Flawless Compliance

Goldman Gets Sacked

Lloyd Blankfein Justifies Unethical Behavior

Goldman Sachs CEO Lloyd Blankfein, apparently having a bad day. Picture Source

What’s in a name? That which we call a crappy deal, by any other name would smell as foul.

How do I not put Lloyd Blankfein, the amusing CEO of Goldman Sachs, in the soup this month? He’s spent so much time in the White House over the last couple of years, he might as well just get a room there.

Don’t you love those Senate firing lines? Public interrogations like this are not only entertaining, but they’re healthy. Like many others, I’ve developed a real rancid taste for these bankers that use ostensible complexity as a cloak for greedy and dishonest behavior. Here’s what Blankfein submitted as testimony prior to his cross-examination:

“While we strongly disagree with the SEC’s compliant, I also recognize how such a complicated transaction may look to people.”

What I like about the Senate questioning (at least parts of it), is that it demonstrates how thin this smoke screen of complexity really is. It’s not complicated, it’s actually pretty easy to understand. I can explain it on one sentence. They crafted and sold a crappy deal to investors, then they bet heavy on the fact that the deal was crap. That’s not hard to understand.

Was it legal? Maybe. Was it ethical? Depends on your answer key, right?—not.

This is my biggest problem with these bankers. They’re actually trying to rationalize that there’s no ethical problem here. Who’s answer key are you using, Lloyd?

The reason why ethics and compliance are commonly used in the same context is because they’re so closely related. In large part, compliance is an attempt to keep people ethical but it’s not perfect. Unethical compliance is possible due to the devious ingenuity of some people, but trust me, it’s unsustainable, and eventually these people pay.

I don’t know whether or not Mr. Blankfein survives his boiling ordeal, but either way I don’t like the taste of this soup.

Just Because You Can, Doesn’t Mean You Should

Just Because You Can, Doesn’t Mean You Should

Self Journalist Arrested for Threatening Eric Cantor

Norman Leboon was arrested for threatening the life of Eric Cantor on YouTube. Picture Source

Norman Leboon is in Congressional soup this month for threatening to kill House Minority Whip Eric Cantor this month. His medium of choice? YouTube. According to Fox News, Leboon recorded a video in which he states:

"My Congressman Eric Cantor, and you and your cupcake evil wife... the final Yom Kippur has been given. You are a liar, you're a Lucifer, you're a pig, a greedy f---ing pig, you're an abomination, you receive my bullets in your office, remember they will be placed in your heads. You and your children are Lucifer's abominations."

I don’t think Norman likes Eric very much. In fact, apparently there are a number of people Leboon doesn’t care for. He told authorities that he made 2,000 such threatening videos. Where did he find the time? Needless to say, the FBI didn’t find his videos very entertaining, and now he has a lot of explaining to do.

As you know, I’ve always been a big proponent of open an honest communication, but there’s a point at which you need to keep your views to yourself. Being forthright in your communication over what people deserve to know is much different from telling everyone what’s on your mind.

Be careful in your compliance communication, that you don’t cross the line by infusing your personal views, especially if there’s a permanent record!

Down to Earth Advice

From the October 2008 issue, who can forget about the balloon boy hoax? I especially loved the part when the little boy was so upset by the questioning, that he threw up on camera! It doesn't have to be a complete waste of time, at least we have a lesson to learn here. Read on!

Balloon Boy Hoax Could Cost Family, Big Time

6-year-old Falcon Heene says he was hiding in a box in the attic while authorities were searching for him.. Picture Source

Balloon Boy’s father Richard Heene is in the soup this month, that’s hard for his now infamous son to hold down, after the way-over-publicized fiasco took reality stunts to “new heights” this month. For some reason, this story flooded the news on Thursday, October 15th.

On Thursday, the story (which preempted just about every other story) was that six-year old Falcon Heene may have climbed into an experimental helium balloon that accidentally took to the skies of Colorado. Panicked, authorities sounded the alarms and pulled Colorado’s best together in a concerted effort to save the boy. The balloon finally came down, and the boy is nowhere to be found.

By Sunday, the story according to CBS News was:

“a little boy[who] had floated away in a giant helium balloon was a hoax concocted to land a reality television show, authorities said Sunday, and the boy's parents will likely face felony charges.”

Now it looks like the Heene’s are facing felony charges, some of which may include multi-year jail terms and hefty fines in the hundreds of thousands of dollars. Richard hasn’t been convicted, but the evidence right now doesn’t look good. Authorities are quite certain, this was a hoax.

Stunts like this, which are intended to shortcut the system, are unnecessary and extremely damaging. Richard’s “reality career” is finished, and he’s looking at some very serious penalties. Don’t take shortcuts in your compliance program. Do your diligence, and get it done right. Otherwise, your program is just full of hot air.

FSA Turns Up the Heat on Watanabe

Japanese Brokerage fined 1.75 Million Pounds

Mr. Kenici Watanabe, CEO of Nomura Holdings, Inc. Picture Source

Kenichi Watanabe is in the miso soup this month, as the UK unit of his company Nomura Holdings, Inc. was fined 1.75 million pounds (approximately $3 million) by Britain’s Financial Services Authority (FSA). Nomura Holdings, Japan’s largest brokerage, was charged with having inadequate controls that would prevent the mis-marking of certain financial derivatives. According to Compliance Exchange, Margaret Cole, the FSA’s enforcement director stated:

“Financial instruments must be valued correctly by traders and a firm’s systems and controls must be able to minimize the risk of traders mis-marking their positions.”

I agree, but I think it’s a bit ironic that even the FASB and the IASB are having a hard time coming to terms on an agreed-upon reporting structure, and the sticking point is—valuation.

Mr. Watanabe’s tenure in the soup was short-lived. Nomura holdings cooperated fully with the investigation, and maintained open lines of communication. This actually qualified them for a “discounted” fine, which could have been 2.5 million pounds.

Nice move, Mr. Watanabe. Nobody wants to be in the soup, but if you find yourself there, get out before things get too hot!

Down to Earth Advice

Balloon Boy Hoax Could Cost Family, Big Time

6-year-old Falcon Heene says he was hiding in a box in the attic while authorities were searching for him.. Picture Source

Balloon Boy’s father Richard Heene is in the soup this month, that’s hard for his now infamous son to hold down, after the way-over-publicized fiasco took reality stunts to “new heights” this month. For some reason, this story flooded the news on Thursday, October 15th.

On Thursday, the story (which preempted just about every other story) was that six-year old Falcon Heene may have climbed into an experimental helium balloon that accidentally took to the skies of Colorado. Panicked, authorities sounded the alarms and pulled Colorado’s best together in a concerted effort to save the boy. The balloon finally came down, and the boy is nowhere to be found.

By Sunday, the story according to CBS News was:

“a little boy[who] had floated away in a giant helium balloon was a hoax concocted to land a reality television show, authorities said Sunday, and the boy's parents will likely face felony charges.”

Now it looks like the Heene’s are facing felony charges, some of which may include multi-year jail terms and hefty fines in the hundreds of thousands of dollars. Richard hasn’t been convicted, but the evidence right now doesn’t look good. Authorities are quite certain, this was a hoax.

Stunts like this, which are intended to shortcut the system, are unnecessary and extremely damaging. Richard’s “reality career” is finished, and he’s looking at some very serious penalties. Don’t take shortcuts in your compliance program. Do your diligence, and get it done right. Otherwise, your program is just full of hot air.

Financier Fingered for Fancy Funny-Business

AIG Executive Up on Charges

Joseph Cassano, Former AIG Executive in charge of credit default swaps. Picture Source

Joseph Cassano is in the soup this month for, none other than, financial fraud. According to the Wall Street Journal:

“The Justice Department and the Securities and Exchange Commission have been investigating whether Joseph Cassano, whose AIG Financial Products unit nearly brought down the insurer a year ago, committed securities fraud in allegedly misleading investors by overstating the value of mortgage-related contracts and failing to disclose material facts about them to AIG's outside auditor, the people said.”

Really? Would he really do that to us?

Keep in mind he hasn’t been convicted of anything, but based on recent and not-so recent history, I don’t think he’s going to fare very well here.

The key thing I wanted to point out here is the lack of disclosure. Albeit somewhat exaggerated, this is an example of how not doing something can really get you into trouble. I’m seeing this more and more as America clamps down on oversight and regulation. Please make sure to disclose absolutely everything you know, even if you think it might incriminate you. Fines for not disclosing are the ones that cut the deepest.

Oh, and don’t cry for Mr. Cassano. When forced to retire, he floated down under a $315 million golden parachute.

Switzerland Exits Tax Evasion Business

US Cracks Down on Swiss Bank Accounts

Former UBS bank manager Hansruedi Schumacher and Swiss attorney Matthias Rickenbach are in the erbsen cremesuppe this month. According to the New York Post the two were charged with helping Americans evade taxes on UBS accounts.

Just when you thought it was safe to hide money in a Swiss bank account, America starts cracking down on the time honored practice of using Switzerland as a tax avoidance strategy.

It’s no surprise this is coming at a time when the country is facing the biggest recession since the Great Depression. Like everybody else, the IRS needs money and this would seem to be a perfect target!

Schumacher, Rickenbach, and 150 fellow Americans are now under the IRS’s microscope for criminal activity. So, watch your step Mr. Moneybags! Switzerland may still be good for skiing and chocolate, but it looks like they’re out of the tax evasion business.