On a Couple of Days in February — The Headlines Spoke Volumes and Show a Trend

February 3-4, 2011

•“SEC Sues Over Bug in ‘Quant’ Program,” Wall Street Journal, February 4, 2011, p. C1 –AXA SA agreed to pay $242 million to settle fraud charges that it hid material information from clients through the use of complex computer models and a secretive culture

•“32% Admit Mooching Off Neighbor’s Wi-Fi,” USA Today, February 4, 2011, p. 1B. –Neighbors admit to borrowing their neighbors’ unencrypted Wi-Fi connections.  The number of piggy-backers has doubled since 2008. –Terrorists, pedophiles, and identity thieves are known piggy-backers but were not part of the survey (to the best of the survey company’s knowledge and discernment) –Firesheep, a free eavesdropping tool, has been downloaded more than 1,000,000 times since 2010.

•“States Widen Currency-Trade Probes,” Wall Street Journal, February 3, 2011, p. A1. States are investigating whether banks charged their state pension funds the highest possible foreign-exchange rate for currency trades on the day of the trades instead of the rate at the time the trades were made.

•“Flurry of Data as Rules Near for Commercial Colleges,” New York Times, February 4, 2011, p. A11. –The Department of Education finishes promulgating rules that will require more disclosure of the financial performance and loans at for-profit colleges following disclosure of higher default rates of for-profit school students than for nonprofit school students.

•“Despite Doubts JP Morgan Kept Ties to Madoff,” New York Times, February 4, 2011, p. A1. –A suit by the trustee in the Madoff bankruptcy against JP Morgan Chase to recover funds from the bank for its failure to follow advice of internal risk officers who said that the returns from Madoff did not make sense.

•“Harvard Changes Course,” Wall Street Journal, February 3, 2011, p. B8. –“The public lost trust in business, and some of our graduates seems to be responsible for that.”  Harvard Business School Dean Nitin Nohria –The new curriculum will include an increased focus on ethics.

•“Ex-Banker in Britain Sentenced to 3 Years for Insider Trading,” New York Times, February 3, 2011, p. B3. –Christian Littlewood, a former investment banker at Dresden Kleinwort entered a guilty plea to insider trading on the shares of Highway Insurance in advance of the company’s announcement of a takeover offer.  The company’s stock jumped and Mr. Littlewood, his wife, Angie, and Helmy Omar Sa’aid, a friend, made ₤1 million.  Angie and Helmy were also sentenced. –British authorities had found over 22 incidents of advance share purchases by the trios on the even of takeover announcements that Mr. Littlewood’s employer was handling.  Mrs. Littlewood used an account with her maiden name to make the trades and hold the cash profits.  The three invested £5.5 million over 10 years and had about a 25% ROI. –Helmy was extradited Comoros Islands off the coast of Africa. British officials found him there after finding an address for the shipment of pizza ovens to Comoros at his London home. 

•“S.E.C. Hurt By Disarray In Its Books,” New York Times, February 3, 2011, p. B1. –“A reasonable possibility exists that a material misstatement of S.E.C.’s financial statements would not be prevented, or detected and corrected on a timely basis.”  from the audit report on the SEC’s financial statements. –The auditor found errors in the agency’s tracking of income from fines, filing fees, and the return of ill-gotten profits.

•“S.E.C. Charges 6 in Insider Trading Cases,” New York Times, February 4, 2011, p. B7. –The charges relate to executives at companies moonlighting as experts for hedge funds.

•“Afghan Minister Denies Allegations of Bribery,” Wall Street Journal, February 3, 2011, p. A8. –Finance Minister Omar Zakhilwal and former Interior Minister Haneef Atmar denied that they took payoffs from Kabul Bank –Afghan president Hamid Karzai’s brother Mahmood owns a 7% interest in the bank.

•“India Ex-Minister Arrested in Telecom Scandal,” Wall Street Journal, February 3, 2011, p. A8. –Former telecom minister Andimuthu Raja and two of his former aides were arrested and accused of irregularities in the allocation of telephone spectrum.  –The Central Bureau of Investigation alleges that Raja underpriced cell phone frequencies by $40 billion.

•“Video Scandal Hits Planned Parenthood,” Wall Street Journal, February 3, 2011, p. A3. –Planned Parenthood released a statement of shock when it was shown undercover videos that showed employees at Planned Parenthood clinics in New Jersey providing advice about abortion, contraceptives, and treatments for sexually transmitted diseases for girls who were as young as 14 and possible illegal immigrants.

•“SEC Files Insider Charges Against Six,” Wall Street Journal, February 4, 2011, p. C3. –Four consultants and two former employees of an “expert networking” firm were charged with violating insider trading laws when they passed along information from company insiders to hedge funds.

•“Renault Case Yields New Suit,” Wall Street Journal, February 3, 2011, p. B3. –Espionage allegations against top executives continue as new lawsuits emerge.

•“Match-Fixing Claims Hit Sumo Wrestlers,” Wall Street Journal, February 3, 2011, p. A8. –Japan’s ancient sport of sumo wrestling has been rocked, as it were, by allegations that 13 wrestlers may have fixed matches.

For those of you keeping score — 16 headlines, and they are not pretty. The Barometer must stop — oh, what times are these when we lose the great sumo wrestlers to corruption!