Judge Issues Scathing Rebuke of DOJ and Law Firm, Paul Weiss By Pam Martens and Russ Martens: May 7, 2019
If you needed more proof that the United States is heading in the direction of a dystopian authoritarian state, it arrived last Thursday, May 2, when the Chief Judge for the U.S. District Court for the Southern District of New York wrote a decision finding that the U.S. Justice Department had outsourced a criminal investigation to the target of the investigation – Deutsche Bank – and Deutsche Bank’s outside law firm, Paul, Weiss, Rifkind, Wharton & Garrison. Making the matter all the more interesting, the Chief Judge who wrote the decision, Colleen McMahon, formerly worked for Paul Weiss for 19 years, rising to the rank of partner. She remains, according to this profile, close friends with a number of former and current Paul Weiss lawyers.
Meet the Lawyer Who Gets Citigroup Out of Fraud Charges
By Pam Martens: September 6, 2012
The following is Part II of an investigative series on Citigroup and fraud. Read Part I here:
It’s one of the few things predictable on Wall Street; an immutable signature on the reply briefs whenever Citigroup is charged with fraud – and that is quite often.
Brad Karp, a partner at the 737-attorney-strong Wall Street law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP, has been Citigroup’s go-to guy for fraud allegations since the company was born out of the too-big-too-fail merger of Travelers Group insurance, its myriad Wall Street investment banks, brokerage units, and Citicorp, parent of Citibank.
When the London-based private equity firm, Terra Firma, claimed it had been lied to and defrauded by Citigroup, making it overpay for the purchase of EMI, a British music label, in 2007, Karp and colleagues wrung an 8-0 decision from the jury in favor of Citigroup. Karp was also on hand to witness victory when the trustee for the bankrupt Italian dairy giant, Parmalat, charged Citigroup with fraud. Then there were fraud charges connected to Citigroup’s involvement in the collapse of WorldCom and Enron – along with auction rate securities, rigged stock research and understating its exposure to subprime debt by $39 billion. Karp, Karp, and more Karp. […]
Sullivan & Cromwell’s Rodge Cohen: The Untold Story of the Fed’s $29 Trillion Bailout By Pam Martens and Russ Martens: May 2, 2019 ~
There is a little noticed audio tape of an interview conducted on August 5, 2010 by investigators for the Financial Crisis Inquiry Commission (FCIC), a body convened under the Fraud Enforcement Recovery Act of 2009 to investigate the 2008 financial collapse on Wall Street. The interview is with Rodgin (Rodge) Cohen, Senior Chairman of Sullivan & Cromwell, the preeminent go-to lawyer on Wall Street.
Cohen makes a number of eyebrow-raising admissions during his interview. First, in response to a question, Cohen concedes that he was personally involved in the amendment contained in the Federal Deposit Insurance Corporation Improvement Act (FDICIA) that changed the Fed’s emergency lending powers under Section 13(3) of the Federal Reserve Act.
That one-sentence amendment to Section 13(3) was interpreted by the Federal Reserve from December 2007 to mid-2010 as giving it carte blanche to shovel $29 trillion in cumulative loans for as long as 2-1/2 years to Wall Street banks, broker-dealers, investment banks, hedge funds and foreign global banks, backstopped in many cases by dodgy collateral. In one of the Fed’s lending programs, the Primary Dealer Credit Facility (PDCF), it made revolving loans totaling $8.95 trillion, a significant portion of which was based on accepting stocks and junk bonds as collateral at a time when the prices of both were in freefall. (See chart below.)
Reuters Drops a Bombshell: The Big Short Doomsday Machine Is Back
By Pam Martens and Russ Martens: April 29, 2019 ~
In what can only be described as a new low in defining deviancy down on Wall Street, Thomson Reuters’ International Financing Review (IFR) reported this past weekend that some of the biggest names on Wall Street have returned to creating and/or trading synthetic collateralized debt obligations (Synthetic CDOs).
The products were a major factor in bringing the U.S. financial system to the brink of failure in 2008. Synthetic CDOs also resulted in hundreds of millions of dollars in fines and reputational damage to these same Wall Street behemoths as investigators found that the firms were allowing hedge funds to pick “crap” subprime mortgage bonds to stuff in the CDOs in order to make windfall profits for the hedge fund, which shorted (bet against) the CDOs. The Wall Street firms had full knowledge of what the hedge funds were doing but, nonetheless, peddled the investments as sound to unsuspecting investors. In some instances, the same Wall Street firm that was selling the product as a good investment to public pension funds, school districts, churches and insurance companies, was also making short bets itself against the CDO. In at least one case involving Goldman Sachs, it placed a 10 to 1 short bet on failure of its own product.
Writing for IFR, Christopher Whittall reports that “Trading volumes in synthetic collateralised debt obligations linked to credit indexes are up 40% this year, according to JP Morgan, after topping US$200bn in 2018 on the back of three years of double-digit growth. Meanwhile, analysts predict more than US$100bn in sales of bespoke synthetic CDOs in 2019 following an estimated US$80bn of issuance last year.” […]