Senator Grassley investigating SAC Capital trades

Reuters, by Ann Saphir and Matthew Goldstein, CHICAGO/NEW YORK | Sat May 21, 2011

Senator Charles Grassley (R-IA) answers questions during the 2009 Reuters
Washington Summit in Washington, October 19, 2009. (Credit: Reuters/Jonathan Ernst)

(Reuters) - A powerful Republican lawmaker is investigating possible insider trading at SAC Capital Advisors LLP, highlighting increased public scrutiny of potential wrongdoing by hedge funds.

The Financial Industry Regulatory Authority last week provided Senate Judiciary Committee head Charles Grassley with about 20 instances of suspicious trading at the hedge fund, a spokeswoman for the senator confirmed on Saturday.

Grassley had asked Finra in April for information on any such trading at Steven Cohen's $13 billion hedge fund.

It was not clear if the trades had been referred to the Securities and Exchange Commission's enforcement staff, and authorities have not alleged wrongdoing by SAC or Cohen.

The government has been investigating current and former SAC employees since U.S. prosecutors announced a huge insider trading case involving the Galleon Group in October 2009. SAC Capital employees Donald Longueuil and Noah Freeman have pleaded guilty to charges.

Earlier this month Galleon Group founder Raj Rajaratnam was convicted on insider trading charges in a sweeping government victory in the case.

Court filings also show prosecutors are investigating trade accounts at SAC, including one tied to Cohen, SAC Capital's founder.

SAC representatives and congressional investigators met in Washington on May 10 to discuss possible suspicious trades, according to the Wall Street Journal, which earlier reported Grassley's receipt of information from Finra.

At the meeting, SAC representatives suggested the investigators go easy on the hedge fund, saying it has internal procedures to track down and prevent illegal trading, according to the Wall Street Journal report.

Also at the meeting, SAC Capital's Washington-based policy adviser Michael Sullivan cited Cohen's "civic-minded interest" in purchasing a stake in the New York Mets baseball team, the report said.

"We welcomed the opportunity to meet with the staff to educate them about the firm and our compliance efforts, and had an entirely appropriate, professional and cordial meeting," said SAC Capital spokesman Jonathan Gasthalter. "We will continue to cooperate in any way we can."

(Reporting by Ann Saphir with reporting by Matt Goldstein; editing by Christopher Wilson)

Majority of Americans support gay marriage in poll

Reuters, by Alex Dobuzinskis, LOS ANGELES | Fri May 20, 2011

A marriage equality supporter holds gay pride and American flags at a
demonstration outside the appeals hearing on California’s Proposition 8
at the 9th District Court of Appeals in San Francisco in this December 6,
2010 file photo. (Credit: Reuters/Stephen Lam)

(Reuters) - Fifty-three percent of Americans support making gay marriage legal, a Gallup poll showed on Friday, a marked reversal from just a year ago when an equal majority opposed same-sex matrimony.

The latest Gallup findings are in line with two earlier national polls this spring that show support for legally recognized gay marriage has, in recent months, gained a newfound majority among Americans.

Gallup said Democrats and political independents accounted for the entire shift in its survey compared to last year, when only 44 percent of all respondents favored gay marriage, while 53 percent were opposed. The percentage of Republicans favoring same-sex matrimony held steady at 28 percent.

Same-sex marriage remains a highly contested issue in U.S. politics, but homosexual couples have won the right to legally wed in five states -- Massachusetts, Connecticut, Vermont, New Hampshire and Iowa -- and the District of Columbia. Gay couples have faced setbacks elsewhere, and no statewide initiative to legalize gay marriage has ever won a majority vote.

The growing support for gay marriage comes after President Barack Obama signed into law legislation in December to repeal the ban on openly gay men and women serving in the military under a 17-year-old law known as "Don't Ask, Don't Tell."

Gallup noted the policy change, but said it was unclear if that influenced Americans' attitudes about same-sex unions.

"The trend toward marriage equality is undeniable -- and irreversible," Joe Solmonese, president of the gay rights group Human Rights Campaign, said in a statement.

Maggie Gallagher, chairman of the National Organization for Marriage, said the poll shows her fellow opponents of gay matrimony have been "shamed" into silence.

"Polls are becoming very sensitive to wording, and the wording being used in the media are not predicting accurately what happens at the actual polls when people vote," she said.

In a sign of a generation gap, Gallup found 70 percent of respondents between the ages of 18 and 34 support gay marriage, compared to only 39 percent among those 55 and older.

A Washington Post/ABC News poll in March showed 53 percent of Americans said same-sex marriage should be legal, and 51 percent said the same thing in a CNN Poll released in April.

By comparison, a 1996 Gallup found that 68 percent of Americans were opposed to same-sex marriage, a figure that has trended downward ever since.

Twenty-nine states have adopted constitutional amendments restricting marriage as between a man and a woman, and 12 other states have passed laws to that effect, according to the Human Rights Campaign.

In Minnesota, a proposal to put a constitutional amendment banning same-sex marriage before voters in 2012 gained momentum this month when it passed the state Senate.

In a setback for gays and lesbians seeking marriage rights, 52 percent of California voters approved a constitutional amendment that banned same-sex marriage in 2008, months after the state's Supreme Court had legalized it. Passage of the ban, known as Proposition 8, was seen as particularly significant because of Californians' history of supporting liberal causes.

In 2010, a federal judge found Prop 8 unconstitutional, but his decision was blocked by the 9th U.S. Circuit Court of Appeals while the case remains under judicial review.

(Reporting by Alex Dobuzinskis; Editing by Steve Gorman and Greg McCune)

Related Articles:

About the Challenges of Being a Gay Man – Oct 23, 2010 (Saint Germain channeled by Alexandra Mahlimay and Dan Bennack) - “You see, your Soul and Creator are not concerned with any perspective you have that contradicts the reality of your Divinity – whether this be your gender, your sexual preference, your nationality – or your race, ethnicity, religious beliefs, or anything else.”

Obama announces 'new chapter in American diplomacy'

CNN News, By Alan Silverleib and Tom Cohen, May 19, 2011

Obama: Two states for 'lasting peace'

STORY HIGHLIGHTS

• Recent events show oppression will not work in the Middle East anymore, Obama says
• The president announces $2 billion in assistance for Egypt
• He announces a trade plan for the region
• A two-state Arab-Israeli solution should be based on 1967 borders, Obama says

Washington (CNN) -- President Barack Obama placed the United States squarely on the side of democratic reform in the Middle East and North Africa on Thursday, declaring that the wave of change sweeping the region "cannot be denied."

Addressing a global audience, Obama condemned the use of force against protesters by longtime allies and adversaries alike. He also said the eruption of demands for greater opportunity in Arab nations could be used to kick-start stalled Israeli-Palestinian peace talks.

Obama dismissed the notion of al Qaeda-style extremism appealing to future generations of Muslims, asserting that the organization was "losing its struggle for relevance" long before the death of Osama bin Laden.

The president's speech -- the subject of intense speculation in recent days -- was a long-promised overview of America's changing Middle East policy in the wake of the Arab Spring that started unfolding in Tunisia last December.

In recent months, Washington has often appeared to struggle to keep up with the pace of events not only in Tunisia, but also in Egypt, Libya, Syria, Yemen, Bahrain, and elsewhere.

Administration officials have also wrestled with an Arab suspicion of U.S. motives fueled by decades of American support for the region's autocratic regimes.

"Shouts of human dignity are being heard across the region," Obama declaring, speaking in front of a group of diplomatic and military officials at the State Department. "We support political and economic reform in the Middle East and North Africa that can meet the legitimate aspirations of ordinary people throughout the region."

The president acknowledged that "there will be times" when America's "short-term interests do not align perfectly with our long-term vision."

"But we can -- and will -- speak out for a set of core principles" including freedom of religion and expression, and equality under the law, he promised.

"It will be years before this story reaches its end," Obama said. But "the events of the past six months show us that strategies of oppression and strategies of diversion will not work anymore."

RELATED TOPICS

• Barack Obama
• Middle East
• Political Policy

Among other things, Obama accused Iran of hypocrisy for publicly supporting protests in parts of the Arab world after violently cracking down on protests at home.

He also criticized the crackdown against Shiite protesters in Bahrain -- a key Persian Gulf ally and home of the U.S. Navy's Fifth Fleet. The president made no mention of struggles for greater rights in neighboring Saudi Arabia, another close ally.

A large portion of Obama's speech was devoted to the Israel-Palestinian conflict. The administration's strategy for a comprehensive settlement has been seemingly derailed in recent months. Former Sen. George Mitchell unexpectedly submitted his resignation as the president's Mideast envoy Friday, and deadly clashes broke out Sunday between pro-Palestinian protesters and Israeli forces.

Ongoing Israeli settlement construction in the West Bank and Palestinian steps toward a unilateral declaration of statehood have driven the two sides further apart since Obama took office.

Additional doubts about the viability of the stalled peace process were raised this month in the wake of a formal reconciliation agreement between the two largest Palestinian factions: President Mahmoud Abbas' party, the West Bank-based Fatah; and the Islamist group Hamas, which rules Gaza.

Both Israel and the United States consider Hamas a terrorist organization and have voiced strong opposition to the inclusion of the group in any unity government, demanding that it first renounce violence, recognize the state of Israel and abide by all previous agreements.

Nevertheless, the president renewed his push for a two-state solution Thursday, declaring that the borders of Israel and a future Palestinian state should be based on pre-1967 lines "with mutually agreed swaps, so that secure and recognized borders are established for both states."

"The full and phased withdrawal" of Israeli security forces from the West Bank has to be accompanied by evidence of a Palestinian state that can help secure the peace and prevent attacks against Israel, he said.

But a continued Israeli presence in the West Bank is inconsistent with long-term dreams of a secure Jewish and democratic state, Obama said.

"The Palestinian people must have the right to govern themselves, and reach their potential, in a sovereign and contiguous state," the president said.

On a broader regional level, Obama stressed the importance of economic development to accompany political reforms. Toward that end, he announced $1 billion in debt forgiveness for Egypt, as well as another $1 billion in loan guarantees for Cairo.

He also promised a new "comprehensive" trade and investment partnership initiative with the Middle East and North Africa. Europe will play a key role in moving the initiative forward, he said.

Obama also defended U.S. and NATO intervention in Libya, arguing the move was necessary to prevent an imminent massacre.

"Time is working against (Libyan leader Moammar) Gadhafi," he asserted. When Gadhafi goes, "decades of provocation will come to an end" and a democratic transition can begin, he said.

Thursday's speech came nearly two years after Obama delivered an address in Cairo, the Egyptian capital, that called for "a new beginning" between the United States and the Muslim world.

Today, many in the Middle East and North Africa consider the Cairo speech a collection of lofty ideals that lacked sufficient follow-through, and they have been looking for Obama to signal substantive and concrete policies that support the aspirations of the region's people.

Marwan Muasher, a former Jordanian foreign minister and longtime advocate of Arab reform, said Wednesday that the Middle East is a new environment now, where young men and women are laying their lives on the line for democracy throughout the region. They need to be told their cause is just and how the United States will support them.

If Thursday's address is viewed as just "another Cairo speech, forget it," said Muasher, now at the Carnegie Endowment for International Peace. "It was great two years ago, and even then the feedback was mixed, because people wanted to see what he would do. If he doesn't have much to add this time, people will not be fooled by it."

Gigi Ibrahim, a 24-year-old Egyptian activist and blogger, predicted Obama's words will have little impact in her country.

"At this point, whatever President Obama will address will really be irrelevant to what the situation is now because we're really building democracy from the bottom up," Ibrahim told CNN, adding that "America is not the model of democracy that we are striving for."

She called U.S. policy on the Middle East "hypocritical" because, she said, the United States "will support a dictatorship if it's aligned with its interests."

That attitude is still rife throughout the Middle East and North Africa, noted CNN senior political analyst David Gergen.

With Egypt facing economic crisis, the Libyan conflict at a stalemate, an ongoing harsh crackdown on demonstrators in Syria and the Israeli-Palestinian peace process at a standstill, there is little belief in the region that Obama or the United States can do much to help, Gergen said.

"I think it's going to be very difficult in the near term to generate excitement about his policies in the Middle East," Gergen said.

In an effort to start changing such perceptions, the Obama administration on Wednesday imposed tough sanctions against Syrian President Bashar al-Assad and six other senior Syrian officials in an effort to stop the regime's fierce crackdown on anti-government protests.

The sanctions also target two top Iranian officials whose unit was a "conduit for Iranian material support" to Syrian intelligence, according to a copy of the executive order issued by the White House.

Obama's speech came in a week when the White House is strongly focused on Middle East issues. He met Tuesday with Jordan's King Abdullah II at the White House, and will meet Friday with Israeli Prime Minister Benjamin Netanyahu.

CNN's Elise Labott and Matt Smith contributed to this story.

SEC to propose new regulations for credit-raters

Reuters, by Sarah N. Lynch, WASHINGTON | Wed May 18, 2011

(Reuters) - Credit-rating agencies will have to disclose more details about their ratings process and better manage conflicts of interest under rules unveiled on Wednesday that are expected to lightly touch industry practices.

The 500-plus pages of proposals by the Securities and Exchange Commission aim to ensure credit-raters don't rubber-stamp complex financial products and would seek to manage conflicts that could arise if analysts leave their jobs to work for the firms issuing the products they rate.

The proposals are all required by the Dodd-Frank Wall Street overhaul law in an effort to hold the firms such as Moody's Corp (MCO.N), McGraw Hill's (MHP.N) Standard and Poor's and Fimalac SA's (LBCP.PA) Fitch Ratings more accountable for their performance after they slapped inflated ratings on complex mortgage securities during the financial crisis.

However, none of Wednesday's proposals strike directly at the heart of what many say is an inherent conflict of interest at the big three credit-rating agencies which all get paid by issuers.

The measures being considered on Wednesday include requiring raters to provide the SEC with an annual report that assesses the effectiveness of each firm's internal controls, and establishing training and testing protocols for credit analysts to ensure they are well versed on rating methods.

Raters would also be subject to more robust disclosure rules about their initial ratings and any subsequent changes so the investing public can better gauge their accuracy and quality.

In order to make sure that rating methodologies are solid, each firm's board of directors will have to sign off on them. If any material errors are uncovered, the firm will have to publish a notice about the changes.

For addressing conflicts of interest, the proposal would create a firewall of sorts between the sales and marketing division and the division that establishes and monitors ratings. Any firm that violates this provision could be subject to penalties, and smaller companies with fewer resources could seek an exemption from this requirement.

In addition, the proposals would implement a "look back" provision by which credit-raters would need to establish procedures to monitor when employees leave the company to work for an issuer that received a rating within a one-year time frame.

The firms would be responsible for determining if any conflicts exist and whether they need to re-issue the rating.

In addition to rules targeting credit-raters, the SEC on Wednesday will also consider a plan that requires third-party firms conducting due diligence reviews of asset-backed securities to certify the information provided to the credit-raters.

Some of the proposals put forth on Wednesday build upon prior regulations previously adopted by the SEC. Some of the plans, such as the "look back" provisions and separations between commercial and analyst sides of the business, are already in place at the big firms.

A bipartisan report issued last month by the Senate Permanent Subcommittee on Investigations blamed Moody's and S&P for helping trigger the crisis after they were forced to downgrade inflated ratings en masse. The report highlighted the conflicts posed by the so-called "issuer-paid" model as well as other factors that led to inflated ratings.

In internal e-mails obtained by the committee, employees at both companies appeared to have a solid grasp of the deteriorating housing market well before the bubble burst, with one S&P employee describing it like "watching a hurricane from FL (Florida) moving up the coast."

Even with the findings of this latest report, the major credit-raters have not faced any civil or criminal charges in connection with their behavior in the crisis, and their earnings have not greatly suffered, either.

Dodd-Frank requires the SEC to address the inherent conflict discussed in the Senate report, but delays any immediate action on the matter.

Earlier this month, the SEC began the process by soliciting public comments for a study on the feasibility of establishing a system where a public or private utility would assign a credit-rater to determine ratings for structured products

(Reporting by Sarah N. Lynch, editing by Dave Zimmerman)

New York AG probes banks over mortgage securities: report

Reuters, Tue May 17, 2011 7:45am EDT

(Reuters) - New York Attorney General Eric Schneiderman is investigating big banks like Bank of America Corp (BAC.N), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) related to packaging of toxic mortgage loans into securities, the Wall Street Journal reported, citing sources.

The Attorney General will hold meetings with bank executives and has requested related documents from the firms, the Journal said.

Huffington Post on Monday reported the inspector general of the Department of Housing and Urban Development has concluded that Bank of America, JP Morgan Chase (JPM.N), Wells Fargo (WFC.N), Citigroup (C.N) and Ally Financial defrauded the government in seeking reimbursements for mortgages on properties they improperly foreclosed upon.

Bank of America and Wells Fargo declined to comment on Monday, while representatives for the other servicers were not immediately available for comment.

The U.S. Securities and Exchange Commission is also in talks with major Wall Street banks to settle allegations of fraud relating to sale of toxic mortgage bonds that helped unleash the financial crisis.

Bank of America, Morgan Stanley and Goldman Sachs could not immediately be reached by Reuters for comment on the Journal report outside regular U.S. business hours.

(Reporting by Rachel Chitra in Bangalore; Editing by Vinu Pilakkott)

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Israel Fires Warning Shots at Malaysian Aid Ship

Jakarta Globe, Hazel Ward | May 16, 2011

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Jerusalem. Israeli naval forces fired warning shots at a Malaysian aid ship as it approached the Gaza Strip on Monday, forcing the vessel to retreat to Egypt, organizers and the Israeli military said.

“The MV Finch, carrying sewage pipes to Gaza, had warning shots fired at it by Israeli forces in the Palestinian security zone this morning at 6:54 a.m.,” said Shamsul Azhar from the Perdana Global Peace Foundation.

“The vessel was in the Palestinian security zone, about 400 metres from the Gaza shoreline, when they were intercepted by Israeli naval forces,” he told AFP, adding it was now anchored 30 nautical miles away in Egyptian territory.

An Israeli army spokeswoman confirmed that the vessel, flying a Moldovan flag, had been intercepted as it sailed from Egypt’s El-Arish port, where it had been docked for several days.

“A navy patrol boat contacted the vessel, which claimed to be heading for the Gaza shores. Once it crossed into Israeli naval territory and didn’t answer calls to turn back, warning shots were fired in the air and it returned to El-Arish,” she said.

The Perdana Foundation is helmed by former Malaysian premier Mahathir Mohamad, an 85-year-old firebrand who was a strident critic of the West and Israel over the treatment of Palestinians during his two decades in power.

The organization was also involved in the first “Freedom Flotilla,” a 2010 attempt to break the Israeli blockade on Gaza, which ended in disaster when naval commandos raided the aid ships, killing nine Turks on board one of the vessels.

Perdana Foundation officials said the MV Finch left the Port of Piraeus in Greece on May 11 for Gaza, carrying plastic pipes to help restore the “devastated” sewage system in Gaza.

Alang Bendahara, a Malaysian journalist on board, told AFP that Israeli naval ships stopped the vessel with a volley of gunfire as it approached the shore.

“The Israeli naval vessel fired a warning shot at us upon approaching and asked us to leave the waters but the ship’s captain refused and the Israelis fired again, circling the MV Finch before firing twice more,” he said.

“At that point they threatened the ship’s captain that they would board the vessel and we were forced to turn back, it was lucky that no one was injured.

“Two Egyptian naval vessels were monitoring us and they escorted us once we were in Egyptian waters,” said Bendahara.

“They have now boarded our vessel and are inspecting our cargo to make sure there is nothing illegal on board. They will be escorting us to the port of El-Arish because they say they will detain the ship.”

The journalist said there were 12 people on board the vessel -- seven Malaysians, two Irish nationals, two Indians and a Canadian -- including anti-war activists and journalists.

Israel has maintained a blockade on the Gaza Strip since 2006, after militants there snatched Israeli soldier Gilad Shalit, who is still being held.

It was tightened a year later when the Islamist Hamas movement seized control of the territory, ousting forces loyal to the Western-backed Palestinian Authority.

Israel says the blockade is meant to stop the ruling Hamas movement from gaining access to weapons, money or material that could be used to attack the Jewish state.

But Palestinians say it prevents them from accessing material and goods that are desperately needed to rebuild infrastructure in the impoverished territory.

Israel agreed to relax some of the embargo’s restrictions in July 2010, following a wave of international pressure after the botched raid on the Freedom Flotilla.

The incident sparked heavy criticism of Israel and led to a sharp deterioration in ties between Turkey and the Jewish state.

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"The End of History" – Nov 20, 2010 (Kryon channeled by Lee Carroll)
(Subjects:Abraham, Isaac, Ishmael, Muhammad, Jesus, God, Jews, Arabs, EU, US, Israel, Iran, Russia, Africa, South America, Global Unity,..... etc.) (Text version)

"If an Arab and a Jew can look at one another and see the Akashic lineage and see the one family, there is hope. If they can see that their differences no longer require that they kill one another, then there is a beginning of a change in history. And that's what is happening now. All of humanity, no matter what the spiritual belief, has been guilty of falling into the historic trap of separating instead of unifying. Now it's starting to change. There's a shift happening."

ABI letter 'warned of shareholder challenge to corporate excess'

• Investor group targeted the chairmen of remuneration committees

• Executive pay on the rise again after period of restraint

guardian.co.uk, Jill Treanor, Sunday 15 May 2011

The ABI has expressed concern over plans to pay Bob Diamond 20%
more than his predecessor as chief executive of Barclays. Photograph: PA

Influential City investors have demanded that major companies block big pay rises to top bosses even if economic conditions improve.

The warning was made in a letter apparently sent to boardroom directors as shareholders detected a new trend for executives to demand pay rises after the period of restraint sparked by the 2008 banking crisis.

The Association of British Insurers (ABI) targeted the chairmen of the remuneration committees, the boardroom committees that set pay, and said that its members – which control about 15% of the stock market – had asked it to monitor the level of salary rises. For a senior boardroom executive, the salary is an important benchmark as bonuses are paid out as multiples of this.

The letter spells out that investors will "robustly challenge unjustified changes" in the size of individual pay deals.

In a key passage, the ABI said that its "members continue to believe it is the duty of remuneration committees to set executive salary levels commensurate with the roles undertaken, but to do so with due regard to company performance, with sensitivity to pay and conditions elsewhere in the business, and with awareness of wider economic circumstances".

The letter was sent at the beginning of major companies' annual general meeting season, in which there have been a number of protest votes against pay deals. Xstrata, the FTSE 100 mining company, suffered a rebellion against pay awards that were seen as excessive by Pirc, the corporate governance consultants. The directors of the bookmakers Ladbrokes and William Hill and Pace, the set-top box maker, faced similar challenges.

The ABI refused to elaborate when asked to confirm the authenticity of the letter, which notes the "restraint among many companies over the past few years in relation to executives' salaries".

"This restraint has been welcomed by investors in light of the challenging economic conditions," it said.

A rise in salary approaching 20% for Bob Diamond, the chief executive of Barclays bank, relative to his predecessor John Varley, has already been noted by the ABI.

António Horta-Osório, the new chief executive of the bailed-out Lloyds Banking Group, has two salaries – his actual £1m salary and a £1.2m "reference" salary used to determine the size of his bonuses.

Shareholders will be asked to vote on his pay deal – the subject of an "amber top" alert issued to investors by the ABI – at Wednesday's annual meeting.

One institutional investor said: "There was always a danger that pay freezes over the past few years would tempt firms to ratchet up pay at a later date. Shareholders will only accept pay increases if it matches true and sustained performance."

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IMF head arrested in New York

Reuters, NEW YORK | Sat May 14, 2011

International Monetary Fund (IMF) Managing
Director Dominique Strauss-Kahn pauses at a
news conference during the spring IMF-World
Bank meetings in Washington April 16, 2011.
(Credit: Reuters/Yuri Gripas)

(Reuters) - The head of the International Monetary Fund, Dominique Strauss-Kahn, was arrested in New York on Saturday and accused of a sexual attack on a hotel maid, The New York Times reported.

The newspaper, citing a Port Authority spokesman, said Strauss-Kahn, also a possible Socialist candidate in next April's French presidential election, was arrested minutes before he was to due to fly to Paris from John F. Kennedy International Airport in New York.

The Times quoted authorities as saying Strauss-Kahn was accused of a "sex attack" on a maid at a Times Square hotel earlier in the day.

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"Back office" fraud seen rising after recession peak

Reuters, ORLANDO, Florida | Sat May 14, 2011

(Reuters) - "Back office" fraud is draining corporate treasuries of billions of dollars a year, and the risk is growing as companies and employees struggle in the wake of the recession, finance managers and experts say.

Fraud schemes in company finance departments include the creation of fake vendors, billings for nonexistent goods, checks written to dummy companies and kickbacks from vendors.

"Most companies are weak in the area of back office and vendor fraud and that poses a significant threat to them," Michele Edwards, a fraud expert, told Reuters this week on the sidelines of a corporate finance professionals' conference.

Typically, it takes 18 months to detect a fraud, Edwards said.

In an informal poll of 622 finance managers during the May 8-12 Orlando conference, 72 percent reported seeing an increase in cases of back office fraud, Tom Bohn, president of the Institute of Financial Operations, said on Friday.

The institute, which groups several associations of corporate finance professionals from across the world, was launched this week during the Orlando conference.

Bohn and Edwards said some of the rise in reported losses might be a result of companies' increased focus on, and detection of, back office fraud over the past two years.

That focus came in response to U.S. federal regulators taking a harder line against companies that were not doing enough to prevent fraud that caused shareholder losses.

SQUEEZE ON PERSONAL FINANCES

But Edwards and Bohn said the recent recession had increased the risk of fraud.

Company budget cutbacks had resulted in some employees becoming solely responsible for what previously had been two or more separate duties, and there had been a reduction in internal checks and balances and office controls.

The squeeze from the recession on employees' personal finances and family life also was a factor, Edwards said.

"They didn't get a raise. They didn't get a 401k (retirement plan) match. Those are all additional pressures that have been on a lot of people over the past couple of years that may have caused them -- where they might not have in a normal environment -- to do something unfortunate like fraud," Edwards said.

She said the end of the recession won't solve the problem.

"You've got those expectations from the shareholders and the CEO that, hey, we're coming out of the recession. It's back to business. It's back to growth mode. That pressure isn't really going away," Edwards said.

Companies are beginning to employ safeguards such as software, analytical tools and fraud prevention specialists to detect problems early. They are also starting to search out and shut down opportunities for fraud, and to build a corporate culture that discouraged it.

"If you focus on the culture, you can reduce the risk from day one," said Bohn. "The more dollars you can save leaving the corporation, the better your bottom line is going to be."

(Editing by Pascal Fletcher and Xavier Briand)

Rajaratnam's fraud conviction will spark flurry of insider dealing cases

Dozens have admitted guilt and are now co-operating

guardian.co.uk, Dominic Rushe in New York, Thursday 12 May 2011

Raj Rajaratnam outside the New York court after his conviction. He faces
20 years in jail. Photograph: Emmanuel Dunand/AFP/Getty Images

The conviction of hedge fund billionaire Raj Rajaratnam will herald an unprecedented wave of insider trading cases, according to legal experts.

Rajaratnam's conviction on 14 counts of fraud and conspiracy came amid the largest insider dealing investigation in US history. In the last 18 months, US authorities have charged 47 hedge fund managers and others with insider trading. Rajaratnam was the 35th defendant to be convicted or to plead guilty.

More cases are pending. Next week Zvi Goffer, a former employee of Rajaratnam's Galleon hedge fund, faces trial on insider dealing charges. Goffer, known as "Octopussy" because of his reputation for having his hands on so many sources of information, is being tried with his brother Emanuel Goffer and Michael Kimelman, a trader. They have all pleaded innocent.

The US authorities are also building a case against Rajit Gupta, a former Goldman Sachs director and global managing director of McKinsey, who is accused of leaking non-public information about Goldman board discussions to Rajaratnam.

Robert Mintz, a former federal prosecutor and now partner at law firm McCarter & English, said he expected the Galleon investigation to lead to an "unprecedented" number of insider trading prosecutions.

Rajaratnam's conviction came after the jury heard damning taped evidence of him discussing trades using insider information. The hedge fund manager and his associates had been covertly taped in the what is probably the largest use of wiretaping in a white-collar crime case.

The use of wiretapping is common in mafia and drug dealing cases but is expensive and controversial and has been less widely used in white-collar investigations. Wiretaps have to be monitored in real time as they must be switched off when their subjects discuss matters unrelated to the case. They have to be sanctioned by a judge who will regularly monitor progress. But Mintz said that after such a high profile conviction, more wiretaps were inevitable. "The cost is high but the evidence can be blockbuster," he said.

Prosecutors have thousands of hours of taped evidence to sift through as they build new cases. On top of that dozens of people have pleaded guilty in the Galleon case and are now co-operating. "Insider trading is going to be the crime du jour for federal prosecutors for the next several months if not years," said Mintz.

Preet Bharara, Manhattan US attorney, has described insider trading on Wall Street as "pervasive". In a statement after the conviction he said: "We will continue to pursue and prosecute those who believe they are both above the law and too smart to get caught." Bharara is investigating so-called "expert-network" firms, which arrange conversations between employees and investors seeking insight into companies and industries.

Wiretaps have also put pressure of Steven Cohen, one of the world's top fund managers, and Noah Freeman and Donald Longueuil, two former managers at Cohen's SAC Capital Advisers. Freeman pleaded guilty first and wore a wire to tape conversations with Longueuil, who originally pleaded innocent.

According to court filings the US authorities are now looking at trades made in SAC accounts. There has been no allegation of wrongdoing against either Cohen or SAC.Tom Dewey, a partner at Dewey Pegno & Kramarsky, said that in the past "insider dealing cases have been small and discrete". But the global nature of trading and the networks of information and communication made available by new technology had fundamentally changed the scale of insider dealing cases, he added. "Since Preet Bharara took office he has made it clear he believes that insider trading is a top priority. There are many more shoes about to drop," he said.

Related Article:

Bernanke says big banks need tighter rules

Bernanke says big banks need tighter rules

Reuters, Washington, Wed May 11, 2011

(Reuters) - Larger financial firms should face more onerous regulatory requirements to make sure they can withstand turbulence in economy or credit markets, Federal Reserve Chairman Ben Bernanke will say on Thursday.

In copy of his Congressional testimony obtained by Reuters on Wednesday, Bernanke said the U.S. central bank was aiming to keep international standards as consistent as possible to ensure that no big firms fall through the cracks and guarantee a level playing field.

"Federal Reserve is developing more-stringent prudential standards for large banking organizations and nonbank financial firms" designated by a council of top regulators, Bernanke said in prepared remarks that did not directly touch upon the economy or monetary policy.

(Reporting by Dave Clark; Writing by Pedro Nicolaci da Costa; Editing by Diane Craft)

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