The Odebrecht scandal brings hope of reform

Revelations of wholesale bribery may mark a turning-point in Latin America’s battle against corruption

PERCHED on a sandy hill overlooking Lima’s oceanfront is a 37-metre-high statue of Christ, a crude copy of the one that looks majestically down on Rio de Janeiro. It was unveiled in 2011 by Alan García, then Peru’s president. Now Peruvians see it as a monument to corruption. It was built with a donation of $800,000 from Odebrecht, Brazil’s biggest construction company, which has admitted that it paid $29m in bribes to secure contracts in Peru under the three governments that preceded the current one.

In the largest anti-corruption settlement in history, reached in December, Odebrecht revealed to authorities in the United States, Brazil and Switzerland that over 15 years it had paid nearly $800m in bribes related to contracts for more than 100 construction and engineering projects in a dozen countries. In Brazil, Odebrecht was at the centre of a cartel that gouged Petrobras, the state-controlled oil company; its former boss, Marcelo Odebrecht, is serving a 19-year jail sentence. The settlement showed that in nine other Latin American countries the company paid a total of $388m in bribes to government officials and their associates. read more »

Senators grill Janet Yellen on Republican plans to neuter Dodd-Frank Act

Asked about Donald Trump’s claim that the financial regulation meant businesses could not borrow, the Fed chair said growth in lending was robust

Dueling senators turned the Federal Reserve chairwoman’s first testimony before Congress since the election of Donald Trump into a row over Republican plans to defang Dodd-Frank, the financial regulation brought in after the Great Recession. read more »

Morgan Stanley Settles Charges Related to ETF Investments

The Securities and Exchange Commission today announced that Morgan Stanley Smith Barney has agreed to pay an $8 million penalty and admit wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.

The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.  Among the order’s findings, Morgan Stanley failed to obtain from several hundred clients a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses. read more »

Officials: $70M scheme funded $400-a-month Victoria's Secret lingerie habit

A Warren County man who operated multiple investment and asset management companies has admitted defrauding nearly 480 investors in a $70 million Ponzi scheme, officials said.

William Apostelos, a onetime resident of Springboro, was charged along with his wife, Connie, in a scheme that officials said was “laced with a web of financial lies.”

The couple recruited investors from 37 states to invest in Apostelos’ Dayton-area companies WMA Enterprises and Midwest Green Resources, according to a news release from the U.S. Attorney’s Office. Investors were told their money would be used for acquiring stocks or securities, officials said, buying real estate or land, providing loans to businesses, and buying gold and silver.

Instead, officials said Apostelos used the money to pay for things including $400 per month on Victoria’s Secret lingerie and $35,000 per month on his wife’s horse racing company. read more »

Ex-governor of the Bank of Spain charged with fraud

The Spanish banking elite faces one of the biggest cleanups in its modern history

Spain’s central high court has charged the former Bank of Spain governor Miguel Ángel Fernández Ordóñez.

The decision was followed by resignations of Bank of Spain officials, including the bank’s Director General of Supervision, Mariano Herrera Garcia-Canturri.

Bankia case

Miguel Angel Fernandez Ordonez led the Bank of Spain from 2006 to 2012.

Fernández is charged with allowing the floatation of 48% Bankia in July 2011, a move that has cost 200,000 investors millions.

The lender was created in 2010 through the consolidation of seven building societies that had offloaded their non-performing loans to a bad bank (BFA).

Bankia floated on the stock exchange for €3.75 a share; within a year, the stock’s value was under €1. There is now evidence to suggest that Fernández Ordóñez was perfectly aware that the bank was troubled and should never be listed. The bank was soon partially nationalized.

At the year of its floatation, the lender cheated investors, reporting a €4,3bn deficit as a €309 million profit. Charges have also been issued against the former securities watchdog chief, Julio Segura, and several of their aides. read more »

MEPs call for EU-wide protection for whistle-blowers

An “effective and comprehensive European whistle-blower protection programme” should be proposed “immediately” by the EU Commission, urges Parliament in a resolution voted on Tuesday. MEPs deplore the Commission’s failure, so far, to deliver any legislative proposals to establish a minimum level of protection for whistle-blowers who help protect the EU budget against fraud

This programme should include whistle-blower protection mechanisms for companies, public bodies and non-profit organisations, says the text of the non-binding resolution, which was approved by 607 votes to 16, with 70 abstentions.

MEPS also advocate setting up an independent EU body, with offices in EU member states, to help internal and external whistle-blowers to use “the right channels to disclose their information on possible irregularities” affecting the EU’s financial interests. read more »

Toshiba’s Chairman Resigns as Its Nuclear Power Losses Mount

Toshiba, the embattled technology conglomerate, said it planned to write off more than $6 billion and withdraw from the business of building nuclear power plants as the impact of a disastrous bet on American nuclear energy continued to rock a mainstay of corporate Japan.

The company also said on Tuesday that its chairman, Shigenori Shiga, would resign, ending weeks of speculation.

Its executives have come under intense scrutiny because of the financial mess and the years of flawed business decisions that led to it. The company said it was examining whether managers had acted inappropriately when they struck a deal to buy a company at the center of the problems.

The trouble stems from Toshiba’s management of Westinghouse Electric Company, the American nuclear power business it acquired a decade ago. Westinghouse faces spiraling cost overruns at nuclear plant projects in the United States, and Toshiba said on Tuesday that it would like to sell all, or part, of its controlling stake in the company. Previous efforts to offload a portion of its shares in the subsidiary have failed, however. read more »

Ex-Rabobank trader spared prison for cooperating in U.S. Libor probe

A U.S. judge on Tuesday spared a former Rabobank trader from prison after he cooperated in a U.S. probe into how traders manipulated Libor, the leading benchmark for pricing financial transactions, to the bank's advantage.

U.S. District Judge Jed Rakoff in Manhattan imposed the no-prison sentence on Lee Stewart, 53, citing the British citizen's decision to cooperate with the U.S. Justice Department. read more »