U.S. Senator Charles Grassley asked the Securities and Exchange Commission to answer allegations that the agency destroyed files from initial investigations of firms including Goldman Sachs Group Inc. (GS), SAC Capital Advisors LP and Bernard Madoff Investment Securities LLC.
Grassley, the top Republican on the Senate Judiciary Committee, made the request in a letter to SEC Chairman Mary Schapiro dated Aug. 17, citing claims by an agency employee that more than 9,000 such files have been purged. The Iowa lawmaker asked Schapiro to explain whether the SEC routinely destroys documents related to so-called matters under investigation that don’t progress beyond the initial phase.
“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence,” Grassley said in a statement. “If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”
Grassley said his request was prompted by a letter from Darcy Flynn, a 13-year SEC employee who claimed the agency destroyed documents including materials related to Goldman Sachs’ trades of American International Group Inc. (AIG) credit- default swaps in 2009, insider-trading probes of Deutsche Bank AG (DBK), Lehman Brothers Holdings Inc. (LEHMQ) and SAC Capital Advisors LP, and investigations of possible financial fraud at Wells Fargo & Co. (WFC) and Bank of America Corp. in 2007 and 2008.
In a July 15 letter to Grassley, Aguirre claimed that the SEC had illegally destroyed documents and that some officials “concocted a false and misleading story” to cover it up.
“As a general matter, not every document that comes into an agency’s possession in the course of its work must be retained,” John Nester, an SEC spokesman, said in an Aug. 17 statement, declining to respond specifically to Grassley’s letter. “We do keep records of our MUI’s and they’re available to our investigators to learn about previous work on matters that have been reviewed.”
SEC Inspector General H. David Kotz said he is looking into whether the agency followed federal guidelines and plans to issue a report on the matter by the end of September.
For more, click here.
Compliance Policy
BOE’S Haldane Says Regulation May Have to Stimulate Risk Taking
Andrew Haldane, the Bank of England’s executive director for financial stability, said policy makers may have to use regulation to help boost risk taking if banks curtail lending and hurt growth.
“As long as aversion to risk taking is causing financial congestion, growth (like traffic) will remain sluggish,” Haldane said in a research paper released yesterday by the central bank in London. “Macro-prudential policy may have a role to play in shouldering the heavy burden of damaged balance sheets and diminished risk appetites.”
Haldane’s comments come amid the U.K. government’s shake-up of bank rules, which will invest the Bank of England with control of financial regulation. The central bank’s interim Financial Policy Committee recommended in June that banks take the opportunity of periods of “strong earnings” to build up capital. As well as helping institutions to weather losses, it could also help them increase risk taking, Haldane said.
“The FPC, like the Monetary Policy Committee, needs to act symmetrically in response to these developments,” he said. “Its job is to cushion the fall as well as arrest the rise in credit and debt.”
Aquino Invokes Eliot Ness in War on Graft to Lure Investors
Philippine President Benigno Aquino has ordered his guards to protect officials hunting tax evaders in an anti-corruption drive to draw investors, saying “we’re going after very entrenched and very vested interests,” in an interview in the presidential palace in Manila.
Al Capone “got caught on tax evasion, not murder, not corruption, by not paying his taxes, that amazed me,” said Aquino, who recalled being inspired by Capone’s nemesis Eliot Ness as portrayed in the 1959 series “The Untouchables.”
Aquino campaigned on the slogan “If There’s No Corruption, There’s No Poverty.” He has since filed more than 120 complaints against suspected smugglers, corrupt officials and tax evaders, though he hasn’t secured any convictions yet in a country that was ranked 134 out of 178 on Berlin-based Transparency International’s corruption perception index in 2010.
Besides pursuing tax cheats, in his first year in office Aquino has narrowed a record budget deficit and been rewarded with higher credit scores by all three major ratings companies.
“The administration’s emphasis on good governance has improved the business climate and should result in more favorable assessments of institutional strength if that focus can be sustained,” said Christian de Guzman, a Singapore-based assistant vice president at Moody’s.
For more, click here.
South Africa Studies Tougher Mining Laws on Safety Concerns
South Africa may strengthen mining laws because companies are compromising worker safety as they accelerate production amid rising commodity prices, according to Mineral Resources Minister Susan Shabangu.
“Where there’re more profits, there is an increase in fatalities,” Shabangu said yesterday in an address to the Cape Town Press Club. “We will not hesitate to stop unsafe mines in order to save the lives of workers who inadvertently fall victim to these lapses” in safety standards.
South Africa, where Anglo American Plc (AAL), BHP Billiton Ltd. (BHP) and AngloGold Ashanti Ltd. (ANG) operate, is the world’s largest platinum producer and Africa’s biggest gold producer. Its mines are among the world’s deepest, and labor-intensive methods have made them some of the most dangerous. About 76 people died at South African mines from Jan. 1 to Aug. 15, compared with 79 a year earlier, government data show.
Separately, Shabangu announced a six-month extension to a moratorium on issuing gas-exploration licenses in the Karoo region, allowing the government more time to investigate the implications of hydraulic fracturing, or fracking. A government task force is due to deliver a report to the Cabinet next month.
FAA Works ‘Aggressively’ on Rest Rule After Missed Deadline
The U.S. Federal Aviation Administration said it’s “working aggressively” to complete a pilot fatigue rule after missing an Aug. 1 deadline amid opposition from cargo carriers and charter-flight operators.
After decades of inaction on rest rules, the FAA two years ago brought together fatigue experts, pilot unions and airlines to craft new fatigue restrictions. It proposed rules last year that would give pilots longer rest periods between shifts and reduce the maximum hours they can fly under conditions deemed fatiguing.
Cargo airlines including United Parcel Service Inc. (UPS) and FedEx Corp. (FDX), and charter operators, both types of carriers that often fly overnight flights, opposed the FAA proposal. While pilot fatigue has been increasingly cited as the cause of accidents during the past decade and the National Transportation Safety Board has made the issue one of its “Most Wanted” safety improvements, attempts dating back to the 1990s to revamp pilot work rules have stalled.
Compliance Action
U.S. Regulators Step Up Scrutiny of European Banks, WSJ Reports
U.S. regulators are stepping up scrutiny of local operations for Europe’s largest banks on concern that the region’s sovereign debt crisis may lead to funding problems, the Wall Street Journal reported yesterday.
The Federal Reserve Bank of New York has been holding talks with the lenders and sought information about their access to funds to maintain operations in the U.S., the Journal said, citing people it didn’t identify. The regulator has also been asking some lenders to overhaul their structure, it said.
Policy makers, who aim to avert a repeat of the 2008 global financial crisis, are concerned that Europe’s debt problems may curtail the banks’ ability to fund loans and meet their obligations in the U.S., or lead them to siphon funds from the U.S., the newspaper said. The problems haven’t yet escalated to the level of previous crises, it said.
Overseas lenders that don’t have big branch networks in the U.S. can borrow dollars from other lenders, the central bank or money-market funds, or swap their domestic-market currencies, the newspaper said. Those avenues of funding typically disappear in a crisis, it said.
Former News of the World Hollywood Reporter Said to Be Arrested
James Desborough, a former Hollywood reporter for the now- shuttered News of the World newspaper, was arrested by London police investigating phone-hacking, according to a person familiar with the probe.
Desborough, 38, is the 13th person detained since police renewed a probe this year to determine if the practice extended beyond a former royal reporter and a private investigator who were jailed in 2007 for intercepting voice mails. Desborough started at the tabloid in 2005 and began a role as an editor in the U.S. in April 2009, according to the person, who didn’t want to be identified because they weren’t authorized to discuss the matter publicly.
“We are fully cooperating with the police investigation and we are unable to comment further on matters due to ongoing police investigations,” News International, the New York-based company’s U.K. newspapers unit, said in an e-mailed statement.
At least nine of the 13 people arrested in investigations of phone hacking and bribes to police have ties to the News of the World, including former editor Rebekah Brooks, who resigned July 15 as chief executive officer of News Corp. (NWSA)’s News International unit. Andy Coulson, another former editor of the tabloid, was arrested last month, after resigning in January as British Prime Minister David Cameron’s spokesman.
For more, click here.
German Police Say 30 Companies Probed in Railway-Steel Case
German police have widened an investigation of possible antitrust violations in the country’s railway-steel market to include about 30 companies in a probe that already included ThyssenKrupp AG. (TKA)
Police raided the homes of two suspects and one witness in the cities of Bochum, Essen and Dortmund, the Bochum police said in an Aug. 17 statement. The probe concerns about 90 people. Prosecutors said last month the investigation concerned about 10 companies and 30 suspects.
ThyssenKrupp, Germany’s largest steelmaker has “parted company” with two employees since it launched an internal inquiry in May, said a spokesman for the producer who declined to be cited by name, in line with company policy. The Essen, Germany-based steelmaker is helping police with its investigations, he added.
Voestalpine AG (VOE), Austria’s biggest steelmaker, was the whistleblower in the investigation, which is being led by the Bochum police force in collaboration with the German Federal Cartel Office and the Bochum prosecutor’s office.
Police said the harm caused by the alleged antitrust infractions was in the three-digit-millions of euros.
Courts
China Minmetals, Sinosteel Price-Fixing Lawsuit Revived
China Minmetals Corp., China’s biggest state-owned metals trader, and Sinosteel Corp. must face claims they conspired to fix the price of magnesite sold in the U.S., a federal appeals court ruled.
The U.S. Court of Appeals in Philadelphia on Aug. 17 reversed a lower-court decision dismissing the lawsuit. The lower court erred in ruling that it lacked jurisdiction to decide the dispute based on a federal statute, the appeals panel said, remanding the case for further proceedings.
Animal Science Products Inc. and Resco Products Inc., U.S. buyers of magnesite, sued 17 Chinese companies in 2005 claiming they conspired since at least April 2000 to fix the price of the metal exported and sold in the U.S. Magnesite is mined from magnesium deposits and used to melt steel, clean wastewater and make cement, the appeals court said.
The appeals case involves only the China Minmetals and Sinosteel defendants, who had argued that the dispute should be arbitrated in China, according to court papers. Sinosteel is China’s biggest iron-ore trader.
The case is Animal Science Products Inc. v. China Minmetals Corp., 10-2288, 3rd U.S. Circuit Court of Appeals (Philadelphia).
Hyundai Oilbank Loses Appeal Against 26.3 Billion Won Fine
Hyundai Oilbank Co., one of six liquefied petroleum gas distributors fined by South Korea’s Fair Trade Commission for price fixing, lost an appeal against the antitrust regulator’s 26.3 billion won ($24 million) penalty.
The Seoul High Court ruled that the commission’s fine was appropriate as suppliers looked to implicitly reach an agreement on fixing prices, Hyundai spokesman Koh In Soo said by phone yesterday.
The commission imposed fines totaling 668.9 billion won last year on companies including GS Caltex Corp., S-Oil Corp. (010950), E1 Corp. (017940) and SK Gas Co. for fixing fuel prices for six years. SK Energy Co. wasn’t required to pay its fine after being the first company to admit wrongdoing.
Interviews/Speeches
Fed’s Dudley Sees Growth Rebounding, Low Recession Risk
Federal Reserve Bank of New York President William Dudley speaks about the U.S. and New Jersey economies.
Dudley, 58, said yesterday in response to questions after a speech in Newark, New Jersey, that “We very much still expect the economy to recover.” Growth during the second half of 2011 will be “significantly firmer” than in the first six months, and the risk of recession remains “quite low,” he said.
To listen to Dudley’s remarks, click here.
Comings and Goings
Davis Polk Hires Former Federal Trade Commission Economist
Davis Polk & Wardwell LLP said Howard A. Shelanski, a former deputy director at the Federal Trade Commission, joined the law firm’s Washington office to strengthen its antitrust and regulatory business.
Shelanski, 47, was a law professor at the University of California at Berkeley from 1997 to 2009, where he co-directed the Berkeley Center for Law and Technology from 2000 to 2008, Davis Polk said in a statement.
He also served as chief economist at the Federal Communications Commission from 1999 to 2000, and from 1998 to 1999 was a senior economist to the President’s Council of Economic Advisers, Davis Polk said. He was deputy director of the FTC’s Bureau of Economics from 2009 until this year, where he was responsible for the antitrust portfolio.
Davis Polk said it has been bolstering its Washington office with lawyers with senior government experience during the past three years, including Susan C. Ervin, former deputy director and chief counsel of the U.S. Commodity Futures Trading Commission, and Michael Sohn, former general counsel of the FTC.
Municipal Securities Rulemaking Board Names Polsky Chairman
The Municipal Securities Rulemaking Board appointed new officers and board members including Alan D. Polsky, senior vice president at investment firm Dougherty & Co. LLC, who will serve as chairman of the MSRB, the board said in a statement yesterday.
Robert A. Lamb, president of Lamont Financial Services Corp., will serve as vice chairman, according to the statement. Officer terms are for one year.
No comments:
Post a Comment