Madoff Money to Japan Mob Ties Breed Banks’ Global Pains

Madoff Money to Japan Mob Ties Breed Banks’ Global Pains

Japanese regulators said they’re looking for loans to gangsters by the nation’s three biggest banks. The 115-year-old Dutch lender Rabobank Groep was fined more than $1 billion for rigging interest rates. Deutsche Bank AG (DBK) and UBS AG (UBSN), Germany and Switzerland’s biggest lenders, both said they’re facing investigations into currency manipulation. It was another day in global banking.Those headlines, all from yesterday, arrived after the six biggest U.S. banks had passed the $100 billion mark for legal costs since the financial crisis. The largest, JPMorgan Chase & Co., is in talks with prosecutors to resolve allegations it helped facilitate Bernard Madoff’s crimes, as it tries to complete a proposed $13 billion settlement of cases related to its mortgage business.

“People just started picking the rock up a little bit, and they found a lot of snakes,” said Michael Greenberger, a former Commodity Futures Trading Commission trading director who teaches law at the University of Maryland. “We’ve got one scandal after another.”

Rabobank Chairman Piet Moerland resigned. Mizuho Financial Group Inc. (8411) President Yasuhiro Sato gave up six months of pay for failing to stop loans made to yakuza crime syndicates. Takashi Tsukamoto will also forgo a half year’s compensation and give up his role as chairman of Mizuho Bank Ltd., keeping his post at the parent company.

Pain, Shame

No leading bank executives have been jailed since the global financial crisis. The largest lenders are so big that criminal charges could threaten the global economy, U.S. Attorney General Eric Holder said in a Senate hearing this March, saying that made it “difficult for us to prosecute.”

Executive-suite alterations, docked pay and company fines need to be paired with criminal prosecutions, according to Jennifer Taub at Vermont Law School.

“You have to have some kind of pain,” she said, “and some kind of shame.”

Banks have been punished too much, according to Phil Gramm. The former Republican senator who co-authored the 1999 U.S. law that ended Depression-era restrictions on banking said it’s the amount the largest U.S. lender is being forced to pay and not the company itself that’s criminal.

“Had the fines levied on JPMorgan been levied in a developing country we would have called it extortion,” Gramm, a UBS vice chairman until last year, said in a phone interview from Japan. “I think everybody knows it’s true.”

‘Long Way’

Lenders in countries including Canada and Australia have avoided major legal troubles. Stock prices of most of the world’s largest banks, including the top six in the U.S., are up this year. JPMorgan has climbed 20 percent and Zurich-based UBS has advanced 25 percent.

Gramm’s former firm was in the news for a separate reason yesterday, when UBS said it’s taking measures against employees as investigators examine currency markets.

At the same time, Standard Chartered Plc (STAN) put Matt Gardiner, a senior foreign-exchange dealer, on leave because of allegations that don’t relate to his work there, said a person with knowledge of the matter. Gardiner worked at Barclays Plc and UBS before joining London-based Standard Chartered, which last year agreed to pay more than $600 million after regulators alleged it violated U.S. sanctions with Iran.

“Some of this is just old deeds coming home to roost, and it’s taken this amount of time,” Thomas F. Cooley, the former dean of New York University’s Stern School of Business, said about the recent onslaught of fines. Cooley, who now teaches economics there, said he wonders if the global banks have the right oversight and compliance now.

“We’re a long way from there yet.”

To contact the reporter on this story: Max Abelson in New York at mabelson@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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