself — notably on the subject of abortion, which I’ll return to in a minute.
To sum up this little constitutional history. The history of the Constitution is the story of its inversion. The original understanding of the Constitution has been reversed. The Constitution creates a presumption against any power not plainly delegated to the federal government and a corresponding presumption in favor of the rights and powers of the states and the people. But we now have a sloppy presumption in favor of federal power. Most people assume the federal government can do anything it isn’t plainly forbidden to do.
and
What it comes to is that we don’t really have an operative Constitution anymore. The federal government defines its own powers day by day. It’s limited not by the list of its powers in the Constitution, but by whatever it can get away with politically. Just as the president can now send troops abroad to fight without a declaration of war, Congress can pass a national health care program without a constitutional delegation of power. The only restraint left is political opposition.
Congress roasts Lehman CEO as financial crisis probe begins
By Julie Hirschfeld Davis Associated Press
Article Last Updated: 10/07/2008 12:01:48 AM CDT
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WASHINGTON — The now-bankrupt investment bank Lehman Brothers arranged millions in bonuses for fired executives even as it pleaded for a federal lifeline, lawmakers learned Monday, The panel unearthed internal documents showing that on Sept. 11, Lehman planned to approve "special payments" worth $18.2 million for two executives who were terminated involuntarily, and another $5 million for one who was leaving on his own.

“King” Henry Paulson, our Treasury Secretary, is a former CEO of Goldman Sachs. That means he comes directly from the very crowd that created the current financial mess, the ever-greedy investment banks led by the elite, who now together demand, daily, from Congress, pushed on by Dubya, a speedy, yes speedy, blank check for perhaps over a trillion US Dollars which they will spend without real oversight! And yet, despite all of this, you stupid Americans are seriously thinking of voting for that guy who has his whole political life basically taken his orders from that same elite!
If you cannot wake up from your own madness, you deserve every ounce of terrible, unrepresentative government you get! And in ten years, when the US’ status resembles that of Argentina, no offense to Argentina, a third world nation marked by hyperinflation, an absent middle class, a tiny ruling elite, and a 99% population below or at the poverty line, perhaps, just perhaps, then, you will begin to critique your own stupidity, to think for yourselves, to shed the shackles of your slavery, and to concentrate more on the meaningful values of wisdom and truth related to your own lives, instead of trash-distractions like Paris Hilton, Britney Spears, and Mrs. lipstick.
These Democratic Party powerbrokers have certainly been privy to the inner workings of the financial feeding frenzy that has unfolded on Wall Street over the last two decades and are as complicit as any Republican in enabling the same firms now being bailed out with taxpayer dollars. It could also be argued that their liberal rhetoric is a key component of the selling job now needed to contain a popular revolt against the unbridled greed that has brought the U.S. financial system to the brink of collapse.
Indeed, their campaign coffers are overflowing with Wall St. dollars. Frank’s top contributors in the current election cycle include Brown Brothers Harriman & Life, Manulife Financial, the American Bankers Association and the American Society of Appraisers, according to the Center for Responsive Politics. Back in 2003, Frank opposed the Bush administration plan to increase regulation of Fannie and Freddie. At the time, Frank argued, 'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
As recently as July 11th, Dodd concurred. "This is not a time to be panicking about [Fannie May and Freddie Mac], Dodd argued in a press conference. “These are viable, strong institutions.” Dodd’s main contributors from 2003-2008 included Citigroup, SAC Capital Partners, United Technologies and the American International Group (the now infamous AIG).
Schumer’s top five campaign contributors from 2001 to 2006 were Goldman Sachs, JP Morgan Chase & Co, Merrill Lynch, Bear Stearns and Citigroup. Earlier this year, he went on record supporting a federal bailout for mortgage lenders modeled on the federal government’s savings and loan bailout of the early 1990s—which offloaded the debts incurred by insolvent S & Ls onto the backs of taxpayers while the investors (among them Neil Bush, son of George H. W.) who recklessly created the savings and loan crisis walked away with their profits.
These same congressional foxes have once again been guarding the chicken coop, with a predictable outcome. Much like addicted gamblers on a winning streak in a Vegas casino, they ignored the crippling losses that inevitably follow as long as the good times rolled. Now they must reconcile the excesses of their Wall Street patrons with as little retribution as possible.
"What you heard last evening is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly,” Dodd told ABC’s “Good Morning America” the morning after the closed-door meeting—as if Democrats and Republicans have been involved in an intractable war in recent decades. In reality, the two parties have been equal partners in enforcing punishing neoliberal policies on the world working class. And after three decades of neoliberal rule, U.S. workers are no strangers to federal intervention.
Federally orchestrated bailouts, always justified by the slogan “They’re too big to fail” over the last 30 years have typically signaled a steep drop deeper down the economic ladder for those who actually work for their income. Congress has played an active role in forcing down working-class living standards since the Carter administration intervened to rescue Chrysler from bankruptcy in 1979. At the time, Congress refused to give Chrysler its $1.2 billion loan guarantee unless workers gave concessions totaling $462 million. This included a wage freeze and giving up seventeen vacation days

how Americans have been conditioned to "trust" a very corrupt "System."

the controversial USA Patriot Act undermine the U.S. Constitution, Bush screamed, "Stop throwing the Constitution in my face. It’s just a goddamned piece of paper

THIS IS TREASON!!!!
HELLO........ Nancy {and all you overpaid LAZY scheming Congressional no good CORRUPT BASTARDS!!!..you guys are SICK!!! HOW DARE YOU! Bush you poor thing...your pathtic..you don't know better...Uneducated DRUNK COKE HEAD!!! Good Job Bush...YOUR A JOKE! TV makes fun of your SAD EXISTENSE..your punishment is being you..RETARDED DRUNK and STUPID!---------- Forwarded Message ----------
US Financial System Corrupt!

As each day passes, we are hearing of more US corporate and financial frauds and scandals.
Wake up all you trusting souls out there before it's too late!

I describe how Americans have been conditioned to "trust" a very corrupt "System."
Then I outline the corruption that permeates the entire "System." HELLO!! The ENTIRE SYSTEM!
Then I focus on the corruption in the financial markets: the illegal naked short selling process; and the federal agency, the SEC, that is failing to perform its prescribed duty to oversee the securities markets and to enforce the federal laws
Finally, I list the necessary action that you can take to both safeguard your own financial well-being and to help eradicate the corrupt "System."
My script is aligned with Ron Paul in regards to the following:
1. The "trusting" nature of the US populace has allowed "special interests" to take control of the US government.
2. The US Constitution has been/is being breached by those "special interests" in the US government.
3. Our entire "system" is corrupt.
4. Before any real change can occur, that entire corrupt "system" must be eradicated.
5. Both the U.S. Stock Clearing and Settlement System and the Federal Reserve Banking System are fractional systems and therefore are the cause of our financial crisis.
6. The proposed "bailouts" are worthless.
Please bring my script to the attention of Ron Paul as it complements his agenda for the aforementioned reasons.
Then Ron Paul's technicians could create from my script a YouTube video that would encompass titles, stock footage, and animation. Ron Paul would narrate the script.

Wake up all you trusting souls out there before it's too late!
If you continue to "trust" the untrustworthy, you might wake up one fine day to find that everything you have ever worked for has disappeared.
For example, if you are a twentysomething hotshot market trader, the beach houses, the sports cars, and the exotic vacations have all gone poof.
If you are a thirtysomething married couple, your dream house and the college tuition for your two daughters have gone south.
Or if you are a fiftysomething married couple, your retirement nest egg has vanished into thin air.
You don't believe it.
Fantasy, you say.
Can't happen in the United States.
Keep watching!
Because the word "trust" will be repeated throughout this video, and in fact is the keynote of this video, it needs to be defined.
According to the dictionary, "trust" is defined as "the firm belief in the honesty and reliability of another."
So who are these untrustworthy entities that you mistakenly believe are honest and reliable?
Let's begin with the President of the United States, George W. Bush.
You have been conditioned to "trust" that the President of the United States is performing his prescribed duty of enforcing the laws. And you have been conditioned to "trust" that the President of the United States is adhering to his sworn oath of office which is to preserve, protect, and defend the Constitution of the United States.
Are you aware that when a presidential aide of President George W. Bush told him that provisions of the controversial USA Patriot Act undermine the U.S. Constitution, Bush allegedly screamed, "Stop throwing the Constitution in my face. It’s just a goddamned piece of paper.”
Are you aware that if George W. Bush did in fact make that statement, he has violated the oath or affirmation of office of the President of the United States?
Remember the definition of "trust?"
Do you still "trust" that President George W. Bush is "honest and reliable?"
Next you "trust" that the members of the Congress of the United States are legislating fair laws and adhering to their sworn oath of office to uphold and defend the Constitution of the United States--that being the same Congress that passed the USA Patriot Act, a blatantly dangerous law that infringes on the rights of every American citizen under the guise of fighting terrorism and, as one brave aid told President Bush, undermines the Constitution of the United States.
At least two U.S. District Federal Judges have already ruled that at least two provisions of the U.S. Patriotic Act are unconstitutional.
U.S. District Federal Judge Victor Marrero ruled that the FBI's use of secret "national security letters" to demand data violates the First Amendment and constitutional provisions on the separation of powers and therefore ordered the FBI to stop its wide use of a warrantless tactic for obtaining e-mail and telephone data from private companies for counterterrorism investigations.
Furthermore, U.S. District Judge Ann Aiken ruled that two provisions of the USA Patriot Act are unconstitutional because they allow search warrants to be issued without satisfying the probable cause requirements of the Fourth Amendment.
Do you still "trust" that Congress is "honest and reliable?"
Then you "trust" the Federal Courts to impartially interpret the laws.
And finally you "trust" the various quasi-judicial governmental agencies that have been created pursuant to the various Acts of Congress to perform their prescribed duties which are to enforce the federal laws. In essence, you "trust" the entire "System."
Do you still think that is a wise choice?
Now let's examine 2 situations: one in which "trust" is involved; and one in which "trust" is not involved:
When you purchase something that is tangible like an automobile, you do not require that the seller guarantees the existence of the automobile because you can readily see for yourself that it exists. So "trust" is not involved.
Conversely, when you purchase something that is intangible like shares of stock in a company, you do not usually require that the seller guarantees the existence of the shares of stock even though you can't see them. Therefore you "trust" that they actually exist. So "trust" is involved.
But, in fact, do those shares of stock actually exist?
Sometimes they do; sometimes they don't.
And this is why.
In a normal legal settlement process, buyers buy shares of stock that sellers own at the time of the purchase.
In a normal legal setlement process, all shares of stock are held in the Depository Trust Company (DTC). When buyers buy shares of stock, their brokers' account ledgers are credited the exact number of shares of the purchase of the stock; likewise, when sellers sell stock, their brokers' account ledgers are debited the exact number of shares of the sale of the stock.
In a normal legal settlement process, all funds are held in the National System Clearing Corporation (NSCC). As soon as the buyers' funds are credited to the sellers' accounts, the NSCC alerts the DTC and the buyers' account ledgers are updated to show ownership of the stock.
Therefore those shares of stock actually exist.
No problem so far.
In a legal short selling settlement process, buyers buy shares of stock that sellers do not own at the time of the purchase.
The sellers then borrow the shares from legitimate owners' brokers in the DTC and then use those shares to make good on their short sale when it comes time to credit shares to the buyers.
Therefore those shares of stock actually exist.
No problem still.
In an illegal naked short selling settlement process, buyers buy shares of stock that sellers do not own at the time of the purchase.
But this is where the illegal naked short selling process deviates from the legal short selling process. These sellers borrow no shares. In place of the shares, the U.S. Stock Clearing and Settlement System (System) creates IOUs, which in essence are illegal counterfeited shares, about which the buyers are never told. Therefore the buyers receive IOUs/counterfeited shares, in exchange for their real funds. In essence, the System creates the IOUs/counterfeited shares which in turn creates failures to deliver(FTD).
Therefore those shares of stock are nonexistent.
A problem exists now!
So the questions that naturally arise are:
Which governmental agency is allowing the problem to fester by failing to perform its prescribed duty to oversee the securities markets and to enforce the federal laws?
And why is it doing so?
Let's examine the "System" further and find out.
The U. S. Congress enacted the Securities Act of 1933 in the aftermath of the Stock Market Crash of 1929 and during the ensuing Great Depression that was caused by the Crash. It requires that any offer or sale of securities using the means and instrumentalities of interstate commerce be registered pursuant to the 1933 Act, unless an exemption from registration exists under the law.
The Securities Act of 1933 has two basic objectives:
1. to require that investors receive significant (or “material”) information concerning securities being offered for public sale; 2. to prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public.
The relevant phrases pursuant to the Securities Act of 1933 are "any offer or sale of securities using the means and instrumentalities of interstate commerce be registered" and "prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public."
Then U. S. Congress enacted the the Securities Exchange Act of 1934 which is a law governing what is and what is not legal in the secondary trading of securities.
The relevant phrase pursuant to the Securities Exchange Act of 1934is "the prompt and accurate clearance and settlement of securities transactions."
The Securities and Exchange Commission (SEC), a quasi-judicial governmental agency, was created pursuant to the Securities Exchange Act of 1934. The SEC is the principal federal agency responsible for oversight of the securities markets and for enforcement of the federal securities laws.
Therefore the U.S. Stock Clearing and Settlement System, the NSCC and the DTC, the participating brokerages, and the naked short sellers such as the hedge funds are clearly in direct violation of numerous provisions in both the Securities Act of 1933 and the Securities Exchange Act of 1934.
Furthermore, the Securities and Exchange Commission is clearly guilty of complicity by failing to perform its prescribed duties which are to oversee the securities markets and to enforce the federal securities laws.
Moreover, the SEC attempts to hide its complicity in the collusion and attempts to protect the wrongdoers by creating worthless laws, such as Regulation SHO, that are rife with loopholes.
The SEC enacted Regulation SHO in January 2005 to target abusive naked short selling by reducing failure to deliver securities. It states that a broker or dealer may not accept a short sale order without having first borrowed or identified the stock being sold. A major loophole in Reg SHO exempts the market makers from being required to locate stock before selling short because, according to the SEC, naked short selling, when transacted by the market makers, contributes to market liquidity.
Before we can address that loophole, we must first examine what a market is.
All markets are simple. Their primary purpose is to distribute, at a reasonable price, a limited supply of stocks, commodities, widgets, or whatever to those buyers who want it the most. They do that by finding and then defining the exact price in which, at any given moment, an absolute balance exists between the buyers and the sellers.
In other words, all markets are created when two or more people have an equal agreement on price and an equal disagreement on value.
For example, Buyer A bids $10 for 1 share of XYZ company. Seller A asks $10 for 1 share of XYZ company.
Both Buyer A and Seller A have an equal agreement on price: they both agree on the price of $10.
Both Buyer A and Seller A have an equal disagreement on value: they both value what they want more than what they have; Buyer A obviously values 1 share of XYZ company more than $10; and Seller A values $10 more than 1 share of XYZ company.
Furthermore, $10 is the exact price in which an absolute balance exists between Buyer A and Seller A.
In essence, Buyer A and Seller A have just created a market. And that is the natural market process.
But now the SEC attempts to rationalize the loophole it creates in Reg SHO, and in the process circumvents the natural market process by posting on its website under "Division of Market Regulation: Key Points About Regulation SHO" the following: "market makers stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers. Thus, market makers must sell a security to a buyer even when there are temporary shortages of that security available in the market. This may occur, for example if there is a sudden surge in buying interest in that security, or if few investors are selling the security at that time. Because it may take a market maker considerable time to purchase or arrange to borrow the security, a market maker engaged in bona fide market making, particularly in a fast-moving market, may need to sell the security short without having arranged to borrow shares."
Stop this tape now and go back and listen again to my explanation of the natural market process.
Now listen again to the SEC's pathetic rationalization and compare it with my explanation of the natural market process and you can readily see how the SEC's rationalization is totally illogical and how it conflicts with my explanation of a natural market process.
1. SEC's illogical rationalization: "market makers stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers."
Pertinent question: If "there are no other buyers or sellers," who are the market makers going to sell to or buy from?
2. SEC's illogical rationalization: "Thus, market makers must sell a security to a buyer even when there are temporary shortages of that security available in the market. This may occur, for example if there is a sudden surge in buying interest in that security, or if few investors are selling the security at that time."
Natural market process: "If there is a sudden surge in buying interest in that security, or if few investors are selling the security at that time" simply means an imbalance exists between buyers and sellers because they disagree on price and agree on value. In a natural market process, the price of the stock will rise to the point in which the buyers and sellers have an equal agreement on price and an equal disagreement on value.
The following is from SEC's own website: "Although the vast majority of short sales are legal, abusive short sale practices are illegal. For example, it is prohibited for any person to engage in a series of transactions in order to create actual or apparent active trading in a security or to depress the price of a security for the purpose of inducing the purchase or sale of the security by others. Thus, short sales effected to manipulate the price of a stock are prohibited."
Therefore what the SEC alleges "contributes to market liquidity" are just "abusive short sale practices" and are "illegal" because they artificially "manipulate the price of a stock" and should be "prohibited."
3. SEC's illogical rationalization: "a market maker engaged in bona fide market making, particularly in a fast-moving market, may need to sell the security short without having arranged to borrow shares."
Pertinent question: Why would a "market maker," "particularly in a fast-moving market" which of course indicates numerous buyers and sellers (otherwise the market would NOT be "fast-moving"), "need to sell the security short without having arranged to borrow shares?"
Furthermore the SEC solidifies its complicity in the collusion by deciding that, after a year of comments pertaining to the market maker exemption loophole, more comments are needed.
As Bob O'Brien asserts, "Yep. Seems that, as if allowing one sort of participant to print stock out of thin air, as often as they like, solely in order for the participant's customers to have inexpensive options pricing in dangerously overshorted issues, WASN'T ENOUGH REASON TO SHUT THE EXEMPTION DOWN IMMEDIATELY. No, a long study was necessary, while every day countless investors were harmed and companies destroyed. The result, that indeed the companies and investors were being hosed by the options market makers, now goes out for comment yet an umpteenth time."
As Bud Burrell asserts in a recent interview: "Regulation SHO is a Fraud. They [SEC} Grandfathered failures to deliver after they looked at the failures at the systemic level they realized they could not force all the failures to settle in the market place without essentially wiping out the Brokerage industry and the Hedge Funds. The List was fraudulent did not list all the stocks that had these persistant FTD's.
"The Brokers realized the way to hide their Fails or to create Naked Shorts so that they couldnt be seen was to do them outside of the system of the Depository Trust custody and clearing system which is a Monopoly in this country in a thing called Ex-Clearing."
So why is the Securities and Exchange Commission failing to perform its prescribed duties, hiding its complicity in the collusion, and protecting the wrongdoers?
Because the SEC is being controlled by the same entity, the U.S. Stock Clearing and Settlement System, that it is supposed to be overseeing.
Therefore do you "trust" that the Securities and Exchange Commission is "honest and reliable?"
Furthermore, the wrongdoers who own the fractional U.S. Stock Clearing and Settlement System also own the Federal Reserve System and control the Internal Revenue Service.
Therefore do you "trust" that the fractional U.S. Stock Clearing and Settlement System, the fractional Federal Reserve System, and the Internal Revenue Service are "honest and reliable?"
By the way, Ron Paul was the only presidential candidate who understands the workings of the corrupt "System," and who is not being controlled by it. He advocates the elimination of the fractional Federal Reserve Banking System and the Internal Revenue Service.
So what are the adverse effects on companies that have been illegally naked shorted?
Under the Securities Act of 1933, publicly traded companies are the only entities that are authorized to issue stock. That Act preserves the integrity of the stock of the publicly traded companies and protects the rights of its shareholders to vote and to receive dividends.
When IOUs/counterfeited shares are allowed to trade alongside legitimately registered and issued shares, the normal operation of the markets is skewed because the natural relationship between supply and demand no longer exists.
Furthermore, the company that issues the legitimate stock is irrevocably harmed because that stock is its currency to be used for compensation, acquisitions, collateral for debt, capital raises, etc. When the price of a stock is depressed artificially due to IOUs/counterfeited shares increasing supply in the face of fixed or limited demand, the value of the company's stock (its currency) is depressed. That damages the company and its shareholders in precisely the same way as counterfeiting money harms the general populace.
Taser International, Inc. is an example of just one company that has been harmed by the illegal naked short selling process.
The legal consortium of The O'Quinn Law Firm and Christian Smith & Jewell, both of Houston, Texas and Bondurant, Mixson & Elmore, LLP of Atlanta, Georgia filed a Complaint in the State Court of Fulton County, Georgia on behalf of certain shareholders of TASER International Inc. against eight of the largest Wall Street firms, including Bank of America Securities LLC, Bear Stearns Securities Corp., Credit Suisse USA Inc., Deutsche Bank Securities, Inc., Goldman Sachs Group, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Morgan Stanley & Co. Inc., UBS Securities LLC.
Furthermore, the Complaint accuses the defendant firms of violating Georgia's Racketeer Influenced and Corrupt Organization (RICO) Act. "These are not isolated incidents: we believe the trading data evidences an ongoing and coordinated effort to violate securities and other laws," stated Attorney Wes Christian.
Bloomberg.com did an excellent special report entitled "Phantom Shares" in which it explains stock manipulation and NSS.
In the special report, Patrick M. Byrne , CEO of Overstock.com, describes how his company was victimized by stock manipulation and NSS.
video link
http://video.google.com/videoplay?docid=4490541725797746038
transcript link
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEOpTqmLZB7A
Both the U.S. Stock Clearing and Settlement System and the Federal Reserve Banking System are fractional systems and therefore are built on, here is that word again, "trust."
The U.S. Stock Clearing and Settlement System "trusts" that shareholders who own shares of stock in a particular company will not all request their certificates simultaneously; but unfortunately for the U.S. Stock Clearing and Settlement System, their fractional Settlement System was exposed when shareholders of CMKM Diamonds, Inc., did all request their certificates simultaneously and by doing so proved FTD in the trillions (the DTCC ridiculously claims FTD are less than 500 million for the entire market). And shareholders who have purchased shares of stock in a particular company "trust" that all of their shares will be available when they request them; but the U.S. Stock Clearing and Settlement System has violated the "trust" of shareholders of CMKM Diamonds, Inc., by failing to deliver the certificates to all the shareholders because those certificates were counterfeited and are therefore nonexistent.
Likewise, the Federal Reserve Banks "trust" that their customers will not all withdraw their money simultaneously; but unfortunately for the Federal Reserve Banks, their fractional banking system was exposed when their customers did all attempt to withdraw their money simultaneously as evidenced by the 1929 Stock Market Crash and subsequent panic and run on the the Federal Reserve Banks that ultimately caused The Great Depression. And the customers who place their money in Federal Reserve Banks "trust" that all of their money will be available when they want to withdraw it; but the Federal Reserve Banks have violated the "trust" of their customers, as evidenced by the panic and run on the Federal Reserve Banks in 1929, by failing to deliver the money to their customers because it was counterfeited and therefore was nonexistent.
G. Edward Griffin wrote an excellent book, "The Creature from Jekyll Island," in which in he details the secret meeting on Jekyll Island in Georgia at which the fractional Federal Reserve Banking System was conceived.
So the entire "System" is corrupt; and therefore you would be unwise to "trust" any governmental entity or organization.
As Bud Burrell asserts: "Markets in the USA are corrupt top to bottom, front to back."
Because the money that you have invested in the stock market might be in jeopardy, you should now be prepared, if you were not so previously, to take the necessary action to protect your investments.
First, read this Press Release concerning CMKM Diamonds, Inc., and its ongoing quest to try and identify all of its shareholders.
http://www.tradingmarkets.com/.site/news/Stock%20News/1670552/
Next, if you believe that any shares of stock that you own might be counterfeit, go to the following site and register.
http://www.unshareholder.com/
You can both safeguard your own financial well-being and help to eradicate the corrupt "System" by taking the necessary action now.
Once again, America’s disgustingly underhanded government has failed its people, this time bailing out greedy financial brokerage firms without jailing the criminals involved. If the Savings & Loan/ Enron scandals didn’t wake up brain-dead Americans, who, like unsuspecting pigs going to a slaughterhouse, accept higher tolls, taxes, and a dire two-party system with little justification, then I’m sure the fraudulent bald-headed dick-shortened Ivy League turds responsible for America’s brokerage collapse will escape jail time.

watch Corruption report / Real broadband - download - Download (Real) watch Corruption report / Real broadband - download - Watch (Real) watch Corporate Corruption report / Real dialup - download - Download (Real) watch Corporate Corruption report / Real dialup - download - Watch (Real)
Enron and Worldcom often come to mind as prime examples of corporate corruption. But some analysts say corruption in the business world is more common and less sensational than most people think. Mil Arcega continues VOA's series on corruption with a look at the cost of corporate misdeeds in America and around the world.
U.S.-based energy trading firm Enron reported earnings of more than $100 billion in 2000. So when Enron collapsed a year later, the financial community was stunned.
Employees lost jobs and pensions. Some investors lost their entire life savings in what became the largest bankruptcy in American history. Top Enron officials were later found guilty of fraudulent accounting practices and of trying to hide hundreds of millions of dollars in debt.
Worldcom was next. The telecommunications company was once among the most powerful in the world. But a 2002 investigation by the U.S. Securities and Exchange Commission found company officials had inflated the value of the company's assets by 11 billion dollars.
A string of other cases followed, including revelations of executive excess at Tyco International - a multinational manufacturing conglomerate - and insider trading by television personality Martha Stewart.
The abuses led to new accounting standards , but Wendell Rawls, who heads the Center for Public Integrity in Washington DC, says corporate corruption is nothing new.
"This has been going on for 150 years," he said. "The Rockefellers, the JP Morgans of the world, the Vanderbilts of the world - they were all doing the same thing in the late 1800's, in the early 20th century. They made huge profits. That's the reason they were calling them the robber barons."
Kimberly ElliottKimberly Elliott wrote a book on corruption in the global economy. She says corporate misdeeds extend beyond America's shores.
"Some European countries used to allow their corporations to take tax deductions for bribes," she noted. "That was, in fact, a normal way for doing business. That is no longer allowed."
Wang XuebingBanker Wang Xuebing, once regarded as a leader in efforts to modernize China, was convicted in 2003 for taking bribes and expensive gifts at the Bank of China's New York office. Wang was sentenced to 12 years in prison and ordered to pay $20 million in fines.
Earlier this year, Hyundai Motor Corporation chairman Chung Mong-koo was arrested by South Korean authorities for allegedly embezzling millions of dollars.
Analysts say there's no way to estimate the true cost of corruption. But author Kimberly Elliott says its impact on societies is clear.
"You really can see it very qualitatively in countries where sick people in poor countries don't get medicine because it's been shifted off to the black market and sold or you don't get teachers showing up in schools unless they're paid by parents to show up and teach their children," she added. "You see it in cement plants that are built and never operate, because they weren't really needed."
Wendell RawlsCorruption's effects are different, but just as pervasive, in developed countries. "Corporate corruption leads to higher prices," added Wendell Rawls. "Corporate corruption leads to less efficiency. Corporate corruption leads to a reduced share price. Corporate corruption reduces your pension benefits. Corporate corruption means there's less profit usually because they spend more money on legal fees to protect themselves against prosecutions."
And it can cause markets to decline as Peter Morici, an Economics Professor at the University of Maryland, explains.
Peter Morici"These corporate scandals - Enron, Tyco and the others - they together caused stock market values to come down as a group," he noted.
Despite the impact on stock markets, Morici described the reforms that followed as "overzealous." He points out that Enron officials were convicted on regulations that were already in place before U.S. lawmakers changed the law to make chief executives, board members and auditors more accountable.
"We don't need to micromanage America's accountants by putting a federal auditor over their shoulders through regulation every step of the way as we are doing now," he explained.
Wendell Rawls, who won a Pultizer Prize for investigative journalism, believes tougher laws are necessary, but he says the best way to reduce corruption is to expose it.
"You have to shine lights in the corners and expose those who are trying to cut corners and those who are trying to skirt the law and you have to make government accountable at every level," he said. "You have to make anybody who profits on the backs of the American people or the people of the world, accountable for how they're making their money and who they are abusing and how they are abusing them."
Analysts say the Enron case revealed that many of the nation's most successful companies during the stock market bubble of the 1990's were far less substantial than they seemed. A former federal prosecutor said it's important to expose and punish those responsible for corporate misdeeds in order to restore investor confidence.

Like rich assholes dumb enough to lose houses, cars, and millions at gambling tables, defunct brokerage firms such as Lehman Brothers, Bear Stearns, and their lower-rung crooks will walk away from the current credit problem they created with nary a slap on the wrist. How appalling! Put a poor black man in jail for selling cocaine (usually to the same corporate scum causing America’s financial collapse), but allow the presidents and corporate board members of these disdainful brokerage houses to keep ill-gained millions in profits without reparation. Fuck these creepy overeducated brokerage cretins and let the same black men jailed for mere drug trafficking rape their ugly cornholes in prison while they cry in pain. That’s justification.
I hate the fucking jerkoffs running this dumbed-down country with a passion (Bush, Cheney, pussy democrats) and despise what they’ve done to ruin America’s society and corporate infrastructure. I’d never dream of asking what I could do for this country now since its government rapes me out of thousands in taxes every year for unworthy causes and the shrill lobbyists put in place to kill off independent candidates who’d end their reign. And I’m even more sick of America’s Lowest Common Denominator scum always falling for the stupid shit overpaid lobbyists’ candidates dump on the wretched proletariat. Chances are you are one of the lazy, overweight LCD scum suffering from two-party fraud and the criminal brokers lowering your meager stock-bond portfolios.
I tried for fucking years to help dumber LCD scum, joining college committees, chambers of commerce, and employee programs, using common sense logic to help these twits survive and lead a better life, but the desperate chum with names in lights (mayors, governors, senators) fooled the public with bold-faced lies. No republican or democratic cares to get anything done correctly until everything fails, such as our current financial system. As long as the LCD scum’s little corner of the world is fine and politicians receive unworthy salaries, the numb-skull proletariat will sit in a box like a veal calf and let an unworthy politician worry about, then destroy America. What dipshits! For this, I pray for the total demise of our LCD scum and feel sorry for their compromised offspring, who will get stuck with an exorbitant future debt demising social security, welfare funding, and bank lending.
NAKED SHORT SELLING SPECULATORS GIVEN FREE REIGN TO RUIN EQUITY MARKET WITH NO RECOURSE
Here’s what fucked up America’s financial system in ’08. Naked short sellers known as crooked money-hungry speculators trading and selling securities, such as common stock, then taking a negative position in stock price hoping for stock decline and personal gain afterwards. These fucking crooked assholes known as naked short sellers, will borrow 1,000 shares of stock at $10 for a $10,000 purchase. These fucking crooked assholes will then buy back the shares when the stock falls to $8 and is worth $8,000. Profit to naked short selling fucking assholes equals $2,000. Banks and brokers (two evil shit-stained lenders only in it for ill-gotten gains) provide money to secure the crooked speculating borrowers so they may sell these stocks to individual buyers, ensuring shares to be delivered. When the crooked speculating brokers ‘fail to deliver’ these stocks to individuals, it creates a loss since the outdated flakes at the Security & Exchange Commission allow three business days for stock delivery on deals that have never been arranged with individuals in the first place. It’s a corrupt method of doing business. What a pile of shit!
Basically, this manipulated maneuver has hurt this so-called ‘greatest country on earth’ (as if we have any competition with the pennywise dollar-stupid Asians and lazy, ignorant Europeans) to the tune of a trillion dollars in corporate draining and bad loans. So now our communistic government plans to purchase the bad loans given to stupid LCD scum by crooked brokers to save face and, later on, rip off these same LCD scum who took out bad adjustable rate mortgages from slimy bankers and brokers connected to short selling slime. America’s dreadfully antiquated two-party system of government could not care less since they’ll make back the money on newer loans meant to fuck over the LCD scum once more.
Similarly, the crooked oil speculators blamed the lower American dollar value against the soon-to-be shrunken Euro for higher gas prices, sucking billions of dollars from the LCD scum for Big Oil profits that our government could then tax and steal more money. These unchecked oil speculators were allowed to go on a rampage, bloating oil’s value by selling bad news (hurricanes, Nigerian extremist fighting, Iranian stupidity) to America’s LCD scum for better oil profit gain. Here’s how it works. An oil speculator falsely creates panic and runs crude oil to $145 in July, then sells the shares and ‘shorts’ the market while manipulating the price down to $93. So these speculative scum have made a fortune on the way up and then another 30% profit ($145 minus $93 equals $53 gain shorting oil) on the way down. This just happened in a two-month period – look it up.
America’s biggest problem is we have too many former or current coke addicts, mostly so-called yuppies, who are ‘chizzlers’ trying to rip you off for profit. Our Security & Exchange Commission allows these fucking brokerage cretins to find holes in their cheesy rules and exploit you, the investor, for their own gain. It’s a simple pump and dump. You get calls from these ‘chizzlers’ when your stock is doing well so they could sap you for more investment money, but they are nowhere to be found when you’re losing money. And they always have a ready excuse at hand if you should finally catch up with these blood-sucking vermin on the way down.
Basically, the arrogant jerkoffs at Lehman, Bear Stearns, and their lower-rung crooks, who’ll be divorced by their sagging trophy wives now that they’ve lost jobs (but won’t face jail time), tried convincing individuals to buy in so they could corruptly manipulate individuals’ cash for personal gain through short selling tricks. What’s worse is how the Security & Exchange Commission changes and manipulates its own rules so two-party politicians could be in on the take and take nifty personal profit gains when the paradigm shifts. These scummy politicians then become the first ones to invest in the markets’ newfound profits before the public does.
Do yourself a favor and don’t let some overpaid Ivy League jerkoff convince you how to invest properly. I’ve dealt with these losers but never let them manipulate my accounts. They have no proper educational knowledge to understand the financial markets since most of their professors have no street knowledge or personal experience to relay. Most of these Ivy League jerkoffs only got into their once-prestigious schools because they are legacies. And I really mean, once-prestigious schools, since that dumb-ass Bush and fatty-fucker Clinton graduated from these despicable overpriced Ivy League mess halls. Want some help: buy Colgate Palmolive, Johnson & Johnson, Proctor & Gamble, and two months before Christmas, Apple and RIMM. There. I’ve sanctified your horridly blackened soul. I’ve profited on these worthy stocks and several others over time while making a killing on failed internet IPO’s (bought and sold in a week) during 1999 – before Prez Clinton’s phony economic uplift failed miserably and the NASDAQ index crumbled from 5,000 to 2,000. But I paid dues, too. I worked as an operations manager and independent columnist while obtaining a Real Estate Brokers License, semi-retiring in 2001 at age 40. I once believed in the American dream, which has now become nothing but the American scheme. I was driven to succeed by my absolute hatred of the blathering LCD scum, ruinous government officials, and rancid brokerage frauds crowding this formerly great, and now grating, country. And I won’t be happy until the corporate scum that once headed Lehman, Bear Stearns, Washington Mutual, and other financial corporate giants get serious jail time for misrepresenting their firms and the LCD scum.
Meanwhile, get ready to meet the new boss (Mc Cain), same as the old boss (Bush-Clinton). Sad sacks. I pity this fucking country and all it’s done to ruin its youthful foundation through corporate fraud, financial corruption, and mortgaged futures while allowing those in charge of crooked financial firms to roam streets safely

GIVE US A BREAK!!!!

US Financial System Corrupt!

As each day passes, we are hearing of more US corporate and financial frauds and scandals. The current crisis is giving credibility to the view that the whole financial system in the US is corrupt and the white collar crooks have been getting away with it because they, themselves, have been treated as the 'gatekeepers' to the system... but instead, they have abused their positions of trust... and now the whole world is paying for it.The real question is this... has the US government started building all the prisons it will need, to house all the corporate crooks of the US who have brought the US financial system into disrepute and who have caused untold damage to the US?Financial giants revealed potential losses of almost ï¿¡4 billion today as they joined a queue of investors caught up in an alleged fraud by investment manager Bernard Madoff.The Royal Bank of Scotland, HSBC and Abbey owner Santander as well as France's BNP Paribas and Japan's Nomura Holdings all reported they had fallen victim to Madoff's alleged 50-billion US dollar (ï¿¡33 billion) pyramid scheme.The Wunderkinder charity connected to film director Steven Spielberg and the foundation of Nobel laureate Elie Wiesel were also reportedly among the investors.Madoff, 70, a well respected investment manager and former chairman of New York's Nasdaq stock exchange, was arrested last week after apparently telling his employees his operations were "all just one big lie" and "basically, a giant Ponzi scheme".A Ponzi scheme is a fraudulent investment vehicle which pays very high returns to existing investors paid for by money put into the fund by newcomers.The arrest has raised questions about the competence of financial regulators.Hedge fund giant Man Group said: "Based on information available to date, it appears that a systematic and comprehensive fraud may have been committed, evading a range of structural controls."The company, which said it had approximately 360 million US dollars (ï¿¡239 million) of exposure, said Madoff Securities was registered with the Securities and Exchange Commission (SEC), which monitors investment funds.Madoff Securities was also a member of five self-regulatory organisations, including US independent securities regulator Finra and the Nasdaq.Nicola Horlick, who manages Bramdean Alternatives, which had 9% of its funds invested with Madoff's scheme, said the SEC had given it a "clean bill of health".
Profile: Securities and Exchange Commission (SEC)
Securities and Exchange Commission (SEC) was a participant or observer in the following events:

Early September 2001: Unusually High Volume Trade of US Treasury Note Purchases

After 9/11, both the SEC and the Secret Service announce probes into an unusually high volume trade of five-year US Treasury note purchases around this time. These transactions include a single $5 billion trade. The Wall Street Journal explains: “Five-year Treasury notes are among the best investments in the event of a world crisis, especially one that hits the US. The notes are prized for their safety and their backing by the US government, and usually rally when investors flee riskier investments, such as stocks.” The value of these notes has risen sharply since the events of September 11. The article also points out that with these notes, “tracks would be hard to spot.” [Wall Street Journal, 10/2/2001]
Entity Tags: Securities and Exchange Commission, Secret Service
Timeline Tags: Complete 911 Timeline, 9/11 Timeline

Early September 2001: NYSE Sees Unusually Heavy Trading in Airline and Related Stocks

The Securities and Exchange Commission (SEC) later announces that they are investigating the trading of shares of 38 companies in the days just before 9/11. The San Francisco Chronicle reports that the New York Stock Exchange sees “unusually heavy trading in airline and related stocks several days before the attacks.” All 38 companies logically stand to be heavily affected by the attacks. They include parent companies of major airlines American, Continental, Delta, Northwest, Southwest, United, and US Airways as well as cruise lines Carnival and Royal Caribbean, aircraft maker Boeing and defense contractor Lockheed Martin. The SEC is also looking into suspicious short selling of numerous insurance company stocks, but, to date, no details of this investigation have been released. [Associated Press, 10/2/2001; San Francisco Chronicle, 10/3/2001]
Entity Tags: Securities and Exchange Commission, New York Stock Exchange
Timeline Tags: Complete 911 Timeline, 9/11 Timeline

Early September 2001: Suspicious Trading in Reinsurance Companies

It will later be speculated that, around this time, people with foreknowledge of the 9/11 attacks short sell reinsurance company stocks that are insuring either or both the airplanes and the buildings involved in the attacks. Munich Re, the largest European reinsurance company, loses 22 percent of its value in the two month before 9/11, with about half of that taking place in the week before the attacks. German authorities will later alert the Securities and Exchange Commission of “suspect movements” with Munich Re. [Agence France-Presse, 9/17/2001] Suspicious inquiries into the short selling of millions of company shares are made in France days before the attacks. [Reuters, 9/20/2001; San Francisco Chronicle, 9/22/2001] Munich Re stock will plummet after the attacks, as they claim the attacks will cost them $2 billion. [Dow Jones Business News, 9/20/2001] There is also suspicious trading activity involving reinsurers Swiss Reinsurance and AXA. These trades are especially curious because the insurance sector “is one of the brightest spots in a very difficult market” at this time. [Los Angeles Times, 9/19/2001] A source within AXA will later say, “There are indications that the shorting has been going on for some time. People inside the company could not understand why” there had been so much shorting of the stock in recent weeks. “This could give some explanation why the stocks were going down so much when there seemed to be no apparent reason.” AXA shares drop almost 10 percent in the week before 9/11, and will plummet afterwards. The attacks will cost the company up to $400 million because of its coverage of both airplanes and buildings. [Los Angeles Times, 9/18/2001]
Entity Tags: Swiss Reinsurance, AXA, Securities and Exchange Commission, Munich Re
Timeline Tags: Complete 911 Timeline, 9/11 Timeline

After February 2002-January 6, 2005: Justice Department and SEC Investigate Monsanto for Bribery

The Justice Department and the Securities and Exchange Commission (SEC) launch an investigation into allegations that Monsanto representatives paid bribes to Indonesian officials in an effort to advance its business interests there. The Justice Department and SEC were reportedly informed of the suspected bribery by Monsanto itself, which says it launched its own investigation after noticing irregularities in the accounting of its Jakarta-based subsidiary. [Wall Street Journal, 5/27/2004] The investigation lasts about three years. On January 6, 2005, the Justice Department and the SEC announce that Monsanto has agreed to pay a $1 million penalty to the Justice Department, which has charged the company with violating the US Foreign Corrupt Practices Act. The company is also ordered to pay $500,000 to the US Securities and Exchange Commission (SEC). As part of the settlement, Monsanto will allow an “independent compliance expert” to audit and monitor the company and to ensure there are no further breaches of the US Foreign Corrupt Practices Act. The company says it accepts full responsibility and has taken action against those involved. “We accept full responsibility for the improper activities that occurred in connection with our Indonesian affiliates,” says Lori Fisher, one of the company’s spokespersons. “Such behavior is not condoned nor accepted at Monsanto, and the people involved are no longer employed by Monsanto.” [Associated Press, 1/6/2001; Reuters, 1/7/2001; BBC, 1/7/2005; Sunday Herald, 1/9/2005]
Entity Tags: US Department of Justice, Securities and Exchange Commission, Monsanto
Timeline Tags: Seeds

March 2, 2002: Diesel Tanks May Have Destroyed Building and Secret Files on 9/11

A New York Times article theorizes that diesel fuel tanks were responsible for the collapse of Building 7 of the WTC. It collapsed at 5:20 p.m. on 9/11, even though it was farther away from the Twin Towers than many other buildings that remained standing (see (5:20 p.m.) September 11, 2001). It was the first time a steel-reinforced high-rise in the US had ever collapsed in a fire. One of the fuel tanks had been installed in 1999 (see June 8, 1999) as part of a new “Command Center” for Mayor Rudolph Giuliani. [New York Times, 3/2/2002; Dow Jones Business News, 9/10/2002] However, in interviews, several Fire Department officers who were on the scene say they were not aware of any combustible liquid pool fires in WTC 7. [Fire Engineering, 9/2002] And, according to the National Institute of Standards and Technology (NIST), between 11:30 a.m. and 2:30 p.m. on 9/11, “No diesel smells [were] reported from the exterior, stairwells, or lobby areas” of WTC 7. [National Institute of Standards and Technology, 6/2004, pp. L-22 ] Curiously, given all the Wall Street scandals later in the year, Building 7 housed the SEC files related to numerous Wall Street investigations, as well as other federal investigative files. All the files for approximately 3,000 to 4,000 SEC cases were destroyed. Some were backed up in other places, but many were not, especially those classified as confidential. [New York Law Journal, 9/17/2001] Lost files include documents that could show the relationship between Citigroup and the WorldCom bankruptcy. [Street, 8/9/2002] The Equal Employment Opportunity Commission estimates over 10,000 cases will be affected. [New York Law Journal, 9/14/2001] The Secret Service had its largest field office, with more than 200 employees, in WTC 7 and also lost investigative files. Says one agent: “All the evidence that we stored at 7 World Trade, in all our cases, went down with the building.” [Tech TV, 7/23/2002] The IRS and Department of Defense were also tenants, along with the CIA, which, it has been revealed, had a secret office in Building 7. [CNN, 11/4/2001; New York Times, 11/4/2001; Federal Emergency Management Agency, 5/1/2002, pp. 5-2; New York Magazine, 3/20/2006] A few days later, the head of the WTC collapse investigation says he “would possibly consider examining” the collapse of Building 7, but by this time all the rubble has already been removed and destroyed. [US Congress, 3/6/2002]
Entity Tags: WorldCom, US Department of Defense, World Trade Center, Secret Service, Securities and Exchange Commission, Citibank, Internal Revenue Service, Central Intelligence Agency
Timeline Tags: Complete 911 Timeline, 9/11 Timeline

September 10, 2003: SEC, Others Still Keep Mum About Insider Trading Investigations

Slate reports that two years after the 9/11 attacks, neither the Chicago Board Options Exchange nor the Securities and Exchange Commission will make any comment about their investigations into insider trading before 9/11. “Neither has announced any conclusion. The SEC has not filed any complaint alleging illegal activity, nor has the Justice Department announced any investigation or prosecution.… So, unless the SEC decides to file a complaint—unlikely at this late stage—we may never know what they learned about terror trading.” [Slate, 9/10/2003]
Entity Tags: US Department of Justice, Securities and Exchange Commission, Chicago Board Options Exchange
Timeline Tags: Complete 911 Timeline, 9/11 Timeline

July 22, 2004: 9/11 Commission Finds No 9/11 Insider Trading

In a footnote contained in its Final Report, the 9/11 Commission dismissed allegations of insider trading in the days preceding 9/11. According to the Final Report, the put options of the parent companies of United Airlines were placed by a “US-based institutional investor with no conceivable ties to al-Qaeda” “as part of a trading strategy that also included buying 115,000 shares of American on September 10.” With respect to the highly suspicious trading on the parent company of American Airlines, the Commission stated that much of the trades were “traced to a specific US-based options trading newsletter, faxed to its subscribers on Sunday, September 9, which recommended these trades.” According to the Commission, “The SEC and the FBI, aided by other agencies and the securities industry, devoted enormous resources to investigating this issue, including securing the cooperation of many foreign governments. These investigators have found that the apparently suspicious consistently proved innocuous.” [9/11 Commission, 7/24/2004, pp. 499]
Entity Tags: Securities and Exchange Commission, United Airlines, American Airlines, Federal Bureau of Investigation, Al-Qaeda, 9/11 Commission
Timeline Tags: Complete 911 Timeline, 9/11 Timeline
A Little Accounting Background
The most important documents that a company puts together are its financial statements. These include a balance sheet, a cash flow statement, and a profit and loss statement. These documents quantitatively describe the financial health of a company and are used by almost every entity that deals with the company, including the company executives and managers themselves. The following financial statements are usually compiled on a quarterly and annual basis: The New York Stock ExchangeThe balance sheet gives a snapshot or bird's eye view of the company's financial situation at a given date in time. It includes assets and liabilities and tells the business's net worth. The cash flow statement shows cash that is coming in as well as the cash needed to go out over a period of time. It is very helpful for planning for large purchases, or to help be prepared for slow periods in the business. In simple terms, the cash flow equals cash receipts minus cash disbursements. The profit and loss statement (also referred to as an income statement) lists revenues and expenses. It also lists the profit or loss of the business for a given period of time. It is helpful for planning and helps to control operating expenses. Banks review the financial statements to decide if they will lend the company money (and at what interest rate if they choose to lend it). Investors review the documents to decide if they feel confident in the company enough to invest their hard-earned money. Company managers use them to analyze the business and determine how well they are doing. Many others also use the documents, so it is critical that they are accurate. For public companies, these documents are audited by outside accounting firms that certify that the documents are compiled according to generally accepted accounting principles, or GAAP. These firms are still at the mercy of the information provided by the company, however. They are also interested in keeping their largest customers happy.
The Sarbanes-Oxley Act of 2002
In 2002, President Bush signed the Sarbanes-Oxley Act into law to "re-establish investor confidence in the integrity of corporate disclosures and financial reporting" [ref]. The act was brought on by the large number of corporate financial fraud cases (such as those of Enron, WorldCom, Tyco, Adelphia, AOL, and others) and by the end of the "boom" years for the stock market. The Act requires all public companies to submit both quarterly and annual assessments of the effectiveness of their internal financial auditing controls to the Securities and Exchange Commission. Each company's external auditors must also audit and report on the internal control reports of management and any other areas that may affect internal controls. The company's principal executive officer and principal financial officer must personally certify that the financial reports are true and that everything has been disclosed. Many of the Act's provisions apply to all companies, United States and foreign. However, some provisions apply only to companies that have equity securities listed on an exchange or NASDAQ. The details of the Sarbanes-Oxley Act address many of the tactics companies have used to "cook the books" over the years. In the next few sections, we'll go over some of the more popular methods of improving a company's bottom line -- if only on paper.
Who keeps them all straight?
The Securities and Exchange Commission (SEC):
The U.S. Securities and Exchange Commission (SEC) protects investors by maintaining the integrity of the securities markets, based on the idea that all investors should have access to certain basic facts about an investment. The SEC requires public companies to disclose meaningful financial information (and other types of information) to the public so all investors can determine whether or not a company's securities are a good investment. The SEC also oversees stock exchanges, broker-dealers, investment advisors, mutual funds, and public utility holding companies. Each year the SEC files between 400-500 civil enforcement actions against individuals and companies that break securities laws. Financial Accounting Standards Board (FASB):The Financial Accounting Standards Board establishes standards for financial accounting and reporting. Those standards dictate how financial reports must be prepared. Generally Accepted Accounting Principles (GAAP):GAAP is the accepted method for accountancy (the practice of accounting). It works with the authority of the FASB and establishes a common set of procedures for compiling financial statements.
Off-Balance Sheet Accounting
With off-balance sheet accounting, a company didn't have to include certain assets and liabilities in its balance sheet -- it was "off-sheet" and therefore not part of their financial statements. We'll talk more later about how the Sarbanes-Oxley Act changed this practice. While there are legitimate reasons for off-balance-sheet accounting, it is often used to make a company look like it has far less debt than it actually does. Some types of off-balance-sheet accounting move debt to a newly created company specifically for that purpose, which was the case with Enron. These are called special purpose entities (SPEs) and are also known as variable interest entities (VIEs). Off-balance-sheet entities can be created for several reasons, such as when a company needs to finance a business venture but doesn't want to take on the risk, or when there is too much debt to get a loan. By starting a new SPE, they can secure a loan through the new entity. There are situations where it makes sense to start an SPE. If your company wants to branch out into another area outside of its core business, an SPE will keep that risk from affecting the main balance sheet and profitability of the company. Prior to 2003, a company could own up to 97 percent of an SPE without having to report the liabilities of the SPE on its balance sheet.
Synthetic Leases
Synthetic leases often use SPEs to hold title to a company's property and lease that property back to the company. Because of off-balance-sheet accounting, synthetic leases allowed companies to reap the tax benefits of ownership without having to list it as a liability on their balance sheets. Synthetic leases could also be signed with some entity other than an SPE. Banks, for example, would often purchase property for businesses and lease it back to them via a synthetic lease. The company leasing the property avoids the liability on the balance sheet but still gets to deduct interest and depreciation from its tax bill.
The End of the Hiding Game
New requirements from the Financial Accounting Standards Board now require SPEs to be listed on a company's balance sheet. Section 401(a) of the Sarbanes-Oxley Act requires that annual and quarterly financial reports disclose all material off-balance sheet transactions, arrangements, and obligations. The rules also require most companies to provide an overview of known contractual obligations in an "easy-to-read tabular format" [ref]. This new ruling has essentially ended the days of the SPE and the synthetic lease -- even though they are still legitimate practices. In the next section will talk about how companies manipulate expenses to boost the appearance of earnings.
Expense ManipulationAccelerating Expenses
Accelerating a company's expenses may not seem to be the way to boost the appearance of earnings, but it depends on when those earnings need to be boosted. There are legitimate and illegitimate reasons to accelerate expenses. A legitimate example would be making equipment purchases when earnings are high rather than when they were planned.
Here's an example of a less legitimate earnings acceleration. A manager's bonus is based on his meeting a certain earnings goal. Once the target earning level has been exceeded, that manager might decide to spend money now that was budgeted to be spent in the next year because having higher earnings this year won't mean a bigger bonus for him. Spending money this year that was budgeted for next year, however, could help ensure he meets next year's level as well. While this may seem like the same thing as making purchases when earnings are high, it depends on the circumstances. If making those purchases earlier than planned has no adverse affect on the business, then perhaps there is no problem. In many instances there is an adverse affect, however. For instance, buying computer equipment six months earlier than expected can mean a big difference in the actual equipment purchased -- power, features, and price can all change dramatically.
Delaying Expenses
Companies that are cooking the books have been known to capitalize expenses that are really everyday expenses. AOL was charged with engaging in various acts of securities fraud -- among other things -- between 1992 and 1996. In one part of a larger case, AOL was accused of listing advertising expenses (the cost of creating those CDs and diskettes they send out) as capital expenses rather than regular expenses. This presented a false picture of the company's profitability and boosted the stock price. The disks should have been expensed as they were mailed. In an upcoming case study, you'll see that WorldCom capitalized expenses that should have been operating expenses to the tune of billions of dollars. When companies land a big contract to provide a product or service over a long period of time, they're supposed to spread the revenue over the cost of the service contract. Some companies have been known to show the sale and revenue in the quarter in which the contract was signed. Here are some other examples of premature revenue booking: Recording sales after the products were ordered but before they were shipped to the customer
Recording revenues when the sales involved contingencies that allowed the customer to return the merchandise
Overstating revenues by speeding up the estimated percentage of completion for a project in process
Recording revenues by shipping products that weren't ordered by the customer or by shipping defective products and recording revenues at full rather than discounted prices.
Recording revenues when unassembled products are shipped from the manufacturing plant -- they must set up a separate assembly location and assemble the products before the products can actually go to the customers Trying to improve future earnings by "front loading" future expenses and booking them in the current quarter is another example. This has been done during the acquisition of a company. The company will pay off (or even pre-pay) expenses in order to increase the earnings per share (EPS) over that of previous quarters for the combined company.
Non-recurring Expenses
While this category of expenses was meant for things that would only occur once in order to keep it from affecting regular operating expenses, it has been abused in the world of "managed earnings." By over-budgeting for a "non-recurring" expense, companies have been known to then move the excess money over as earnings.
More Manipulation Methods
In-Process R&D Charge-Offs
Another way companies have increased their earnings per share is through in-process R&D (Research & Development) charge-offs. Here's how it works. A large company buys a small company that has new technology in development. The technology is not yet ready for commercialization, so the large company writes off the related costs. Later on, the technology is further developed and ready for market, but with a much lower R&D expense.
Now the GAAP requires companies to charge off that expense. This charge will reduce earnings and must be disclosed in the financial statements. Operating expenses are the everyday costs of running a business. Capital expenses are business expenses for long-term assets, such as equipment. They are not tax deductible as business expenses, but may be used for depreciation or amortization -- in other words, the expense is somewhat delayed by being stretched over several years.
Pension Plan Manipulation
Many companies have defined benefit pension plans for their employees. These are plans that pay out a specific, defined amount at retirement. Companies are required to maintain enough money in their retirement account to pay benefits to everyone in the event that the company goes out of business. It makes sense for companies to invest that money so it will grow. Rather than investing in something safe like bonds, some companies invest in the stock market. Accounting rules allow any "extra" money that the fund earns to be claimed as company profit. Companies can "estimate" how much it believes the money will grow each year rather than going by actual numbers. They use their estimate to figure how much money they should plan to put into the fund and how much they can consider profit. The potential for companies to inflate their earnings by underestimating the contributions required to fully fund their retirement funds is high. Even assuming a percentage point or less can mean a difference of hundreds of millions of dollars on a company's balance sheet. Many company pension plans have been underfunded because the companies assumed that the stock market will perform as it did in the late nineties, which is nowhere near the rate of returns right now. These methods for earnings management are just the tip of the iceberg when it comes to ways to manipulate a company's earnings. There's a fine line between legitimate earnings management and "cooking the books." Let's take a look at some real-life cases and learn how they did it.
Case Study: Enron
Company Background
Once the seventh largest company in America, Enron was formed in 1985 when InterNorth acquired Houston Natural Gas. The company branched into many non-energy-related fields over the next several years, including such areas as Internet bandwidth, risk management, and weather derivatives (a type of weather insurance for seasonal businesses). Although their core business remained in the transmission and distribution of power, their phenomenal growth was occurring through their other interests. Fortune Magazine selected Enron as "America's most innovative company" for six straight years from 1996 to 2001. Then came the investigations into their complex network of off-shore partnerships and accounting practices.
How the Fraud Happened
The Enron fraud case is extremely complex. Some say Enron's demise is rooted in the fact that in 1992, Jeff Skilling, then president of Enron's trading operations, convinced federal regulators to permit Enron to use an accounting method known as "mark to market." This was a technique that was previously only used by brokerage and trading companies. With mark to market accounting, the price or value of a security is recorded on a daily basis to calculate profits and losses. Using this method allowed Enron to count projected earnings from long-term energy contracts as current income. This was money that might not be collected for many years. It is thought that this technique was used to inflate revenue numbers by manipulating projections for future revenue. Use of this technique (as well as some of Enron's other questionable practices) made it difficult to see how Enron was really making money. The numbers were on the books so the stock prices remained high, but Enron wasn't paying high taxes. Robert Hermann, the company's general tax counsel at the time, was told by Skilling that their accounting method allowed Enron to make money and grow without bringing in a lot of taxable cash. Enron had been buying any new venture that looked promising as a new profit center. Their acquisitions were growing exponentially. Enron had also been forming off balance sheet entities (LJM, LJM2, and others) to move debt off of the balance sheet and transfer risk for their other business ventures. These SPEs were also established to keep Enron's credit rating high, which was very important in their fields of business. Because the executives believed Enron's long-term stock values would remain high, they looked for ways to use the company's stock to hedge its investments in these other entities. They did this through a complex arrangement of special purpose entities they called the Raptors. The Raptors were established to cover their losses if the stocks in their start-up businesses fell. When the telecom industry suffered its first downturn, Enron suffered as well. Business analysts began trying to unravel the source of Enron's money. The Raptors would collapse if Enron stock fell below a certain point, because they were ultimately backed only by Enron stock. Accounting rules required an independent investor in order for a hedge to work, but Enron used one of their SPEs. The deals were so complex that no one could really determine what was legal and what wasn't. Eventually, the house of cards began falling. When Enron's stock began to decline, the Raptors began to decline as well. On August 14, 2001, Enron's CEO, Jeff Skilling, resigned due to "family issues." This shocked both the industry and Enron employees. Enron chairman Ken Lay stepped in as CEO.
How it Was Discovered
On August 15, Sherron Watkins, an Enron VP, wrote an anonymous letter to Ken Lay that suggested Skilling had left because of accounting improprieties and other illegal actions. She questioned Enron's accounting methods and specifically cited the Raptor transactions. Later that same month, Chung Wu, a UBS PaineWebber broker in Houston, sent an e-mail to 73 investment clients saying Enron was in trouble and advising them to consider selling their shares. Sherron Watkins then met with Ken Lay in person, adding more details to her charges. She noted that the SPEs had been controlled by Enron's CFO, Fastow, and that he and other Enron employees had made their money and left only Enron at risk for the support of the Raptors. (The Raptor deals were written such that Enron was required to support them with its own stock.) When Enron's stock fell below a certain point, the Raptors' losses would begin to appear on Enron's financial statements. On October 16, Enron announced a third quarter loss of $618 million. During 2001, Enron's stock fell from $86 to 30 cents. On October 22, the SEC began an investigation into Enron's accounting procedures and partnerships. In November, Enron officials admitted to overstating company earnings by $57 million since 1997. Enron, or "the crooked E," filed for bankruptcy in December of 2001.
Where Are They Now?
Enron's CFO, Andrew Fastow, was behind the complex network of partnerships and many other questionable practices. He was charged with 78 counts of fraud, conspiracy, and money laundering. Fastow accepted a plea agreement in 2004. He was given a ten year prison sentence and ordered to pay $23.8 million in exchange for testifying against other Enron executives. Jeff Skilling and Ken Lay were both indicted in 2004 for their roles in the fraud and will stand trial in January 2006. Other Enron executives are also being charged. According to the Enron Web site, "Enron is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations."
Case Study: WorldCom
Company Background
WorldCom took the telecom industry by storm when it began a frenzy of acquisitions in the 1990s. The low margins that the industry was accustomed to weren't enough for Bernie Ebbers, CEO of WorldCom. From 1995 until 2000, WorldCom purchased over sixty other telecom firms. In 1997 it bought MCI for $37 billion. WorldCom moved into Internet and data communications, handling 50 percent of all United States Internet traffic and 50 percent of all e-mails worldwide. By 2001, WorldCom owned one-third of all data cables in the United States. In addition, they were the second-largest long distance carrier in 1998 and 2002.
How the Fraud Happened
So what happened? In 1999, revenue growth slowed and the stock price began falling. WorldCom's expenses as a percentage of its total revenue increased because the growth rate of its earnings dropped. This also meant WorldCom's earnings might not meet Wall Street analysts' expectations. In an effort to increase revenue, WorldCom reduced the amount of money it held in reserve (to cover liabilities for the companies it had acquired) by $2.8 billion and moved this money into the revenue line of its financial statements. That wasn't enough to boost the earnings that Ebbers wanted. In 2000, WorldCom began classifying operating expenses as long-term capital investments. Hiding these expenses in this way gave them another $3.85 billion. These newly classified assets were expenses that WorldCom paid to lease phone network lines from other companies to access their networks. They also added a journal entry for $500 million in computer expenses, but supporting documents for the expenses were never found. These changes turned WorldCom's losses into profits to the tune of $1.38 billion in 2001. It also made WorldCom's assets appear more valuable.
How it Was Discovered
After tips were sent to the internal audit team and accounting irregularities were spotted in MCI's books, the SEC requested that WorldCom provide more information. The SEC was suspicious because while WorldCom was making so much profit, AT&T (another telecom giant) was losing money. An internal audit turned up the billions WorldCom had announced as capital expenditures as well as the $500 million in undocumented computer expenses. There was also another $2 billion in questionable entries. WorldCom's audit committee was asked for documents supporting capital expenditures, but it could not produce them. The controller admitted to the internal auditors that they weren't following accounting standards. WorldCom then admitted to inflating its profits by $3.8 billion over the previous five quarters. A little over a month after the internal audit began, WorldCom filed for bankruptcy.
Where Are They Now?
When it emerged from bankruptcy in 2004, WorldCom was renamed MCI. Former CEO Bernie Ebbers and former CFO Scott Sullivan were charged with fraud and violating securities laws. Ebbers was found guilty on all counts. Sullivan pleaded guilty and took the stand against Ebbers in exchange for a more lenient sentence.
Case Study: Tyco
Company Background
Tyco International has operations in over 100 countries and claims to be the world's largest maker and servicer of electrical and electronic components; the largest designer and maker of undersea telecommunications systems; the larger maker of fire protection systems and electronic security services; the largest maker of specialty valves; and a major player in the disposable medical products, plastics, and adhesives markets. Since 1986, Tyco has claimed over 40 major acquisitions as well as many minor acquisitions.
How the Fraud Happened
According to the Tyco Fraud Information Center, an internal investigation concluded that there were accounting errors, but that there was no systematic fraud problem at Tyco. So, what did happen? Tyco's former CEO Dennis Koslowski, former CFO Mark Swartz, and former General Counsel Mark Belnick were accused of giving themselves interest-free or very low interest loans (sometimes disguised as bonuses) that were never approved by the Tyco board or repaid. Some of these "loans" were part of a "Key Employee Loan" program the company offered. They were also accused of selling their company stock without telling investors, which is a requirement under SEC rules. Koslowski, Swartz, and Belnick stole $600 million dollars from Tyco International through their unapproved bonuses, loans, and extravagant "company" spending. Rumors of a $6,000 shower curtain, $2,000 trash can, and a $2 million dollar birthday party for Koslowski's wife in Italy are just a few examples of the misuse of company funds. As many as 40 Tyco executives took loans that were later "forgiven" as part of Tyco's loan-forgiveness program, although it was said that many did not know they were doing anything wrong. Hush money was also paid to those the company feared would "rat out" Kozlowski. Essentially, they concealed their illegal actions by keeping them out of the accounting books and away from the eyes of shareholders and board members.
How it Was Discovered
In 1999 the SEC began an investigation after an analyst reported questionable accounting practices. This investigation took place from 1999 to 2000 and centered on accounting practices for the company's many acquisitions, including a practice known as "spring-loading." In "spring-loading," the pre-acquisition earnings of an acquired company are underreported, giving the merged company the appearance of an earnings boost afterwards. The investigation ended with the SEC deciding to take no action. In January 2002, the accuracy of Tyco's bookkeeping and accounting again came under question after a tip drew attention to a $20 million payment made to Tyco director Frank Walsh, Jr. That payment was later explained as a finder's fee for the Tyco acquisition of CIT. In June 2002, Kozlowski was being investigated for tax evasion because he failed to pay sales tax on $13 million in artwork that he had purchased in New York with company funds. At the same time, Kozlowski resigned from Tyco "for personal reasons" and was replaced by John Fort. By September of 2002, all three (Kozlowski, Swartz, and Belnick) were gone and charges were filed against them for failure to disclose information on their multimillion dollar loans to shareholders. The SEC asked Kozlowski, Swartz, and Belnick to restore the funds that they took from Tyco in the form of undisclosed loans and compensations.
Where Are They Now?
Kozlowski and Swartz were found guilty in 2005 of taking bonuses worth more than $120 million without the approval of Tyco's directors, abusing an employee loan program, and misrepresenting the company's financial condition to investors to boost the stock price, while selling $575 million in stock. Since replacing its Board Members and several executives, Tyco International has remained strong. The difference in the Tyco case and some of the others is that it is more related to greed than accounting fraud. For more information on cooking the books and related topics, check out the links on the next page.
Related How Stuff Works Articles
How Stocks and the Stock Market Work
How Banks Work
How Currency Works
How Accounting Works
How Employee Compensation Works
Investopedia: Cooking the Books
Cooking the Books: The Cost to the Economy
Sarbanes-Oxley: Financial and Accounting Disclosure Information
FASB: Financial Accounting Standards Board
SEC: Securities Exchange Commission
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