Quote:

One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.”

So, the investors that were scammed got half their money back?!

Quote:

Quote:

One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.”

Why the *%&^ can't anyone put these guys in jail with emails like this helping the case?

Also, does this settlement prevent the investors from continuing to go after Citi?

Quote:

Bhatt consented to the issuance of an order directing him to cease and desist from committing or causing any violations or future violations of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and suspending him from association with any investment adviser for a period of six months.

What a joke!

This is a perfect example where people should be going to jail. Here's the deal. Stoker, from Citi, puts together a $1M CDO deal where Citi picks out $500M of the assets and ensures they are crap. Credit Suisse is lined up to market the crap but isn't in on the scam. Stoker then buys CDS on the crap to cover when losses occur, from Ambac who is backstopped by BNP Paribas. There's an email between Stoker and his boss verifying boss knows about deal, as does the prop trading desk, who arranges for $500M of shorts, $490M of which are naked shorts, just on the portion that Citi selected. Stoker also arranges with Credit Suisse to write the disclosure circulars himself, and of course, does not disclose any of this to prospective investors.

So, the crap is sold and within a few months, surprise, surprise, is going belly under, with the Citi selected assets defaulting at a significantly higher rate than the rest. The investors end up losing everything and Ambac has to pay out $300M, Paribas another $100M. Citi makes $160M on the shorts plus their fees ($30-40M?) for structuring the deal. Stoker gets a $1M bonus that year (2006) and ends up negotiating a $2.25M bonus the next, presumably due to the success of this deal, in addition to his low 6 figure salary.

Citi has been ordered to pay $285M, without admitting any guilt, awaiting court approval of the settlement. It will be heard by Judge Rakoff, who will NOT be a happy camper, he's getting fed up with the slaps on the wrist, and has been raking some of these deals over the coals (and refused to approve one for BAC/ML). Stoker has civil charges pending asking for injunctive relief (will agree not to commit the same crime anymore, seriously) along with disgorgement, i.e. monetary penalty. No charges against Stoker's boss, the prop desk, or anybody else at Citi. If this doesn't represent criminal activity, what does? Stoker, his boss, whoever did the short trading, they all should be facing criminal charges with sufficient evidence for convictions and prison sentences. Yes, the monetary fines ARE substantial but to be allowed to claim no admission of guilt or liability????? That, in itself, is criminal.

Bhatt is the manager at Credit Suisse who was responsible for disclosure to investors and hence the charges against him. From what I can tell, he knew nothing of the fraud, was merely lazy and let Stoker write the disclosures and didn't bother to read them. The disclosures stated that Credit Suisse had selected the assets, not Citi, which Bhatt certainly would have known was not true. Or perhaps he knew the disclosures were false on that point and let it go, honestly I didn't read the charges specifically against Bhatt but from the filings against Citi and Stoker, he/Credit Suisse was not informed of the adverse selection or the short positions taken by Citi.

ETA: Ricka01,
I'm not sure if any suits by investors have been filed or not. Ambac has filed quite a few on their deals gone bad. If suits have not yet been filed though, they're out of luck as the statute of limitations has now expired.

More about the ruling striking down the settlement here:
http://tickerforum.org/akcs-www?post=198....