I am writing this article to send a special message across the globe. There is always a section of the people enjoys committing fraud and this continues to happen. But if you support or suppress fraud in any form, then the result is total collapse. Supporting and or suppressing fraud is also a fraud.
The lone reason for the current devastating economic world war is nothing but fraud committed by few people and the support and suppression enjoyed by them for a long period of time. Colleagues, superiors, department heads, and government agencies to an extent support or suppress the fraud committed by their favorites. The top authorities become serious and active when such frauds are brought to the notice of the public. In some cases, even the media including daily news papers do not report fraud committed at high ends.
After the Great Depression of the 1930s, the worst economic disaster in the United States history that began with the U.S. stock market crash of 1929, this is the worst depression that mankind has ever witnessed.
Some naked facts as reported in the press:
Like in the Great Depression, fall of Lehman bank, an American crisis, suddenly went global;
When the Swiss giant UBS suffered tens of billions of euros in writedowns as a result, most of the big banks in Europe seemed secure. With doubts rising, confidence in the banks plunged, dragging down their share prices and making it even harder to attract funds;
The stock market plunge, the government takeover of the giant insurer American International Group, the buyouts by bigger banks of Wachovia and Washington Mutual, and the hard-fought battle to pass the $700 billion bailout bill;
Banks refused to lend to one another fearing the other end to be infested with Lehman’s positions;
Insiders claim that it could take over a decade to fully unwind Lehman’s positions;
What’s more, Lehman was one of the largest prime brokers to international hedge funds. Lehman’s bankruptcy immediately caused wholesale panic within the hedge fund industry as funds tried to close/transfer/pull their money out of their Lehman custodian;
Over $60 billion is still locked up in Lehman’s London brokerage unit;
Given the leveraging nature of hedge funds, the effect on global equity markets was catastrophic as trillions of dollars were wiped off global equity markets;
AIG, once the world’s largest insurer, last month was forced to seek a government bailout to stay afloat. Yet days after accepting $85 billion in government loans, it emerged that AIG had funded hundreds of thousands of dollars for luxury executive retreats, hunting trips and a golf outing;
Global equity and commodity correction;
With $hundreds of billions-worth of positions that need to be closed fast, we witnessed the most dramatic equity downturn outside of 1930 and 1987;
Russian markets went down 70% and Nikkei, the world’s second-largest equity index, is down 30% since September 1;
In the financial arena, Chinese, Asian, Middle Eastern, and Latin American banks had minimal exposure to US subprime debt or to the collapse of US banks;
Teck Cominco, Canada’s largest mining conglomerate is down to $15 from a high of $53 in 2008;
IMF chief warns of global financial meltdown;
Wall Street crisis: Investors dump shares after Lehman collapse;
Bush urges patience in crisis fix; rich nations vow to fight credit crunch;
Probe of Lehman collapse escalated;
NEW YORK: Prosecutors have stepped up the investigation into the collapse of Lehman Brothers. The federal prosecutors in Brooklyn, Manhattan and New Jersey were examining events leading to Lehman’s collapse and bankruptcy filing;
President Bush, looking for answers to a global economic emergency with just three months left in office, will host an international summit to discuss ways to fix the world financial;
Kuwait‘s central bank governor called for key economic data, like inflation, to be released more quickly and consistently, a move that would enable the Gulf Arab country to improve monetary;
HONG KONG: Up to 2.5 million people could lose their jobs in the Pearl River delta, covering Hong Kong and parts of southern China, by January as a result of the global economic slowdown;
LONDON: OPEC will Friday announce it is cutting oil output to help lift crude prices that have dived 55 percent since striking record highs in July, as a global economic slowdown slashes demand;
ISLAMABAD: Pakistan may have to accept politically unpopular International Monetary Fund assistance to ward off a possible economic meltdown if wealthy nations turn it down, the government said;
DUBAI: Oman’s Chamber of Commerce and Industry called on the government to inject cash into local banks so they can finance development projects, the Ministry of National Economy said on Sunday;
ZURICH: UBS Chairman Peter Kurer is a stern lawyer who embodies the values of conservative Swiss banking the exact qualities the bank is desperate to revive after a disastrous venture into risky;
WASHINGTON: The International Monetary Fund said on Saturday it was investigating whether its chief Dominique Strauss-Kahn abused his power in an affair with a subordinate who has since left;
NEW YORK: Stocks fell on Friday on weakness in manufacturing and financial stocks after bleak data on consumer confidence and construction, but the Dow still snapped a disastrous three-week;
DETROIT: U.S. automakers Chrysler LLC and General Motors Corp are pushing for a quick merger deal ahead of the U.S. presidential election as sales continue to plummet and they cannot gain access;
PARIS: On Sunday, Sept. 14, central bankers from Europe, Asia and as far away as Australia took part in a conference call with their Federal Reserve counterparts in New York and Washington. It was still mid-afternoon there, but the news was bleak: Lehman Brothers, the 158-year-old investment bank, was about to fail and nobody knew what would happen when the markets opened on Monday;
Banks lead fallers in London’s worst day in years;
UAE Sets Terms for Dh70b Fund;
In Global Crisis, Islamic Finance May be the Answer;
UAE Markets Grapple With Uncertainty;
Falling Oil Could Challenge Saudi Development Plans;
Kuwait Traders Walk Out;
Kuwait Oil Minister Says Opec Must Consider Global Crisis;
Indian Banks Safe from Toxic Assets, Says Bank Chief;
World stocks slide on recession jitters;
Global Stock Markets Plunge on Fears of Economic Slowdown;
Libya eyes US, Europe equities after prices drop;
UAE banks urged to follow liquidly bailout guidelines;
Carmakers brace for gloom time;
Europe and Korean Majors see demand drop;
Global bank lending slides $1.1tr;
Many Major International Institutions Also Hit By Client Withdrawals;
Governments move to buffer aftershocks;
US set to discuss second fiscal stimulus Bill;
Europe calls for greater help from Asia in tackling slump;
Weak Japanese exports send ominous signals;
New fund to protect French firms;
Dutch flower sales wilt in the face of global economic meltdown;
Customers spending less on non-essentials, flower-growers say;
When people have less money to spend, they tend to buy bread instead of flowers;
Interest rate cut looms as Indian economy’s slowdown goes deeper;
Indian rupee falls again despite easier foreign loans;
Pakistan faces credit rating cut after bailout;
Opportunists swam UK’s housing market;
Dropping US home prices lure bargain-hunters into market; More than ever before, buyers are in the driver’s seat and able to get property at reduced prices as millions of houses sit unwanted in the realty sector;
Opec cuts may not halt price plunge;
If oil prices continue to drop, there could be unrest as all this prosperity and self-assurance we have seen (under Putin) will disappear. Marshall Goldman, Harvard University;
Oman crude settles below $60 a barrel;
The Bank of England (BoE) said on Tuesday (28/10/08) that estimated losses incurred by investors across the Eurozone region and the US on selected securities and corporate bonds since 2007 may have reached a staggering $2.8 trillion;
and the horrifying news goes on ………. endlessly.
Now let’s see why the 158 year old Lehman Brothers collapsed. Fraud?. Certainly yes.
Lehman Brothers Holdings Inc., was a global financial-services firm. The firm did business in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking. It was a primary dealer in the U.S. Treasury securities market. Its primary subsidiaries included Lehman Brothers Inc., Neuberger Berman Inc., Aurora Loan Services, Inc., SIB Mortgage Corporation, Lehman Brothers Bank, FSB, Eagle Energy Partners, and the Crossroads Group. The firm’s worldwide headquarters were in New York City, with regional headquarters in London and Tokyo, as well as offices located throughout the world.
Executives of bankrupt Lehman Brothers, for example, asserted to the bitter end that the bank was financially healthy.
When shortseller David Einhorn started arguing that Lehman hadn’t written down the value of its debt portfolio enough, the Lehman Brothers tried to destroy Einhorn’s credibility. Now it is revealed that Einhorn was right and Lehman was wrong.
Look at the past. WorldCom, Adelphia, Tyco, Enron, and so on in the West fell with billions of dollars in the drain.
West, East, North or South is no exception. But the impact differs. The West has been the financial hub of the world for over a very long period of time. Now with the shift and flow of funds to the East, more care to be taken as the East is not equipped to react to fraud as in the West.
Enron joined WorldCom, Adelphia and Tyco among the big companies busted by President Bush’s Corporate Fraud Task Force, which has won 1,063 convictions, including guilty verdicts against 36 chief financial officers and 167 corporate CEOs and presidents.
All financial fraud!. Several corporate auditors and lawyers are for sale.
Let’s take the case of the fall of the oil giant Enron Corporation.
The once mighty energy firm, which traded at US$ 90 a share traded at USD 11 Cents and later shut down. Stakeholders lost $60 billion in market value. Long-serving employees lost more than US$ 2 billion in pension money. And 5,600 people lost their jobs.
“The rot came from within Enron. For all the Porsche cars parked in the company garage, it turned out Enron didn’t have much in the bank. Forensic auditors had discovered that cash flow in 2000–the money left over after the bills are paid–was a negative $153 million, not the heady $3 billion claimed. The nearly $1 billion profit was bogus. (Forget 2001. Even the auditors couldn’t fathom the books that year)”.
Arthur Anderson, one of the big 5 auditing firms that audited Enron, committed fraud. David Duncan of Anderson was supervising the accounts of Enron. Anderson’s Chicago based lawyer Nancy Temple told David Duncan to remove her name from a file memo that disagreed with Enron’s characterization of a US$ 1 billion loss as “non-recurring”. And David Duncan sanitized Enron’s records so that the Securities and Exchange Commission (SEC) would have less information about the said US$ I billion.
The result. Along with Enron, Anderson also sunk. Now Arthur Anderson, once in the big 5, is history.
Is it not high time to do a stock taking to see how many big 5 auditors as Anderson and how many lawyers as Temple are existing to support or suppress corporate fraud for meager gain?
Bad companies will go under, while good companies will survive and flourish. This is applicable in every field including individual human beings.
The Great Depression of the 1930s ended with the Second World War 1939-45. Are we bracing for the Third World War after the present Great Depression?.
History teaches us that ‘fraud’ is a social menace. There is no other crime as serious as fraud as fraud committed by one person may ruin the whole society, the whole nation, or even the entire world, as seen now.
There is only one remedy. Say no to fraud. Be it your kith and kin, friend, colleague or any person. Report fraud to the authorities. And the authorities must to act swiftly and without any bias.
KK Sarachandra Bose
Partner/ Corporate, Commercial & Contract Lawyer
Advocates & Legal Consultants
P.O. Box. 15878
Tel: 04- 3355577/ Fax: 04- 3354000/ Mobile: 050 6245087