AMERICAN PSYCHO

Christopher MarkowskiArticle, Wall Street Fraud0 Comments

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NOVEMBER 2011

A recent study by the Swiss research University of St. Gallen seems to have scientifically proven what readers of our newsletter and listeners of the Watchdog on Wall Street Radio Show have been privy to for years.  The University found that the behavior of stockbrokers’ tops that of psychopaths when it comes to manipulation and recklessness.

According to Scientific American, psychopaths exhibit characteristics such as: charm, dishonesty, callousness, remorselessness, infallibility and a fondness for irresponsible behavior.  The Swiss study’s authors, forensic expert Pascal Scherrer and Thomas Noll (a lead administrator at the Poschwiess prison north of Zurich) compared and contrasted the behavior of 28 brokers who were given computer simulation and intelligence tests to that of psychopaths who were given identical tests.

The results…

Brokers outscored psychopaths in their willingness to engage in risk.  Brokers were more eager to harm their opponents in their desire to “come out on top.”  Thomas Noll stated in the study that, “Naturally one can’t characterize the traders as deranged.  But for example, they behaved more egotistically and were more willing to take risks than a group of psychopaths who took the same test.  Instead of simply pursuing the greatest gain possible it was most important to the traders to get more than their opponents.  And they spent a lot of energy trying to damage their opponents.”  Noll also stated their behavior resembled people “whose neighbors might have the same car and then took after it with a baseball bat so they could look better themselves.”

Neither Noll nor Scherrer were able to explain why brokers were so willing to cause some much damage and pain in their quest to get ahead.  Since they were unable to explain the phenomenon, I will give you my theory.

Do you remember when Roy Horn of the Siegfried and Roy Las Vegas variety show was attacked by one of his tigers?  Comedian Chris Rock commented on the attack by going after all the pundits and experts that were rationalizing that the attack occurred because the “Tiger went crazy.”  Rock stated that the “The tiger didn’t go crazy.  The tiger went tiger.”   The same truth holds true for humans as well.  If someone has had an ethical bypass at birth there is a pretty good chance that it will surface.  It does not matter what school the ethically challenged graduated from, or their societal pedigree; they are who they are.

For Example…

The Roof Is On Fire

This scandal I am about to describe is an almost perfect example of how conflicted, crooked, and disgusting the conduct of the crony capitalists of Wall Street, Washington D.C and the main stream media.  In other words, what we call “The Watchdog on Wall Street’s Axis of Evil.”  

Bank of America reached an agreement to pay $8.5 billion to settle claims by investors who were suckered and duped into purchasing mortgage-backed securities.  I know it sounds like a big settlement, but putting it into perspective, the face value of all the crappy bonds sold was $424 billion.  One would think a fraud of this magnitude might garner a criminal investigation.  One would think wrong.  In this case nobody has taken responsibility.  There has been no admission of guilt.  As far as the government is concerned there has been no fraud.

The Securities and Exchange Commission stated that J.P. Morgan Securities would pay $153.6 million to settle charges that the firm misled investors in mortgage-backed securities transactions “just as the housing market was starting to plummet.”   Note to readers: The word misled, when used by the SEC or any governmental agency when dealing with Wall Street or other crony friends, translates to lied, cheated, scammed or defrauded.  In this case, the company once again neither admitted nor denied the charges.  J.P. Morgan did agree to improve how it reviews and approves mortgage-bond deals.  That should make us all rest easy.  Was this deal with the SEC sealed with a pinky promise?

Citigroup agreed to pony up $285 million to settle civil charges that it had misled customers during the housing bubble.  Citigroup also took a pledge!  They promised they would never ever violate one of the main antifraud provisions of the nation’s securities laws.  How cute!  Now we should all feel warm and fuzzy about Citigroup because they promised to be good boys and girls.  The regulators and Citigroup really do think we are stupid.  Citigroup took the same pledge in April 2000, March 2005, May 2006 and July 2010.

They are not the only disingenuous liars.  According to a New York Times study, nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, J.P. Morgan Chase, Credit Suisse, Merrill Lynch, Wells Fargo, UBS and Bank of America have settled fraud cases by promising that they would never ever violate an antifraud law, only to have the SEC determine that they did again a few years later.  In what could be described as eerily reminiscent of Jon Lovitz’s pathological liar character Tommy Flannigan from Saturday Nigh Live; The New York Times analysis of enforcement actions during the past 15 years found at least 51 cases in which the SEC concluded that wall street firms had broken anti-fraud laws they had agreed never ever to breach again.  “Yeah, yeah that’s the ticket!”

This ruse is essentially the same concept as if an individual was allowed to buy bomb insurance on someone else’s house.  It doesn’t end there…the houses where bomb insurance was purchased were also built by the insurance purchaser.  It gets worse…Mr. Contractor/Insurance Buyer also placed time bombs within the walls of the houses set to go off in the not so distant future.  In other words Mr. Contractor/Insurance Buyer/Bomb Maker (A.K.A. Wall Street) makes money constructing and selling the house, and also makes money when the time bombs that they set go off, and the house explodes.  Remember that, the next time you see one of their soft and fuzzy commercials on the tube or drive by one of their offices.

Municipal Bonds Soprano Style

SEC Enforcement Director Robert Khuzami announced that J.P. Morgan Chase will pay a $228 million fine for a bid-rigging scheme involving municipal bonds.  J.P. Morgan is just one of a number of banks involved including Bank of America and UBS.  Matt Taibbi of Rolling Stone wrote on his blog, “This is one of the best examples we’ve had yet of the profound difference in the style of criminal justice enforcement for the very rich and connected, versus the style of justice for everyone else.  This scam that Chase, Bank of America, and UBS were involved with was no different in any way, really from old-school mafia-style bid-rigging scams.”

I know…it sounds so “Occupy Wall Street,” but he is right.

The major firms in a Soprano-like manner carved up territory between them, arranging their business so they would not step on each other’s toes and bid against one another in municipal debt auctions.  In other words taxpayers got screwed with interest rates that would have been lower if it was a truly competitive landscape.  The mafia operates in the same fashion when it comes to public contracts.  The mafia families would get together and divide up the boroughs and neighborhoods.  The families could then intimidate their way in the bidding process or in reality, lack their of.  The public ends up, over paying for garbage collection, road construction, or anything else they can get their hands in.  Some first hand experience…I used to work at a restaurant on the Upper East Side of Manhattan, while cleaning up behind the bar one night, a man walked in and instructed me to let my boss know that, HE was taking care of garbage from then on.  Being a NYC novice, I was bit naïve and was taken back by what the man said.  I asked for his name or a business card, he proceeded to laugh at me and tell me, “My boss would understand.” and walked out.

Taibbi, in his blog points out, “If Khuzami’s defendants had been a bunch of Italians from Howard Beach, they would be facing RICO charges and would be looking at years in prison, plus seizure of all their ill-gotten gains, in addition to civil suits and penalties.  You don’t have to take my word for it.  Go back for yourself and look through bid-rigging cases in the past.  If you see a bunch of Italian names in the list of defendants, you can pretty much guarantee that there’s a RICO prosecution involved.  But if the defendants are a bunch of Ivy-League educated bankers from wall street, what we end up getting is a negligible fine (officials will brag about this $228 million, but it’s a drop in the bucket compared to what banks make scamming communities and governments) and, as always, no admission of guilt.”

The Devil is in the Details

I get some nasty emails and phone calls from listeners of our show when I warn of people who use God in their sales pitch.

Here is an important life skills tip:  Just because someone can cite bible verse and tells you he is a man of God or has some biblical investment strategy does not make it so.

I have warned repeatedly of con artists who infiltrate houses of worship and take parishioners hard earned dollars, and I have yet to be proved wrong.  Not once has someone called up or emailed me and told me how successful they were investing with the person who utilizes Jesus in his sales pitch.

From the Associated Press, “With confidence and zeal, Ephren Taylor riveted audiences at mostly black churches with a list of his impressive accomplishments and an uncanny business sense.  He had the blessing of top clergy as he gave financial seminars from the pulpit on Sundays, promising rock-solid investments only many of the churchgoers said they haven’t seen a dime.”

The pulpit?  What in the world is a guy doing selling investments from the pulpit?

Cathy Lerman an attorney who is suing Taylor in an effort to get her clients money back stated, “He knew if he went to a Christian African-American and said, I can take your hard-earned investment money, and you’re going to earn more money, but more importantly you’re going to do good for your church and community, that they would fall for it hook, line and sinker.” 

Taylor went to an Atlanta mega church with his sales pitch.  On Saturday, he held a financial seminar aimed at children, telling parents to hold all their questions.  Flanked by Bishop Eddie Long the following day, he told the 25,000-member congregation that his investors would buy can’t-miss real estate rather than take risk on Wall Street.  He told parishioners that their money was guaranteed safe.

From my March 2006 article Affinity Fraud

Their pitch is simple… “Since I am like you and believe like you, you can believe in me and what I say.”  This is the hook of the affinity fraud con artist.

Dante Alighieri wrote in his early fourteenth century masterpiece the Divine Comedy that in the eighth circle of hell in the eighth ditch “Fraudulent Advisors” were sent to be trapped in flames.  However in the ninth circle of hell “Traitors” were sent, distinguished from the merely fraudulent in that their deeds involved knowingly and deliberately betraying others.  These “Traitors” according to Dante are frozen in a lake of ice that is kept frozen by Satan’s flapping wings while he sits chewing on sinners.  It is my belief that perpetrators of affinity fraud are an evil cross between both “Fraudulent Advisors and “Traitors. I wonder what happens to these fraudulent advisors-traitors who use God to sell their scams.  Dante does not specify.  Whenever and whatever is happening to them, the demons in charge of that ditch are certainly going to be very busy.

Does This Really Surprise Anyone?

Bernie Madoff recently stated that top Wall Street executives knew all along what he was up to with his multi-billion scam and didn’t do a thing about it.  The Financial Times conducted a jailhouse interview with him where he stated that all the banks he worked with had sufficient information about his accounts to detect any suspicious activity.  “I am not a banker, but I know that $100 billion going in and out of a bank account is something that should alert you to something.”  He went on to say that banks were “going to have big problems” when all of the facts are disclosed.  He added, “There were senior people at the bank who knew what was going on.”

Big shocker there.  These big banks and firms love acting as the clearing agent for con artists and penny stock firms.  They can take a slice of the ill-gotten gains without the risk.  All of the boiler room operators utilized the big banks as clearing agents.  All of these banks knew EXACTLY what was going on, and did nothing.  It is kind of like those losers at the Wall-Mart over this past black Friday sales day that decided to step over a elderly man who was on the floor having a heart attack.

In 1770 Edmund Burke wrote in Thoughts on the Cause of the Present Discontents that, “When Bad men combine, the good must associate; else they will fall, one by one, an unpitied sacrifice in a contemptible struggle.”  I agree with Burke’s observation with one exception, when one refuses to come to the aid of another or refuses to rebuke bad works when one is capable; disqualifies he or she from the ranks of good men.

 

Satter Marlene Who’s More Reckless: Stockbrokers or Psychopaths Advisor One 9/30/2011

Fitzpatrick Dan Bank of America Moves to Settle Mortgage Claims Wall Street Journal 6/29/2011

Editors J.P. Morgan to Pay $153.6 Million to Settle SEC Charges Wall Street Journal 6/21/2011

Wyatt Edward Promises Made, and Remade, By Firms in SEC Fraud Cases New York Times 11/7/2011

Taibbi Matt JP Morgan Chase Fine: Another Slap On The Wrist For Wall Street Rolling Stone 7/11/11

Hallowell Billy Faith Ponzi Scheme? Young CEO Sued For Allegedly Defrauding Christian Congregants Of Millions The Blaze 10/31/2011

Markowski Christopher Affinity Fraud Markowski Quarterly 3/2006

Gardner David Bernie Madoff Points Finger At Big Banks Who Knew What Was Going On During Scam UK Mail 4/9/2011

 

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