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

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.

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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

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.

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): Continue reading

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), Bloomberg 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: Continue reading

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: