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Wednesday, March 17, 2010
Jon Stewart
Jon Stewart's opening segment on The Daily Show last night was great. He starts with Dodd's financial regulation reforms and goes back to the causes of the crisis. Brilliant.
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3 comments:
Stewart is very funny and everything he said is just about 100% accurate except for one minor point....
Stewart said that "apparently everything Lehman did was legal".
Well Stewart is wrong.
According to many smart people who understand accounting fraud (much better than I do), including the Examiner responsible for the final report on the Lehman bankruptcy, Lehman committed accounting fraud and there are findings of "colorable claims" against various officers of the company.
RICHARD FULD, CEO:
The examiner found evidence for breach of fiduciary duty against the former chief executive for not investigating whether the company was deceiving investors about its leverage by using a repurchase and sale program, known as Repo 105.
"There is sufficient credible evidence to support a determination that Fuld's failure to make a deliberate decision about Lehman's disclosure obligations was grossly negligent or demonstrated a conscious disregard of his duties."
Erin Callan, CFO
Lehman's chief financial officer from December 2007 to June 2008 was warned that the Repo 105 program was a "headline risk" to the company and could damage its reputation if it became public, according to the examiner.
"Callan thus had ample red flags to alert her to potential problems arising from Lehman's Repo 105 program before she signed Lehman's first quarter form 10Q. Callan ignored these red flags," said the report.
Ian Lowitt, CFO:
"There is sufficient evidence to support a finding by the trier of fact that Lowitt was at least grossly negligent in causing Lehman to file materially misleading financial statements," said the report.
Even though the piece was funny, Stewart was wrong and misleading in a primary assertion - that "apparently everything that Lehman did was legal".
I normally wouldn't be so critical of Stewart, but since people are tuning into his show as "news", he shouldn't be so free and easy with the facts.
Apparently, according to the court appointed examiner, NOT everything Lehman did was legal.
And for what's it worth, Stewart did not even begin to scratch the surface of the causes of the crisis, which lay in an absurd compensation system that rewards people for short term performance with incomprehensible amounts of money, and without consideration of how the profits are generated and the consequences to the firms, much less to the larger economy as a whole.
These people ran their own companies into the ground between 2002 and 2008, while chasing larger and larger bonuses, which were based upon accounting frauds and other illegal financial activities. They collected the largest bonus payouts in the history of Wall Street, while the rest of us suffered through a lost decade, or worse in many cases.
In doing so, they ran their own organizations companies into the ground and the devastation to the US economy, well, too bad, in a free market capitalist system you will have winners and losers. Somehow Wall Street is always the winner and the rest of us, well I guess we're just collateral damage.
But what do they care, as Stewart said they are all in St Bart's laughing at the rest of us fools.
The day after, no make that the day of, the bankruptcy Examiner released his report, Fuld, et al should have been doing the perp walk in handcuffs into the Federal Courthouse in lower Manhattan.
I've heard that Callan might be turned as a witness. One can only hope.
So it goes.
TT
Well in fairness he did call it "fraud" which probably went too far based on the report. I haven't researched it in depth yet but from my understanding from NPR that day the report didn't find enough evidence for criminal charges but expect civil suits to be filed. Here's the four minute piece.
This Washington Post piece seems the most informative: "Valukas's report doesn't reach a conclusion on whether executives violated securities laws. It does say that the executives' decision not to disclose the effects of its business judgments "does give rise to colorable claims against the senior officers who oversaw and certified misleading financial statements." Colorable claims means there appears to be sufficient evidence to support the awarding of civil damages in a trial."
Also of interest is the failure of oversight as reported by Bloomberg.
If the Examiner is saying that in his opinion, damages in civil cases would most likely be awarded, then shouldn't that trigger an immediate criminal investigation, and future prosecution if the evidence supports such.
It's not up to the examiner or anyone else to determine if a crime may have been committed. It is up to the governing prosecutorial body, in this case I believe it would be either the Justice Department (assisted by the SEC) or the State AG of NY (insurance fraud) to bring charges in the event they believe a crime may have been committed.
Is there not sufficient evidence that crimes may have been committed?
Is there not sufficient reason now to open formal investigations?
What in god's name are these people waiting for?
Do we not deserve a public statement from the SEC, the Justice Department, and the NY State AG's office regarding possible criminality associated with the Lehman bankruptcy, given the available evidence?
Everytime a Wall Street stone is overturned more slime is uncovered.
What will it take for the prosecutors to defend the laws that they swore an oath to uphold, and what about their responsibility to the people, they swore an oath to protect?
TT
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