Wednesday, September 03, 2014

More Proof That Wall Street Is Stacked In Favor Of An Elite Few

In case you haven't figured it out yet, I don't have much respect for people who make their living running corporate America today because of their single-minded determination to make income inequality as extreme as possible. There are a  couple of recent examples in the news which illustrate how the system is stacked against the vast majority of us.

Let's start with that evil company known as Affiliated Computer Services ("ACS"), an information technology company founded and run by government insiders who aren't very good at providing IT services but are very successful at wielding influence over decision-makers in government who make the decision to award government contracts. Yes, that's the same ACS which employed a bunch of government insiders like Steve Goldsmith, Mitch Roob, Ann Lathrop, et al. before the company won lucrative contracts to run Indiana's welfare privatization initiative and Indianapolis' parking meter assets.

Shortly before ACS was acquired by Xerox, the company's CEO and CFO were looking for a way to artificially boost the company's sagging revenues to make an acquisition as lucrative for them as possible. ACS CEO Lynn Blodgett and CFO Kevin Kyser arranged for a computer equipment manufacturer to run pre-existing orders in 2009 through the company to give the appearance the company was involved in the sales of the equipment, thereby padding the company's bottom line by $124.5 million. The customers who were purchasing the equipment had no idea that ACS was even involved in their transaction. This gave investors the impression the company was meeting its revenue targets, not to mention boosting the multi-million dollar bonuses paid out to Blodgett and Kyser.

A subsequent SEC investigation uncovered the accounting fraud. Yet the punishment meted out to Blodgett and Kyser hardly fits the crime. Together, the two received fines and disgorgement penalties totaling $675,000. Together, the two owned over $40 million worth of ACS shares when Xerox acquired the company according to Fortune's Jack Ciesielski. One of the SEC commissioners, Mary Jo White, had to recuse herself because her husband's law firm performed work for ACS. One commissioner, Luis Aguilar, broke ranks with the other three commissioners, complaining that the penalty was a wrist slap at worst. In the words of Aguilar, the SEC is defining down deviancy. He believed both men should have faced fraud charges and been banned from serving in executive capacities for publicly-traded companies. Blodgett still works as a Senior Vice President for Xerox and is set to retire at the end of the year. Kyser retired from a high-level executive position at Xerox last year.

The other story in the news that caught my eye was the announcement that former House Majority Leader Eric Cantor, who got the boot by Republican voters in a primary election earlier this year, is joining a Wall Street investment banking firm after resigning his seat in Congress before the end of his term. Cantor, a career politician with no prior experience working in investment banking, is becoming Vice President and Managing Director of Moelis & Co. If the figures provided by Fortune are accurate, Cantor could earn up to $3.4 million his first year at Moeils, a bit more than the $193,000 a year he earned as House Majority Leader. As New York magazine points out, Cantor couldn't have gotten a job at a fifth-tier firm in the financial services industry based on his experience and skills. His sole purpose will be to buy access in Washington for the firm and its clients. Who would have thought?


local landlord said...

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail.The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted.Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. It's management buying its way off cheap, from the pockets of their victims.

Flogger said...

There is always some "News Report" by the Mega-Media or some clueless Politician comparing Putin to Hitler, and adding a finger wag on corruption in Russia.

Well it seems the Russians know how the game is played here in the USA - Alexander Cohen at the Center for Public Integrity reports that “a Russian bank targeted with sanctions by President Obama over the Ukraine crisis, has hired two former U.S. senators to lobby against those sanctions.” Gazprombank thinks former Senate Majority Leader Trent Lott (R-MS) and former Sen. John Breaux (D-LA) can sway their former colleagues to go easy on Russia.

The Russians know both Parasite Parties are one in the same.

Hernan Dough said...

Despite warnings in 2003 & 2007, Indiana banks & their lobbyists failed to act or even alert shareholders or customers, about the GA's plans to soak them with confiscatory property taxes. This adversely impacted borrower's expense to income ratios & therefore fidelity of collateral held by shareholders.

Rigged at the 19th hole?