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“(MoneyWatch) Facebook has yet to go public, but it is already a breeding ground for securities fraud. The SEC late Wednesday filed charges against two money managers for misleading investors eager to buy stock in the social networking company ahead of Facebook’s highly anticipated IPO later this year.

The SEC alleges that the fund managers raised a total more than $70 million from investors to acquire shares of Facebook, Twitter, and other technology companies before they go public. In a related move to clean up the growing market for shares in popular social media firms, securities regulators also accused an online service called SharesPost that matches buyers and sellers of pre-IPO stock of operating without registering as a broker-dealer, as required by law.

2 managers of private-share funds charged by SEC 
SEC complaint against Frank Mazzola
Facebook IPO, interesting fact since the SEC filing

SEC official say the secondary market for shares in pre-IPO companies is growing and poses a risk even to sophisticated investors. “While we applaud innovation in the capital markets, new platforms and products must obey the rules and ensure the basic fairness and disclosure that are the hallmarks of sound financial regulation,” said Robert Khuzami, director of the SEC’s enforcement division, in a statement.

The SEC alleged that money manager Frank Mazzola and his firms, Felix Investments and Facie Libre Management, created two funds to invest in Facebook and other high-profile tech companies. But the firms engaged in “improper self-dealing” by collecting higher commissions than what they had disclosed in marketing materials aimed at investors seeking to purchase Facebook stock, according to the agency. SEC officials said that improperly raised the price of shares in the social network.

Mazzola and his investment firms also are accused of deceiving investors in funds that had been created to buy stock in pre-IPO companies. One investor was falsely told that a fund set up Mazzola’s firms had acquired stock in Zynga (ZNGA), a well-known social gaming company that went public in December. The firms also allegedly made false claims about the financial performance of Twitter to attract investors to a fund set up to buy stock in the micro-blogging startup before it goes public…”

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Classic Wall st moves….

Fun times for the people while  the banks get all the stops pulled out for them….

Sarkozy would like to top Hollande’s previous goal of taxing the wealthy for 75% of income…..mad i tell you.

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“When Washington, DC decided to try out an Internet voting system to make casting absentee ballots as easy as clicking a mouse, they dared hackers to compromise the contest. It was a feat accomplished in less than two days.

The District of Columbia hosted a public trial before going live with an e-voting program to see if their presumably impenetrable online ballot system could sustain a cyber attack. If you’re wondering why they never followed through, it is because the government is going to need a lot more time with this one.

“Within 48 hours of the system going live, we had gained near complete control of the election server,” researchers from the University of Michigan explain in a write-up of their 2010 hack of an e-voting system that DC was debating on pushing live. They managed to gain access and make massive alterations to the internal configuration of the voting site in two years, write the researchers, who presented their work at a cryptography and data security conference in the Caribbean last month.

With elections regularly plagued with allegations of inaccuracy and fraud, jurisdictions across the country have debated since the dawn of the Information Age if democracy would translate well to the Web. Although logging-on to pick a future president might someday be an option that is a lot easier than driving to the nearest polling place, the report out of the University of Michigan suggests that there is a ways to go before that goal is reached.

Not only did the team of researchers manage to expose the would-be voting system as one with rather lax security, they also explain in their findings that is was rather easy to do devastation once inside the system. “We successfully changed every vote and revealed almost every secret ballot,” writes the researchers — Scott Wolchok , Eric Wustrow, Dawn Isabel and J. Alex Halderman — adding that Election officials did not detect their intrusion for at least two days,“and might have remained unaware for far longer had we not deliberately left a prominent clue.”

The severity of what they accomplished, they write, was something they also felt that DC would be unable to bounce right back from. “Recovery from this attack is difficult; there is little hope for protecting future ballots from this level of compromise, since the code that processes the ballots is itself suspect,” reads their report.

“This case study — the first (to our knowledge) to analyze the security of a government Internet voting system from the perspective of an attacker in a realistic pre-election deployment — attempts to illuminate the practical challenges of securing online voting as practiced today by a growing number of jurisdictions.”

The group goes on to say that they wanted to not necessarily take advantage of the open invite from Washington to test their abilities, but to act as accurately as actual hackers would. “Our objective was to approach the system as real attackers would: starting from publicly available information, we looked for weaknesses that would allow us to seize control, unmask secret ballots and alter the outcome of the mock election,” they write.

After the hack was first revealed, Paul Stenbjorn of the DC Board of Elections and Ethics bluntly admitted, “The integrity of the system had been violated” and said that, upon analyzing the footprints left by the researchers, “they had to be able to change anything they wanted on the Web site.”

Even two years after they admitted to their attack, security is still considered largely under par as far as government entity’s online presence is concerned. The FBI recently called cyberattacks the biggest threat facing America and officials from within NASA admitted that the United States department that overseas billions worth of high-tech gadgetry is not only highly susceptible to hacks — but is also regularly attacked.”

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The original story of Narcissus may be a couple thousand years old now but in the eyes of market strategist Adam Parker at Morgan Stanley, the myth about the boy who falls in love with his own image is about to make a comeback.

“My sense is that we’ve gone a little bit too internal now among U.S. investors,” Parker says in the attached video clip, adding we are so focused on our domestic comeback that we’re ignoring the risks that still exist in Europe and China.

Sure U.S. stocks have rebounded nicely and investors (theoretically) have enjoyed a nice six month run –not to mention a bull market that just entered its fourth year running– but Parker feels this inward focus is about to get a rude awakening.

“We don’t think U.S. companies have sufficiently guided down for the weakening economy in Europe,” Parker warns. He predicts that along with first quarter earnings results in April will be a slew of cautious commentary about the 2nd half due to the bite from a recession in Europe.

“I think you should be betting on the fact you will see more negative guidance from companies with exposure to Europe,” he says.

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On Monday, European finance ministers are expected to approve the latest bailout package for Greece, which last week got more-than 85% of its creditors to agree to “voluntary” haircuts on their Greek debt.

The resulting restructuring is the largest for a sovereign nation in modern history, and the first since the adoption of the euro in 1999, but did avoid a messy, disorderly “credit event.” But a default by any other name is still a default.

The EU has probably bought itself “several more months,” thanks to the Greek restructuring and the “radical measures” adopted by the European Central Bank, says Steve Forbes, chairman of Forbes Media. “You can keep kicking” the can down the road, “but crises emerge.”

Notably, Greek debt is trading in the so-called “grey market” as if Greece will fail to make payments on its newly restructured debt and Portuguese debt yields have risen sharply in the past week.

In sum, Forbes fears European policymakers have failed to take the “right” lessons from the Greek tragedy.

Right now “you have the worst of both words” in Greece, he says. “The economy is going into the tank without the pro-growth reforms to get it back again.”

Forbes prescription for Greece — and Europe’s other so-called PIIGS — is familiar to anyone who’s followed his work over the years: less regulation, labor reform and a “radically reformed tax structure,” featuring (of course) a flat tax.

“They’re going in the wrong direction” in Europe, he says, citing new tax increases in Spain and Portugal and Greece’s failure to really reform its bloated public sector.

“They need remedial education,” Forbes says of EU policymakers. “They’re all tied to defunct notion of Keynesianism that government spending somehow stimulates the economy — that easy money stimulates the economy. No it does not.”

Forbes compares European policymakers to medieval doctors who tried to “bleed the patient to cure the patient. So they killed the patient.”

Europe — and the Eurozone — certainly isn’t “dead” but the road to recovery from its rolling debt crisis is starting to look shaky, again.

Who has done more damage; Scooter Libby or Bradley Manning ?

“MBIA’s (NYSE:MBI) chief executive Joseph W. Brown Junior has been accused of insider trading. The allegation comes in the midst of a trial concerning fraud when MBIA was split into two separate organisation. The specific allegation relates to purchases of the company’s stock Mr. Brown made in the months leading up to the restructuring. MBIA committed to a plan to separate its municipal bond insurance business from its mortgage backed securities sector which were in trouble due to the financial crisis. The announcement of that plan was made in February 2009….”

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When you watch your butcher grind the meat you know what your getting…..

PINK SLIME DISGUST

They were forced to use CAC to complete deal.

Full article

“NEW YORK (Reuters) – Bank of America NA prevented homeowners from receiving mortgage-loan modifications under a federal program in order to avoid millions of dollars in losses while benefitting from financial incentives for participating in the program, according to a complaint unsealed in federal court Wednesday.

The suit is the second whistleblower complaint unsealed so far with apparent ties to the $1 billion False Claims Act settlementannounced by Bank of America and the U.S. Attorney’s Office for the Eastern District of New York on February 9.

The Bank of America settlement is also part of the sweeping $25 billion agreement reached between state and federal authorities.

Final settlement documents have yet to be filed in the BoA settlement, which the U.S. Attorney’s Office said was the largest ever False Claims Act payout related to mortgage fraud.

The settlement resolved claims that Bank of America’s Countywide Financial subsidiaries defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans, as well as claims involving the Home Affordable Modification Program, a federal program to help American homeowners facing foreclosure.

The complaint unsealed Wednesday was filed by whistleblower Gregory Mackler, a Colorado resident who said he worked alongside Bank of America executives while an employee at Urban Lending Solutions, a company to which Bank of America contracted some of its HAMP work….”

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More than one is too many….

“The AARP put out a remarkably complex research paper that shows, among other things, that the costs that people over 50 paid for commonly used drugs rose 25.6% between 2005 and 2009. The data used in the AARP Public Policy Institute research was based on the retail prices of the 469 most used prescription drugs among people over 50. To make matters worse, the price for the 441 most common drugs for treatment of chronic disease rose 46.7%. The findings beg the question of who is minding the drug price store.

The AARP, the primary lobbying group for older Americans, has a stake in the drug price battle. Its millions of members expect the association to help them live affordable lives. That is part of the reason these people pay dues to the AARP. That does not make the data any less compelling.

Much of the focus on bringing down health care costs has been on doctors, hospitals and affordable insurance. These sectors of the health care business involve hundreds of thousands of transactions a year, because of the large numbers of doctors and hospitals and the complex insurance pricing systems. Drug costs are another matter. It is not terribly hard for the federal government to monitor what consumers pay for several hundred drugs and to ask pharmaceuticalcompanies why those prices have risen so fast. In some cases, the reasons may be adequate. Among the reasons are the prices that companies pay for drug ingredients….”

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LONDON/ATHENS (Reuters) – A disorderly Greek default would cause more than a trillion euros ($1.3 trillion) of damage to the euro zone and could leave Italy and Spain dependent on outside help to stop contagion spreading, the main bondholders group has said.

Greek private creditors have until Thursday night to say whether they will participate in a bond swap that is part of a bailout and restructuring deal to help it manage its finances and meet a debt repayment on March 20.

Investors will lose almost three-quarters of the value of their debt in the exchange. Finance Minister Evangelos Venizelos told Reuters on Monday it was the best deal they would get and those who did not sign up would still be forced to take losses.

Analysts said the Institute of International Finance document, marked “IIF Staff Note: Confidential,” may have been designed to alarm investors into participating in the exchange.

“There are some very important and damaging ramifications that would result from a disorderly default on Greek government debt,” the IIF said in the February 18 document obtained by Reuters.

“It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed 1 trillion euros.”

Praise the interwebs for a step forward in discovery….

via Marc to Market

The Tragedy that is Spain

The Greek PSI will be resolved one way or the other this week. Early reports suggest a weak start and the triggering of collective action clauses and credit default swaps remain a distinct possibility. Portugal is next and, although the credit dynamics and implementation of reforms are superior to Greece, the risk remains high that it will need a second aid package and/or debt restructuring, as it is unlikely to be able to return to the capital markets in H2 2013. With 2 LTROs and collateral liberalization, the 10-year benchmark in Portugal is yielding more than 13%, compared with a bit more than 12% at the end of last year.

However, the devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain’s PM Rajoy revealed that this year’s deficit would come in around 5.8% of GDP rather the 4.4% target. This of course follows last year’s 8.5% overshoot of the 6% target.

The problem for Spain is that the 4.4% target was based on forecasts for more than 2% growth this year. However, in late February, the EU cut its forecast to a 1% contraction. This still seems optimistic. The IMF forecasts a 1.7% contraction, which the Spanish government now accepts.

This will be the third year in 5 that the Spanish economy contracts.

Read the rest here.

You work hard, pay your bills, and have a tiny slip up and suddenly your credit record is negatively impacted and now your paying through the nose for something you want, need, or deserve….

NICOSIA (Reuters) – The euro zone sovereign debt crisis has eased in recent weeks, ECB Governing Council member Athanasios Orphanides said on Saturday, adding more needed to be done to convince markets the euro zone had an effective crisis handling mechanism in place.

“We have seen a very substantial improvement if you look at where we were in November and where we are now in terms of risk for example of France, Belgium, Italy and Spain,” Orphanides told a conference in Cyprus.

“But you realize we have not solved the problem yet, because the risk is a lot greater than the risk we started off with two years ago.”

He said a defining moment for the euro zone was when Europe’s leaders abandoned the concept of private sector involvement (PSI) as a means of handling debt crises, leaving it in place only in the case of indebted Greece.

Orphanides, governor of the Central Bank of Cyprus, has frequently argued that the PSI, which imposed a writedown in the value of Greek sovereign debt held by creditors, triggered contagion throughout the euro zone.

“By abandoning the PSI (concept) in December, essentially we improved the framework up to a point,” he said. “Unfortunately it didn’t reverse the haircut on Greece, so we had them (European leaders) on the one hand saying “we won’t do it again” but on Greece, imposing a loss.

“We had a situation where declarations were not consistent with deeds and that is one reason why, in my view, European leaders did not manage to fully restore the confidence of the markets,” he said.

A “fiscal compact” enforcing more financial discipline on euro zone states which was agreed to by Europe’s leaders in December was an important step forward in building a mechanism to fight future crises, Orphanides said.