Too Big To Jail?

Last week (2012.08.22) William B. Harrison Jr. penned an OP-ED in The New York Times defending bankers. Harrison retired as Chairman of JP Morgan Chase in 2006 when he was rolling the dice with the best of the big banksters at the height of the Casino-i-zation of our banking sector. 

Harrison’s OP-ED would be laughable if he were not talking about a tragedy. A tragedy impacting nearly everyone in the world except the too-big-to-fail banks and the banksters who run them. They are back at their gaming tables doing fine since we bailed them out; safe in the knowledge that when they lose, we’ll be forced to bail them out again.

Harrison is wildly out of step with Sanford I. “Sandy” Weill, who suggested in a CNBC interview (2012.07.25) that it is time to break up the big banks. Not a new idea, but coming from Weill it exploded in the news cycle. Weill is the father of the very monster zombie banks that he now wants broken up. In 1997 he merged  Travelers Insurance Group and Citibank, creating the largest financial institution on the face of the earth. 

Like Harrison, Weill retired in 2006. However, unlike Harrison’s convoluted apologia, Weill takes a totally different tack. He wants the gaming tables out of our banks. Weill wants bankers focused on watching our money and making loans. It took a lot for Weill to step up and suggest that times have changed and it’s time to break up the big banks.

When Roger Clemens denied steroid use before a Congressional Committee, they went after him tooth and nail. The evidence against Clemens was pitifully weak and he was acquitted. Two years ago four Goldman Sachs executives appeared before a Committee led by Senator Carl Levin. 

Under oath they dodged and twisted and turned, but made statements that internal Goldman memos and emails showed were untrue; they lied. It’s difficult to prove that the “Wild West Wall Streeters” committed fraud. However, the arrogant banksters who lied under oath to Congress surely broke the law.

Senator Levin turned their testimony over to the Justice Department. While it’s tough to prove fraud, how tough can it be to show that the Goldman crowd lied? There’s a long paper trail to backup the charges. Where is the zeal displayed in prosecuting Clemens? Gone. The Department of Justice has advised the Sachs executives that they will not be prosecuted.   

There’s more. Six months ago Sachs, Wells Fargo and Chase all got SEC “Wells Notices” indicating the agency’s intent to look into their well-documented role in the current downtrend. In an abrupt about face the SEC let Sachs off the hook; they’re singing “Anything Goes.”

Well the lying dudes and the doubling dealing traders at Sachs are having a Cole Porter moment but not Sergey Aleynikov. He has been charged by NY State with stealing computer code when he worked at Sachs. This, only six months after Sergey was acquitted of the same charges in Federal Court. As one blogger noted, “The only way to get arrested when you work at Goldman Sachs, is to be accused of stealing from Goldman Sachs.”

Dancing To Big Pharma’s Tune

Two researchers writing in the British Medical Journal have concluded that despite what they say, Big Pharma is putting peanuts into developing new drugs. Joel Lexchin, MD, York University Toronto, and Donald Light, PhD, University of Medicine and Dentistry Cherry Hill, N.J. claim that most of the big drug makers put the bulk of their bucks into “tweaking” their big sellers in an effort to stretch their patent rights out as far as possible and that, much more, the real big bucks go into marketing. 

Additional research published by Dr. Lexchin along with Marc-André Gagnon, Université du Québec, Montreal, adds to the evidence that the drug makers’ claims that they spend more, on developing new drugs than in pushing existing best selling drugs are nonsense. The oft quoted $1.3 billion cost to bring a new drug to market breaks down quickly under the researchers’ lens. Half of that figure is what the drug company could have earned had they invested their bucks in a high flying index fund over a 15-year period. Tax deductions and credits make up another quarter (that’s our money), whittling the cost down to $330 million. Wait, even that figure is based on the most expensive new drugs, the top twenty percent. When you figure in all new drugs they come in at about $90 million a pop; a lot of money but a long way from $1.3 billion dollars. 

Meanwhile the real money goes into marketing. While the big drug companies make it really hard to come up with any numbers, Lexchin and Gagnon dug deep into multiple sources and concluded that the most modest estimate they could come up with had the drug companies spending twice as much on promotion as on R&D. This shell game behavior is nothing new; fifty years ago Senator Estes Kefauver came to roughly the same conclusions at the end of his Senate hearings. 

The tons of cash Big Pharma’s “K” Street agents pour into the pockets of the Congress have road-blocked any progress. A House Committee recently blamed FDA regulations for crucial drug shortages. A survey of doctors put the blame on the drug companies. These people are playing with our lives and driving up the cost of healthcare. Senator Bernie Sanders has a great idea; instead of the tax breaks we give the drug companies, offer grants to companies that develop new drugs. The drug companies would score big profits immediately; an incentive to keep working on more new drugs. Drugs that would be available in generic form immediately.

As opposed to a system that now has the drug companies making deals with generic manufacturers that end up holding generics off the market for years. The so-called "pay-for-delay" scheme has generic makers challenging the name brand Pharmas’ patents in court. Then settling for a deal that keeps the patent holder out of the generic market once the patent does expire. The FTC has been fighting this scam for years. Congress even tried to bar the practice, but the “K” Street types cut those efforts off at the pass. And in the end the alley cat ethics of Big Pharma leave us with the bill.                                                                                                 © 2012 GLG

Iran? Really?

Hearings scheduled for this week (2012.08.15) by the NY State Department of Financial Services will examine alleged money laundering on behalf of Iran by a British bank, Standard Chartered. They are accused of using their US Branch to clean up some 60,000 transactions totaling $250 billion, a quarter trillion dollars for Iranian customers.

The seriously damning evidence seems to come from Standard Chartered itself. Published reports have its CEO responsible for US operations warning that the Iranian deals could, “cause very serious or even catastrophic reputational damage to the group.” His bosses in London replied, “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

But even that isn’t the worst of it. The bank is alleged to have a manual detailing how to automatically cover up the illegal transactions. They even devised a fancy code name for the scam, “Project Gazelle.” When sanctions were imposed during the Clinton administration, the bank is alleged to have set up a plan to dodge the restrictions and to have warned that this scheme must not be sent to the United States to prevent prosecution.

Standard Chartered has, of course, brushed off the charges out of hand, a course hard to understand when their own records show that they were well aware that what they were doing was illegal all the way back to the mid-nineties when the United States first imposed sanctions on Iran. That would seem to put the bank in the position of deliberately breaking the law. And it wasn’t just our sanctions on Iran. Standard Chartered is said to have routinely ignored sanctions on Libya, Myanmar, the Sudan and any others it could make a buck from. Reportedly the FBI has an ongoing investigation into this bank.  

Off shore banks with operations in the United States seem to feel that they can ignore our rules, and they can, just not while they are doing business here. In the last few years our laws regarding sanctions against doing business with Iran and other nations have snared a batch of these banks. Typically they walk with a fine that amounts to a slap on the wrist. That seems to have emboldened them to push the limits more and more until we are looking at wide ranging nasty stuff such as the alleged dealings with criminal organizations by HSBC.

It’s time to take the gloves off; to go after the folks running these banks. We need to treat them as the criminals they are. We need to kick these foreign banks out of the country if they don’t abide by our laws. The arrogant response of the Standard Chartered executives in London to their New York folks’ red flag, makes it clear that nothing is going to change over there. That’s reason enough to give them the boot. We have enough arrogant bankers in the United States, we don’t need to import any more from London.

What’s It Take? RICO?

George Lundberg, MD, a physician and medical journalist, has a fresh approach to deal with outrageous practices by the pharmaceutical companies, RICO. In an opinion piece in Med Page Today he points out that a $3 billion dollar fine Glaxo Smith Kline (GSK) has agreed to pay is probably a fraction of the profit generated by the no-nos that triggered the fine.

In published reports GSK is said to have poured huge bucks into goodies for doctors, delivered by those well-dressed attractive professionals who whisk into your doc’s office with their sample case in tow, while you wait for hours to see the doc. They have tons of neat stuff, vacations meetings in exotic locations, dinners, speaking engagements with fat fees, prime seats at entertainment events, and on, and on. Of course most of this is out of bounds according to their industry code, but GSK reportedly ignored the rules as some of the pharma giants do.

GSK is said to have used the access thus gained to promote drugs for uses outside FDA approved boundaries. Once a drug is on the market doctors aren’t limited to its approved uses; they can prescribe it for anything they choose. Pharmas take advantage of this loophole to increase sales of their drugs. GSK is said to have pushed this opening to the limits, including in one case urging docs to prescribe a drug not approved for children, teens and young adults because in clinical trials the drug had triggered a small number of this demographic to become suicidal. Adults became suicidal in small numbers on this drug as well. However, suicidal kids and teens are not at all the same thing; they are already too prone to dark thoughts.

Are fines or industry codes going to reduce the level of bribery some pharmas practice? A practice that’s illegal everywhere except New Zealand and the USA. Pharmas pour billions into marketing in America; more than three-quarters of it into an effort to influence the drugs doctors prescribe. To be fair, many docs do not allow the pharma hustlers into their office. But too many welcome them and happily accept their bribes goodies even though they will swear these pharma bribes goodies have no effect on the scripts they write,,,,,, yea, right.

It is obvious that fines do not work; the pharmas look at them as a “cost of doing business.” What is it going to take to put a stop to these outrageous practices? Dr. Lundberg suggests that we recognize this scourge for what it is, racketeering, and go after those responsible –top pharma executives, maybe some docs– under the RICO Act. If these egregious activities threatened to trigger some serious jail time for the “Dons” of the pharmaceutical world, we’re pretty sure they would clean up their act. And we would all be much the better for it.

In fact, if the ethically challenged leaders in several sectors of our economy were to face RICO charges for their shenanigans, we would all be much the better for it.  For openers think LIBOR and rigging bond auctions.