Lawyers Score Big Again

           As we understand yesterday's Reuters account, Sillycorp has agreed to pay $590 million to shareholders duped into buying the bank’s common stock between Feb 26, 2007 and April 18, 2008 because the Crime Family had toxic mortgage assets on the books at the time and kept mum about it.  By March 2009, Sillycorp’s stock had lost roughly $250 billion from the start of that class period, meaning the award amounts to substantially less than a penny on every dollar lost, so shareholders somewhere, maybe everywhere, have been horribly shortchanged by our pathetic legal system, though you can't tell who got what from the information reported.

           Whatever, it’s unlikely that anyone responsible for creating said toxic assets will pay anybody anything, and shareholders buying Sillycorp common before and after the class period weren’t included in the lawsuit, so, as near as we can figure anyway, their stockholder interest is, in effect, ponying up the cash.

           Lawyers initiating this kind of legal action generally do so to further victimize the victims, as it's our understanding that attorneys can pull down as much as half of the pitiful proceeds for themselves.

           Nothing in the Reuters story mentioned that part or even began to describe what’s really going on here.  More crooks.  More racketeering.  Different perps is all.

           Members of a corrupt bar climbing aboard the Crime Family gravy train to screw us on this one, totally ignoring 1) the 99 cents on the dollar that folks like you and I really lost, and 2) the Crime Lords who pulled that little toxic asset caper off.

           And all the reasons why Rigged-Market Nepotism can't possibly work just keep on keeping on.

The End Game

           We’re told that a Facebook (FB) Director described as a “venture capitalist and hedge fund manager” sold 20.1 million FB shares on Aug 16 and 17, adding $395.8 million to the $640.1 million he received for selling 16.8 million shares in the recent initial public offering (IPO), a $1.04 billion take.  The guy still holds, we’re forced to guess, 7.8 million shares, and doing the math from numbers included in a story that took some wading through, he apparently bought something like 44.7 million FB shares for $500 thousand in 2004, meaning the position is 83% liquidated now.

           FB, offered at 38 in the IPO, fell to a low of 18.75 last week, then rebounded to close at 21.01 on Friday, up 5.04% from the previous day.  Subscribers, lets just pause here for a moment … if you’re wondering who’s crazy enough to step in front of this train wreck at 19 and bid the quote up 5.04% in one trading session, the answer is, nobody.  In one of the more insidious twists to Wall Street racketeering, investment bankers are allowed to short-sell stock in an IPO they've screwed up, in fact during the offering they can short up to 15% of the total real shares offered and just stick their phony-baloney shares in with the authentic ones on Crime Family books so the public can’t tell the difference.  Mob trading capos are then granted free reign to cover these shorts by closing out half-bogus sell transactions with upside-down half-bogus buy transactions at their criminal leisure.  Like Friday.

           Short-selling is the principal mechanism used by financial racketeers to inflict maximum damage on the victimized public, perpetuating the original crime for as long as that takes.  (Short-covering accompanied by media pundit “is it time to get in?” coverage is probably the leading cause of death in the United States, striking Seniors as hard as it does, shortening lives by hours, days, weeks, and even years that would otherwise succumb to all the causes actually - and erroneously – cited.)

           Now $500 thousand divided by 44.7 million shares comes out to a little more than a penny a share.  That's what you-know-who paid for his FB stock.  Public investors buying into the IPO, who could have included you and us … well okay, you anyway ... invested $38 a share.  Suckers have lost over $17 of that “investment” so far, including pro forma fees and commissions.  The “venture capitalist and hedge fund manager” guy got his stock for a penny and pulled down a tad over $1 billion in profit, the tad being $39.5 million for those of you familiar with colloquial English and rounding.

           It's curiously difficult to identify the exact number of shares offered in the FB IPO, but if you put it at 484 million, one guess we ran across, then the investing public's loss in the drop from 38 per share to 21 has totaled $8.2 billion.  And our WTF guy made $1 billion.  Himself.  

           And there’s no chance anybody but us will even think about sending this whatever-he-really-is-guy to jail.

           Insiders are subject to selling restrictions in and after an IPO.  For FB, 5 releases are scheduled during its first year as a public company.  The first came last week, freeing up 271.1 million shares.

           Another, possibly overwhelming, 1.44 billion shares will be unlocked in the weeks ahead - from now through November.

Is This Some of What's Behind Those Missing Tax Returns?

Bain Closes U.S. Plant, Forces Workers to Train Chinese Replacements

By Eamon Murphy for AOL Daily Finance

Throughout this presidential election cycle, we've heard attacks on the business practices of Bain Capital, the private equity firm co-founded by Mitt Romney in 1984.  Most recently, a political action committee that supports the re-election of President Obama released an ad featuring Joe Soptic, a former steelworker who lost his job, and hence health insurance for himself and his family, after the closing of the Bain-owned plant where he worked.  Soptic's wife subsequently died of cancer; in the ad, he blames Bain and Romney for the fact that she didn't get care in time to detect and treat her disease.

"I don't know how long she was sick," Soptic says, "and I think maybe she didn't say anything because she knew that we couldn't afford the insurance."

The ad's veracity has been questioned (and defended), but evidence of Bain's deleterious impact on workers continues to surface.

In the most recent news in that vein, The Guardian reports that Bain has for months been dismantling and shipping to China, "piece by piece," a car parts plant, of which it is majority owner, in Freeport, Ill. -- even as it requires the workers to train personally their Chinese replacements, who have been flown in by management.

"It's not easy to get up in the morning, training them to do your job so that you can be made unemployed," Bonnie Borman told the paper.  Borman, 52, has worked at the Sensata auto sensors plant for 23 years.  She has three children and predicts that soon, "I am going to be competing for minimum wage jobs with my own daughter."

Although Romney left Bain around the turn of the century -- pinpointing the exact year is difficult, which has itself become a source of controversy -- he maintains financial ties to the company, receiving millions of dollars annually in profits from buyout and investment funds.  Which means that Romney stands to gain if Bain's plan to cut costs at Sensata by eliminating U.S. jobs succeeds in increasing profitability.

Needless to say, such an arrangement strikes the company's current employees as deeply unjust.  "I understand business needs to make a profit," Tom Gualrapp told The Guardian.  "But this product has always made a ton of money.  it's just that they think it is not enough money.  They are greedy." Gaulrapp, 54, is a 33 year veteran of the plant, and says that homelessness "is a real possibility" in his near future.

Bain has already quadrupled its initial 2006 investment in Sensata, The Guardian says.  The closing of the Freeport plant will cost the city 170 well-paying jobs, further damaging an already enfeebled economy.  The process of transferring the machinery to China will be complete by the end of the year.

Still, the workers are keeping up the fight to save their livelihoods.  Having already hand-delivered a letter asking for Romney's support to campaign headquarters in Madison, Wis., they're now planning to protest at the Republican National Convention, to be held in Tampa, Fla., at the end of the month.

Attacks on Bain Capital have been controversial: Democrats including Newark Mayor Corey Booker, Massachusetts Gov. Deval Patrick, and former President Bill Clinton have expressed their discomfort with the way the Obama campaign has impugned the morality of the private equity business.

But the critiques are starting to gather momentum as the human toll of Bain's business practices becomes increasingly obvious: Writing about the deal that left Joe Soptic embittered and bereft, Bloomberg's William D. Cohan (no socialist; a former investment banker, in fact) asks, "Is there any fairness in a system where a group of people can borrow a bunch of money to buy a company and pay themselves millions of dollars in dividends and fees, while the company itself ends up bankrupt and its employees lose their jobs, health insurance and pensions?"

Election Update

           With a hedge fund manager in the Oval Office come January, we could be one crack overdose away from having The Boogeyman as President of the United States of America.  Post projections call for 50.1% of the electorate to be in therapy by the third week in October.

           (Needless to say, MacDougal woke up in the middle of another scary night again just now.)

On Navigation

           With Blatant Umama and Invisible Joe finally pitted against Carried Interest and The Boogeyman in treacherously tossed waters, what we’ve got here now is one of your typically stressed-out piloting decisions.   Come November, an aggrieved 99% of the nation will have to determine where the super-overindulged 1% will set their next socioeconomic heading on the political compass, and thence launch the scarily-looming scorched-earth invasion somewhere along a defenseless, constitutionally unfortified coastline.  For the foreseeable storm-swept future, either more and more Government largess will enrich Al Gore and those wild-eyed entitlement-huggers of his without economic reason, as the 2008 election results produced in spades, or more stealth financial weapons of mass destruction will frag distressed asset values into the hands of a laugh-a-minute cop impersonating POTUS and his hedge fund gumbas, probably disemboweled corporate paper assets throughout the civilized world and Iceland, as beheld in the Global Economic Thermonuclearaccounting Apocalypse which, your brokerage records may reflect, spun out of control that very same year.

           As either heading freaks out at least 49.9% of the electorate, expect swing voters to trash the victors as soon as they possibly can, well those of us swing voters still allowed to vote anyway, probably four years out, maybe only two if the scourge is malevolent enough.

The Latest

           Now we’re being told that hedge fund racketeers are amassing formidable stockpiles of cash as the Robber Barons prepare to pounce on some kind of overseas financial collapse putting European bank paper on the market at fire sale prices.  Sounds like one of those insidious back room smoke and mirror things again.

           Bank failures, only over there this time – instead of, as some of you may recall, right here in your own fallutin back yard.

           Bank failures AGAIN.  What we’re wondering now is this …. we’re wondering if these mover-shaker, wheeler-dealer, your-a$$-is-mine covert hedge fund operatives have been quietly building up the clout to sink the world economy for Carried Interest and that Boogeyman of his.  A market bloodbath hung around Umama’s vulnerable neck some brisk October morn would just about do the job.

           Mess around with Wall Street long enough, young subscribers, and you’ll start seeing things that go bump in the night too.

           MacDougal's been doing quite a bit of that lately himself.

Paul WTF Ryan

           Vetting the Chair of the House Budget Committee as soon as Carried Interest announced his choice for Vice President on what is now the Romney Ryan GOP ticket, we started with Paul Ryan’s position on Medicare.

           The man wants to END IT, and ....

           WTF?

           There’s other stuff too, but we can’t get any further than that.  A sitting Muslim President running against 1) a laugh-a-minute cop impersonating hedge fund manager who got rich shipping American jobs overseas and trading the toxic assets (derivatives) that sank the world economy in 2008/09 and 2) the boogeyman who’s going to end Medicare, and ....

           Nope, we can’t get any further than that for you.

Lost Capital - A People Robbed of All They Had (and Spin)

           In 1883, Sitting Bull was a guest of honor at the opening ceremonies for the Northern Pacific Railroad.  When it was his turn to speak, he said in the Lakota language, "I hate all White People.  You are thieves and liars.  You have taken away our land and made us outcasts."   A quick-thinking interpreter told the crowd the Chief was happy to be there and that he looked forward to peace and prosperity with the White People.

           Sitting Bull received a standing ovation.

Some Financial Crooks Go Down

           A former Fallutin National capo agreed to plead guilty to rigged-bid racketeering last month as part of a leniency deal requiring him to rat out gangland accomplices at that and other white-collar criminal enterprises.  Taking the witness stand to help the Feds crack down on municipal bond underwriting cons, this rat fink threw the former head of a supposedly rival municipal derivatives group under the bus at Manhattan Federal Court Thursday, blabbing about how enforcers at Fallutin and their counterparts at Zurich’s Funnymoney Numbered Account Bank of Switzerland (FNABS) maintained dirty little deals like “agreements to forestall head-to-head competition”, “ways competition could be dulled”, and how to “keep other competitors away”.

           Apparently, it was your Madoff-Class Rip-Off City all over again, with the municipal bond derivatives trading desks at Fallutin and FNABS spilling to one another all the information they got, playing you screw your customer and I’ll screw mine while the dumb suckers think we’re coming up with independent numbers because we’re telling them we are. 

           Near as MacDougal Post staffers can determine, these cases against the Presbyterian Mafia really rest on wiretaps, the same kind of method Feds have been using to take down their Sicilian Mafioso gumbas for generations.  The only difference between “Scarface” Al Capone, Vincent “Mad Dog” Coll, “Icepick Willie” Alderman and your prototypical 21st Century Wall Street arch-criminal are two startling truths:  these Ivy League vipers bag way, way, way, way, way more swag than the cold-blooded thrill killers of yesteryear would’ve ever figured possible.

           And today’s mob perps murder way, way, way, way, way more innocent victims too.  All those suicides and family homicides/suicides begotten from catastrophic financial depredation.  Who else are you going to finger for the horrific consequences of Wall Street crime?

Goody Two-Shoes

           In short-selling what their own internal memos labeled “crap” that this Crime Family was touting to conservative clients as gilt-edged, AAA-rated, income investments of the highest quality, “crap” secured by sub-prime home mortgage loans to people who couldn’t afford the ballooning payments, the very “crap” that caused the Global Financial Holocaust of 2008/09, Goldberg, Styx was not a criminal enterprise and the mob lowlifes there were not conducting any criminal activities, the Justice Department proclaimed Thursday.

           "The Department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time," the Justice Department said in a statement accompanying the miscarriage.

           There appears to be nobody charged with investigating the “Department and investigative agencies”, or those lying, pandering, complicitous, sleazebag mob stooges would soon be heading to the slammer instead.  How much are Umama and his political cronies getting paid off by way of political graft/contributions to keep the likes of these Goldberg, Styx/Justice Department/investigative agency crooks out on the streets anyway?

           Is it billions yet?  Or still only hundreds of millions.

Fact No. 75

           America is home to less than 5% of the world's population, but nearly a quarter of its prisoners.  -  100 Mind-Blowing Facts About the Economy by Morgan Housel, The Motley Fool

Snake in the Grass

According to reports, computers at some high-frequency trading outfit got misprogrammed last week, triggering wild gyrations in several major stocks.  Since these screw-ups account for a ginormous 17% share of all trades on the NYSE and NASDAQ, making the firm the largest trading operation in our equity markets, the debacle is reminiscent of the infamous May 2010 Flash Crash that drove Mr. Irving to create The MacDougal Post the very next month, and our subscribers have every right to wonder why securities laws haven’t been reformed to call for the death penalty in cases like these by now.

Our position remains unchanged.  Many savvy investors had been taught to use market orders when buying or selling liquid securities, preventing mobsters from ripping these customers off by trading against them.  Effective May 6, 2010, all that changed.  On Day One of the post Flash Crash Era, the enlightened investor switched over to limit orders, placing them at or inside bid or asked, basically whatever price seems most likely to get the trade done, which is all you’re trying to accomplish with market orders anyway.

           Rather than fume over state-of-the-art financial violation, we’re just going to remind loyal readers, once again, what the latest updates in Wall Street depredation mean to you:  This new high-frequency technology has taken the old-time floor specialist out of the game, adding a brand new risk that renders the market order obsolete.  He isn't there to watch over us anymore.

Place limit orders yourselves.  Just like MacDougal.  Don’t get snakebit by whatever this horror is that now lies underfoot.