CenTrust Bank Scandal
CenTrust, first called Dade Federal Savings and Loan, was founded in 1934 during the Great Depression and eventually became a stalwart of the South Florida business establishment. By the early 1980s, Miami had a corporate community that any city would envy. The companies were large and growing. They contributed mightily to local causes. They virtually invented a skyline where none existed as late as the early 1980s. CenTrust Bank and David Paul gave huge sums of money and much effort toward founding the New World Symphony in the 1980s. But the local corporate world was shaken badly at that time. In South Florida, home of fragile physical, social and economic climates, big business became an endangered species. Prominent in the downtown skyline were buildings built by financial institutions that had failed or were in serious trouble. By November 1983, CenTrust had losses of $500 million and was headed toward insolvency and federal takeover. David Paul, pledging little more than some real-estate holdings, gained control and quickly remade and personalized the institution. Before long, the company's stock-ticker symbol became DLP, Paul's initials. At the end, as senior managers deserted him, David Paul held the posts of chairman, president, chief executive officer and chief operating officer.
South Florida became a center of risky banking practices in the 1980s, and CenTrust was one of hundreds of thrifts traumatized by inflation and soaring interest rates.
Through this time, Drexel's former junk king Michael Milken, sold billions of dollars of high-yield junk bonds to cooperative companies with big piles of cash such as CenTrust Bank, Columbia Savings & Loan, Imperial Corp. of America and First Executive. The companies were loyal buyers of Drexel underwritings. They paid fat trading and investment banking fees to Drexel and helped the firm to launch bigger and bigger deals.
CenTrust held more than $1 billion in junk bonds and worked closely with Drexel. The relationship was launched when Drexel led an underwriting syndicate of five investment bankers that raised $12 million in subordinated debt to bolster CenTrust's capital base. Eventually, CenTrust also bought $1.4 billion in junk bonds from Drexel. Moreover, in early 1989, Lincoln and CenTrust sold warrants and other assets to each other through Drexel, with each recognizing s...
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...s of false internal accounting by the thrift. CenTrust eventually repurchased the securities for more than BCCI had paid, and Mr. Pharaon allegedly kept the difference of $331,500.
Mr. Pharaon a Saudi businessman was indicted on 1991 as well as Mr. Milken on 1989 was indicted of racketeering and securities violations. Drexel Burnham Lambert has settled criminal and civil securities charges.
After being seized, CenTrust sold its deposits in June 1990, to Great Western Financial Corp., Beverly Hills, California. Mr. Paul, the former chairman and CEO of the failed CenTrust Savings Bank of Miami, was sentenced to 11 years in federal prison after being convicted in a jury trial of 68 fraud-related counts in US District Court in Miami involving the spectacular collapse of CenTrust at a cost of $1.7 billion to taxpayers, and for allegedly helping arrange the sham purchase of $25 million in CenTrust securities by Bank of Credit & Commerce International. The verdict followed a six-week trial. In all felony counts, most involving allegations that he siphoned $3.2 million from CenTrust and spent it on his 95-foot yacht, his homes in Miami, his luxuries, and elsewhere during the 1980s.
Seidman, L. W. (1986) Lessons of the Eighties: What does the evidence show? Retrieved July 25, 2010 from http://www.fdic.gov/bank/historical/history/vol2/panel3.pdf
Debra became the assistant vice-president and manager of energy lending of a Canadian Western Bank on January 31, 2006. Within a month Debra set up her embezzlement scam by creating two corporations that the embezzled funds would be funnelled too. Debra set up an account in a woman’s name using the woman’s GIC (guaranteed investment certificate) which was worth 8 million dollars. Debra started with 100,000 dollars in a line of credit using the woman’s name and increased it 6 times until the line of credit reached $950,0000 on November 6, 2007. Additionally, Debra arranged for 5 new accounts in the same woman’s name with a total deposit of $16.4 million. Debra made 72 unauthorized withdrawals from the fake account in the two year time frame of the scam. She kept the scam going by transferring money from the
As a partner in the public accounting firm of Deloitte & Touche. LLP. James, in this case, was responsible for this violation. First, James was no on the basis of full inspection of the subsequent discovery existing at the date of the auditor 's report. Second, he did not detect and address problems regarding Ligand Pharmaceuticals ' exclusion of certain types of returns from the evaluation of future returns. Last but not least, he did not adequately perceive the reasonableness of Ligand’s estimates of future product
Stewart was convicted of conspiracy, perjury and obstruction of justice in 2001, and for using insider information to sell shares of the company ImClone Systems. This type of fraud damages the confidence of investors, it makes them perceive the lack of equality.
Rothstein) were indicted for conspiracy to defraud the public. All were acquitted for want of
Mooney, Richard. "Banker of America." The Boston Globe 4 Apr. 1999: L1 "Powerful house of Morgan Changes with the Times." The San Diego Union-Tribune 24 Feb. 1986: 18 Sinclair, Andrew. Corsair: The Life of J. Pierpont Morgan. Toronto: Little, Brown and Company, 1981.
This involved sacking of all the employees who had involved themselves in the scam and ensuring that they faced the full force of the law as it is required under the law. A back with such kind of reputation to be implicated in a huge scandal like the one it was involved cannot be looked upon lightly. The news posts suggest that such acts and those who were involved should not be left to go scot free as they have gained a lot from the scandal. The news post also questions the code of ethics in operation in the bank. Ideally, bank staffs are supposed to observe high levels of disciplines especially when the customers are involved. The employees’ actions were a manifestation of how weak the code of conduct with which the bank is applying is and therefore needs a lot of
The Eron Scandal is thought to be a standout amongst the most famous inside American history. An Eron of occasions is considered by numerous students of history and market analysts alike to have been an informal outline for a contextual investigation on White Collar Crimes. ("Enron Scandal Summary - Finance | Laws.com," n.d.)White Collar Crime is characterized as peaceful, monetarily based criminal action ordinarily attempted inside of a setting in which its members hold propelled training as to business that is thought to be prestigious. ("Enron Scandal Summary - Finance | Laws.com," n.d.) The accompanying occurred amidst the Enron Scandal. Eron had great success in their early years. Though the period regulation inside of a business and corporate
The L.A. Times reported the unethical business practices in 2013, and aided in exposing the fraud. This report directed to a 2015 lawsuit against Wells Fargo by the city of Los Angeles. They were fined $185 million and Wells Fargo terminated 5,300 employees, nearly 1% of the U.S. workforce. Therefore, the federal regulators got involved and this resulted in WF announcing they were going to pay the $185 million fine. The purpose of the announcement was the bank’s executives wished to have the matter behind them. However, due to the firing of the employees and creating the fake accounts, it caused a public uproar and caught the government officials attention (the U.S. Senator Elizabeth Warren and U.S. Treasure Secretary Jack Law). They scolded Wells Fargo for the misconduct and asked John Stumpf to resign. Though, Stump wanted to continue and lead the team to success. In addition, a former consumer banking chief, Carrie Tolstedt, who had resigned during the summer and reportedly collected $125 million. She ran the unit that was responsible for the millions of fake accounts may be have million dollars in penalties. However, since she decided to retire in July, there are no indication that she will face any
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
This case illustrated that there were real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. (He still had millions remaining, however, from his illegal gains.) His actual prison sentence was three years, yet he served only twenty-two months in the federal prison at Lompoc, California, which was known to have a “country-club” atmosphere.
Mattew Hutcheson was indicted by a federal grand jury for Embezzlement on April 11th 2014. “The indictment alleges that Hutcheson was a trustee and fiduciary for the G Fiduciary Retirement Income Security Plan, National Retirement Security Plan 401(k) and the Retirement Security Plan and Trust“ (Sullivan 2014). Hutcheson misappropriated assets of G Fiduciary Retirement by using wire transfers by putting 401K plan assets into bank accounts controlled only by Hutcheson. Hutcheson defrauded more then $5 million dollars of assets.
The history of Lehman Brothers (LBs) is dated back to 1844 when Henry Lehman and his two brothers established a small shop in Alabama (United States) to sell groceries and other commodities (Geisst, 2001). In the early 1900’s, they formed to a greater business company trading on the New York exchange market and the Cotton Exchange, which successfully promoted the family business to the retail giants with a partnership with Goldman and Sachs (Geisst, 2001; Wechsberg, 1966). Subsequently, the further opportunity raised in collaboration with some firms in the railway industry such as the Baltimore and Ohio railways, Chicago railways and others (Harward Business School, 2012). In 1975, the company achieved its success when it became the 4th largest investment bank in the US by merging with Kuhn, Loeb and Company, which boosted their financial activities in the financial market (Sloane, 1977). In the new line of business by diversifying their operations from a small shop via investments in the industry sectors, eventually they transformed to the company operating in the banking and brokerage (Geisst, 2001). Although LBs experienced remarkable successes and achievements, the housing market bubble in USA led to their collapse causing that in September 2008 the company filed for chapter 11 bankruptcy petitions that triggered a negative flow of consequences (Caplan et al., 2010).
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.