Tag Archives: business ethics

USA Today Founder Has Good Advice for Investors, Misses A Couple Things

Every so often, the editorial page of USA Today asks me to weigh in with a brief comment on a column written by the newspaper’s founder, Al Neuharth. Today, Neuharth writes on the important topic of saving money for college or retirement, and keeping that money in the stock market.

Neuharth says “the stock market continues to be our surest, steadiest investment” despite its ups and downs. Maybe that’s true, which doesn’t say much for the other investments he doesn’t mention — mortgage-backed securities, bonds, real estate, and, before we know it, crowd funding.

But here’s the problem: Investors don’t think the financial markets are fair. They’re not only sick and tired of the motion sickness they get from high-frequency trading glitches that rock the markets. They’re sick of Wall Street lobbyists who have more power than securities regulators; they’re sick of insider trading; and they’re sick of powerful people in finance who can do the wrong thing and suffer minor repercussions. Or no repercussions at all.

My quote in USA Today this morning:
“The public will buy into Al’s good advice once they see that regulators are in charge of Wall Street — not the other way around. Confidence flows in fair markets.” Read article.

Vetting a Stock Broker? Pay Attention to Who’s Supplying the Records

Investors are spending more time checking on the backgrounds of the financial types who pitch for their business, and that — mostly — is a good thing.

The public used a regulatory database to check the records of 14.2 million stockbrokers and advisers last year, according to the Financial Industry Regulatory Authority, known as Finra, a self-regulatory group that’s financed by Wall Street. That’s more than double the 6.7 million searches in 2007, the year before the financial crisis began.

Nothing wrong with investors getting more vigilant, of course. But there are some important caveats about what investors get when they check in with a broker-vetting site.

Finra’s records don’t include lawsuits against brokers that aren’t considered “investment-related.” That means that a lot of brokers who are exposed to the possibility of big judgments have official records that say nothing about that exposure.

And then there’s the issue of the freebie websites popping up to help investors vet brokers. Check the fine print, and you learn that some of those sites get their revenues from advisors who pay to be featured. If you get it for free, and the broker pays to get his or her name in front of you on the site, can it really be investor-friendly?

I took a look at the broker background-checking business in my latest column for Bloomberg View. Read article.

And Another Word on Justice and Goldman Sachs

Over at wallstreetonparade.com, editor Pamela Martens has more to say about the lopsided priorities of prosecutors who won’t quit in pursuing Sergey Aleynikov, a small fish who has been arrested yet again on charges he stole data from Goldman Sachs. The most recent Aleynikov arraignment was on the same day that we learned that prosecutors will not be charging Goldman with any crimes related to a scathing government report on how the firm treated its customers in the period leading up to the financial crisis.

Aleynikov was tried and found guilty of stealing computer code from Goldman, but an appeals court reversed that on April 11, saying that prosecutors hadn’t properly applied corporate espionage laws. Martens writes:

“Then, on Thursday, August 9, 2012, the unthinkable happened.  Aleynikov was arrested and charged based on the same set of facts by Cyrus Vance of the Manhattan District Attorney’s office. Under the Fifth Amendment to the U.S. Constitution, an individual is not permitted to be tried twice for the same crime.  But when you take from Wall Street, all bets are off apparently.” Read article.

Is there Justice for Goldman Sachs?

Do you remember that 11-hour Senate hearing where there were more scatological references than you could find in a Beavis and Butthead movie? “How much of that sh**ty deal did you sell?” asked Senator Carl Levin, the Michigan Democrat who was running a hearing of the Senate Permanent Subcommittee on investigations. “Should Goldman Sachs be trying to sell the sh**ty deal?

Levin was grilling a Goldman executive about the over-the-top emails Levin’s committee had collected that made very clear that insiders at Goldman — and other firms — were privately trashing the same securities they were selling to their customers. One gem the investigators had come across: A Goldman executive emailing a colleague “Boy that Timberwolf was one sh**ty deal.”

When all was said and done, Levin asked the Justice Department to look into whether Goldman had broken the law by misleading clients. Last Thursday, Justice said it wouldn’t be bringing a case.

In my column for CNN.com today, I raise the question that’s on a lot of people’s minds: Do big banks like Goldman get special treatment? Read article

No Big Boy Pants for Banks That Whine Over Rules

Are you tired of it yet? “We are all for financial reform,” the Wall Street story goes. “But we can’t have regulations that make us anti-competitive.”

Another financial crisis like the last one and you have to wonder who we’d be worrying about competing against. Whatever. The financial industry is very busy trying to make the case that before we can make new rules, we have to prove that the benefits outweigh the costs. I write about it in my latest column for Bloomberg View:

To get an idea of who has the upper hand in this fight, consider what it entails to be the chump who has to explain the “benefits” side of financial regulation. Costs can be easy to figure out. But how do you put a dollar figure on credit markets that don’t collapse? Or the elderly who don’t lose their life savings because regulators have cracked down on rip-off artists who troll retirement villages?

The object of the exercise is to swamp regulators with work and make rule-making impossible. The strategy is working. Read article.

 

$200 Million of Customers’ $ Went Missing, But Iowa Sure Loved PFGBest

You can count on “the absolute dedication” of our company to protect your money. That’s what a futures trading firm in Iowa, PFG Best, said to customers just after MF Global filed for bankruptcy last Fall. Fast forward to July 11. PFG itself was filing for bankruptcy after $200 million of its customers’ money had disappeared.

PFG Best is the latest example of a lot of things that              are wrong with the financial industry and the people who purport to police it.

Its CEO, who said in a suicide note earlier this month (the suicide attempt failed) that he’d been stealing from customers for 20 years, sat on an advisory committee of one of his company’s regulators. In fact, the board of directors of the National Futures Association voted three times to put Russell Wasendorf, Sr. on the committee it consulted with about possible new regulations.

And then there are all the awards that Wasendorf got for his charity and civic-mindedness. Do keep that in mind next time you’re wowed by some business big-shot whose generosity is fueling a few too many press releases. I wrote about the PFG debacle in a column for Dealbreaker.com today. Read article.

Judge to Kleiner Perkins: Sex Suit Goes to Trial, Not Arbitration

A San Francisco Superior Court judge said this afternoon that he didn’t buy arguments by Kleiner Perkins Caufield & Byers that a sex discrimination case against it should be heard in private arbitration. The venture capital firm was sued in May by Ellen Pao, who said she was pressured into sex by a junior partner and then retaliated against when she complained.

Judge Harold Kahn had already told Kleiner that he wasn’t persuaded by its argument that Pao had no legal right to be in open court, but gave the firm a chance to file a revised motion. Today, Kahn told Kleiner “I thought your papers were terrific,” adding, “and I disagree with all of them.”

Here’s a story by the Mercury News about the action in court today.

I wrote about the Pao case in my Bloomberg column last month; Pao had said in her complaint that the top guys at Kleiner didn’t invite women to power dinners with big clients because women would “kill the buzz.” Kleiner denied her allegations.

Kleiner said today that it will appeal the judge’s decision. Companies fight hard to keep sex discrimination and other cases out of the public eye, and nothing serves that goal better than forcing cases into private arbitration. Here’s a story I wrote describing how the public has suffered from 25 years of business forcing litigants into closed-door arbitration hearings.

Scandal? What scandal?

Lloyd Blankfein, CEO of Goldman Sachs Group Inc., wrote an op-ed today for Politico.com. He talks about the challenges facing America and offers some solutions that might make America a more attractive place to invest.

He managed to carry on for 975 words without addressing the impact of his industry’s reckless behavior on investor confidence. Read article