Al-Raya’s CEO Dies in Apparent Suicide

From Bloomberg:

Hazem al-Braikan, who was sued last week by U.S. regulators over bogus takeover bids, was found dead in an apparent suicide, a security official at the Kuwaiti Interior Ministry said.

The U.S. Securities and Exchange Commission sued al-Braikan along with Al-Raya Investment Co., United Gulf Bank BSC and Kipco Asset Management Co. for allegedly placing “highly profitable and suspicious” trades before newspaper and Internet reports claiming investors planned to buy Textron Inc. and Harman International Industries Inc.

Al-Braikan, 30, was found dead today from a gun-shot wound, said the official, who declined to be identified because the investigation is ongoing. The Kuwait-based financier and firms reaped more than $5 million from the transactions, the SEC said in the lawsuit targeting the traders on July 23.

Al-Arabiya provides the following detail:

“The board … confirms the correctness of these dealings made by the CEO on behalf of the company,” added the company, which is 10 percent owned by Citigroup Inc.

From the SEC filing it is apparant that al-Braikan had not been charged with spreading the false rumours but with profiting from trades made ‘around false news’:

Washington, D.C., July 23, 2009 — The Securities and Exchange Commission today charged a trader located in Kuwait and three related foreign entities for engaging in an illicit scheme through which they reaped millions of dollars in profits when trading around hoax offers to acquire U.S. companies. The SEC has obtained an emergency court order to freeze more than $5 million in trading profits located in various U.S. accounts in their names.

The SEC filed its charges and obtained the asset freeze within days of the latest hoax offer. The SEC alleges that Hazem Khalid Al-Braikan and the related entities traded around false news of a purported tender offer by a Middle East investment group to acquire Harman International Industries. A phony announcement publicizing the hoax offer was faxed to media outlets on Sunday, July 19, and subsequently reported on the Internet. Harman’s share price climbed more than 40 percent in pre-market trading on Monday, July 20.

So, the SEC can act very quickly if it wants to. Was this another one of those pump & dump and naked short selling games going on here?

However, what doesn’t quite add up is that the SEC claims that the Harman’s share price climbed more than 40 percent in pre-market trading.
If I look at the trading data from the NYSE for that week, it looks like this:

HARMAN (NYSE:HAR) Share price and volume

It doesn’t look like the share price rose 40% on July 20. On the contrary the press release seems to have stopped a downward trend as the traded volume was very high.

Surely the SEC has better information than I do.

More Green Shoots Reporting

This is not the first time I noticed headlines like the following on Bloomberg:

Recession Probably Abated Last Quarter: U.S. Economy Preview

Probably? Can’t you do any better than this in reporting.

The quality of the information in the article matches the headline, with thing like

The worst U.S. recession in five decades probably eased in the second quarter
or
The world’s largest economy shrank at a 1.5 percent pace following a 5.5 percent drop in the first three months of 2009.
or
Other reports may show orders for long-lasting goods fell and sales of new houses rose
or
“The pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization,” Fed Chairman Ben S. Bernanke told Congress last week.
or
“The recession has decelerated sharply and is starting to form a bottom,’ said Joel Naroff, chief economist at Naroff Economic Advisors Inc. in Holland, Pennsylvania. “I think we’ll see some growth in the third quarter.” Naroff was the top forecaster in 2008, according to a survey by Bloomberg Markets magazine.

How does something look like that appears to have slowed significantly? Wouldn’t a significant slowdown be very visible as opposed to just appear to be there? Oh I see. It is significant because Bernanke says it is, not because there would be any actual proof supporting the views he doles out while ‘reporting’ to Congress.

Mr Naroff was the top forecaster in 2008? So he did forecast the crash then, did he. Or didn’t he. Never mind. Facts are not important anymore. It seems.

Obviously the idea is that if you put enough bullshit out there it will act as fertilizer for the green shoots.
Good luck with that.

India Introduces First Nuclear Sub

As we learn from the Hindustan Times, India has today entered the club of nations that have nuclear subs.

The INS Arihant (Arihant means destroyer of the enemy) was entirely built in India. The submarine was named in a symbolic launching ceremony at the Indian Matsya shipyard.

The pictures provided by  the Hindustan Times display Russian built submarines (see below). So it is not actually clear to us, how the Indian Arihant looks like.

Russian Submarines

However, thankfully the Russian are ready to provide some technical information at ITAR-TASS who writes:

Submarine, which received the eloquent title “Arihant” which means “destroyer of enemies, has a displacement of about 6000 tons with a total length of the shell in the 104 meters. It is equipped with a capacity of 80 megawatt reactor, developed by specialists of Center of Bhabha Atomic Research – a leading national research and design agency industry.

The fuel unit uses highly enriched uranium, produced at specialized Department of Atomic Energy, in force near the city of Mysore. According to preliminary calculations, the nuclear submarine power plant will enable it to develop the speed to 30 knots and in the autonomous navigation of up to 90 days.

The Legality of the Federal Reserve System

The U.S. Constitution states in Article I, Section 1:

All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

So how come the Federal Reserve (Fed), FDIC SEC, etc can make rules by way of regulations as well as adjudicate disputes?

The following document presents a critical review of the legal basis of the Federal Reserve System.

View this document on Scribd

Zurich Authorities get Involved in Assisted Suicide

The Zurich authorities, more specifially the Secretary of Justice of the Canton of Zurich Markus Notter, has decided to insert himself as setter of standards regarding to how and when private companies can assist people in commiting suicide.

In Switzerland it is legal to assist someone to commit suicide, provided such assistance is not done for egoistic or selfish motives (Art. 115, Swiss Criminal Code):

Assistance or inducement to suicide

Whoever for selfish motives induces someone  or assists him to commit suicide will, if the suicide is executed or attempted, be imprisoned for not more than five years or fined.

It has always escaped me why Zurich authorities think that helping people kill themselves and making a good profit from this assistance is not selfish or egoistic.

In most European countries assisting people to commit suicide is illegal or even criminal. So, if you are the only one to be able to do so without facing legal repercussions, can mean big business. That assisted suicide is a big market waiting to be developed is clear from the fact that many people, for example from the UK and Germany, come to Switzerland just to kill themselves.

In Switzerland, there are two companies, both organized as associations under Swiss law – presumably for tax and legal reasons – that offer this unique ’service’. The first one is EXIT and the other is Dignitas.

There are currently no laws or regualtions that regulate this business, so Mr. Notter deciced to go out on a limb an task the Attorney General (AG), which is a non-elected official named to his post by the executive, to negotiate a contract with one of those companies, namely EXIT, that would regulate their behavior.

Recently NZZ Online on 29.06.2009 wrote (translation and emphasis mine):

Satyam Back in Business

Curiously enough, Satyam seems to be back in business, although under a new company name Mahindra Satyam. One may remember earlier this year, the chairman Ramalinga Raju resigned after admiting to having falsified earnings and assets for several years which caused a hole of 50.4 bln rupees (1.03 bln dollars), Bloomber story here.

Ramalinga Raju and a few others a currently still under investigation and a court approved that the Indian Central Bureau of Investigation (CBI) can perform “lie detector and brain mapping test[s]” on them. (WTF,  is a brain mapping test? Probably an MRI, but not sure)

Writes the Hindustan Times:

The CBI told the state high court last month that Ramalinga Raju also diverted and misappropriated funds of Satyam through foreign bank accounts. In a written submission during the hearing of bail application of former auditor S. Gopalakrishnan, the CBI said it sought Interpol’s help to identify the end users of these funds.

Obviously Satyam has passed the rite of passage test of the corporate state and has demonstrated that it is willing to cook the books to please its customers, who can then rightly claim that outsourcing was a success because it made them save money and increase profits (and bonuses with that, but for some reason they never say that out loud).

Among customers of Satyam are Nestlé for its outsourcing GLOBE projects and now Glaxo. As we read again in the Hindustan Times:

IRS v. UBS

Karl Denninger wants the US government to show the finger to the Swiss government. He got irked obviously by the following snippet from Reuters:

ZURICH, July 8 (Reuters) – Switzerland has vowed to prevent UBS from handing over client information to U.S authorities, in an attempt to defend bank secrecy, saying a tax case targeting its main bank is souring diplomatic ties.Wealth management giant UBS is facing a court hearing in Miami next week after refusing to disclose data on 52,000 Americans holders of secret Swiss bank accounts to U.S. tax authorities.

The Swiss Justice Ministry said on Wednesday that Swiss law prevents UBS from handing over client information and the government would seize UBS client data, if necessary, to stop that happening.

In general I agree with his assessment of the situation. UBS broke laws in the US and will have to pay a price for that. In the criminal case, it would get away fairly cheaply with the Deferred Prosecution Agreement (see below), considering – at least in my understanding – that the bank could face the stigma of being labeled a Racketeer Influenced and Corrupt Organization and being treated as such.

As I side note, it seems that Swiss companies are in the habit of not handing over information even if asked to by the relevant authorities, just ask Nestlé.

Unfortunately for the Swiss population, UBS is in Switzerland what Goldman Sachs is in the US. Key positions in the Swiss government are filled with former UBS executives, for details see my previous post.

Normally there is no such thing as criminal investigations of executives of swiss multinationals, as long as they don’t commit acts detrimental to the interests of employers. This is especially true for UBS, Credit Suisse, Swiss Re, Zurich Financial Services, Novartis and Nestlé and a few more.

It is also instructive to check the boards of these corporations and compare who is sitting in them. For example UBS. Its the list of the usual suspects.

Swiss law does indeed forbid UBS to hand over such documents. This is article 47 of the Swiss Banking Act of 1934, which states:

(1) Is imprisoned for up to three years or fined whoever intentionally:
(a) reveals confidential information, that was brought to his attention or he found in his function as an member, employee, trustee or liquidator of a bank, or as member or employee of an auditor ; or
(b) willfully causes someone else to release such confidential information.

(2) Whoever committed the offence negligently, shall be fined with not more than CHF 250,000.

However, as we have seen in the past, the only Swiss financial regulator, the Finma (Financial Markets Authority), did authorize the transfer of several hundreds of these documents just recently. The legality of that act is currently under judicial review by the Federal Adminstrative Court.

It looks like the UBS executives are now stuck between a rock and a hard place as they do have the choice of being imprisoned or fined either in the US or in Switzerland.

For me I would have no problem with UBS getting clobbered in US courts and some executives being handed jail terms if found guilty.
However, I would hope that US government administer the same treatment to Goldman Sachs, JPM, and the likes, otherwise it will lose any credibility it might still have.
Will the US have its coming out and admit that it is a banana republic or will it find its way back to the ideals of 1776?

Defered Prosecution Agreement:

View this document on Scribd

If You are a Concerned Employee Read This

It seems that even for reading certain critical websites at work can put you into trouble. At Zero Hedge they published tips on how to avoid such issues at work:

As of this writing we know of two individuals who have been confronted by the Human Resources group of their employers, both financial institutions, in connection with their reading Zero Hedge or emailing the Zero Hedge team. In one of these cases said individual was summarily terminated after an investigation.

We must be doing something right.

We would, however, prefer that we found out about our impact in a manner that does not involve the termination of our readers. Given this, it seems prudent to make some suggestions about contacting the Zero Hedge team.

1. Don’t email us directly from work.

Somewhere out there, there is a log with your address and ours on it. If your employer is likely to peruse such things (pretty much guaranteed if you work at a financial institution) you might be in for a bit of scrutiny. Don’t play that game.

2. Use encrypted webmail.

If you must email from work, after being sure you aren’t violating your employer’s network usage policies, use a good webmail provider that allows SSL encrypted browsing. We are quite fond of hushmail.com, but your mileage may vary.

3. Consider not using any of your employer’s resources when contacting us (or your lawyer for that matter).

Yes, we want to hear from you yesterday. Yes, we can probably wait until later tonight. Consider the sad tale of Maria Stengart as outlined in Stengart v. Loving Care:

Read more on Zero Hedge

Zero Hedge even goes further and requests you to consider contacting them if you have relevant information regarding potential problems inside your company. It seems that some people have already done that, please read here.

This is a cause I think worth supporting, because you need to deal with big corporations by exposing their fraud, lies and deceit.

However, a cautionary note from me: If you have any suspicions do not talk to anyone inside your company or any former employees of that company, or to employees of potential business partners of your employer about anything. A good choice is to talk first to a lawyer you can trust, i.e. one who is not linked to your employer.

Be aware that there is a risk involved in stepping forward, you might expose yourself to retaliation from and to legal actions by your employer.

My view is it  can be worthwile to voice your suspicions even if you are not sure what is going on or what your impressions mean. With information from different sources, it might be possible to get the whole picture and see whether there is a real issue or not. Sometimes it might take some time to figure that out, though.

However, this is your call and make it wisely. What is certain is that it will not be possible or at least very much harder to do, without your help.

Take care, good luck and thanks for showing courage.

Happy Fourth of July

See Cartoons by Cartoon by Bob Englehart – Courtesy of Politicalcartoons.com – Email this Cartoon

Putin Ask Russian Bank(st)ers Not to Leave For Holidays

We read on Komsomolskaya Pravda the following:

Vladimir Vladimirovich (Putin) seems to be fed up with the fact that Russian banks don’t lend to the real economy and he is reportedly tired of hearing the complaints of factory and plant managers about banks not lending them money. According to Komsomolskaya Pravda, Putin said:

“Until that moment that money is brought to the real sector of the economy, I ask the leaders of financial institutions not to plan for summer leaves.”

However, bankers seem justified: The second wave of the crisis is approaching, so why lend?
Peter Aven of Alfa-Bank thinks that credit defaults might reach 25% and that businesses simply couldn’t pay back their debts, because nobody bought their products – so there is no revenue.
Aven thinks that the situation could be rectified if the government were to provide 2 to 3 trillion rubles (63 to 95 billion USD).

“It seems to me that Peter Olegovich is overly pessimistic,” said Arkady Dvorkovich, assitant to the President. While he acknowledges difficulties, he does not think that bad credits will reach that level, “because the government takes action, and what we did in the winter, will have an effect now.”

So to say that Russia without doubt will have a second wave of economic crisis in autumn,  is premature, thinks Komsomolskaya Pravda.

Well, I must say they have a point there. How, in a consumer driven economy, could there be an improvement as long as people are loosing their jobs and those who are still at work get even less compensation? Credit is obviously not the solution here. And now there is already talk about cutting into social welfare ‘to balance the budget’.

The situation can not be improved by giving the banks even more money, they simply don’t need it.
The money is missing with the consumers, not the banks. So you have the choice of either to provide jobs or another form of income.

[Source: Komsomolskaya Pravda, Moscow Edition]