Showing posts with label Banking Crime. Show all posts
Showing posts with label Banking Crime. Show all posts

May 3, 2018

Puerto Rico's Maria and the Debt Created The Perfect Storm}} From Rich to Poor Once The US Gov't Cut The Plug


 Any Town PR, USA 7 Months Ago

  Riding up the rickety elevator to the top of the Palo Seco power plant just outside San Juan, this convergence of natural and economic forces was apparent. As engineers fought to turn the plant back on and restore electricity to the island, weeds and rusted steel revealed decades of government neglect.

"There are elements that have not been replaced in years," said José Sánchez, then the head of power grid restoration for the U.S. Army Corps of Engineers. "Puerto Rico is in dire need, not only of power plants but a reconstruction of the grid itself."

And it wasn't just the power grid. Water pumping stations, bridges, levees, roads — all had been starved for investment for years. Even people's homes weren't as strong as they should have been. Before the storm, the island could afford only five building code inspectors, for a population of 3.5 million people.

Banks involved in Puerto Rican finances declined NPR and Frontline's requests for an interview but said in statements that they have done nothing but try to help Puerto Rico when it was in need of money.

One thing that is clear: The island needed more help than it got.

"We've gone through not only Maria, but we've gone through the financial crisis," said top Puerto Rican banker Carlos Capacete. "It doesn't end. And there's no help coming. In the financial crisis, [Puerto Ricans] are the ones left holding the bag here. There was no life raft in the plane."

'Down The Rabbit Hole'
It wasn't always this dire. For decades, Puerto Rico's economy was booming. A special tax break on the island lured in pharmaceutical companies and manufacturers.

Then in 1996 Congress started phasing out the tax break, and a decade later the island spun into recession. Rather than cut spending to make up for declining tax revenue, the Puerto Rican government went the other way. It borrowed money. 

"When you start borrowing long term just to pay next month's payroll you know you are going down the rabbit hole," said Sergio Marxuach, the policy director for the nonprofit Center for a New Economy in Puerto Rico.

"It was crazy," he said. "The government was borrowing at an incredible clip."

Like most governments, Puerto Rico preferred to borrow money through the sale of bonds. The island would take an investor's money and essentially give him an IOU — a promise to pay the money back with interest. Investors liked the deal because they could earn that interest tax-free.

Banks liked the deal too. They stepped in to structure the bonds and find buyers — often pension funds, retirement accounts, maybe the bank's own investment clients — all in exchange for fees.

"Fund managers, they will not admit this now, but when Puerto Rico was selling debt like pancakes, they loved Puerto Rico debt," Marxuach said. "You would put ... these Puerto Rico bonds into your portfolio and since they had slightly higher interest rates and no taxes attached to them, you immediately looked like a genius. You just bumped up the entire return."

"So that's your bonus," he added. "That's your new Mercedes, your new yacht."

NPR and Frontline talked with more than a dozen bankers, advisers and brokers involved in Puerto Rican bonds who described a fast pace of moneymaking and competition, and politicians desperate for an influx of cash.

"All the major banks in New York would come to Puerto Rico on a regular basis to pitch deals," said Capacete, a former branch manager for UBS, the largest broker-dealer in Puerto Rico. "They make commissions. They make fees. This is kind of like a moneymaking machine. As long as there are transactions coming and going, they're making a ton of money."

But Capacete said that in 2011, he and other bankers started realizing what many bond investors hadn't yet figured out: Puerto Rico was in trouble. There was too much debt. And instead of moving away from bonds — and keeping the shaky investments out of their clients' portfolios — Capacete says the opposite happened. He said banks pushed brokers to sell more bonds.

Many of the bonds were specifically designed to be sold to Puerto Ricans, packaged into special funds that were less transparent than anything regulators would allow on the mainland. Regulations against things such as banks recommending their own bond deals to investors didn't apply on the island.  
Even Before Hurricane Maria Hit, Puerto Rico Was In Financial Ruin
According to court records filed in the aftermath of the island's economic calamity, brokers sold thousands of Puerto Ricans these special funds. This left hundreds of millions of dollars of the island's wealth concentrated in increasingly tenuous investments — at the worst possible time.


How FEMA Failed To Help Victims Of Hurricanes in Puerto Rico Recover
And then, Capacete says, he learned it was even worse than it looked. He says a client warned him that some brokers on the island were pushing Puerto Rican investors — who already had so much of their retirement or personal savings in these special funds — to borrow still more money, and invest that in the funds too. He says he sent emails complaining to the bank.

"It's unethical, it's against the banks' regulations and it puts the client in a really, really tough risk situation," Capacete said.

UBS declined NPR and Frontline's request for an interview but said the loan terms were fully disclosed to clients and that Capacete is a disgruntled former employee who has sued the bank. The bank said the loan program as a whole did not violate financial regulations, but that it had fired the one broker it discovered had been using the program incorrectly. And it pointed to a separate case where federal regulators determined the bank had not misled its customers.

Eventually federal regulators investigated and found the bank should have had a system in place to prevent the practice. They fined UBS $34 million for the loan scheme and other problems. They also fined UBS and four other banks for putting clients at risk in the special Puerto Rican funds.

The party came to an end for investors in 2013. Bond prices tanked. All those thousands of investors tied up in the same Puerto Rican funds were in serious trouble, and those who had taken out additional loans suddenly had to cover them.

Within months, hundreds of millions of dollars in Puerto Rican wealth was wiped out. Rating agencies downgraded Puerto Rican bonds to junk.

Looking back, Rosselló said at this point in the financial crisis it seemed like "the government of Puerto Rico was run as a big Ponzi scheme."

"What you had was essentially a black box of a government running, that had no clarity as to what was being borrowed and or what was being spent," Rosselló said in an interview with NPR and Frontline.

'The Banks Get Out'

Once again, at a time when you might think Puerto Rico and the banks would turn away from the bond business, they did the opposite. In 2014, Puerto Rico and a group of banks teamed up for another bond deal. At $3.5 billion, it was the largest municipal junk bond offering in U.S. history.

Puerto Rican officials told NPR and Frontline they needed the cash to make payroll.

But some bankers and brokers, several of whom worked on the deal, described the 2014 bond as more than just a bond deal. They said it was also an exit strategy for the banks.

Government records show banks had been lending Puerto Rico hundreds of millions of dollars and making other investments there in the years before the financial troubles began. And according to bond documents from the 2014 deal, nearly a quarter of the entire bond went to those banks.

Ricardo Rosselló, governor of Puerto Rico
Almost $900 million raised from the bond issue didn't go to Puerto Ricans — or even to keep the government afloat — but instead went to pay back loans, pay fees or eliminate risk of banks directly involved in putting the deal together.

Barclays, which led the bond deal, received almost $500 million; Banco Santander received $99 million; JPMorgan, $74 million; Morgan Stanley, $24 million; among others.

Neither Barclays nor any of the other banks involved in the deal would agree to an interview. In statements, banks said that they fully disclosed their financial stake in the deal and did not influence how Puerto Rico used the money. Morgan Stanley noted that it also extended Puerto Rico $250 million in credit after the bond.

Axel Rivera, who worked at Morgan Stanley as a bond broker and financial adviser when the deal was done, said as the island got closer to default, banks were getting nervous.

"They had much more [debt] than they wanted and they needed to unwind that," Rivera said, adding that the bond deal allowed them to do that.

"The banks get out, and everybody else gets stuck with the bill," Rivera said. "Most of the general public didn't understand what was going on. The darkness of this bond deal made a lot of people in Wall Street happy, but it was immoral in many ways."

Fifteen months later, Puerto Rico announced it couldn't pay its debt. The island was broke.

The bond funds crashed. Many Puerto Rican investors lost savings, retirement funds or their pensions. The government started closing hospitals. There was little money to shore up bridges or strengthen the electrical grid.

And then, on Sept. 20, 2017, a Category 4 hurricane came barreling into Puerto Rico. The island was left to face the wrath of the storm in a place starved of investment for years by a government that had to borrow to pay its bills.

DO YOU WANT TO HELP?? Make a Trip to Puerto Rico...San Juan is back to Normal... FEMA has only helped with payments to only 1% on the island (The Mximum is around $31K for loses)


PBS Frontline's Emma Schwartz, Kate McCormick and Rick Young contributed to this report.

December 15, 2017

TD Bank Has The Inheritance Money UPS Lost But Neither One Would Pay The Poor Owner

The Money is Not lost because TD Bank has it. UPS Lost the Bank note which no one has cashed but the bank refuses to give the money to the family who bought the bank note to ship for security to recipient.

It has been more than nine months since a family in Canada realized that UPS lost a bank draft worth $846,000 (Canadian) that was sent to an inheritor. So far, the only money recovered is the $32 it cost to ship the document. The family's bank, TD Canada Trust, has delayed issuing a new bank draft.
Lorette Taylor, who lives in Ontario, was distributing the proceeds from her late father's estate when she tried to send an inheritance to her brother, Louis Paul Hebert, who lives near Cornwall, Ontario, some 270 miles from the office of the family's lawyer. 
Their story ran on the CBC on Thursday — and within hours, reporter John Lancaster says in a tweet, TD Canada Trust issued a statement on Thursday that read, "It's clear to us we didn't get this right along the way and that there was more we could have done to come to a resolution faster."
Taylor told the CBC that she and her husband, John, went to their longtime bank, TD Canada Trust, hoping to get a certified check for $846,000 Canadian — around $660,000 in U.S. dollars, at today's exchange rate. But TD employees had a different idea. As Taylor said, given the large sum, "They said a bank draft was more appropriate."
Bank drafts are generally seen as being one step beyond cashier's checks, in terms of security and guarantee. In nearly every case, they're issued to signify that a bank has total control of the money being transferred. And in theory, at least, they're able to be replaced or reimbursed if an initial draft is lost or destroyed.
An mage taken from a TD Canada Trust error message that NPR received when trying to read about how the institution handles bank drafts.
TD Canada Trust/Screenshot by NPR
We can't get more specific about how TD's Canada operation handles bank drafts, because when we clicked a link in this statement on its site to "find out more information about purchasing a draft," the site returned a page stating, seemingly without ironic intent, "The document you requested cannot be found."
The Taylors' bank draft never made it to Cornwall. UPS says it was able to track it to Concord, north of Toronto. But after that, the shipping company says, the trail turns cold. In February, TD Bank said the draft could be canceled — but only if the Taylors signed an indemnity agreement.
"Essentially, the bank wanted to hold Lorette — the executor of her father's estate — liable for life if the draft was cashed illegally," the CBC reports. Under the terms, the liability would extend to Lorette's spouse and heirs.
Lorette Taylor eventually signed that agreement; the bank still did not produce the funds. TD officials told the Taylors that they would need to secure the balance of the draft further, by taking a lien on their home. To that, they refused.
"If the bank really wants indemnity," she said in explaining her thinking to the CBC, "then UPS should sign it."
There may now be new hope of a deal being reached, particularly as TD Canada Trust has issued a new statement as the story has won a wide audience in Canada and beyond.
But Hebert, 61, who went to the UPS store to await his hefty check back in February, is still waiting.
"TD has the money" he told the CBC. "The money is actually sitting in an account with TD. Nothing has been stolen. It's there. That's my inheritance."
Every day, Hebert said, he kicks himself for not simply driving to pick up the bank draft.
Discussing the difference the money could have made, he said, "I would have been retired."

December 6, 2017

Mueller Wants Trump Bank's Records

US special counsel Robert Mueller has asked Germany's Deutsche Bank to provide records of accounts held by Donald Trump, according to reports.

Mr. Mueller issued a subpoena to the bank several weeks ago demanding data on transactions linked to the US president, Reuters news agency, and a German newspaper said.
Deutsche Bank has previously rejected similar demands, citing privacy laws.

Mr. Mueller is investigating claims of collusion between Mr. Trump and Russia.

US investigators are said to be demanding information on dealings linked to Mr. Trump as part of an investigation into alleged Russian influence in the US presidential election, according to Handelsblatt and Reuters.

Deutsche Bank, which is one of the Trump Organisation's major lenders on its real estate projects, said it would not comment on any of its clients.

In June, the German bank rejected requests for account records by Democrats in the US House of Representatives to provide details of the president's finances.

Russia: The 'cloud' over the Trump White House
As special counsel, Mr. Mueller, who headed the FBI for more than a decade, has the powers to subpoena records and bring criminal charges.

He can also prosecute anyone who interferes in his investigation into crimes including perjury, obstruction of justice, destruction of evidence and intimidation of witnesses.

US intelligence agencies have concluded that Moscow tried to sway the presidential election in favor of Mr. Trump.

It is alleged that Russian hackers stole information linked to the campaign of his rival Hillary Clinton and passed it to Wikileaks so it could be released to undermine her.

Mr. Trump has repeatedly denied any collusion with Russia, calling the allegations a "witch hunt".

July 14, 2017

Jane and Bernie Sanders Feel The Heat from The Investigation/Closed College

A federal investigation into Jane Sanders is quickly becoming a political problem for her husband, Sen. Bernie Sanders. Federal investigators are looking into whether Jane Sanders lied in a loan application when she was president of Burlington College, a small liberal arts school along the shore of Lake Champlain.
Questions about Jane Sanders' time at the college are putting Sen. Sanders on the defensive at a time when national speaking tours and regular appearances on cable talk shows have some of this supporters predicting a 2020 presidential run.
Investigators have not formally accused Jane Sanders of any wrongdoing, but at least one donor has publicly said that Sanders mischaracterized the financial gift she'd promised to the college. Sanders allegedly claimed in loan documents that Corinne Bove Maietta, a member of a prominent Burlington family, promised a series of donations to the college, but Maietta has since said that the money was actually promised as a bequest, not recurring gifts.
Jane Sanders is one of her husband's closest political advisers. On the campaign trail last year, she took the stage with him regularly, from campaign rallies in rural Iowa to his victory speech after the New Hampshire primary. In hotels on the campaign trail, she could be seen in the lobby working with campaign staff.

Burlington College, where Jane Sanders served as president from 2004 to 2011, closed in 2016.
Wilson Ring/AP
A spokesman for the Sanders family says the investigation is part of a politically motivated attack designed to hurt the Vermont senator's political career, but that hasn't stopped investigators from requesting documents and conducting interviews with former Burlington College officials.

Here's what we know — and what we still don't know — about the Burlington College investigation:
Jane Sanders took over as president of Burlington College in 2004 with plans to growthe small liberal arts school (enrollment was below 200 in the college's final academic year). By 2010 that plan included expanding the college into a new campus.
In 2010, the college got a loan in order to buy a $10 million headquarters building on more than 30 acres of waterfront land just a mile north from where Sen. Sanders would launch his presidential campaign more than five years later.
People's United Bank provided the money. The college bought the property. Six years later, after Burlington College's accreditation came into question over financial woes, and just months after federal agents began asking questions about Jane Sanders' loan application, the college closed.
While the investigation began just as the college was collapsing, Sanders and his supporters say the event that brought Jane Sanders under scrutiny has nothing to do with Jane Sanders or Burlington College. Sanders says this whole situation is a political play by Republicans to hurt his reputation. Whether the investigation reveals wrongdoing or not, Republican operatives are working to bring this issue into the spotlight.
In January 2016, more than five years after the loan to Burlington College was approved, and eight months after Sen. Sanders announced his presidential run, Brady Toensing wrote a letter to the Department of Justice calling for an investigation into the statements Jane Sanders made on the loan application. Toensing served as the Vermont campaign chairman for President Donald Trump's 2016 campaign, and he's the co-chairman of the Vermont Republican Party.
Within a few weeks of Toensing's letter, former college officials said, they heard from federal investigators who were asking questions about what Jane Sanders told lenders. The Washington Post reported this week that prosecutors have subpoenaed college records for a grand jury.
The federal investigation hadn't been publicly reported when Burlington College shut down in the spring of 2016, but the local non-profit news site VTDigger revealed emails this spring from Vermont's Agency of Education that showed officials discussing the investigation.
Since VTDigger revealed the federal investigation, Republican Party staff have been working to generate press coverage about the investigation and implicate Sen. Sanders himself, but there's no public evidence to suggest Sanders was in any way involved with the Burlington College property deal and no public evidence that he is under investigation.
Jane and Bernie Sanders hired a lawyer this spring, after news of the investigation was public. Sanders' detractors say the move shows that there's something the couple is trying to hide. Family spokesman Jeff Weaver told The Washington Post that there's no truth in that argument. He says the couple brought lawyers on because of fears that President Trump or Sanders' other political adversaries would improperly use the Justice Department to damage Sen. Sanders' reputation.
The investigation leaves Sanders sharing a small piece of common ground with President Trump: Both men say political enemies are making up stories about them and their families to hurt their reputations and distract from the substance of their policies.
As with Trump, the investigation Sen. Sanders' family faces could change the political landscape of the next election; for Sanders, that could come as soon as 2018, when he faces reelection in Vermont. Sen. Sanders hasn't yet declared his candidacy but his would-be opponents have already announced runs, and they're already using Burlington College to call Sanders' character into question.

June 10, 2015

A Criminal bank “too big to Jail" Now Lays off 250,000 Workers


With HSBC's announcement that it will lay off 25,000 workers, sell its Brazilian and Turkish businesses, and separate its retail operations from its investment banking in the United Kingdom, you could be forgiven for thinking that the financial sector is in some kind of trouble again, or that regulators have forced the industry to cede some of its stake in the global economy. You'd be wrong.
At least in this country, finance is back and feeling better than ever, as Neil Irwin wrote in the New York Times last month:
Seven years after a crisis that shook Wall Street to its core, the financial sector’s economic imprint has largely recovered. The number of people working in the securities business nationally has returned to 2007 levels, as has the gap between the compensation of Wall Street workers and that of everyone else. The financial sector as a whole is reporting profits that are as large a share of the overall economy as in the early 2000s and more than double their average level over the 70 years ended in 1999.
National and investment banks, though, are the ones that have enjoyed this success, not the behemoth international firms such as HSBC that have simply proven too cumbersome to manage, the Economist explained earlier this year. The costs of global scale outweigh the benefits, it turns out:
The panic about global banks reflects their weak recent results: in aggregate the five firms mentioned above reported a return on equity of just 6% last year...
There is a growing fear that the costs of global reach — in terms of regulation and complexity — exceed the potential benefits.
It all seemed far rosier 20 years ago. Back then banks saw that globalisation would lead to an explosion in trade and capital flows. A handful of firms sought to capture that growth. ...
These giant firms proved hard to manage. Their subsidiaries struggled to build common IT systems, let alone establish a common culture. Synergies have been elusive and global banks’ cost-to-income ratios, bloated by the costs of being in lots of countries, have rarely been better than those of local banks. As a result these firms have all too often been tempted to make a fast buck.
HSBC, apparently, has not been able to resist that temptation. In case you've forgotten, former Attorney General Eric Holder was explaining why the Justice Department hadn't prosecuted HSBC for its alleged involvement with Mexican drug cartels when he famously said that some banks have become "too big to jail."
If the decision not to prosecute HSBC resulted from its importance to the global financial financial system, that choice looks questionable in retrospect. Maybe a criminal investigation by Holder's staff and the possible loss of HSBC's license to bank in this country would have been the straw that broke the camel's back, or maybe not. Its clear the firm has serious problems, apart from the actions of regulators here.
HSBC has run afoul of regulators around the world. "Explaining why the bank had failed to hit its previous return on equity target — set when Mr Gulliver took over in 2011 — the chief executive said the performance was undermined by $11.1bn of legal, regulatory and other charges, as well as rising compliance costs and higher capital requirements. HSBC has been hit by fines and compensation for a number of legal scrapes, including rigging foreign exchange markets, breaching US sanctions and money laundering rules, and mis-selling payment protection insurance in the UK." The Financial Times.
"'Cutting 25000 jobs is inevitable consequence of loss of our core business of money-laundering, tax avoidance and Libor manipulation' - HSBC" -- @davidschneider

Max Ehrenfreund is a blogger on the Financial desk and writes for Know More and Wonkblog.

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