Screw the Pooch!!??

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Editor’s Comment:

Do some research, think about what you know and what you need to know. Come to my seminar or any seminar on securitization and you will understand the significance. Naked short-selling is the same as selling forward. In both cases you sell to an “investor” something where you have no asset and no money to back it up. You take the money from the investor and use it pretty much any way you like and account for it as “trading profits.” Then you take what is left and you create the illusion of transactions when in fact the documents refer to a virtual transaction in which the parties were different than those described on the closing documents and the terms of repayment of the loan are different than the terms disclosed to either the  investor or the borrower.

This sort of thing is unfathomable to most people, except those who spent a lot of time on Wall Street or doing Wall Street-type things, which is an adequate description of my background. If you sold a car to someone when you didn’t have the car or the money to buy it and then you took the money and put part of it in your pocket as your fee and then went out and bought a junker, you might be charged with civil or criminal fraud. Don’t you think? But on Wall Street these behaviors are permitted in the name of increasing liquidity.

What a country!

Joe Floren Screws the Pooch

by Patrick Byrne

The first time I heard Joe Floren speak I was standing behind him in an elevator in his law firm’s San Francisco office tower  as another lawyer informed him that the subpoena Joe Floren had served the previous day on a colleague of mine had reached her in the hospital, after a difficult delivery of her first child, while she was breastfeeding for the first time.

“Really? That’s beautiful. I love it!” He replied with glee.

Joseph E. Floren, Esq., is a lawyer at Morgan Lewis, the white shoe law firm defending Goldman Sachs against Overstock’s prime broker litigation, and tonight I celebrate the mistake Joe Floren made yesterday.  In filing Goldman’s response to Overstock’s motion to vacate the trial court judge’s decision to stay his own decision to unseal various documents related to this litigation (in more straightforward English: the trial court judge decided to unseal some documents while also deciding to delay acting on his decision, but we objected to this delay, and Goldman responded to our objections), Joe Floren screwed the pooch. He filed something containing an attachment he forgot to redact. That attachment is a previous filing of Overstock’s, a filing which contains but a sample of the shenanigans at Goldman and Merrill that has turned up over the course of five years and millions of pages of discovery, but which filing we had redacted when we made it (as good litigants do).

Fortunately for the cause of all that is good and right about America, Joe Floren’s goof came to the attention of a diligent 1st amendment attorney in California named Karl Olson, who represents the Economist, Bloomberg, the New York Times and Wener Publications (owners of Rolling Stone magazine) in their efforts to obtain the documents.  Karl Olson provided Joe Floren’s sloppy filing to his clients. Tonight these stories appeared:

Rolling Stone: Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’

Bloomberg: Goldman, Merrill E-Mails Show Naked Shorting, Filing Says

Economist: An enlightening mistake

Really, Joe Floren?  That’s beautiful.  I love it.

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Whistleblower Bangs BofA for $14.5 million in Mortgage Case

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Editor’s Comment:

Countrywide Financial Inflated Appraisals 

For people in law enforcement this is a time when it gets to be fun going after the big guys.  Being arrogant to the highest degree going into this mortgage mess you can only imagine the ego of the Titans of Wall Street after making trillions of dollars in turning the entire mortgage process on its head and reversing all common sense criteria in underwriting loans.

The rats are leaving the ship by the thousands, whether they want to or not.  There is hardly a day that goes by that some former employee of Countrywide, Bank of America, Chase, Citi or Wells Fargo does not reveal that they were under instructions to violate regulations and law.

The inflation of appraisals of the securities and the inflation of the homes themselves was the key to the success of the Wall Street plan.  This plan was devoted to sucking out as much o the liquidity in the marketplace as they could possibly achieve.  This in itself is a reversal of even the purpose of allowing Wall Street to exist.  Wall Street’s mandate is to provide liquidity in the marketplace and not taking it away.  Instead they took the equivalent of the gross domestic product of several countries combined (including the United States) and converted the proceeds to “trading profits”.

It is good that these whistleblowers are appearing and it’s even good they are making so much money.  This will encourage other whistleblowers and will encourage those attorneys who thought mortgage litigation was beneath them.  As these cases proceed we will see more and more understandable facts emerge that explain the tragic reversal of our financial model and the historic consequences to most of the major countries of the world.

Bank of America Whistleblower Receives $14.5 million in Mortgage Case

By Rick Rothacker

(Reuters) – A former home appraiser will receive $14.5 million as part of a whistleblower lawsuit that accused subprime lender Countrywide Financial of inflating appraisals on government-insured loans, his attorneys said Tuesday.

Kyle Lagow’s lawsuit sparked an investigation that culminated in a $1 billion settlement announced in February between Bank of America Corp (BAC.N) and the U.S. Justice Department over allegations of mortgage fraud at Countrywide, his attorneys said in a news release. Bank of America bought Countrywide in 2008.

Lagow’s suit was one of five whistleblower complaints that were folded into the $25 billion national mortgage settlement that state and federal officials reached with Bank of America and four other lenders this year. His suit was unsealed in February, but the amount of his settlement had not been disclosed.

Gregory Mackler, a whistleblower who challenged Bank of America’s handling of the government’s HAMP mortgage modification program, has also finalized a settlement, said Shayne Stevenson, an attorney with the Hagens Berman law firm, which represented both whistleblowers. Stevenson declined to comment on Mackler’s settlement amount.

The complaints were brought under a whistleblower provision in the U.S. False Claims Act, which allows private individuals with knowledge of wrongdoing to bring suits on behalf of the government and share in the proceeds of any settlement.

Both Lagow and Mackler lost their jobs after raising concerns about practices at their companies and faced difficult times awaiting settlements, Stevenson said. Lagow, who worked in a Countrywide appraisal unit, filed his suit in 2009; Mackler, who worked at a firm called Urban Lending Solutions, brought his case in 2011.

“These guys are inspirational,” Stevenson said. “They both did the right thing. They should inspire other people to come forward.”

Bank of America declined to comment. A spokesman for the U.S. Attorney’s Office in the Eastern District of New York, which handled the Bank of America settlement, also declined to comment.

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