Seniors at Risk in Wall Street Financed Attacks on Retirement Security... http://www.progressivestates.org/news/dispatch/seniors-risk-in-wall-st.
DEFENDANTS
EXHIBIT
K-9
SENIORS AT RISK IN WALL STREET FINANCED ATTACKS
ON RETIREMENT SECURITY
(/rH5vg^E^t3rt^^nmjSTak-jrvvg3t^»tegt-fn^Ti^^ittoi&-iiiTv-'eaiK?n!g5iUaauin'.v)
Tim Jutlson - _ - on October 7. 2011 - 12:05pm
□ OB)
You are viewing an article
on
Workers' Rights
f/D0liCv//1889)
Take-lt-or-Leave-IJ.Approach to
Pensions Threatens Retirees in
Rhode Island irtims^AJspalcMalie-J crim^<:
a^oacf)-prn5i»«^nr<'3rgn»-
itfireO- m-^KKJe-^larxJ)
11/04/11
News from last week reveals that attacks on retirement funds are not just deceptive, out are actually a major front in the
overall push to privatize public assets and dismantle government. Think Progress urnr/t.--TiKproflri-v.
and HuffingtOO P03tIMpiv.-.v.vhiillitrttorpottconVday.:*wnA^w'.otf •:©-
i • •-....r. both reported on how the US Postal Service's financial woes were engineered intentionally by
conservatives to cnpple USPS financially and force privatization urnp
a fitm . c » _ i)o ^ T in e _ a t _ i3 At the same time, several sources <Bap/AMww<tmyfcoa conv\«wyy2Qii/c.of3cno2ieiSAOr«a.
SesttseidseitiBeaitoiBW ^HettifiBisMijtom swtdadleaJMSVeponed that many conservative state lawmakers
currently pointing the fmger at workers are themselves among the worst abusers of state pensions.
in fact, the major charges laid against pension plans — and government workers in general — are either exaggerated or
invalid nn -...... r i '"mil ■ i m it umiimHfliii w* t cornmniteua>e^>cB^r..io-.. Public employees are actuatly paid less
.«■ •,-.v.w<ccfr n - i ' ' . w f f >-»’cnv/.'ag<st>enaTy-201 o os parjhan their private sector counterparts when comparable
experience and education levels are taken into account, including<htrf)
io 04 wrpensions and other benefits. Beyond the cost of personnel, pension funds actually cost state governments very
little, since the costs of managing them are paid for out of the funds' earnings and. in any case, are far lower
■^wtaayconvopr- than the fees charged by private sector fund
managers. The much-touted problem of pension fund shortfalls was a short-term result of the stock market collapse
.wetxoqrtaaa^Pi Pi**?,V ' \ and by February 2011 ma ny had already recovered > i■ • •
^yfr^Vpi*l>c»Iionwpefr»«3nv29t1:PZWU
Major finance companies like AIG. American Express, and Morgan Stanley have invested mtilicns.(i-cp<\vaw<x.c--.-r*ora
«cwr«Krr.s_ieeuf4»««t^vtn-^»f.v^s.o^a|r»oof»3:;K'- pofjin the Cato Institute and other think tanks to undermine
public faith in Social Secunty and pensions Cato. Heritage. and others do so by using unrealistically low estimates of
pension fund growth rates in order to paint problems that don’t exist. For instance, an Ohio think tank grossly exaggerated
; :e<«a»tipnft>f^p^xit<c-«n ^ v*a»-owreompc<n^- -: employment costs by using a 4% rate of return for
pension fund growth, when in fact Ohio's funds have grown at a rate more than double thiat (8.99%) over the last thirty
years. It is particularly important to remember that the state budget crises that have fueled the fire of penston-cutting are
the result of plummeting revenues, not states' expenses
Seniors at Risk in Wail Street
Financed Attacks on Retirement
SeCuntyti’n-6i/«1'cli!ipa|c.,vl>cniof3-rt)Lk-<n-
•ecurrf,-
10/07/11
Payday Lending Abuses Reined
In, As Colorado Joins Other
States in Reform {/rwwtfa«prfcj>
/R»da/-»f«£ rin«lin-
coiorado.|Ct,E»-cthcr.*taicft-in-icfoffT)i
05/17/10
Center for Responsible Lending
State & local Foreclosure
Prevention Policy Options {Apoicy
11/11/09
NOA Stales' Foreclosure
Response uootevtmw n ^ om ii
11/11/09
There is a need to reform rules that encourage employees to pad their wages with overtime in their final years to inflate
their pension benefits However, these are problems with the rules governing how individuals' pension benefits are
determined, or with the absence of limits or controls on overtime. Even so. the vast majority of pensioners receive modest
benefits, averaging around $24,000 per year For some 3QC•• of those r e t i r e e s ; n R p that
modest amount is the only source of retirement income because they were ineligible for Social Security
Not only are claims of widespread fraud and abuse generally based on individual examples that are rare rather than the
norm; the worst abuses IbflBffTffrftfiffffinWfrrtPHI GBBSOU '^<^f t ^ -pcnBon-atiu«e-in<^hyrE.vare typically
committed by management — or high-level officials — including conservative pofcymakerB (http ;/wi> uwxtay com
frwwtottwnfttorvaoiM&'n n n n frwrnriaii fum&oBnMofm«K2?03a/! themselves. For instance, of the seventy Ohio House and
Senate officials who voted for legislation this year to strip public servants of collective bargaining rights, nearly all
if«p/,',movx><xKrfi<> otojy aim n r . vusz-cay • pc* Kvana^vcxxntyBwarded themselves part-time salaries almost ^double
...................what most of
the slate's nurses, teachers, and firefighters take home for full-time work. Twelve of those legislators are also 'doubledippers.*
collecting a state pension in addition to their legislative salary, inducing House Speaker Bill Batchetder who
receives a S100.000 pension on top of his $94,500 salary
Progressives need not search long for the motivations behind the pension privatization agenda. Private sector workers
have increasingly beon pushed into 401 (k) accountsirm? ’Msnioicra
-i;.-it their sole form of retirement benefits, and
while the result has been disastrous for account-holders it lias been highly profitable for fund managers. The United
Kingdom'sI’rp/.ww* *>•<*< ^•ct'fcm!«_s<cjf<jfrtcp<r:*.'PM>flnPn-/jfcni?<r.e;.*»-ngo<«<sco3V-Scp00El»/experience with pension
privatization in the last decade has been nearly identical Lack of transparency and more speculative investing lead to stark
inequalities for retirees and excessive management fees can amount to $70,000 or more in net deductions from each
individual's account.
US- 230k Long-Term Unemployed
Lose Jobless Benefits <.wrAnftn-thencw
»Aifl-?3Cfc-tong-}effp- u w nplovcd-
05/24/12
MO. Missouri Legislature
Approves Bill Allowing Employers
To Deny _ Access To .Birth Control
tMevwi/!n-ttie-o<rA»/nv>-nvssQurictnpfovcri^
cny-accew-lymwxxitfoH
05/24/12
U_S: 22 States Back Montana in
Supreme Court Fight Against
Citizens United
2?-*l.it^fcui(*^ontarajn._«upf«n^.coiwtrg^-
oga»ty<jiurcm-on(iodj
05/24/12
MD Maryland Enacts Mwe
Progressive Income Tax jinm
/<n-Vic nc«AT%a marjfaM-eracis-
As protests on Wall Street spread across the country, the dire need for
progressive solutions to financial corruption and savage inequality is
captunng national attention One aspect of Wall Street s agenda that
has not been sharply criticized enough is emerging as a defining issue
in the presidential campaigns of challengers to President Obama
dismantling Social Secunty and public pension systems. Texas
Governor Rick Perry has grabbed the most headlines by absurdly
-jirtp /avaw nrpt nev;«i4fx ^p<o^<>3v 4 -<o^*T^cpp<35-S<olumr^!V6pcj!-*!»ir<j'-
- :.r■■ ■:...... characterizingSodal
Security as a *Ponzi scheme." and calling it a 'crumbling monument to
the failure of the New Deal iw®//awa- nuff.-gtcrfor.* «rvaoi •. , ' ? n.
• v.-: >ii • _ • / • jr-.” Other presidential
candidates inap .>vrowta*nqwti comrpo»c»rf20n KBn Ttooo-canadatevwiv/*-
f * >pai:„i , : ....... , gre also trying to stake out positions to privatize retirement funds, and state
policymakers who are leading ideological attacks on workers have targeted pension funds in an effort to pit
............. -jv .'-vm • t-M., • .-iunion and non-union workers against each other
I of 3 5/28/2012 8:00 AM
Seniors at Risk in Wall Street Financed Attacks on Retirement Security... http://www.progressivestates.org/news/dispatch/seniors-risk-in-wall-st..
The prospect of similar profits to be reaped on hundreds of millions of new accounts if Social Security and state pensions
are privatized is simply irresistible for Wall Street. With the very possibility of retirement security at stake — and
conservatives’ hypocrisy in demanding concessions from workers they are not willing to make themselves — progressive
leaders don't simply have a responsibility to protect Social Security and state employees’ pensions. They have strong
ground to stand on in pushing back on Wall Street, and a lot of friends rising up to join them.
SENIORS AT RJSK IN WALL STREET FINANCED ATTACKS ON RETIREMENT SECURITY
Center for Economic and Policy Research - A Voluntary Default Savings Plan An Effective Supplement to Social Seajnty
(hflp /Awwcapr netftndcx ptiii/puWcalianVrqportiUa-vQtuntafv-d a taoB-s a v ^g v ply * ^
Demos - The Failure Of the 40100 (nt»p .7(5gmos ortrt>ut>bca6oncfm?aim?ntnubtcationlD^3228f(«F%2O3FF4%2O6Ce2%2OSABC4668B4D61A0F)
Demos - Republicans' Next Move: Get Rid of P ensions Altogethe r ihttim»os;>caora
/bsfarftdes?arT^Jp->ftpMbllcans next trove act rid ot pension* aUoaWher)
Economic Opportunity Institute- Pension Privatization in Britain. A Boon to the Finance Industry, a Boondoggle to Workers
llrttp /hwAv« i a nlinrpfgft<rtirotT»nt_«ccurtfrfrcportiVPeriscnPriva1galionBr<i»in8aondoqQlg-SepOO pdfi
Economic Policy Institute - Discounting Public Pensions- Reports of Trillions in Shortfalls Ignoro Expected Returns on Assets
{hflp/Awwepi crpfpaoaMiPi PeacyMenxxamfam 17Spdfj
more-progressive-tncome-iax)
05/24/12
MN: Michigan Pushes Plan to
Welcome Immigrants and iheir
Revitalizing Power to State (/newa
Ao-the-newsftnn-mlchigan-pushosplan-
w»teom*-»mmiqt;ints-and-th«irtevitataing-
pg-A^f-statc)
05/24/12
more </news/in«tho»newsi
ACORN- Road to Rescue How
the Philadelphia Model Can
Reduce Foreclosures Across the
Country fhttp/Awwacom ocg
/mdex php?xy^2439&
tOBJM£JLMr*B$=225^
tx_nne-.w[backP.dl- t^384S
This article is part of PSN 's email newsletter. The Stateside Dispatch
View other items from this edition ^puWatategidg-dspgtch/20U-»0-<?7)
COM
f l SBCuri?vteDinmarrtt-l5S)
fftfefeabian nc.-^nbi.imO on October 7, 2011 - 3:49pm
K)
The surprising thing about the continued description of progressive social policies and programs as
"failed:" It's hard not to notice that the US was at its strongest, richest and most productive from the
time of the New Deal, up until Reagan and the elimination of those ‘failed” social programs. We've
been on a quite rapid downhill slide since welfare "reform, which opened the door to today's
widespread anti-union/anti-worker agenda
inngnt-fomDor Bg&t
m)to post comments
Login Uinpfiof Register .juLo-;.-e?/xf)to comment.
NCLC-* Model State Foreclosure
Rescue.Scam Statute and
Overview Memo
(Wtp. /Av.\w. CO r>suo^rW,v
/Wpd<*i_FR.S_Si3?ute.doc)
P O L I C Y S T U D I E S
ACORN: Attorneys Gerteral Take
Action: Real Leadership in
Fighting Foreclosures
(http://aww.3CQm wg
/index pnp7>d=12439&
tx ttnewsfbackPidl= 12384&
StiMbEUatifflZlSS
NCLC: Foreclosing A Dream:
State Laws Deprive Homeowners
of Basic Protections
Ihttp /Aaww consumctlaw org/issucs
/fweclosure/content y Q R E -
R?P9<tO?09jdr)
Center for Responsible Lending:
Mortgage Repairs Lag Far Behind
Foreclosures
fhmp-/Miww responablatendlno org
/mWg^e;lwdt^rte^arch-anaiyK5 /iTOrtgagc-[cpaifs-!ag-t«r;.oe»)inl'
foredostires htnU)
ACQRN Stop Foreclosures
Campaign (http//wwa-acorn o:g
facfcx.php->id=l£»4j
Americans for Financial j^efprm
IWtp.//y|.^_^j^s©!eJend!ng:org
/mortgage-tending/)
Center for Public Policy Priorities
(CPPP) (http //vavw.cppp org)
Center for Responsible Lending
(http /Aw<w reaponsibtelendino pro
^molgaoc:l«D«ng/j
Center on Budoet and Policy
Pnonties (CBPP) ;mtp //•Av.w.-cpp.otg;
Center on.policy Initiatives (CPI)
Institute for Women’s Policy
Research ttittpV/www twpr org
National Consumer Law Center
2 of 3 5/28/2012 8:00 AM

Money Managers Make Their Distress Your Problem: Susan Antilla - http://ww w. bloomberg.com/news/print/2011 - 12-01 /money-managers-.
Money Managers Make Their Distress Your Problem:
Susan Antilla
Bloomberg
12} Saturn AflitsUa - 3b'. 2MI1
Is it possible that, even after the uncountable lessons of the past three years, investors have learned nothing?
A popular financial planner and blogger made a very public disclosure of his personal economic meltdown
last month, telling the story of how he got in over his head with a Las Vegas house that had two mortgages,
no equity, and a date with destiny for a short-sale with Wells Fargo & Co.
What’s stunning to me isn’t that Carl Richards of Park City, Utah inspired hundreds of online hate-mail
postings after writinghis tell-all, “How a Financial Pro Lost His House,” in the New York Times on Nov. 8.
The thing I’m trying to figure out is why even a smattering of readers would sing his praises. He’s “a brave
guy to write what he did,” one reader wroteon the Times’s comment board. “If I lived in Utah, I would hire
you in a minute,” another wrote.
Fifteen investors have sent e-mails to inquire about becoming new clients after reading the article, Richards
told me in a telephone interview, and not one of his 29 clients have strayed as a result of the confession
heard around the blogosphere. Anonymous writers on various blog sites mostly trashed him, but Richards
says readers with the courage to contact him directly swamped him with supportive messages.
Which leads me to a single, simple question: Are you people all nuts?
It’s important to make it clear that Richards, despite his bad financial judgment in racking up a mountain of
personal debt, has a squeaky-clean record with securities regulators. And it says a lot if clients are sticking
with him. But all this honesty-begets-heroism nonsense tells me that some investors are still out to lunch
when it comes to evaluating financial professionals. It’s a fair bet that the people applauding Richards don’t
have a clue whether he’s a guy with a spotless record or is a financial Jack the Ripper.
Separate from that, as far as I’m concerned, if you hire an adviser who is having a personal financial crisis,
you are begging for trouble. It’s axiomatic that some financial advisers will be tempted to make their mone;
trouble your money trouble.
I’m sorry, sort of, if that means deserving advisers are passed over by investors who show an abundance of
Begging for Trouble
caution. But this is no time to get hooked up with a broker, financial planner or investment adviserfeeling
I of 4 5/28/2012 8:47 AM
the squeeze. Richards, in fact, has heard from financial planners who wrote to tell him that they, too, were in
trouble, but had no one to talk to about it. Heartbreaking, I know.
There are lots more where they came from. And not all have the pristine record that Richards has.
When the credit crisis hit in 2008, financial advisers who were overleveraged, afraid of losing their jobs, or
just plain crooked suddenly had an elevated motivation to maintain their income with tricks that ranged
from dipping into clients’ accounts to old-fashioned churning in order to drum up commissions. No matter
the state of the economy or the stock market, it’s in your interest to find out if your financial expert has liens,
big loans from an employer or a history of bankruptcy. When bad times hit, you forsake that sort of
investigating at your peril.
Liens and bankruptcies by brokers licensed with the Financial Industry Regulatory Authority, or Finra, are
listed at the end of their public Broker Check reports. Certified financial planners with certification from the
CFP Board o f Standards can wind up with an online citation of any bankruptcies in their CFP histories,
although it pays to check Finra, too. I’ve seen CFP records that don’t include red flags such as the short sale
of a broker’s home — when a property is sold for less than the mortgage amount.
A caveat is that if the broker doesn’t report it, or the regulator doesn’t catch it, you’re not going to see it. Pay
a few dollars to search Public Access to Court Electronic Records and you might catch something an adviser
is trying to keep off the radar.
Professional Crisis
There’s a rash of finance professionals going through personal financial crises, says Bill Singer, a New York
securities lawyer since 1985. “I’ve never seen it like this,” he told me.
A Finra spokeswoman says the agency doesn’t compile aggregate statistics about broker bankruptcies for
public consumption. The CFP Board o f Standards — which tests and vets financial planners - says that this
year it has held 49 disciplinary hearings of planners who declared bankruptcy, up from 20 in 2010. But
those numbers don’t include other warning signs, such as short sales of homes.
It doesn’t help that stockbrokers often are motivated to cheat because of six-figure upfront bonuses that
convert into personal debts to their firm if they leave or get fired. Scot Bernstein, a California lawyer who
represents aggrieved investors, says it keeps the pressure on brokers to follow management’s sales agenda
even if it means fleecing customers. The shady firm desperate to do business sends a message “that we can
toss you out on your ear for any reason, including if you don’t want to sell variable annuities to a
90-year-old,” Bernstein says.
Public records at Finra and the CFP show the link between financially pressed investment pros and
customer complaints over recent post-credit-crisis years. A Minnesota broker was barred from the
Money Managers Make Their Distress Your Problem: Susan Antilla -... http://www.bloomberg.com/news/print/2011-12-01/money-managers-...
2 of 4 5/28/2012 8:47 AM
brokerage industry in October after using the Social Security number of a customer and personal friend --
without that person’s permission — to co-sign a college loan for his daughter. The broker told Finra at a
hearing that he and his wife had gotten used to doing “things we never did before” and that when times got
tough, he had to “mask things a bit.” He’s appealing Finra’s bar.
A broker from Long Island was suspended for two months beginning Nov. 21 after he neglected to tell Finra
about a felony charge: A Las Vegas casino filed charges, saying he’d bounced a $10,000 check with the
intent to defraud. He already had contributed to settlements of two customer complaints since 2009 and has
four liens listed in his records with Finra, which waived a monetary penalty because he couldn’t have paid a
fine anyway.
Great Timing
Sometimes brokers file for bankruptcy with remarkable timing that gets them off the hook just as a hearing
looms. Another Long Island broker has a Finra dossier that lists two criminal items; four resolved
complaints that involved payments to investors; and four pending client disputes. He filed for Chapter 7
bankruptcy in February, just as a $5 million claim against him was headed for arbitration.
If you think I’m just a crank who is overstating the risk when bad times set off the cheating side of advisers,
consider the perspective o f an expert who has a more forgiving view of financial types who make personal
mistakes: Carl Richards.
We didn’t agree on some issues when we spoke last week. I told him, for instance, that I would never let
someone with his history run my money. But when I asked him whether investors should worry that
ethically challenged advisers with personal money troubles might be more inclined to cheat a customer in
bad times, he conceded I was “spot on.” It’s “a legitimate concern,” he said.
There are always conflicts when you are taking care of other people’s personal finances, Richards told me.
But it’s “harder to handle” for the adviser whose own checkbook balance begins with a minus sign. You can
see Richards’s own record under “David Carl Richards III” here.
It’s clean. Do the same thing with the name of anyone who is pitching to run your money. If you are looking
to steer business to someone who is needy, get a list of deserving workers from your local church or
homeless shelter. Parking your money with needy brokers is just too risky.
(Susan Antilla. who has written about Wall Street and business for three decades and is the author of “Tales
From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View
columnist. The opinions expressed are her own.)
To contact the writer of this article: Susan Antilla at santilla@bloomberg.net or
To contact the editor responsible for this article: James Greiff at igreiff@bloomberg. net
Money Managers Make Their Distress Your Problem: Susan Antilla -... http://www.bloomberg.com/news/print/2011-12-01/money-managers-...
3 of 4 5/28/2012 8:47 AM
@2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Money Managers Make Their Distress Your Problem: Susan Antilla -... http://www.bloomberg.com/news/print/2011-12-01/money-managers-...
4 of 4 5/28/2012 8:47 AM

Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - Bloomberg http://www.blooraberg.com/news/print/2012-04-04/ex-con-man-says-j..
DEFENDANTS
EXHIBIT
K-ll Bloomberg
Ex-Con Man Says JOBS Law Makes Guys Like Him Rich
H&v ftiHoni 'tfJlfciSa - rfypr 4. 2M!LI‘
Mark L. Morze knows a good investment opportunity when he sees one, but he hasn’t pursued his fortunes
quite the way the rest of us have. Morze, 61, hung his hat for 4 1/2 years at federal prisons in Lompoc and
Boron, California, after pleading guilty to two counts of fraud for cooking the books at the infamous carpetcleaning
company 7777. Best fZBSTQlin the 1980s.
He says he’s baffled that President Barack Obama plans to sign a lawtodav that amounts to an open
invitation for fraud. “I wish legislators would consult with people like me before they write something like
this,” he says, sounding dead serious about the offer. “I could tell them, ‘I know what your intent was with
this wording, but we can get around it so easily, it cracks me up.’”
I’m sure the last thing U.S. lawmakers were looking for in their zealous bipartisan push for the Jumpstart
Our Business Startups (JOBS) Act was the inconvenient feedback of a seasoned investment fraudster —
albeit one who says he’s rehabilitated and now lectures on the techniques scammers use. Though the JOBS
Act was packaged as a plan to streamline rules to help small companies crank out jobs, even its cheerleaders
have come up with scant evidence the law will boost employment much, if at all. In an election year when
pragmatic politicians are laboring to come off as allies of deep-pocketed business donors, the JOBS Act is a
slapdash attempt at securities-lawderegulation. plain and simple.
Discovering Gems
The new law has 22 pages of gems that include new ways for securities analysts to tout their firms’ public
offerings, and cool opportunities to avoid rules that force companies to supply audited financial statements.
In the end, though, the law that Morze tags as having “real potential for abuse” boils down to two features
that don’t bode well for small investors: It lets a lot of companies reveal less about themselves when they sell
stock, and, for the first time, it lets companies flog their shares on the Internet.
The Securities and Exchange Commission still has to figure out how the new JOBS rules will read, which just
means the unsightly lobbying to diminish investor protection hasn’t yet ended.
There is a lot to dislike about the law, and we will all learn soon enough which ill-advised provisions in the
JOBS Act have done the most harm to smaller investors. For the moment, though, the law’s approval of
something called “crowdfunding” looks like the most toxic of all.
1 of4 5/28/2012 8:46 AM
I wrote about crowdfunding this time last year, having noticed that celebrity Whoopi Goldberg had
promoted the idea on her Facebook page, where she continued to plug crowdfunding as recently as last
month. Crowdfunding is a way to raise money, as tech types put it, “from the crowd” on the Internet. It
became popular when musicians and other artists began using it to solicit online donations for underwriting
music tours and films.
Crowdfunding comes with some heart-warming benefits. Families have crowdfunded to raise money for a
loved one’s expensive medical procedure, for example. But it was only a matter of time before sharp-eyed
investment types spotted the benign Internet fund-raising technique as a way to sell shares to the public.
There was a hitch, though. They had to find a way around those irritating SEC rules that force you to slog
through extensive registration requirements. Now that the hurdle has been removed by the JOBS Act,
companies will be able to peddle as much as $1 million in shares a year that investors can access with a click
on their shiny new iPad 3s.
No Scams Shortage
Even before JOBS came along, we were at little risk of running out of financial scams to worry about. At the
Federal Bureau o f Investigation in Washington. Unit Chief for Financial Crimes Aaron Seres says investors
continue to get fleeced by boiler-room operators who hype shares of microcap companies, and that’s without
the viral fraud possibilities that Internet IPOs would add. His fear is that unsophisticated investors will be
lured into online scams and learn too late, as Seres puts it, that “Lo and behold, there’s no business in the
first place.”
It will take months for the SEC to get those new rules in place, but Morze figures that the sleaze set is
already doing prep work to line up refuse to sell on the new crowdfunding sites, which are known as portals.
“My guess is they’re setting up dummy companies,” he says, speculating that crowdfunding will appeal to
“small investors who are a little intimidated by bigger marketplaces.”
Investors with annual income or net worth of less than $100,000 will be allowed to invest as much as
$2,000 a year in a company that offers shares via crowdfunding. People with net worth or income of more
than $100,000 can invest as much as 10 percent of their annual income or net worth, up to $100,000.
From what I can tell, crowdfunding’s supporters mostly are well-meaning boosters of entrepreneurialism
who simply don’t have much understanding of how a swindler’s mind works. They have suggested fraudthwarting
measures such as a self- regulatory organization to keep things honest, and there is nothing wrong
with trying that, though SROs have been no cure for the fraud we already have in the markets.
Fans of the idea have also found solace that when an entrepreneur makes a claim online about his or her
company, readers can signal that the assertion is sound by pushing the “ like” button. Unexplained in all this
Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - Bloomberg http://www.bloomberg.com/news/print/2012-04-04/ex-con-man-says-j...
2 of 4 5/28/2012 8:46 AM
is why we wouldn’t expect that some sleazy stock promoter couldn’t arrange for his cronies to be gathered in
an Internet cafe pushing the same button over and over again on some worthless fraud.
The JOBS regulatory easing coincides with a soaring caseload for law enforcers. The FBI had a record 726
pending corporate-fraud investigations in the fiscal year ended Sept. 30. It had 1,800 pending commodities
and securities-fraud investigations for the same period, also a record.
Discouraging Investors
History suggests that when you strip away regulators’ authority, you set the stage for more fraud and a spike
in the number of investors who want nothing to do with financial markets. After Congress passed the 1996
National Securities Markets Improvement Act -- what’s with these titles that say the opposite of their intent?
— state regulators shifted from stopping fraud before it happened to mopping up the mess after investors
had been bilked. Joseph Borg, the securities commissioner in Alabama, says investors have suffered “billions
of dollars of losses” since that law stripped state regulators of their ability to vet private deals known as
Regulation D 506 offerings.
“We used to call them up and ask questions about this or that or the other thing, and we’d never hear from
them again — they’d just go away,” says Borg, referring to the shady characters who tried to sell garbage
under the Regulation D exemptions from full securities-law registration. Today, Borg and his colleagues in
other states usually settle for filing enforcement actions against Reg D crooks after the money is gone. State
regulators have brought 580 enforcement actions against violators of Reg D’s exemption over the past three
years.
The JOBS Act similarly denies states any say over crowdfunding offerings, but does honor them with the
booby prize of having the authority to bring fraud charges.
And who might be the victims in the wacky new world of securities crowdfunding? Maybe not who you
think.
The quest for financial literacy among smaller investors is a laudable goal pursued by consumer advocates in
recent years, but it turns out that knowing the basics doesn’t mean you have what it takes to ward off
investment criminals. Anthony Pratkanis, a professor of psychology at the University of California in Santa
Cruz, told me he worked on a project where researchers got their hands on real-life tapes of crooks pitching
victims on the telephone.
Perhaps it isn’t a surprise that victims often had unusual stress in their lives - divorce, job loss, or other
difficulties — that made them more vulnerable. The crooks would “tailor the investment advice to whatever
was needed,” Pratkanis said.
Money Losers
Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - Bloomberg http://www.bloomberg.com/news/print/20l2-04-04/ex-con-man-says-j...
3 of 4 5/28/2012 8:46 AM
But Pratkanis said he didn’t expect to discover this attribute in many of the investors who lost: they tended
to score highest on a quiz o f eight basic questions about investing, which signaled to the research team that
financial literacy offered little protection. Equally surprising was that victims were more likely to be male,
married, wealthy and educated.
John Lawlor, a Long Island New York-based lawyer who has practiced securities law for 27 years, told me
the target of choice for scamsters who peddle worthless private securities over the telephone is the same
group that the hapless JOBS law says it is trying to help: small businesses.
“It’s always small-business owners, usually outside of major metropolitan areas,” he said. “That’s who is on
the cold-calling lists.” Regulators figure the same bad operators who scam over the phone will be exploiting
the new online opportunities, too.
Morze has a good idea, JOBS law or no JOBS law. When someone gets caught, make it hurt, he says. “Prison
really helps deter white-collar guys,” he said. Let’s hope lawmakers and regulators hear that.
(Susan Antilla. who has written about Wall Street and business for three decades and is the author of “Tales
From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View
columnist. The opinions expressed are her own.)
Read more opinion online from Bloomberg View.
Today's highlights: The View editors on austerity in Spain and the Muslim Brotherhood’s political rise; Ezra
Klein on worrying about the deficit; Caroline Baum on scapegoating oil companies: Jonathan Weil on
Groupon's IPO; and Rowan Jacobsen on atrocities in Myanmar.
To contact the writer of this article: Susan Antilla at santilla(Sbloomberg.net
To contact the editor responsible for this article: James Greiff at igreiff@bloomberg.net
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - Bloomberg http://www.bloomberg.com/news/print/2012-04-04/ex-con-man-says-j...
4 Of 4 5/28/2012 8:46 AM

Wall Street’s Legal Magic Ends an American Right - Bloomberg http://www.bloomberg.com/news/print/2012-05-03/wall-street-s-legal...
DEFENDANTS
EXHIBIT
K-12
Wall Street’s Legal Magic Ends an American Right
Ii\ ftossa ATfiiiRa- Mia 3. Z'iiilll
American business entered its Teflon era on a spring day 25 years ago.
Lawyer Madelaine Eppenstein had taken the morning off from work for a parent-teacher event at her
5-year-old’s elementary school on June 8, 1987, when she was summoned to the principal’s office for an
urgent call. Her husband and law partner, Theodore Eppenstein, told her they lost the Supreme Conrtc.asf>
he had argued two months before on behalf of a couple trying to sue their stockbroker for fraud.
“I felt like I got punched in the face,” she told me in an interview late last month.
If Eppenstein was punched, the investing public was mauled. The case known as Shearson v. McMahon
would wind up locking investors out of U.S. courts any time they tried to sue a broker. A tiny clause in
customer agreements turned out to be Wall Street’s magic formula to keep its transgressions out of sight.
The agreement that Eugene and Julia McMahon signed said that any dispute between them and their broker
at Shearson/American Express Inc. — a trusted fellow parishioner at their church —“shall be settled by
arbitration” in a Wall Street forum. Investors since then have either had to agree to similar terms, or forget
about having a securities account.
“If you get screwed,” Theodore Eppenstein says, “now you have no place to go.”
Looking for Luxuries
No place to go, that is, if you’re looking for luxuries like publicly filed documents, juries that hear the facts
and judges that preside over open proceedings.
The McMahon decision was damaging enough for the impact it had on individual brokerage customers, who
tell their stories about fraud, misrepresentation and churning behind closed doors where the public —
including reporters — isn’t welcome. Perhaps worse is what happens when a powerful industry gets
accustomed to keeping its squabbles quiet: Wrongdoers are inclined to relax, sending ethics to ever-lower
lows.
“It means that all sorts of scams against individuals, however large, are very unlikely to come to the
attention of the media and the public,” says F. Paul Bland Jr., a senior attorney at the public-interest law
firm Public Justice in Washington
I of 4 5/28/2012 8:44 AM
Wall Street may have been first to catch on to the benefits of mandatory arbitration, but Bland worries that
the closed-door trials are spreading to industries from retailing to homebuilding. “The silence and secrecy
that surrounds arbitration is extremely harmful to the country,” he says.
These days, employers -- Manpower Inc. and Nordstrom Inc. among them — require new hires to give up
their rights to court before a fresh-faced recruit can check in for orientation. And consumers can forget
about opening a Netflix account, signing a mobile-phone contract, or putting a loved one into most
big-name nursing homes unless they are willing to give up their rights to go to court. Buying a Starbucks gift
card? You are agreeing to mandatory arbitration of any fraud or misrepresentation by the company.
The results can be chilling. After watching his father die from sepsis of the blood caused by infections from
13 bedsores in 2005, David W. Kurth o f Burlington, Wisconsin, tried to sue the nursing home whose staff he
claimed had left his father’s wounds covered in excrement and urine for days at a time. Though the death of
his father would have been shocking enough, Kurth told a Congressional subcommittee in 2008 that the
“most shocking” part of his family’s ordeal was this: They wouldn’t be able to sue for the alleged neglect
because the deceased man’s wife had signed admissions documents that had a mandatory- arbitration
agreement.
“How can anyone in good conscience argue that it should be perfectly legal to trick frail, elderly, infirm
senior citizens experiencing the most stressful time in their lives into waiving their legal rights?” Kurth
asked.
Free Phones
Conscience, of course, plays no role when companies demand arbitration. But Supreme Court decisions do.
In April 2011, the court dealt a new blow to consumers and employees in a case known as AT&T Mobility v.
Concepcion. AT&T had pitched a deal to woo new mobile-phone customers by offering free phones, but it
turned out the freebie came with a $30.22 bill for “taxes.” Vincent and Liza Concepcion tried to bring a
class-action lawsuit on behalf of all the other consumers who took AT&T’s deal. But the court said that when
the couple signed the customer agreement, they gave up their right not only to sue, but also to a class action
even in arbitration.
In the year since the Concepcion decision, lower courts have trashed dozens of cases in which consumers or
employees were trying to sue as a group. The National Labor Relations Board pushed back against the
impact the Concepcion decision might have on employment class actions, ruling in January that it’s a
violation of federal labor law to make workers give up the right to pursue group claims. That decision
probably will be challenged in court.
About 25 percent of U.S. employees are covered by mandatory-arbitration clauses, says Alexander J.S.
Colvin, an associate professor of labor relations and conflict resolution at Cornell University. He figures the
number will grow as a result of the Concepcion case.
Wall Street’s Legal Magic Ends an American Right - Bloomberg http://www.bloomberg.com/news/print/2012-05-03/wall-street-s-legal...
2 of 4 5/28/2012 8:44 AM
I f you are wondering just how bad arbitration can be, the examples are many. When I wrote my book about
sexual harassment on Wall Street, “Tales From the Boom-Boom Room,” I was aghast at the things brokerage
firms could do that would never be allowed in court. In the weeks before one woman’s arbitration hearing
was set to begin, her former employer hired a psychiatrist who questioned about her sex life and her
menstrual cycle. She had alleged that a man in the office had followed her into a stock room and grabbed her
breasts. Another woman, who said the same man had accosted her, was directed by the consultant-shrink to
sit in a chair in the middle of a room and recite the names of all the U.S. presidents — in reverse order.
Both women bailed out and settled, having seen enough of arbitration’s downside before the hearings even
started.
Get There Early
In October, a doctor who was fired from her job by a physicians’ group in suburban Philadelphia told the
tale of her arbitration to the Senate Judiciary Committee. Deborah Pierce would have preferred to sue the
partnership (17 men, one woman at the time) that fired her, but her employment agreement tied her to
arbitration run by the American Health Lawyers Association. One morning, she arrived early to her hearing
at a law office in Wayne, Pennsylvania, to see one of her former bosses strolling out of the arbitrator’s office
earning a cup of coffee. That sort of encounter is known as an ex-parte meeting between a judge and a party
to a case. It isn’t allowed in court proceedings.
To pay for her case, which included her half o f the arbitrator’s $117,042 fee, Pierce took out a home-equity
loan that she and her husband are still paying off three years later. Her consolation prize: the arbitrator at
one point ordered her adversaries to pay her $1,000 in sanctions for destroying documents and delaying the
proceedings. And then, he billed her $2,000 for the time he spent deciding whether he should impose the
fine. She lost.
It’s an open secret in legal circles that arbitrators are more worried about alienating the corporations who
give them regular business than they are about one-shot plaintiffs. “Arbitrators who ding a major firm know
they’re going to be blackballed,” says Timothy J. Dennin, a New York lawyer who represents aggrieved
investors.
There are upsides to arbitration, if only the public had a chance to consider it as an alternative to court
instead of a mandate. Investors whose losses are too small to be attractive to lawyers, for example, can often
navigate securities arbitration more easily than a court case. And arbitration can be faster than court.
“Do some cases fare better in arbitration? Definitely,” says Ryan K. Bakhtiari, the president of the Public
Investors Arbitration Bar Association, a group of lawyers who represent investors. He says arbitration
should be at the choice of the investor, not mandatory.
Bad Behavior
Wall Street’s Legal Magic Ends an American Right - Bloomberg http://www.bloomberg.com/news/print/2012-05-03/wall-street-s-legal...
3 o f 4 5/28/2012 8:44 AM
The more cases we relegate to arbitration, the more we fail to hold companies accountable for bad behavior.
Frank Partnov, the author of “Infectious Greed: How Deceit and Risk Corrupted the Financial Markets,”
says that even if an arbitrator decides a business is guilty of fraud, a company “can write a check and not
worry about creating a dangerous precedent.”
That case by the McMahons never got to arbitration after the Supreme Court said the couple couldn’t go to
court. Regulatory records for their former broker show they settled for $700,000. Christine Hines, the
consumer and civil-justice counsel in Public Citizen’s Congress Watch unit, says groups such as hers would
simply have no material to work with if bad products and practices were all relegated to private justice.
“There is no way we, as advocates, would know what’s going on,” she says.
Twenty-five years after the McMahons lost their fight for a public hearing, it’s hard not to conclude that’s
precisely what business is counting on.
( Susan Antilla, who has written about Wall Street and business for three decades and is the author of “Tales
From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View
columnist. The opinions expressed are her own.)
Read more opinion online from Bloomberg View.
Today's highlights: the View editors on Argentina's oil grab and poor corporate governance at tech
companies; Michael Kinsley on Mitt Romnev's former spokesman; Virginia Postrel on the economic folly of
recycling eyeglasses; and Jonathan Cohn and David Strauss on making health-care reform work.
To contact the writer of this article: Susan Antilla at santiIla@bloomberg.net
To contact the editor responsible for this article: James Greiff at igreiff@bIoomberg.net
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wall Street’s Legal Magic Ends an American Right - Bloomberg http://www.bloomberg.com/news/print/2012-05-03/wall-street-s-legal...
4 of 4 5/28/2012 8:44 AM

Occupy Vigilantes Write New Volcker Rule Script: Susan Antilla - Bl. http://www.bloomberg.com/news/print/2012-03-0l/occupy-the-sec-wri..
I of 4
Bloomberg DEFENDANTS
EXHIBIT
K-13
Occupy Vigilantes Write New Volcker Rule Script: Susan
Antilla
Sosas Anailta - S ob
It isn’t every day that a reporter gets to sit in on a high-stakes policy meeting in New York’s financial district,
but that’s exactly what I did on a balmy evening in late February at 60 Wall Street the U.S. headquarters of
Deutsche Bank AG.
No, the bank didn’t lose its institutional marbles and give me clearance to scribble notes while its
cognoscenti mapped out corporate strategy. The confab I dropped in on was taking place under potted palm
trees in the bank’s ground-floor public atrium, and the participants were 13 members of Occupy the SEC, a
spinoff group of the Occupy Wall Street movement. I can’t help but conclude that their plans for petitions,
marches, op-eds and sit-down meetings with banking regulators will be inflicting Wall Street with a long,
nasty attack of agita.
Occupy Wall Street and its working groups, including Occupy the SEC, were supposed to be dead, in case you
missed the obituaries Now the protesters are messing with detractors’ heads with the emergence of a
media-sawy collection of legal, banking and activist members who come off as sane and authoritative. This
is not the way the Occupy bashers’ “welfare-bum hippies” propaganda script was supposed to play out.
On Feb. 13, seven writers who described themselves as “concerned citizens, activists and financial
professionals” filed a 325-page comment letterto financial regulators, outlining their concerns about
loopholes in the “Let’s Try to Avoid the Next Financial Crisis” proposal known as the Volcker rule.
Most Detailed
It was among the longest and most detailed of 16,000 letters sent to the Securities and Exchange
Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the
Comptroller of the Currency during the public-comment period.
We may call it a “public” comment period, but in the real world it is deep-pocketed business interests, not
Mom and Pop, who usually have the juice to persuade officials to amend financial regulations. It’s no
surprise that Wall Street has been working furiously to dilute the rule’s restrictions on how banks trade and
what investments they can own, and the industry has a heap of comment letterson the Volcker rule to show
for it.
5/28/2012.8:27 AM
This time, though, there is a noisy voice plugging for the little guy, and it carries weight that these rabblerousers
understand the banking industry from the inside.
Or, as Occupy the SEC member Alexis Goldstein — who has worked at Morgan Stanley, Merrill Lynch and
Deutsche Bank — explained the group’s line-by-line analysis of the Volcker Rule to me: “We’d say ‘OK, I’m a
bank, so how am I gonna get around this rule?”’
Even veteran activists who advocate regularly for the public were wowed. “They understood the nonsense in
the proposed rule,” said Bartlett Naylor, financial policy counsel at Public Citizen’s Congress Watch. Public
Citizen, which also wrote a Volcker comment letter, was “humbled” by the Occupy effort, Naylor said.
Along with Goldstein, 31, who quit her job as a business analyst in Deutsche Bank’s technology department
in 2010, the founding members of Occupy the SEC include Akshat Tewary a former Kaye Scholer LLP lawyer
who today specializes in immigration law; Caitlin Kline, a former credit derivatives trader; and a mysterious
guy who calls himself “George Bailey” and claims to have spent 30 years working at compliance and
accounting jobs at financial firms.
Bailey was a no-show at the Feb. 21 meeting I attended, but the other six authors of the letter were seated
around three silver cafe tables strewn with half-eaten deli dinners and a jumbo bag of Reese’s Pieces. Seven
other Occupy the SEC participants were there, too, including a New York University professor, Michael
Ralph, who had come to the meeting because he had been impressed by Goldstein’s performance in a recent
interview on MSNBC.
‘Finance Dorks’
The group, which Goldstein calls “the finance dorks of Occupy Wall Street,” divvied up the tasks related to a
regulatory comment letter they will be sending to the U.S. Commodity Futures Trading Commission, then
made their way down a typed agenda list to this item: “March on Sifma.”
“What is Sifma?” a new member asked, referring to the abbreviation for the Securities Industry and
Financial Markets Association, a financial-industry trade group. Tewary, who was running the meeting, put
it in language that a newcomer could understand: “If we are the rebels,” said Tewary, “they are Darth Vader.”
Sifma has predicted something close to financial Armageddon — I guess they mean the sequel — if the
Volcker rule, as written, becomes law. And the trade group seems to be going out of its way to ignore the
protesters, which says a lot about how official Wall Street feels about the Occupy movement: When the
action in New York’s Zuccotti Park was headline news in November, Sifma held its annual conference in
midtown Manhattan and devoted not a single item on its program to the public outcry against its members.
Asked last week if Sifma would like to comment on Occupy the SEC or its letter about the Volcker rule,
spokeswoman Katrina Cavalli declined.
That stance doesn’t surprise public-relations pros who say that engaging with anyone in the Occupy
Occupy Vigilantes Write New Volcker Rule Script: Susan Antilla - Bl... http://www.bloomberg.com/news/print/2012-03-0I/occupy-the-sec-wri...
2 of 4 5/28/2012 8:27 AM
movement would recognize it as legitimate, which is the last thing Wall Street wants. “Financial institutions,
as well as other big businesses, have been quite successful in recent years in solving their regulatory
problems without engaging in an open dialogue with the public,” says Alexander V. Laskin, an assistant
professor of public relations at Quinnipiac University in Hamden, Connecticut “Instead of public relations,
they rely on private relations,” such as lobbying, he says.
Protest March
Keeping the public out of the dialogue may get harder for Wall Street as Occupy the SEC steps up its game.
At their recent meeting, members volunteered to set up in-person meetings with financial regulators (they
have already had a one-hour conference call with 11 SEC officials); launch a Facebook page; post a petition
on change.org to support their Volcker letter; and figure out the logistics of a protest march in Washington
The June 6 anniversary of the SEC’s founding is a possible date for the march.
They have left voicemail messages with luminaries including Paul Volcker. the former Federal Reserve
chairman after whom the rule is named, and Charles Ferguson, director of the documentary “Inside Job,”
hoping to get them acquainted with Occupy the SEC’s work. The members exploit every opportunity to
schmooze: One wound up chatting with Eliot Spitzer (yes, that Eliot Spitzer) recently after noticing the
former New York governor biding his time waiting to be called in a Manhattan jury pool. On March 20, the
group has appointments to meet with SEC and FDIC officials.
Once Occupy the SEC’s Volcker rule lobbying is done in May, members will pick a topic for what they call
“the next big step.”
The group has brains, energy and flattering media coverage. But o f all the things Occupy the SEC has going
for it, its biggest edge may come from something that isn’t of its own doing: the financial industry’s
cluelessness about the level of public disgust with its flouting of rules and kingly pay. Jamie Dimon. the chief
executive officer of JPMorgan Chase & Co., told Fox News on Jan. 24 that the bashing of all bankers as bad
guys is “a form of discrimination that should be stopped.” New York magazine interviewed a Wall Street
executive in its Jan. 16 issue who bellyached that Main Street doesn’t understand Wall Street’s problems:
“Even getting cut from $1 million to $500,000, they still think you’re earning too much,” the banker said.
Proprietary Trading
And then there is T. Timothy Rvaa Jr., CEO of Sifma, who in an interview with Bloomberg Radio on Feb. 15
was asked this question: Might the economy be better off if trading and commercial banking were separated,
“given what banks did to the country during the bubble?” Ryan’s answer came dripping with condescension:
“Your comments are, I would say, relatively over-the-top as to what happened here,” he told Bloomberg’s
Michael McKee Proprietary trading didn’t cause the 2008 crisis, Ryan said. “Actually, most of the problems
were created by consumer loans, which were retail residential mortgages.”
Occupy Vigilantes Write New Volcker Rule Script: Susan Antilla - Bl... http://www.bIoomberg.com/news/print/2012-03-0l/occupy-the-sec-wrL.
3 of 4 5/28/2012 8:27 AM
If only we could do something about those out-of-control residential borrowers who are imperiling the world
economy.
Wall Street could get lucky. A prolonged bull market is always a trigger for faded memories and public
complacency. The best thing that could happen for the bankers who today are under attack would be a
revival of ailing investment portfolios strong enough to inspire the public to start ringing their real-estate
brokers again.
Short of that, people like Ryan and Dimon should pay attention to this: “We want to get the message out that
anyone can do what we did,” says Goldstein, who wants ordinary Americans to be comfortable playing a part
in rule-making. The more success Goldstein and her pals have in getting the word out on this democracy
thing, the more Wall Street ought to worry about the finance dorks who munch on peanut-butter cups in the
60 Wall Street atrium.
( Susan Antilla who has written about Wall Street and business for three decades and is the author o f “Tales
From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View
columnist. The opinions expressed are her own.)
Read more opinion online from Bloomberg View.
To contact the writer of this article: Susan Antilla at santilla@bloomberg.net
To contact the editor responsible for this article: Paula Dwyer at pdwvern@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Occupy Vigilantes Write New Volcker Rule Script: Susan Antilla - Bl... http://www.bloomberg.com/news/print/2012-03-01/occupy-the-sec-wri...
4 o f 4 5/28/2012 8:27 AM

Wall Street’s Big Swingers Get the Biggest Breaks: Antilla - Bloomberg http://www.bloomberg.com/news/print/2012-01-04/wall-street-s-big-s..,
DEFENDANTS
EXHIBIT
K-14
Wall Street’s Big Swingers Get the Biggest Breaks: Antilla
Suttra AaS&ILa- taro 5. ZsO'hl
On the surface, the year 2011 was one of ramped-up securities regulation and scary times for financial
scammers, with enforcement cases soaring at the U.S. Securities and Exchange Commission and coverage
galore about the humbling of inside traders and municipal-bond riggers.
Along with the sexy headlines about felled lawbreakers, though, there were also troubling free passes and
favors granted to the accused and the privileged.
Laws that were set up to punish bad guys got waived within days of the press releases announcing that the
offenders had been brought down. Well-connected lawyers in the employ of investment firms got
express-lane access to regulatory brass. Among the C-suite set, there was even one big name who left the
securities industry for a few years and returned to face the humiliation of retaking the licensing tests. Of
course, as it should be for the privileged, he got a waiver from the requirements that lesser mortals on Wall
Street must meet.
In November, the said big-shot wound up resigning from his gig at MF Global Holdings fMFQLQTLtd. after
the firm filed for bankruptcy, but we’ll get to that later.
The good news is that the most compromising free pass of all, the ability of alleged financial cheats to dispose
of SEC lawsuits by saying they “neither admit nor deny” what they’ve been accused of, is under fire and
inspiring calls for congressional hearings. Just how odious these deals have become was exemplified in a
spat late last month between U.S. District Court Judge Jed Rakoff and settlement partners Citigroup Inc. and
the SEC.
Rakoff said in November that he wouldn’t sign off on the SEC’s $285 million settlement with Citigroup,
which had been accused of misleading investors in a $1 billion financial product tied to risky mortgages.
Dissatisfied with Rakoff s decision, Citi and the SEC went to the appeals court on Dec. 27 seeking a stay, even
talking on the phone with Rakoff later in the day about procedural matters without mentioning a word about
their new motion. “Misleading,” Rakoff said in a Dec. 29 order.
Rakoff, who in 2009 nixed a similar deal between the SEC and Bank of America Corp., seems to have broken
the spell of courts that rubber-stamp these ultimate regulatory cop-outs.
Paying fines and walking away from liability, though, isn’t the only break that the accused have been
1 of 4 5/28/2012 8:25 AM
catching. It has become routine that, on the heels of a settlement with the SEC, big banks and other
defendants request and receive waivers from punishments designed to kick in as a result of their settlement
orders. My personal favorites are the series of agreements between the SEC and the investment firms it
accused of rigging prices of municipal bonds. Five firms have agreed to pay $743 million in bid-rigging cases
since December 2010 — all reaping the benefits of those “neither admit nor deny” clauses along the way, of
course.
Start Believing
If we are to believe the SEC, some of those firms that didn’t have to say they did anything wrong really did
break laws and hurt the public. Read this quote from a May 4 SEC press release: “Our complaint against UBS
reads like a ‘how-to’ primer for bid-rigging and securities fraud,” said Elaine C. Greenberg, chief of the SEC’s
Municipal Securities and Public Pensions Unit. “They used secret arrangements and multiple roles to win
business and defraud municipalities through the repeated use of illegal courtesy bids, last looks for favored
bidders, and money to bidding agents disguised as swap payments.”
I don’t know about you, but that sounds pretty bad to me. Fraud. Secret arrangements. Disguises.
Bad, perhaps, but not bad enough to stop UBS AG’s lawyers at Debevoise & Plimpton LLP from writing to the
SEC five days later on May 9 to ask a favor. Through its lawyers, UBS asked the SEC not to enforce a rule that
would have disqualified it from participating in securities offerings that are exempt from registration
requirements. To help make the case for UBS, the letter cited nine examples of times the SEC had granted
waivers for “similar reasons” since 2002, including another action against UBS. On the very same day, the
SEC wrote back to say the waiver was granted.
In case you are having trouble keeping track, what we’re talking about here is an exemption from a ban from
an exemption. Regulators do have the ability to bring administrative proceedings if a firm abuses the
privileges it gets from a waiver. But if we need to go to this much trouble to undo the rules when somebody
gets caught — but doesn’t admit it anyway - - why have rules at all? UBS didn’t respond to a request for
comment.
While all the settling and waiving and exempting is going on, the banks paying the most for legal juice
benefit from remarkable access. Thanks to research by the Project on Government Oversight, the public got
hard data back in May showing just how easy it was for SEC professionals to leave their posts for the private
sector and, on behalf of their new financial-industry clients, to get rapid entree to sitting securities
regulators.
Nice Work
The group got five years’ worth of information about SEC employees who left their jobs and, within two years
of their going-away parties, wound up representing financial firms before the agency. In all, 219 former SEC
Wall Street’s Big Swingers Get the Biggest Breaks: Antilla - Bloomberg http://www.bloomberg.com/news/print/20l2-01-04/wall-street-s-big-s...
2 of 4 5/28/2012 8:25 AM
employees filed 789 of the required statements (“Hey guys, we’re back, and wearing nicer suits”) from 2006
to 2010.
To give you a flavor of how these things really work, I’ll mention one of several gems among the 789.
Margaret E. “Mitzi” Moore, former senior counsel in the SEC’s Office of Compliance Inspections and
Examinations, resigned Jan. 13, 2006, and within two months disclosed that she and other colleagues at her
new job at the Financial Services Roundtable would be meeting March 17 with then-SEC Chairman
Christopher Cox. The Project on Government Oversight got its hands on the meeting agenda that Moore
submitted, and the first item on the list was a shout-out for the “good start” and “positive mood change at
SEC.” The question “positive for whom?” comes to mind. Equally depressing was her memo notation that the
SEC had made “good staff appointments.”
Much as we would all love to know exactly which regulators were warming the hearts of Wall Street
lobbyists, the names were deleted from the agenda. In July last year, the Government Accountability Office
released a study on similar revolving-door issues, but did give the SEC credit for a new policy of collecting
post-employment information from departing workers.
Perhaps I am being too tough on the financial cops who pride themselves on being vigilant enforcers of rules
that keep financial markets safe and fair. At the Financial Industry Regulatory Authority, the Wall Streetfinanced
self-regulator that is overseen by the SEC, decision makers have been known to be uncompromising
in ensuring that members don’t skirt the rules.
With some exceptions, Finra expects members to re-take licensing exams if they have been out of the
business for more than two years. It has fought and won battles against some former brokers, invariably
small fries, who look for waivers.
Playing Rough
Some brokers who challenged Finra’s tough decisions have appealed to the SEC, only to have the agency
back Finra with arguments that are hard to criticize. In one case, the SEC said the re-exams can be a
safeguard to the public interest. In another, the agency argued that a broker who had been out of the
business for more than two years should be denied an exam waiver because “in that time, there have been
changes to the securities laws and regulations” with which she should be familiar. And who could argue that
understanding the rules is important if you’re entrusted with other people’s money?
Which is why the exam waivers granted to Jon Corzine. the former MF Global chief executive officer who
resigned from the bankrupt company last year, make you wonder. Corzine took his Series 7 broker exam in
1975, and took the test for brokerage principals in 1982, yet he landed a waiver of both of those exams when
he took over at MF Global in 2010. By then, he had been out of the business since 1999, having served as the
Democratic governor of New Jersey and senator of that state. Finra has said it showed no favoritism in
Wall Street’s Big Swingers Get the Biggest Breaks: Antilla - Bloomberg http://www.bloomberg.com/news/print/2012-01 -04/wall-street-s-big-s...
3 of 4 5/28/2012 8:25 AM
Wall Street’s Big Swingers Get the Biggest Breaks: Antilla - Bloomberg http://www.bloomberg.com/news/print/2012-01-04/wall-street-s-big-s...
granting the waivers.
But as history continues to get written in the MF Global story, regulators might take some lessons from their
own tough talk about the importance o f keeping up with regulations and safeguarding the public. Sometimes
digging in your heels to enforce the rules isn’t such a bad idea.
(Susan Antilla, who has written about Wall Street and business for three decades and is the author of “Tales
From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View
columnist. The opinions expressed are her own.)
To contact the writer of this article: Susan Antilla at santilla@bloomberg.net
To contact the editor responsible for this article: James Greiff at igreiff@bloomberg.net
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
4 of 4 5/28/2012 8:25 AM

Legal Mistake Sheds Light on Unscrupulous Wall Street Practices
May 22, 2012 by Page Perry. LLC
inShare | More Sharing ServicesShare
Last week lawyers representing Goldman Sachs and Bank of America/Merrill Lynch
inadvertently released embarrassing documents detailing unethical trading practices and
complete disregard for the interests of smaller clients (See “Accidentally Released - and
Incredibly Embarrassing - Documents Show How Goldman et al Engaged in ‘Naked Short
Selling,'” Matt Taibbi, Rolling Stone and “Goldman, Merrill E-Mails Show Naked Shorting,
Filing Says,” Karen Gullo, Bloomberg). These documents include a series of e-mails from 2005-
2006 that “reflect business decisions to put profits and corporate ambition over compliance.”
These e-mails were produced during a California lawsuit against these banks on charges of naked
short selling Overstock shares to artificially lower Overstock’s stock price; the lawsuit was
dropped in San Francisco because “none of the conduct alleged in the complaint happened in
California.”
The process of naked short selling can artificially devalue a stock by lowering the cost of taking
a short position and by falsely increasing the supply of the security in the market. In one of the
released e-mails a Goldman executive embarrassingly admits “Two months ago 107% o f the
floating was short!” 2008 SEC regulations have made the practice of “abusive naked short
selling” illegal. Holders of stock in a company that has been a victim of abusive naked short
selling may have endured significant and undue financial damages.
The released e-mails demonstrate a lack of concern for federal compliance and the banks’ own
clients. One Merrill executive in a 2005 e-mail mockingly told his colleague to ignore “the
compliance area - procedures, schmedures.” Goldman Sachs clearing unit told its largest client
that “we will let you fail” in regard to whether it would clean up failed short transactions. The
worst evidence sheds light on how these banks treated their own small clients; an e-mail sent by
Goldman executive John Masterson included “nonpublic data concerning customer short
positions in Overstock and four other hard-to-borrow stocks to Maverick Capital.” Simply stated
these trusted financial institutions have been illegally giving large institutionalized hedge funds
an unfair advantage over individual investors. Unfortunately, this appears to be business as usual
for Wall Street these days.
DEFENDANTS
EXHIBIT
K-15

Wells Fargo. Goldman Sachs, JP Morgan Chase. Citigroup, UBS Secur... http://www.stockbrokerfraudblog.cora/2009/03/wells_fargo goldman
W/inmittoMMuk\ i l.n v
SECURITIES FRAUD WEB SITE PRACTICE AREAS CONTACT US
Araitratior
Home Bank of America Broker Fraud Citigroup Credit Ratings Agencies Credit Suisse Deutsche
Bank Financial Firms Fitch J P Morgan - Chase Moody’s Morgan Stanley > Walls, Fargo, Ccidmarr
Saths. JP 'JltriTjar, Dtaae. CograuiE. J S isrjrfces. fejra: af Anerara, W&cdy/'s llTOesarnenc Services.
3Ttt Irtofn iTaniras ai* -irrroTO: 'jftrfeTCarrns iuest' IFrr lieitsiFof'M^l6 Farga Certificate I mtesrors f a r
■^lejEt Ssninnis F^auirVeiHJCiTS
Call for a Free Consultation
(800) 2 5 9 -9 0 1 0
A ccoun tjn o i*irms
Accoummc r-aur
A ^ ?n iT \ r L;z
Aosds ?or.z Schsm-
Ar.2 JV»?S
Annuiliss
Annuities and insurant
Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS
Securities, Bank of America, Moody’s Investment Services, and
Fitch Ratings are Among Defendants Sued On Behalf of Wells
Fargo Certificate Investors for Alleged Securities Fraud
Violations
Share I jfTweet 0 U Like 0
The Boilermaker-Blacksmith National Pension Trust is suing a number of investment
banks, credit rating agencies, and underwriters, including Wells Fargo.WFASC,
Morgan Stanley & Cq. Credit Suisse Securities (USA) LLC Barclays Capital Inc. Bear
Stearns & Co. Countrywide Securities Corp. Deutsche Bank Securities inc., JPMorgan
Chase Inc. Bank of America Corp. Citigroup Global Markets Inc. McGraw-Hill Cos.,
Moody’s Investor Services Inc., and Fitch Ratings Inc., over allegations that they made
false statements in the prospectus and registration statement for certificates that
were collateralized by Wells Fargo Bank, IMA. The lawsuit, filed on behalf of thousands
of investors that bought the certificates from Wells Fargo Asset Securities Corp.,
accuses the defendants of violating the 1933 Securities Act by engaging in these
alleged actions.
According to the securities fraud lawsuit, the defendants concealed from investors
that Wells Fargo revised its underwriting practices in 2005 and became involved in
high risk subprime mortgage lending. The complaint contends that WFASC and a
number of defendants submitted to the Securities and Exchange Commision
prospectus and registration statements representing that the mortgages were backed
by certificates that were subject to specific underwriting guidelines for evaluating a
borrower's creditworthiness. The plaintiffs contend that these prospectuses and
registration statements were false because they neglected to reveal that the Wells
Fargo-originated certificates were not in accordance with the credit, underwriting,
and appraisal standards that Wells Fargo, per the companies, had supposedly used to
approve mortgages.
The lawsuit also claims that because Wells Fargo decided to enter the subprime
DEFENDANTS
EXHIBIT
I of 9 5/28/2012 8:14 AM
mortgage mortgage market in 2005, the investment bank had to take significant
write-downs in 2008 because of its massive exposure to the subprime market and the
WFASC certificates that these mortgages backed dropped significantly in value. The
Boiler-Blaksmith fund reports that it lost about $5 million, which is more than half of
what it invested.
Related Web Resources:
Read the Complaint
The Boilermakers National Funds
Please contact our securities fraud lawyers at Shepherd Smith Edwards & Kantas LTD
LLP if you believe you were the victim of investment fraud.
Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS Secur... http://www.stockbrokerfraudblog.com/2009/03/wells_fargo_goldman_...
Posted by Shepherd Smith Edwards & Kantas LTD LLP | Permalmk I Email This Post
Posted In: Bank of America. Broker Fraud. Citigroup. Credit Ratings Agencies. Credit Suisse.
Deutsche Bank. Financial Firms . Fitch . I P Morgan - Chase . Moody's ■ Morgan Stanley
Asset-Backed Securities
Attorneys
Auction-Rate Securities
Bond Dealers
Bond Funds
Broker Fraud
Broker-Dealers
crrc
Churning
Class Action Lawsuits
Closed-End Funds
Collateral Debt Obligation
Collateralized Mortgage
Obligations
Collateralized loan obligations
Commercial Lenders
CIT Croup
CMAC
Prudential Financial
Commodity Options Fraud
Credit Default Swaps (CDS)
Credit Rating s
Credit Ratings Ageiicies
Fitch
First Montauk Securitas
Corp.
Moody's
Standard and Poor's
Crime
Derivatives
Direct Access Systems
Dodd-Frank
ERISA Lawsuits
Enron
Exchange Traded Funds
Exchange-Traded Notes
FINRA
Financial Advisers
Bernard L Madoff Investment
Securities
Fisher Investments
Financial Firms
2 of 9 5/28/2012 8:14 AM

JP Morgan Chase to Pay S75 Million in Penalties and Forfeit S647 Mil... http://www.stockbrokerfraudblog.eom/2009/l I/jp morgan chase to ...
%Hnmi
M i
DEFENDANTS i'
EXHIBIT
K-17
Home Financial Firms J P Morgan - Chase SEC Enforcement Securities Fraud - jP Morgan Cltsse c
®av $75 Wliliamnr ^TanssaTU -nrfec Wlligir Tr SffrifcSS- Oarggs QXigrAilggtsi MUniefpat
Sara) S’atrmsrti S am
POSTED ON: NOVEMBER 16, 2009 BY SKgPfgRD SMITHEDVWRDSft KAHTA51TD 11 P
JP Morgan Chase to Pay $75 Million in Penalties and Forfeit
$647 Million to Settle SEC Charges Over Alleged Municipal
Bond Payment Scam
1 Share I j^Tweet B 3 - - 1 B Like 0
JP y w g w . C h ;v has settled Securities and Exchange Commission charges that the
securities firm was allegedly involved in an illegal payment scam to get municipal
securities business from Jefferson County, Alabama. As part of its settlement with the
SEC, JP Morgan Chase agreed to pay penalties of $75 million and forfeit $647 million
in termination fees that it says the county owes. JP Morgan Securities will also pay
Jefferson County $50 million, as well as a $25 million penalty. By agreeing to settle,
the securities firm is not admitting to or denying the commission’s charges.
The SEC had accused JP Morgan Securities and former managing directors Douglas
MacFaddin and Charles LeCroy of making over $8 million in undisclosed payments to
friends of certain Jefferson County commissioners. These friends either worked for or
owned broker-dealers in the area. The SEC says that these payments led to the
commissioners voting forJP Morgan Securities as its managing underwriter of bond
offerings. They also voted for JP Morgan Securities's affiliated bank as the
transactions’ swap provider.
The SEC claims JP Morgan Securities charged Jefferson County higher interest rates on
swap transactions. This allowed it to pass on the unlawful payments’ costs. According
to Robert Khuzami, SEC Enforcement Director, senior bankers with JP Morgan made
illegal payments to earn fees and garner business.
The SEC has filed a civil lawsuit against LeCroy and Macfaddin. The SEC is accusing
the two men of committing securities frajd for allegedly directing the illegal
payments to the Jefferson County commissioners’ associates.
The commission claims the two men knew that the transactions, which occurred
between October 2002 and November 2003, were "sham transactions." The SEC says
the men's failure to disclose these payments or related "conflicts of interest” to either
Jefferson County or bond offering investors or the county in the challenged swap
agreements deprived those involved of swap agreement negotiations and bond
Call for a Free Consultation
(8 0 0 )2 5 9 -9 0 1 0
• M- c d d ? T£- :n r
n rM ? n * D r it * •on*
'nii?rn*atson
TOPICS | BY DATE | SEARCH
Topics
AccouniinQ Firms
Accounting fraud
Affinity Frauc
Aaao? Donzi Snfagme
Annuities anr ins j -an re
I of 9 5/28/2012 8:13 AM
underwriting processes that were impartial and objective. The SEC is seeking
disgorgement plus prejudgment interest and permanent injunctions against the two
men.
Related Web Resources:
j PMorgan to Pay S75 Million in Alabama Case. NY Times, November 4, 2009
Read the civil complaint (PDF)
Read the administrative complaint (PDF)
Our securities fraud law firm represent clients who have suffered financial losses.
Posted by Shepherd Smith Edwards & Kantas LTD LLP I Permalink I Email This Post
Posted In: Financial Firms . I P Morgan - Chase. SEC Enforcement. Securities Fraud
JP Morgan Chase to Pay $75 Million in Penalties and Forfeit $647 Mil... http://www.stockbrokerfraudblog.com/2009/ll/jp morgan_chase to ...
Asset-Backed Securities
Attorneys
Auction-Rate Securities
Bond Dealers
Bond Funds
Broker Fraud
Broker-Dealers
CFTC
Churning
Class Action Lawsuits
Closed-End Funds
Collateral Debt Obligation
Collateralized Mortgage
Obligations
Collateralized loan obligations
Commercial Lenders
CIT Group
GMAC
Prudential Financial
Commodity Options Fraud
Credit Default Swaps (CDS)
Credit Ratings
Credit Ratings Agencies
Fitch
first Montauk Securities
Corp.
Moody's
Standard and Poor's
Crime
Derivatives
Direct Access Systems
Dodd-Frank
ERISA Lawsuits
Enron
Exchange Traded Funds
Exchange-Traded Notes
FINRA
Financial Advisers
Bernard L Madoff Investment
Securities
Fisher Investments
Financial Firms —--- — ----
2 of 9 5/28/2012 8:13 AM

Home Bank of America Bear Stearns Citigroup Financial Firms J P Morgan - Chase Lehman
Brothers UBS Wachovia Wells Fargo > .^..pVcrrgyin.. :_:HTmsrr1.!feiTi«.af .4fnenca. and Other Santes
tnrueisi dt _s j 'ir CD-CiDTSBranjrs 'it: CDR Scair
Call for a Free Consultation
(800) 2 5 9 -9 0 1 0
POSTED ON: MARCH 31, 2010 BY StCPtgRD SMTTH EDVH*RDS» KANTAB LTD LLP
UBS, JP Morgan. Lehman, Bank of America, and Other Banks Includ... http://www.stockbrokcrfraiidblog.com/2010/03/ubsjp_morganjehm.
The government says that CDR, a local-government adviser, ran auctions that were
scams. This let banks pay lower interests to the local governments. In October, CDR,
and executives David Rubin, Evan Zarefsky, and Zevi Wolmark were indicted. They
denied any wrongdoing. This year, three other former DCR employees pleaded guilty.
While the original indictments didn’t identify any investment contract sellers that took
part in the alleged conspiracy, Providers A and B were accused of paying kickbacks to
CDR after winning investment deals that the firm had brokered. The firms were able
to do this by allegedly paying sham fees connected to financial transactions involving
other companies.
Per the court documents filed in March, the kickbacks were paid out of fees that came
out of transactions entered into with Royal Bank of Canada and UBS. The US Justice
Department says the kickbacks ranged from $4,500 to $475,000. Financial Security
Assurance Holdings Ltd divisions and CE units created the investment contracts that
were involved.
Tr»f c n j r abstfs t*. :-.r
i r o ie cno n o*' vriiT
iTm jrm a itrjn .
SUBMIT
Topics | BY DATE I SEARCH
Topics
Accounting Firm>
Ar coy mine Fraud
Aninivvrraus
Aaane Panzi Scheme
Analysts
Annuities
Annuities anc- ir.>ur~anc£
Arbitration
UBS.JP Morgan, Lehman, Bank of America, and Other Banks
Included on List of Co-Conspirators in CDR Bid-Rigging Scam
Share I j^Tweet B3 ; - H Like 0
Over two dozen bankers at Wall Street investment firms have been listed as
co-conspirators in a bid-rigging scheme to pay lower than market interest rates to
the federal and state governments over guaranteed investment contracts. The banks
named as co-conspirators include IP Morgan Chase & Co UBS AG Lehman Brothers
Holdings Inc., Bear Stearns Cos. Bank of America Cora Societe General, Wachovia
Corp. bought by Wells Fargo), former Citigroup Inc. unit Salomon Smith Barney, and
two General Electric financial businesses.
The investment banks were named in papers filed by the lawyers of a former CDR
Financial Products Inc. employee. The attorneys for the advisory firm say that they
"inadvertedly" included the list of bankers and individuals and asked the court to
strike the exhibit that contains the list. The firms and individuals on the
co-conspirators list are not charged with any wrongdoing. However, over a dozen
financial firms are contending with securities fraud complaints filed by municipalities
claiming conspiracy was involved.
I of 9 5/28/2012 8:11 AM
Approximately $400 billion in municipal bonds are issued annually. Schools, cities,
and states use money they get from the sale of these bonds to buy guaranteed
investment contracts. Localities use the contracts to earn a return on some of the
funds until they are needed for certain projects. The IRS, which sometimes makes
money on the investments, requires that they are awarded on the basis of competitive
bidding to make sure that the government gets a fair return.
Related Web Resources:
IPMorgan. Lehman. UBS Named in Bid-Riaaina Conspiracy. Business Week, March 26,
2010
U.S. Probe Lavs Out Bid Fixing, Bond Buyer, March 29, 2010
Read the letter to District ludae Marrero (PDF)
Shepherd Smith Edwards & Kantas LTD LLP represents investment fraud clients
throughout the US.
Posted by Shepherd Smith Edwards & Kantas LTD LLP I Permalink I Email This Post
Posted In: Bank of America ■ Bear Stearns. Citigroup. Financial Firms. I P Morgan - Chase. Lehman
Brothers■ UBS. Wachovia. Wells Fargo
UBS, JP Morgan, Lehman, Bank of America, and Other Banks Includ... http://www.stockbrokerfraudblog.com/2010/03/ubsjp morganlehm...
Asset-Backed Securities
Attorneys
Auction-Rate Securities
Bond Dealers
Bond Funds
Broker Fraud
Broker-Dealers
CFTC
Churning
Class Action Lawsuits
Closed-End Funds
Collateral Debt Obligation
Collateralized Mortgage
Obligations
Collateralized loan obligations
Commercial Lenders
CIT Croup
CMAC
Prudential Financial
Commodity Options Fraud
Credit Default Swaps (CDS)
Credit Ratings
Credit Ratings Agencies
Fitch
First Mcnisuk Securities
Corp.
Moody’s
Standard and Poor's
Crime
Derivatives
Direct Access Systems
Dodd-Frank
ERISA Lawsuits
Enron
Exchange Traded Funds
Exchange-Traded Notes
FINRA
Financial Advisers
Bernard L Madoff Investment
Securities
Fisher Investments
Financial Firms
2 of 9 5/28/2012 8:11 AM

Wisconsin’s Pension Fund Among Nation’s
Healthiest
WASHINGTON -- While Wisconsin Gov. Scott Walker (R) has painted a dire picture of his
state's pension obligations, Wisconsin's pension fond for public employees is among the nation's
strongest, according to a reportby the nonpartisan Pew Center for the States.
The Pew report, issued last year, concluded that Wisconsin is a "national leader in managing its
long-term liabilities for both pension and retiree health care." Walker has cited the fund's lack of
sustainability as grounds for his plan to revoke collective bargaining rights for state employees,
but that proposal has sparked outrage among state employees and drawn tens of thousands of
protesters to the state's capitol.
"We're going to ask our state and local workers ... to pay a little bit more, to sacrifice, to help to
balance this budget," Walker said in a Sunday interview with Fox News' Chris Wallace, adding
that he would be forced to lay off 5,000 to 6,000 state employees if his budget plan was not
approved, as well as a comparable number of local public employees.
But the Wisconsin pension fund is simply not in fiscal trouble. Its managers weren't burned by
subprime mortgage assets or mortgage-backed securities as the housing bubble collapsed. The
fund also relies on an automated dividend system, which pays out benefits in years the system is
making gains while restricting payouts in years when it takes losses. And while the pension fund
had a rough year during 2008 due to stock market losses, it remains robust, both in terms of
fundamental financial stability and in comparison to other state pension programs.
According to the Pew study. Wisconsin had about $77 billion in total pension liabilities in 2008.
But according to that same Pew study, those liabilities were 99.67 percent "funded," giving
Wisconsin one of the four-highest of such ratios in the nation. Other states had funding ratios as
low as 54 percent. For comparison, expert analysts and the Government Accountability Office
consider an 80 percent level to be a good benchmark for pension fund stability, while Fitch
Ratings considers 70 percent adequate.
First Posted: 02/22/11 05:33 PM ET Updated: 05/25/11 07:35 PM ET
Pension accounting relies on a very long-term outlook. When the state calculates its pension
liabilities, it adds up the total expected pension expenditures for the entire lifetimes o f everybody
currently receiving a pension and all employees expected to receive pensions. That outlook
routinely eclipses 30 years, depending on the ages o f state employees. A $77 billion liability is
only a problem i f the state has no realistic way o f meeting those expenses over that 30-plus year
timeframe. But the Wisconsin pension system actually does have the vast majority o f that money
— in fact, in 2008, the pension fund had 99.67 percent percent o f that $77 billion total on hand. If
all o f the assets in the fund had simply been sold at market values on June 30, the resulting cash
would have been enough to pay 99.67 percent o f the state's total pension payouts for decades to
come.
According to the Wisconsin pension fund's own 2010 annual report, the system had $69.1 billion
in total assets at June 30, 2010, while paying out $3.7 billion in benefits over the course o f the
previous year. The value o f those assets has since risen. According to Dave Stella, secretary o f
the Wisconsin Department o f Employee Trust Funds, the retirement system's assets were worth
$79.8 billion at the end o f last month. The most recent solvency test for the fund was conducted
for the fund's operations at Dec. 31, 2009. At the time, the funding ratio was 99.8 percent. The
next solvency test is scheduled for June o f this year.
So while Wisconsin does face a $137 million budget shortfall this year, the source o f that fiscal
trouble is not the state's pension fund. Under the current plan, Walker hopes to generate $30
million this year by raising taxes on public employees — the governor refers to this as increasing
the "contribution" that state employees make to their pension funds.
But Walker could make the state's pension system bear the costs o f a broader state budget
shortfall — one created almost entirely by lower tax revenues resulting from the economic
downturn — without raising taxes on public workers or eliminating public bargaining rights. All
he has to do is cut a few ties with the financial-services industry.
According to the pension fund's 2010 report the fund spends about 84 percent o f its management
costs on outside help — highly-compensated fund managers who work for private-sector financial
firms. While Wisconsin has made a concerted effort to bring more o f its fund management inhouse,
it could do more.
In 2009, roughly half o f the pension fund's total assets were managed by state employees, who
were paid a total o f $28.4 million for their work. By contrast, outside Wall Street professionals
were paid $194.7 million to manage the other half o f the fund's assets. Cutting Wall Street pay,
or simply moving more fund management in-house, could easily generate the $30 million in new
taxes Walker wants to assess on state employees.
Wisconsin accounts for its pension fund assets using "mark-to-market" accounting. That means
that while the state often expects to hold its assets indefinitely, collecting interest payments until
the assets expire, it can't simply add up those expected interest payments to determine the value
o f an asset. Instead, the fund can only say that the asset is worth what other investors are willing
to pay for it at a given moment. If investors want to pay less than the future interest payments,
that's too bad for Wisconsin.
While some accounting experts say this market-oriented accounting is a more honest and
accurate way to represent asset values than other methods, U.S. corporations are often allowed
much more lenient accounting standards. During the financial crisis, for instance, many banks
balked at the suggestion that they be required to account for subprime mortgage bonds at the
prices that people were actually willing to pay for them. Instead, they argued, banks should be
allowed to account for these items based on secret company economic models. If Wisconsin and
other pension funds were simply cut the same slack that the government cut for Wall Street, it's
easy to imagine pension fund worries easing, even in states whose pension situations are more
dire.

<0201;! Impact Litigation Journal
Btog WebMastered i>y AB Hi One Webmasttr.
Eximius Theme by dkszon9.net !
Maine State Retirement System v. Countrywide: Federal Judge Certifl... http://www.irnpactlitigation.com/201 l/12/13/maine-state-retirement-sy...
Impact Litigation Journal
Observations and asides about California representative actions and other complex litigation
Home About Contact Archives Disclaimer
B Class Action News Maine State Retirement System v. Countrywide: Federal
Judge Certifies Countrywide Securities Class Action
n - » 1
A California district court judge granted certification in a class action against
Countrywide Financial. The plaintiffs allege that the home mortgage giant, now owned
by Bank of America, engaged in deceptive practices while selling billions of dollars in
mortgage-backed securities. See Maine State Retirement System v. Countrywide
Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class
certification) (available her*). The class consists of all persons and entities that bought
Countrywide's mortgage-backed securities before January 14, 2010, and Includes
participants in several public employee pension plans. Id.
The certified class can now pursue claims that Countrywide and its investment banks
made misleading statements and omissions in connection with the issuance of highly
risky mortgage-backed securities, which were secured by mortgages virtually certain to
result in defaults. See Second Amended Complaint, Maine State Retirement System v.
Countrywide, No. 2:10-cv-00302 (C.D. Cal., filed Dec. 6, 2010), Ml 4-10. The
inevitable mortgage defaults revealec1 that the properties underlying the mortgages
were worth materially less than the loans issued to the borrowers, and that the
borrowers were unable to cover the outstanding mortgage balances. Id. at M] 10-17.
The class certification order came after Countrywide stipulated to a proposed class in
conformity with the judge's previous rulings in the case, thereby cutting short
protracted legal argument over class certification. See Maine State Retirement System
v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order
granting class certification).
Recent Posts
- Face book Settles "Sponsored
Stories" Class Action; "Friend
Finder’' Case Still Pending
* Duran Petition for Review
Buoyed by Consumer and
Worker Rights Advocates
* Samamego v. Empire Today :
Court of Appeal Unanimously
Holds Arbitration Agreement
Unconscionable
- BREAKING NEWS Duran v.
U.S. Bank: Petition for Review
Granted
- Nutella Class Action
Settlement: Company to
Compensate Consumers and
Remove Misleading Health
Claims
- BaileyDaily
* California Wage and Hour Lav/
Blog
- Consumer Law & Policy Blog
• Mass Tort Litigation Blog
- Protect Consumer Justice
- The Pop Tort
- Today's Workplace
- Tort Deform
- l)D. Practitioner
• Rosen Law Firm Files Class
Action Against ChinaCast
Education Corporation - CAST -
CNBC.com
*■ Microsoft Revamping Terms of
Service Agreements to Block
Class Action Lawsuits - Hot
Hardviare
- Facebook IPO Is flashback to
dot-com class action - Reuters
• Berger & Montague, PC Filed
Class Action Lawsuit Against
Facebook - MarketWatch (press
release)
- Ryan & Maniskas, LLP Files
Class Action Lawsuit Against
Facebook, Inc. - MarketWatch
(press release)
- Pomernntz Law Firm Has Filed
a Class Action Against Facebook.
Inc. - FB - MarketWatch (press
release)
• Hotice ot Filing Securities
Class Action Against Onrstown
Financial Services
MarketWatch (press release)
- Hagens Berman Files
Securities Class Action against
Facebook, Zuckerberg and
MarketWatch (press release)
- Shareholder Class Action Filed
Against Facebook, Inc. by the
Law Firm o f ... - MarketWatch
(press release)
- Groupon customers offered
class action payout - CNNMoney
Legal Resources
’ m et#
5/27/2012 1:45 PM
- Cat. Bus. & Prof Code Sections
17200 et seq.
' Cal. Code of Civ. Proc. Section
362
• California Labor Code
• Consumer Legal Remedies Act
• Federal Rules of Civil
Procedure - Rule 23
Caselaw Developments(94)
Certification Rulings(27)
Government & Regulation(6)
Judgments(3)
Judlcfary(3)
Law Firms & Lawyers(5)
Motion Practice(l2)
New Fllings(4)
Settlements(14)
Uncategorizod(3)
Search
Catebw DvvcbpmenK Certification Rulings
« Rubin v. MF Global S90 Million Class Action Settlement Approved
Wachovia to Pay SI 43 Million to Seitle Bond Market Manipulation Claims*
DEFENDANTS
EXHIBIT

Orphans Get Fleeced, Rich Widows Should Be Next: Susan Antilla - http://www.bloomberg.com/news/print/2011 -02-10/orphans-get-fleeced...
DEFENDANTS
EXHIBIT
K-21
Orphans Get Fleeced, Rich Widows Should Be Next: Susan
Antilla
ft*. Susat .\iWSix - I 2<H fi
Bloomberg Opinion
It’s hard to imagine why anyone would fleece a widow or an orphan when there are so many inexperienced
municipalities and dumb sports team owners to hoodwink.
Rich widows, I suppose, will always be tempting marks for con artists. But orphans? If the allegations in a
recent lawsuit are true, I’d say we’ve sunk to a new low in financial roguery.
Hillcrest Children’s Center formerly the WashingtonCity Orphan Asylum, claims a money manager stole
$8 million of the group’s $17 million endowment, according to a complaint filed last month in U.S. District
Court for the District of Columbia.
Hillcrest, founded in Washington as an orphanage in 1815 to help children left homeless by the War of 1812,
in its more recent history has tended to the mental-health needs of local children and families. In 2008, its
board of directors retained Gibraltar Asset Management Group Inc. which represented itself as a prominent
Washington wealth adviser, according to the complaint.
If the allegations are true, Hillcrest would have been better off stashing its money in a safe and leaving the
door open.
Gibraltar prides itself on the firm’s “availability to our clients,” according to the company website. Rallying
anyone these days at Gibraltar is not so easy.
No Response
Gibraltar’s three telephone numbers have been disconnected. Jeffrey A. King, the firm’s president and chief
operating officer, did not respond to an e-mail. A woman answering the telephone at his home on Feb. 7
acknowledged that he was a defendant in the lawsuit and said she would ask him to return my call; he
didn’t.
Maurice Taylor, a defendant who is the firm’s chief investment officer and executive vice president, told me
in a brief telephone interview on Feb. 7 that he would get answers to my questions and get back to me, but I
haven’t heard from him since.
I of3 5/28/2012 9:29 AM
Stuart H. Gary, a lawyer at Bailey/Gary in Washington who worked on the Hillcrest account and also was
named in the suit, did not respond to telephone calls or an e-mail. I asked Maurice Taylor for the phone
number of Gibraltar’s chief executive, Garfield Taylor, one of six individual defendants, and he offered me a
disconnected number I already had tried.
Not-for-profits that busy themselves with the work of promoting "the well-being and spiritual development
of all children and youth” as Hillcrest describes its mission, are not typically staffed with bosses adept at
discerning a Bernie Madoff from a Warren Buffett
Disappearing Act
While Hillcrest’s version of events is only an allegation, the organization says that an $8 million investment
made in February 2009 had shriveled to $25,000 in 13 months. By the time the suit was filed, $200
remained.
As the lawsuit describes it, in the summer of 2008, Gibraltar persuaded Hillcrest to let it manage $1.2
million using a so-called covered call strategy in which the money managers would purchase stock while
simultaneously selling a call option on the shares.
“Like an endowment, your principal will stay intact,” said a Gibraltar Power Point slide during a
presentation to Hillcrest, according to the suit. Indeed, the Gibraltar guys described themselves as nothing
less than stock market geniuses: “Gibraltar managers make money trading equity options in UP, DOWN, or
SIDEWAYS markets,” one slide promised. “Risk is ALWAYS LIMITED.”
Priming the Pump
And so it seemed for several months. Hillcrest executed a promissory note lending $1.2 million to Gibraltar
on July 14, 2008, with Gibraltar agreeing to pay Hillcrest $20,000 every month for six months, returning
the principal by January 2009. In a page taken out of a penny-stock peddler’s handbook for priming
suckers, the payments in this initial transaction came in on time or early. The complaint describes Hillcrest
taking the bait, and by February 2009 entrusting $8 million to Gibraltar.
Then, whoops, in March 2009, money began to be transferred out of the account. By May, the suit says
$6,650,000 had been withdrawn without Hillcrest’s knowledge.
Gibraltar wras teeming with red flags. It isn’t a registered investment adviser. Its marketing materials are
sprinkled with typographical errors that suggest a sloppy operation. One of its advisory board members,
touted as being licensed with securities regulators, had his registration revoked by the Financial Industry
Regulatory Authority in April 2008.
Gibraltar’s vice president of organizational development is listed in a marketing document as a cum laude
graduate of the University of Hartford. A school spokeswoman said in an e-mail that Randolph Taylor did
Orphans Get Fleeced, Rich Widows Should Be Next: Susan Antilla -... http://www.bloomberg.com/news/print/2011-02-10/orphans-get-f1eeced...
2 of 3 5/28/2012 9:29 AM
Orphans Get Fleeced, Rich Widows Should Be Next: Susan Antilla -... http://www.bloomberg.eom/news/print/2011-02-10/orphans-get-fleeced...
not have the grades for cum laude status.
‘Ongoing Investigation’
Hillcrest is not the only investor claiming to have lost money. In recent months, a company run by
Gibraltar’s Garfield Taylor was sued for breach of contract in two cases brought by individuals who say they
had promissory notes with Taylor and lost everything. None of the defendants in any of the three suits has
yet filed a response.
The District of Columbia Department of Insurance. Securities and Banking has an “ongoing investigation” of
Taylor and his business entities, says Stephen M. Perry, associate commissioner of enforcement and
investigations.
It takes a special kind of chutzpah if, in the Hillcrest case, it’s shown that money was stolen from people who
help poor kids. What happened to Hillcrest “is pretty raw” said William McLucas, one of the lawyers at
WilmerHale who is working on the case pro bono. That would be the same McLucas who used to run the
enforcement division of the Securities and Exchange Commission, and suffice it to say he’s a guy who’s hard
to shock.
(Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Susan Antilla in New York at santiIla@bloomberg.net
To contact the editor responsible for this column: James Greiff at igreiff@bIoomberg.net
@2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
3 Of 3 5/28/2012 9:29 AM

Crooks Get Ideal Conditions for Market Schemes: Susan
Antilla
'vss^rt \sa&3 * i~. 2$I]
Bloomberg Opinion
Did somebody say America was having a hard time getting back to work after the financial crisis an
ensuing recession? Forget the dopey career counselors who are coaching you to earn a new degree. There's a
job sector poised to enter a new golden age, and it doesn’t even require a high school diploma. So all you
aspiring millionaires had better listen up.
“This is a perfect time if you want to be a crook,” says Joseph Borg, the 16-year veteran securities regulator
who runs the Alabama Securities Commission. Borg, who has seen his share of creepy wrongdoers, doesn’t
mean just any kind of crook, of course. He’s talking about lawbreakers who sweet-talk investors out of their
money with eveiything from misleading products and promises to bogus tax shelters, real estate pools and
Ponzi schemes.
Why now? Because everything is going right for you if you’re in the business of cheating investors, that’s
why. In fact, I’ll count down 10 good reasons:
10. The nation’s biggest securities regulator, hardly a paragon of effective policing in the first place, is being
neutered. Budget constraints at the Securities and Exchange Commission have meant putting plans on hold
for a new Office of the Whistleblower, among other stalled SEC projects. If you’re a bad guy at a brokerage
firm looking to make a little mischief, you can rest easier about the risk of a colleague ratting you out for fun
and profit.
9. If you’re looking for easy marks, demographics are on your side. The over-6o crowd is panicked about the
soundness of the Social Security system and afraid of the stock market. The 75-plus crowd, long enamored
with certificates of deposit, is freaked out that interest rates are so low. The former credit- card junkies now
in their 40s and 50s have lost big on their McMansions and want to make a quick recovery. These groups are
desperate for returns, making them targets for fraud.
8. The trend is your friend if you’re hunting for a new idea for a bogus product. Inflation worries are picking
up, and if it kicks in enough to hurt, the public will be sitting ducks for schemes supposedly backed by real
estate, gold or silver. If you see a rising consumer price index, new investment products with names like
‘The Inflation Buster” will not be far behind, says Borg, the securities regulator.
r ^
DEFENDANTS
EXHIBIT
K-22
I of 2 5/28/2012 9:28 AM
7. Another trend favoring swindlers: Rising gasoline prices that may lead to new opportunities to package oil
and gas schemes. Once gasoline hits $4 a gallon, investors let down their guards and become more
vulnerable to energy-related scams, Borg says.
6. State watchdogs are getting more work just as budgets are under pressure. About 4,000 investment
advisers who previously were regulated by the SEC will begin to be policed by the states this year. That may
be bad news for the advisers — 3,000 of whom have never been examined by the SEC — because state
regulators say they’ll make inspections a priority. But some states are reducing oversight in other areas to
make time for the new adviser workload. The cagey crook will find out which activities are getting less
scrutiny.
5. Deregulation is the “it” thing in Washington and that’s a plus if you don’t like regulators breathing down
your neck.
4. Technology is opening new frontiers for cheats. The May 6 so-called flash crash that took the Dow down
almost 1,000 points in a matter of minutes was a head-scratcher for regulators who work with the tech
version of Edsels while traders use state-of-the-art systems. The potential for manipulation is huge, says
Denise Crawford, securities commissioner of the Texas State Securities Board. “Market regulators are so
behind in that whole area that I’m not sure they will ever catch up,” she says.
3. Elizabeth Warren probably won’t be around for long. Republicans hate her and she doesn’t have a
permanent appointment to her job as head of the new Consumer Financial Protection Agency. So if your
area of expertise is mortgage fraud or bait-and-switch bank products, it might just be a matter of waiting it
out until the pro-consumer regulator is shipped back to her gig as a Harvard University professor.
2. Business risk is low. We’re just stumbling back from a financial crisis, and companies that helped fuel the
meltdown with aggressive accounting or dicey disclosure got bailed out, not indicted. So what are you
worried about?
1. Even if you do get in trouble — and I’m not saying that’s likely — there are great lawyers around to get your
career back on track. Hire one of the stars who cycled through the SEC before settling in at a law firm.
Before you know it, your lawyer will be swapping stories about the old days over drinks with an agency pal,
and you’ll be back in the game faster than you can say “regulatory capture.”
Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Susan Antilla in New York at santilIa@bIoomberg.net
To contact the editor responsible for this column: James Greiff at igreiff@bIoomberg.net
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Crooks Get Ideal Conditions for Market Schemes: Susan Antilla - Bl... http://www.bloomberg.com/news/print/20l 1-02-18/crooks-get-ideal-m...
2 Of 2 5/28/2012 9:28 AM

Beauty Rest of Rich Is a Warmup for Next Bust: Susan Antilla - Bloo... http://www.bloomberg.com/news/print/2011-01 -27/beauty-rest-of-rich-
DEFENDANTS
EXHIBIT
K-23
Beauty Rest of Rich Is a Warmup for Next Bust: Susan
Antilla
fty Steal Amflfa - 2*>. !l
Bloomberg Opinion
Politicians are making like Santa Clausa nd asking business for wish lists of regulations it would like to get
rid of.
Rich people are heading out for shopping sprees at Tiffany & Co. and not feeling ashamed about it anymore.
One economist at the World Economic Fnnimin Davos, Switzerland is even hyping an imminent “supercycle”
of global economic growth. And to think we’ve been stressing about trifles like fat, dangerous banks
that could bring down the economy.
The financial crisis has become the inconvenient memory we’re losing interest in, which would be no
problem if only we had finished the nasty job of fixing the system’s flaws before the party got going again.
Not that it wouldn’t be easy to get swept up in the good news. Zillionaires are sleeping soundly again now
that their tax cuts have been renewed, and how can something like that not give you a warm and fuzzy
feeling?
While the affluent resume their collective beauty rest, though, some of the reforms we cheered when the
imperfect, better-than-nothing Dodd-Frank Actbecame law last July are being quietly undone.
Will we look back at 2010 and 2011 as the period when we planted the seeds of the next financial crisis? We
sure seem to be headed that way:
— Investor protection is out. Remember all the talk about making the markets safe for investors? Well, get
over it. Dodd-Frank instructed the Securities and Exchange Commission to set up five new offices, including
one to handle whistleblower cases, and a committee to represent the interests of investors on issues like fees
and disclosure. But on Dec. 2, the agency put those efforts on hold because of “budget uncertainty.”
A frozen budget has also forced the SEC to scale back its plans to get up to speed with the dynamics that
resulted in the so-called flash crash on May 6, 2010, when the Dow Jones Industrial Averagefell almost
1,000 points in a matter of minutes. The agency had planned to hire five math whizzes acquainted with the
sorts of financial algorithms involved in the instant meltdown. Instead, it’s settled for one.
I of 3 5/28/2012 9:27 AM
— Pandering to business is in. Darrell Issa the car- alarm millionaire twice accused of auto theft (both
charges were dropped), and now the California Republican who is chairman of the House Oversight and
Government Reform Committee, sent letters to 150 companies and business trade groups in December
asking them which regulations and rules might be restraining job growth. He didn’t really have to ask,
because we all know that the answer, of course, is: “All of them.”
Nice Gesture
But it was a nice gesture anyway. By the middle of this month President Barack Obama was jumping on the
business-friendly bandwagon with an op-ed in the Wall Street Journal announcing an executive order “to
remove outdated regulations that stifle job creation and make our economy less competitive.”
If you’re getting confused, keep reminding yourself that we don’t talk about the employment Armageddon to
job creation that resulted from the financial meltdown anymore. Instead, we divert our attention to the
curse of regulations, taking care never to acknowledge that unregulated products such as derivatives helped
fuel the meltdown that, well, helped destroy the jobs.
— Obama is making friends with the U.S. Chamber of Commerce.
Well, OK, Obama and Chamber President Thomas Donohue aren’t quite to the point where they’re ready to
jet off to share a chalet at Davos, but it’s almost as stunning to know that the Chamber invited Obama to
speak at its headquarters on Feb. 7 —and that Obama accepted. Donohue even had something nice to say
after Obama’s Wall Street Journal piece (“a positive first step”), and after Obama’s appointment of William
Daley, a bigwig at JPMorgan Chase & Co., to be White House chief of staff (“a man of stature”).
Out With Volcker
When the president refashioned his Economic Recovery Advisory Board into a shiny new Council on Jobs
and Competitiveness, Donohue of course liked that, too. Obama even replaced the board’s chairman, former
Federal Reserve boss Paul Volcker. with General Electric Co. Chief Executive Officer Jeffrey Immelt whose
company, like Daley’s, enjoyed bailouts during the crisis. “An excellent choice,” said Donohue, who just
seems to be getting happier and happier these days.
— It’s more acceptable than ever to trash-talk even the regulators who haven’t had a chance to screw up yet.
Harvard professor Elizabeth Warren invented the idea of an agency that would protect consumers of
financial products like checking accounts and mortgages, and as far as business is concerned, that’s strike
one.
Warren’s Letter
Strike two must have been that politicians feared she would have done the job — protecting consumers, that
is — quite well, because Obama had to appoint her via a back door in September to set up the Consumer
Beauty Rest o f Rich Is a Warmup for Next Bust: Susan Antilla - Bloo... http://www.bloomberg.com/news/print/2011-01-27/beauty-rest-of-rich-...
2 of 3 5/28/2012 9:27 AM
Financial Protection Agency, giving her the title of special adviser rather than go through the contentious
Senate confirmation hearings needed to officially give her the job.
Warren got a letter on Jan. 18 from Congressman Randy Neugebauer, chairman of the House Financial
Services Subcommittee on Oversight and Investigations, that thrashed the new agency as “a fatally flawed
plan.” A particular problem, in Neugebauer’s view, is that the agency doesn’t have to get approval from
Congress for most of its funding, which the congressman would like to change.
Right, that’s an idea we all can relate to. Congress has overseen the SEC and its budget through the fiasco of
Bernard Madoffand the biggest financial crisis in 80 years, and where did that get us? Is this a case of deja
vu, or what?
Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Susan Antilla in New York at santilla@bloomber g.net
To contact the editor responsible for this column: James Greiff at jgreiff(Sbloomberg.net
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Beauty Rest of Rich Is a Warmup for Next Bust: Susan Antilla - Bloo... http://www.bloomberg.com/news/print/2011-01-27/beauty-rest-of-rich-...
3 Of 3 5/28/2012 9:27 AM

Pension funds back SEC over reforms - FT.com http://www.ft.com/int!/cms/s/0/352ae75e-5720- lie! -be5e-00I44feabd..
February 14, 2012 7:42 pm
Pension funds back SEC over
reforms
DEFENDANTS
EXHIBIT
K-24
By Dan McCrum in New York
Several of the world’s largest pension funds have urged the US’s Securities and Exchange
Commission to finish the job of implementing financial reform in the face of resistance from
industry, the Republican party and corporate legal challenges to the introduction of new rules.
Republican candidates for the presidency have spoken of their desire to roll back the
Dodd-Frank financial reforms, and since the party won control of the House of Representatives
it has held hearings to look at revising portions of the legislation. The SEC, meanwhile, has
struggled with the breadth of new rules to be written.
* |P J Calpers, the largest US public pension fund which is leading the
initiative, began discussing the move last year after the US
Chamber of Commerce successfully challenged in court new rules that made it easier for
investors to propose candidates in boardroom elections.
“Our concern was that the agency has been buffeted by court decisions, is struggling to secure
the resources that it needs and has faced a political storm in the House,” Anne Simpson, head of
corporate governance for Calpers, told the Financial Times. “The prime role of the SEC is
protect investors, so it is our responsibility to back them up.”
It also comes after the $234bn pension fund decided in November to expand its corporate
governance activities beyond its stock market holdings. On Monday Joe Dear, chief executive of
Calpers, also attacked the tax treatment enjoyed by private equity as “indefensible”, and urged
the industiy to support public policies to assist workers dislocated by their activities.
The 14 pension funds and plan sponsors, which manage more than $i,6oobn in retirement
savings, wrote to Mary Shapiro, SEC chairman, to say they “stand ready to assist the
commission to combat efforts to weaken or roll back the important investor protection
provisions of Dodd-Frank”.
The letter also draws attention to areas of reform where the SEC is yet to begin work on new
rules - in particular reform of the credit rating agencies, which failed to correctly assess the risk
of mortgage-backed securities that caused extensive losses for banks and investors during the
1 of 2 5/28/2012 9:48 AM
Pension funds back SEC over reforms - FT.com http://www.fl.eom/intl/cms/s/0/352ae75e-5720-l Iel-be5e-00144feabd.
financial crisis.
Dodd-Frank requires the agency to develop a way to track the accuracy and effectiveness o f
ratings, and undertake a study o f alternative ways to finance the credit rating agencies.
The group includes several o f the biggest US public pension funds, as well as the largest UK
fund, the BT Pension Scheme, AustralianSuper and the €i09bn ($i44bn) Dutch fund PGGM.
The funds presented the SEC with six reform priorities, which ranged from the completion o f
specific proposals such as writing new rules to grant equal access to shareholder ballots, to calls
to work on international accounting standards and promote sustainability and diversity issues.
The investor group also called on the SEC to appoint an investor advocate to advise the agency
on “matters o f concern to investors in the securities markets”.
The SEC said: “We appreciate their recognition o f the SEC’s progress in protecting investors and
welcome their views on the additional measures the SEC should implement.”
Printed from: http://www.ft.eom/cms/s/0/352ae75e-5720-11e1-be5e-00144feabdc0.html
Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
© THE FINANCIAL TIMES LTD 2012 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
2 of 2 5/28/2012 9:48 AM

Wednesday, February 22, 2012
r ^
DEFENDANTS
EXHIBIT
K-25
Is 'Pension Envy' Misguided?
___________ Bolduc, secretary-general of
the Quebec regional office of the Canadian Union of Public Employees (CUPE), wrote an op-ed
article for the Montreal Gazette, Pension deficits aren't the fault of public-sector workers
Today and tomorrow in a hotel in downtown Montreal, some 600 representatives of the
Canadian Union of Public Employees are holding a think-tank session to discuss the future of
their pension plans.
Our meeting is being held against the backdrop of a rise in public discourse of voices criticizing
supposedly "overly generous" public-sector pension plans.
Governments and employers are painting public-sector workers as part of a privileged
class, and are moving to strip these so-called privileges from them.
Quebec City Mayor Regis Labeaume is leading the attack. He is urging the Quebec government
to change municipal pension plans in order to help cities and towns reduce their operating costs.
Pension-plan deficits are a sad reality. However, changes such as those proposed by
Labeaume place responsibility for these deficits on the backs of workers rather than the
true culprit: the financial crisis of 2008 and the economic collapse that ensued.
Canada and the rest of the world are emerging from the worst global economic recession since
the 1930s. Thanks to stronger regulation and some good luck. Canada wasn't hit as badly as the
United States and European countries. But there is no doubt that recovery will be slower and
more difficult than in previous recessions.
Huge losses as a result o f irresponsible speculation in the stock market are largely to blame
for current deficits in pension plans. Banks then lowered interest rates, which in turn
affected bond-market returns. This had a bearing on pensions plans because the two most
important components of pension plans are stocks and bonds.
We were promised that a "free market" would lead us into an era o f unprecedented prosperity.
Undeniably, as the Wall St. fiasco has shown, this has not been the case. That said, trade unions
know that they must take action and that doing nothing is simply not an option.
So, what should unions be doing?
First, it must never be forgotten that pension plans were built using salary money that employees
agreed to forfeit, in exchange for a retirement plan. Some commentators contend that publicsector
workers are stealing from the public purse. This misconception is offensive. The money in
pension plans was always negotiated as deferred salary. Pensions, therefore, must be looked at
on a long-term basis, and solvency o f plans should consequently be measured over the span o f a
career. Deficits in place as this particular moment in time should not be used as an excuse to
slash benefits.
CUPE Quebec is one o f the first major trade unions to sit down with its members, as we are
doing this week, to think through the current pension crisis. Pension plans are complex entities
and each plan has its own set o f rules and regulations.
We shouldn't forget that there was a time in Quebec when there were surpluses in our
municipal pension plans. When that was the case, did you ever hear of Quebec
municipalities offering to lower taxes because of those surpluses? Of course you didn't.
During those golden years, employers were making their pension contributions using money
taken directly out o f pension-fund surpluses. There was nothing strictly illegal about this. The
surpluses legally belonged to them, just as deficits belong to them.
Municipalities had no qualms about sticking their hands in the cookie jar when it was
convenient for them. But now that pension plans are struggling with deficits, municipalities
aren't so sure they want sole legal responsibility anymore. That's not fair: workers expect
their employers to do the right thing.
Public pension programs - Old Age Security, the Guaranteed Income Supplement, the Canada
Pension Plan or Quebec Pension Plan - are proven successes. However, there is a problem with
these plans. They really don't pay out very much. The labour movement as a whole is running a
major campaign right now to improve benefit levels. We are advocating a doubling o f Quebec
Pension Plan benefits, to be phased in over a period o f seven years.
Currently, a majority of Canadian workers do not have a workplace pension plan, and
one-third has absolutely no savings set aside for retirement. The loss of supplemental
pension plans would mean an increase in poverty among seniors, which in return would
mean higher costs for the government in health care and social services.
It's about time the general public hears our voice on this issue. These are our pensions.
When it comes to pensions, the general public is asleep, completely oblivious to what is going
on. They only wake up to whine about pensions when someone threatens to raise the retirement
age or cut their benefits.
Mr. Bolduc raises some excellent points above. In the good years, municipalities and companies
loved dipping in the cookie jar but now they can't unload pensions fast enough. Some companies
are acting more responsibly. For example, Ford Motor Co. will pump $3.8 billion into its global
pension plans this year as it tries to get them closer to fully funding their obligations and will
"de-risk" by investing its plan assets more heavily in bonds (see Leon Cooperman below):
The outsized cash contribution and shift to bonds reflect Ford's push to offset the challenges
posed by rock-bottom interest rates, market volatility and lower expectations for investment
returns.
"With the lower returns, over time you need to be putting more into the plan to meet your
liabilities,” Morningstar analyst David Whiston said. "Your liabilities don't change. You
still have to fund the plan."
Assets in Ford's pension plan earned 7.7 percent in 2011, better than the broader U.S. stock
market, which was flat, but lower than the expected 8 percent return. Ford's long-term return
forecast is now 7.5 percent.
In the filing, Ford said it expected its pension assets to match future benefit obligations in
the next few years. If Ford fully funds its pension plans by around 2015, the stock could
spike to $24 a share, nearly double its current level, Citigroup analyst Itay Michaeli said
last month.
Since Ford has already reinstated its dividend and chances for a share buyback are slim, Whiston
o f Morningstar said "the next best use o f cash" is for Ford to fund its pension plan.
Many other companies are in a similar situation which is why they're scrapping defmed-benefit
plans for new employees and winding down existing ones. And interestingly, while private plans
are de-risking, most public plans are taking on more risk, pumping billions in alternative
investments.
This brings me to another point raised in Mr. Bolduc's article. Instead o f demonizing public
sector workers, we should be making the case for boosting DB plans for everyone. I said it
before, companies shouldn't worry about pensions, they should worry about their business.
Pensions should be a public good and countries that understand this will have a competitive
advantage over those that solely rely on defined-contribution plans or some variant o f them.
If you bring this up in public policy debates, people immediately jump out o f their seats and
bring up the unsustainable pensions in Greece and how they contributed to their fiscal crisis.
Well, the truth is pensions were overly generous in Greece but there too, the crisis wasn't just due
to an over-bloated public sector. It's more complicated than alluding to the fable o f ants and
grasshoppers.
Finally, everyone is to blame for the pension crisis. Wall Street speculating like crazy, pension
fund managers taking stupid risks to make unrealistic return targets, and unions who refuse to
accept that times have changed drastically and they need to make compromises to shore up their
pension plans. As far as municipal pensions, they need to roll them up into large, transparent,
well governed public defmed-benefit plans (consolidate!!).
Below, Leon G. Cooperman, chief executive officer o f Omega Advisors Inc., talks about the
outlook for the U.S. economy and investment strategy, warning investors to steer clear o f bonds.
Cooperman speaks with Erik Schatzker on Bloomberg Television's "InsideTrack."
Also, watch a debate on "pension envy" on The Agenda with Steve Paikin:
There is a great divide in the pension world: those who are on defined contribution plans, and
those predominantly public sector workers who are on defined benefit plans. Is one group getting
the short end o f the pension stick?
I think both groups are getting the short end o f the stick, which is why it doesn't surprise me that
a new poll shows half o f all Canadians have little or no confidence in the future o f the Canada
Pension Plan. Unfortunately, as long as our governments drag their feet on meaningful pension
reform, the trend toward pension poverty will accelerate. When it comes to pensions, all
Canadians deserve better.