Next Year’s Model?

With their snappy name and flashy mathematical formulae, “quants” were the stars of the finance show before the credit crisis erupted. Now the complex models of risk that they developed are accused of misleading banks about the safety of subprime-laced securities. Small wonder that investment ban...

By Economist Staff • Feb. 29, 2008

No Bars for Ex-CFO of Bar-code Company

It looks like the former CFO of bar-code device maker Symbol Technologies has avoided the prospect of being covered in black stripes himself. Kenneth Jaeggi, the former finance chief of Symbol — now a part of Motorola — Wednesday pleaded guilty to fraud stemming from alleged backdating of stock o...

By Stephen Taub • Feb. 28, 2008

A Regulatory Migraine

Ng Wailun should be one happy CFO. This year, his company, Shanghai-basedpharmaceuticals and skin-care products distributor Profex, will see itscorporate income tax rateslashed from 33 percent to 25 percent. “This is good news for us,” Ngconcedes. At the same time,however, a new labor contract la...

By Cesar Bacani • Feb. 28, 2008

Can’t Anyone Here Deal with Derivatives?

Can anyone figure out how to account for derivatives? Apparently not one of the biggest investment banks in the world.In a Monday regulatory filing, Merrill Lynch disclosed that it would restate previously issued cash-flow statements going back to 2005 to correct errors stemming from an adjustme...

By Stephen Taub • Feb. 26, 2008

IBM Adds $15 Billion to Buyback Coffer

IBM announced on Tuesday that its board of directors authorized a $15 billion stock repurchase program, on top of about $400 million remaining at the end of February from a prior authorization.The company said it may repurchase shares on the open market or in private transactions depending on ma...

By Stephen Taub • Feb. 26, 2008

Splitting Headaches

“We were not designed or structured to be the most important company in the entire financial system,” said Jay Brown on February 19th as he returned to MBIA, charged with steadying the company he had run from 1999 to 2004.You may think otherwise, given the markets’ fevered concern over the “monol...

By Economist Staff • Feb. 26, 2008

Report: Mounties to Charge Ex-Nortel Finance Execs

The Royal Canadian Mounted Police are about to charge two former top finance executives at Nortel Networks for their alleged involvement in a fraudulent accounting scheme, according to Canada’s Financial Post. Douglas Beatty, a former CFO, and Michael Gollogly, an ex-controller, are expected to b...

By Stephen Taub • Feb. 25, 2008

Five Guilty in General Re/AIG Scheme

Five former insurance company executives, including the one-time CFO of General Re, were found guilty Monday of participating in a scheme to manipulate the financial statements of American International Group, the Associated Press reported. Four of the defendants worked for General Re, the fifth...

By Stephen Taub • Feb. 25, 2008

Three Years for Three Enron Bankers

Three former employees of a British bank will spend up to 37 more months on America’s shores, behind bars, for participating in the massive Enron fraud. On Friday, a federal judge sentenced David Bermingham, Giles Darby, and Gary Mulgrew to just over three years in prison, according to the Associ...

By Sarah Johnson • Feb. 22, 2008

Refco Reversal: Ex-CFO Will Help Prosecutors

In a tearful apology as he entered a guilty plea in a cooperation deal with federal prosecutors, former Refco Inc. CFO Robert C. Trosten emerged as a key player in the government’s securities fraud case against the commodities broker and its top executivesTrosten, who had maintained his innocence...

By Roy Harris • Feb. 21, 2008

Flowserve Pumps Out $10.5M in Iraqi Kickback Settlement

Flowserve Corp. has agreed to pay $10.5 million to settle charges that its subsidiaries participated in a kickback scheme with the Iraqi government between 2001 and 2003. The maker of pumps and valves will pay a $4 million penalty to the Department of Justice, which charged it with conspiracy to ...

By Sarah Johnson • Feb. 21, 2008

SEC Charges ex-CFO in $1B Death-benefit Fraud

The Securities and Exchange Commission charged a former CFO with helping fraudulently raise more than $1 billion from about 30,000 investors in a company specializing in interests sold in the insurance-policy death benefits of terminally ill or elderly persons. In its complaint against the ex-CF...

By Sarah Johnson • Feb. 20, 2008

SEC Probes Dozens of Subprime Lenders

Securities and Exchange Commission Chairman Christopher Cox said Thursday that the agency has more than three dozen subprime cases underway to determine who might be blameworthy, as regulators press to root out the causes of the mortgage mess.Details of the investigations are confidential, Cox s...

By Alan Rappeport • Feb. 14, 2008

Court Tosses Conviction of Ex-Enron Unit’s CFO

The conviction of a former Enron unit finance chief was thrown out by a federal appeals court.The Associated Press reported that the Fifth U.S. Circuit Court of Appeals upheld a judge’s decision to toss the conviction of Kevin Howard for falsifying records at the one-time energy giant’s broadband...

By Stephen Taub • Feb. 14, 2008

Keep a Close Eye on Sovereign Funds: Cox

Sovereign wealth funds should not be over-regulated, Securities and Exchange Commission Chairman Christopher Cox warned Thursday. But the investment groups controlled by foreign governments — hot targets this week, as Senate members seek to place blame for a faltering U.S. economy — certainly dem...

By Alan Rappeport • Feb. 14, 2008

SEC Relies on Rating Agencies, Too

The Securities and Exchange Commission is looking at ways to pull back its reliance on credit ratings. The SEC and federal regulators, as well as state and local lawmakers, have the ratings embedded in many of their rules — effectively requiring investors to trust the ratings. For the past 30 yea...

By Sarah Johnson • Feb. 14, 2008

SEC May Lure Foreign Firms by Easing Disclosure

In a continuing effort to make U.S. capital markets more appealing to foreign companies, the Securities and Exchange Commission proposed a number of amendments to its disclosure standards, including eliminating all requirements for paper submissions.“The proposed amendments would bring our foreig...

By Stephen Taub • Feb. 14, 2008

SEC Blesses Companies that Deny Proxy Access

Shareholder activists hoping to gain wider access to corporate proxies have been dealt another setback by the Securities and Exchange Commission.The SEC told a number of companies, including Bear Stearns, JPMorgan Chase & Co., E-Trade Financial, Croghan Bancshares, and Kellwood Co., that the ...

By Stephen Taub • Feb. 12, 2008

Lerach Gets Two Years Behind Bars

Class-action lawyer William Lerach will serve two years in prison for his role in a kickback scheme at his former employer Lerach Coughlin Stoia Geller Rudman & Robbins, according to press reports. The attorney, who once led a $7 billion case against Enron, had won the ire of the corporate co...

By Sarah Johnson • Feb. 11, 2008

Faulty Forecasts on a Roll

Faulty forecasts have been the downfall of many CFOs. Last year the retirement of Motorola’s finance chief, David Devonshire, coincided with the technology company dropping its revenue projections by a billion dollars in the first quarter. At Ericsson, the telecommunications giant, the CFO depart...

By Alan Rappeport • Feb. 11, 2008

Finance Exec’s Loose Lips Sink Old Pal

You wouldn’t think finance executives need to be reminded to keep their mouths shut about the material, non-public information they normally possess. But here is yet another example that they do need reminders. The Securities and Exchange Commission has settled charges with an individual who ad...

By Stephen Taub • Feb. 11, 2008

City Investment Contracts Draw SEC’s Eye

The Securities and Exchange Commission is weighing whether to bring civil charges against Financial Security Assurance Holdings for bid-rigging in connection with the investments of municipalities. Financial Security, a subsidiary of Belgium-based Dexia Holdings, provides financial guaranty insu...

By Stephen Taub • Feb. 8, 2008

Does Mass. Law Force Sarbox on Nonprofits?

A Massachusetts health-care workers’ union is asking board members of Beth Israel Deaconess Medical Center to apply Sarbanes-Oxley Act disclosure rules to the nonprofit hospital’s audits.The 1199 SEIU United Healthcare Workers East sent letters to 6 of Beth Israel’s 18 board members, who also ser...

By Kate Plourd • Feb. 8, 2008

Restructured Products

Hounding credit-rating agencies has become the bloodsport of choice for moneymen. At a conference this week one speaker announced, to raucous laughter, that he had just received a news flash: “Moody’s has downgraded Fitch, Fitch has cut Moody’s in retaliation, and Standard & Poor’s has put it...

By Economist Staff • Feb. 8, 2008

How to Fix the Rating Agencies, Part II

In 2007, lawmakers waggled their fingers at the credit rating agencies for missing the mark in assessing the risks of mortgage-backed securities, a factor congressmen and senators claim partly led to the subprime-mortgage crisis. Now, nearly a year after the mortgage market meltdown, national and...

By Sarah Johnson • Feb. 7, 2008