Monday, September 25, 2006

Republic Bank Corruption Charges...

Insider information on Republic Bank...
If I could add my two cents here…. when reviewing the Martin Armstrong situation it's important to note the following:

1)Republic Bank, the securities firm his company traded thru and kept client funds, was in the middle of a merger negotiation for $10 billion with HSBC when the Japanese FSA started investigating Cresvale/PEI. So when the FSA inquired with Republic for confirmation of client funds Republic then started closing positions without PEI/Amstrong approval and then contacted US authorities before Armstrong new what was going on. This resulted in substantial losses, and their objective was clear: make Armstrong the scapegoat and save the merger with HSBC - which they did by knocking off $500 million from their price tag, which ultimately re-surfaced in the form of payment to the supposed victims in Japan a couple of years later when they finally had to admit guilt for mishandling client funds. But by that time it didn’t matter, they already secured their acquisition and Armstrong was already publicly made out to be the villain. $500 million was a small price for them to pay.

2)Although Armstrong flat out admitted being on the wrong side of trades towards the end and losing a sizeable amount of money, that is no crime. Moreover it's inaccurate to reference quotes from those at Republic Bank as a source for Armstrong's trading performance. In particular, the individual who made the quote you reference regarding Armstrong's performance being no better than "flipping a coin" was later found to have been stealing from PEI accounts while working at Republic. The government later found that this individual, along with one colleague at Republic and a senior person at PEI, orchestrated a scheme in which he siphoned winning trades from PEI and allocated them into personal accounts while taking losing trades and putting them into PEI accounts. Hence, he had every reason to tell people Armstrong's trading was much worse than it really was because he himself was taking millions in winning trades. I believe he is coming up for sentencing of his own soon.

3)One final note, what Armstrong recently plead guilty to is a far cry from what he was originally charged with. He admitted to bad trades, shared accountability with Republic for failing to keep client funds segregated from each other, and took responsibility for allowing sales/marketing materials to continue to go out to prospective clients that promoted favorable trading performance even as he/PEI continued to lose money (hence, the “misleading of clients”).

I'm not here to proclaim Armstrong was without fault, he obviously made mistakes and has paid for them, but there is more that meets the eye in his case and there is a big difference between a legitimate, well intentioned business failing and a business the set out to deceive and defraud from the outset. Clearly Armstrong is the former, not the latter, and his research and contributions to the industry (see earlier post about his discovery of 8.6yr cycle) should be recognized independently.

Written by Anonymous from http://nihoncassandra.blogspot.com/2006/08/enigma-of-martin-armstrong.html

4 comments:

Cruising Pablo said...

Cassandra said...
The "Repair Bond" business is hilariously Japanese (though by no means limited to them UPS the large American Delivery Co. was "rumoured" to have done nearly a billion of slow-amortizing repairs bonds for their late 80's early 90's Nikkei & S&P exposures.

I would have loved to been a fly on the wall in some of those meeting between Cresvale & the unsuspecting Japanese Corporates....

10:18 AM
Cruising Pablo said...
"I would have loved to been a fly on the wall in some of those meeting between Cresvale & the unsuspecting Japanese Corporates...." - Up until March 2000 Japanese accounting standards allowed balance sheet assets to be valued at cost, or market value or maturity value - therefore none of the Japanese Corporates were unsuspecting of anything, they knew what they needed to do with illiquid portfolios, but what they & Martin Armstrong didn't know is that management in Cresvale Intl Ltd, Tokyo branch, would be shorting the stocks due to be liquidated once Princeton swapped a bond for the portfolio!

The Japanese FSA's enquiry to the Fed about the gross out-flow of funds from Tokyo to Princeton Global notes (plus the accidental addition of a zero) and the Fed's subsequent query to republic was what precipitated the collapse of the Princeton Global accounts. At that time & for many months as attested to by a leading UK law firm MAA had been requesting an audit of the accounts held at Republic!

The FSA request to the Fed was precipitated by Cresvale Tokyo management not passing on answers MAA had supplied to questions from the FSA. Their reasons for not passing on those answers can only be assumed to be connected with the short trading outlined above. One company associated with a Cresvale Tokyo senior exec is now believed to have substantial assets in Western Australia.

Enough people witnessed 1st hand that MAA could consistently trade profitably & the prosecution brief submitted for the original indictments should just be ignored as fiction generated by 2 self-serving Govt witnesses one of whom had a Republic Bank terminal in his Philadelphia office! (It should be understood that the core original indictments from Sept 99 & super-ceding ones from Sept 03 were dropped at the time he made the final guilty plea which was to 2 matters that were fallout issues generated in the final imbroglio of 1999).

MAA thru his Princeton publications had a big mouth & enraged a powerful group of capital market speculators with his accusations of market manipulation & rigging (US T-Bills, COMEX - LME Precious Metals, Mexican & Brazilian Bonds, S E Asian Currencies, & Russian Bonds). He had a US$1B line of Credit at Republic & in Sept 98 he entered a a $100M short trade on the Yen which immediately went against him $300M before he could find a counterparty to close the trade - he found that world-wide it had been very effectively arranged that he not get a market. Documents have been sited whereby Republic Bank officials subsequently offered him a further $1B line-of-credit. MAA also claims that in Sept 99 he had a trade at Republic that was winning by $100M and which disappeared when the "Temporary" Receiver was (illegally) appointed.

The Yen finally did go south subsequent to the liquidation of all of the Princeton Global Bond portfolios!

MadeInTheShade said...

I grew up across the street from Marty as a child .. no surprises to us.As we played tag he gloated over his stamps and coins and we laughed when he left for military school in his uniform. He was already ID's as a perp and he had to be sent away to a controlled environment.
All summer long he never came out ... he had allergies (when no one knew what the word meant)
His parents apparently knew he might be a danger to the juvenile community and the lunch money set.

MadeInTheShade said...

Give me the child until he is seven and I will give you the man . Marty went bad early on, he was a Smarty Marty Armstrong to us all .. we kept our stamps and lunch coins tight to our chests and Marty's parents kept him away from victimising the local children.
Japanese parents were not so wise ....
what he has put his poor elderly mother thru says it all .... he is the infamous Lippincott Avenue recluse child,.

Dennis The Menace said...

As far as those banksters go I say lets exchange those three piece suites and briefcases for a good pick a shovel a bucket and some pinstripes.