Ten More Madoffs?

I ignored this the first two times I saw it referenced, but this rumor is gaining steam. I have no doubt that there are 10 more Ponzi schemes out there, I am working with folks involved in two more in New York alone.

But there is one bigger than Madoff? I sincerely doubt (hope?) that is not true.

FBI makes first arrest in Stanford fraud case

The FBI made the first arrest in the $8 billion Stanford Financial Group fraud investigation on Thursday, detaining chief investment officer Laura Pendergest-Holt on federal obstruction charges.

Reuters speculates that prosecutors are getting ready to charge Allen Stanford, the group's Chairman. Standford is already the subject of SEC charges accusing him of running an $8 billion dollar fraud.

Madoff Made No Trades

"We have no evidence to indicate securities were purchased for customer accounts"

And there it is. That statement, from the court appointed Madoff Trustee tells the story, and is the death knell for Madoff investors. There is no money, there are no securities, there were no trades.

And that means no SIPC funds, no discovery of missing securities, no government funded recovery. We discussed this months ago, and unfortunately it looks like it will be the case. SIPC Disappointment Down the Road for Madoff Investors.

The Trustee is busy recovering assets, $950 million so far, but a far cry from the billions that were lost.

And the second part of the story, the lawsuits against investors with profits are on the way. Yes, as we posted months ago,(Investors as Defendants) the Trustee is going to attempt to recover profits from investors who had profits. A long standing, and often misunderstood legal concept permits the practice, and will cause havoc for those investors who thought they escaped the scam.

There are defenses available to those profitable investors, but there are going to be lawsuits. Be prepared.

Citibank Gets Caught in Nigerian Scam

We all get the emails, looking for us to work with some foreign minister who needs to get a gazillion dollars out of his country, for which he will give you half. You have to wonder who falls for these schemes?

Well, Citibank did. Sort of. The NYT is reporting that Citibank wired 27 million dollars to various accounts from around the world from an account owned by the National Bank of Nigeria. The money was wired based on bogus wiring instructions sent to Citibank as part of an elaborate scheme by a Nigerian citizen living in Sinapore, according to the article.

While not a classic Nigerian Scam, it's close enough, and while the scammers were ultimately caught, and the money returned, one has to wonder what the heck is going on? We now know that the banks are so poorly run that they cannot invest their own money, now we have to worry about them giving away their depositor's money?

3 New SEC Investor Scheme Cases That Will Blow Your Mind

From StockTradingToGo, Ponzi scheme targeting the deaf, UBS hiding 14.8 billion dollars for customers, and the 8 billion dollar Stanford scheme.

New Ruling, Truth May Not Be a Defense

From Gordon Firemark's Entertainment Law Blog comes  post regarding a First Circuit Ruling, finding Staples liable for distribution of an email regarding a terminated employee that was true!
I haven't seen the decision, but I trust Gordon't redention of the facts. It seems that the First Circuit has toss out 40 years of jurisprudence, and now it is possible to be sued for making a true statement, if you do it with "actual malice."

In this case, the defendants sent out a company wide email saying that the plaintiff was fired for falsifying travel expense reports.

Very odd, and a precedent for making everyone who blogs, writes a newsletter or posts on the web a potential defamation defendant.

Madoff Settles with SEC

The SEC announced a settlement with Madoff of its civil case. The terms of the settlement, the amount of disgourgement, and the amount of the fine have not been disclosed.

The settlement has no direct effect on the criminal case, which is ongoing.

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• SEC, Madoff agree to settle civil fraud case (msnbc.msn.com)

Wall Street Goes To Congress

On Wednesday, eight chief executives of big banks will make their
way to Washington to appear at a Congressional hearing in front of the House Financial Services Committee.

Tthe guest list will be interesting. The chief executives scheduled to appear are Lloyd Blankfein (Goldman Sachs), Jamie Dimon (JP Morgan Chase) John Mack (Morgan Stanley), Vikram Pandit (Citigroup) and Kenneth Lewis (Bank of America).

DealBook is calling for a public flogging. It should be interesting.

$500,000 is SuperWealthy? Not in NYC

Anyone who thinks that the President's plan to cap executive comp at $500,000 for the banks who took bailout funds is a good idea needs to consider who is going to take those jobs when they could earn multiples of that $500,000 at another company.

But is $500,000 a reasonable cap? Maybe in Houston, but not in NYC. They Daily News reports that a New Yorker would have to make $123,322 a year to have the same standard of living as someone making $50,000 in Houston. Said another way, a $60,000 salary in Manhattan is equivalent to someone making $26,092 in Atlanta.

Which raises another topic. In all of this economic stimulus discussion, are we ever going to recognize that it costs more to live in certain cities than in others? Saying that you are going to give X dollars to anyone making less than $50,000, without recognizing the vast differences in costs of living harms those living in those high cost cities.

Or is that just the New Yorker in my talking?

Goldman Sachs to Repay TARP Funds Early

While the President's proposal to cap executive comp at $500,000 a year is, IMHO, a seriously misguided attempt to address the financial crisis, it may have some ancillary benefits. Goldman Sachs Group Inc (GS.N) Chief Financial Officer
David Viniar said the bank is keen to avoid restrictions it agreed to
after receiving funds from the U.S. government late last year and it is
looking to pay the money back as soon as possible.

That's great. Give the American taxpayer back his money, and figure out how to get out of your financial mess on your own. Sounds good to me.

Source: Reuters: Goldman Sachs CFO Seeks to Repay TARP Funds.

Kentucky Seizes Domain Names

Here is an idea that has not been well thought out. Kentucky, which prohibits online gambling, got a judge to issue a forfeiture order to internet registrars, seizing the domain names of gambling sites!

Say what you will about online gambling, but how one State believes it has the jurisdiction, or the right for that matter, to seize an internet domain name is beyond all rational thought. Kentucky says that the domain names are illegal gambling devices under state law.

That is doubtful, but there is simply no justification for the seizure of the device when the device is not located in the State.

An appellate court reversed, but it is on appeal again. There are a host of legal issues, starting with the First Amendment, but imagine taking this to its illogical conclusion? Some states will ban youtube.com because it promotes copyright infringement, others will try to seize every adult site in existence, and on and on and on.

Not good. Not helpful. Not legal.

Law.com has the full story, Kentucky Domain Name Suit Has Web World Buzzing. HT to LillyHill who is quickly becoming one of our favorite Tweeters on Twitter. Follow her, or follow me, or follow both.

Wachovia- UBS Retail Joint Venture?

Pretty soon we are going to need a scorecard - Wachovia Securities LLC and UBS Financial Services Inc. of New York
have engaged in preliminary talks about a joint venture for their
retail-brokerage units, according to a report in today’s New York Post.

Dreier Partners Liable as Partners?

The status and liability of so called "non-equity" partners in law firms has always troubled me. While I never actually dealt with the issue, my concern has always been, "if you tell the world you are a partner, haven't you made yourself a partner in the eyes of the world, including the firm's creditors?"

Unfortunately, Dreier partners may learn the answer to the question, according to the ABA Journal. Potential liabilty for the firm's debts, returning fees to clients for unfinished work all loom on the horizon. The piece also claims that there is the potential for disciplinary action on missing escrow deposits, but that one seems to be a bit far fetched.

Can you say "apparent authority?"