Tax Breaks Targeted, JPMorgan-Madoff, SAC: Compliance
11 November 2013
Posted by: Author: Carla Main
Author: Carla Main (Bloomberg)
Executive stock options, corporate
jets and the tax break enjoyed by hedge-fund managers are among
the targets for Democratic lawmakers seeking to negotiate a
budget deal by next month.
The Democrats’ list of options, obtained by Bloomberg News,
sets the stage for a renewed clash with Republicans, who reject
proposals to raise revenue as part of an agreement. Democrats
say taxes must be on the table as lawmakers seek an annual
budget that would replace some of the $1 trillion in automatic
spending cuts now in effect.
While congressional aides say the two sides are finding
some areas of compromise on spending cuts, the standoff over
revenue might be the main obstacle to reaching a deal by the
lawmakers’ self-imposed Dec. 13 deadline.
Democrats have long urged Republicans to agree to scrap at
least some of the tax preferences on their list, while
Republicans argue that doing so would undermine efforts for a
broader tax-code revision.
One proposal to limit the ability of some business owners
to avoid payroll taxes by claiming income as business profits
would save $12 billion over the next 10 years, according to the
Democrats’ estimates. Another option is the carried-interest
treatment that allows hedge-fund managers and private-equity
advisers to pay a 20 percent tax rate on their income instead of
the nation’s top income rate of 39.6 percent. Ending that break
would save more than $17 billion over a decade, according to the
Limiting corporate deductions for "excessive” executive
stock options could save even more -- as much as $50 billion
over the same period, the Democrats’ list says.
Ending preferences for corporate jets and subsidies for
yachts and vacation homes, combined, would bring in another $19
Representative Paul Ryan, the lead Republican negotiator
and chairman of the House Budget Committee, has opposed
including any tax measures as part of a budget agreement. The
29-member panel, which met last week, will reconvene on Nov. 13.
A spokesman for Ryan didn’t respond to a request for
For more, click here.
Freddie Mac Profits Push Dividend Return Close to Bailout Funds
Freddie Mac (FMCC) and Fannie Mae will return $39 billion to the
U.S Treasury after reporting third-quarter profits, bringing
their total payments to within about $2 billion of the cash aid
they got after the credit crisis.
The companies, which were sustained by $187.5 billion in
taxpayer money after they were placed under federal
conservatorship in 2008, will make dividend payments by next
month to boost their total returns to $185.2 billion, they said
in separate filings Nov. 7.
Under terms of their conservatorship, the government since
last year has been taking all of the companies’ quarterly
profits beyond a $3 billion net-worth cap. The money counts as a
return on the U.S. investment and not as a repayment of the aid.
The company’s aid and amount returned have left taxpayers
$9 million ahead, according to a statement. The government has
an additional $1 billion liquidation preference in the company. China Agency Lists 181 Shanghai IPO Applications as of Nov. 7
The China Securities Regulatory Commission said 10
applications were approved of 181 companies that submitted
applications for initial public offerings on the Shanghai
exchange as of Nov. 7.
Thirty applications were approved so far this year of 311
companies applying for initial public offerings on Shenzhen’s
main and medium-small company board’s initial public offerings.
Forty-three applications of 265 companies that submitted
applications for initial public offerings on Shenzhen’s Chinext
board were approved as of Oct. 31.
SAC Tipper Aggarwal Pleads Guilty to Securities Fraud
Sandeep Aggarwal, a former research analyst with Collins
Stewart LLC, admitted passing inside information about a deal
involving Yahoo! Inc. (YHOO) and Microsoft Corp. (MSFT) to a former SAC
Capital Advisors LP fund manager.
Aggarwal, 40, pleaded guilty to one count each of
conspiracy and securities fraud Nov. 8 in federal court in
Manhattan. He told U.S. Magistrate Judge Ronald Ellis that he
tipped "Richard Lee and others” about the Yahoo-Microsoft
venture in 2009.
He told Ellis he was "very sorry” for his actions, which
he did to "improve his standing as an analyst” and "increase
revenue” for his firm.
Aggarwal faces as much as 25 years in prison when he’s
sentenced and may be deported to his native India. He agreed to
cooperate with prosecutors in hopes of receiving leniency.
The case is U.S. v. Aggarwal, 13-mj-01877, U.S. District
Court, Southern District of New York (Manhattan). JPMorgan’s Madoff Banker Backed $200 Million Loan in 2008
A former JPMorgan Chase & Co. (NPM) banker who managed Bernard
Madoff’s account said the con man was on track to receive a $200
million loan less than a month before his arrest if the request
hadn’t been dropped.
Daniel Bonventre, one of five ex-Madoff employees on trial
accused of aiding the fraud, asked JPMorgan in November 2008 to
borrow twice Madoff’s credit limit of $100 million, with U.S.
Treasuries as collateral, Mark Doctoroff, who left the bank last
year, testified Nov. 7 in federal court in Manhattan.
Doctoroff described Madoff’s securities firm in an e-mail
to JPMorgan’s credit department on Nov. 17, 2008 as "doing well
The five former Madoff employees are accused of helping
Madoff hide his fraud from customers, banks and regulators for
years and getting rich in the process.
The loan was part of a last-ditch attempt by Madoff to
secure cash as his Ponzi scheme was collapsing, and Bonventre’s
role in the application process was one of the many examples of
his involvement in the fraud, prosecutors have said.
While the loan never went through, Doctoroff said he
thought the loan would have been granted and that he didn’t know
why the loan process stopped.
He said he never met Madoff.
Bonventre, who oversaw the broker-dealer and proprietary
trading operations of Madoff’s company, where real trading took
place, pleaded not guilty and has denied involvement in the
fraud, saying he was duped like thousands of others.
Bonventre’s lawyer, Andrew Frisch, asked if the loan
request and the fraudulent capital figures given by Bonventre
could have come from Madoff himself. Doctoroff agreed Madoff
could have given the fake figures to Bonventre.
Joseph Evangelisti, a JPMorgan spokesman, declined to
comment on the testimony.
The office of U.S. Attorney Preet Bharara in Manhattan is
investigating JPMorgan in relation to Madoff. Bharara is
weighing a deferred-prosecution agreement or fine to resolve the
probe, a person familiar with the matter said last month.
The case is U.S. v. O’Hara, 10-cr-00228, U.S. District
Court, Southern District of New York (Manhattan).
For more, click here.
Hedge Fund Founder Says U.K. Fraud Prosecutors Acted Unfairly
Magnus Peterson, the founder of the collapsed hedge fund
Weavering Capital (UK) Ltd., is seeking to delay a criminal
prosecution against him by arguing that U.K. prosecutors acted
unfairly in the case.
A decision by the director of the Serious Fraud Office to
reopen a probe into the firm’s collapse after the former
director closed the investigation is an "abuse of process” by
the agency, Peterson’s lawyer, Peter Lodder, said at a hearing
in London Nov. 8. The court will hear his arguments in February.
Peterson will also argue that the SFO’s initial decision to
open the probe could be unlawful.
Weavering Capital, which once had about $640 million under
management, collapsed in March 2009 after discovering the
counterparty for its biggest trading position was controlled by
the fund’s manager. Peterson and about 10 employees were ordered
by a U.K. court last year to repay a total of $450 million to
liquidators of the collapsed hedge fund.
Peterson was charged in December with fraud and other
counts related to the collapse. A trial is scheduled for October
Fed’s Dudley Says Banker Pay Rules Could Help Curb Risk
Federal Reserve Bank of New York President William C.
Dudley spoke in New York about the regulation of too-big-to-fail
firms and the compensation of banker executives.
For the video, click here. Bharara Says Budget Constraints May Derail Future Prosecutions
Manhattan U.S. Attorney Preet Bharara said a federal hiring
freeze is threatening his office’s ability to carry out its job
of prosecuting financial and other crimes.
Bharara made the remarks Nov. 8 at a Practising Law
Institute event in New York, where he spoke on a panel.
"We’re OK now but at some point that will cease to be
true,” he said.
Other governmental departments and offices have faced
financial constraints as a result of federal budget cuts known
as sequestration. Bharara said he’s not able to replace
prosecutors who leave through normal attrition.
Also, in contrast to the SEC’s policy to seek admissions
from defendants only in a subset of cases, Bharara said there is
"a very strong presumption” that if his office pursues a civil
case, it will require admissions of wrongdoing. Companies will
often be willing to pay "huge sums” of money to settle a
matter yet are ready to go to trial over an admission, he said.
"It’s not just the financial component, but the story
needs to be told,” Bharara said. "We’re a little tired of
Bharara said prosecutors are looking more into holding
institutions accountable for employees’ misconduct, both
criminally and civilly.
Comings and Goings
SEC Names Gaunt Head of Muni Securities and Public Pensions Unit
The U.S. Securities and Exchange Commission appointed
LeeAnn Ghazil Gaunt to be chief of the agency’s Enforcement
Division’s Municipal Securities and Public Pensions Unit.
Gaunt oversaw the commission’s first "pay-to-play”
enforcement action for in-kind political campaign contributions.
The action occurred in September 2012, when the agency charged
Goldman Sachs (GS) with violations related to contributions to the
state treasurer of Massachusetts, the agency said in a
This article first appeared in bloomberg.com.