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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Friday, May 21, 2010

Goldman’s Dueling Goals

Here's more from that lengthy and excellent article from GRETCHEN MORGENSON and LOUISE STORY at the NY Times. Just about everything you would want to know about them is included. All the signs are pointing to another market crash soon. Don't say you weren't warned.
Clients Worried About Goldman’s Dueling Goals

As the housing crisis mounted in early 2007, Goldman Sachs was busy selling risky, mortgage-related securities issued by its longtime client, Washington Mutual, a major bank based in Seattle. Although Goldman had decided months earlier that the mortgage market was headed for a fall, it continued to sell the WaMu securities to investors. While Goldman put its imprimatur on that offering, traders in the same Goldman unit were not so sanguine about WaMu’s prospects: they were betting that the value of WaMu’s stock and other securities would decline.


Goldman’s access to client information can also give its traders an advantage that many of the firm’s competitors lack. And because betting against a company’s shares or its debt can create an atmosphere of doubt about a company’s financial standing, Goldman because of its size and its position in the market can help make the success of some of its wagers faits accomplis. Lucas van Praag, a Goldman spokesman, declined to say how much the firm earned on its bets against WaMu’s stock. He said his firm lost money on its bets against the other WaMu securities. In an e-mail reply to questions for this article, he said there was nothing improper about Goldman’s wagers against any of its clients. "Shorting stock or buying credit protection in order to manage exposures are typical tools to help a firm reduce its risk."


During the early stages of the mortgage crisis, Goldman seems to have unnerved WaMu’s former chief executive, Kerry K. Killinger, according to an e-mail message that Congressional investigators released. In that message, Mr. Killinger noted that he had avoided retaining Goldman’s investment bankers in the fall of 2007 because he was concerned about how the firm would use knowledge it gleaned from that relationship. He pointed out that Goldman was "shorting mortgages big time" even while it had been advising Countrywide, a major mortgage lender. "I don’t trust Goldy on this," he wrote. "They are smart, but this is swimming with the sharks."


As Trading Arm Grows, a Clash of Purpose

When new hires begin working at Goldman, they are told to follow 14 principles that outline the firm’s best practices. "Our clients’ interests always come first" is principle No. 1. The 14th principle is: "Integrity and honesty are at the heart of our business." But some former insiders, who requested anonymity because of concerns about retribution from the firm, say Goldman has a 15th, unwritten principle that employees openly discuss. It urges Goldman workers to embrace conflicts and argues that they are evidence of a healthy tension between the firm and its customers. If you are not embracing conflicts, the argument holds, you are not being aggressive enough in generating business.


Fostering a Market Then Abandoning It

Even now, two years after a dispute with Goldman, C. Talbot Heppenstall Jr. gets miffed talking about the firm. As treasurer at the University of Pittsburgh Medical Center, a leading nonprofit health care institution, Mr. Heppenstall had once been pleased with Goldman’s work on the enterprise’s behalf. Beginning in 2002, Goldman had advised officials at U.P.M.C. to raise funds by issuing auction-rate securities. Auction-rate securities are stock or debt instruments with interest rates that reset regularly (usually weekly) in auctions overseen by the brokerage firms that sell them. Municipalities, student loan companies, mutual funds, hospitals and museums all used the securities to raise operating funds.


Stay the course, Goldman advised U.P.M.C. in a letter, a copy of which Mr. Heppenstall read to a reporter.

On Feb. 12, less than a month after that letter, Goldman withdrew from the market — the first Wall Street firm to do so, according to a Federal Reserve report. Other firms quickly followed suit. With the market in disarray, the interest rates that U.P.M.C. and other issuers had to pay investors skyrocketed.


Brokering State Debt and Advising Against It

A state assemblyman in New Jersey named Gary S. Schaer also has had unsettling encounters with Goldman. Mr. Schaer, who heads the New Jersey Assembly’s Financial Institutions and Insurance Committee, said he became wary in 2008 when he learned that Goldman, one of the state’s main investment bankers, was encouraging speculators to bet against New Jersey’s debt in the derivatives market.


Over the years, it has played the role of adviser and fund-raiser for a diverse range of countries, while occasionally drawing criticism for simultaneously betting against the ability of some countries, like Russia, to repay their debts.


Read the whole thing here


Anonymous said...

Same old $hit from the same $hit leaders...

So We Now Have "Financial Reform"?
The most-important part of the bill, stopping derivative abuse, was watered down to the point of irrelevance. The exceptions and exemptions that remain for OTC trading are big enough to drive 200 West Street through - sideways - and Goldman will do exactly that.

Nor did we re-impose a hard leverage cap. You know, the one that existed before 2004?

Nor did we reinstate a hard deposit cap limitation.

Nor did we fix The Fed illegally usurping the appropriation power of Congress or impose an actual audit on them.

Nor did we fix the off-balance sheet or "mark to fantasy" BS - in short, the outright lies printed in so-called "financial reports" every quarter.

Anonymous said...

I thought credit was tight? I guess not for some...maybe their setting themselves up for price inflation down the road?

May 21 (Bloomberg) -- Thomas H. Lee Partners LP agreed to sell Michael Foods Inc., a supplier of refrigerated foods, to a Goldman Sachs Group Inc. private-equity fund for about $1.7 billion, according to a person with knowledge of the matter.

An announcement to sell the business to GS Capital Partners may come as soon as today, said the person, who declined to be identified because the talks are private. Spokespeople for THL and Goldman declined to comment.

Private-equity dealmaking is accelerating as the economy stabilizes and financing becomes available for new transactions. Thomas H. Lee will make about three times the $230 million it put up to buy Michael Foods in 2003 and hold about 20 percent of the company after the sale closes, the person said.

The Boston-based firm, also known as THL Partners, was created in 1974 and has invested in about 100 businesses during its history. Other investments include doughnut seller Dunkin Brands, and Aramark.

Anonymous said...

This article has nothing to do with Goldman but everything to do about business, ethics, and politics and how breaking rules doesn't prohibit you from seeking office. This guy is chump change compared to recent financial shenanigans but gives us a glimpse on how the guys on top think and its not for the betterment of society..its for the betterment of hook or by crook...and that is Goldman related!

Never faced charges

Scott was never charged and left Columbia/HCA with $10 million in severance and stock valued at $300 million.

Scott was unaware of the billing practices and "would have fired any employees found engaged in that activity," Baker said.

Alderson thinks Scott had to know.

The hospitals kept two sets of books: One showed the reimbursements actually submitted to Medicare and the other, marked confidential, detailed those charges that would likely be rejected if caught by federal auditors.

The company kept funds in reserve to repay the government for those claims and once the timeframe for an audit had passed, the reserves would be reclassified as revenue, Alderson said.

"They had $1 billion in play in these reserves," said Alderson, who now lives in La Quinta, Calif., and speaks to college students and Rotary clubs about business ethics. "Anywhere from 25 to 33 percent of their bottom line was these reserves, so you bet he knew about it.''

Schilling, the other whistleblower, said the billing schemes existed before Scott took over.
"His culture fostered it to continue and probably placed more of a demand for it to grow," said Schilling, who lives in Naples and has a company devoted to combating health care fraud.

"It was all about how to game the system, how to maximize the reimbursement."

As I recall certain firms gamed reimbursement of worthless paper to the detriment of our country's financial health. We better make some real changes on who we vote for and what type of people we want in office.

RobertM said...

@Scott running for governor.

I saw that article this morning. We have all sorts of scum run for office here in Florida. It's an embarrassment to all the rational and forward thing people that live here. Unfortunately, the state is FULL of morons.

We do have one candidate for governor that actually makes sense, an economist by the name of Farid Khavari ( but he is virtually unknown and gets zero press.

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