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Dimon Screwed Up, Got a Raise Anyway!

Dimon Screwed Up, Got a Raise Anyway!

I apparently misunderstand the theory of the free market. I thought that successful performance was to be rewarded. And that disastrous or failing performance was to be penalized. But I am mistaken. For Jamie Dimon, failure is not failure, disaster is not disaster, life is good all the time – great job if you can get one!

Business ethics!! Do you reward constant business ethics violations? If you count settling multiple regulatory settlements in the billions of dollars as business ethics violations which apparently JPMorgan’s board does not, it might make you uncomfortable. Apparently in the mind of JPMorgan, business ethics is a matter of opinion, right?

Once again, I have another negative example to show my students. Instead of virtue being rewarded I have an example of rampant misconduct involving incredible amounts of money being rewarded. It makes my job more difficult.

But it’s not just me. Everyone who values justice, everyone who believes in right and wrong, everyone who believes in the value of business ethics, is being slapped in the face by this decision.

It is a blatant reward for misconduct and incompetence. It’s wrong. It’s destructive. It’s the wrong example for every human being on this planet.

Do we live in such a morally bankrupt system that not only do we have to suffer massive financial lawbreaking but watch it being rewarded too?

James Pilant

Jamie Dimon gets raise despite JPMorgan’s massive regulatory fines – Salon.com

JPMorgan Chase’s “punishment” was short lived. Last year, following the egregious “London Whale” scandal — a multibillion trading loss by the bank (which led to $1 billion in regulatory fines) — Dimon’s salary was cut in half to a measley $11.5 million.Wall Street memories are evidently as short as its pockets are deep. Dimon is getting a raise again. The New York Times reported:

JPMorgan’s board voted this week to increase Mr. Dimon’s annual compensation for 2013, hashing out the pay package after a series of meetings that turned heated at times, according to several executives briefed on the matter.

… JPMorgan’s directors may have decided that Mr. Dimon, as his peers may, should get a raise, but to ordinary Americans — and possibly to regulators — the decision to increase his compensation may seem curious given the banner penalties that federal authorities have extracted from the bank. It is not unheard-of for chief executives to lose their jobs when their companies have been battered by regulators.

via Jamie Dimon gets raise despite JPMorgan’s massive regulatory fines – Salon.com.

From around the web.

From the web site, A Means to an End.

http://meansstotheend.wordpress.com/2013/12/22/jamie-dimon-strikes-again/

I guess either Jamie Dimon, his personal attorney or someone from chase noticed my latest blog post Taking What’s Ours Part 6 .

Our Attorney along with the Federal Judge in Indianapolis received a notice Friday morning December 20th that a petition had been filed against us in New York by Jamie Dimon’s personal attorney.

What was the petition?

It was a cease and desist petition to keep us from talking and writing about what we were doing to Chase Bank any further.

The Judge placed a conference call with our attorney and Jamie Dimon’s attorney.

The conversation was recorded and on the record.

Dimon’s attorney proceeded to tell the Judge and our attorney that his client was at fault for all of this and that we could continue seizing assets until we had ALL of our money. Mr. Dimon just didn’t want us to write about it anymore.

The Judge proceeded to tell Mr. Dimon’s Attorney that the case was in his Federal Court and that he wasn’t going to allow a petition to hinder our Freedom of Speech.

This was a failed attempt to silence us and we will continue writing about our experiences.

I would like to thank Mr. Dimon’s attorney for admitting your client was at fault for all of this on the record. I’m sure this will prove valuable to us with any future lawsuits we have against Chase and your client, Mr. Jamie Dimon.

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The Ethics Sage, KPMG Insider Trading Scandal Damages the Reputation of the Accounting Profession

(I honored to have the Ethics Sage, Steven Mintz, write a post for my blog. Please visit his blog at Ethics Sage.)

KPMG Insider Trading Scandal Damages the Reputation of the Accounting Profession

What possesses an audit partner to trade on inside information and violate the accounting profession’s most sacred ethical standard of audit independence from one’s client? Is it carelessness, greed, or ethical blindness? In the case of Scott London, the former partner in charge of the KPMG’s Southern California’s regional audit practice, it was some of each that motivated him to violate ethical standards and, in the course of doing so, causing the audit opinions signed by London on Skechers and Herbalife to be withdrawn by the accounting firm.

This case has a local twist as pointed out by Stephen Nellis in his column “Deckers, PCBC were victims of auditor leaks” in the April 19-25 Pacific Coast Business Times. Nellis notes that two companies affected are Goleta-based Deckers and Pacific Capital Bancorp, the former parent of Santa Barbara Bank & Trust now part of Union Bank.

Overall, Shaw is charged with leaking confidential information to his friend, Brian Shaw, about Deckers, Pacific Capital Bancorp, Manhattan Beach-based Skechers, and Los Angeles-based Herbalife. The leak of information about quarterly earnings information led to Shaw’s unjust enrichment of $1.27 million. Shaw, a jewelry store owner and country club friend of London repaid London with $50,000 in cash and a Rolex watch, according to legal filings.

The leaking of financial information about a company to anyone prior to its public release affects the level playing field that should exist with respect to personal and business contacts of the leaker and the general public. It violates the fairness doctrine in treating equals, equally, and it violates basic integrity standards. The KPMG scandal concerns me because a pattern of such improprieties may be developing.

In 2010, Deloitte and Touche was investigated by the SEC for repeated insider trading by Thomas P. Flanagan, a former management advisory partner and a Vice Chairman at Deloitte. Flanagan traded in the securities of multiple Deloitte clients on the basis of inside information that he learned through his duties at the firm. The inside information concerned market moving events such as earnings results, revisions to earnings guidance, sales figures and cost cutting, and an acquisition. Flanagan’s illegal trading resulted in profits of more than $430,000. In the SEC action, Flanagan was sentenced to 21 months in prison after he pleaded guilty to securities fraud. Flanagan also tipped his son, Patrick, to certain of this material non-public information. Patrick then traded based on that information. His illegal trading resulted in profits of more than $57,000.

The KPMG case is a particularly egregious one because it involves insider trading by an auditor of client stock. This incident jogged my memory and I came up with a characterization of London’s actions as “stupid is as stupid does.” Scott London, the partner in charge of audits of Herbalife Ltd. and Skechers USA Inc., traded on inside information for personal gain.  KPMG resigned as the auditor of both companies after learning that London provided non-public information about the companies to a third party, who then used the information in stock trades. The firm fired London.  

In resigning the two audit accounts, KPMG said it was withdrawing its blessing on the financial statements of Herbalife for the past three years and of Skechers for the past two. KPMG stressed, however, that it had no reason to believe there were any errors in the companies’ books. Both companies said they are moving to find new auditors.

In a statement that should raise red flags for all CPA firms that audit public companies, KPMG stated it had concluded it was not independent because of alleged insider trading. Independence is the foundation of the accounting profession and the cornerstone of an audit conducted in accordance with generally accepted auditing standards. The public (i.e., shareholders and creditors) relies on auditors’ independence, objectivity, and integrity to ensure that the audit has been conducted in accordance with such standards and that the financial statements are free of material misstatements.

I’m having a hard time understanding the stupidity and moral blindness of London in this case. Surely he knew of his ethical obligations. All audit firms supposedly have been carefully assessing independence in the aftermath of financial frauds in the late 1990s and early 2000s (i.e., Enron and WorldCom). Firms generally have quality controls in place to prevent compromises to audit independence.

Trading on insider information for cash and gifts is bad enough, and when done by an audit partner it is unforgiveable. Even more baffling to me is that the quid pro quo for passing along stock tips about clients to a friend for London was to receive cash and gifts in return. According to London, he received a discount on a watch, and the friend bought him dinners from time to time and on a couple of occasions gave him $1,000 to $2,000 in cash. A cynic might say he sold himself cheap.

So, what happens next? Both Herbalife and Skechers will need to have their financial statements re-audited, not an inexpensive proposition. Even though the companies were not at fault, the public may misunderstand and think the companies were complicit in the matter.

For KPMG, the insider trading investigation is a setback. The accounting firm has worked hard to rehabilitate its reputation after coming under scrutiny last decade in a wave of corporate accounting scandals and the firm’s role in the marketing of fraudulent tax shelters. KPMG paid large nine-figure settlements to resolve lawsuits related to accounting scandals at the drugstore chain Rite-Aid and Oxford Health Plans. In 2005, the firm paid a $456 million penalty to the government related to tax fraud.

I have to wonder whether insider trading by partners at Deloitte and KPMG portends a larger scandal on the horizon. It seems every ten years or so the accounting profession finds itself in a “pickle” and hauled before Congress to explain its actions. It is about that time following financial frauds at Enron, WorldCom and a host of other companies. I don’t know how to get the message across to those in the profession that every time such incidents occur, and now insider trading, the public loses patience with the profession and doubts begin to surface about whether the profession truly acts to protect the public interest.

Blog Posted by Steven Mintz, aka Ethics Sage, on April 12, 2013

 

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George Washington – Business Ethics

George Washington – Business Ethics

George Washington – Business Ethics

This is from The Life of George Washington, Volume I, by Washington Irving:

The Virginia planters were prone to leave the care of their estates too much to their overseers, and to think personal labor a degradation. Washington carried into his rural affairs the same method, activity, and circumspection that had distinguished him in military life. He kept his own accounts, posted up his books and balanced them with mercantile exactness. We have examined them as well as his diaries recording his daily occupations, and his letter-books, containing entries of shipments of tobacco, and correspondence with his London agents. They are monuments of his business habits. [Footnote: The following letter of Washington to his London correspondents will give an idea of the early intercourse of the Virginia planters with the mother country.

“Our goods by the Liberty, Capt. Walker, came to hand in good order and soon after his arrival, as they generally do when shipped in a vessel to this river [the Potomac], and scarce ever when they go to any others; for it don’t often happen that a vessel bound to one river has goods of any consequence to another; and the masters, in these cases, keep the packages till an accidental conveyance offers, and for want of better opportunities frequently commit them to boatmen who care very little for the goods so they get their freight, and often land them wherever it suits their convenience, not where they have engaged to do so. … A ship from London to Virginia may be in Rappahannock or any of the other rivers three months before I know any thing of their arrival, and may make twenty voyages without my seeing or even hearing of the captain.”]

The products of his estate also became so noted for the faithfulness, as to quality and quantity, with which they were put up, that it is said any barrel of flour that bore the brand of George Washington, Mount Vernon, was exempted from the customary inspection in the West India ports. [Footnote: Speech of the Hon. Robert C. Winthrop on laying the corner-stone of Washington’s Monument.]

Washington practiced good business ethics by keeping his own accounts and maintaining a reputation for accuracy and competence.

James Pilant

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Banks Need to be Protected from Themselves

 

Waiting for a bank loan.

Banks Will Always Suck At Trading, Badly Need A Volcker-Like Rule: Study

A new study by economists Arnoud Boot at the University of Amsterdam and Lev Ratnovski at the International Monetary Fund finds that recent blow-ups in the banking sector — JPMorgan Chase’s $6.8 billion “London Whale” losses and that whole financial-crisis thingy, to name two — are not isolated events, but “a sign of deeper structural problems in the financial system.”

The only prescription? Less trading by big dumb banks.

“Without policy action, crises associated with trading by banks are bound to recur,” Boot and Ratnovski write in a blog post about the paper. “Even strong supervision will not be able to prevent them. Consequently, it appears necessary to restrict trading by banks.”

Banks Will Always Suck At Trading, Badly Need A Volcker-Like Rule: Study

If you read the fuller article, and I recommend you do, you will find that banks have incentives to do what is essentially speculative trading. Right now with interest rates low, there is a terrible temptation to take their money and gamble with it since there is little profit in traditional investments. And, of course, why do legitimate investments in business, industry and homes, when you can make so much more money speculating?

The banks have to be regulated to perform their traditional functions of lending to build a strong economy. We protect banks from collapse and insure their deposits with taxpayer money because when they loan money that develops the economy and creates opportunities. What we are getting now is a lot less useful investing and a lot more gambling at the public’s expense.

James Pilant

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Wall Street Protests, the 99 percenters, Spread Around the Globe

NEW YORK, NY - SEPTEMBER 26: A demonstrator ho...

Image by Getty Images via @daylife

It seems the winter of our discontent is spreading around the world. A small movement, the 99 percenters, continues to catch fire. I wonder if the great corporations are having studies done on the globalization of dissent?

Social media is not limited geographically to the United States, and that is increasingly important. The multinationals could organize for decades both on a national and international basis with little competition from dissent but that advantage is gone.

James Pilant

From Radio Netherlands Worldwide

Occupy Wall Street, the US protest against the financial elite and the banking sector, is spreading around the world. There are demonstrations planned for London’s financial district – and also for The Hague and Amsterdam. Occupy The Hague is demanding attention for a gamut of economic and political problems.

The Wall Street protests, which began last month, against “corporate greed and corrupt politics” have not only been repeated elsewhere in the country, in cities like Chicago, Los Angeles and Boston, the movement has spread to Canada and Europe. Demonstrations are planned for 15 October in The Hague and  a day later in Amsterdam. But Occupy The Hague goes beyond a protest against the financial system.

“The protest has scope for a range of opinions and interests,” spokesperson Robin van Boven says, “varying from the economic crisis to the Libyan uprising.”

“All these things are cause for concern. The point is that we want people to be aware of the problems that exist, and join us in looking for a solution. We think that at the moment politicians haven’t taken enough action.”

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Screw Sam! Reconstruct the Mortgages with their Rightful Owners (via Deadly Clear)

There is a lot of anger in this article. But I too share disgust with this government’s willingness to help out every kind of financial institution while ignoring the needs of the Middle Class. These people no longer have a defender in the government just a facilitator of the predation

James Pilant

Screw Sam! Reconstruct the Mortgages with their Rightful Owners U.S.Seeks Ideas on Renting Out Foreclosed Property By EDWARD WYATT Published: August 10, 2011 WASHINGTON— Uncle Sam wants you — to rent a house from Uncle Sam. The Obama administration said on Wednesday that it was soliciting ideas on how to turn the federal government’s inventory of foreclosed houses into rental properties that could be managed by private enterprises or sold in bulk. The goal, the administration said, is to stabilize neighborhoo … Read More

via Deadly Clear

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The BlackBerry Riots — What Should RIM Do? (via The Business Ethics Blog) Are Twitter and Facebook major elements in recent unrest?

We have learned that Chris MacDonald quickly analyzes current events for ethical issues and can be counted on to get a post up in a day or less. This is one of those.

Chris MacDonald

My favorite paragraph is this one –

The question is complicated by questions of precedence. Tech companies have come under fire for assisting governments in, for example, China, to crack down on dissidents. Of course, the UK government isn’t anything like China’s repressive regime. But at least some people are pointing to underlying social unrest, unemployment etc., in the UK as part of the reason — if not justification — for the riots. And besides, even if it’s clear that the UK riots are unjustifiable and that the UK government is a decent one, companies like RIM are global companies, engaged in a whole spectrum of social and political settings, ones that will stubbornly refuse to be categorized. Should a tech company help a repressive regime stifle peaceful protest? No. Should a tech company help a good and just government fight crime? Yes. But with regard to governments, as with regard to social unrest, there’s much more grey in the world than black and white.

We’re going to come across this issue again and again. Modern social unrest, justified, unjustified or simply beyond our understanding, is now also a product of social networking. As these machines gain complexity and power, so will the possibilities of social action. We are entering a new world in which a protest or similar action can be organized in very short chunks of times. Flyers and bullhorns are as obsolete as Egyptian hieroglyphs in this new climate of computer assisted unrest exemplified by Facebook and Twitter.

James Pilant

The intersection of social media with social unrest is a massive topic these days. Twitter has been credited with playing an important role in coordinating the pro-democracy protests in Egypt, and Facebook played a role in helping police track down culprits after the Vancouver hockey riots. But the mostly-unstated truth behind these “technologies of the people” is that they are corporate technologies, ones developed, fostered, and controlled by c … Read More

via The Business Ethics Blog

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Benjamin Franklin (via London Sideways)

This is an English web site discussing what has become of Franklin’s London lodgings in the intervening years. It celebrates Franklin, which leads me to believe that the little inconveniences of Franklin’s leadership in revolution and creation of a spy service against Britain have apparently been forgiven or forgotten. The link to the Franklin House is wonderful and I recommend you take a look at it. To my astonishment and delight, they have a piece of music you can listen to, that Franklin composed. So, to all of Franklin’s many accomplishments, I can add composer. I shouldn’t be surprised. What field of human endeavor did he not find interesting?

Benjamin Frankln first came to London as a young printer in 1725. He spent 18 months working for James Watts, whose printing shop was in Wild Court, St Giles. Wild Court is still there, now an alley behind the new City Lit. Some would say there is nothing there, but you try walking along Wild Court and tell  me there are no ghosts of it's past. During Victorian times it was a slum. Whilst working in Wild Court, Benjamin Franklin lodged nearby in … Read More

via London Sideways

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