Months ago I posted a blog titled Goldman Sachs go Directly to Jail. Did that happen? Nope. Not one person has yet to pay a price for the Goldman debacle. Key word is yet. In late November, there were a slew of arrests at major hedge funds as part of a probe in to rampant Insider Trading investigations. Now word is that there is much more to come.
This is not surprising, as insider trading has actually accelerated in recent years. Call it a sign of the times! What is surprising is the “shock” some are showing at the Federal investigations and allegations. I have had numerous calls from Wall Street Honchos afraid that a mass conspiracy was afoot. PLEASE! Anybody who has worked on Wall Street and been the subject of any investigations by the Justice Department or SEC knows that these never come as a surprise. Take it from this insider.
Even Bernie Madoff claimed he never knew what was about to happen to him. Of course he did and so did his family and close conspirators. How would it be possible for a $50 billion arrest to go down so quickly? The wheels of justice turn very slowly. But, they do turn. U.S. authorities began subpoenaing big name investors in late November as the FBI raided hedge funds in three states. Now, CNBC is reporting that last week Manhattan Federal Prosecutors sent more subpoenas to several large hedge funds.
So, what’s a Wall Street firm to do? They should start talking to their key employees now. This is the time when some humility and strategic positioning is needed. Wall Street has always been a place of survival of the fittest, but that may not work this time. This insider says Wall Street, now is the time to get real and talk about how best to get on with it. Can you spell INCARCERVENTION?
Filed under bail, celebrities, Criminal Justice, Federal Prison, Hedge Funds, jail, Madoff, prison consultant, Prison Consulting, prison preparation, SEC, Wall Street
Why is the Goldman Sachs situation different than other fraud cases like that of Michael Milken?
The truth is that in complex cases like Milken and Goldman Sachs it is hard to understand what is actually illegal vs. what is borderline unethical. In the Milken case from the 1980’s, Milken wound up pleading guilty to six counts of securities and tax violations. That’s usually what the government settles for when things are too complicated. Think Al Capone!
Michael Milken was the king of “junk” bonds. Bonds that helped launch the LBO or leveraged buyout craze. Milken sold bonds in companies with high growth potential but often these companies became so debt laden they failed. But, others like Turner broadcasting soared and are still around today. Many felt that Milken and others also sold bonds that they knew were “junk” solely for profit. However, the ultimate convictions of minor securities and tax issues were what sent him to prison.
In the Goldman Sachs case it is déjà vu. No junk bonds but an equally confusing security called a mortgage backed or subprime mortgages. Today the Feds announced that they were looking into criminal charges against the firm and maybe even CEO Lloyd Blankfein. In this case Goldman allegedly sold equity in companies with too much debt or sold securities in companies they knew were junk. However, just like with Drexel and Milken, these packaged investments were very complex and Wall Street seemed fine as long as everyone was making money.
But, every pyramid has a top and such is the mess Goldman Sachs has left us with. Maybe even worse as the average person also has been hurt in the mortgage and real estate market collapse.
So, what’s different? This insider thinks not much. In over 20 years the SEC still has not learned much and the truth is may never. But, it is time for Goldman Sachs to be held accountable. The good news is that if some Goldman employees go to jail they will be able to see old friend Bernie Madoff again.