Iceland has found nine top bankers guilty and sentenced them to decades in jail for crimes related to the 2008 economic crash.
On Thursday Iceland’s Supreme Court returned a guilty verdict for all
nine defendants in the Kaupthing market manipulation case, after a long
running court trial which began in April last year.
Kaupthing was a big international bank headquartered in Reykjavik,
Iceland. It expanded internationally for years, but collapsed in 2008
under huge debts, crippling the small nation’s economy.
By demanding that bankers be subject to the same laws as the rest of
society, Iceland opted for a very different strategy in the wake of the
financial crisis to rest of Europe and the US, where banks were fined
nominal amounts, and directors and chief executives escaped punishment
altogether.
While the US and UK governments provided bail outs and government stakes
for their big banks with tax-payers’ money – essentially giving bankers
the green light to continue behaving in the same way – Iceland adopted a
different approach, declaring it would let the banks go bust, weed out
and punish the criminal element at the top of the banks, and protect the
savings of the people.
Former director of the bank, Hreiðar Már Sigurðsson, who was found
guilty and jailed last year, was also given a six-month extension to his
sentence on Thursday.
According to Iceland Monitor, the bankers are found guilty of crimes relating
to deceitfully financing share purchases – the bank lent money for the
purchase of the shares while using its own shares as collateral for the
loans.
They are also found guilty of creating a misleading demand for Kaupthing shares by means of deception and pretence.
The Icelandic Approach
These guilty verdicts are just the latest in Iceland’s unprecedented
clampdown since the economic crash. Authorities have been pursuing bank
bosses, chief executives, civil servants and corporate looters for
crimes ranging from insider trading to fraud, money laundering,
misleading markets, breach of duties and lying to officials.
Meanwhile the economy that collapsed so spectacularly has rebounded
after letting its banks go bust, imposing capital controls and
protecting its own citizens rather than the elite bank bosses
responsible for the mess.
This determination to hold people to account for actions that caused
intense financial misery contrasts strongly with the U.K., the rest of
Europe and the US. Yes, fines were imposed on the 20 biggest banks for
transgressions such as market manipulation, money-laundering and
mis-selling mortgages, but these costs fall on shareholders and, by
hampering the banks’ ability to lend, they also punish the rest of
society.
Meanwhile the guilty senior bankers, thanks to government bail outs,
carry on making enormous profits and collecting their obscene bonuses as
though nothing happened.
Last year, the International Monetary Fund declared that Iceland had
achieved economic recovery “without compromising its welfare model” or
unduly punishing its citizens for crimes committed by its bankers.
Iceland is right to jail it’s bankers – and the US and Europe
is wrong to merely slap a few wrists and give the green light to future
outrages.
PERTH, Australia -- An Australian academic's discovery of global gold
price collusion has sparked a looming US trial in which four of the
world's major banks are being sued for up to $1 billion over claims they
rigged the price of the precious metal at the expense of investors over
a decade.
Perth-based Andrew Caminschi can be revealed as the academic who
unwittingly exposed a scandal during a painstaking study of tens of
millions of gold transactions that took him 18 months.
"It was needle in the haystack-type stuff," Associate Professor
Caminschi said yesterday of the anomalies he discovered in the data.
"But once we found it, it was pretty damning."
In a key development, a US judge ruled last week that the four banks
-- Barclays, Bank of Nova Scotia, HSBC and Societe Generale -- had a
case to answer and that a lawsuit filed by investors would proceed to
trial.
Germany's Deutsche Bank was also accused of manipulation but settled
its case in April and has agreed to help the plaintiffs in their claims
against the remaining defendants.
Assistant Professor Caminschi, 42, said he would act as an expert
consultant at the trial in New York and admitted he was surprised his
otherwise obscure PhD thesis at the University of Western Australia --
for which he had to build his own server -- had damaged the banks and
led to a shake-up of the century-old gold pricing system.
"I never thought it would get to this," he said. "I didn't go out
cartel-busting or bank-bashing -- it was more like the data was just
yelling at me."
During his research, the academic discovered apparent manipulation
during the twice-daily meetings held by banks in London that determined
the benchmark price of gold, which was then used by dealers, central
banks and mining companies to trade the precious metal.
The analysis of 14 years of raw data found that during these
meetings, and before the benchmark price became known, trading volumes
in gold derivatives would rise substantially. This suggested the banks
were trading on, and potentially profiting from, information that was
not available to the wider market -- a theory that had been rumoured for
years but never proven.
"I went into my supervisor's office and I had this heat map and there
was a thin white line which runs through the heat map which symbolised
areas of very, very intense trading," Associate Professor Caminschi
recalled.
"We were only expecting to see that white line when the news came
out, when people would adjust their positions based on the news.
"When I showed it to my supervisor, and after I explained it, he said, ‘Oh shit'."
The research was first published in an academic journal in 2013.
It was later picked up by industry publications and financial news
provider Bloomberg, sparking attention from regulators and leading to
scores of lawsuits.
In a seminar room in Oxford, one of the reporters
who worked on the Panama Papers is describing the main conclusion he
drew from his months of delving into millions of leaked documents about
tax evasion. “Basically, we’re the dupes in this story,” he says.
“Previously, we thought that the offshore world was a shadowy, but
minor, part of our economic system. What we learned from the Panama
Papers is that it is the economic system.”
Luke Harding, a former Moscow correspondent for The Guardian,
was in Oxford to talk about his work as one of four hundred–odd
journalists around the world who had access to the 2.6 terabytes of
information about tax havens—the so-called Panama Papers—that were
revealed to the world in simultaneous publication in eighty countries
this spring. “The economic system is, basically, that the rich and the
powerful exited long ago from the messy business of paying tax,” Harding
told an audience of academics and research students. “They don’t pay
tax anymore, and they haven’t paid tax for quite a long time. We pay
tax, but they don’t pay tax. The burden of taxation has moved inexorably
away from multinational companies and rich people to ordinary people.”
The
extraordinary material in the documents drew the curtain back on a
world of secretive tax planning, just as WikiLeaks had revealed the
backroom chatter of diplomats and Edward Snowden had shown how
intelligence agencies could routinely scoop up vast server farms of data
on entire populations. The Panama Papers—a name chosen for its echoes
of Daniel Ellsberg’s 1971 leak of the Pentagon Papers—unveiled how a
great many rich individuals used one Panamanian law firm, Mossack
Fonseca (“Mossfon” for short), to shield their money from prying eyes,
whether it was tax authorities, law enforcement agencies, or vengeful
former spouses.
Tax havens are supposed to be secret.
Mossfon itself, for instance, only knew the true identity of the
beneficial owner—a person who enjoys the benefits of ownership even
though title to the company is in another name—of 204 Seychelles
companies out of 14,000 it operated at any one time. The Panama leak
blew open that omertà in a quite spectacular fashion. The
anonymous source somehow had access to the Mossfon financial records and
leaked virtually every one over the firm’s forty years of
existence—handing to reporters some 11.5 million documents. By
comparison the Pentagon Papers—the top-secret Vietnam War dossier leaked
to The New York Times by Ellsberg—was around seven thousand
pages. Harding estimates that it would take one person twenty-seven
years to read through the entire Panama Papers.
Why did
the source leak the papers? In a two-thousand-word manifesto published
after the publication of the main material, he or she claimed to be
motivated by exposing income inequality—and the way in which the “wealth
management” industry had financed crime, war, drug dealing, and fraud
on a grand scale.
“I decided to expose Mossack Fonseca
because I thought its founders, employees and clients should have to
answer for their roles in these crimes, only some of which have come to
light thus far,” he or she wrote. “It will take years, possibly decades,
for the full extent of the firm’s sordid acts to become known. In the
meantime, a new global debate has started, which is encouraging.” International Consortium of Investigative JournalistsJürgen
Mossack, co-founder of the Panamanian law firm Mossack Fonseca, whose
practices of tax evasion were leaked in the Panama Papers, June 2014
The first contact from the whistleblower came at 10 pm one evening in the spring of 2015. Bastian Obermayer, an investigative reporter for the German newspaper Süddeutsche Zeitung,
was checking his e-mail while staying with his parents when a message
pinged onto his laptop. “Hello. This is John doe. Interested in data?
I’m happy to share.”
The German paper soon realized that
it did not have the resources to do justice to the material that had
started to gush from this unknown source. Obermayer and his
near-namesake colleague Frederik Obermaier reached out to the
International Consortium of Investigative Journalists, a
foundation-supported body that has been coordinating joint inquiries
into issues of global interest since 1997.
The
information kept washing in: it gradually dawned on the journalists that
the source, whoever he or she was, appeared to have ongoing access to
Mossfon’s servers—not least because he or she could monitor internal
conversations about how the firm would respond to the reporters’ initial
questions. “When we look at our files we keep coming across emails that
are only a few days old,” the German reporters recalled later in their
book, The Panama Papers:
It’s almost as if we
were following events in real time, as if we were inside the law firm
that provides assistance to so many criminals. As if we were standing
behind the employees in Panama City, whose names are now so familiar to
us, and looking over their shoulders at their screens.
Except that they cannot see us….
So now we know that Panama is reading what we publish. But they don’t know that we are reading their e-mails…
The
story of how hundreds of reporters around the world set to work on this
vast database is racily told by the pair known in their office as the
Brothers Obermay/ier—or as racy as anything involving complex tax
structures can be. Their book should be read in journalism schools as
well as by tax authorities.
As more and more data sloshed
in, the Brothers Obermay/ier repeatedly had to purchase ever-larger
computers to handle it. How on earth to secure, scan, search, store,
order, distribute, edit, and share such vast amounts of information
across continents? A new breed of data specialists from around the world
had to be assembled to advise on encryption, creating databases, search
software, data visualizations, graphics, and communications.
It’s
doubtful that any one news organization could have gathered together
the amount of expertise needed to work on the material, still less have
the language skills, legal resources, and local knowledge to grasp the
significance of the characters and defend the stories that emerged. The
kinds of collaborative journalism that began with WikiLeaks, Snowden,
and the offshore leaks stories found new expression with the Panama
Papers and are a pointer to future partnerships.
In
writing about extremely powerful individuals, states, and corporations
there is some safety in numbers—though the Western reporters were
extremely conscious of the dangers faced by their Russian and Chinese
colleagues, in particular, as they delved into the evidence of how
prominent families had used Mossfon to salt away billions. And though
journalists in countries with repressive media laws should in theory
benefit from being able to publish in conjunction with news
organizations protected by more enlightened constitutions and courts,
this is far from being the case.
The German reporters use the word “addiction” to describe the work on which they now embarked:
If
we didn’t both have families we would probably spend every evening on
our laptops, clicking and clicking away. Yet even while keeping halfway
regular working hours, it takes us only a few weeks to grasp the basic
business model….
From the outside at least, it is a black box.
Not
from the inside, though. Inside, in the computer folders we mine day
after day (and often night after night), lie thousands of internal email
exchanges between Mossack Fonseca employees. These messages are a seam
of gold running through this mountain of data, repeatedly turning up
vital nuggets of information about the true owners.
Gradually,
a picture emerges of how the substantial mechanisms of offshore tax
avoidance work. The rich person with money to hide would generally
contact Mossfon via an intermediary—a bank, a lawyer, or an asset
manager. These were Mossfon’s “clients,” the ones who ordered up an
off-the-peg offshore company in the British Virgin Islands, Bermuda, the
Bahamas, or elsewhere. Mossfon would then appoint directors to look
after this company. These directors, uniquely in the world of high
finance, appeared to have few qualifications for the job.
The
Brothers Obermay/ier discovered an example of one such director—a woman
called Leticia Montoya, whose name appeared “more than 25,000 times in
the Panamanian company register alone.” They found that she lived in “a
poverty-stricken area outside Panama City” and calculated that her
countless directorships earned her just $400 a month.
These
days, most respectable banks will set up accounts for offshore
companies only if their ultimate beneficial owner is named—a measure
considered essential to prevent money-laundering, financing terrorism,
and other forms of crime. Mossfon, by contrast, appears to have been
remarkably incurious about whose money it was accepting. The authors
describe one case pursued by Süddeutsche Zeitung:
Mossack
Fonseca ignores so many warning signs it is almost incredible. The
parties concerned were at times reluctant to provide sufficient
information about themselves, they used multiple accounts, they acted
conspiratorially, they gave conflicting explanations about the origin of
the money and they had even been investigated for financial crimes.
According
to the reporters, Mossfon repeatedly found ways of getting around the
difficulties of verifying ownership—typically offering the use of a
nominee beneficial owner in place of the ultimate beneficial owner.
Commerzbank, in Frankfurt, which was propped up by €18 billion from
German taxpayers during the financial crisis of 2008, is singled out for
helping German clients “on a routine and systematic basis to evade
taxes” with the help of Mossfon. For example, by setting up shell
companies, the Luxembourg subsidiary of the bank helped its clients to
avoid paying taxes. “It doesn’t look very good to take billions from the
state with one hand and yet help other clients to cheat the same state
with the other,” observe the authors drily.
Such stories
need villains, and there is no shortage of them as the teams of
reporters around the world mined the databases, sharing their findings
on a web-based forum, with occasional meet-ups to compare notes. A sorry
parade of arms smugglers, oligarchs, defense contractors, mafia dons,
drug dealers, gambling fraudsters, sanctions breakers, and kleptocrats
emerge from the papers. And then there are the eye-catching names. They
include the richest man in Syria, a Uruguayan presidential candidate,
three current prime ministers, a well-known film director, a former
Iraqi vice-president, a top soccer player, a clutch of Arab heads of
state, the brother-in-law of the Chinese president. We get glimpses into
billions siphoned out of Africa, China, Libya, and Russia—all from a
single law firm. How many others have kept their work on tax avoidance
secret?
The Russian story—the specialty of Luke
Harding—is a particularly juicy one, involving Sergei Roldugin—a
moderately well-known cellist but, more importantly, a lifelong friend
of Vladimir Putin—who shows up in connection with five offshore
companies worth hundreds of millions of dollars. Roldugin was one of a
number of Putin’s circle to have become fabulously wealthy, earning
millions in deals that, as The Guardian delicately put it, “seemingly could not have been secured without [Putin’s] patronage.”
Interesting
as the individual characters are—and the dryness of tax avoidance
schemes certainly needs a bad-guy narrative to keep the reader
reading—the mechanisms of how money that should be taxed is instead
routinely kept offshore are just as gripping. Harding was fascinated by
the pristine respectability of the London offshore enablers: “I think
the kind of big reveal for me was the role played by the West, and law
firms, and banks, and so on,” he told his Oxford seminar. “It’s easy to
think kleptocracy is a problem of faraway, nasty countries, about which
we don’t want to inquire too deeply, but it turned out that we’re the
biggest crooks of all, actually, in that we facilitate this.” His “we”
refers to the British:
We found it over and over again
in the Panama Papers that there were very expensive law firms,
especially in London, in the Isle of Man, in Jersey, who charged big
fees. If you look at their websites, they look eminently respectable,
you know, they have pictures of stucco Georgian office blocks in London
with neatly topiaried trees—but it was just so depressing to see these
lying lawyers lying about who their clients were and, meanwhile
pocketing enormous fees.
The history of British involvement in tax havens is traced in Nicholas Shaxson’s book Treasure Islands,
which shows how attitudes toward tax avoidance have substantially
shifted over the decades since the late 1930s, when the US Treasury
secretary, Henry Morgenthau, informed the president that some wealthy
American tax evaders had started to set up dummy corporations with dummy
directors in British colonies. “The ordinary salaried man and the small
merchant does not resort to these or similar devices,” wrote Morgenthau
disapprovingly.
Legalized avoidance or evasion by the
so-called leaders of the business community…throws an additional burden
upon other members of the community who are less able to bear it, and
who are already cheerfully bearing their fair share.
In
other words there was, before the World War II, something shameful in
the rich trying to avoid the taxes that the rest of us have to pay.
The
extreme liberalization of London’s financial arrangements is usually
dated to the Big Bang—the deregulation of British financial markets by
the Thatcher government—of 1986. Shaxson shows in Treasure Islands
how the modern offshore system in fact dates back to the decline of the
British Empire after the war. He quotes the historians P.J. Cain and
A.G. Hopkins:
As the good ship Sterling sank, the City
was able to scramble aboard a much more seaworthy young vessel, the
Eurodollar. As the imperial basis of its strength disappeared, the City
survived by transforming itself into an “offshore island” serving the
business created by the industrial and commercial growth of much more
dynamic partners.
The formal empire dwindled
into fourteen small island states that opted to become British Overseas
Territories, with the queen as their head of state. Half of
them—Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands,
Gibraltar, Montserrat, and the Turks and Caicos islands—remain “secrecy
jurisdictions,” actively supported and managed from Britain and
intimately linked with the City of London. The United Kingdom also
maintains sovereignty over the Crown Dependencies of Jersey, Guernsey,
and the Isle of Man.
By the end of 1959 about $200
million was on deposit abroad. By 1961 the total had hit $3 billion, by
which time offshore financial engineering “was spreading to Zurich, the
Caribbean, and beyond” as jurisdiction after jurisdiction got in on the
game. Today, the economist Gabriel Zucman estimates that there is $7.6
trillion of household wealth in tax havens globally—around 8 percent of
the world’s wealth.
Ronen Palan, professor of
international politics at City University London, describes the birth of
tax havens in a similar way in his The Offshore World (2003), a
process that took about ten years. “These satellites of the City were
simply booking offices: semifictional way stations on secretive pathways
through the accountants’ workbooks,” writes Shaxson. “But these
fast-growing, freewheeling hide-holes helped the world’s wealthiest
individuals and corporations, especially the banks, to grow faster than
their more heavily regulated onshore counterparts.”
Thus
began a race to the deregulatory bottom. Each time one haven changes its
laws to attract more funds, the rival havens have to respond. “This
race has an unforgiving internal logic,” writes Shaxson.
You deregulate—then when someone else catches up with you, you must deregulate some more, to stop the money from running away.
He
describes how the US eventually found it impossible to resist the lure
of hot money, with a gradual blurring of the onshore and offshore escape
routes from financial regulation. The end result is as described by
Harding: the offshore world becomes inextricably embedded in the global
political economy.
It is not a victimless system. A 2010 report by Global Financial Integrity (GFI),
a nonprofit research organization in Washington, concluded that the
total illicit financial outflows from the African continent were
anywhere between $854 billion and $1.8 trillion. Shaxson quotes another
study calculating the real capital flight from Africa over a
thirty-five-year period to 2004 at $420 billion. He contrasts this with
the total debt of these forty countries—“only” $227 million:
So, the authors [of a 2008 University of Massachusetts, Amherst, study] note, Africa is a net creditor
to the rest of the world, with its net external assets vastly exceeding
its debts. Yet there is a crucial difference between the assets and the
liabilities…. “The subcontinent’s private external assets belong to a
narrow, relatively wealthy stratum of its population, while public
external debts are borne by the people through their governments.”
Shaxson,
a former Reuters correspondent based in Angola, is particularly
interested in the billions he estimates have disappeared offshore
through opaque oil-backed loans channeled outside normal state budgets,
many of them routed through two special trusts operating out of London.
He adds:
Having watched people die before my eyes in
Angola…I am seared by having witnessed some of the ways Africa’s people
bear their public debts, in the forms of poverty, war, a hopeless lack
of real opportunities and the regular physical and economic violence
perpetrated against them by corrupt and predatory offshore-roaming
elites… Raymond Baker, director of [Global Financial Integrity], was
quite right to call the emergence of the offshore system “the ugliest
chapter in global economic affairs since slavery.”
The
Panama Papers confirm this picture. They found that businesses in
fifty-two out of Africa’s fifty-four countries used offshore companies
created by Mossfon. In forty-four countries offshore companies were used
to assist oil, gas, and mining deals with more than 1,400 companies.
One
of the least savory characters in the Panama Papers is Beny Steinmetz,
one of the richest men in the world, who uses his private jet to commute
between Tel Aviv, London, Geneva, and his many diamond companies. He
has been the subject of intense curiosity by students of corruption in
Africa since, in 2008, the Guinean authorities withdrew the license of
the Anglo-Australian company Rio Tinto to extract iron ore from the
Simandou mountain range—possibly the largest untapped deposit in the
world—giving it instead to Steinmetz’s Group Resources company, BSGR.
A year later BSGR
sold half of the Simandou arm of the business empire to the Brazilian
mining company Vale for $2.5 billion (the entire annual Guinea
government budget at the time was $1.2 billion). The deal led to one of
Africa’s biggest-ever corruption investigations. The NGO
Global Witness investigated the deal, led by Daniel Balint-Kurti, a
former journalist who had reported from Ivory Coast. In 2013 BSGR started legal proceedings against Global Witness, trying to find out who its sources were.
Balint-Kurti
had done his best to investigate—but always ran into a brick wall of
multiple shell companies created by Mossack Fonseca. With the aid of the
Panama Papers documents, the German reporters discovered strong
evidence that Balint-Kurti was on the right track.
How significant are such revelations and what can be done to deal with them? This will be the subject of a second article.
A note from the blogger: Years ago I produced evidences to the UK Authority about gold market manipulation by the banks because there was a money prize of 100,000 GBP for useful revelations to the UK police... I never heard from them again...
Part 2: How The Gold Manipulation Trial Will Unravel
Canada's Bank of Nova Scotia has been ordered to turn over internal documents
last week's ruling was the first time a Gold and Silver manipulation case reached the discovery stage
defendants are Scotia, Barclays PLC, HSBC Holdings PLC, Societe Generale, and Deutsche Bank PLC
Deutsche settled out of court prior to the ruling
Overview
by Soren K and Vince Lanci, with contributions by Kitco News
| Last week Marketslant was fortunate enough to break the story on
Judge Caproni’s decision in the Gold Fix manipulation case. The decision
is a landmark one and changes the landscape forever in commodity
manipulation cases. Simply put, things are just getting started now. And
today's news is the first step.
We had received the original document from Kitco News' Chief Editor "Dani".
Our goal at that time was to strip out the legalese and make the case
particulars plain for readers. What was not discussed were the
implications of the Judge’s finding for the Plaintiffs. In light of the
first discovery demand, we will try to outline the rulings implications.
Original Story and Ruling HERE
UPDATE:Scotia Bank Gets Tapped for Documents
Today, we learned that Scotia Bank, one of 5 defendant banks in the
case, is the first to be ordered to produce internal documents requested
by the plaintiffs. These documents go back years covering emails,
Instant Message records, internal memorandums, notes from risk meetings
and anything the plaintiffs’ attorneys think to ask for that could help
their case. Things are about to start getting interesting. Here's why.
Why Things are Different Now
Judge Caproni’s decision was a landmark event for the plaintiffs. It
is the first time that a precious metals manipulation case had made it
past the “Opinion and Order” stage with a recommendation the case be
litigated.
The decision is key in that the plaintiffs will be able for the first
time to obtain evidence through discovery and depositions of the
defendants. We cannot emphasize that enough. A barrier has been broken that cannot be put back in place.
The production of discovery, depositions of witnesses, and other
evidentiary processes have never been on the table before are now
accessible.
The Defendants Have Risk
Using a different analogy, cans of worms are being opened now. The
defendants have real risks now. Risks like: perjury, internal
contradictions, contradictions across different firms, and escalation up
the corporate ladder (respondeat superior). The defendants know it. And Daniel Brockett, the point man for the plaintiffs knows it.
“They have to produce all the relevant emails and chat room instant messages, however they communicated with each other"--Daniel Brockett, senior partner and litigator at Quinn Emanuel Urquhart & Sullivan LLP
So, to what ends do these requests for documents serve?
What Do the Plaintiffs Hope to Find?
Broadly speaking, we believe the plaintiffs’ attorneys hope to find 2
types of proof from the documents; proof of intent and proof of Sherman
Antitrust law violations. In essence: 1) Did they mean it? and 2) Were
they working together? Proving Intent-The Plaintiffs' attorneys will
look for evidence of intent. Intent is the most difficult part to prove
in any manipulation case. Intent involves knowing what the
“manipulator” was thinking leading up to the action. Essentially, did
the offender intend to do what he did? There are at least 3 ways of
proving intent, none of which are easy.
The defendant admits it- a product of depositions and/or discovery
A written audit trail that shows intent exists- discovery
An email in which a defendant describes why he did a trade- a written admission
An internal inquiry asking for justification in the scope of the firm's risk- usually involves a superior officer and getting the 2 parties to contradict each other in deposition
An operational or programming person was made privy to the intent as a function of their duties.- underutilized in our opinion
These are very real risks and if the defendants don’t “get their
story straight” (not pejorative), any divergence between word and deed
can hurt their credibility and open the door for more aggressive tactics
by the plaintiffs. Proving Antitrust Law Violations-The
plaintiffs will seek putative damages under the Sherman Anti-trust act.
Specifically under Section 1 governing unlawful restraint of trade.
Section 1 delineates and prohibits specific means of anti-competitive
conduct. The plaintiffs seek to prove collaboration between 2 or more
defendant banks. They will attempt to prove cartel-like behavior between
the defendants. The burden of proof here, even with evidence is high. As stated in Judge Caproni’s decision(emphasis ours):
“Because
the Sherman Act does not prohibit [all] unreasonable restraints of
trade . . . but only restraints effected by a contract, combination, or
conspiracy, . . . [t]he crucial question is whether the
challenged anticompetitive conduct stem[s] from independent decision or
from anagreement, tacit or express.”
Sherman Anti-Trust Act, Section 1:
"Every
contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States, or with
foreign nations, is declared to be illegal."
The purpose of the Sherman Act was to preserve a competitive
marketplace and protect consumers from abuses. However its more recent
applications involve the prevention of cartel operations or monopolies (Wikipedia).
Certainly an email from an employee of Scotia Bank to one of its fellow
defendants describing what it has done or intends to do would serve
this purpose well. But the burden of proof is high.
Even with the uphill battle ahead for the plaintiffs, Brockett was not blowing hot air when he said,
“The
ruling is a major victory for the plaintiffs because it upholds the
core anti-trust claim against the five fixing banks, and the statutory
commodity manipulation claim against the five fixing banks.”
What's Next
Requests for documents will come in for each defendant.
Plaintiff attorneys will review the documents and drawn up their plan of attack.
Depositions of defendant personnel will occur as plaintiffs will
look for contradicting and/or corroborating statements of the documents
reviewed
New requests are made
Defendant Legal Tactics
The following are legitimate reasons for difficulty complying with a court order. They are however easily abused.
Delay: "Those documents have been archived. It will take time to get them"
Inability to Comply: " ..and some of them have been destroyed as a matter of the statute for keeping records has expired"
Redirect: "check (former employee) their personal cell phone records"
No longer works here: "We do not employ that person anymore"
Trade Secrets: "We cannot give you information that our competitors can use to destroy our business"
The Peter Gabriel: " I don't remember, I don't recall"
Lesser Evils Get Ranked
The Prisoner's Dilemma grid will come into play, even if nothing was done wrong. There will be triage as well.
Contempt over perjury
Perjury over fraud/ intent
Fine over jail
Rogue employee over Ceo scandal
Why This is Far from Over
The law operates on facts, not intuition. That means inductive logic,
patterns of abuse, and circumstantial evidence don't prove intent.In
manipulation cases, intent is the hardest leg to prove of the 3 legged
stool concept in law. Judge Caproni said as much in her decision. From Page 1
Whether
the detailed statistical analyses contained in the Complaint reveal
ground truth about the activities of the Defendant banks who
participated in the Gold Fix or are on the “lies, damn lies and
statistics” side of the dichotomy remains to be seen.
In context of her whole statement we take that to mean: "In my
judgment you have met the burden of proof and have the right to seek the
facts you need to corroborate your statistical conclusions. But
statistics are not facts, they are probabilities. You will need facts
after today."
“So
we’ll be able to tell from the communications whether the traders were
actually agreeing to manipulate the gold fix price for their own
personal gain, which is what we allege.”- Daniel Bockett
They may be able to tell. Doubtful if the communications alone
will offer a smoking gun, as cool as that would be. A world of grey
exists here. For The Defendants
"We are unable to comment as the matter is still before the courts,”- Rick Roth for Scotia
We bet you are unable to do a lot of things, like produce documents in a timely manner if at all.
[Editor's Note:
Simon is out with the flu, so in his absence we've selected one of our
most popular and compelling stories for you today. This was originally
published on October 7, 2014.]
Chris Rose was dying
from terminal heart disease. He didn’t have long, and before he passed,
he wanted to make sure that his 18-month old son received his British
passport.
When he went to pay the application fee at the British consulate in Hong
Kong with cash, they told him, “Sorry we only take credit cards.”
The English teacher who had been living in Hong Kong for 20 years
doesn’t have a credit card, and thus has no way of paying the passport
fees for him and his son.
So they rejected him. They rejected a dying man from paying for his son’s passport with the very currency that they themselves issue. It’s obscene.
Facing intense bureaucracy and several months of waiting with no
guarantee of success, he gave up on the hope that his infant son would
be able to visit his grandparents back home.
It was only after the story was publicized in the local press in Hong
Kong that the requirement to pay with a credit card was ‘waived on
compassionate grounds.’
Think about how ridiculous this whole situation is for a moment.
First the government makes it mandatory that you have a passport in
order to be able to move across arbitrary borders on the map that they
have created.
Then they charge you money for the privilege of having a passport. In
other words, if you want to leave the country, you have to pay up.
But then they won’t allow you to pay for it with the pieces of paper they force you to use as money.
Instead, they force you to use the government-regulated (and protected) banking industry, whether you want to or not.
Everywhere you look you can find examples like this of how politicians
view people as government property to be exploited like cattle.
The Brazilian government imposes a tax of 6.38% on all purchases made by Brazilians with credit cards abroad.
This rate rose from the previous 2.38% in 2011 with a federal mandate in
an effort to curb the rising trend of Brazilians traveling abroad to
make purchases that are often cheaper than back home.
They don’t even try to hide the fact that they don’t want Brazilians to spend money outside of the country.
The message they are sending is quite clear: stay put and pay through
the nose for inferior products produced by companies that have paid us
off for a monopoly.
Of course, we’re starting to see protests around the world, proving that
people are increasingly aware of being screwed by their governments.
But these protests are flawed.
Going out into the streets doesn’t change the system. And going to the voting booth only changes the players… not the game.
Every single election cycle people fill themselves with hope. They
delude themselves into believing that everything will get better if they
vote the right guy into office.
Of course, the right guy very quickly turns into the last guy. And nothing changes.
That’s because it’s the system itself that’s flawed. It’s not about any single individual.
This system awards a tiny elite with the power to kill. Steal. Wage war.
Confiscate anyone’s property in their sole discretion. To tell people
what they can/cannot put in their own bodies. To conjure trillions of
currency units out of thin air.
But this current system can’t last.
It requires economic stability to self-sustain. And it’s already at the
point where those in power have to resort to desperate tactics.
This simply cannot sustain. Whether it happens today, tomorrow, 10 days
from now, 5 years from now… is irrelevant. What’s important is the
trend. It’s happening.
This is fundamentally good news. Yes, every shred of evidence suggests
that the old system is on the way out. And that’s a bit scary. The
unknown is always uncertain.
But what will come out on the other end will be better, brighter, and more free.
If you take a hunk of coal and put it under extreme pressure, you end up with a diamond.
Our entire civilization is being put under intense pressure. And what
will come from this eventually is just as precious: a system where the
individual has the power and freedom to choose. Where we are no longer
viewed as government property.
In the meantime, it’s going to be a bumpy (and high-pressure) ride.
So for now, look at the objective data. Trust your senses about what’s happening. And don’t put all of your eggs in one basket.
Paul Romer speaks at the Disruptive Innovation Awards at the 2011 Tribeca Film Festival in New York. - Slaven Vlasic/Getty Images
It's
rare one uses the words gossip or gossipy in conjunction with economics
— except maybe around Nobel Prize time. Which, as it happens, we are.
The
winner of the Nobel in economics will be announced on Monday. One of
the people perennially on the shortlist is Paul Romer, professor of
economics at the Stern School of Business at New York University.
If
he wins, he'll be the toast of the economic town. But there's a bit of a
hubub in the dismal science lately over a paper he wrote that's
probably not going to win him any prizes.
Romer, also newly appointed chief economist at the World Bank, recently wrote “The Trouble With Macroeconomics.” Kai Ryssdal spoke with Romer about his thoughts on the current state of macroeconomics.
On what he thinks is wrong with modern macroeconomics:
Here’s
the real sign of the disconnect: In the market, everybody is very
focused on whether or not the Fed is going to raise interest rates, and
they think that’s a big deal; it’s going to have a lot of implications.
In macroeconomic theory, there is this argument that what the Fed does
has no effect on unemployment, no effect on investment, no effect on the
rate of GDP growth. It’s just — it’s really an absurd statement, but
it’s kind of almost like angels on the head of a pin: "I don’t believe
monetary policy matters and you can’t make me."
On why macroeconomists matter:
What
happens at the Fed, what Janet Yellen and the other people decide
there, what happens in central banks in other parts of the world is very
important. This can make the difference between a high unemployment
rate, a slow recovery or a more rapid recovery. So it’s important that
the people making those decisions do it based on the best evidence and
the best reasoning. And what we’re getting from the universities right
now is not reliable. It’s worse than noise; I think it’s totally off
base.
