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24 Aug

Report Says: Bear Stearns Executives Sold Illegal RMBS and Covered It Up

Former back office employees from Bear Stearns are coming out of the woodwork to explain how Tom Marano’s mortgage group cheated their own clients out of billions. This week I reported at The Distressed Debt Report, EMC insiders say they were told to make up the classification for whole loans, packaged into mortgage securities, to get them switched out of the trust. By classifying the loans as ‘prepaid’ or having ‘subsequent recoveries’ Bear employees were able to fool the trustee into giving them back loans they were not able to legally service. A move New York Attorney General Eric Schneiderman is actively investigating now.

In my latest Distressed Debt Report story we hear from EMC staffers who describe how subprime loans, that would have been sold by Bear Stearns trader Jeff Verschleiser’s team, never had a proper servicing license in West Virginia when they were packaged into the residential mortgage backed security. In 2003 Bear/EMC put $100 million of subprime loans from West Virginia into a few RMBS transactions. EMC, the banks wholly owned mortgage servicing shop, would service all of Bear’s RMBS after they were sold.

A year latter, after senior executies realized the mishap, instead of Bear Stearns going out and informing their regulator or applying for a license, they orchestrated a cover up and even threaten EMC employees not to talk about it. Verschleiser was the head trader for the subprime desk reporting directly to Tom Marano. Marano was the head of mortgages for the bank. Verschleiser now works for Goldman Sachs and Marano is CEO of ResCap a division of Ally Bank.

Bill Singer, a former federal regulator attorney, reviewed the whistleblower testimony for us and had a few choice words on the potential legal problems Bear/EMC has as a result of the subprime loan swaps.

“First off, the inclusion of West VA loans into the RMBS might constitute a material misrepresentation in written offering documents and would certainly raise questions as to whether the deal was properly “Blue Skied” if EMC was not licensed to service the West VA loans,” says Singer who also writes about legal issues at his popular blog Broke and Broker.

Singer sees the failure to timely disclose this to the Trustee could constitute fraud to the extent it was a material omission and that the law imposes an ongoing obligation upon Bear to timely notify the Trustee of any subsequently discovered noncompliant facts.

“What constitute a troubling twist and potentially exacerbating factor, is that upon recognizing the lapse, EMC (and possibly in “conspiracy” with Bear and/or others), may have willfully enlisted the assistance of an individual who was deemed pliable and vulnerable to pressure, and such pressure may have been directly or indirectly exercised in a manner that was calculated to conceal or to further the non-disclosure of the West VA issue. Such conduct could raise questions as to whether it was calculated to “obstruct justice” or to impede/interfere with regulatory/criminal investigations,” says Singer.

We need to recall that a few years ago Bear Stearns Companies, LLC and its subsidiary, EMC Mortgage Corporation paid $28 million to settle Federal Trade Commission charges that alleged unlawful practices in servicing consumers’ home mortgage loans, particularly misconduct pertaining to misrepresentations about sums owed, undisclosed/unapproved fees, and collection abuses.

Singer point out, “As such, Bear/EMC are not particularly lovable companies these days and given Bear’s demise and the upcoming election, we should expect that politicians and aspiring prosecutors may find firms such as Bear/EMC to be particularly popular targets.”

J.P. Morgan who bought Bear Stearns and EMC in 2008 also assumed litigation risk. It’s JPM’s deep pockets that institutional investors in Bear’s RMBS are counting on paying out billions in damages for the actions of these dubious Bear executives. Stay tuned because the New York A.G. questions don’t appear to be ones JP Morgan can delay or ignore. There’s an old saying that you don’t get in trouble so much for what you are doing as for what you have done — and this is a perfect example. These things have a way of catching up with you over time.

Editor’s Note: You can buy a single copy of my story at The Distressed Debt Report. If you are an investor in any of Bear Stearns RMBS I think it’s worth it.

12 Comments
10 Aug

UPDATE: JP Morgan is afraid of the RMBS Fraud Suits

JP Morgan is showing signs of fear. Yesterday, I updated Keiser Report viewers on the dirty tricks the bank’s lawyers and former Bear Stearns mortgage traders are pulling in an atempt to stop the truth coming out in the Bear Stearns/EMC fraud suit. A story I first began reporting a year ago at The Atlantic has now led to a very active New York Attorney General investigation for possible violations of the Martin Act and witness tampering.


Click here to see the full interview it starts at minute 13.

Nick Verbitsky, documentary film maker and founder of BlueChip Films, received a call from the NY AG’s office last month requesting all unedited footage of former Bear/EMC anaylst turned whistleblowers. Verbitsky’s film about the failure of Bear Stearns and how some players of the media, CNBC, failed to deliver reliable news is about to begin showings at business schools around the country. It’s a must see and you can watch the trailer here.

UPDATE 8-20-11: My former employer, Hearst CT Newspapers, has finally figured out Verbitsky has made an important film and it’s newsworthy. It’s nice to see they still follow my reporting — even if it took a year for them to write a good review this week. The Hearst writter gets a little confused on who the important players are in this film. The background detail Roddy Boyd provides highlighting what Tom Marano’s team of Bear traders saw regrading real liquidity issues is much more important to the story than anything Andrew Ross Sorkin (who did very little reporting on Bear in 2008) has to offer. Nick’s big finds in this film are really the EMC and Moody’s whistleblowers and it’s their testimony of fraud and negligence that makes this a must see film.

7 Comments
5 Aug

Wachovia Executives lies About Health of Stock Leads to half a Billion Payoff

Pension funds who bought faulty Wachovia preferred securities and bonds between mid-2006 to mid-2008 scored a big win today. The commercial bank, who was taken over by Wells Fargo when it failed in 2008, agreed to pay over half a billion for misleading institutional investors as to the health of their option ARM portfolio. The class action suit lead by Pennsylvania law firm Kessler Topaz scored a $590 million payout from Wachovia (paid for by Wells Fargo) and even got its auditor KPMG to pony up $37 million.

Orange County Employees’ Retirement System, Louisiana Sheriffs’ Pension fund and the Southeastern Pennsylvania Transportation Authority were the court appointed plaintiffs in the class action suit. Unfortunately since this was a settlement, former Wachovia bank executives, like CEO Robert Steel, didn’t admit wrong doing but the discovery tied to the section 11 (negligence part of the 1933 Securities act) charges the pension funds brought forward clearly scared the pants off these bankers. Considering the common shareholders just had their similar case against Wachovia thrown out, this reads like the institutional investors out lawyered the bank.

“We estimated actual losses to be proven at trial to be around $1.5bn -2bn. So we think a 25-40% out of court recovery like this is very successful,” said attorney David Kessler of Kessler Topaz.

Of course if the pension funds had paid attention to mortgage expert Mark Hanson’s warnings about Wachovia’s pick-a-pay book back in 2007 they might have not gotten themselves into this big of a loss in the first place. It was Hanson’s self made u-tube videos about the accounting games Wachovia and Wells Fargo were playing that made him a cult classic among hedge funds shorting these banks during the financial crisis. CNBC’s Herb Greenberg was one of the first pundits to publish his views in December 2007 after Hanson wrote “The Hybrid-term ARM and Pay-Option implosion are all happening simultaneously and are about to heat up drastically”.

This settlement also highlights that eventually if investors stick with their convictions, and not just write off assets the banks mislead them on, lawsuits can help them get some of their money back. I knew in September 2008, when I was first to publish a New York Post story calling Robert Steel a liar for the low loss numbers he was claiming on Jim Cramer’s Mad Money show, that it could be a silver bullet in forthcoming investor lawsuits. Steel had said on CNBC only $10 billion out of $500 billion were problematic loans but when the FDIC finally seized the bank a much high number came to light and proved my reporting was spot on.

While it’s good that mom and pop investors in pension funds are getting millions back I have to wonder if the feds will ever go after the mega millions Wachovia executives pocketed for themselves. Or ever figure out how blatantly they lied to public investors while pumping the health of their faulty stock. It sounds like stealing to me and doesn’t that type of behavior usually equal jail time? Since this is a civil settlement, not litigated in conjuction with a criminal case, there is no reason the Feds can’t still charge former Wachovia executives for lying to stockholders and go take a look at some of that sealed discovery the Kessler Topaz lawyers are sitting on. I’m sure there are plenty of damaging emails that we’d all like to see.

2 Comments
26 Jul

FDIC Report Blames Fred DeCaro Jr. For USA Bank Failure

The watchdog that inspects what went wrong after the FDIC seizes a bank has found USA Bank failed because of its Chairman’s actions. Today I report at The Distressed Debt Report , Fred DeCaro Jr was named as violating multiple banking and lending laws that lead to last summer’s seizure of USA Bank. DeCaro and other bank executives had repeatedly told Hearst CT Newspapers that the failure of the bank was a cause of the financial crisis and not the fault of management. Now the bank’s primary regulator says this isn’t true.

To make matters worse the FDIC’s Office of Inspector General also lays out a case against USA Bank’s board of directors for misleading the regional FDIC examiners and lying about who was really controlling the bank’s executive decisions after DeCaro Jr was kicked out of his CEO title in 2007.

When I asked FDIC spokesperson David Barr when the civil suits will start for DeCaro Jr he wouldn’t comment. But Ralph Hutchinson, former federal bank regulator who now consults on bank fraud told The Distressed Debt Report he expects the FDIC to impose a bar against DeCaro from ever working as an executive of a FDIC insured bank. Hutchinson says the FDIC is likely to go after DeCaro’s personal fortune if they cannot recover the $65 million they took in losses to the insurance fund from the bank’s officers and directors insurance. Shareholders of the bank say USA Bank had only $5 million in D&O insurance.

What’s not clear is how serious the Department of Justice is in going after board members who allegedly lied to Federal bank regulators or DeCaro’s son who I previously reported acted as a bagman to fool the FDIC into thinking his construction loans were performing.

But the heat is definitely on DeCaro Jr now. This morning I learned Congressman Himes office has looked into my reporting on the lending abuse and fraud at USA Bank and encouraged the Connecticut Attorney General to begin an investigation into DeCaro and the bank directors. Himes office told me in May he’d contacted the FDIC and wanted an answer, on behalf of constituents who lost millions as shareholders of the bank, as to the status of their investigation.

It looks like if you complain loud and often enough the FDIC will pick up the pace and actually work to spot the villains that abuse our free markets. DeCaro has been fined over $100,000 but no criminal charges have been filed yet. People who have spoken with DeCaro lately say he’s prepared for any upcoming civil suits and has squirreled away some of his alleged ill gotten millions, making it hard for plaintiffs to get any real cash out of his estate. DeCaro did not return a request for comment and the last time I spoke to him his comments about why the bank failed turned out to be untrue – but we are always open to hearing from you Fred.

2 Comments
19 Jun

RBS Embezzler James Glover’s USA Bank loan Close to Default

The 20-year Greenwich Capital executive, James Glover, who pled guilty to an embezzlement scheme against Royal Bank of Scotland this month, is likely to see his ski resort real estate project blow up in smoke.

An over built luxury ski mansion is allegedly the driving factor that pushed Glover to steal from RBS when he couldn’t afford to pay his short term construction loan. The seven bedroom home, pimped out with over the top luxury amenities, is now up for sale in a private auction by Concierge. Glover’s partner Tom Poelker, a developer in the Windham area, has kicked Glover out of any management responsibilities. He’s now desperate to sell the home in a no minimum bid auction before the loan is due at the end of the month or the Pennsylvania bank who took over the distressed mortgage could go after their personal assets, which includes Glover’s primary resident in West Harrison, NY. The Glover loan was assumed by Customers Bank when the FDIC shut down the mortgage originator, USA Bank, last July.

News of Glover being suspended from RBS and turned over to authorities surfaced early last year when Greenwich Time and DealBreaker reported Glover felt cashed strapped from the lack of bonus the British subsidized bank was giving in 2009. I reported at Greenwich Time Glover had been vocal with his RBS peers about needing cash to make interest and balloon payments on a commercial loan issued by USA Bank. The $3.6 million loan was for development of a high-end residential development at a ski resort in Windham, New York. The 2008 construction and building improvement loan was issued in June 2008 at 9 percent interest only but Glover and his partner Tom Poelker were unable to get sales going and couldn’t make the June 2010 balloon payment, according to Poelker’s attorney Larry Gardner who handles his real estate transactions. USA bank loan documents show, the secured loan was backed by Glover’s personal ski house and the near 80 acres of prime land the development project had bought for around $1 million.

Poelker is a known developer in the tony upstate New York ski area and the chairman of the Democratic Committee for Greene County. Poelker says their goal was to zone the land into about 9 lots, build a road and sewer hook ups for spec homes selling for about $5 million each. Carol Shaw, a local realtor says most lux homes near the ski resort don’t go for over $2 million. But still, Poelker’s attorney admits, Glover and Poelker began building a 11,000 square spec house during the heart of the 2008 financial crisis with no buyer in site to promote the lux resort community idea. It’s been listed since last year for $5.9 million but had no takers. I reported for DealFlow Media last month that USA Bank is currently under a criminal investigation by the FDIC’s Office of Inspector General. My investigation detailed the bank’s failure due to reckless lending that lead to a depletion of their $35 million in equity capital in only four years. The FDIC seized the bank in July 2010 after they couldn’t raise their risk based equity capital above 7 percent and their lending profile was too highly concentrated in defaulting commercial and construction loans.

Glover’s plea deal with the U.S. Attorney states he stole around $625,000 from RBS by making up a client account, CPS Funding, that had a similar name to a real RBS vendor and client. Glover’s first cousin Bill Kardias’s has a New Jersey based information security business called CPS/Comtech and was a vendor for Greenwich Capital. Court documents say that Glover made nine separate transfers to the fake account set up in New Jersey in 2009 and 2010 and pocketed the money. An RBS internal audit caught the last transfer on Jan. 21, 2010 for $359,180.55 and RBS officials confronted him about the fraud. Glover reversed the transfer and returned the $300,000 immediately. The rest of the money he siphoned off from the bank was return in March 2010.
RBS has stated this was an act of only one person from the bank, but a spokesman for the Department of Justice says the investigation is ongoing.

Neither Glover or his cousin Kardias returned a call for comment.

Gene Riccio, Glover’s attorney, declined to comment except to say that, “It was an unfortunate situation.”

Glover’s sentencing is scheduled for mid-September.

After Glover was fired from RBS he listed his second home, a nine bedroom five bath ski chalet in Windham for $1.1 million. His realtor, Carol Shaw, confirmed it sold at a discount in June for $870,000. According to Poelker’s attorney Gardner, Glover and Poelker then used the proceeds from the sale to bring current the interest on the loan and USA Bank gave them a modification lowering the interest rate to 6 percent and extending the time of the balloon payment to June 30th 2011. Poelker had to add a personal guarantee to the modification. Poelker’s attorney Stewart Barrelson said after the news broke that Glover had been fired and was being investigated, Poelker had him removed as a managing and voting partner of the Llc, Stony Hill Road 1,that runs the resort project. Loan documents show Glover is still personally liable for the $3.6mn USA bank loan. With the new looming construction loan due and no successful sales to any of the nine lots or the $5.9 million spec home; Poelker was in a bind and recently put it up for auction. The auction for the 7 bedroom lux home with in-ground pool on 5 acres, takes place June 25th. Modified loan documents show the bank will release the spec house from the secured collateralized construction loan if they get $3 million. If Glover and Poelker default on the loan the bank can claim the entire project’s land of near 80 acres, plus Glover’s primary residence in West Harrison New York.

The Bank was seized July 9th 2010 and the loans were assumed by Pa.-based Customers Bank, which is run by former Sovereign bank executive Jay Sidhu. Glover’s only lucky break appears to be a loan modification given to his resort project on June 29th just two weeks before USA bank was seized. But my investigation into USA Bank shows Sidhu’s team isn’t so accommodating and has already tried to force other real estate developers in Greenwich and New Canaan into Chapter 7 bankruptcy because they appear to want the mega mansions that were secured by the defaulting USA Bank loans. USA Bank’s father-son chairmen, Fred DeCaro Jr. and Fed DeCaro III, have also been reported to be under criminal investigation for bank fraud.

For now we wait to see if a cash flush distressed debt buyer is able to scoop up the entire Windham resort project for only the $3.6 million principle Glover and Poelker are desperate to pay off.

4 Comments
5 Jun

Greenwich Capital’s James Glover admits to stealing from RBS

This story was originally published at Greenwich Time last year. James Glover finally plead guilty on June 1st to one count of interstate transportation of money obtained by fraud stemming from an embezzlement scheme. The Department of Justice said he stole $625,000 from January 09-10 but lucky for RBS he gave it all back (a fact I reported would happen over a year ago). Sentencing isn’t until September and he could face up to ten years in jail plus a fine of $1.25mn. When I first reported on Glover for Greenwich Time a RBS spokesman wouldn’t admit which authories were investigating the scheme. We now learn it was the Secret Service. Oddly, my former peer at Hearst CT Newspapers didn’t mention in his story on Glover that the paper(via me) had published a detailed report on Glover’s fraud a year before and that last week we finally learned my report was dead on and way ahead of the DOJ’s announcement of fraud.

EX-RBS Executive James Glover sees Upstate NY Investment at Risk (2010-03-09 21:23) – Teri Buhl

The Royal Bank of Scotland executive who was fired from the bank’s securities trading operation is still a free man. James M. Glover, who goes by Jamie, ran the back office operations for Greenwich Capital, the securities firm bought by RBS that operates like an internal hedge fund. After RBS discovered Glover’s indiscretions though an internal review, people who work with him say he was grilled for eight hours before they escorted him out of the building. The news was first reported at Dealbreaker after internal whistleblowers called in to report the problem, saying Glover used junior staffers to siphon off funds from trades. The bank’s press man, Mike Geller, confirmed Glover’s dismissal and involvement in the trading scandal but was vague about which authorities they turned Glover over to. Geller told Greenwich Time they wouldn’t comment further since the investigation is still ongoing.

We can confirm that Glover, 52, lives in West Harrison, N.Y., with his wife, Jeanette, who teaches preschool at Rye Country Day school. When we reached Glover at home last week he told us he was surprised RBS released his name as being involved in the case. He quickly referred all future comments to his criminal defense lawyer, Gene Riccio, of Bridgeport-based Gulash & Riccio. Riccio told Greenwich Time that at this time they are not commenting about what happened at RBS or any pending actions.

Ron Geffner, a former Securities and Exchange Commission enforcement lawyer, told Greenwich Time after being asked if it was normal for the Feds to take no action for a month after the bank reported the case, “Glover’s likely not arrested yet because the feds don’t see him as a flight risk and he is working with authorities to plead out a deal. Or best case scenario, they still don’t know yet if he is guilty of criminal charges.”

Why a respected and seasoned financial executive would risk his livelihood after two decades with Greenwich Capital is yet to be answered. But according to multiple people who worked with him, Glover was vocal about RBS taking away cash bonuses last year and mad about what he felt wasn’t fair pay for performance. Many also knew about his dream to build beautiful luxury mountain homes in his favorite ski town, Windham, N.Y.

Glover has a second home he shares with his sister, Janet Glover, in Windham. But just three weeks ago, after his separation from RBS, he put the home up for sale. A Windham neighbor told Greenwich Time they were surprised he was going to sell the house considering he just finished an addition. The nine-bedroom, five-bath ski house is appraised for around $800k and listed at $1.1 million. Glover’s neighbor and local Realtor, Carol Shaw, told Greenwich Time she thinks he’s priced it to sell right away.

You see, in June 2008 Glover took out a very large building loan and security agreement against the house and another piece of land in Windham from Port Chester-based USA Bank. Building loans are typically due in 18 months to two years and the pressure to pay this one off was mounting. If not paid off on time, the Glovers could risk losing their home and other Windham real estate investment. Glover had partnered up with Thomas Poelker, a builder in the upstate New York resort community, to develop a luxury subdivision near the Windham ski resort. According to people familiar with the transaction they bought the undeveloped 75 acres of land for around $1 million a few years ago. It was subdivided into 9 lots, a road was built into the area, and one 10,000 square foot spec house is under construction.

One lending financier who spoke on the condition of anonymity because the deal is private, told Greenwich Time that Glover came to him a few months ago and said he was really worried about the balloon payment coming due on the $3.6 million dollar loan he took out against the second home in Windham to help finance the luxury development. While he was still employed with RBS, the financier told him he would have to try to do a workout with the bank, and that refinancing wasn’t likely. The unfinished spec house has been for sale for a year for $5.9 million. According to a local Realtor, no spec-built luxury home has ever been sold in the area for more than $2 million. Many locals question if this level of luxury second home living will find a willing buyer in this economy. USA Bank would not comment on whether it will foreclose or do a workout if Glover can’t make his loan payment. When we reached Janet Glover, James’s sister who co-signed on the loan, she would not comment on how they plan to make the payments.

For now it’s a wait-and-see game. Even if no criminal charges are levied, will Glover’s somewhat overleveraged lifestyle and side investment projects turn into financial ruin?

2 Comments
30 May

Former Bank President was Afraid to Whistleblow on USA Bank’s DeCaro

Greenwich bankers, from once publicly traded USA Bank, are under criminal investigation for their role in lending abuse and possible securities violations. I detailed in an investigative report last week at Dealflow’s The Distressed Debt Report how Fred DeCaro Jr. and his son were allegedly allowed to violate the business plan that earned them a FDIC approval for years before they were seized on July 9th, 2010. Now we learn the bank’s founding president, Peter Keller of New Canaan, CT, backed out of whistle blowing with another board member, at the last minute because he was afraid of the DeCaro’s retaliation.

According to The Distressed Debt Report, one of the founding investors and board members, Sal Pane, went to the FDIC within the first year of bank operations (September 2006) with documented evidence of lending abuse and securities violations. We now learn according to Maurizio Carusone, a founding investor, and Sal Pane that Peter Keller and the banks V.P. of residential lending Tom Calabro, agreed to go with Pane for his whistle blower interview. They all met the night before to talk about their testimony but Pane says at around 9 a.m. ,while waiting outside the FDIC office, he received a message from Keller that he was backing out.

“Peter said I can’t, I’m sorry but you have more money than me and I can’t afford a lawsuit by DeCaro,” according to Pane.

Pane ended up attending the meeting as the sole board member (with his attorney) and brought with him 17 boxes of documents detailing bank fraud and securities violations. Still, it took the FDIC over a year to issue their first cease and desist order. A move that forced DeCaro Jr. out as chairman but allowed the bank to put his son Fred DeCaro III, with no banking experience, in to replace him. It’s unclear how much opperationally changed after the C&D. DeCaro Jr. was eventually fined $125,000 and Keller only $1,500 in mid-2008 but by then Keller had moved on to secure a job as Vice President of Retail Sales for another publicly traded community bank – The Bank of New Canaan.

According to an April 2006 proxy statement sent to shareholders, Keller was paid $117,769 plus an additional $100,000 consulting fee for services rendered in 2005 prior to the approval of the Bank’s organization certificate. Of the five people paid for services involved in founding USA Bank Keller received the highest payout. The proxy statement also shows he received the 2nd lowest amount of shares, 20,000, issued to founding board members. Keller’s salary, as President of the bank was $180,000 a year; equal to that of the Chairman Fred DeCaro Jr.

Keller did not return emails to his work and phone calls to his home for comment.

Investors in USA bank say Keller was lucky to get a bank license from Connecticut’s banking commissioner after his time at USA Bank; his FDIC fine was one of the smallest of all the board members. But according to his LinkedIn profile and publicly filed bank documents he was never made a member of the board at New Canaan Bank and took a lesser position. After three years, Keller left Bank of New Canaan, this April for undisclosed reasons, to do a similar job at First Niagara Bank. His LinkedIn profile omits his work at USA Bank.

Pane did sue USA Bank and DeCaro Jr. after he resigned as a non paid board member in November 2006. Court documents show he’d been granted discovery from USA Bank and depositions of DeCaro; he beat the Bank’s motion to dismiss. But after the FDIC seized the bank, in July 2010, his legal claims against USA Bank became null. Pane can still sue DeCaro Jr. personally and his attorney said that’s the game plan.

According to my story in The Distressed Debt Report, Keller was not named as a person of interest in the FDIC investigations but then I haven’t interviewed every single person the FDIC has. No charges have been filed yet against any of the executives or board of directors of failed USA Bank. The FDIC said they don’t comment on active investigations.

You can buy a single copy of my investigation at DealFlow Media here.

UPDATE 5-31-11: Peter Keller has finally written back to say he has no comment on USA Bank.

5 Comments
6 May

SEC Thinks Bear Stearns Mortgage Traders Need Investigating

It appears the Securtities and Exchange Commission has been reading my reporting on Bear Stearns mortgage traders cheating their clients out of bilions and double dipping on profits. Today, Jody Shenn at Bloomberg reports he’s heard J.P. Morgan received subpoenas asking for information on how Bear Stearns mortgage team sold back failed loans to mortgage originators and didn’t pass the monies back to the investors in their mortgage bonds.

J.P. Morgan won’t confirm the SEC subpoena for Bloomberg but I can confirm the regulator has been investigating the actions of the bank since I first broke news on the problems at TheAtlantic on Jan 25th. I even reported the SEC’s actions to Max Keiser the day my news broke after I received calls from people familar with the case saying the SEC office in Colorado had reached out to them because they wanted to know what kind of documents and whistleblowers they had accumlated to prove their accusations.

No charges have been filed against JP Morgan or the Bear Traders, now making millions at other banks, but let’s not forget they also have the Manhattan D.A. on their tail.

TheAtlantic’s Dan Indiviglio, a terrifc editor who worked on my Bear Stearns coverage, said it best :

As I stated before, these fraud allegations should actually be fairly easy to prove or disprove — unless evidence has been destroyed. If a double-dipping scheme took place or if securities provided were different than indicated, the process either did or did not violate deal covenants. There’s not a great deal of gray area allowed when actual money changes hands. We aren’t merely talking about insurers claiming they didn’t have all the information they needed; we’re talking about insurers claiming that deal documents specified that funds should have been provided to them that these Bear execs kept for their bank, or that the securities sold did not adhere to the criteria deal documents specified.

Unfortunately, I don’t see the Bear traders, led by Tom Marano, sweating these investigations until a federal regulator actually shows the strength to charge them for what most of you who write me think is very clear criminal fraud.

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