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The EU Positions for Total Control Over Winding Down Banks

“BRUSSELS—The European Commission will propose itself as the single authority for winding down banks in the euro zone, a step that will set the European Union’s executive on a collision course with the bloc’s most powerful member, Germany.

Berlin insists that such an authority—whose actions could force national governments to spend money to help rescue failed banks—would breach EU treaties. That, it says, could lead to legal challenges over bank restructurings and create uncertainty for financial markets at a sensitive time.

Michel Barnier, the EU commissioner responsible for financial-market regulation, was to lay out his final proposal Wednesday for a so-called single resolution mechanism, giving it the authority to restructure or close any of the 6,000 banks in the 17-nation euro zone that hit financial problems.

Bank restructurings currently take place under a patchwork of national rules, which also hinder the winding down of cross-border banks.

The euro-zone’s ambitious banking union project—a cornerstone of efforts to end the three-year-old debt crisis—aims to break the vicious link between struggling euro-zone banks and their governments.

The first pillar is a single supervisor for euro-zone banks, a task the European Central Bank is expected to assume in the fall of 2014. The single resolution mechanism is meant to form the second pillar.

The commission calls for a so-called “single resolution board” to prepare and carry out bank restructurings, backed by a shared fund that would be financed by contributions from banks….”

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Morningstar Reports Credit Card Info Leak

“Investment-research firm Morningstar said personal information, including credit-card details, of about 2,300 users of its Morningstar Document Research service may have been compromised due to a security breach last year.

The incident on April 3, 2012 may also have led to the leakage of names, addresses, email addresses and passwords, the company said in a filing on Friday.

Morningstar Document Research, formerly 10-K Wizard, provides a global database and search tool for company filings.

An additional 182,000 clients who had email addresses and user-generated passwords on the system may also have been affected, Morningstar added…”

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France Will Charge $GOOG a Privacy Fine If They Reject Transparency on Prism

“PARIS (AP) — France is giving Google three months to be more upfront about the data it collects from users — or be fined. Other European countries aren’t far behind.

Now it’s up to Google to decide whether the relatively small fines are enough of an incentive to rethink its privacy rules — the Internet giant risks a €300,000 euro ($402,180) penalty in France.

Europe’s a big market, but one where Google has no serious competition.

However, the company does have a reputation problem when it comes to protecting user privacy. Thursday’s legal action puts new pressure on Google, which is smarting from criticism over providing customer data to the U.S. government as part of its fight against foreign terrorists.

The French agency that regulates information technology says that five other European countries are taking similar steps in a staggered offensive against Google’s privacy policy between now and the end of July. It says Google largely ignored earlier recommendations from European regulators.

The French National Commission on Computing and Freedom, known as CNIL, says Spain joined France in the first wave of legal action Thursday, and that Britain, Germany, Italy and the Netherlands will join in the coming weeks.

The legal action accelerates a long-running European fight against Google over privacy, which is more rigorously protected in many European countries than in Google’s homeland, the United States.

A spokesman for Google said Thursday that it believes its privacy practices respect European laws.

“We have engaged fully with the authorities involved throughout this process, and we’ll continue to do so going forward,” said Al Verney.

Paris’ formal warning gives the company three months to make changes to its privacy practices. They include specifying to users what it is using personal data for, and how long it’s held.

Regulators also want Google to let users opt out of having their data centralized — for example, when data from online searches, Gmail and YouTube are crunched into a single location.

If not, Google risks a fine of up to 300,000 euros by France, which could eventually mean millions of euros in penalties across all six countries. By comparison, Google’s revenues were $14 billion in the first quarter of this year, much of that from advertising — which is boosted by the Internet giant’s ability to target users based on what they read, watch and buy online….”

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Oil Traders Confirm Price Fixing

“The process for setting benchmark oil prices has never been particularly transparent, depending as it does on self-reporting by traders of offer and sale prices to energy pricing agencies like Platts, a division of McGraw Hill Financial Inc. (NYSE: MHFI). Platts, which depends on the truthfulness of traders, then

A report in today’s Wall Street Journal indicates that it ought to be fairly easy for the European Commission (EC) to substantiate charges of price fixing in the world’s oil markets. Last month the EC raided the offices of Royal Dutch Shell PLC (NYSE: RDS-A), BP PLC (NYSE: BP), Statoil ASA (NYSE: STO) and Platts to collect information on the charges. Italian oil major Eni SpA (NYSE: E) was also asked to provide information, but was not included in the raids.

One trader told the WSJ how the fiddling works. He offers to sell a small quantity of oil at a loss, driving down the price that he reports to the pricing agency. Once the lower benchmark price is published, he then buys larger quantities at the lower price.

Traders do not believe the practice is illegal…”

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Chrysler to Recall 2.7 Million Jeeps

“After a public disagreement that threatened to blow up into a larger battle, Chrysler said Tuesday that it agreed to recall 2.7 million Jeep vehicles that a government safety watchdog said could potentially erupt into fire if rear-ended.

Chrysler had been expected to file papers Tuesday refusing to comply with a National Highway Traffic Safety Administration’s voluntary recall request sent earlier this month. That request covered Jeep Grand Cherokees in model years 1993 to 2004 and Libertys in model years 2002 to 2007.

NHTSA had warned after investigations that a crash from behind on these vehicles could puncture the fuel tank, located in the rear of the models, spill fuel and potentially cause a fire. NHTSA said the defect may have been responsible for up to 51 deaths.

Chrysler had disagreed with NHTSA’s assessment.

“As a result of the agreement, Chrysler Group will conduct a voluntary campaign with respect to the vehicles in question that, in addition to a visual inspection of the vehicle will, if necessary, provide an upgrade to the rear structure of the vehicle to better manage crash forces in low-speed impacts,” Chrysler said in a statement…”

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$SI Shutters Last Solar Unit After Failing to Find a Buyer

“MUNICH (Reuters) – German industrial conglomerate Siemens is shutting down the last of its solar energy businesses after it failed to find a buyer, the company said on Monday.

Confirming a report in German newspaper Handelsblatt, a spokesman for Siemens said the group would close Solel by early next year. The Israeli business has accumulated losses of around 1 billion euros ($1.33 billion) since Siemens bought it in 2009, including a write-off of the entire purchase price.

Siemens has spent seven months trying to sell Solel, which makes components used in solar-thermal power stations. Some 280 employees will be affected by the closure, most of them in Israel.

The cost will run into the mid-double digit millions of euros, according to Siemens….”

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CBOE Settles With the SEC Over “Systemic Breakdowns” in Regulating Naked Shorting

“The Securities and Exchange Commission widened its crackdown on a controversial practice known as “naked shorting” by charging the Chicago Board Options Exchange with “systemic breakdowns” in the exchange’s regulatory and compliance functions.

The CBOE agreed to pay a $6 million fine and implement major reforms to settle the SEC’s charges. This is the first time an exchange has been assessed a fine for violations related to its regulatory oversight role, according to the SEC. (You can read the SEC’s press release here.)

The settlement follows a decision Monday by an SEC judge to fine a former Maryland banker accused by the SEC of engaging in billions of dollars in naked short trades. The Charles Schwab owned brokerage optionsXpress and its former chief financial officer were also penalized for violating laws aimed at banning naked shorting.

A naked short trade occurs when a trader sells a stock he does not own and does not intend to borrow to deliver to the buyer. An SEC rule known as Reg SHO is meant to ban the practice, which the SEC regards as abusive and harmful to markets….”

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Investors Sue Uncle Sam Contesting the Takeover of $FNM and $FRE

“Amid newly energized trading in the stocks of mortgage giants Fannie Mae and Freddie Mac, shareholders filed suit Monday against the federal government, contesting its takeover of the two in 2008.

The City of Austin Police Retirement System in Texas and Seattle-based bank Washington Federal are seeking $41 billion in damages. They charge that the conservatorship of Fannie Mae and Freddie Mac was “unlawful and unwarranted,” as is the requirement instituted this year that the two pay the Treasury all of their profits.

“The government has appropriated many billions of dollars’ worth of private shareholder property, without providing any compensation for this action,” according to the filing.

Fannie Mae reported record profits in the second quarter of this year and has now paid the Treasury $95 billion in dividends, nearing the $116 billion it originally drew. Shareholders believe they should be reaping some of these profits, not the federal government….”

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$XIDE Files for Chapter 11

“Battery maker Exide Technologies Inc. XIDE -66.83% filed for Chapter 11 bankruptcy protection early Monday as it faced $31 million in interest payments in August and the maturity of nearly $52 million in convertible notes in September.

The Milton, Ga., company, which sought Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del., plans to “implement a restructuring that would result in a de-levered balance sheet and a sustainable capital structure,” Chief Financial Officer Phillip A. Damaska said in court papers.

The company has lined up a $500 million bankruptcy loan from J.P. Morgan Chase & Co. to fund its restructuring.

The filing is Exide’s second. It emerged from an earlier Chapter 11 restructuring in 2004.

The company makes Exide- and NorthStar-branded lead-acid batteries for vehicles and other machines. Its customers include auto makers, parts suppliers and retailers.

Exide, which employs about 10,000 people in more than 80 countries, listed assets of about $1.9 billion and debts of $1.1 billion in its Chapter 11 petition….”

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Former Barclays Employees Face Criminal Charges for Rate Rigging

“LONDON—U.S. and British authorities are preparing to bring criminal charges against former employees of Barclays BARC.LN +0.15% PLC for their alleged roles trying to manipulate benchmark interest rates, according to people familiar with the plans, marking an escalation of a global investigation now entering its sixth year.

The charges are likely to be filed this summer, these people said, roughly a year after the big British bank became the first institution to settle over allegations that it attempted to rig the London interbank offered rate, or Libor, and other widely used financial benchmarks. The people cautioned that the plans aren’t finalized and could be delayed or modified.

The planned criminal cases indicate that government investigations into Libor manipulation, which have been under way since 2008 and until now have targeted mostly institutions rather than individuals, are moving into a new phase. So far, U.S. authorities have filed charges against two individuals. British prosecutors haven’t charged anyone. Units of two banks—UBS AG UBSN.VX +0.12% and Royal Bank of Scotland Group RBS.LN +1.29% PLC—pleaded guilty to U.S. criminal charges as part of rate-manipulation settlements….”

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Tax Shelter Sham Hits Former Chairman of $HPQ With $100M Tax Bill

“Ray Lane, former chairman of Hewlett-Packard Co. (HPQ) and partner emeritus at venture-capital firm Kleiner Perkins Caufield & Byers, is in a dispute with the U.S. Internal Revenue Service that has left him with a $100 million tax bill.

In December, the IRS found Lane, 66, participated in a “sham” tax shelter, generating improperly claimed losses of $251 million to offset income, according to appeal papers filed May 6 in U.S. Tax Court in Washington. Lane argued that the IRS was wrong to say that his partnership, Vanadium Partners Fund LLC, lacked “legitimate business purpose.”

The Tax Court wrangling comes amid a series of career setbacks for him. He stepped down as Hewlett-Packard’s chairman in April after less than three years. Investors were dismayed with his oversight of the computer maker’s $10.3 billion purchase of software maker Autonomy Corp. The acquisition later had to be written down.

That same month, he scaled back his role at Kleiner Perkins, becoming a partner emeritus. The following month, he left the board of Fisker Automotive Inc., the struggling electric luxury carmaker he backed while at Kleiner Perkins….”

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U.S. Regulators Sue $USB Over Allegedly Allowing ‘Midwest Madoff’ To Use Customer Funds

“NEW YORK/CHICAGO (Reuters) – U.S. regulators sued U.S. Bancorp on Wednesday, alleging it knowingly allowed the head of a failed Iowa brokerage, dubbed ‘the Midwest Madoff,’ to use customer money held at the bank to help fund a lavish lifestyle.

The case is the first from regulators to target banks used by Russell Wasendorf Sr., the former chief executive of Peregrine Financial Group (PFG), who began serving a 50-year sentence in February for bilking $215 million from customers.

The revelation of a nearly two-decade fraud last summer has dealt another blow to confidence in the futures industry after the failure of MF Global in late 2011, and drew comparisons with New York money manager Bernard Madoff’s massive Ponzi scheme due to the length of his deception. Madoff is serving a 150-year prison sentence.

“(The bank) knowingly facilitated Wasendorf’s transfers of millions of dollars of customers’ funds out of this account to pay for Wasendorf’s private jet, his restaurant, and his divorce settlement, among other things,” the U.S. Commodity Futures Trading Commission (CFTC) said.

“Although the (account) was a customer segregated account containing Peregrine’s customer funds,U.S. Bank and Banker A treated the account as if it were a Peregrine commercial checking account.”

The lawsuit singled out a female employee, identified only as ‘Banker A’ and described as a ‘Assistant Relationship Manager’ at the bank’s Cedar Falls, Iowa, branch, who had close dealings with Wasendorf. According to the suit, the bank and employees involved with the account were aware it held customer money.

“Throughout the relevant period, Banker A personally facilitated telephonic and inbranch deposits and wire transfers of Peregrine customer funds,” the CFTC lawsuit said.

“Banker A and other U.S. Bank personnel perceived Wasendorf as a successful, desirable bank client with the potential to be a profitable, high growth client.”

The CFTC complaint, filed in the U.S. District Court for the Northern District of Iowa, alleged U.S. Bank NA, a unit of U.S. Bancorp, accepted customer funds as security on multimillion dollar loans to Wasendorf, his wife and his construction company….”

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$JPM Faces DOJ Investigation and Sanctions From FERC

“NEW YORK (Reuters) – A Congressman on Wednesday called on the Department of Justice to investigate JPMorgan Chase & Co’s power trading in Michigan, as the Federal Energy Regulatory Commission (FERC) considers whether to sanction the firm.

Michigan Congressman Dan Kildee, a Democrat who sits on the Committee on Financial Services, said in a letter to the DoJ that it should pursue its own investigation into JPMorgan to see if it manipulated electricity markets.

The bank has told shareholders it has been notified by FERC staff that they intend to recommend that the five members of the commission take action over an alleged manipulative trading scheme in Michigan and California earlier this decade.

JPMorgan has denied that it manipulated power markets, and has vowed to “vigorously defend” itself and its employees.

“These allegations are serious charges, including traders devising deliberate schemes to manipulate energy prices and top bank executives lying under oath,” said Kildee in the letter, a copy of which was obtained by Reuters.

“The people of Michigan, and the American public generally, deserve a marketplace where all participants play by the same rules. I urge the Justice Department to resolve this matter by investigating these potentially illegal practices.”

JPMorgan spokeswoman Jennifer Zuccarelli declined on Wednesday to comment on Kildee’s letter, but said that the FERC notice to the bank is only a “statement of the staff’s views, and does not represent findings of the commission.”

She added “we strongly disagree” with the FERC conclusions….”

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Truck Strike Blamed for Bridge Collapse, Not Dilapidated Infrastructure

“A colliding truck may have triggered the collapse on Thursday of part of a four-lane freeway bridge that sent vehicles and drivers tumbling into a frigid river in Washington state, officials said.

A U.S. National Transportation Safety Board (NTSB) investigation into what led part of the Interstate 5 bridge to fall into the Skagit River 55 miles (90km) north of Seattle was expected to continue on Friday.

Two of the three people rescued from the river were hospitalized with hypothermia, but no one died, officials said.

The freeway is a principal corridor for vehicles between Seattle and Vancouver, Canada, and Washington state Governor Jay Inslee said he expected major traffic delays in the region.

State Patrol Chief John R. Batiste said a semi-truck driven southbound struck the bridge just before part of it collapsed. The bridge has metal overhead beams.

“The size of the load he was carrying appeared to create a problem, causing him to strike the bridge,” Batiste said. He said investigators were talking to the driver and inspecting the truck….”

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SAC Case May See RICO Charges

“Federal prosecutors are considering charging hedge fund SAC Capital Advisors LP as a criminal enterprise through a powerful legal tool used against the Mafia and drug gangs, people familiar with the probe said.

It is rare for investment firms to be charged criminally under the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. Such a step would require approval from top Justice Department officials….”

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The U.K. Turns Up the Heat on Offshore Tax Evasion

“Prime Minister David Cameron wrote to the Cayman Islands and nine other U.K. territories to request action to tackle company tax evasion as Britain prepares to host the Group of Eight summit next month.

“We need to know who really owns and controls each and every company,” according to the letter, released today by Cameron’s Downing Street office. “This goes right to the heart of the ambition of Britain’s G8 to knock down the walls of company secrecy.”

Cameron asked the countries to set up central registries that contain information on the owners and controllers of every company, and for this information to be made available to law enforcement and tax collectors. He asked the nations to attend an event on June 15 to indicate progress on tax, trade and transparency.

He said that while countries have the right to set low taxes, they’re sustainable only if “what is owed is actually paid — and if the rules to achieve this are set and enforced fairly to create a level playing field right across the world,” he wrote….”

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SocGen’s CEO Face 7 Years for Bribery

“MOSCOW (Reuters) – The head of Societe Generale’s Russian unit Rosbank faced up to seven years in jail for bribery on Thursday after Russian investigators released a film of him with cash piled on his desk in what several bankers said may have been a set up.

The case could increase alarm among international investors and sheds a damaging light on business practices in Russia, where SocGen is one of the few Western banks left in a market dominated by homegrown state players.

Investigators said on Thursday they had opened an official criminal investigation against Vladimir Golubkov, who was detained on Wednesday, and his senior vice president, Tamara Polyanitsyna – a final step before formally charging them.

Golubkov, 47, worked through the ranks at Rosbank to take the helm in 2008 with the task of steering the bank into profit.

“I know him to be a good man,” Garegin Tosunyan, president of the Association of Russian Banks, told Reuters. “The accusations simply don’t fit – although the law enforcement authorities are entitled to their version and to investigate….”

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Bloomberg Finds it Hard to Keep Client Information Confidential as 10k Users Messages are Leaked

“More than 10,000 private messages sent between users of Bloomberg’s financial terminals have leaked online, undermining the company’s attempts to restore faith in its ability to keep client data confidential as it scrambles to allay clients’ privacy concerns.

Two long lists showing confidential Bloomberg messages between traders at dozens of the world’s largest banks and their clients have been online for several years, the Financial Times has learned.

The documents from one particular day in 2009 and also from 2010 contain messages sent in by clients so Bloomberg could extract price data for their use on bonds, credit default swaps and other financial products from traders’ messages….”

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Jamie Dimon Says He Will Quit B4 He Gets Fired

“May 11 (Reuters) – JPMorgan Chase & Co Chairman and CEO Jamie Dimon said he may consider leaving the bank where he has held the top post since 2005, if shareholders vote to split his duties, the Wall Street Journal reported on Saturday.

Shareholders will vote later this month at an annual meeting in Tampa, Florida, on a non-binding proposal to separate the chairman and chief executive roles after a more than $6 billion trading loss last year raised questions about risk oversight.

At first, Dimon said he would not comment publicly on what he would do if the vote went against him, but when pressed he added that the worst-case scenario would be to leave the bank, the newspaper said, citing sources that attended a private meeting at the company’s New York headquarters.

Results of the vote will be announced on May 21, but it remains unclear what the board will do if the proposal passes….”

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The Council of Institutional Investors Urge SEC Again to Restrict Executive Trading Rules

“Federal securities regulators have been slow to revamp rules abused by corporate insiders to trade their company stocks, according to a group of pension funds and a former SEC commissioner.

In a letter Thursday to the Securities and Exchange Commission, the Council of Institutional Investors urged the agency for the second time in four months to tighten rules on government-sanctioned trading plans that allow corporate executives and directors to sell shares despite potentially having knowledge of nonpublic information about their companies.

The group, which represents pension funds overseeing more than $3 trillion in assets, cited a series in The Wall Street Journal on the issue. The articles have triggered criminal and civil investigations into whether executives and directors improperly profited from trading their company shares while in possession of confidential information.

“There are some abuses going on—even broader than some had suspected,” Jeff Mahoney, the group’s general counsel, said in an interview.

Mary Jo White, the SEC’s new chairman, declined to comment through a spokesman. The SEC hasn’t ruled out taking action to amend its guidance or regulations on the plans, but no such review is under way, according to a person familiar with the agency.

For now, the SEC intends to continue to tackle any abuses of the plans through enforcement actions, the person added…..”

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