Did Citi and B of A Help Hide Rogue Trader’s Losses
When rogue currency trader John Rusnak was finally exposed for having buried $691 million of losses between 1997 and 2002, his employer, Allied Irish Bank, started looking for places to put the blame. Allied sued the prime brokers involved--Bank of America and Citigroup--for having aided and abetted Rusnak’s deceptive book-keeping. Yesterday, Manhattan Federal Judge Deborah Batts rejected a bid by the two big banks to dismiss the lawsuit, opening up the possibility that big punitive damages could lie in the future.
Bid ti End Rogue Trader Case Fails [Reuters UK]
Former Citigroup Big-Wig Pays to Settle with SEC
Citigroup’s former head of emerging markets agreed to shell over $2.68 million to settle charges of insider trading surrounding his March 2002 sale of the firm’s stock in advance of bad news about performance in Argentina. The former exec, Victor Menezes, retired from Citigroup a year ago avoided having to admit to the allegations but did say through his lawyer that he was “glad to get this behind him.” We bet. It’s hard to enjoy your golf game with that kind of thing hanging over you.
Citigroup’s Menezes To Pay $2.68 Million [Bloomberg]
Clients’ Lack of Knowledge a Trader’s Best Friend
Explaining (and partially defending) the massive payouts on Wall Street this year, Fortune editor-at-large Justin Fox hones in on the lucrative trading desks of the big firms:
Much of the profit (just how much is not disclosed) is generated by traders executing tasks for clients—making block trades, structuring derivatives contracts, buying currency for overseas deals, etc. Why is this so lucrative? It’s partly a fair reward for taking risks, partly a byproduct of the knowledge the big firms accrue by being at the center of everything that goes on in global financial markets. They’re profiting from their customers’ comparative lack of knowledge. How long will customers put up with it? As long as they lack knowledge, one presumes.
Why Wall Street Had a Record Year [Fortune]
Merrill Sued for Canning Squawk Box Whistle Blower
Merrill Lynch had to answer to the Occupational Safety and Health Administration this week in connection with a suit by former broker James Altschul. The 65-year-old Garden City-based employee claims he was fired for cooperating with the investigation into last year’s squawk box scheme. To refresh, the SEC charged that day trader John J. Amore paid brokers at Citigroup, Lehman Brothers and Merrill Lynch to provide live audio access to those firms’ “squawk boxes” in order to front run the inevitable flood of institutional orders that would follow. Meanwhile, Merrill’s sticking to its story that Altschul’s firing had nothing to do with his cooperation and everything to do with “inappropriate office conduct.” Right.
Ex-Merrill Broker Challenges Firing [WSJ]
More Pity, Less Titty, In Wall Street’s Future
Don’t expect your favorite salesman to be able to plunk down the plastic when he hits the strip-bar circuit with you next time. The NYSE and NASD tag-teamed on an announcement yesterday that they would file a proposal with the SEC for “principle-based standards that address the obligations of securities firms and individual brokers in connection with business entertainment.” Translation: No more titties. And how does the adult entertainment industry feel about this? Understandably bummed.
“Bankers and stock brokers make up a large part of our clientele,” said Lonnie Hanover, spokesman for the Scores gentleman’s club, which operates New York’s two largest adult entertainment establishments. “If you try to curtail their visits to Scores, then the world might as well come to an end.”
Indeed.
Street Reins in Stripper Spending [NY Post]
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