The Securities and Exchange Commission yesterday charged four individuals for overvaluing the commodity derivatives trading portfolio at Bank of Montreal and inflating BMO's publicly reported financial results.
The defendants include a former senior derivatives trader at BMO and the top two senior executive officers of Optionable, a publicly traded commodities brokerage firm. The SEC alleges that David Lee, formerly the managing director of BMO's Commodity Derivatives Group, fraudulently overvalued BMO's portfolio of natural gas options by deliberately “mismarking” trading positions for which market prices were unavailable.
Lee recorded inflated values that were then validated by Optionable, which held itself out to BMO and the public as a legitimate provider of independent derivatives valuation services. Lee also allegedly schemed with Optionable's CEO Kevin Cassidy, its president Edward O'Connor, and Optionable broker Connor to have the firm simply rubber-stamp whatever inflated values Lee recorded.
After the scheme was discovered, BMO restated its financial results by reducing net income for the first quarter of its 2007 fiscal year by approximately C$237 million (US$204 million), which reflects a 68% overstatement of BMO's net income for that quarter.
Whatever It Takes
According to the SEC, BMO was Optionable's largest customer, and BMO trades accounted for as much as 60% of Optionable's commodity brokerage business. Lee's trading accounted for virtually all of BMO's business with Optionable. As a result, Optionable's management, led by Cassidy, allegedly was willing to do whatever it took to keep Lee satisfied. When market prices were unavailable, BMO's risk management personnel sought to verify the accuracy of BMO's commodity derivatives traders' valuations by obtaining supposedly independent valuations for those positions from one or more third parties.
As it turned out, Optionable was the primary source of the third-party quotes that BMO used to validate Lee's marks. Lee allegedly provided his marks directly to Cassidy or Connor, who then simply forwarded his marks virtually unchanged to BMO's risk management department as if they were Optionable's independent quotes. At first, Lee allegedly used this scheme to boost his trading profits and incentive compensation, but in 2006, the market turned against Lee and he used the scheme to hide substantial trading losses.
In May 2007, BMO concluded that due to the Optionable scheme and other positions that Lee had also mismarked, Lee's trading book was overvalued by an aggregate total of C$680 million (US$553 million) since the beginning of BMO's fiscal year ended Oct. 31, 2006.
On May 9, 2007, one day after BMO announced that it had placed Lee on leave and suspended its business relationship with Optionable, Optionable's stock price fell almost 40% from $4.64 to $2.81 per share, and dropped to below 50 cents per share one week later after Cassidy's prior criminal record was disclosed in press reports.
In connection with his guilty plea, Lee agreed to pay a total of $4.41 million in forfeiture.
The SEC is seeking a permanent injunction against future violations, disgorgement of ill-gotten gains plus prejudgment interest, and civil monetary penalties for the other defendants. The complaint also seeks an order barring Cassidy and O'Connor from acting as officers or directors of a public company.

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Despite billions and now trillions of dollars in capital injections and equity investments made by our government, private equity, and sovereign wealth funds, our economic turmoil is a long way from being over. I do find it interesting that despite numerous Wall St. titans having indicated to us at different points over the last year that we were in the 7th inning of this fiasco, that now a recurring theme is that we should not expect any real economic recovery until 2010. Actually maybe we were in the 7th inning but it was the 7th inning of the first game of a 4 game set.
Well, if we want to figure out where and when we are moving forward, I think it would be beneficial to know from where and when we came.
For those over 50 years of age, perhaps you remember when mortgage money dried up. Perhaps you also recall the days of putting down 20% before you even thought of buying a home. In any event, the growth of the secondary mortgage market in the mid 1980s was a result of some very sharp financial minds on Wall St. who engineered a product called a Collateralized Mortgage Obligation (CMO).
CMOS and their cousins that grew from that model were and are not necessarily bad structures. However, much like prescription drugs. if and when they are abused. they can be deadly.
CMOs used the stream of cash flows from a standard fixed rate mortgage to create specific bonds which met the investment desires of a wide array of investors, including money market funds, bank portfolios, insurance companies, money managers, and pension funds. Prior to the development of the CMO, mortgages were an investment that typically only met the needs of bank portfolios.

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WB television news anchor Tom McGee was escorted from the WHCP-TV studio in Charleston on Tuesday afternoon by police, but he said he expects to be back on the air tonight. Station manager Chuck Jones called Metro 911 at 4:05 p.m. and asked for help escorting McGee from the building, according to a 911 recording released late Tuesday.
Jones told a dispatcher that an employee “got up in my face earlier” and “asked me to step outside with him.” He later identified the employee as McGee.
Jones said McGee said, “I’m done. I’m outta here,” but later returned to the newsroom.
When police arrived, they asked someone at the building whether they indeed wanted McGee gone. The person said yes, Charleston police Lt. A.C. Napier said.
“[McGee] left willingly,” Napier said. “He didn’t give them any problems.”
The situation was too minor for officers to write a report, he said. No charges were filed.
Reached by phone Tuesday night, McGee said he expects to be back on the air tonight.
“There were some work issues being discussed,” he said. “I kind of try to represent the people there. They were asking questions regarding parking and health insurance. Beyond that, I’m supposed to have more conversations [with station management on Wednesday].”
McGee said nobody got in Jones’ face. He said he asked Jones to step outside so they could continue their discussion away from everyone else in the office.
The station’s owners could not be reached for comment Tuesday. A news director who answered the phone at the station said no one at the station would have any comment.
The WB station moved to Charleston from Portsmouth, Ohio, in November, and McGee and Leigh Ann Woodbury began anchoring the station’s 6 and 10 p.m. newscasts on Nov. 7. Woodbury anchored the 6 p.m. and 10 p.m. newscasts by herself Tuesday.
She did not mention McGee’s absence.

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Are we the only ones to observe this? Is US rich $billions piled in a place that restricts  those $billions to re-enter US?
Recently I was reading about a CEO of a Fortune 100 company and his conversation turned towards how much money is in the bank. I observed that he pointed out that its in european banks and that money cannot be brought back. gone baby gone -  I was shocked to hear this.
I and my brother went online to figure if this information is accurate and also what other s are doing. (You can look at 10Q filing online for those disclosed). We were shocked to the peak! - Guess what? Most corporations are doing the same - They are cashing all their profits in $billions and most of this money cannot come back to US.  We were flabbergasted!
Whats the point of out-sourcing lots of jobs to cheap places while the money saved cannot be enjoyed because its in a bank overseas which restricts money transfers into US? What is the whole point of common american losing job and stoop to lowest levels while rich become richer and that rich is not going to be used inside US. Whats the point of this greed? We as common americans need to know why our riches ois thrown overseas for nobody to use - unless there is a reason for all of this.
Any comments.

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Bank of Americas Florida president is changing, however the job devise remain based in Jacksonville.
The bank named Elizabeth Ferrer as Florida state president, following the retirement of Susan Walker, effective June 13. Walker had served in the job for less than a year.
Ferrer, a Jacksonville resident with a 24-year career at Bank of America, will cater business, civic and philanthropic leadership for Bank of America, according to a release. Throughout the companys 16 Florida markets, she will focus on strengthening connection and integration among the local transaction lines, enhancing the purchaser actual presentation, revenue growth and efforts to strengthen Bank of Americas presence in the community, the release said.
Ferrer too will continue to serve as the global community development executive, responsible for the banks community development and investment efforts, the release said.
Walker had a 28-year race with Bank of America, in a variety of key leadership roles, and she worked closely through many nonprofit organizations in Jacksonville.
Charlotte, N.C.-based Bank of America (NYSE: BAC) for many years has been the largest bank in Florida based on deposit emporium share, although Wachovia Corp.s (NYSE: WB) purchase of Golden West Financial Corp. last year made Wachovia Floridas largest bank.
In the Tampa Bay area, Bank of America was the largest bank with 161 offices, $14.7 billion in deposits and a 20.5 percent market apportioned lot as of June 30, 2007, according to the most recent information to be turned to account from the Federal Deposit Insurance Corp.

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