What’s the Matter with the SEC? Funny Farm Redux

Posted on March 11, 2011 by mmjdiary

 

We need not go back to the SEC’s missed Madoff opportunities or its unwillingness to shut down the Stanford Ponzi operation because it was a little too complex to fit within the performance evaluation slam-dunks its lawyers needed. The SEC is a troubled agency with the hits that just keep on coming.

We learned a week ago from a government audit of its books that the SEC, if it were a publicly traded company, would not be able to get its financials or internal controls certified.  We learn this week that the agency charged with policing directors and officers of publicly traded companies for their conflicts of interest missed a big in its own general counsel. 

Former SEC General Counsel David Becker had inherited $2 million from his mother’s Madoff account.  Mr. Becker disclosed this tidbit after he joined the agency.  The agency’s ethics counsel cleared Mr. Becker Continue reading →

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He should not lead.

Posted on March 10, 2011 by mmjdiary

Scott Bundgaard, the Senate Majority Leader in the Arizona Senate had a late-night side-of-the-road ruckus with his ex-girlfriend.  “Ruckus” may be charitable because the story keeps changing.  True enough, the judicial process on domestic violence charges have not run their course, and there is that presumption of innocence.  Wait-and-see is appropriate for allowing him to retain his senate seat.  However, he should not lead.  A leader under such a cloud sets a tone at the top that should trouble the members of his party because their decision to retain him as their leader astonishes the public.  It is in no one’s self-interest to allow him to keep his position, not even his own.  Mr. Bundgaard needs the time to sort through both the criminal justice system and a complex personal life.

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“No. Are you kidding? I’m just hoping the coach doesn’t dismiss me.”

Posted on March 10, 2011 by mmjdiary

Ohio State University president, E. Gordon Gee upon suspending football coach Jim Tressel for his failure to mention to Mr. Gee the allegations against his players that culminated in the NCAA suspending 5 players for the first 5 games.  Coach Tressel also remained silent as the U.S. Attorney’s office began its investigation.  Coach Tressel withheld these tidbits for at least six months – long enough to make it through the Fall 2010 season.  The NCAA suspended Continue reading →

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“Just about everyone does it. If your dream is to have someone (famous) sing at your birthday or wedding, and you offer enough money, the answer will most likely be yes.”

Posted on March 10, 2011 by mmjdiary

Gary Bongiovanni, editor of Pollstar, commenting on Beyoncè, Nelly Furtado, Mariah Carey, and Usher performing private shows for the Gadhafi family.  About a million bucks came each of their ways in exchange.  Ms. Carey said she was “naïve and unaware of who I was booked to perform for.”  Well, a glance at a newspaper now and then would have told Ms. Carey that Gadhafi was the one in the doorman’s uniform with the pillbox hat.  Dictators are relatively easy to spot.  Continue reading →

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“I don’t judge a person by what they’ve done and what they’re going to do.”

Posted on March 10, 2011 by mmjdiary

Brian Wilson, of the San Francisco Giants, in discussing his meeting with Charlie Sheen.  That leaves only judging folks by what they are currently doing.  Mr. Sheen has that covered as well, and he could use just a smidgen of judgment.  Sometimes judgment of past and planned actions is sorely needed in the world of Mr. Sheen, wherever that world may be.

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When the Punishment for Cheating is Far Less Than the Consequences for Failure

Posted on March 10, 2011 by mmjdiary

I am a single parent, so, hell yeah, I have the motivation to want to have good scores. I don’t want to lose that money.

Think about the teachers who are monitoring their own students who are taking those state exams that they must pass or they cannot graduate or they go to prison – the Barometer is not really sure of consequences for students, just that they are serious.  If the consequences were not so grave, why else would teachers cheat?  And cheating they are, according to a study released by Audrey Amrein-Beardsley, Continue reading →

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You may have crossed a few ethical lines if you have covered the windows of your classroom so that folks on the outside cannot see that students are cheating on their state exams.

Posted on March 10, 2011 by mmjdiary

Yes, educators at the George Washington Carver Charter School in Highland Park, Michigan opened exams early, spread the questions around before students took those exams, and offered answers as the students took the exams.  “I think they were afraid for their jobs,” explained Celestine Sanders, the new principal at the school who has been hired to fix the problem.  Principal Sanders is correct; she understands one of the “Seven Signs of Ethical Collapse.”  Pressure to achieve, when it becomes the sole decision factor, results in covered windows and everything from answers to topic sentences being given to the children.  Perhaps most ironic was what the fourth and fifth graders explained about the practices during the investigation, “She [the teacher] was trying to help us do our best.”  Teachers should do that, but not during the exam itself.  Teach your children well.  They can then handle the exams, with the windows uncovered.  Just a little-horse-and-cart problem in Michigan.

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We Are Ahead of Japan When It Comes to Cheating

Posted on March 4, 2011 by mmjdiary

The Barometer recalls the 80s when we here in the USA feared that the Japanese would take over the world because they were so good with cars, real estate, and production.  Their lost decade found us pulling ahead.  And there is no need to fear a catch-up.  Folks at Kyoto University are flummoxed by a cheating scandal on entrance exams that found the questions from the two-day exam posted on the internet, followed by answers as Ask Wiki or whatever came through for the aspiring lads and lasses.  University officials believe that the applicants posted the questions on line using their smart phones.  DUH!

We here in the USA banished cell phones from exams about a decade ago.  Continue reading →

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On BYU’s Standards: Enforcement is to an organization what integrity is to individuals.

Posted on March 4, 2011 by mmjdiary

This ethics stuff is fairly straightforward when there’s not much to lose.  We tend to go wobbly when so much is on the line. However, BYU yanked the eligibility of one of its star basketball players as it heads, with justifiably high hopes, into March Madness.  The BYU player violated the university’s honor code.  Absolute, unequivocal, egalitarian standards applied.  The young man’s name is not given here because he did the right thing in admitting his breach Continue reading →

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Rajat Called Raj: SEC Says Goldman Director Tipped Galleon CEO and Now Faces Charges

Posted on March 2, 2011 by mmjdiary

Rajat Gupta was a member of the Goldman Sachs board in 2008 (he has just resigned) when the board discussed on September 21-23 converting Goldman Sachs into a Bank Holding Company and accepting Berkshire Hathaway’s offer of a $5 billion purchase in preferred shares. Telephone records and calendar entries indicate that, on the morning of Monday, September 22, the day after the Sunday evening Goldman Sachs Board meeting, Gupta and Rajaratnam very likely had a telephone conversation. Shortly after that conversation, Rajaratnam had his hedge company, Galleon, which held no pre-existing long or short position in Goldman Sachs securities at the time, to purchase over 80,000 Goldman Sachs shares.

On September 23, Rajaratnam placed a call to Gupta which lasted over 14 minutes. Less than a minute after the call began, Rajaratnam caused the Galleon Tech funds to purchase more than 40,000 additional Goldman Sachs shares.

Gary Naftalis, Mr. Gupta’s lawyer explained, “Mr. Gupta has done nothing wrong.  There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo.” Ah, but a director passing along non-public information can be a bit of a problem.

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On a Couple of Days in February — The Headlines Spoke Volumes and Show a Trend

Posted on March 2, 2011 by mmjdiary

February 3-4, 2011

•“SEC Sues Over Bug in ‘Quant’ Program,” Wall Street Journal, February 4, 2011, p. C1 –AXA SA agreed to pay $242 million to settle fraud charges that it hid material information from clients through the use of complex computer models and a secretive culture

•“32% Admit Mooching Off Neighbor’s Wi-Fi,” USA Today, February 4, 2011, p. 1B. –Neighbors admit to borrowing their neighbors’ unencrypted Wi-Fi connections.  The number of piggy-backers has doubled since 2008. –Terrorists, pedophiles, and identity thieves are known piggy-backers but were not part of the survey (to the best of the Continue reading →

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“Countrywide was one of the most admired companies in America, financial or otherwise. . . It probably made more difference in society, in the integrity of our society, than any company in the history of America.”

Posted on March 2, 2011 by mmjdiary

former Countrywide CEO, Angelo Mozilo, who paid $22.5 million to the SEC to settle federal charges that he misled investors about the nature of the risk in Countrywide’s loan portfolio.  Countrywide’s stock grew 25,000 percent over 25 years (from 1982-2007).  However, in February, 2008, the stock lost 90% of its value, and fell to $4.00 per share.  Bank of America bought Countrywide, under threat by the federal government, for $4.25 per share.

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“When people frantically begin shredding sensitive documents and deleting computer files and smashing flash drives and chasing garbage trucks at 2 a.m. . . . It is not because they have been operating legitimately.”

Posted on March 2, 2011 by mmjdiary

U.S. Attorney (Manhattan) Preet Bharara on the activities of two hedge-fund managers who learned that they were under investigation for insider trading.  One texted the other, “I think u just go into office . . . shred as much as u can . . . ” Former fund manager Donald Longueuil, the man accused of insider trading, destruction of his hard drive with pliers, and chasing New York City garbage trucks at 2 AM in order to dispose of the hard drive parts he had placed neatly in Baggies.

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States Sales Tax for Internet Companies: The Saga Continues

Posted on March 2, 2011 by mmjdiary

Them’s fightin’ words! Amazon.com is closing its Irvine, Texas center because it has a dispute with the Texas state comptroller over $269 million that the controller says Amazon owes to the state in sales taxes for goods shipped to Texas residents.  Off went 119 jobs.  With state budget deficits boiling over and under and every which way into the media, the revenue pot from online purchases remains largely untapped due to the federal laws and the U.S. Constitution’s limitations on the ability of states to tax companies that do not have a “presence” in those states.  The National Conference of State Legislatures says that the amount of uncollected taxes on online and catalog sales totals $8.6 billion.  Collecting those taxes by states all depends on the meaning of “physical presence” in each state.  Texas Governor Rick Perry sides with Amazon.com and jobs and says Amazon owes no taxes because it does not have a store front presence in Texas.  State controller Susan Combs says that the physical presence of a warehouse is enough os a physical presence to require Amazon.com to pay taxes on sales to Texas residents.

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