The Securities and Exchange Commission has charged Barr Rosenberg, a leading academic and quant fund manager, with fraud. Without admitting or denying guilt, Rosenberg has agreed to a consent decree that requires him to pay a $2.5 million fine and bars him from the securities and investment advisor industries.
The 68-year-old Rosenberg owned 21 percent of AXA Rosenberg (ARG) during what the SEC describes as the relevant time when the alleged fraud was committed. He was also the owner of the Barr Rosenberg Research Center (BRRC).
The agency alleges that in late June 2009 a BRRC employee discovered an error in the code of a complex automated optimization model that caused $217 million in losses in about 600 client portfolios. After the employee discussed his finding with Rosenberg and other employees, the SEC claims Rosenberg directed them to keep quiet about the error and not to inform anyone else about it.
Rosenberg also directed that the error not be corrected at the time. “Before and after the discovery, [the firm’s] clients were expressing dissatisfaction with their portfolio’s underperformance,” the SEC said in its complaint.
As a result of Rosenberg’s directives, the SEC contends that ARG’s global CEO did not learn of the errors as soon as he should have and instead found out about them in November 2009.
It is a hard fall for Rosenberg, a supremely wealthy man and widely respected academic, who pioneered the use of quantitative techniques to implement investment strategies for decades.
Clients reportedly were not informed of the error until 2010. In mid-to-late 2009, ARG's board met to discuss the model and its underperformance.The SEC said Rosenberg failed to disclose the error to the board.
When a director inquired about its underperformance, the SEC claims Rosenberg responded that he was "not aware of siginificant" mistakes and added that "if there are any [they] will not be made in the future." ARG's CEO remained in the dark until November 2009 when a BRRC employee felt required to inform him.
Showing posts with label SEC. Show all posts
Showing posts with label SEC. Show all posts
Sunday, October 2, 2011
Wednesday, April 21, 2010
Paolo Pellegrini's Testimony Could Undercut SEC Charge Against Goldman
CNBC's Steve Liesman reports: The SEC has testimony from Paolo Pellegrini, who negotiated the deal with ACA, that could contradict SEC's claims against Goldman Sachs. Paolo Pellegrini, ex right hand of Paulson, told ACA that he chose the portfolio of CDOs based on the low FICA score and high debt-to-value ratio. His intent to short the portfolio was clear and hard to miss.
Watch Steve Liesman discussing the case
Background:
Pellegrini is the Rome-born analyst who helped hedge fund operator John Paulson to make a ton of money on the subprime crash in 2007 and 2008. Pellegrini and his colleagues crunched tons of U.S. mortgage data, concluded that housing prices were due for a collapse, and invested accordingly. Paulson made over $3.5 billion on the trade. Pellegrini, is now investing his personal money via his firm PSQR Capital.
Paulson Protege Pellegrini on Bernanke's Fed: "Sheer Lunacy" Posted by: Peter Carbonara on November 16, 2009
Watch Steve Liesman discussing the case
Background:
Pellegrini is the Rome-born analyst who helped hedge fund operator John Paulson to make a ton of money on the subprime crash in 2007 and 2008. Pellegrini and his colleagues crunched tons of U.S. mortgage data, concluded that housing prices were due for a collapse, and invested accordingly. Paulson made over $3.5 billion on the trade. Pellegrini, is now investing his personal money via his firm PSQR Capital.
Paulson Protege Pellegrini on Bernanke's Fed: "Sheer Lunacy" Posted by: Peter Carbonara on November 16, 2009
Tuesday, February 17, 2009
Sir. R. Allen Stanford Charged with $8B Financial Fraud
Federal regulators are charging R. Allen Stanford and three of his companies with a "massive" fraud that centered around high-interest-rate CDs.
The Securities and Exchange Commission's complaint, filed in federal court in Dallas, alleges that Stanford International Bank sold about $8 billion of so-called certificates of deposit to investors by promising "improbable and unsubstantiated high interest rates."
The rates allegedly allowed the bank to achieve double-digit returns on its investments for the past 15 years. U.S. District Judge Reed O'Connor entered a temporary restraining order and froze Stanford's assets.
The SEC's outgoing enforcement chief Linda Chatman Thomsen says Stanford and his family and friends "perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors."
Earlier, on February 13, Herald Tribune wrote:
R. Allen Stanford's company oversees a bank that has paid more than twice the national average on certificates of deposit.
For years, R. Allen Stanford, a flamboyant Texas billionaire, richly rewarded the wealthy clients of his private investment empire.
But now the U.S. federal authorities are investigating whether those rewards were simply too good to be true.
Several federal agencies, including the U.S. Securities and Exchange Commission, the FBI and the Internal Revenue Service, have spent "many months" looking into the business activities of the Stanford Financial Group, which is based in Houston, and Stanford's Antigua-based bank, which issues high-yielding certificates of deposit, according to two individuals briefed on the investigations who were not authorized to speak publicly.
The focus of the investigations appears to be how the bank could issue certificates of deposit that pay interest rates that are more than twice the national average.
A spokesman for Stanford Financial said it had been told by the Securities and Exchange Commission and the Financial Industry Regulatory Authority, a securities industry oversight group, that "their visits to our offices were part of a routine examination."
The spokesman said those visits had occurred in January.
Embarrassed by their delayed response to multiple opportunities to uncover the $50 billion fraud that Bernard Madoff is suspected of having orchestrated, regulators are turning up the heat on money-management companies that appear to be performing significantly better than their peers.
This is not the first time Stanford's business operations have provoked attention.
Stanford Financial, a diversified financial company that offers a broad array of services, including investment banking and research, holds about $8 billion in deposits at its bank and has about $50 billion in assets in its wealth management affiliate, its spokesman said.
But a wrongful-termination lawsuit filed in a state court in Texas last summer suggests that the asset sizes may have been inflated. The two former brokers for Stanford Financial who filed the lawsuit said they had left the company as a result of fears that they could be implicated in various "unethical and illegal business practices" they claim to have witnessed.
In their lawsuit, they assert that Stanford Financial overstated individuals' asset value to mislead potential investors, failed to file mandatory forms disclosing its clients' offshore accounts and purged electronic data from its computers in response to an investigation by the Securities and Exchange Commission. A lawyer representing the two men did not return a call.
Stanford Financial, which has filed a countersuit against the two men seeking repayment of certain loans, denied the accusations.
"These allegations were made by disgruntled employees and are totally without merit," the company said. "Our company follows industry standards in generating marketing and sales plans, we are rigorously managed and fully compliant with all U.S. regulations."
A colorful and controversial figure, R. Allen Stanford has claimed ties to Leland Stanford, the former governor of California who started Stanford University. The university, however, has said there is no genealogical relationship between the two.
Stanford and his company have also emerged in recent years as major contributors to various lawmakers, appearing to have focused particularly on legislators considering bills that would tighten offshore banking rules.
And a decade ago, Stanford told The Associated Press that he had flown a Roman Catholic priest displaying signs of "stigmata," or bleeding wounds on his wrists and ankles, from the Caribbean island of Antigua to New York on his jet.
Stanford, who was said by his company to be unavailable for comment, ranked 205th last year on Forbes magazine's annual list of the richest people in the United States, with an estimated net worth of $2.2 billion.
On Antigua and Barbuda, he is akin to royalty, having been knighted by a prime minister and referring to himself as "Sir Allen Stanford" on the company's Web site.
The Securities and Exchange Commission's complaint, filed in federal court in Dallas, alleges that Stanford International Bank sold about $8 billion of so-called certificates of deposit to investors by promising "improbable and unsubstantiated high interest rates."
The rates allegedly allowed the bank to achieve double-digit returns on its investments for the past 15 years. U.S. District Judge Reed O'Connor entered a temporary restraining order and froze Stanford's assets.
The SEC's outgoing enforcement chief Linda Chatman Thomsen says Stanford and his family and friends "perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors."
Earlier, on February 13, Herald Tribune wrote:
R. Allen Stanford's company oversees a bank that has paid more than twice the national average on certificates of deposit.
For years, R. Allen Stanford, a flamboyant Texas billionaire, richly rewarded the wealthy clients of his private investment empire.
But now the U.S. federal authorities are investigating whether those rewards were simply too good to be true.
Several federal agencies, including the U.S. Securities and Exchange Commission, the FBI and the Internal Revenue Service, have spent "many months" looking into the business activities of the Stanford Financial Group, which is based in Houston, and Stanford's Antigua-based bank, which issues high-yielding certificates of deposit, according to two individuals briefed on the investigations who were not authorized to speak publicly.
The focus of the investigations appears to be how the bank could issue certificates of deposit that pay interest rates that are more than twice the national average.
A spokesman for Stanford Financial said it had been told by the Securities and Exchange Commission and the Financial Industry Regulatory Authority, a securities industry oversight group, that "their visits to our offices were part of a routine examination."
The spokesman said those visits had occurred in January.
Embarrassed by their delayed response to multiple opportunities to uncover the $50 billion fraud that Bernard Madoff is suspected of having orchestrated, regulators are turning up the heat on money-management companies that appear to be performing significantly better than their peers.
This is not the first time Stanford's business operations have provoked attention.
Stanford Financial, a diversified financial company that offers a broad array of services, including investment banking and research, holds about $8 billion in deposits at its bank and has about $50 billion in assets in its wealth management affiliate, its spokesman said.
But a wrongful-termination lawsuit filed in a state court in Texas last summer suggests that the asset sizes may have been inflated. The two former brokers for Stanford Financial who filed the lawsuit said they had left the company as a result of fears that they could be implicated in various "unethical and illegal business practices" they claim to have witnessed.
In their lawsuit, they assert that Stanford Financial overstated individuals' asset value to mislead potential investors, failed to file mandatory forms disclosing its clients' offshore accounts and purged electronic data from its computers in response to an investigation by the Securities and Exchange Commission. A lawyer representing the two men did not return a call.
Stanford Financial, which has filed a countersuit against the two men seeking repayment of certain loans, denied the accusations.
"These allegations were made by disgruntled employees and are totally without merit," the company said. "Our company follows industry standards in generating marketing and sales plans, we are rigorously managed and fully compliant with all U.S. regulations."
A colorful and controversial figure, R. Allen Stanford has claimed ties to Leland Stanford, the former governor of California who started Stanford University. The university, however, has said there is no genealogical relationship between the two.
Stanford and his company have also emerged in recent years as major contributors to various lawmakers, appearing to have focused particularly on legislators considering bills that would tighten offshore banking rules.
And a decade ago, Stanford told The Associated Press that he had flown a Roman Catholic priest displaying signs of "stigmata," or bleeding wounds on his wrists and ankles, from the Caribbean island of Antigua to New York on his jet.
Stanford, who was said by his company to be unavailable for comment, ranked 205th last year on Forbes magazine's annual list of the richest people in the United States, with an estimated net worth of $2.2 billion.
On Antigua and Barbuda, he is akin to royalty, having been knighted by a prime minister and referring to himself as "Sir Allen Stanford" on the company's Web site.
Sir. Allen Stanford 's Videos From The Past
Allen Stanford twenty 20 Cricket and the WAGS
Cricket 20 million dollars for 20 overs
In a historic announcement Sir Allan Stanford announces a 20 million prize for the winner of one game of cricket. Each winning player becomes an instant millionaire. The losers get nothing. Cricket finally enters the big money league.
Cricket 20 million dollars for 20 overs
In a historic announcement Sir Allan Stanford announces a 20 million prize for the winner of one game of cricket. Each winning player becomes an instant millionaire. The losers get nothing. Cricket finally enters the big money league.
Sunday, February 8, 2009
Before and After. Madoff on Markets and Markopolos on Madoff
Before: October 20, 2007, Bernard Madoff at a roundtable discussion with Justin Fox, Ailsa Roell, Robert A. Schwartz, Muriel Seibert, and Josh Stampfli.
After: February 04, 2009, Harry Markopolos, independent financial fraud investigator, testifies at the House Financial Services Subcommittee hearing on $50 billion investment fraud engineered by Madoff.
After: February 04, 2009, Harry Markopolos, independent financial fraud investigator, testifies at the House Financial Services Subcommittee hearing on $50 billion investment fraud engineered by Madoff.
Tuesday, February 3, 2009
A sequel in the ongoing Madoff scandal
A sequel in the ongoing Madoff scandal is available for download on the QWAFAFEW website at
http://www.qwafafew.org/boston-file-article-wsj-20090203
Harry Markopolos, CFA, former President of the BSAS and former member of Boston QWAFAFEW's Steerage Committee, laments about lost opportunities.
Anyone need a good fraud investigator? A good guess is that the SEC will take him much more seriously in the future!
http://www.qwafafew.org/boston-file-article-wsj-20090203
Harry Markopolos, CFA, former President of the BSAS and former member of Boston QWAFAFEW's Steerage Committee, laments about lost opportunities.
Anyone need a good fraud investigator? A good guess is that the SEC will take him much more seriously in the future!
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