Judge Rakoff Nails JP Morgan

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Judge Rakoff Nails JP Morgan

By Michael Collins

Federal district court Judge Jed S. Rakoff called off a J.P. Morgan deal in an order that revealed the inside track on how the financial giant does business. The ruling of January 28 prevents Morgan from selling or participating the $225 million loan it made to Cablevisión, owned in the majority by Grupo Televisa, one of Mexico's largest telecommunications companies. Snip

According to Judge Rakoff, by its actions “JP Morgan thereby violated, at a minimum, the covenant of good faith and fair dealing” by attempting to turn participation into what was really a disguised assignment of the loan that would cause irreparable harm to Cablevisión." (author's emphasis)

We have entered a period of grotesque decadence in the financial and business dealings of those who brought us the great financial calamities. It's time to begrudge the culprits their ill gotten gains and turn the tables before it's too late, if it isn't already.



Link: http://www.apj.us/index.php?option=com_content&task=view&id=2841&Itemid=2

This article may be reproduced in whole or part with attribution of authorship
and a link to the article in American Politics Journal.

[Fire1]

1. GOOD!!! n/t

[autorank]

3. Rakoff is the same Judge that handles the SEC-Bank of America Case

He told the SEC that the $33 mil fine of Bank of America for their tricks on the Merrill Lynch merger was too low and has it uip to $150 mil now (still not good enough;). He's a tough judge and knows business law backwards and forwards.

[Fire1]

9. True. Not enough but it'll get their attention!! LOL!! n/t

[autorank]

19. It would take a 2 x 4 across the knews!

[unc70]

14. Rakoff accepted SEC-BofA settlement w/modifications

He was not very happy while doing it. Rakoff also has had some rather stern words for Cuomo, et al for making claims against BofA but being unwilling to provide supporting info to Rakoff. Cuomo eventually provided some info, but apparently not anything that countered the SEC findings or precluded Rakoff's acceptance of the settlement.

I previously posted in my DU Journal about some interesting items tucked away in the NY AG Cuomo v BofA Complaint.

[autorank]

20. Here's what the judge said re Cuomo's case

"It is important to emphasize, with respect not just to Mayopoulos’s termination but with respect to all the events that the Attorney General interprets so very differently from the SEC that the Court is not here making any determination as to which of the two competing versions of the events is the correct one," Rakoff writes. WSJ Blog http://tinyurl.com/ycby6qs

That's not critical, it's neutral, which is appropriate for a judge in federal court given the circumstances. They're not supposed to decide the cases of others.

As far as criticism of Cuomo, it wasn't the case, it was the prose in the complaint. Here's the NY Observers reporting:

"Bank of America's management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth," wrote the A.G.'s office in one typically overblown passage from its filings.

"While even in an era of purple prose, such language may seem deepest violet," Mr. Rakoff critiqued, "it is nonetheless equivalent of alleging that the Bank and its top officers purposely defrauded their shareholders, or at the very least, acted in reckless disregard of the facts and the law." New York Observer http://tinyurl.com/ygxau3p

That's exactly what one would conclude from the NY State AG's complaint against them. According to The Martin Act, they committed acts that "they knew or should have known" were deceitful.

Of note, the Special A.G. for the Attorney General's office, Markowitz, was a leading SEC attorney for eight years before joining Cuomo's team.

It's good that you're actively defending BofA so they get some exposure in this matter here but it is ultimately fruitless. Why? Because they deceived both shareholders and the government in the same time period. That's going to be demonstrated in court or through their admission if they plead.

Lewis, Price, and the corporate "personhood" of the BofA are going down in this one.

[unc70]

24. Rakoff also complained about much more wrt Cuomo

But you seem much too emotionally and with too much of your personal reputation involved in these issues to review what is actually going on.

I have a far different opinion than you on what is going on within the NY AG office in regard to BofA disclosure of ML status. I have posted my alternative view (key items in my journal). Nothing I can say has received anything approaching a critical review versus the evidence.

The critical new information I noticed was that the ML internal reports of losses (relied upon by BofA) were changed to End of Month rather than End of Quarter, but the labels were not changed. This change happened after Chris Flowers had done his own DD of ML Q4 2007, from which BofA gained much of its understanding of ML internals. So if many of those within BofA who saw the reports thought the reports still meant what they claimed to mean, then the BofA actions make a lot more sense.

I don't have much to gain or lose either way, so I have stated most of my analyses, forwarded critical components to several people qualified to critique my brief, and will await things to play out in the courts and elsewhere.

If you read my posts/journal you would realize that all the facts from testimony under Martin needed to complete the BofA defense of the NY Complaint are disclosed in the Complaint itself. Consider why.

A reason BofA might prefer to avoid going that route in its defense is that it might raise questions regarding the behavior of people at ML who remain with the merged entity BofA ML unit.

[autorank]

29. Stop that right now

"But you seem much too emotionally and with too much of your personal reputation involved in these issues to review what is actually going on." That's typical back door defamation. "you seem much too emotionally" (sic) - please. I offered a supported response to your reply and you take a cheap shot. We can disagree but if you want to get personal, gratuitously so, I'll call you on it every time. I don't agree with you but I'm not casting aspersions about your judgment or professional reputation, whatever that might be. So just stop or don't show up on my threads.

My writing on Rakoff's decision and Cuomo's case are supported by a review of the material that I'm writing about. There are many topics of interest out there and these are of the greatest interest due to the stakes and also the quality of the judging and arguments. Let's keep the dialog to fact and interpretation.

[unc70]

31. I have tried to stick with facts, even if dismissed as "fruitless"

I have not made a decision on NY v BofA yet, though I am gradually moving towards the BofA side with regard to the disclosure of losses pre-vote. No position yet on the bonuses. To claim that my efforts will be "fruitless" misses the point. I want the truth, not the allegations. Except for my posts here, I am not on my soapbox anywhere else, have nothing to gain from keeping this active, haven't been kicking my own posts or linking to anything else, and had more-or-less moved on excepting the short post upthread.

I don't post much, but I rarely post without careful preparation when involving complex issues such as these. I did a lot of research wrt Cuomo complaint before I said much about it. I have thought all along that it seemed more about NY politics than anything else, but I carefully read and explored the full Complaint before commenting on its merits. I believe that I brought to the discussion facts that others have not and presented them in a direct relatively-neutral tone.

In this and previous threads on related topics, you have been personally dismissive of my presentation of an alternative narrative of events, even though it is completely consistent with all known facts. You have also overstated the meaning and content of various documents involved.

For example, after "questioning" if I were from Charlotte, HQ of BofA (my profile says Chapel Hill), you stated that BofA in its SEC settlement had accepted the facts that I was questioning in Cuomo's complaint. Not the case; read the SEC Settlement. Or Rakoff's comments yesterday.

Much of the Cuomo case involves the firing of Mayopolus. Here is what Rakoff said on that matter:

"Rather, the Court, after a careful review, of voluminous materials, determines only that the S.E.C.'s conclusion that the Bank and its officers acted negligently, rather than intentionally, causing the nondisclosures that are the predicates of the settlement here proffered, is a reasonable conclusion, supported by substantial evidence, that a reasonable regulator could draw."

While Rakoff doesn't decide anything about the merits of NY v BofA, he does state that his review determined that the SEC settlement is a reasonable conclusion one could make from the evidence in hand. It follows then that, unless Cuomo has some critical evidence that he refused to share with Rakoff, the NY v BofA complaint lacks the evidence to reject this alternative "reasonable conclusion". In fact, the complaint surprisingly includes several exculpatory facts that might otherwise have remained undisclosed to the civil defendants, shielded under Martin -- facts strongly supporting the BofA and SEC conclusions.

I offered my alternative reading of these cases because I thought that you and most everyone at DU were too eager to bash BofA and praise Cuomo without looking past the inflammatory language in the Cuomo complaint. I still ask anyone eager to assume the guilt of Lewis, Price, and BofA on deliberate fraud charges to do a couple of things before jumping on the bandwagon.

Read the posts in my journal about the misleading "anachronistic" labels on the ML reports provided to BofA during this period. Then read the NY/Cuomo complaint keeping in mind the possibility that some or all those at BofA might have thought the reports in Q4 2008 were full-quarter projected losses, as they had been in Q4 2007 and as they were still labeled. I know of no one who has done that exercise who did not find the NY case much weaker than they had before.

Have you gone back and reread NY v BofA in that context? Did you reject the possible alternative narrative I described and the "reasonable conclusion" in the SEC settlement approved by Rakoff? If so, why?

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32. 4Q & Rakoff's information

On Mayopolous, Rakoff was very careful not to contradict Cuomo's time line on the firing. That's significant, as an event, but not central to Cuomo's case. The judge's neutrality is appropriate judicial boundaries and also a lack of all the evidence. The case would stand and still be very strong without that dismissal.

With regard to 4Q and confusion, the time line in Cuomo's complaint is intricate, something I'll clarify shortly. In the complaint, the language is fairly precise. Cuomo distinguishes between actual losses and projected losses. It was very clear to me that the basis for the charges is based on actual reported losses. There's a chart in the complaint, page 41, where there's a clear distinction between "actual" losses and "known and forecasted" losses. That speaks to your question and answers it clearly. In the narrative, it's clear that when Lewis contacted the feds for bailout relief for the rapidly accelerating losses after Dec 5 (or 9th), most of the losses he portrayed had already occurred. This was not based on any estimate or confusion about 4Q. It was actual losses, accelerating. There is no confusions in that part of the sequence on where they were in the quarter.

We'll see where it goes. But, unless the facts in the narrative are simply wrong, BofA has some serious thinking to do about settlement and trial.

[unc70]

34. Missing critical point. Not timeline. ML reports were changed, labels were not

The big problems I have with the Cuomo complaint are not with the timeline. While the complaint overstates the timing of things here and there by a day or two, only the report delivered the Friday night after the shareholder vote (Dec 5, 2008) is of important in this area. That is the report that I suspect finally made it clear to some at BofA what was wrong with the ML reports, plus it had nearly $2 billion in other surprises. The complaint implies that BofA knew those numbers before the shareholder vote earlier that day, but the facts and details show otherwise.

All this other stuff in the complaint is trying to distract from what was actually going on, the charts and most everything else. Even if you read my journal posts first, you can't see the impact by just jumping around sections of the complaint.

Here is how you must do this examination: i

1. Read the entire complaint from the beginning (might want to hold off on the Summary until last).

2. At each claim in the complaint, consider the possibility that those at BofA might not have known the ML reports had been changed and might have believed that the numbers still represented what their labels claimed -- that these were actual and projected losses through the end of Q4, not through the end of the current month. Pay close attention any time you see "should have known", "negligent in not knowing", or similar language.

3. The complaint uses this exact argument to claim that BofA mislead Mayopolus because he lacked this critical information. Nowhere does the Complaint allow for the possibility that others at BofA might have been similarly mislead because they also lacked this information.

4. The complaint is also careful to state that this change was made after the previous DD by Flowers in Q4 2007. It is unclear when content of the ML reports was changed. Even if the changes were before mid-September when Flowers helped BofA with the ML due diligence, Flowers might not have noticed any difference (it being 2 weeks prior EOQ and EOM).

When done, explain who included in the complaint the extra bits of Martin testimony that reveal the problem with the ML reports being changed and why did they include these facts in the complaint.


If I can get a little time, I will try to do a "Cuomo complaint for Dummies".

[unc70]

27. Third BofA option: settlement without any admission of guilt (SEC )

The BofA Settlement with the SEC and with NC AG includes no admission of guilt on the part of BofA. I can not imagine that they would even consider "pleading" in this civil case in NY. Too many consequences elsewhere.

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30. I hope that they don't plead

This deserves a trial, which will settle any disagreements we may have over the facts and arguments in Cuomo's filing. These are serious charges. If it's not guilty, fine. If there's a guilty plea, however, the consequences elsewhere will be, I would think, worse than if there's a settlement.

[pleah]

2. K AND R!

[EFerrari]

4. Kick to mark for later.

:kick:

[autorank]

15. Is it later yet;)

[formercia]

5. They collect their commission, then sell the paper.

You would think that JP Morgan was selling houses.

I wonder if they shorted Cablevision stock.

[autorank]

7. Then they turn on the client!

The judge said it was "bad faith" at least. Wonder wha the has in mind? If it's fraud
then this comes under The Martin Act and Cuomo and go after them. Nice #2 after he finishes
off Bank of America.

[tabatha]

6. I loathe Jamie Dimon.

Get him for any and all wrongdoing.

[Fire1]

10. AND Ken Fuckin Lewis!! n/t

[autorank]

18. Ken's in the hot seat!

Cuomo Takes on The Money Party

It's going to be a legal beat down on Lewis, Price, and BofA, which is a named defendant in all of
it's corporate "personhood".

[Fire1]

22. I know. Let him squirm! Miserable bastard! n/t

[autorank]

11. You'll appreciate this from their business section

"We were founded more than 200 years ago and have a proud history of, in the words of one of our founders, doing 'only first-class business... in a first-class way.'"
http://www.jpmorgan.com/pages/jpmorgan/investbk

This deal was so sloppy and the reliance on emails to a "junior" level staffer to confirm approval for assignment is beyond the pale. They are either out of control or complete buffoons. No one would buy the email trick.

Wasn't Diamon in consideration to replace Geithner? That would be a royal nightmare.

[bridgit]

8. Morgan/Chase is right up there with BofA and others for gaming the system...

Banks act less like banks and more like bands marauding white collar criminals

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16. Your characterization is actually mainstream

At least with the public and in terms of factual accuracy.

The BofA deal with Merrill was just scandalous and deserves prosecution as Cuomo is doing ably in
New York state court. This judge is also kicking BofA in the SEC case, which is not over yet. There
should be a ruling this week, the 24th I think, from Rakoff in that SEC versus BofA case. But right
now that's headed for trial.

These crooks have gotten about $14 trillion in cash, credit and guarantees - for what?!!! Nothing.

It's amazing to see this and to have a Democratic president participate in the folly.

[ThomCat]

12. Wow! I can't wait to see what the repercussions of this will be.

I hope it's seismic and seriously shakes some foundations throughout the business world!

How many business executives out there could ever imagine their own bank selling selling them out to their biggest competitor, deliberately working sleazy back-room deals to try to put them out of business?

If they got away with this, and had the insider information that it had gone through, you know damned well that they'd be short-selling stock to cash in as Cable Vision crashed and burned.

[autorank]

13. This should get the word out

I don't think that the judge is done with them. These guys are so outrageous, they inspire
outrage by even the most experienced judges. There will be more;)

[Me.]

17. KR

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21. New York is showing its best aspects in these legal matters!

[autorank]

23. k

:kick: k

[EFerrari]

25. K

[leftstreet]

26. Ever notice there's more silence & reverence in a bank lobby than a church?

Something wrong there.

K&R

[puebloknot]

28. K&R Now, let's hear it for the little guy -- the targets of unfair banking...

... practices at Chase Bank.

Thanks for your continuing scrutiny of The Money Party!

[autorank]

33. Welcome!!!

The "little guy" may get her day in court! If so, it's time for some Truth and Justice.

[Joe Chi Minh]

35. Rakoff's the wrong name for the judge. More like JP Morgan's.

'We have entered a period of grotesque decadence in the financial and business dealings of those who brought us the great financial calamities. It's time to begrudge the culprits their ill gotten gains and turn the tables before it's too late, if it isn't already.'

You keep the best till last, Capting.