Dave Hartley
http://www.Asheville-Computer.com
http://www.ioa.com/~davehart
Classic Financial Scandals
BCCI, Barings, Daiwa, Sumitomo, Credit Lyonnais, Bre-X etc.
Bank of Credit and Commerce International (BCCI)
- The Sandstorm Report This is the report of an official investigation into the BCCI affair that the British government refused to publish. Along with other material on BCCI, the Sandstone Report is made available on the web site of AABA, the Association for Accountancy & Business Affairs.
- BCCI, Bank of Crooks and Criminals a chapter from Defrauding America by Rodney Stich which also has information on other bank scandals.
- The Media and the Savings and Loan and BCCI Crises Why the news media took so long to focus on the Savings and Loan and BCCI crises by David McKean.
- Congressional Report on the BCCI Affair A Report to the Committee on Foreign Relations, United States Senate by Senator John Kerry and Senator Hank Brown, December 1992. The report is also available on Orlin Grabbe's web site.
- BCCI, the Intelligence Services and Money Laundering An article by J. Orlin Grabbe.
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Banco Ambrosiano
Although this series of scandals first came to light in the early 1980s the controversy is not over yet.
- Through the Looking Glass : Vatican Politics, the Calvi Murder and Beyond... A long article by Conrad Goeringer on Roberto Calvi and the Banco Ambrosiano scandal.
- Three bankers brought scandal to the Vatican An article, from the Irish Times Saturday, August 29, 1998, about how the Vatican Bank was affected by various scandals in the early 1980s, including the collapse of the Banco Ambrosiano.
- Italian judge orders exhumation of banker who died under bridge In June 1998 an Italian judge ordered exhumation of the body of Roberto Calvi, known as "God's Banker" because of his connections with the Vatican, to determine whether his 1982 death was murder or suicide.
- Fugitive financier Gelli extradited to Italy from France Licio Gelli, the fugitive financier who played a key role in one of Italy's biggest postwar scandals was extradited to Italy in October 1998 to begin a 12 year prison sentence.
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Barings Bank
The collapse of Barings Bank was probably the most discussed financial scandal of recent years. The bank was subsequently taken over by the Dutch-based ING Bank and is now as ING Barings.
British Government
Bank of England
Singaporean Authorities
- The Executive Summary of the Report of the Inspectors of Barings
Futures and a press statement on Barings Bank by the Singapore Ministry of
Finance used to be on the Web but seem to be no longer available. However, if
anyone wants to obtain the official report in print the reference is -
Lim, Michael Choo San Barings Futures (Singapore) Pte Ltd : investigation pursuant to section 231 of the Companies Act (Chapter 50) : the report of the Inspectors appointed by the Minister for Finance / Michael Lim Choo San, Nicky Tan Ng Kuang. Singapore : Singapore Ministry of Finance, 1995. - xi, 183p. -
The review by Maxmilian Hall may also be of interest.
Hall, Maxmilian Review of the Singapore Inspectors' Report on Baring Futures (Singapore) Pte Ltd. Loughborough University Banking Centre, Jan 96. - 30cm.i,17... - (Loughborough University Banking Centre Research Paper S.,No.92/96). ISBN - 1-899275-15-0
Numa Financial Systems
- The Collapse of Barings Bank a collection of links to articles on the scandal maintained by Numa Financial Systems.
Scandals in Justice
Scandals in Justice which regularly publishes online articles attacking the British legal system has also published one on the Barings affair.
- Barings: A Random Walk to Self-Destruction This article argues that regulators and human nature do not always coincide in their objectives. In the old days, speculators were protected by the twin devils of fear and greed - the gambler's emotions. Computers do not know fear or greed, they do not have any common sense, either. Anyone trading off a screen soon loses touch with reality and common sense.
Media Central
- The Other Trial of the Century Media Central's Foreign Agent column discusses the coverage of the Leeson case on the Web.
US Commodity Futures Trading Commission Response
- Status Report on Regulatory and Self-Regulatory Responses to the Barings Bankruptcy Article by Joseph B. Dial, Commissioner, Commodity Futures Trading Commission.
Other Articles on Barings
- Billion-Dollar Man Rogue trader Nick Leeson astonished the world when his derivatives deals brought down Barings - and forced reforms on financial markets.
- Leeson Scandal 'could happen again' A report from the BBC, just after the premier of the film Rogue Trader.
- How Safe is your Company? Lessons from recent financial disasters by Stuart Hamilton, Professor at IMD Lausanne. Barings is used as the main example.
- Repercussions of the Barings disaster A file maintained by Chong Kee.
The central figure in the debacle has written a book about the Barings
affair.
Rogue trader by Nick Leeson. London : Warner, 1997. ISBN
0-7515-1708-9. US edition published by Little Brown & Company, 1996 ISBN
0-316-51856-5.
Locking the Stable Door After the Horse has Bolted
Whenever a scandal like the Barings debacle is uncovered there is a demand that legislators and regulators should ensure that nothing similar occurs again. All too often such action is merely a case of locking the stable door after the horse has bolted. Could frauds on a massive scale be foreseen? Regulators are hardly likely to answer yes because that would undermine their excuses for their failures.
However, immediately after the news of the Barings affair broke, Allan Fotheringham writing in the leading Canadian news and current affairs magazine Maclean's made the following points.
Author Linda Davies has proven a point made years ago by Marshall McLuhan, who said that artists can warn us of future disasters. Three years ago, Davies wrote the novel, Nest of Vipers, about a computer whiz-kid who decides to exploit the system and make tons of money while being employed as a mole by the Bank of England. She wrote what 28-year-old Nick Leeson accomplished in Singapore last week. Leeson has been able to upset world economies more than J. P. Morgan, the Vanderbilts, or the Rothschilds ever could.
See also the Psychology of Risk, Speculation and Fraud the text of a speech by Linda Davies at the European Research Center's annual Financial Panel, Amsterdam, 11 June 1997.
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Daiwa Bank
- Japanese Bank to Pay $340 Million in Fines Daiwa Bank Ltd. agreed to plead guilty to a criminal cover-up of $1.1 billion in bond-trading losses and pay $340 million in fines, settling one of history's biggest banking frauds. The financial penalty against the big Japanese bank is the fourth-largest ever levied by U.S. authorities against a financial institution operating in the United States, after Drexel Burnham Lambert's $650 million, BCCI's $550 million and Prudential Securities' $370 million.
- The Social Market A short article on lessons for Japanese banks article from issue 2 of Applied Futures & Trading.
- Daiwa Bank, Sumitomo Bank Agree on U.S. Asset Transfer A short article from News-Times, January 29 1996.
- I Didn't Set Out to Rob a Bank Toshihide Iguchi's interview with Time Magazine.
- Daiwa Bond Trading Scandal Figure Book From Jail Details of claims made by Toshihide Iguchi in a book he is writing - from Viking Phoenix Web's Japan, Incorporated site.
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Sumitomo Corp.
- Sumitomo sues Chase and UBS The Sumitomo Corp. filed a lawsuit in Manhattan federal court against Japanese bank seeks $760M for alleged copper-trade abuses; UBS rejects claim. 3 June 1999.
- Merrill Settles Copper Suit The Sumitomo Corp. filed a lawsuit in Manhattan federal court against Merrill Lynch & Co. agreed on Wednesday 30 June to pay $25 million to the U.S. Commodity Futures Trading Commission and the London Metal Exchange to settle allegations of involvement in Sumitomo Corp.'s efforts to fix copper prices more than three years ago.
- The copper trader who fell from grace An account of Sumitomo's losses of $1.8 billion caused by the activities of their trader Yasuo Hamanaka on the copper market.
- How Copper Came a Cropper Sumitomo's robber-baron tactics make the case for regulation. By Paul Krugman.
- The Copper Debacle A brief account of the scandal affecting one of Japan's oldest companies.
- How to Launder Money in the Copper Market by J. Orlin Grabbe.
- Laundering Numbers J. Orlin Grabbe argues that the copper scandal cost Sumitomo even more than was originally claimed.
- The '96 Copper Crisis A response by Christopher J.B. Green, Chairman of Barclays Metals Group, London, and former Chairman of the Board of the London Metal Exchange, to criticisms of the LME in the aftermath of the Sumitomo Corp. (Sumisho) "unauthorized copper trading" scandal.
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Credit Lyonnais
- The Credit Lyonnais Debacle By Joseph Fitchett International Herald Tribune. Long France's flagship bank, Credit Lyonnais has now gained another reputation as the bank whose name is associated with the country's worst financial scandal this century.
- How an Italian Thug Looted MGM, Brought Credit Lyonnais to its Knees, and made the Pope Cry An article about Giancarlo Parretti.
- Credit Lyonnais & L.F. Rothschild Ready to Topple J. Orlin Grabbe ponders the implications for the international financial system if Credit Lyonnais were to collapse.
- Another Disaster for French Bank: Theft at Belgian Unit An article from the International Herald Tribune, 15 March 1997, about fraud at a Belgian subsidiary of Credit Lyonnais.
- Financiers flamboyants, contribuables brules par Ibrahim Warde, Le Monde Diplomatique, Juillet 1994. Article in French about how deregulation has led to scandals in various countries, e.g. Credit Lyonnais in France and Banesto in Spain.
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Bre-X
- The BRE-X Saga Articles from the archives of the Calgary Sun.
- BRE-X :The Inside Story A brief summary of a book on the scandal by Diane Francis.
- RCMP's Hands Tied in Bre-X Debacle Article from the Financial Post Tuesday, May 25, 1999, blaming the failure to convict anyone in the BRE-X affair not on the Royal Canadian Mounted Police but on successive federal governments that have gutted the RCMP budget.
- On the Road to Busang with BRE-X Brief notes from Business Week magazine on some of the big-name players that had close dealings with Bre-X Minerals.
- Bre-X Survivor Clarifies Why He Invested A Response by John Kuytn to an article entitled after the gold rush which appeared before the scandal broke.
- BRE-X Shares, by Vern Krishna, QC, FCGA The rise and fall of Bre-X shares is the classic story of euphoria feeding on greed, followed by despair in its aftermath.
- First Book on Bre-X Scandal Blames Geologist de Guzman Douglas Goold and Andrew Willis claim that Michael de Guzman, the geologist who jumped to his death from a helicopter, had doctored core samples with gold bought from an Indonesian prospector.
- Bre-X Chronology
- The Deloitte & Touche Inc's Forensic Investigative Associate Inc. (FIA) Report The full text of a report on how the mineral samples were tampered with.
- The Strathcona Report A detailed report on the tampering process.
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Griffin Trading Company
- Derivatives firms shut down The UK's Securities and Futures Authority (SFA) forced two firms to close down after John Ho Park lost at least �6.2m, in the biggest trading scandal to hit the City of London since Nick Leeson broke Barings Bank.
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Jardine Fleming
- Whom to Trust? Investors are spooked by a scandal in Asia's No. 1 fund manager An account of the Colin Armstrong affair and its effects on Jardine Fleming and on Hong Kong in general.
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Metallgesellschaft
- Metallgesellschaft AG: A Case Study By John Digenan, Dan Felson, Robert Kelly and Ann Wiemert. An article from the FMT Review about how in 1993, Metallgescellschaft AG revealed publicly that its "Energy Group" was responsible for losses of approximately $1.5 billion, due mainly to cash-flow problems resulting from large oil forward contracts it had written.
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Morgan Grenfell
- Deutsche Morgan Grenfell and the Case of Peter Young An article from Inside Fraud Bulletin.
- UK watchdog raps ex-Morgan Grenfell head over scandal Britain's investment fund regulator reprimanded Keith Percy, former chief executive of Morgan Grenfell Asset Management, for his role in the country's biggest pension fund scandal more than two years ago.
- Solv-Ex's dealings with MorganGrenfell begin to unfold Solv-Ex securities were purchased fraudulently using dummy shell companies in order to deceive compliance supervisors.
- �2m fie for Morgan over Peter Young affair Daily Telegraph, Thursday 17 April 1997. (You have to register to get access to articles in the Telegraph's archives but registration is free). A record fine of �2m, pus an order to pay costs of more than �1m, was imposed on Morgan Grenfell Unit Trust Managers by City regulators yesterday. A spokesman for Deutsche Bank, which owns Morgan, said the total cost of the "Peter Young affair" was likely to exceed �400m.
- Deutsche Bank counts cost of Young debacle Daily Telegraph 27 March 1997. Deutsche Bank, Germany's largest bank, yesterday announced that it had set aside Dm1.2 billion (�440m) to cover losses incurred by disgraced fund manager Peter Young who was sacked last September from Morgan Grenfell Asset Management.
- SFO investigation into Morgan at a standstill after High Court ruling Sunday Telegraph, 24 August 1997. Peter Young, the disgraced former Morgan Grenfell fund manager being investigated by the Serious Fraud Office, has been declared "mentally incapable" by the High Court. His illness has made it almost impossible for the SFO to continue its investigation into the collapse of the unit trusts he managed.
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NASDAQ Stock Market
- The NASDAQ Price-Fixing Case A detailed outline of the allegations.
- Third Circuit Reinstates Nasdaq Suit Three brokerage firms now face securities class action. Despite the court's recent verdict the legal battle is not over yet. An article from The National Law Journal, Monday, February 16, 1998.
- How the Journal of Finance broke the NASDAQ Scandal In 1994 the Journal accepted for publication a study of Nasdaq spreads by two assistant professors. Then the fireworks began.
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NatWest Markets
- Natwest Announces
Findings Of Independent Inquiry Into Losses At Natwest Markets The losses
and mis-pricing in the London interest rate options business went undiscovered
because of deliberate concealment and weaknesses in the operations and
internal controls in this area. Improvements were already being made to the
controls over a period of time, and it was as a result of these that the
losses were detected at the end of February 1997.
Financial regulators to descend on NatWest An article from the Irish Times, Friday, June 27, 1997, about possible wrong-doing in connection with a �90 million loss in the options markets.
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Lloyds of London and the Insurance Industry
- LLiars of London A web site produced by disgruntled American Names or investors in Lloyds of London claiming to tell the truth about the loss of approximately $20 billion in investors' funds since 1988 and which they assert is the greatest financial scandal the world has ever seen in a single organisation.
- The Mob Behind The Names An article from Scallywag no. 27 on the Mafia, Yakuza and the problems of Lloyds.
- Police probe �100m City Swindle American crime syndicates have infiltrated the Lloyd's insurance market in a wide-ranging fraud that could cost hundreds of millions of pounds in lost disaster claims.
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The Savings and Loan or Thrifts Crisis
- The Greatest Stedilnica Crisis in History An article about the Savings and Loan crisis by the Israeli economist Shmuel Vaknin.
- The Looting of U.S. Saving and Loans A series of articles by Franklin Mancusco.
- Prudential-Bache Securities Scandal An extract from the book Serpent on the Rock: The Shocking Truth Behind the Prudential-Bache Securities Scandal by Kurt Eichenwald, Harper Business. ISBN 0-88730-720-5. Kurt Eichenwald, an award-winning financial reporter for the New York Times, tells the explosive story behind Wall Street's most destructive scandal of the 1980s - the massive securities fraud perpetrated by Prudential Bache. Half a million people lost enormous sums and names like Onassis and Bush numbered among the victims.
- The Savings and Loan Crisis a select bibliography by Elaine Hopkins.
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Smith Barney
- Feds charge broker in $40 million Euroscheme A federal grand jury in Houston has charged Harold Deavours, a former Smith Barney financial consultant with defrauding foreign investors of more than $40 million. An article from the Houston Business Journal, December 8, 1997.
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Pension Fund Scandals
- Pensioners mugged by men in suits When Robert Maxwell was found to have fiddled the Mirror Group pension fund, he was posthumously branded a robber baron. Yet Maxwell seems to have been something of a model for many other employers who are interfering with our pension funds and getting away with it. Reproduced from Living Marxism issue 57, July 1993.
- Pension Frauds Over the coming years we will see pension scandals that dwarf the Maxwell case, according to an article from Inside Fraud Bulletin.
- Helen Liddell gets tough with pensions companies A package of sanctions aimed at maintaining the pressure on pension firms to meet their targets for resolving pensions misselling cases was outlined on the 18th November 1997 by the Economic Secretary in a statement to the House of Commons.
- Patricia Hewitt Recognises Pension Firms' Efforts to Complete Priority Review All 41 of the largest firms reviewing pensions mis-selling have made sufficient progress with the priority review to be removed from the Treasury's monthly list, the Economic Secretary Patricia Hewitt announced on 16 February 1999.
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The Flaming Ferraris
Because of the relatively small sums involved this is unlikely to go down in history as a classic financial scandal but it is one that in February and March 1999 has received plenty of publicity following reports that a member of the team had been involved in illegal trades in the Swedish stock market.
- Flaming Ferraris Making Millions A report from the Sidney Morning Herald Tuesday, 22 December 1998, a couple of months before some of the leading traders were fired.
- James Archer to Sue Bank for �400,000 Bonus James Archer is planning to sue Credit Suisse First Boston for the bonus he would have received had he not been fired. Sunday Times 14 March 1999.
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Miscellaneous
- Martin Frankel : Organized Criminal Martin Frankel, a money manager has vanished with as much as $3 billion in clients' money, leaving behind a things-to-do list (item No. 1: "Launder money") and astrological charts designed to answer such pressing questions as "Will I go to prison?"
- Frankel Extradition Awaited German prosecutors said they were waiting for an extradition request for fugitive broker Martin Frankel who was arrested in Hamburg on Saturday 4 September 1999.
- Accused in
Japanese Case, Armstrong Surprises Prosecutors
Martin A.
Armstrong, a financial guru accused of defrauding Japanese investors of about
$1 billion, may have tried to thwart federal prosecutors' fraud probe by
attempting to liquidate his New Jersey company in a West Indies island court.
- Tokyo
Police Raid CSFB Japanese police
raided the Tokyo branch of Credit Suisse Financial Products (CSFP), a unit of
CS Group, on Thursday 14 October 1999, on suspicion it obstructed an earlier
inspection by Japanese financial regulators.
- Princeton Bond
Buyers Weigh Next Move About 70 Japanese
companies have incurred combined losses of about 125 billion yen but they have
yet to seek legal redress even a month after the scandal broke.
- Big
Bank Scandal Unearthed in Tiny W.Va. $500 million
mortgage fraud alleged, involving Keystone Mortgage Co., a subsidiary of First
National Bank of Keystone.
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Last updated 19 October 1999.
