Financial crime more than every other crime combined?

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Re: Financial crime more than every other crime combined

Postby admin » Mon Sep 07, 2009 10:50 pm

Twenty Things You Should Know About Corporate Crime
By Russell Mokhiber, AlterNet
Posted on June 16, 2007, Printed on September 7, 2009
http://www.alternet.org/story/54093/

The following is text from a speech delivered by Russell Mokhiber, editor of Corporate Crime Reporter to the Taming the Giant Corporation conference in Washington, D.C., June 9, 2007.

20. Corporate crime inflicts far more damage on society than all street crime combined.

Whether in bodies or injuries or dollars lost, corporate crime and violence wins by a landslide.

The FBI estimates, for example, that burglary and robbery -- street crimes -- costs the nation $3.8 billion a year.

The losses from a handful of major corporate frauds -- Tyco, Adelphia, Worldcom, Enron -- swamp the losses from all street robberies and burglaries combined.

Health care fraud alone costs Americans $100 billion to $400 billion a year.

The savings and loan fraud -- which former Attorney General Dick Thornburgh called "the biggest white collar swindle in history" -- cost us anywhere from $300 billion to $500 billion.

And then you have your lesser frauds: auto repair fraud, $40 billion a year, securities fraud, $15 billion a year -- and on down the list.

19. Corporate crime is often violent crime.

Recite this list of corporate frauds and people will immediately say to you: but you can’t compare street crime and corporate crime -- corporate crime is not violent crime.

Not true.

Corporate crime is often violent crime.

The FBI estimates that, 16,000 Americans are murdered every year.

Compare this to the 56,000 Americans who die every year on the job or from occupational diseases such as black lung and asbestosis and the tens of thousands of other Americans who fall victim to the silent violence of pollution, contaminated foods, hazardous consumer products, and hospital malpractice.

These deaths are often the result of criminal recklessness. Yet, they are rarely prosecuted as homicides or as criminal violations of federal laws.

18. Corporate criminals are the only criminal class in the United States that have the power to define the laws under which they live.

The mafia, no.

The gangstas, no.

The street thugs, no.

But the corporate criminal lobby, yes. They have marinated Washington -- from the White House to the Congress to K Street -- with their largesse. And out the other end come the laws they can live with. They still violate their own rules with impunity. But they make sure the laws are kept within reasonable bounds.

Exhibit A -- the automobile industry.

Over the past 30 years, the industry has worked its will on Congress to block legislation that would impose criminal sanctions on knowing and willful violations of the federal auto safety laws. Today, with very narrow exceptions, if an auto company is caught violating the law, only a civil fine is imposed.

17. Corporate crime is underprosecuted by a factor of say -- 100. And the flip side of that -- corporate crime prosecutors are underfunded by a factor of say -- 100.

Big companies that are criminally prosecuted represent only the tip of a very large iceberg of corporate wrongdoing.

For every company convicted of health care fraud, there are hundreds of others who get away with ripping off Medicare and Medicaid, or face only mild slap-on-the-wrist fines and civil penalties when caught.

For every company convicted of polluting the nation’s waterways, there are many others who are not prosecuted because their corporate defense lawyers are able to offer up a low-level employee to go to jail in exchange for a promise from prosecutors not to touch the company or high-level executives.

For every corporation convicted of bribery or of giving money directly to a public official in violation of federal law, there are thousands who give money legally through political action committees to candidates and political parties. They profit from a system that effectively has legalized bribery.

For every corporation convicted of selling illegal pesticides, there are hundreds more who are not prosecuted because their lobbyists have worked their way in Washington to ensure that dangerous pesticides remain legal.

For every corporation convicted of reckless homicide in the death of a worker, there are hundreds of others that don’t even get investigated for reckless homicide when a worker is killed on the job. Only a few district attorneys across the country have historically investigated workplace deaths as homicides.

White collar crime defense attorneys regularly admit that if more prosecutors had more resources, the number of corporate crime prosecutions would increase dramatically. A large number of serious corporate and white collar crime cases are now left on the table for lack of resources.

16. Beware of consumer groups or other public interest groups who make nice with corporations.

There are now probably more fake public interest groups than actual ones in America today. And many formerly legitimate public interest groups have been taken over or compromised by big corporations. Our favorite example is the National Consumer League. It’s the oldest consumer group in the country. It was created to eradicate child labor.

But in the last ten years or so, it has been taken over by large corporations. It now gets the majority of its budget from big corporations such as Pfizer, Bank of America, Pharmacia & Upjohn, Kaiser Permanente, Wyeth-Ayerst, and Verizon.

15. It used to be when a corporation committed a crime, they pled guilty to a crime.

So, for example, so many large corporations were pleading guilty to crimes in the 1990s, that in 2000, we put out a report titled The Top 100 Corporate Criminals of the 1990s. We went back through all of the Corporate Crime Reporters for that decade, pulled out all of the big corporations that had been convicted, ranked the corporate criminals by the amount of their criminal fines, and cut it off at 100.

So, you have your Fortune 500, your Forbes 400, and your Corporate Crime Reporter 100.

14. Now, corporate criminals don’t have to worry about pleading guilty to crimes.

Three new loopholes have developed over the past five years -- the deferred prosecution agreement, the non prosecution agreement, and pleading guilty a closet entity or a defunct entity that has nothing to lose.

13. Corporations love deferred prosecution agreements.

In the 1990s, if prosecutors had evidence of a crime, they would bring a criminal charge against the corporation and sometimes against the individual executives. And the company would end up pleading guilty.

Then, about three years ago, the Justice Department said -- hey, there is this thing called a deferred prosecution agreement.

We can bring a criminal charge against the company. And we will tell the company -- if you are a good company and do not violate the law for the next two years, we will drop the charges. No harm, no foul. This is called a deferred prosecution agreement.

And most major corporate crime prosecutions are brought this way now. The company pays a fine. The company is charged with a crime. But there is no conviction. And after two or three years, depending on the term of the agreement, the charges are dropped.

12. Corporations love non prosecution agreements even more.

One Friday evening last July, I was sitting my office in the National Press Building. And into my e-mail box came a press release from the Justice Department.

The press release announced that Boeing will pay a $50 million criminal penalty and $615 million in civil penalties to resolve federal claims relating to the company’s hiring of the former Air Force acquisitions chief Darleen A. Druyun, by its then CFO, Michael Sears -- and stealing sensitive procurement information.

So, the company pays a criminal penalty. And I figure, okay if they paid a criminal penalty, they must have pled guilty.

No, they did not plead guilty.

Okay, they must have been charged with a crime and had the prosecution deferred.

No, they were not charged with a crime and did not have the prosecution deferred.

About a week later, after pounding the Justice Department for an answer as to what happened to Boeing, they sent over something called a non prosecution agreement.

That is where the Justice Department says -- we’re going to fine you criminally, but hey, we don’t want to cost you any government business, so sign this agreement. It says we won’t prosecute you if you pay the fine and change your ways.

Corporate criminals love non prosecution agreements. No criminal charge. No criminal record. No guilty plea. Just pay the fine and leave.

11. In health fraud cases, find an empty closet or defunct entity to plead guilty.

The government has a mandatory exclusion rule for health care corporations that are convicted of ripping off Medicare.

Such an exclusion is the equivalent of the death penalty. If a major drug company can’t do business with Medicare, it loses a big chunk of its business. There have been many criminal prosecutions of major health care corporations for ripping off Medicare. And many of these companies have pled guilty. But not one major health care company has been excluded from Medicare.

Why not?

Because when you read in the newspaper that a major health care company pled guilty, it’s not the parent company that pleads guilty. The prosecutor will allow a unit of the corporation that has no assets -- or even a defunct entity -- to plead guilty. And therefore that unit will be excluded from Medicare -- which doesn’t bother the parent corporation, because the unit had no business with Medicare to begin with.

Earlier, Dr. Sidney Wolfe was here and talked about the criminal prosecution of Purdue Pharma, the Stamford, Connecticut-based maker of OxyContin.

Dr. Wolfe said that the company pled guilty to pushing OxyContin by making claims that it is less addictive and less subject to abuse than other pain medications and that it continued to do so despite warnings to the contrary from doctors, the media, and members of its own sales force.

Well, Purdue Pharma -- the company that makes and markets the drug -- didn’t plead guilty. A different company -- Purdue Frederick pled guilty. Purdue Pharma actually got a non-prosecution agreement. Purdue Frederick had nothing to lose, so it pled guilty.

10. Corporate criminals don’t like to be put on probation.

Very rarely, a corporation convicted of a crime will be placed on probation. Many years ago, Consolidated Edison in New York was convicted of an environmental crime. A probation official was assigned. Employees would call him with wrongdoing. He would write reports for the judge. The company changed its ways. There was actual change within the corporation.

Corporations hate this. They hate being under the supervision of some public official, like a judge.

We need more corporate probation.

9. Corporate criminals don’t like to be charged with homicide.

Street murders occur every day in America. And they are prosecuted every day in America. Corporate homicides occur every day in America. But they are rarely prosecuted.

The last homicide prosecution brought against a major American corporation was in 1980, when a Republican Indiana prosecutor charged Ford Motor Co. with homicide for the deaths of three teenaged girls who died when their Ford Pinto caught on fire after being rear-ended in northern Indiana.

The prosecutor alleged that Ford knew that it was marketing a defective product, with a gas tank that crushed when rear ended, spilling fuel.

In the Indiana case, the girls were incinerated to death.

But Ford brought in a hot shot criminal defense lawyer who in turn hired the best friend of the judge as local counsel, and who, as a result, secured a not guilty verdict after persuading the judge to keep key evidence out of the jury room.

It’s time to crank up the corporate homicide prosecutions.

8. There are very few career prosecutors of corporate crime.

Patrick Fitzgerald is one that comes to mind. He’s the U.S. Attorney in Chicago. He put away Scooter Libby. And he’s now prosecuting the Canadian media baron Conrad Black.

7. Most corporate crime prosecutors see their jobs as a stepping stone to greater things.

Spitzer and Giuliani prosecuted corporate crime as a way to move up the political ladder. But most young prosecutors prosecute corporate crime to move into the lucrative corporate crime defense bar.

6. Most corporate criminals turn themselves into the authorities.

The vast majority of corporate criminal prosecutions are now driven by the corporations themselves. If they find something wrong, they know they can trust the prosecutor to do the right thing. They will be forced to pay a fine, maybe agree to make some internal changes.

But in this day and age, in all likelihood, they will not be forced to plead guilty.

So, better to be up front with the prosecutor and put the matter behind them. To save the hide of the corporation, they will cooperate with federal prosecutors against individual executives within the company. Individuals will be charged, the corporation will not.

5. The market doesn’t take most modern corporate criminal prosecutions seriously.

Almost universally, when a corporate crime case is settled, the stock of the company involved goes up.

Why? Because a cloud has been cleared and there is no serious consequence to the company. No structural changes in how the company does business. No monitor. No probation. Preserving corporate reputation is the name of the game.

4. The Justice Department needs to start publishing an annual Corporate Crime in the United States report.

Every year, the Justice Department puts out an annual report titled "Crime in the United States."

But by "Crime in the United States," the Justice Department means "street crime in the United States."

In the "Crime in the United States" annual report, you can read about burglary, robbery and theft.

There is little or nothing about price-fixing, corporate fraud, pollution, or public corruption.

A yearly Justice Department report on Corporate Crime in the United States is long overdue.

3. We must start asking -- which side are you on -- with the corporate criminals or against?

Most professionals in Washington work for, are paid by, or are under the control of the corporate crime lobby. Young lawyers come to town, fresh out of law school, 25 years old, and their starting salary is $160,000 a year. And they’re working for the corporate criminals.

Young lawyers graduating from the top law schools have all kinds of excuses for working for the corporate criminals -- huge debt, just going to stay a couple of years for the experience.

But the reality is, they are working for the corporate criminals.

What kind of respect should we give them? Especially since they have many options other than working for the corporate criminals.

Time to dust off that age-old question -- which side are you on? (For young lawyers out there considering other options, check out Alan Morrison’s new book, Beyond the Big Firm: Profiles of Lawyers Who Want Something More.)

2. We need a 911 number for the American people to dial to report corporate crime and violence.

If you want to report street crime and violence, call 911.

But what number do you call if you want to report corporate crime and violence?

We propose 611.

Call 611 to report corporate crime and violence.

We need a national number where people can pick up the phone and report the corporate criminals in our midst.

What triggered this thought?

We attended the press conference at the Justice Department the other day announcing the indictment of Congressman William Jefferson (D-Louisiana).

Jefferson was the first U.S. official charged with violating the Foreign Corrupt Practices Act.

Federal officials alleged that Jefferson was both on the giving and receiving ends of bribe payments.

On the receiving end, he took $100,000 in cash -- $90,000 of it was stuffed into his freezer in Washington, D.C.

The $90,000 was separated in $10,000 increments, wrapped in aluminum foil, and concealed inside various frozen food containers.

At the press conference announcing the indictment, after various federal officials made their case before the cameras, up to the mike came Joe Persichini, assistant director of the Washington field office of the FBI.

"To the American people, I ask you, take time," Persichini said. "Read this charging document line by line, scheme by scheme, count by count. This case is about greed, power and arrogance."

"Everyone is entitled to honest and ethical public service," Persichini continued. "We as leaders standing here today cannot do it alone. We need the public’s help. The amount of corruption is dependent on what the public with allow.

Again, the amount of corruption is dependent on what the public will allow."

“"f you have knowledge of, if you’ve been confronted with or you are participating, I ask that you contact your local FBI office or you call the Washington Field Office of the FBI at 202.278.2000. Thank you very much."

Shorten the number -- make it 611.

1. And the number one thing you should know about corporate crime?

Everyone is deserving of justice. So, question, debate, strategize, yes.

But if God-forbid you too are victimized by a corporate criminal, you too will demand justice.

We need a more beefed up, more effective justice system to deal with the corporate criminals in our midst.
Russell Mokhiber is the editor of Corporate Crime Reporter.

© 2009 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/54093/
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 8:46 pm

Picture 14.png
 In summary.

Bad new issues, faulty income trusts, junk securities sold to the public
Nortel, Eatons, Global Crossing, Portus, Crocus, Hollinger
–Bre-X- YBM Magnex -Norbourg
Mutual fund market timing
Alternative Mngt. Hedge fund
–Strategic Value Corp, ABCP, HERCULES MANAGEMENT
VICTORIA MORTGAGE
CANADIAN COMMERCIAL BANK
NORTHLAND BANK
PRINCIPAL GROUP
STANDARD TRUST
TEACHERS INVESTMENT AND HOUSING CO-OPERATIVE
CASTOR HOLDINGS
BRAMALEA
CARTAWAY
GOLDEN RULE RESOURCES = $20 billion each year estimated

Highest Mutual Fund costs in the world = $25 billion each year (U of T study)

Multiple don-nothing regulators = $10 billion each year (Columbia University study)

Sales practices that maximize commissions to customers/rev to broker =1 bil each year est

Double dipping (fees on top of commissions or vice versa) =$1 bil est

Fee based account abuse (adding unnecessary fees to clients accounts) = $5 bil est

Churning for maximum commissions =$ 5 bil est

Totals = $67 bil est

Given that the Canada web site above (National Victims of Crime Week) has total crime in Canada each year as high as $70 bil, and the Justice Canada site counts it at about $40 billion, and Stats Canada counts another figure (closer to the $40 bil figure if I recall) it still can be shown possible that financial crime in Canada is roughly equal to each and every other crime in the country combined. And financial crimes are done without cost in Canada the largest percentage of the time.
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:50 pm

LIST OF CANADIAN INVESTOR LOSSES CAUSED BY MALFEASANCE AND LACK OF MARKET COMPETITION

HERCULES MANAGEMENT $40mil
VICTORIA MORTGAGE $50mil
CANADIAN COMMERCIAL BANK $1 bil
NORTHLAND BANK $230mil
PRINCIPAL GROUP $500mil
STANDARD TRUST $50mil
TEACHERS INVESTMENT AND HOUSING CO-OPERATIVE $150mil
CASTOR HOLDINGS $2bil
BRAMALEA $1bil
CARTAWAY $450mil
GOLDEN RULE RESOURCES $350mil
BRE-X $ 6 bil
CONFEDERATION LIFE $10bil
SHAMRAY GROUP $7mil
LIVENT $500mil
YBM MAGNEX$650 mil
JEVCO INSURANCE$30mil
COREL $500mil

PHILLIPS SERVICES $2.6 bil
MERIT ENERGY $100mil
KING'S HEALTH CENTER$100mil
CINAR $1.4 bil
VISUAL LABS$300mil
HOLLINGER $500mil

CROCUS $150mil
PORTUS $120mil
NORTHSHIELD $500mil
NORBOURG $80mil
source Diane Urquhart, independent consulting analyst
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:46 pm

TOXIC PRODUCTS

Mutual funds- excessive fees ( Canada has highest in the world)
Income Trusts –misrepresentation
PPN’s -excessive fees, opaque disclosure
LSIF’s- just don’t make money
Structured products – complex/expensive
Commercial Paper- non-bank ABCP

The non-bank ABCP market collapsed in August, 2007, leaving investors holding about $35-billion of frozen notes, including 2,542 individuals with investments totalling $317-million.
Private (non regulatory authorities) "negotiate" free do not go to jail passes for participants in return for a refund of small investors monies, and when they have legal immunity, they still do not return the money as promised. (see Purdy Crawford for get out of jail on this one and on $1 bil tobacco smuggling cleanup) Governments have to bail money into this sinking ship in order for small investors to get refunds. Thanks Purdy, keep up the great work you do for..........
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:40 pm

CONFLICTED DEALERS/ADVISORS

Opaque disclosure / “educational” seminars
Excessive fees/undue leveraging
Deceptive marketing practices/financial porn
Incorrect Information
Misleading articulation of risks
Embedded commissions

Painting the tape. In what also is called "banging the close," portfolio managers run up the price of what they already own. ??

Double dipping (Commissions and IPO fees on top of commissions) ??

Abuse of fee based accounts 1 to 2% on every victim ??

Mutual Fund Market Timing $1,260 mil

Mutual fund Window dressing.....mutual fund practice of moving their funds into the top performing stocks at reporting time, so that their financial statements appear as if they were smart stock pickers.......when they made the moves “after the fact”. ??

FMF capital bankrupt within six months of BMO selling it ??

2% of all mutual funds sold in 2007 were into WRAP programs (large proportion of those being less suitable but more profitable house brand funds) est $1 bil per year
(source IFIC)

mutual funds sold at highest commission choice, contrary to duty of care owed to clients (source IFIC)
$1 bil per year on sales of $20 bil

Unauthorized Foreign Exchange Transactions in RRSP & RRIFs$2.5 bil

Canada exhibits illegal insider trading before 63% of its acquisition
announcements,
Insider Trading Surrounding Acquisitions $14.4 bil
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:40 pm

Corporate examples

Self-dealing –Hollinger /Conrad Black
Outright fraud –Bre-X
Defective disclosure/acct’g -Nortel
Front for Russian mafia- YBM Magnex
Misappropriation of fund assets-Crocus LSIF
Theft of fund assets -Norbourg
Mutual fund market timing -20 fund cos.
Theft of assets-Portus Alternative Mngt. Hedge fund
Fraudulent asset valuation –Strategic Value Corp.


Stock options on “faked” earnings

John Roth removes $120 mil from Nortel (US criminal investigation underway) (nothing in Canada)

CIBC on Global crossing
Global crossing bankrupt within one year of CIBC offering ??
CIBC execs get stock options of ?? Millions on deal
CIBC pays 2.4 bil in suit on enron deal
John Hunkin walks away with $54 mil?

Nortel bankruptcy after execs cook books and pay themselves on phoney bonus schemes $366 billion in market value lost as Nortel goes from the most valuable company in Canada to worthless.
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:38 pm

MAJOR CATEGORIES OF FINANCIAL ASSAULT

Systemic
1. CORPORATE- Accounting fraud, self dealing, executive kleptocracy, insider trading,
regulatory capture, toxic products approved, see no evil
2. CONFLICTED DEALERS/ADVISORS - misleading, misrepresentation, unsuitable investments, double dipping, self dealing, fraud, theft, overcharging, predatory practices, salesmen posing as trusted professionals
3. TOXIC PRODUCTS- highest fees possible, penalties, hidden compensation, hidden conflicts, caps, garbage packaged as quality

The above categories are all considered systemic. Built into the system by poor design. Intentional or otherwise, they serve to transfer more than $50 billion dollars each and every year from the hands of trusting Canadian consumers, into the hands of self serving financial interests. (according to www.breachoftrust.ca)

Non-systemic
Non systemic categories of financial assault include brokers who out and out steal from clients, without even the pretense of "serving" the public.

1. Brokers who steal clients assets.

Estimated at millions each year. Small potatoes. These are a no brainer and are what our current regulatory regime is nearly capable of enforcing.

Hidden from public view

The third category of financial asssault in Canada is an estimate of the dollar damages that are hidden by setttlements with confidentiality agreements. Those damages where clients actually "catch" a financial firm assaulting them, suffer through five to ten years of denials by the firm, and then settle for pennies on the dollar, giving up their rights and their voice in exchange for a return of their own money.

Estimated at millions each year.

Un-compensated or un-punished

Last, but not least, is the amount of the above that goes without compensation, without accountability, without recourse. This is considered due to the inneffectiveness of Canadian financial regulators to do thte job that they public wishes they would do.

The amount of financial crime in canada that does not have a recourse, a punishment, or where the perpetrator gets to keep the ill gotten gains is estimated at over 90%.
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:26 pm

Income Trusts sold with a deceptive yield
$8 billion of investor losses on 46 income trust IPO's and secondary
offerings down more than 30%, where investment bank marketing
materials gave deceptive yields and assurances of low risk to seniors
seeking income and preservation of capital. Not the subject of any SRO or
provincial securities commission regulatory restrictions or investigations.
For details see:
http://www.sipa.ca/

just some examples of losses

HEATING OIL PARTNERS $165mil
FMF CAPITAL $196 mil
SPECIALTY FOODS $250mil
ASSOCIATED BRANDS $118mil
SPINRITE SUSPENDED $176mil
BOYD GROUP $67mil
MADACY ENTERTAINMENT $60mil
BLACKWATCH ENERGY SERVICES $132mil
ART IN MOTION $59mil
SOMERSET ENTERTAINMENT $106mil
ADVANCED FIBER TECH $97mil
HIGH ARCTIC ENERGY SERV $68mil
VILLAGE FARMS $49mil
GRANBY INDUSTRIES $48mil
ENTERTAINMENT ONE $185mil
GIENOW WINDOWS & DOORS $150mil
CANWEL BUILDING $118mil
CLEARWATER SEAFOOD $150mil
SFK PULP $299mil
PANTERA DRILLING $30mil
HARDWOODS DISTRIBUTORS $68mil
CLEAN POWER $167mil
MENU FOODS 86mil
DEEPWELL ENERGY SERVICES $20mil
E.D. SMITH $103mil
CRESTSTREET POWER $42mil
ARRISCRAFT INTERNATIONAL $28mil
IMPAX ENERGY SERVICES $29mil
OSPREY MEDIA $196mil
NEWPORT PARTNERS $142mil
STEPHENSON'S RENTALS $26mil
TREE ISLAND WIRE $69mil
CANEXUS $97mil
PETROWEST ENERGY SERVICES $80mil
PEAK ENERGY SERVICES$216 mil
TERRAVEST $80mil
SUPERIOR PLUS $1,123mil
ENERGY SAVINGS$1,170mil
AVENIR DIVERSIFIED $246mil
WELLCO ENERGY SERVICE $83mil
CHEMTRADE LOGISTICS $218mil
MULLEN GROUP $755mil
BUILDERS ENERGY $116mil
CONNORS BROTHERS $332mil
MEDISYS HEALTH GROUP $26mil
ATLAS COLD STORAGE $265mil
TOTAL SECONDARY OFFERINGS $4,632mil
INCOME TRUSTS CAPITAL LOSSES $1,385 6 $8,309 total 8 billion lost

Total economic damage so far = Nortel ($366 bil )
plus $25 bil each year from mutual fund costs
plus $800 million from just one firm's specific abuse of clients.
plus $10 billion for having 13 regulators doing pretty much nothing to protect
plus $8 billion for misguided income trusts with misrepresented yields
I am going to round that out to nearly $35 billion each and every year. (plus the Nortel hit, plus the house brand fund hit, plus the income trust hit)
source Diane Urquhart independent consulting analyst
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:23 pm

Picture 26.png
Picture 27.png
Next we go to Prof John Coffee, Columbia University. He was hired by the Federal Finance dept to study the costs to Canada of our fractured provincial and territorial securities regulation system.

He came up with $10 billion each year due to having 13 regulators in a territory the same economic size as Texas.

Total economic damage so far = Nortel ($366 bil )
plus $25 bil each year from mutual fund costs
plus $800 million from this one firm's specific abuse of clients.
plus $10 billion for having 13 regulators doing pretty much nothing to protect
I am going to round that out to nearly $35 billion each and every year. (plus the Nortel hit)

At $35 billion, we are getting close the the cost number that Justice Canada puts as the dollar cost of each and every other crime in Canada. This means to me that clever, cunning financial folks are milking the country and doing more damage to us than the cost of every other crime you can think of. Or at least they are within 10% of the cost of every other crime, and I have only listed three or four in this topic so far.

Lets keep going shall we?
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:13 pm

Picture 4.png
A mutual fund company learned in 1999 that they could earn between 12 and 26 times more money from putting clients into house brand (proprietary) mutual funds, rather than sellimg them a more competitive, independently proven mutual fund. The reason was that they could collect and keep all the annnual management fees (the 2 to 3%) that are charged to the fund each year to operate.

So they decided that this was in their best interests (not sure what they felt about the clients best interests), and against all industry guidelines to protect from this kind of self serving transactions, they went to it. They applied for and received legal exemption from 13 provincial and territorial securities commissions (who are now strangely silent on the matter) for permission to "kickback" commissions to clients to induce them to covert independent funds to their own house brand.

To juice up the returns higher, they bumped up management fees on these in house mutuals to over 3%, and nearly 4% in cases, making them among the most expensive investment products that the sales force could find. To help sales of this product, they even bumped up the compensation to the sales force to a 6% up front commission from the DSC sales option, making them the most expensive commissions in Canada at the time.

Management was accused of aggressive attempts to convert up to 80% and 90% of client assets to these products, despite lousy performance out of them. The benefits to salespeople, managers and owners of the firm were too great to care what was best for clients.

The firm puffed up its revenues in this manner and was sold for $800 million to a larger firm, eager to cash in on this cash cow.

Damages to clients in this case
$800 million that was earned on the backs of client abuse, and flagrant abuse of client first rules and principles.

Total so far = Nortel ($366 bil )
plus $25 bil each year from mutual fund costs
plus $800 million from this one firm's specific abuse of clients.
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Re: Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 1:03 pm

A second one, was the double dipping, mutual fund churning, highest fee sales tricks, deferred sales charge sales tricks, advisor account (fee account) abuses and the myriad of ways to gain the most money from a client which I witnessed while a retail representative in the industry for 20 years.

Keith Ambaschteer of University Of Toronto says that the highest fees in the world are costing Canadians $25 billion each year, and I am not sure he is including many of the tricks of the trade I am referring to above. But none-the-less, we Canadians are being gouged by $25 bil plus, due to our small oligopoly bank system, and a very weak and incestuous regulatory regime. Read Prof P Puri University of Toronto, report on a very strong financial system combined with a weak regulatory regime.

Keith A article at https://docs.google.com/fileview?id=0Bz ... OTkw&hl=en

These abuses are against all codes of ethics which state that the client interest must come first. They are against all rules and regulations that purport to require similar. As we are self regulated, we can ignore any rules we wish and make as much money as we desire. That, unfortunately is how financial regulations in Canada are treated today.

Add $25 bil to the amount of yearly damages to Canadians.
Total so far = Nortel ($366 bil ) plus $25 bil each year.
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Some examples of crimes against the public

Postby admin » Fri Sep 04, 2009 12:53 pm

Where to even start with this one?

I guess Nortel will do for a beginning. It was a $366 billion dollar company in market cap, and is now virtually worthless. Senior execs took huge bonus's out, as much as $120 million in just one persons case, and these bonus's were based on false sales and revenue figures.

The company is now broke because of this, and I am wondering how much financial damage to our economy is represented by that $366 bil. Can you even imagine the damage to people in our country?
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Re: Financial crime more than every other crime combined

Postby admin » Thu Aug 06, 2009 8:42 pm

Measuring Madoff
By Scott Burns
Media accounts immediately labeled the disappearance of $50 billion, masterminded by Bernard Madoff, as "the largest fraud in history." It is a greater wealth loss than having a household name company -- such as Walt Disney, Anheuser-Busch or Boeing -- vanish without a trace.

The loss is mind-boggling. But the figure does nothing to convey the damage this man has done.

One way to measure the extent of the damage is to compare the $50 billion to measures of loss in the FBI's Uniform Crime Reports. In 2007 there were 9.8 million crimes against property in the United States. This included about 2.2 million burglaries, 6.6 million larceny-thefts and 1.1 million car thefts.

I think you'll agree that 9.8 million crimes represent a veritable army of miscreants. In spite of that, our total losses to property crimes in 2007 were a mere $17.6 billion. To be sure, it didn't feel "mere" if you suffered a burglary. The average loss was $1,991. Nor was it "mere" if you were one of the 6.6 million people who suffered a larceny-theft. In those, the average loss was $886.

But when you add all the losses in 9.8 million common property crimes, it's just a fraction of the estimated $50 billion loss attributed to Bernard Madoff.

Perhaps 2007 was an "off" year for theft?

Well, there was a slight decline in the number of crimes, but not in the amount lost. In 2006 the report shows nearly 10 million crimes against property and losses of another $17.6 billion. Similarly, the 2005 report shows nearly 10.2 million crimes against property and a total loss of $16.5 billion.

Add the three years and you get $51.7 billion. Using that value, Bernard Madoff has caused losses equal to all the losses caused by all the conventional thieves in America for nearly three full years.

We get a different perspective by reading the annual report of the Securities and Exchange Commission. That's the federal agency charged with protecting investors. In the listing of "enforcement milestones," the 2008 report proudly notes that it had "obtained orders in SEC judicial and administrative proceedings requiring securities violators to disgorge illegal profits of approximately $774 million and to pay penalties of approximately $256 million."

In other words, the total recovery of the entire agency, in a full year, was about 2 percent of what Bernard Madoff -- the guy they didn't notice -- made disappear.

This leaves us with two really big questions.

First: What can be done to keep America from becoming a Coffee Can Economy?

I'm serious. Right now all we know is that nothing is trustworthy. Not our political leaders. Not our business leaders. Not the government or private institutions that are supposed to provide oversight and evaluation.

Can anyone, from any of these institutions, give us any reason not to keep what savings we have buried in a coffee can rather than entrusted to the institutions that have destroyed the most fundamental element of commerce -- trust?

The answer is a flat "No."

Second: In the matter of Bernard Madoff, how can the punishment possibly be fit to the crime?

To me, this begs for a punishment that is both cruel and unusual.

Does life without parole in a gentleman's federal prison cut it? I don't think so. Does life without parole in a facility devoted to violent petty criminals sound better? Yes, but the improvement is slight.

In medieval times a man who committed murder or treason could be declared an outlaw. This literally meant he was outside the law, no longer protected by the laws of his society. His property was forfeit. No one was allowed to provide him with food, shelter or aid. And anyone who found him could kill him.

When you look at the damage done, this wouldn't be a cruel or unusual punishment. It fits the crime. It's what we need for white collar financial criminals.
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Re: Financial crime more than every other crime combined

Postby admin » Thu Aug 06, 2009 8:41 pm

Property crime makes up slightly more than three-quarters of all crime in the United States.

Overall, in about 84% of all burglaries, the offender gained entry into the victims residence or other building on the property.

In about 79% of all motor vehicle thefts, the vehicle was stolen.

Of the 13 million completed thefts of property in 2005, there were 4.1 million property thefts of less than $50, 4.7 million between $50 and $249, and 3.2 million of $250 or more.
source US dept of justice stats http://www.ojp.usdoj.gov/bjs/cvict_c.htm

trying to put conrad black (for example) into perspective

if he is guilty of $6 mil, then he has committed the equivalent of 6000 to 12000 property crimes (of average value) the united states?

one man doing the damage of 6000 to 12000 others. And yet they usually get sentenced more leniently.
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Re: Financial crime more than every other crime combined

Postby admin » Thu Aug 06, 2009 8:00 pm

CATEGORIES OF FINANCIAL ASSAULT IN CANADA


Systemic
1. CORPORATE- Accounting fraud, self dealing, executive kleptocracy, insider trading,
regulatory capture, toxic products approved, see no evil
2. CONFLICTED DEALERS/ADVISORS - misleading, misrepresentation, unsuitable investments, double dipping, self dealing, fraud, theft, overcharging, predatory practices, salesmen posing as trusted professionals
3. TOXIC PRODUCTS- highest fees possible, penalties, hidden compensation, hidden conflicts, caps, garbage packaged as quality

The above categories are all considered systemic. Built into the system by poor design. Intentional or otherwise, they serve to transfer more than $50 billion dollars each and every year from the hands of trusting Canadian consumers, into the hands of self serving financial interests.

Non-systemic
Non systemic categories of financial assault include brokers who out-and-out steal from clients, without even the pretense of "serving" the public.

1. Brokers who steal clients assets.
Estimated at ?? millions each year.

Hidden from public view

The third category of financial assault in Canada is an estimate of the dollar damages that are hidden by settlements with confidentiality agreements. Those damages where clients actually "catch" a financial firm assaulting them, suffer through five to ten years of denials by the firm, and then settle for pennies on the dollar, giving up their rights and their voice in exchange for a return of their own money.

Estimated at billions each year.

Un-compensated or un-punished

Last, but not least, is the amount of the above that goes without compensation, without accountability, without recourse. This is considered due to the ineffectiveness of Canadian financial regulators to do the job that they public wishes they would do.

The amount of financial crime in canada that does not have a recourse, a punishment, or where the perpetrator gets to keep the ill gotten gains is estimated at

99%?
Below is partial breakdown
------------------------------------------------------------

Corporate



Self-dealing –Hollinger /Conrad Black
Outright fraud –Bre-X
Defective disclosure/acct’g -Nortel
Front for Russian mafia- YBM Magnex
Misappropriation of fund assets-Crocus LSIF
Theft of fund assets -Norbourg
Mutual fund market timing -20 fund cos.
Theft of assets-Portus Alternative Mngt. Hedge fund
Fraudulent asset valuation –Strategic Value Corp.


Stock options on “faked” earnings

John Roth removes $120 mil from Nortel (US criminal investigation underway) (nothing in Canada)

CIBC on Global crossing
Global crossing bankrupt within one year of CIBC offering ??
CIBC execs get stock options of ?? Millions on deal
CIBC pays 2.4 bil in suit on enron deal
John Hunkin walks away from CIBC with $54 mil personally

Nortel bankruptcy after execs cook books and pay themselves on phoney bonus schemes $366 billion in market value lost as Nortel goes from the most valuable company in Canada to worthless.

$25 bil per year from mutual fund highest fees in world Keith Ambaschteer U of T

$10 bil “cost of fractured regulatory regime”, John Coffee, Columbia University
--------------------------------------------------------

CONFLICTED DEALERS/ADVISORS

Opaque disclosure / “educational” seminars
Excessive fees/undue leveraging
Deceptive marketing practices/financial porn
Incorrect Information
Misleading articulation of risks
Embedded commissions

Painting the tape. In what also is called "banging the close," portfolio managers run up the price of what they already own. $??

Double dipping (Commissions and IPO fees on top of commissions) $??

Abuse of fee based accounts 1 to 2% on every victim $??

Mutual Fund Market Timing $1,260 mil

Mutual fund Window dressing.....mutual fund practice of moving their funds into the top performing stocks at reporting time, so that their financial statements appear as if they were smart stock pickers.......when they made the moves “after the fact”. $??

FMF capital bankrupt within six months of BMO selling it $??

2% of all mutual funds sold in 2007 were into WRAP programs (large proportion of those being less suitable but more profitable house brand funds) est $1 bil per year
(source IFIC)
mutual funds sold at highest commission choice, contrary to duty of care owed to clients (source IFIC)
$1 bil per year on sales of $20 bil

Unauthorized Foreign Exchange Transactions in RRSP & RRIFs$2.5 bil

Canada exhibits illegal insider trading before 63% of its acquisition
announcements,
Insider Trading Surrounding Acquisitions $14.4 bil


---------------------------------------------------------

TOXIC PRODUCTS

Mutual funds- excessive fees ( Canada has highest in the world)
Income Trusts –misrepresentation
PPN’s -excessive fees, opaque disclosure
LSIF’s- just don’t make money
Structured products – complex/expensive
Commercial Paper- non-bank ABCP
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