AIG Investigated Over Subprime Mortgage Related Losses

Bloomberg News reports that prosecutors are examining statements by former American International Group Inc. executive Joseph Cassano to see if he misled auditors and investors on subprime mortgage-related losses, said people familiar with the probe.

Investigators are asking auditors at PricewaterhouseCoopers LLP about memos they wrote last fall on how Cassano and other AIG executives valued contracts protecting $62 billion in mortgage-backed securities. The government is also looking at AIG’s reliance on valuations that have been questioned by auditors and banks.

On Feb. 11 of this year, AIG said the contracts declined more than sixfold in November, for an unrealized loss of $5.96 billion. AIG also said PWC found a “material weakness” in how it valued the credit-default swaps. On Feb. 28 AIG posted what was then its biggest quarterly loss, writing down $11.1 billion on the swaps. AIG announced Cassano’s resignation as president and CEO of AIG Financial Products a day later.

AIG’s board ousted Sullivan on June 15, pegging paper losses on the contracts at $26.1 billion. While the New York- based insurer said it will probably never realize those losses, it got an $85 billion loan from the Federal Reserve in September.

The Justice Department in Washington and the U.S. Attorney’s Office in Brooklyn, New York, have joined with the Securities and Exchange Commission to determine whether AIG executives committed crimes or merely exercised bad judgment.

Baseball broadcaster McCarver files for arbitration against Regions Morgan Keegan

Tim McCarver, the color commentator for World Series broadcasts, and a former Major League Baseball player, has filed for arbitration against Tennessee-based investors Regions Morgan Keegan and Co.

McCarver is looking to receive more than $1.25 million he said he lost in risky investments made by Regions Morgan Keegan. McCarver is a Memphis native and has a baseball stadium named in his honor in the city.

Morgan Keegan investments lost nearly all their value in 2007 and since then, investors who’ve lost thousands have filed lawsuits against the firm.

Just a few weeks ago, a door was opened for those involved in lawsuits to seek an arbitration hearing. Early results of these cases show investors retaining some of the money they invested about half the time.

McCarver is said to have invested in Regions Morgan Keegan because of its regional roots. He sold his holdings with the company some time after he moved to Florida in 2000. That transaction resulted in the huge losses McCarver suffered, his attorney told Memphis Daily News.

RMK is accused of misleading investors about the volatility of their investments. The firm said they made these warnings abundantly clear to their customers.

Arizona adoption agency accused of fraud

A Tucson, Ariz.-based adoption agency is being accused of fraud not refunding its adopting families more than $200,000.

The state filed a lawsuit against Commonwealth Adoptions International Inc., which shut down earlier this year. Many foreign countries refused the agency accreditation to place babies with domestic families.

The lawsuit accuses the agency of failing to refund money to the families which began the adoption process when the company shut down. Some families paid the agency thousands of dollars to adopt a baby.

In fact, the lawsuit accuses Commonwealth Adoptions of refusing to repay families, a point which they denied in an email to Arizona Daily Star, saying they’ve been working with families on that issue.

The state alleges that Commonwealth took money from one family and used it to pay for other adoptions. At least 20 families have asked for refunds and none have received payments. According to the Arizona Attorney General, the money does not exist as it was spent on other adoptions.

The adoption agency said it had 340 clients at the time it closed and most transferred to another agency and continued its adoption process.

In July, the Hague Convention refused accreditation to Commonwealth. The international agency oversees international adoptions to reduce child trafficking.

Commerce Brokerage Services To Buy Back Auction Rate Securities

Commerce Brokerage Services Inc. has agreed to buy $545 million of auction rate securities from 140 investors, according to a settlement announced Wednesday with Missouri Secretary of State Robin Carnahan, the St. Louis Business Journal reports. Commerce also agreed to make a $500,000 payment to the Missouri Investor Education and Protection Fund and will hire a special consultant to analyze the brokerage’s supervisory and compliance policies related to nonconventional investments.

Investors reported that auction rate securities were sold as money market equivalents, but investors have not been able to access their money as promised since the $330 billion market froze in February. Carnahan launched a full-scale investigation into Commerce and other firms, including Wachovia Securities in St. Louis, after formal complaints were filed with her office.

“Commerce has come to realize that what was an accepted industry practice prior to this unprecedented credit crisis is no longer adequate for making sure our customers are properly informed when making investments,” the company said in a statement Thursday.

Commerce first said it would buy back auction rate securities in August. The company said its purchase of auction rate securities from customers was not part of any settlement discussions and was instead “a unilateral decision … made well in advance of any settlement discussions with the secretary of state or anyone else.”

Bond-ratings firms at focus of Senate fraud investigation

The Senate Permanent Subcommittee is currently focusing on bond-ratings firms in its investigation of the mortgage collapse.

Spearheading the investigation is the notion that these firms were driven by a conflict of interest in boosting mortgage investments.

A similar investigation by the House Oversight Committee probed AIG and Lehman Brothers Holdings, firms which failed or needed to participate in the controversial bail-out plan to survive.

Michigan’s Democrat Sen. Carl Levin believes credit-default swaps are at least partially to blame for the financial crisis.

The investigation will see if competition among bond-ratings firms led them to issue certain ratings to get more business from banks, according to a report in Wall Street Journal.

At least one state Attorney General (N.Y. AG Andrew Cuomo) and the Securities and Exchange Commission are also participating in investigations of firms like Moody’s Corp., McGraw-Hill Cos., Standard & Poor’s and Fimalac SA’s Fitch Ratings.

The ratings firms have a track record of a poor track record. They’ve been accused of poor oversight and disclosure, as well as being involved with conflicts of interest.

Billionaire NBA owner accused of insider trading

Outspoken Dallas Mavericks owner Mark Cuban, who even appeared on Dancing With The Stars, is being accused of insider trading.

In a Securities and Exchange Commission court filing, the brash billionaire basketball franchise owner, also believed to be interested in purchasing the baseball franchise Chicago Cubs and its legendary home Wrigley Field, allegedly sold off his shares of Mamma.com just before shares were sold below the asking price.

According to a court complaint, Cuban made a nine-minute phone call to the CEO at Mamma.com, which Cuban owned a 6.9 percent share, from American Airlines Center, the home of his basketball team, in Dallas. The Web exec sent Cuban an email requesting an immediate call.

During that conversation, Cuban allegedly learned of the impending sale and then sold out his shares, saving himself from $750,000 in losses.

According to the complaint, Cuban told the CEO, “Well, now I’m screwed. I can’t sell.”

Cuban contends the SEC is playing poke-and-hope with the charges, calling the lawsuit “gross abuse of prosecutorial discretion.”

“I am disappointed that the commission chose to bring this case based upon its enforcement staff’s win-at-any-cost ambitions,” Cuban said in a statement. “The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

Cuban’s proposed purchase of Chicago Cubs and Wrigley Field is now in doubt in light of the SEC charges. The team and stadium are being offered by Tribune Corp. to shave its massive debt.

The SEC contends Cuban used his insider knowledge to make a business decision beneficial to only him, and used ill-gotten information to arrive at that conclusion to sell his stock prior to the announcement about Mamma.com.

Auction Rate Securities Fraud Sparks Oppenheimer Lawsuit

Looks like the auction rate fraud lawsuits aren’t over yet. Reuters reports that Massachusetts’ top securities regulator sued the small investment bank Oppenheimer & Co for fraud on Tuesday, accusing it of deceiving customers in its sales of auction-rate securities.

It is the first time a regulator has charged one of the handful of smaller brokers who resold ARS as safe and liquid investments at a time when the market for the securities was seizing up.

William Galvin, Massachusetts’ secretary of the commonwealth, said Oppenheimer customers in Massachusetts could not access $56 million of their money when the market froze up in February. Oppenheimer & Co. is a unit of Oppenheimer Holdings Inc.

“Oppenheimer executives betrayed the trust of their clients by continuing to market these auction-rate securities as safe cash equivalents when they knew this was not the case,” Galvin said in a statement.

Oppenheimer said its executives both bought and sold auction rate securities during the period described in the complaint, and that these executives continue to hold “significant amounts” of the securities.

The bank said it was working with regulators and financing sources, including the recently approved federal Troubled Assets Relief Program to help clients cash out of auction rate securities. Oppenheimer also said on Tuesday it was amending its charter to become a depository bank to become eligible for FDIC insurance and to borrow on a short-term basis from the U.S. Federal Reserve “Discount Window” to bridge the liquidity gap.

It also was exploring the possibility of becoming a U.S. corporation or a U.S. bank holding company, the statement said. Large Wall Street firms have bought back billions of dollars of ARS and settled with regulators in New York and Massachusetts.

Subprime Mortgage Fraud Linked to Foreclosures

Florida is first in mortgage fraud and second in foreclosures. The Palm Beach Post reports that with flipping scams involving all facets of the industry to loan originators and borrowers fabricating income, the problems are abundant.

This isn’t just a Florida problem. Mortgage fraud is nothing new. So why does America continue to see an implosion in the banking and lending industries and number of foreclosures? The answer is subprime mortgages.

When the bust started, fingers pointed toward mortgage brokers, who were forced to fend for themselves against onerous legislation. Slowly, the truth came out. Lending firms folded as their lines of credit failed. Wall Street investment banking firms failed as their real estate-backed securities went bust. Freddie Mac and Fannie Mae became insolvent. In a rush to stop the bleeding, the federal government took control. Recent victims of the bust have been huge banks. Quiet while brokers were blamed, banks issued billions in subprime loans and took huge losses. With time working against them, the weight of subprime losses became a reality.

During the boom, too many unscrupulous individuals enter our industry with an eye on the fast buck. New legislation is clearly needed, requiring higher standards are needed for entry into the mortgage industry. Anyone who meets with consumers regarding financing should have to be educated, licensed and pass a background check. And states (like Florida) need to assist counties in setting up real property fraud task forces.

Winning some, losing some in Regions Morgan Keegan arbitration cases

Federal regulators have posted results of four arbitration hearings regarding failed investments with Regions Morgan Keegan & Co. mutual funds.

Of the four cases, two decisions favored investors while two cases were decided in favor of the Tennessee-based investment firm.

The Financial Industry Regulatory Authority oversaw the arbitration hearings but did not give reasons for the decisions.

It did post results of the investor victories, those who received something in return for their failed investments, money invested in high-risk debt.

In one investor victory, a Georgia couple received just more than $90,000 in compensation when they sought $109,000 and the same in punitive damages.

An Alabama man was awarded $15,000 in another arbitration case.

Investors who entered into a class action lawsuit could have opted out of that legal pursuit in lieu of an arbitration hearing with the caveat that they not enter into a class action in the future.

Lawyers representing investors in Regions Morgan Keegan argue the firm misled investors into the stability of their money.

And though most invested lost nearly all their money, representatives of Regions Morgan Keegan claim investors knew the stakes.

Airbag Fraud a Cause for Concern

According to a Consumer Affairs report, in 2004 one out of every 25 previously damaged vehicles had phony or dummy airbags. Hence a growing concern over airbag safety in used vehicles, and new warnings for motorists who might fall victim to unscrupulous auto repair shops that fail to replace used or damaged airbags. Only a handful of states have laws regulating airbag system replacements.

According to an official at the NYPD auto crimes division there are an estimated 75,000 air bags are stolen out of cars every year. Most of these are resold to body shops over the Internet, fetching between $2,500 and $3,000. Airbag tampering can include stuffing the compartments with beer cans, rags, paper or packing peanuts.

Sometimes the original, faulty airbag is just pushed back in, and sometimes the air bag isn’t replaced at all, leaving the compartment empty. Industry experts recommend taking your used vehicle, or any car you might buy to a trusted mechanic to check out its safety components, including the airbag.