Tag Archives: New York

A Small Business Started From Scratch. Surf And Tacos.


You can do this.

This guy rounded up the funds to start this thing long before there were Crowdfunding sites springing up everywhere. Here is a simple little idea that evolved to the employment of 16 people working to create taco lunches for people in Rockaway Beach, an urban beach in Queens, New York, aka the Irish Riviera. He makes tacos.

And, only a few months out of the year. The rest of the time? He surfs in IndonesiaAustralia, and Mexico.

Does this sound better than hanging around unemployment lines hoping for one of those stupid jobs they advertised? Of course it does. Figure out what moves you, what you can do and what will make people come to you to get it.

Then, post your project on RocketHub or Indiegogo or Kickstarter and start your own business. In a year or two, you too will be surfing in Mexico, and having a great time doing what you love, when you are “working”.

Here. Watch this:

(I apologize, but WordPress has serious support issues for video, so you will have to watch it on a Pinterest site):


And, don’t forget to come back to this blog site when you are done.



Stimulus Money Goes To Ground.

Under the banner of saving jobs, kick-starting the economy and keeping small businesses and organizations afloat through tough economic times, the US government has handed out more than $840 Billion in federal stimulus money since 2009. Of that, more than $33 Billion went to California.

Some of the largest and most recognized companies in Silicon Valleynearly all of which are flush with cash—were awarded $94 million as either prime recipients or sub-recipients.

Google got $686,681 as a sub-recipient on a contract to reach 14 additional different language audiences for the 2010 Census Integrated Communications Campaign. HUH?

McAfee was awarded $1,579,271 as a sub-recipient on five different contracts from 2009 through the first quarter of 2012. For ???

eBay received more than $4,447,000 on three different grants including a $2.5 million grant to the Office of the Governor of Arizona for the Government Services Fund. For the WHAT?

Applied Materials took over $10 Million to develop and demonstrate an advanced epitaxial growth system for high-brightness LED manufacturers. Somehow, this doesn’t sound like it is going to save jobs, lives or cure cancer.

Scott Amey, General Counsel at POGO, is critical of some of the outcomes of the stimulus bill.

“There are a lot of large contractors that received stimulus money, and it makes you scratch your head and wonder, ‘Were they really in need of receiving that money?’” Amey said. “A lot of people would say no.”

He went on to say, “When it comes to competition in federal contract, you always have a fear that the usual suspects, that the larger contractors, are always going to get the bigger piece of the pie. And then you have the small and mid-sized businesses that are fighting for the scraps.”

Yahoo! got almost $10 Million to build a clean-energy data center in upstate New York. According to federal data, the project created all of 25 jobs. Why can’t Yahoo! build its own data center?

Yeah sure. These guys really need all the stimulus help they can get. Are you kidding me?

Of all the recipients, more than half didn’t create any more than four jobs with the funds.

One of the biggest jokes was PG&E who received  $47,387,955. Twenty-five million dollars of that goes to design and test an underground compressed energy storage system. On our tax dollars? Come On, Man.

Why can’t a huge utility company do these things on their own?  PG&E made $332 Million in NET PROFIT even after absorbing the $550 Million costs of the pipeline explosions in 2010. “That is the whole purpose of the stimulus money.” A PG&E spokesman said, “to encourage innovation and testing new technologies.”

Sam Rosen-Amy, fiscal policy analyst for OMB Watch in the nation’s capital, said there was a tension between getting the stimulus cash “out as fast as possible to people who need it most,” and ensuring the money is being spent in “an effective and responsible way.” And, he admits that some of the smaller companies that should have received money did not.

Among these were two local applications for stimulus dollars that were denied back in 2009. Linda Crowe applied for stimulus funding, twice, so her organization Califa, which represents public libraries, could buy laptops and provide training for unemployed residents.

“It was all connected toward job assistance and for helping people find work,” she said.

“How much did you get?” Stock asked Crowe.

“Nothing,” she said.

Debarag Banerjee and his three business partners at WiViu Technology applied for $1.5 million to hire 13 people and build a video conference system to serve rural hospitals.

“If we got stimulus, funding had come at the right time,” Banerjee said, “we would have been in a much, much different state.”

Banerjee’s company has downsized significantly, and now it’s essentially out of business.

All of the other Silicon Valley companies who received funds wouldn’t agree to an interview with reporters about their stimulus projects or why their corporations needed the money.

If we simply gave the money to Kickstarter, and let them fund projects through the next few years with that $33 Billion, we would create tons of jobs and a lot of wealth. As one simple example, Pebble Watch Co., which just closed its Kickstarter round after raising $7 Million in three weeks has already created 6 new jobs and expects to create another 15 by year-end and they haven’t even begun to manufacture the watches yet. And, when you think about how this all works, it isn’t just the jobs created directly, its the indirect jobs that really count. Microsoft used to create 6 service jobs for every one new hire.

I don’t know whether Banerjee’s video conferencing system to serve rural hospitals makes any sense, but it only would have cost $1.5 Million to find out. That’s a rounding error on $33 Billion.  Or, how about a few bucks for laptops and training for the unemployed?

Instead we have PG&E throwing almost $50 Million into the ground for compressed energy? Really?

England: Online P2P Lenders Could Replace Banks.

Andy Haldane, Head of Policy at the Bank of England said in a speech in New York yesterday that: “small peer-to-peer lenders like Zopa and Funding Circle could in time replace high street banks”.

This comment reflects just how seriously the Bank of England is taking the new and rapidly growing peer-to-peer finance sector.  

Mr Haldane said the impact of these firms could be revolutionary, saying:

“At present, these companies are tiny. But so, a decade and a half ago, was Google. If eBay can solve the lemons problem in the second-hand sales market, it can be done in the market for loans”.

In response, Giles Andrews, cofounder and CEO of Zopa – the world’s first online peer-to-peer lender – said:

“Andy Haldane’s comments are very welcome as further evidence of how far this new force for good in finance has come over recent years.  As we have said for a long time, it is innovative new alternatives such as Zopa that are going to shake up the banking sector far more effectively than just adding more banks doing the same old things.”

“Complete replacement of high street banks is probably unlikely, as there might be some things no one else can do better. But Zopa has proven that as far as personal loans and savings are concerned, peer-to-peer finance offers a better solution – by design.  And there are other parts of what banks do that peer-to-peer providers could do better. Even mortgages.”

Why I Am Leaving Goldman Sachs.

This is an article written by GREG SMITH in today’s New York Times.
goldman sachs logo

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

Blankfein     Gary Cohn

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus,God’s work, Carl LevinVampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

The King of Hate Radio Strikes Again.

Tracie McMillan calls Rush Limbaugh comments ‘unconscionable and sexist’.

Not only is El Rushbo undaunted by the flack over Sandra Fluke, it actually appears to energize him and encourages him to seek out other female targets. This time, “Authorettes” and the “Over-educated”. If there are women in America who are willing to vote for the Republican candidates who are unable/unwilling to condemn Rush Limbaugh, then there is either something seriously wrong with our culture or me.

Author and Holly (MI) native Tracie McMillan was surprised by comments from radio talk show host Rush Limbaugh Tuesday regarding her gender and education. Does losing 40 sponsors and 2 radio stations send a message to Rush that he should push down on the accelerator?

“What he was saying about me was completely unconscionable and sexist,” said McMillan, 35, of Limbaugh calling her an “authorette” and over-educated” while discussing her new book “The American Way of Eating.” And, not only that, it was stupid! Tracie McMillan is a working class, blue collar woman who grew up in Holly, Michigan. Her father was a lawnmower salesman and her mother had an English degree. Tracie was the oldest of three girls, and helped out at home when her mother fell ill around the time she was 7. The insurance company didn’t want to pay for her care, so when she got too ill to live at home, she bounced between institutions that would hold off on charging the family until the insurance company settled. Her mother left their home when she was 12; they lost the case with the health insurance company when she was 14, and her mother died when she was 16.

Her first job, at 14, was making caramel apples at an apple orchard. At 16, she got a job at Big Boy, stocking the salad bar before moving on to waitress. At 17, she earned a partial scholarship to NYU, moved to New York City, and cobbled together the rest of her tuition and living expenses as a tutor, nanny, waitress, personal assistant and intern; at one point she simultaneously juggled five part-time jobs. She stayed here because she landed in a rent-stabilized apartment that kept the city affordable. Clearly, an elitist authorette and way over-educated.

This “Over-educated Authorette” kept tutoring and freelancing until she got herself a job at City Limits as managing editor. She was a copy editor, photo editor, office manager and deadline nag, and in her free time, she started writing stories about the things that interested her: welfare, child care, anything, really, about how working families eked out a living. She’s proud, and a little shocked, that she’s now won several national awards, including the Harry Chapin Media Award and the James Aronson Award for Social Justice Journalism, and has been recognized by the James Beard Foundation, for her work on these topics. Even though she’s not on staff at a big  magazine or newspaper, the awards put her work in the same league as the publications she beat to win them: the New York Times, Fortune, Businessweek and Time.  But, I’m sure El Rushbo thinks these awards are leftist jack-offs that mean nothing outside of the elitist, self-congratulatory East Coast liberal book clubs.

You want to talk about over-educated authorettes? How about Ann Coulter, who grew up in a wealthy suburb in Connecticut, Then, while attending Cornell University, Coulter helped found The Cornell Review,[5] and was a member of the Delta Gamma national women’s fraternity.[6] She graduated cum laude from Cornell in 1984 with a B.A. in history, and received her J.D. from the University of Michigan Law School in 1988, where she achieved membership in the Order of the Coif and was an editor of the Michigan Law Review.[7] At Michigan, Coulter was president of the local chapter of the Federalist Society and was trained at the National Journalism Center.[8]

After law school, Coulter served as a law clerk in Kansas City, for Pasco Bowman II of the United States Court of Appeals for the Eighth Circuit. After a short time working in New York City in private practice, where she specialized in corporate law, Coulter left to work for the United States Senate Judiciary Committee after the Republican Party took control of Congress in 1994. She handled crime and immigration issues for Senator Spencer Abraham of Michigan and helped craft legislation designed to expedite the deportation of aliens convicted of felonies. She later became a litigator with the Center for Individual Rights. I don’t remember Rush calling Coulter an over-educated authorette, but maybe it’s just me.

Back to Tracie. Over time, her work has appeared in a wide range of publications including the New York Times, Harper’s, Slate, Saveur, Salon and Gastronomica. In October 2012, she was named a Senior Fellow at Brandeis University’s Schuster Institute for Investigative Journalism. (It’s unpaid, but the title helps). Her first book, The American Way of Eating, a nonfiction project examining food and class in America, was published by Scribner in February 2012.

McMillan is currently on a book tour, describing her experience in which she works undercover in fields in California, the produce department of a Walmart store outside of Detroit and an Applebee’s restaurant in New York City to research how food comes to people’s tables and questioning why Americans eat the way they do every day.

The 35-year-old McMillan said she was about to shut off her Internet access when a couple of tweets showed up on her Twitter page regarding Limbaugh’s comments.

“I had no idea Rush Limbaugh had any idea who I am,” she said. “Frankly, I don’t think he does have any idea who I am other than the (New York) Times (book) review.”

McMillan moved to New York after receiving a partial scholarship to NYU, where she received a bachelor’s degree in political science, while working several part-time jobs.

During his comments on-air, Limbaugh stated, “What is it with all of these young single white women?,  They’re over-educated, but that doesn’t mean they’re intelligent,” according to show transcript.

“To say that women who have worked their butts off to get a B.A. are over-educated … do you think any women shouldn’t go to school?” McMillan said.

Students at the University of Michigan-Flint were taken aback by Limbaugh’s comments about McMillan and Sandra Fluke, a Georgetown University law student he called a “slut” and “prostitute” last week after discussing her approval of the use of birth control during a recent hearing on Capitol Hill.

“You’re not looking at their education, but their gender,” said Davison resident Corynn Bowden, a 21-year-old University of Michigan-Flint junior. “He’s not a woman himself. He can’t even be in their shoes if he tried.’

Alyssa Miller, 24, of Lapeer, MI, said sexism is “obviously still around and something that’s still prevalent,” and the bias may be more hidden than other forms of prejudice.

A pre-med student majoring in biology, Miller said she’s had people suggest a change in her major because of the prevalence of men in the field.

“I took it as insulting my intelligence, personally,” she said. “It’s something that’s probably never going to change.” 

While calling Limbaugh’s comments “a whole other level of jerk,” McMillan said the attention has helped get out her message on nutritional problems among Americans, including obesity.

Mark Valacak, health officer of the Genesee County Health Department, said the problem is widespread in Flint, with a recent poll showing the Flint/Genesee County area as the fifth-most obese in the nation.

He said the issue stems from a lack of healthy food options, with just one national food retailer with a store within Flint’s city limits. 

“I think it’s a contributing factor to the obesity problem in this community,” he said. “You have to have access to healthy food options and easy access.”

McMillan tackled the issue to focus on a growing problem among the American population, which allowed her to continue to touch on social issues.

She’s written articles for the New York Times, Salon, Slate and other publications on a variety of issues, but McMillan wants her latest work to show the issues in the food industry and open up dialogue on nutrition.

“Figuring out how to build that kind of an infrastructure is a big part of the book,” she said. “I want a conversation on how we make sure everyone has good food.”

Despite the comments, McMillan has found the controversy “really fascinating” and joked that “I need to send (Rush) some flowers” for creating the attention.

“I think my work is worth as much on its (own) merits,” she said. “He’s certainly helped me professionally in a way I’d never be able to manufacture.”

And, I think El Rushbo has a serious case of grandiose, insecure, psychopathic misogyny and should see a talking doctor. And, his audience should do the same. And, now I am convinced he will be with us for a long time.

I Am NOT A Socialist!

One of the followers of this blog today accused me of being a Socialist, apparently because of the cartoon I posted on the blog  “Wall Street Bankers Jailed for Destroying the Economy: Zero”. He said I had the right idea, but the wrong target. He said the politicians and economists should all be put in jail instead.

So, to set the record (and him) straight, I need to point out that I am a proud, card-carrying Capitalist and that I also hold membership in the dreaded one percent club. As many of you who are reasoned have figured out through reading my blog, I also have little patience with those who operate using opaque business practices and who play by rules designed to cause injury and harm to the least empowered among us. So, you could call me a Moral Capitalist. An Honest Capitalist. A Compassionate Capitalist. A Hippocratic Corpus Capitalist. But, never a Socialist. It is a depressing sign of a cultural tragedy when people are able to confuse Socialism with Moral Capitalism.

Do I think that the fools who paved the road to economic ruin, and then drove recklessly down that road, causing permanent damage, sickness and destruction to the global economy should pay some price, should suffer some ruin, should be sent to jail? You bet I do.

If Bill Clinton would simply say, “You know, when I beefed up the 1977 Community Reinvestment Act to force mortgage lenders to relax their rules to allow more socially disadvantaged borrowers to qualify for home loans, I think I made a mistake there. When in 1999, I repealed the Glass-Steagall Act, which ensured a complete separation between commercial banks, which accept deposits, and investment banks, which invest and take risks, I was probably wrong.” I would be OK with that. Clinton has done a ton of good since leaving the Presidency, and I think the scales are probably balanced.

Phil Gramm however, the former US senator from Texas, free market advocate with a PhD in economics who fought long and hard for financial deregulation, should be in jail right now. His work, encouraged by Clinton’s administration, allowed the explosive growth of derivatives, including credit swaps. In 2001, he told a Senate debate: “Some people look at sub-prime lending and see evil. I look at sub-prime lending and I see the American dream in action.” It is not that I have a problem with derivatives, or credit swaps. I have a problem with actions that have no consequences. I have problem with Senators that serve themselves instead of the American citizenry.

According to the New York Times, federal records show that from 1989 to 2002 he was the top recipient of campaign contributions from commercial banks and in the top five for donations from Wall Street. At an April 2000 Senate hearing after a visit to New York, he said: “When I am on Wall Street and I realise that that’s the very nerve centre of American capitalism and I realise what capitalism has done for the working people of America, to me that’s a holy place.” Not so holy now, Phil. Nowhere near soon enough, this asshole eventually left Capitol Hill to work for UBS as an investment banker. Of course he did.

Kathleen Corbet ran the largest of the big three credit rating agencies, Standard & Poor’s. The agencies were basically acting as cheerleaders throughout the 2005-2008 period, assigning the top AAA rating to collateralised debt obligations, the often incomprehensible mortgage-backed securities that turned toxic. Investigations by the Securities and Exchange Commission and the New York attorney general among others, have focused on whether the agencies were compromised by earning fees from the very banks that issue the debt they rate. Compromised? Do you think?  The reputation of the industry was savaged by a blistering report by the SEC that contained dozens of internal emails that suggested they had betrayed investors’ trust. And Kathleen shouldn’t be in jail? Come on, Man.

How about every senior manager at AIG?  AIG had a vast business in credit default swaps and therefore a huge exposure to a residential mortgage crisis. When AIG’s own credit-rating was cut, it faced a liquidity crisis and needed an $85B bail-out from the US government to avoid collapse and avert the crisis its collapse would have caused. It later needed many more billions from the US treasury and the Fed, but that did not stop senior AIG executives taking themselves off for a few lavish trips, including a $444,000 golf and spa retreat in California and an $86,000 hunting expedition to England. “Have you heard of anything more outrageous?” said Elijah Cummings, a Democratic congressman from Maryland. “They were getting their manicures, their facials, pedicures, massages while the American people were footing the bill.” Yes, they should all be in jail.

And, let’s not forget Dick Fuld, Ralph Cioffi and Matthew Tannin. Fuld, a former bond trader known as “the Gorilla”, encouraged risk-taking and yet, had really no idea what securitized products his traders had created.  He knew they were probably worthless if the shit ever hit the fan though, and it is because of this cynical knowledge and his unwillingness to stop the flow of these products emanating from his own house, that he should be in jail. Cioffi and Tannin were Bear Stearns bankers recently indicted for fraud over the collapse of two hedge funds last year, which was one of the triggers of the credit crunch. They are accused of lying to investors about the amount of money they were putting into sub-prime, and of quietly withdrawing their own funds when times got tough. Jail.

Angelo Mozilo, the former chief of Country-wide Bank, the nations largest lender of sub-prime loans is also a crook. BofA recently paid billions to settle investigations by various attorney generals for Countrywide’s mis-selling of risky loans to thousands who could not afford them. The company ran a “VIP program” that provided loans on favourable terms to influential people including Christopher Dodd, chairman of the Senate banking committee, the heads of the federal-backed mortgage lenders Fannie Mae and Freddie Mac, and former assistant secretary of state Richard Holbrooke. I know it’s a free country. I know Dodd, Holbrooke, et al, did nothing technically wrong in accepting these loans. I know Mozilo is in within his rights to create loans for people who clearly could not afford to pay them off. But, they all had a moral responsibility to themselves, their souls and to the American people.

I could go on for a long time here. George Bush, Gordon Brown, Greenspan, Stan O’Neal, Jimmy Cayne, Chris Dodd, Chuck Prince, Joe Cassano, Lew Ranieri, etc., etc., but you get my point. There are, in my mind, clear fiduciary and moral principles that these people all violated in the course of their work, and as the  direct result of their actions, millions of people are now suffering through what will undoubtedly go down as the worst Global depression in history. This housing market has not hit bottom and will continue to be the Albatross around the neck of this recovery for years to come. It will only get worse, as another 4 million homes fall to foreclosure during the next few months. The government management team at Greece did almost exactly the same thing as the Wall Street Bankers did here (knowingly pushed a corrupt and ruptured system well past its breaking point), and in a few months, the entire Eurozone will begin to pay the price for that. And, then the rest of the world.

But, will anyone be thrown in jail? Not likely. So yes, I do feel more than a bit of empathy for the 99%. When they break the law, they almost always get sent to jail.

The Watchdogs That Didn’t Bark, and a Fun Halloween Party.

New York foreclosure firm, Steven J. Baum, dressed up as homeless and decorated offices like foreclosed homes for Halloween, before November 2010 when they were shut down because of robo-signing, among other offenses.  NY State court judge called one foreclosure filing from the Baum firm “incredible, outrageous, ludicrous and disingenuous.”
Photos from a former employee: Two Steven J. Baum employees mocking homeowners who have been foreclosed on.
A “squatter” in Baum Estates – photo of the Halloween  party from former employee. Funny, right?

Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing.

The federal government, as has been widely noted, has pressed few criminal cases against major lenders or senior executives for the events that led to the meltdown of 2007. Finding hard evidence has proved difficult, the Justice Department has said.

The government also hasn’t brought any prosecutions for dubious foreclosure practices deployed since 2007 by big banks and other mortgage-servicing companies.

But this part of the financial system, a Reuters examination shows, is filled with potential leads:

Foreclosure-related case files in just one New York federal bankruptcy court, for example, hold at least a dozen mortgage documents known as promissory notes bearing evidence of recently forged signatures and illegal alterations, according to a judge’s rulings and records reviewed by Reuters. Similarly altered notes have appeared in courts around the country.

Banks in the past two years have foreclosed on the houses of thousands of active-duty U.S. soldiers who are legally eligible to have foreclosures halted. Refusing to grant foreclosure stays is a misdemeanor under federal law.

The U.S. Treasury confirmed in November that it is conducting a civil investigation of 4,500 such foreclosures. Attorneys representing service members estimate banks have foreclosed on up to 30,000 military personnel in potential violation of the law.

In Alabama, a federal bankruptcy judge ruled last month that Wells Fargo & Co. had filed at least 630 sworn affidavits containing false “facts,” including claims that homeowners were in arrears for amounts not yet due.

Wells Fargo “took the law into its own hands” and disregarded laws banning perjury, Judge Margaret A. Mahoney declared.

And in thousands of cases, documents required to transfer ownership of mortgages have been falsified. Lacking originals needed to foreclose, mortgage servicers drew up new ones, falsely signed by their own staff as employees of the original lenders – many of which no longer exist.

But the mortgage-foreclosure mess has yet to yield any federal prosecution against the big banks that are the major servicers of home loans.


Reuters has identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.

The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation’s largest subcontractor of mortgage servicing duties for banks.

People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.

The Justice Department doesn’t disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys’ general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.

“I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history,” said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. “I can’t think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases.”

Spokesmen for the five largest servicers – Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group – declined to comment about the possibility of widespread fraud for this article.

Paul Leonard, spokesman for the Housing Policy Council, whose membership includes those banks, said any faults in foreclosure cases are being addressed under a civil settlement earlier this year with federal regulators.


Justice Department and Federal Bureau of Investigation officials say they have brought mortgage-fraud criminal cases through their “Operation Stolen Dreams.” None, however, were against big banks. All targeted small-scale operators who allegedly defrauded banks with forged mortgage applications or took advantage of homeowners by falsely promising arrangements to get them out of default and then pocketing their money.

Justice Department spokeswoman Adora Andy declined to comment on the absence of prosecutions for foreclosure practices by big banks. She said in a statement: “The Department of Justice has been and will continue to aggressively investigate financial fraud wherever it occurs, including at all levels of the mortgage industry and, when we find evidence of a crime, we will not hesitate to pursue it.”

Some judges have accused banks of falsely stating in court that they are working on loan modifications for homeowners in default.

In a November 30 court hearing, not previously reported, a federal bankruptcy judge in New York accused Bank of America of falsely telling courts and the public that it was working to renegotiate loans.

“Bank of America issues constant press releases about how it is responsive to their borrowers on these issues. They are not, period,” said Judge Robert Drain, in a case involving homeowner Richard Tomasulo, a pharmacist from Crompond, New York. Drain said Bank of America had been telling the court since January that it was working to modify Tomasulo’s mortgage, but hadn’t done so.

“Whoever is in charge of this program and their supervisor, who should be following it, should be fired” because “they are frankly incompetent.”

Bank of America spokeswoman Jumana Bauwens said the bank has completed “nearly one million” modifications since 2008. The U.S. Treasury in 2011 suspended loan modification incentive payments to the bank because it was “seriously deficient” in responding to requests for modifications.


Foreclosure fraud came to light in September 2010, with evidence that employees of Ally Financial Corp. had committed “robo-signing,” in which low-level workers signed and swore to the facts in thousands of affidavits they hadn’t read or checked.

The affidavits were notarized outside the signers’ presence, in apparent violation of state and federal criminal laws.

Since then, mounting evidence of possible foreclosure fraud has convinced judges and state regulators that servicers have harmed homeowners and the investors who bought mortgage-backed securities.

A unit of the Justice Department that oversees bankruptcy court cases, the U.S. Trustees Program, said in its 2010 annual report that there were “pervasive and longstanding problems regarding mortgage loan servicing,” which “are not merely ‘technical’ but cause real harm to homeowners in bankruptcy.”

Banks, the Trustees Program says, have falsified affidavits by claiming homeowners owe fees for services never rendered and by overstating how much owners are behind on payments.

Former federal prosecutor Daniel Richman, a professor of criminal law at Columbia University Law School, says a central question is who prosecutors would target in criminal investigations. Richman said it would be easy but not worthwhile to charge large numbers of rank-and-file workers who, directed by supervisors, falsely churned out affidavits.

He said criminal investigations would be warranted, but harder to bring, “if there are particular individuals who lie at the heart of this conduct in a very significant way.”

In October 2010, members of Congress pressed the Justice Department to investigate. Attorney General Eric Holder said investigations were best left to the states, with help from the Justice Department.

The Office of the Comptroller of the Currency, the top bank regulator, quickly negotiated settlements with the 14 largest servicers, requiring changes in practices and “remediation” for harmed homeowners. That settlement allows the banks to choose their own contractors to determine who was harmed and by how much.

Lawmakers and homeowner advocates have criticized the arrangement, contending that it will let the banks avoid making all wronged homeowners whole, because the contractors are paid by and answer to the banks.

Since then, the department’s civil division has worked with a shaky coalition of all 50 states, which have been seeking a civil settlement with five banks that are the largest loan servicers. The negotiations center on requiring them to pay $20 billion or more in penalties, only some of which would go to compensate wronged homeowners.


Federal law enforcement has been noticeably absent, even in areas hardest hit by the crisis, such as Las Vegas.

In 2010 the FBI’s Las Vegas office shut down its mortgage fraud task force, which had focused on small-scale swindlers.

Tim Gallagher, chief of the FBI’s financial crimes section, said that the Las Vegas office had asked to transfer agents to other duties.

Impatient with the lack of federal prosecution, states including New York, Massachusetts, Delaware and California have launched their own investigations of the banks.

In November, it became the first state to file criminal charges. The state attorney general obtained a 606-count indictment against two California-based executives of Lender Processing Services.

It accuses the executives of paying Nevada notaries to forge the pair’s signatures and falsely notarize them on notices of default, documents Nevada requires in foreclosure actions. State officials said more indictments are expected.

In an interview, John Kelleher, Nevada’s chief deputy attorney general, said the investigation began in response to citizen complaints.

“We were concerned and then shocked at the sheer number of fraudulent documents we were finding that had been filed with the county recorder,” Kelleher said.

Investigators found “tens of thousands” of false records filed on behalf of big mortgage servicers, he said.

The two executives have pleaded not guilty. In a press release, the company said: “LPS acknowledges the signing procedures on some of these documents were flawed; however, the company also believes these documents were properly authorized and their recording did not result in a wrongful foreclosure.”


The U.S. Attorney’s Office in Manhattan is the federal prosecutors’ office that traditionally has filed the most cases against top banks and financiers. But it hasn’t brought any foreclosure-related criminal cases involving Wall Street’s biggest financial houses or the law firms that represent them.

To date the only step it has taken publicly was an October 2011 civil settlement with New York State’s largest foreclosure law firm.

The Steven J. Baum P.C. law firm, based near Buffalo, New York, in recent years filed approximately 40 per cent of all foreclosures in New York State, on behalf of banks and other mortgage servicers. Court records show that the firm angered state court judges for alleged false statements and filing suspect documents.

Arthur Schack, a state court judge in Brooklyn, in a 2010 ruling said that pleadings by the Baum firm on behalf of HSBC Bank, a unit of London-based HSBC Holdings, in a foreclosure case were “so incredible, outrageous, ludicrous and disingenuous that they should have been authorized by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone.”

Another state judge that year imposed $5,000 in sanctions and ordered the firm to pay $14,500 in attorneys’ fees, ruling that “misrepresentation of the material statements here was outrageous.”

But the U.S. Attorney’s office in Manhattan filed no criminal charges against the Baum firm. Instead, it signed a settlement with Baum ending an inquiry “relating to foreclosure practices.” The agreement made no allegations of wrongdoing, but required the firm to improve its foreclosure practices.

Baum agreed to pay a $2 million civil penalty, but didn’t admit wrongdoing.

The law firm said it would shut down after New York Times columnist Joe Nocera in November published photographs of a 2010 Baum firm Halloween party in which employees dressed up as homeless people. Another showed part of Baum’s office decorated to look like a row of foreclosed houses.

“The settlement between the Manhattan U.S. Attorney’s Office and the Steven J. Baum Law Firm resulted in immediate and comprehensive reforms of the firm’s business practices,” said Ellen Davis, spokeswoman for the Manhattan U.S. Attorney’s office.

Earl Wells III, a spokesman for Baum, said the lawyer wouldn’t comment because “he’s laying low right now.”

An HSBC spokesman said: “We are working closely with the regulators to address any matters raised regarding” the bank’s foreclosure practices.


The most serious potential foreclosure violations involve falsified mortgage promissory notes, the documents homeowners sign vowing to repay mortgage loans. Courts uniformly have ruled that unless a creditor legally owns the promissory note, it has no legal right to foreclose. For each mortgage there is only one promissory note.

Bankruptcy court records reviewed by Reuters show that at least a dozen radically different documents purporting to be the authentic promissory note have turned up in foreclosure cases involving six different properties in the federal bankruptcy court for the Southern District of New York.

In one, Wells Fargo is battling to foreclose on the Bronx home of Tindala Mims, a single mother who works as an ambulance driver. In September 2010, Wells Fargo filed a promissory note bearing a signed stamp showing that the note belonged to defunct Washington Mutual Bank, not Wells Fargo. The judge threw out the case.

In a second attempt, the court was given a different version of the note. But inspection showed physical alterations. A variety of marks on the original were missing or seemed obviously altered on the second. And the second version had a stamped endorsement, missing on the first, that appeared to give Wells Fargo the right to foreclose.

The judge threw out the second attempt too. Wells Fargo is trying a third time. It declined to comment on the case.

Linda Tirelli, Mims’ lawyer, in October sued Wells Fargo, alleging “fabrication of documents.”

“It seems to me that Washington is deathly afraid of the banking industry,” Tirelli said. “If you’re talking about filing false documents and filing false notarizations, do you really think that the U.S. Attorney would find it too difficult to prosecute?”

The office of Attorney Preet Bharara in Manhattan has routinely brought charges involving forgery and filing false documents against smaller targets.

In April, the FBI arrested seven employees of the USA Beauty School in Manhattan. Bharara’s office alleged that the seven suspects had forged documents such as high school diplomas, attendance records and applications for financial aid for students taking cosmetology classes.

In August, Bharara’s office filed felony charges against a sports-memorabilia company’s CEO, accusing him of auctioning jerseys falsely advertised as “game used” by Major League Baseball players.

In a press conference, a U.S. Postal Inspection Service official said prosecution was important because “victims felt that they had a piece of history only to be defrauded and left with a feeling of heartbreak.”

Given the record of Bharara’s office, and those of his fellow U.S. Attorneys around the country, to aggressively pursue violations both big and small, the absence of cases involving the foreclosure fiasco seems to stand out.

“Why there hasn’t been more robust prosecution is a mystery,” said Brescia, the visiting professor at Yale.