Published CommPro.biz 2014.06.03

Credit Suisse - 

You Can’t Put A Bank In Jail

Credit Suisse, a Swiss monster bank apparently has copped a plea with the United States Justice Department. This story has been seeping out since United States Attorney General Eric Holder declared several weeks ago that no bank is “too big to jail.” While that sounds tough, the fact is that banks do not go to jail, people go to jail. And in this case nobody is going to jail. Justice is trumpeting the $2.6 billion dollar fine they got Credit Suisse to cough up. That sounds like a lot but it’s next to nothing given their massive criminal activity.

Credit Suisse sent hustlers out to recruit ultra-rich Americans. They arranged trips to Switzerland to open a secret Swiss bank account. Now, we’re not talking about a handful of rich folks; there are more than 20,000 Americans who are said to have as much as $12 billion stashed overseas with Credit Suisse. In that light the bank got off really easy. Meanwhile it’s business as usual at the bank; in fact their stock went up one percent the day this deal came out.

How are the Credit Suisse hustlers who recruited the ultra-rich and guided them into this tax racket anything but crooks? If they recruited rich Americans to show them how to hide their bucks from the IRS in secret Swiss bank accounts, that sounds to us like they conspired to defraud the United States government. If there are billions overseas still hidden away in Credit Suisse accounts, how have the American people been served?

Why aren’t the Americans who lapped up this deal being named? Why aren’t they being charged? Why aren’t the bankers who recruited them being charged? Why aren’t their bosses who sent them out to recruit tax cheats being charged? And their bosses’ bosses and the CEO of the bank, Brady Dougan, why aren’t they all being charged? Are we to believe Credit Suisse had a crew of hustlers vacuuming American bucks – as much as $12 billion – into secret bank accounts and Dougan didn’t know? It isn’t like he is a stranger in our land; Brady Dougan is a US citizen. One wonders, does Dougan have a secret Swiss account?

We have bankers laundering dirty money of every kind, telling the drug cartels, “If it’s cash we’ve got your stash.” We have bankers scheming to fix international interest rates and help rogue nations avoid sanctions. And now adding recruiting tax cheats to their litany of bad behaviors. AG Eric Holder maintains that sending these criminals to jail might jeopardize the world economy. Really? Instead we give them fines that they see as no more serious than a parking ticket. Yet, just let any of these banks have a couple of bad quarters and watch their top guy get the boot. Executive turnover is an everyday thing; to imagine that bankers are too important to jail is madness.

Published CommPro.biz 2014.04.08

Too Big To Manage, Not Too Big To Fail

In an effort to forestall another “Too Big Too Fail” recession, our Federal Reserve established the so-called Stress-Tests. The Fed looks at a number of aspects of a bank’s operations and determines its potential to go belly-up, requiring another taxpayer bailout, even triggering another recession. Frankly, none of the monster banks are stable. They engage in what would be illegal gambling except for the exemption the Congress gave them to label risky behavior as “Investments.” The eight largest banks have all been told to beef up; to add close to $70 billion in fresh capital.

The latest stress-test dealt a blow to Citicorp. The sprawling giant failed for the second time in two years. The last stress-test failure in 2012 led to a change in leadership, unseating the CEO. This is the second blow Citi has suffered in recent months; in February its Mexican operation was hit with a $400 million fraud. Basically the Fed found that Citi is out of control, not just too big to fail, but too big to manage. It’s clearly time to break up Citi’s operations; it’s time for Citi to become a bank again.

It’s obviously time for all the monster banks to break up their uncontrollable global operations. They’re all clearly too big to manage. When banks count their Vice Presidents by the tens of thousands, that alone should indicate that the same conditions that led to the breakup of the monster banks of the day in the 1930s are in place again today.  It’s also apparent that these behemoths serve no real purpose in our society.

Quite the opposite, the monster banks disrupt the banking sector. Aside from the role they play in manipulating interest rates and other hanky-panky, they make it more than difficult for our community banks. Take credit cards for instance. With the revenue from their legalized gambling operations, they can make offers that a legitimate community bank cannot match. They suck off the checking and savings accounts as well.

But unlike the community banks they don’t use the funds harvested from these sources to provide small business loans. They pour this cash into risky gambling ventures with no social benefit. That leaves the small businesses that create most of the new jobs in our economy starved for operating cash and our economy the worse for it. In addition to Citi, the Fed failed three international banks with operations in the United States including British giant HSBC which our Justice Department considered too big to jail when they were exposed as facilitating international criminal enterprises.

There are a host of reasons why the monster banks should become a thing of the past. Problem is they pour cash into the pockets of our legislators and thwart any effort to restrict or control them. Arrogant CEOs like Chase über kommandant Jamie Dimon strut and lecture our Congressional leaders, flashing cuff links with the Presidential Seal. Those sent to take care of the people’s business are instead increasingly beholden to those with the cash to dictate to them, among others the monster banks.

 
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Published 2013.10.31 CommPRO.biz

Do No Harm

The Hippocratic Oath is a widely edited set of guidelines credited to a long-ago Greek medical practitioner. It is estimated that 98% of medical students swear some form of oath, as do a large percentage of dental graduates. These oaths are focused on ethics and are often condensed into, “Do no harm.” Recent reports of predatory lending practices by doctors and dentists give us a picture of the other two percent.

Patients who lack insurance and those who need or want procedures not covered by their insurer, are being herded into various medical credit cards that are little more than tools created to ripoff the unwary by the monster banks and their lackeys. Wells Fargo and Citibank seem directly involved while others hide in the shadows providing the funds for the smaller credit card issuers. It’s the same set of scams and scammers that created the sub-prime mortgage disaster and more recently the on-going payday loan racket. They seem to be betting on the Justice Department giving them another get-out-of-jail-free card no matter how or who they ripoff.

The unwary –Who doesn’t trust their doctor or dentist?– sign up for these cards right in the doctor’s or dentist’s office. They are told that they will pay no interest if the card is paid off in three or four easy payments. What the docs don’t say is that you will be slapped with interest charges –close to 30% in some cases– if you don’t pay up before the end of the interest free period.

Let’s say you owe $1,000, about average for extensive dental work or plastic surgery. And let’s say you haven’t been able to make any payments over the four month interest free period. In most cases you’ll owe interest from the first month on the entire $1,000, plus the compound interest for the additional three months. You’ll be in hock for a lot more when the fourth month comes around. You can see that this is not going to end well when you start adding on late payments etc.

One of the independent card companies specializing in healthcare credit cards is said to have between five and ten million card holders. In addition to the medical practitioners who swear to do no harm, there are medical device hustlers, selling everything from power scooters and chairs, to hearing aides. These people aren’t even restrained by a “Do no harm” oath. Although, when bucks are at stake some doctors and dentists don’t seem able to recall that phrase.

These practices are beyond unethical, beyond immoral. Doctors and dentists who lead people into these scams may not be breaking any laws, but they are certainly –or should be– on shaky ground with state licensing agencies. A few suspensions would slow down this racket A couple revocations for the worst cases might stop it dead in its tracks. It’s a shame when a few scammers can cast a shadow over a largely principled group of professionals pledged to do no harm.

Published in CommPRO.biz 2013.08.28

The Customer Is Not Always Right

Let’s review – America has been struggling to rise out of what has been called the Great Recession. A recession brought on by a systematic dismantling of safeguards that protected us for decades after the Great Depression. Engineered by lobbyists working for Wall Street banks and the super rich –the 1% of the 1%– this tearing down of the walls was not intended to cause a recession, just to allow those at the top to make more money.

The recession was an unintended consequence. The big banks had been buying up mortgages to create bundles that investors, pension funds and the like could stash away and collect interest on month after month. What could be safer, we all know real estate never loses value; it always goes up, right? Besides, the banks had these packages checked out; the credit rating services marked them AAA.

This new idea caught on like wildfire. Pretty soon the supply of mortgages wasn’t keeping pace with the need. So the banks pushed the mortgage brokers down the line for more and more mortgages. The brokers urged people to buy, coaching them and fudging the numbers when they didn’t qualify. The banks learned to pile the mortgages with the not-so-nice on the bottom. The rating services were overwhelmed. Under intense pressure from the banks to anoint the investment packages with top ratings, it appears that the services buckled. Soon packages the bankers were calling “Crap” were gaining AAA ratings and being sold by those same bankers to trusting customers.

To understand why the rating services would hang a AAA on what the bankers called “Crap,” we have to look at their business model. The banks asking for AAA ratings paid for them. The banks are the rating service’s customers. They feared that saying no to the banks would just send them to another rating service. They anointed the “Crap” AAA to keep the bucks coming through the door.

That’s pretty much what the Justice Department is saying that Standard & Poor’s did when they sued the rating agency for $5 billion. The DOJ and 14 states are suing S&P, the largest of the rating services. The other two, Moody’s and Fitch, are likely to be next. The $5 billion suit is moving through the California court of District Judge David Carter. S&P rated $4 trillion in various bank investment vehicles over the four years leading up to the collapse.

While S&P is facing the $5 billion lawsuit, keep in mind that the real bad guys are the handful of monster banks that put together the piles of crap and coerced an AAA out of the rating services. What’s more the same banks are back at it– gambling wildly secure in the knowledge that we will have to bail them out again when they stumble. We like to think that doing the right thing is easy. It’s not, what’s easy is taking that first step in the wrong direction

Murdoch Again?

The Murdoch slime machine slithered into the news cycle again. Their people in China reportedly laid some hefty “gifts” (entertainment and travel) on sources over there. If true, that would seem to be a big no-no under US law. Wall Street Journal staffers in China were tagged with the bribery charges. They deny everything and say outsiders hired to investigate gave them a clean bill. They could have saved their money; hopefully our authorities will do the investigation and if it turns out that the Journal is clean, it will not cost Murdoch a penny. But if our investigation goes the other way, it will cost him big time. The FBI and the Justice Department are not commenting on these bribery charges.

However, this is not the only instance of the Murdoch empire being looked at for possible violations of our Foreign Corrupt Practices Act (FCPA). That’s the law that makes it illegal for American entities to bribe folks outside our borders as Murdoch has in Great Britain. His minions were nailed for unconscionable telephone hacking schemes and laying thousands of British pounds on police and other public servants for scoops. Murdoch is a US citizen and his organization is based in the United States; that would seem to put his London crew under FCPA.

That could be the least of Murdoch’s worries. The FCPA violations would go away after some healthy fines; just a cost of doing business for the ethically challenged like Rupert Murdoch. More serious is the finding of a committee of the British Parliament that Murdoch is "not a fit person" to run a major international entity like News Corp. Where that spills over into News Corp’s home in America is when Murdoch’s broadcast licenses come into play. He owns a couple dozen broadcast stations in America.  

Citizens for Responsibility and Ethics in Washington (CREW), a nonpartisan watchdog group, has been bugging the Federal Communications Commission (FCC) to revoke his licenses as the Communications Act would seem to dictate. Should that happen Murdoch’s American broadcast properties would be reduced to some used office furniture, used electronics gear and real estate. The tens of millions these facilities are worth would be gone, poof, just like that. We’ll see what the FCC does. They have had this issue before them for a couple years; it is past time for them to act.

Meanwhile the DOJ is juggling the FCPA implications raised by Murdoch’s bribery activities in Great Britain. The Brits have arrested Murdoch minions by the dozen including Rupert’s darling, Rebecca Brooks, who formerly headed all his smarmy Fleet Street newspaper operations. The DOJ ought to be arresting Murdoch executives here in the United States, perhaps even Murdoch himself, certainly his son James, who headed News Corp at least in theory. Don’t hold your breath, however. In the end the FCC and the DOJ will probably chicken out and do nothing; a pity.

Walmart, Ethics & the Law

Walmart announced that Daniel Trujillo came on board last week (2012.10.29) as SVP and Chief Compliance Officer for Walmart International. It’s a new post and part of a restructuring of the retail giant’s legal structure. General Counsel Jeff Gearhart now heads compliance, legal, ethics, and investigations ops, according to published reports. They also added Jay Jorgensen, an attorney, as Global Chief Compliance Officer and FBI veteran Tracy Reinhold, as VP Global Investigations.

This reflects a flurry of activity triggered by the exposure of what looks like their widespread use of bribery in Mexico. If true it would open Walmart to charges under the Foreign Corrupt Practices Act (FCPA). Earlier this year (2012.02.21) in an in-depth investigative piece, The New York Times painted a picture of bribery fueling Walmart’s growth in Mexico. Tens of millions were paid to overcome any obstacle in their effort to fast-track new store construction across the country. It worked; twenty percent of the world’s Walmart stores are now in Mexico.

Walmart employees in Mexico who tried to alert headquarters “Carpet-Landers” were ignored or marginalized. When the top leaders could no longer turn a blind eye to the problem they did their best to minimize the issue. Their Investigations Unit was rebuked for being “overly aggressive” by then Walmart CEO, H. Lee Scott Jr., who is still on their Board of Directors. A few days later their report was shipped to Walmart’s Mexican headquarters never to be mentioned again.

These new hires and this consolidation in the headquarters legal office looks like an extension of the cover-up that has been at the core of Walmart’s response to the bribery scandal. Looking at their newly minted SVP, and Chief Compliance Officer for Wal-Mart International, Daniel Trujillo’s chief qualification for the job is pretty obvious. He was Chief Compliance Officer at oilfield services company Schlumberger Ltd. Our Justice Department just bailed on a bribery investigation involving Schlumberger, an outcome Walmart is probably hoping for.

There are a couple things wrong here. Compliance and ethics don’t belong in the same basket. Compliance has to do with the law; ethics falls way outside what’s legal. It’s about corporate culture and reputation. The corporate communications folks deal in that arena. Were Walmart really interested in fixing this problem, they would be focused on new hires to create a culture to repair their reputation.

You would think that the 2006 Hewlett-Packard Board of Directors spying case would burn that into the minds of every major corporation. Kevin Hunsaker, HP Senior Counsel and Director of Ethics and Standards of Business Conduct, green-lighted a stupid telephone spying operation. He thought it was legal, it wasn’t. Hunsaker and several others were charged with a felony; he pleaded no contest. From an ethics viewpoint this plan wasn’t even close to being OK, but that’s not the viewpoint lawyers work from. Ethics and reputation are not in their skill set.

Murdoch Woes

It just keeps getting worse for the Murdoch Empire. An empire so vast that it’s hard to grasp the wide flung tentacles that encompass a host of newspaper, television and entertainment entities spread across the planet. Rupert Murdoch’s shadow darkens almost every English speaking nation in the world, from his birthplace in Australia, to Great Britain and of course the United States. They are all rife with Murdoch properties. 

Things first began to get out of hand in Great Britain. London’s rough and tumble Fleet Street newspaper world, the world that formed the Murdoch culture has ironically exposed behaviors that may end it all for the clan. A rival newspaper, the Guardian, has unearthed one misdeed after another. Most of the media coverage has focused on the telephone hacking the Murdoch London newspapers seemingly used at every opportunity. That, however, is the least of it.

Murdoch scion, James –who heads (in title if not in fact) much of the family enterprise– testified before Parliament that he knew nothing of any hacking beyond one rogue reporter. When the then editor of the now shuttered News of the World and their legal manager came forth with detailed testimony to the contrary, it left James flopping about like a fish out of water. 

Rupert started with a tabloid stable his daddy left him in Australia. He moved on to London while still in his early twenties and much later came to America where he owns a wide array of media from newspapers to motion pictures to television entities. Actually it isn’t “his;” while Murdoch effectively controls News Corp, it is a public company. In fact it is an American company headquartered in New York City.

While fibbing to a parliamentary committee is serious stuff, it is not the worst of the specters looming over the Murdoch Empire. The courts present the most serious threat. News Corp stockholders are lining up to sue. These law suits are serious but not nearly as serious as the gathering storm in Washington. Rupert Murdoch is an American citizen, and News Corp is an American company; both are subject to American laws.

The U.S. Justice Department is looking at bribes paid to London police by News Corp newspapers. Under our Foreign Corrupt Practices Act (FCPA) American companies are not permitted to practice bribery abroad. News Corp is taking this threat very seriously, as well they should. They have hired a flock of lawyers to deal with it, many of them former Department of Justice FCPA experts.

As the noose tightens it’s hard to see any outcome short of the collapse of the Murdoch Empire. An outcome that would seem foreordained in a company run by a man described by one of his executives as, “a man who wants it all, and doesn't understand anybody telling him he can't have it all." That sounds more like a spoiled child than the kind of person we want running the largest media company in the world. While it fits the trashy tabloid culture that spawned Murdoch, a person of character would have grown into a more ethical mode. It seems a waste to have the resources Rupert Murdoch has amassed devoted to the smarmy ends he put them to.