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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

Sunday, February 6, 2011

Goldman Sachs Makes an End Run Around Regulation on Compensation

Did you ever wonder why Goldman Sachs keeps secret its list of partners? Partnerships in Goldman Sachs makes it possible for executives to take advantage of compensation based on stock ownership. By hedging stock holdings, GS executives can protect their compensation and by-pass regulation of compensation.

Stock-Hedging Lets Bankers Skirt Efforts to Overhaul Pay
by Eric Dash - DealBook

Intent on fixing a banking system that contributed heavily to the recent financial crisis, lawmakers and regulators pushed Wall Street to overhaul its pay practices. Big banks responded by shifting more compensation into stock, a move intended to align employees’ interests more closely with those of investors and discourage excessive risk-taking.

But it turns out that executives have a way to get around those best-laid plans. Using complex investment transactions, they can limit the downside on their holdings, or even profit, as other shareholders are suffering.

More than a quarter of Goldman Sachs’s partners, a highly influential group of around 475 top executives, used these hedging strategies from July 2007 through November 2010, according to a New York Times analysis of regulatory filings. The arrangements were intended to protect their personal portfolios when the firm’s stock was highly volatile, especially at the height of the crisis.

In some cases, executives saved millions of dollars by using these tactics. One prominent Goldman investment banker avoided more than $7 million in losses over a four-month period.

Such transactions are at the center of a debate over whether Wall Street executives should be allowed to hedge their stock holdings. The concern with hedging is that executives can easily break the ties between compensation and company performance. Employees who hedge their holdings are less concerned about a falling share price. That’s why the government barred top executives at banks that received multiple bailouts from using the strategies until they paid back the funds.

“Many of these hedging activities can create situations when the executives’ interests run counter to the company,” said Patrick McGurn, a governance adviser at RiskMetrics, which advises investors. “I think a lot of people feel this doesn’t have a place in a compensation structure.”

More broadly, critics say, the practice of hedging represents another end run around financial reform.

Read the full article here


Anonymous said...

The evil that men do lives after them;
The good is oft interred with their bones.

Anonymous said...

Why Aren’t Geithner And Holder Acting On Failure To File Suspicious Activity Reports On Mortgage Fraud?

Why did FinCEN, a unit of Treasury under then Secretary Henry Paulson, not connect the dots? If fraud was as rampant as the sketchy SARs filings showed, of course fraudulent loans were getting into real estate-backed mortgage securitizations, and into CDOs and synthetic CDOs. How could they not have noticed this level of fraud? Darcy Parmer saw it. Why didn’t someone from FinCEN talk to her or people in positions like hers?

Anonymous said...

Who says twilight zone doesn't exist?

“To Blame Wall Street For the Financial Meltdown Is Absurd”
Steve Eckhaus – a top Wall Street compensation lawyer (he will get you your bonus) – articulated the underlying view with great clarity to Saturday’s Wall Street Journal, “To blame Wall Street for the financial meltdown is absurd.” (p.B13 of Feb.5-6 print edition).

The absurdity here is that we have created Too Big To Fail banks (and insurance companies) and that we are allowing them to become Too Big To Save – while our political elite blithely looks the other way.

Joyce said...

I really don't understand why the people mentioned in the articles above have not been prosecuted for their incompetence. Is the Peter Principle at work here where all the bank leaders and regulators have long since reached their level of incompetence and have been promoted beyond that?

I recently saw a cartoon in The New Yorker which featured a teacher telling his class about the three components of the government which he had listed on the board: the legislative, the judicial and the executive branches. A student puts his hand up and asks, "Where is the business branch?"

I guess that's a good answer to the question of how things can get so screwed up--the government is ruled by business interests.

Anonymous said...

@ said"really don't understand why the people mentioned in the articles above have not been prosecuted for their incompetence."

Your site has all the information needed to answer that seems corrupt practices knows no bounds!

Anonymous said...


someone in Britain does....theft, greed, lies

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