Tag Archive: Financial Fraud


Upon reading Shelley A. Stark’s, Hidden Treuhand:  How Corporations and Individuals Hide Assets and Money, my first response was of shock and disbelief.  Then the anger and outrage emerged.  It is clear Shelly Stark is a courageous Whistleblower.  She has dared to expose an organized and secret system of hiding money and assets that has been going on for a long period of history but, that few average people know exists. 

What Ms. Stark is writing about has been a very closely guarded secret prior to now.  Due to becoming aware of the Hidden Treuhand, because of being victimized by its use on her by some business partners, Ms. Stark started what turned out to be five years of hard investigation and research to find out what had happened to her business partnership.  It was not an easily solved mystery.  Fortuitously, Ms. Stark has the economic education, training, intellect, and courage to have tackled this previously secret strategy,  which large corporations and wealthy individuals have known about and had access to utilize in the shadows of our economic world  for a long time.  Her work required copious amounts of research into the history of the practice of Treuhands, hidden or not, and translating masses of German/Austrian law records to get an historical perspective and meaningful understanding of its contemporary impact on our financial  lives. 

In her book, Stark explains that this type of financial and legal strategy is not legal in the U.S., but is legal in certain countries in Europe (Austria, Lichtenstein, Switzerland) and is spreading to other regions (Dubai) making it possible for a lot of manipulation and corrupt dealings to take place, with the public having no inkling it is happening to their money and assets.  She explains how it is possible for a corporation or certain officers of a corporation to hide money, assets, and even people and other money payoffs to people using these Hidden Treuhands, potentially keeping the Hidden Treuhand and everything put into it, secret even from their own board of directors. 

 It appears that using a Hidden Treuhand, Corporations and the wealthy can now thwart any current U.S. government oversight activity, including laws or federal policies.  (Think about former Vice President, Dick Cheney and his conflict of interest in and financial benefits from Halliburton.  How was he able to evade accountability to even current federal laws regarding conflict of interest, quid pro quo, and revolving door prohibitions?    Halliburton coincidentally has moved its headquarters recently to Dubai.  Perhaps, now we know why.)

Recently an article in the Washington Post presented the concept of a new proposed Financial Protection Agency.  If the U.S. Government is going to tackle protecting Americans’ financial matters, they will have to include the problem of Hidden Treuhand, for what are becoming increasingly obvious reasons.  The corrupt and unethical business practices are not just an isolated American problem, but expand across the globe.

Due to the complicated financial dealings leading to our recent financial meltdown of the “Too Big to Fails” our pensions and 401 K’s are already at risk.  Think about Madoff and the huge sums he stole from the retirement accounts of Americans either directly or indirectly.  If Madoff used a Hidden Treuhand, there is little hope all those millions of dollars will ever be openly discovered and identified, let alone recovered.   

I don’t know about you, but the possibility of my retirement funds being siphoned off and shuffled around in secret hidden corporate accounts that no one can see or audit and that I will never see again is enough to get me writing letters and demanding change.  For anyone concerned about the safety and security of American consumers and their financial affairs, this book is a must read!   In fact, this book should immediately be required reading for all U.S. Federal Oversight authorities too.

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Here is another set of articles  from Truthout with links to the originals.

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Opinion

The Real AIG Scandal

by: Eliot Spitzer  |  Visit article original @ Slate Magazine


Former US Treasury Secretary Henry Paulson (pictured), then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein and Fed Chairman Ben Bernanke made the initial decision to bail out AIG. (Photo: Elizabeth Dalziel / AP)

    It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full.

    Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

    For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

Also see below:     
Hedge Funds May Be Getting a Bailout via AIG’s Payments    •

    It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

    But wait a moment, aren’t we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes – income taxes to sales taxes – to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? Haven’t we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn’t they have accepted a discount, and couldn’t they have agreed to certain conditions before the AIG dollars – that is, our dollars – flowed?

    The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

    So here are several questions that should be answered, in public, under oath, to clear the air:

·  What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?

·  Was it already known who the counterparties were and what the exposure was for each of the counterparties?

·  What did Goldman, and all the other counterparties, know about AIG’s financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn’t they bear a percentage of the risk of failure of their own counterparty?

·  What is the deeper relationship between Goldman and AIG? Didn’t they almost merge a few years ago but did not because Goldman couldn’t get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG’s business model was not to pay on insurance it had issued.

·  Why weren’t the counterparties immediately and fully disclosed?

    Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.

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    Eliot Spitzer is the former governor of the state of New York.

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Hedge Funds May Be Getting a Bailout via AIG’s Payments

by: Dow Jones  |  Visit article original @ Dow Jones

    New York – The fact that some payments made by American International Group Inc. (AIG) to hedge funds are coming from government bailout money raises a question: Are hedge funds receiving a de facto bailout?

    If the answer is yes, it would signify the first taxpayer money yet to reach hedge funds since the financial crisis began back in late 2007. Hedge funds – investment pools made up primarily of high net worth individuals, pension funds and university endowments – have suffered like most during the crisis, but have pointed out with pride that as of yet their industry hasn’t requested any government handouts.

    Officially, of course, any payments made by AIG to hedge funds wouldn’t change that fact. It was AIG that requested the bailout, not the hedge funds. The insurance giant is now simply meeting its contractual obligations.

    In some cases, AIG has already paid out fairly hefty amounts to hedge funds with U.S. taxpayer funds. AIG said in a press release Sunday that it paid $200 million each in “public aid” to Citadel Investment Group and Paloma Securities. These payments were made to settle short-term trades last year in which the hedge funds loaned AIG cash in exchange for bonds.

    Also, as reported Wednesday in The Wall Street Journal, AIG reportedly may be paying out many different hedge funds for bets in which the hedge funds waged that the housing market would crater against AIG’s bets that it would remain robust.

    It isn’t clear how much in total that hedge funds stand to gain through the AIG payments, but the payments call into question the government’s decision, whether out of haste or for any other reason, to allow the AIG bailout money to be dispersed to any counterparties, including hedge funds.

    “Taxpayer money is being paid to hedge funds by a Treasury that could have limited the payments to domestic banks but decided not to risk letting anyone big fail,” said John Coffee, a professor of securities law at Columbia University. “In short, everyone of importance is being protected.”

    Not all observers see a problem.

    While Edward Altman, a professor of finance at New York University’s Stern School of Business, questions the use of taxpayer funds to pay huge bonuses to AIG executives (another controversy surrounding the AIG bailout), he doesn’t see a problem with the hedge-fund payments.

    “The ‘bailout’ funds are doing exactly what they were intended to…pay off [ AIG’s] bills on a timely basis so as not to cause any further harm to the system,” he said. “Otherwise, what’s the purpose of the bailout? It should have been clear that this involves [payments to] hedge funds.”

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    By Dan Molinski, Dow Jones Newswires; 201-938-2245.