...Countrywide / Bank of America Countrywide used to be one of the major mortgage companies in the United States until the housing market started to fall. They had so much bad loans that executives were about to closed the doors, until Bank of America came to the rescues and purchase the company. This was the beginning of the nightmare that was soon to make the evening news. The American people were soon to find out about all the creative loans that were approved to unsuspecting customers who were soon to lose their homes. This was the beginning of the end for Countrywide and a turbulent time for Bank of America which is still going on today. Defining and Analyze To define all the issues that created the downfall of Countrywide, we first need to look at the history of the company. The company was created by Angelo R. Mozilo and David Loeb about forty years ago. The partners were able to grow the company into a $500 billion home loan company and assets of $200 billion (The New York Times 2011). To be one of the major mortgage companies, they took many risks to ensure that their customers could live the America dream of owning a house. There have been many issues that led to the downfall of Countrywide. Greed would have to be high on the list. They approved loans that many other companies would not. Part of the problem happened during the crazy housing bubble that enables almost anyone to be approved for a mortgage. Gone were the days of qualifying for a mortgage by providing...
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...Case Study Bernie Madoff’s Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser By Denis Collins Denis Collins is a professor of management in the School of Business at Edgewood College in Madison, Wisconsin. His research interests include business ethics, management, and organizational change. Contact: dcollins@ edgewood.edu A [person] is incapable of comprehending any argument that interferes with his revenue. Rene Descartes Overview This case study is a chronology of the largest Ponzi scheme in history. Bernie Madoff began his brokerage firm in 1960 and grew it into one of the largest on Wall Street. While doing so, he began investing money as a favor to family and friends, though he was not licensed to do so. Over a period of fifty years, these side investments became an investment fund that mushroomed into a $50 billion Ponzi scheme. Bernie1 pled guilty without a trial on March 12, 2009, and was sentenced to 150 years in prison. Thousands of wealthy clients, philanthropic organizations, and middle-class people whose pension funds found their way into Bernie’s investment fund lost their life savings. What to Do? Bernie Madoff, at age 69, owned three very successful financial companies—a brokerage firm, a proprietary trading firm, and an investment advisory firm. On December 10, 2008, the brokerage and proprietary trading firms, managed by his brother and two sons, were performing as well as could be expected in the middle of a deep recession. His investment...
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...2010 Two years ago, Ken Lewis, the former CEO of Bank of America, was confronted with an enormous predicament when Ben Bernanke and Henry Paulson requested that his company immediately acquire Merrill Lynch to save them from declaring bankruptcy. With the financial system of the United States on the verge of collapsing, how do you say no to the Federal Reserve Chairman and the Secretary of the U.S. Treasury? Thus, Lewis agreed. Now fast forward one year later to September 2009. At this time, Lewis has agreed to step down as CEO. He has also been indicted for fraud for “deliberately misleading his shareholders about the ballooning losses at Merrill Lynch” before the bank bought the firm, which includes failing to disclose the year-end bonuses that were paid out to Merrill executives (Fitzpatrick and Eckblad). Furthermore, this begs two questions: what ethical dilemma was Lewis facing during this crisis and how could he have better handled the request from Bernanke and Paulson? Assuming I was Ken Lewis when Bernanke and Paulson requested me to acquire Merrill Lynch, I believe I would have gone through with the acquisition as well. According to House Republican staffers in a memo obtained by Bloomberg, “the Federal Reserve and U.S. Treasury overstepped their authority and pressured Bank of America to complete its Merrill Lynch purchase” (Lanman and Torres). The memo also stated that: “a gun was placed to the head of Bank of America [Lewis] to go through with the merger. Government...
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...SEC – “Shredded Justice” an article in review In our capital market, within the United States of America, there is one long-standing agency which provides for checks and balances within the finance and investing community. Often many readers may see the initials of SEC, which stands for the Securities and Exchange Commission. It’s with this agency that over the past decade has become a house hold buzz word, particularly within the circle of business, finance, and investing. The agency itself is by far a young branch of the bureaucratic machine, with roots from that of the Great Depression. As we fast forward in time, the agency has undergone some changes for better or worse. In a positive light, although not the scope of this article, the Sarbanes-Oxley Act of 2002 created new guidelines and authority for the agency to require publicly traded companies to provide full disclosure of its financial documents. It also set a precedent for senior management (i.e. CEO, CFO) to legally commit to the accuracy of their books. This topic of discussion revolves around the most recent accusation of ethics violations. To that affect, a whistle-blower by the name of Darcy Flynn within the SEC has come forth claiming that for the past two decades the practice of shredding vital investigation documents has taken place and needs to be justified. The specific documents in question are known as MUI’s or “Matters Under Inquiry”, which are documents that are created during the initial investigating...
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...and these misrepresentations happen through overstating revenues and understating expenses, overstating assets and understating liabilities, and use of fictious and fraudulent transactions that gives a misleading impression of the company’s financial status. There were a few corporate scandals that took place in the last decade that forever changed investment policies in corporate America. The companies that are most commonly known for these scandals are Enron, Adelphia, and WorldCom. These companies had hidden their true financial status from creditors and shareholders until they were unable to meet the financial commitments which forced them reveal massive losses instead of the implicated earnings. The ultimate result cost investors billions of dollars when the share prices of the affected companies had collapsed. According to Hopwood, Leiner & Young (2002), pg. 130, “the public outcry from the corporate scandals were enormous, and congress responded by implementing the Sarbanes-Oxley Act of 2002 (SOX). The main reason for the implementation of SOX was to restore public confidence in corporate America.” In this statement, the authors are implying that the Sarbanes-Oxley was primarily implemented in order to bring back the confidence of the investors so the continuity of investment in public companies by investors...
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...Bank of America is one of the largest corporations in the nation; however they are hit with lawsuits almost every week. The lawsuits range from stockholders to customers. Most recent one being, a 50 billion lawsuits brought by Bank of America shareholders. When the market crashed (recession hit or financial crisis) in 2008, Bank of America acquired Merrill Lynch. The shareholders claim that the bank’s executives including former chief operating officer Kenneth Lewis failed to disclose a loss of $15.31 billion after the acquisition of Merrill Lynch. Shareholders believed that the loss was hidden to ensure they did not vote against the transaction. The bank disclosed the loss to the public after the acquisition of Merrill Lynch was completed. It stated in the article that the bank and its executives knew about the losses months after the Merrill Lynch deal closed. Whether the bank’s intentions were to deceive the shareholders or not, it was unethical. Bank of America argued that the loss was uncertain and the loss would expected by the shareholders since Merrill Lynch was losing billions quarterly. In its defense, Bank of America believes that the disclosure of the loss was not material. In my opinion, I do believe that it was wrong that Bank of America to hide the loss from shareholder and the public since they are a corporation. Nevertheless, it’s easy to sue big corporations such as Bank of America. Since they are hit with several lawsuits during the year, it’s likely...
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...person, the Smoot-Hawley Tariff Act and a massive drought in the Mississippi Valley. From this nation-wide crisis came Social Security as we know it, the creation of the Tennessee Valley Authority Act, the creation of the SEC and stricter banking and stock market regulations. Overall the Great Depression had a large impact on The United States that can still be seen today. Causes of the Great Depression In January of 1929 an editorial (Encyclopedia of American Studies, 2010) said “It has been twelve months of unprecedented advance, of wonderful prosperity. If there is any way of judging the future by the past, this new year will be one of felicitation and hopefulness.” This was obviously not the case. When the stock market crashed on October 29, 1929, it was possibly the greatest contributing factor to the depression. Some believe, though incorrectly, that the “Great Crash” is the same as the great depression. The stock market crash had people scared to spend money. People no longer bought nearly as many products which led to a drop in production, which in turn led to layoffs in the work force. Coupled with these layoffs, were huge debts being defaulted on by stock holders; this all inevitably to the failure or closing of many banks. The Smoot-Hawley Tariff Act was passed in June 1930 to protect farmers affected by the Great Depression from foreign producers. This Act raised the tariffs or taxes on imports to a new, unprecedented high. It was originally...
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...JP Morgan Chase Katherine Phillips Timothy Kellum Business Law/LEG 100 March 8, 2013 JP Morgan Chase announced a trading loss from investment decisions made by three managers that was in the Chief Investment Office (CIO) of 5.8 billion. Those three men were let go soon after and could lose at least two years of income. The traders involved were also let go from the bank with no severance. The CEO Jamie Dimon commended the Ina Drew who was over the office and Dimon volunteered to give two years’ of pay. Drew retired after the trades were exposed. The Securities and Exchange Commission (SEC) enforces the Securities Act of 1933 and 1934. Act 34 consists of disclosure requirements for public companies. Act 34 requires companies to file quarterly and annual financial statements and other documents with the SEC. The documents are publicly available through the SEC database. The documents have to be accurate and represent the company’s financial position and operations. The four elements of a valid contract are capacity, offer and acceptance, consideration and compliance with the law and public policy. The duty of good faith and fair dealing in the banking relationship is a general belief to a contract that will treat each other honestly, fairly and in good faith. It is done either verbal or written. The breach of the contract will result in a lawsuit and the courts decide the disputes between parties to contracts. Intentional tort is a civil wrong doing...
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...companies seek to go public. Visa Inc. is a global payments technology company headquartered in San Francisco, California. It facilitates electronic funds transfers throughout the world. Visa does not issue cards, extend credit or set rates and fees for consumers; instead, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers. Visa has operations across Asia-Pacific, North America, Central and South America, Caribbean, Central and Eastern Europe, Africa and Middle East. Visa’s industry is Financial Services which includes a broad range of organizations that deal with the management of money. Visa’s initial public offering took place three years ago on March 18, 2008. This paper will analyze the process followed by VISA in its IPO in addition to the reasons and their current situation after going public. Company History Visa’s history begins in mid-September 1958 when Bank of America launched its original BankAmericard credit card program...
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...retrieval system, used in a spreadsheet, or transmitted in any form without the permission of the Toronto Leadership Centre for Financial Sector Supervision. Sources: This document is based on information that was in the public domain at the times mentioned or which became public after the resolution of the issues. It does not include information confidential to the financial institution involved. 1 LEHMAN BROTHERS: TOO BIG TO FAIL? WILLIAM RYBACK This case study is written and presented by William Ryback, former special advisor to the Financial Supervisory Service in Seoul, Korea; Deputy Chief Executive of the Hong Kong Monetary Authority; and career bank supervisor in the United States. The material presented is derived from public media sources. INTRODUCTION In this case study an example of a large bank failure and its after effects on the financial markets is presented and raises issues relating to "too big to fail". In this situation government, regulatory, and supervisory agencies were forced to address the public policy issues surrounding when, and if, an individual financial institution should be bailed out . In the case presented here the decisions needed to be made during a time of unsettled market conditions and, as is always the case, within a...
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...Ethics and Compliance Leslie Hope, Quo-vades Simonton, Teresa Duncan, Kizzy Richardson FIN/370 August 2, 2012 Professor Franklin Olivieri Ethics and Compliance This paper contains analyzed data of the organization Lowe’s Home Improvement Stores. Lowe’s is a home improvement store that provides its customers with the supplies needed for any improvements around the home. The discussion hereafter will assess the role of ethics in the financial department and describe the procedures the company has to encourage ethical behavior. Next, explain the role financial markets in the United States. Followed by how Lowe’s complies with Securities and Exchange Commission (SEC) regulations. Lastly, provide an evaluation of the company’s financial performance last two annual periods, followed by the calculations of ratios for each year. The ratios include current, debt, return on equity, and days receivable along with an explanation for trends. The code of business conduct and ethics at Lowe’s improvement stores starts with the board of directors down to the newest employee. Everyone associated with or represented by Lowe’s is required to read and adhere by the code of conduct. Lowe’s values its reputation as a leader when complying with governmental regulations involving ethics. Lowe’s applies ethics in its financial dealings by requiring, under Section B of the code of conduct. That “employees and members of their immediate families should not have any financial interest, direct...
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...transaction in which an unlisted private operating company becomes public via a merger with a publicly traded shell company, which is generally a company with no material business operations.” (SEC Approves New Exchange Rules to Toughen Listing Standards for Reverse Merger Companies) Beginning in 2007 and continuing into the present, more than 150 Chinese companies have obtained listings on both U.S. and foreign stock exchanges via reverse mergers (RTOs). 2. The structure of RTO (Coming to America) • Matchmakers in China and the U.S. connect businesses in China with American ailing or shell companies and propose a merger • The under writer hires an auditor to prepare the financial statements required for the merger to be approved by the SEC • Once the merger is approved, the company is renamed. Often the names contain the word "China" or "Sino". • The company builds up credibility and moves up to a well-known exchange such as Nasdaq • The company works with an investment bank to sell shares. Analysts catch on, investors start paying attention, and funds buy the stock, all moving the price. 3. Why a reverse merger rather than an IPO? • Reduced time and costs to secure public listing Take US stock exchange as example: A firm can avoid having to go through the lengthy SEC review process. This can save the firm anywhere from 2-12 months • Less legal groundwork needed, and therefore less legal expense A RM typically costs $200,000 – 300,000 less than an IPO, and...
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...international group of financial services controlled by Allen Stanford. Stanford financial Group was comprised of several affiliated companies: Stanford Capital Management, Stanford Group Company, Stanford International Bank, Stanford Trust Company, Bank of Antigua and the Stanford Coins and Bullions. Stanford Group Company was a diversified financial services company. The organization offered brokerage and investment advisory, private and commercial banking, investment advisory, trusts, real estate investment services, and investment banking services. It also had private equity investments through the Stanford Venture Capital Holding, Inc. The company’s headquarters was in Houston, Texas with additional offices in Baton Rouge, Louisiana; Irving, Texas; Memphis, Tennessee; Miami, Florida; and Denver, Colorado. This large international financial group controlled by Allen Stanford came crashing down in 2009 when it was discovered that these companies had claimed higher rates of returns on their CDS than those offered by commercial banks in the U.S. and consistent double-digit returns on his bank investment portfolios were nothing more than a Ponzi scheme. In this Ponzi scheme Stanford perpetrated a scheme to defraud investors who purchased his Stanford International Bank (certificates of deposit) of billions of dollars by soliciting funds under false pretenses. Stanford presented hypothetical investment results as actual historical data in his sales pitches to clients and claimed his...
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...Claims Court against companies that violate the law. If you need legal advice, please consult an attorney. Table of Contents Letter from UCAN Executive Director Michael Shames / Introduction……………………….2 Violations for which telemarketers can be sued………………………………………………....3 What to do when you are solicited / Who can you sue?…………………………………………4 “Strike Back” Anti-Telemarketing Script………………………………………………………..5 Controlling the call: a sample conversation……………………………………………………...6 Using “rejection psychology” to your advantage………………………………………………..7 Sample letter to a telemarketer suspected of breaking the law…………………………………8 F.I.S.T. Anti-Telemarketing Program……………………………………………………………9 “Hired Gun” Sample Letter……………………………………………………………………...12 Arkow v. Bank of America……………………………………………………………………….13 UCAN’s Fraud Squad…………………………………………………………………………….15 http://www.ucan.org From The Desk of Michael Shames Dear Fellow Telemarketing Victim: You are awakened by a ringing phone, but when you answer, nobody is on the line. Then, just as you drift off to sleep, you get another call. This time there is a voice on the line, but while they seem to know you, you don’t recognize the voice. Soon you realize: it is a telemarketer. What you may not realize is that you have just been targeted by a sophisticated piece of...
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...a cabinet 1st Congress – lots of work. 1.Springtime meeting – ½ of all trade takes place at that time, concerned about losing revenue James Madison – drafted tariff and tonnage bills Tariff – import tax – Tonnage – licensing fee Generate revenue to kick start the economy 2. Bill of Rights Originally their were 12 – but gutted down to 10 2nd amendment right – right to bear arms AND maintain a well-regulated militia Reaction to Boston Massacre, Quartering Act, etc. All amendments reactions to the revolution Passed and ratified by 1791 3. Pay for the President and Congress 4. unilateral removal of individuals – the cabinet members serve at the pleasure of the President 5. Establish a Cabinet 1st sec of state – Thomas Jefferson 1st sec of Treasury – Alexander Hamilton 5. Creation of the Judiciary - Judiciary Act of 1789 – 1. deemed that a trial court should be established in every state – called district courts – 13 2. appeals levels courts – circuit courts 3. establish the number of Supremes at that 6 – groups of 2 – travel around and works the circuit courts Lifetime Appointments 1st Chief Justice – John Jay, hated the job, so John Marshall will take over Hamilton’s Financial Program - *** 1st congress asked...
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