GROUNDHOG’S DAY FOR THE WATCHDOG

Christopher MarkowskiArticle, Wall Street FraudLeave a Comment

The ABC Network has a new show coming out this winter entitled Daybreak. The promo for the
show from ABC’s website states…

“Detective Brett Hopper’s life takes an unexplained detour when he’s charged with killing a district attorney, discovers his loved ones are in danger and that he’s being framed — and forced to relive the same day over and over until he can right what went wrong.”

Correct me if I am wrong here, but shouldn’t Bill Murray and Puxatawney Phil be receiving royalties for this show? Who at the network comes up with these ideas?

STUPID EXECUTIVE ONE: “Eureka! We take the Bachelor and instead do it with crossdressers; we can get Billy Jean King to host and get Boy George to do the music.”

STUPID EXECUTIVE TWO: “Nah…Let’s take the film Groundhog’s Day remove all humor and cross it with a Steven Seagal movie.”

One of my favorite columnists and authors, despite being a huge Red Sox fan, Bill Simmons lends a little perspective to the rip-off…

“Here’s the problem, ABC: You can’t rip off a popular idea THAT BADLY without acknowledging that same idea in some way. We’re fine with black “Groundhog Day” crossed with “24” — just
admit what you’re doing from the get-go. If there’s one thing that everyone universally hates, it’s somebody ripping somebody else off and not admitting that they’re ripping somebody else off.

That’s a recipe for disaster.

I submit to ABC that they cross Groundhog Day with an investment fraud theme. They could even state at the beginning of the show that it is based on a true story, because this past month I swear I was stuck in some sort of Groundhog Space Time Continuum. Scams that we had covered here in the newsletter and on the radio show were reoccurring, often with the same
culprits. It’s no Cop Rock but I think this show could work.

Scene I: The Evil Empire Strikes Again.
I am sitting in my office around 4:30 AM working on my computer with my son Nicholas on my lap. Instead of being jolted awake by Sonny and Cher singing “I Got You Babe,” I get the news
that the evil empire has struck again. South Korean prosecutors raided the Seoul office of Citigroup’s securities unit as a part investigation over allegations that it aided a private equity fund
Lone Star in manipulating stock prices. The Watchdog/Groundhog Day has begun.

We reported that…
Citigroup was thrown out of Japan, barred from dealing with Japanese investors. The Financial Services Agency revoked their license to serve brokerage customers. In the statement, Japan
criticized Citigroup/Smith Barney for not having properly functioning internal controls, also stating that it had uncovered a long list of “serious violations of laws and regulations” and “extremely
inappropriate transactions.” Over three years Citigroup/Smith Barney misled clients about the risk involved in some products, tied loans to the purchase of specific investments, allowed
transactions that looked like money laundering and extended loans that were used to manipulate publicly traded stock. The Japanese Financial Services review demonstrated a culture within
Citigroup/Smith Barney’s offices that were more than tolerant of lax and potentially criminal practices as long as sales targets were met, states Andrew Morse of the Wall Street Journal.
FSA officials stated that Citigroup/Smith Barney salespeople took advantage of Japanese customers, giving the unrealistic projections for returns on investments and selling them
complicated derivative products they did not understand.

They manipulated the Eurobond market in a scam that they named Dr. Evil. According to Sylvia Ascarelli of the Wall Street Journal, a senior Citigroup/Smith Barney executive in London, told
traders on his European government-bond desk that they were not making enough money for the
firm and ordered them to immediately come up with new trading strategies. Two weeks later, six
bond traders pushed the button on a huge bond trading strategy dubbed “Dr. Evil.” The trades
wrecked havoc in the European government bond markets and netted Citigroup/Smith Barney a
cool quick 15 million euros. European regulators are currently investigating the matter for
criminal violations. According to Professor Michael Levi, a specialist in economic crime at Cardiff
University School of Social Sciences in Wales, “It seemed like a plain example of the market
being rigged. This seems like playing with a stacked deck of cards.”

In 2001 Argentina defaulted on its bonds due to a massive evasion of taxes. In 2002, the Investigative Commission on Capital Flight set up by Argentina’s House of Deputies estimated
that the amount of Argentine assets held abroad had reached an astounding $127 billion, a figure that approached the country’s total recorded foreign debt. In a story that was overlooked in the
United States, TV journalist Maximiliano Montenegro caught a Citibank official in Argentina’s capital, Buenos Aires, offering to help a ‘businessman’ cheat on taxes. Montenegro had sent in
an actor to see what would happen if he told a Citibanker that he was an entrepreneur whose wife had just sold a company and didn’t want to report all the profits. The Citibanker, Mr Mariano, was captured on video enthusiastically talking about how he could help the couple evade taxes.

Last but not least is Italy, where Citigroup is accused of playing a crucial part in the multibillioneuro fraud that pushed Parmalat into insolvency. The company filed for bankruptcy after
collapsing under 14 billion euros in debt. Citigroup engaged in a series of transactions with Parmalat or its subsidiaries whose only economic purpose was to enrich Citigroup, at the ultimate
expense of Parmalat,” alleged the lawsuit. “Citigroup’s transactions with Parmalat were knowingly designed to assist Parmalat in a broad, continuing series of fraudulent transactions.”

SCENE II: Taking Candy Away from Babies, Again.
This past month the NASD has found that both Chase Investment Services and MetLife
Securities failed to supervise the sale of 529 College Savings Plans. The NASD stated that both
firms respectively sold the plan without providing specific criteria or guidance to clients.
Translation: They sold the college savings plans with the highest possible commission, looking
out for themselves, instead of their clients. Much like Phil Connors (Bill Murray) stepping into that
deep cold puddle of water everyday. We also reported back in October of 2005 that the
brokerage firm for aging hippies (Ameriprise) was doing the same thing. In March of 2004 we
also reported on the Columbia Young Investor Fund whose target market was young investors
engaged in market timing, thus fleecing the children who were invested in the fund. This was
coupled with a performance record that lagged 80% of its peers.

SCENE III: Ned Ryerson Returns.
The NASD announced this past month that it has fined CCO Investment Services, a wholly
owned subsidiary of Citizens Bank, for failing to establish, maintain and enforce a reasonably
designed supervisory system and written procedures relating to a series of issues , including
customer suitability, telemarketing compliance, commission records, etc. regarding the sales of
annuities. This was an incredible example of the Watchdog/Groundhog effect because we
reported back in March of 2005 this very same story with none other than Citizens Bank.
The scam perpetrated by Citizens Bank was as dubious as they come. Tellers at the bank
earned compensation on a point system by referring depositors, particularly senior citizens who
had maturing certificates of deposit, to their shark stockbrokers. For many senior citizens, their
weekly trip to the bank is a social event; they build up trust in certain tellers who can take
advantage of them, as in this case. Let’s also not forget the blood-sucking brokers working in the
corner office looking to score another fat payday. One of the brokers at the South Yarmouth
branch office had more than half of his variable annuity sales directed at senior citizens.
Disgusting is one word that comes to mind.

In a similar case Bank of America was fined because they sold variable annuities to people with
Alzheimer’s disease and others who were unable to understand the investment risks.

Scene IV: How does it end?
In the movie Groundhog’s Day Phil Connors is not released from his day of torment, until he
finally realizes that the day isn’t torment at all, but a series of opportunities to make life better for
everyone around him, including himself. It’s a pretty deep movie if you think about it. Anyway my
situation is not so deep, if you want to put an end to the Watchdog/Groundhog day stop being a
victim. Stop falling prey to mind-altering, crook empowering greed. It’s real simple. If some jerk
is guaranteeing double digit returns for your money he or she is a liar. For every crook and scam
that we expose there is another one that takes its place. Get-rich-quick con artists are the world’s
second oldest profession. Put an end to the cycle by ignoring them and giving them the respect
they deserve…none.

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