The feds are after First Brands Executives
- Thread starter cptbarkey
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I saw that movie when it first came out in the theaters. The gasps were audible when he did that speech. He was the embodiment of ‘80’s evil then.In the words of Gordon Gekko, “Greed is good”.
In the current environment the Exxon scandal would just be good business and ignored.
To get charged with a business crime these days is an accomplishment
Usurpury of assets is exactly how modern private equity makes money .
Sun capital took a highly profitable Shopko and claimed they were a contractor and that Shopko had to take out increasingly large loans to pay increasingly large wages to Sun who couldn’t manage its way out of a paper bag. Despite effectively zero leadership Shopko was so profitable it managed to exist far longer than any other Sun property.
Nearly every “fund” operates this way and nobody cares.
Actually knowing how to profitably run a business is considered a liability by most of these incompetent jokers.
Then we have our most profitable industry, just good business
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They should not be released on bond. With that much money, definite flight risk.
I'm glad to see justice being pursued in charging these jackals.
They were nothing more nor less than thieves.
The clever ways in which VC (venture capital or vulture capital?) loots victim companies is technically legal and it would be very difficult to charge anyone with anything involving the systematic deconstruction of companies without other equity holders fiduciary responsibility to whom would come into play.
They were nothing more nor less than thieves.
The clever ways in which VC (venture capital or vulture capital?) loots victim companies is technically legal and it would be very difficult to charge anyone with anything involving the systematic deconstruction of companies without other equity holders fiduciary responsibility to whom would come into play.
Pretty typical and expected. I'm surprised it was such a big company to go down but such is life with vulture captial.
There needs to be an Interpol red notice for them
Your characterization of these things as what Wall Street does regularly is, respectfully, false. This is what I do for a living so I know.
Securities financing and collateral financing transactions, when used in the normal, legal sense are ways for firms to manage their liquidity and funding with other counter parties who may, for example, have cash they want to put to use but want to be collateralized because the numbers are very large and from a prudent risk management this is how you limit your exposure - you over-collateralize and haircut the collateral appropriately to be able to close out if there is a default. This is the same reason btw the banks wanted 20 percent down when you bought a home - slightly different application of the same concept.
What First Brands did was criminal because they repeatedly used collateral to obtain financing when the collateral was already pledged. That is a contractual violation and is also a form of fraud.
The last thing I will say is “rehypothecation” is a poorly understood term. It does not mean that you can pledge the same collateral to multiple people. What it means is that collateral obtained can now be used to “on-lend” or pledge to other market participants in the ordinary course. So if I do an equity repo with a counter party, and I reverse in equity securities and then need cash, those securities are now mine to put out for cash. However, when the other party that has my equities wants them back under the contract, I have to unwind my end and return the equities. The equities were on leant but there was no fraud involved. First brands loaned out the same receivables to multiple counter parties at the same time, from what I have read.
First Brands engaged in clearly criminal/fraudulent conduct that is not representative of the legitimate financial and hypothecation activity that serves as an important financing and liquidity management tool for lawful businesses. People make fun of it because it is acceptable to demonize Wall Street but many of the comforts, financial and otherwise, that people take for granted would not be available if there were not tools available to help develop capital and deploy / manage liquidity. Or they would be much more expensive without these tools.
That’s all I am going to add here.
Prob do 10 years at Club Fed. Ironic that their filters were orange and black. Will match their attire soon.
They belong in prison. Very difficult to get convictions in this space given the appropriately higher standard required in a criminal case. But it is worthwhile to try. I think this is the worst frUd since Enron.
MF Global was not fraud. The firm booked repos to maturity without taking the appropriate regulatory charges - seemed to have been a screw up - but when the market got wind that the charges would consume the firm’s capital based on the financials there was a run on the firm. Corzine made some bad mistakes but he was not a criminal in my judgment.
Yes, banks and others re-hypothecate collateral all the time. Collaterals owner has no clue what counter party risks they have. This is exactly what First brands was doing, and if they had not blown up no one would be the wiser.
If rates had not risen so quickly its quite likely First Brands would not have blown up and none of us would be the wiser. I have no idea what other things these two guys did, but based on what there accused of its financially pretty mundane.
Similar to the GFC - counter party risk was not the cause, it was the accelerant.
Corzine broke the firewall between customer money - which were not deposits but were payments for future contract deliveries to which MF Global was not a party, they were simply the broker. ie they had no claim to take those moneys - and there are specific laws that say its up to the CEO and CFO to Ensure the money is not co mingled. They tried to blame it on BettyLou the book-keeper and say they did not know, but multiple employees testified they did know, and there was no way they could not know because after they blew the investment bank side up where did they magically get $1.6B in funds to try again?
Its black letter law that Corzine was guilty - he failed to protect the customers money. Instead he agreed to a few million in civil fines. How cozy. Let me ask you - if you could rob banks and if caught - your penalty would only be to pay 0.33% of what you took. How many banks per day would you rob?
Corzine's crime which he was never charged with was the theft, not blowing up MF global. Customers eventually got there money but it took years. It was many small firms - small airlines, farmers, metal brokers. Many went under from the loss even though they got there money back years later. I would say Corzine's crimes were far more egregious than First Brands.
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