‘White Money,’ Rank Probe, Polly Peck Ex-CEO: Compliance

Switzerland is delaying plans to require foreign clients of Swiss banks to declare they are tax-compliant to patch together two sets of legislative proposals, the Federal Department of Finance said.

The delayed consultation proposal for a tax-compliant and competitive financial center will be submitted to the Federal Council in January 2013 along with a draft consultation on combating money laundering, according to an e-mailed statement yesterday by Daniel Saameli, a spokesman for the Bern-based department.

Switzerland is developing a “white-money strategy” in response to a crackdown on offshore financial centers by the U.S. and European countries eager to recoup money from taxpayers banking abroad. At the same time, talks with the U.S. to end a tax-evasion probe haven’t concluded and Germany’s Social Democratic Party is blocking an accord that would tax German customers of Swiss banks while keeping their identities secret.

The Swiss government said in February that it will propose “concrete measures” by September covering the regularization of past undeclared assets, the introduction of withholding taxes and obligatory declarations for foreigners to show they are tax-compliant in other countries.

The two sets of proposals will be published together to ensure consistency, Saameli said.

Compliance Policy

Secret Libor Committee Clings to Anonymity After Rigging Scandal

Every two months, representatives from the world’s largest banks meet at an undisclosed location to review the London interbank offered rate.

Who sits on the British Bankers’ Association’s Foreign Exchange and Money Markets Committee, the body that governs the benchmark for more than $300 trillion of securities worldwide, is a secret. No minutes are published. The BBA won’t identify any members, saying it wants to protect them from being lobbied, and declined to make the chairman available for interview.

The group’s lack of transparency is symptomatic of a self-regulated system that failed to stop traders around the world manipulating the world’s most widely used benchmark interest rate for profit. The group has sole responsibility for all aspects of the functioning and development of Libor, according to the BBA. Its functions include the design of the benchmark, which banks sit on the panels that determine the rate, and scrutiny of all rates submitted.

The committee has so far failed to produce reforms that convince regulators and to levy sanctions against banks that have admitted to manipulating the rate. After the Bank for International Settlements first raised concern Libor was open to manipulation in 2008, the committee stepped up scrutiny of rate submissions.

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Hedge Funds Pose Limited Risk to Financial Stability, FSA Says

Hedge funds pose a limited risk to the stability of the financial system, according to a survey by the U.K.’s Financial Services Authority.

Funds have a “strong ability to manage the liquidity of their assets and liabilities,” the FSA said in a report published on its website today. The regulator collected data on funds with a total of more than $380 billion under management.

Banks and other counterparties of hedge funds have “increased margining requirements and tightened other conditions on their exposures to hedge funds since the financial crisis,” according to the FSA report.

Hedge funds and private-equity firms have come under scrutiny from lawmakers who said they were partly to blame for the economic turmoil that followed the collapse of Lehman Brothers Holdings Inc. The European Union has approved measures to require hedge-fund managers to restrict bonuses and increase disclosure to regulators.

German Banks Seek End to National Regulation, Handelsblatt Says

Germany’s BDB association of private commercial banks proposes shifting regulation of the industry to the European Central Bank, Handelsblatt reported, citing an unpublished position paper drafted by the group.

The proposal would end political influence over regulation, the Dusseldorf-based newspaper reported in an article e-mailed before publication. Germany’s Bafin financial-market regulator and the Bundesbank, the German central bank, would give up powers of their own and carry out oversight on the ECB’s behalf, Handelsblatt cited the BDB paper as saying.

Separately, German Finance Minister Wolfgang Schaeuble plans tighter rules for investment funds than regulations set by the European Union’s Alternative Investment Fund Managers directive, which Germany has to implement, Handelsblatt newspaper reported.

Schaeuble, in a draft law, plans to curtail open-ended property funds and closed-end funds, affecting a combined business of 218 billion euros ($269 billion), the newspaper said, citing a letter from the Finance Ministry to lawmaker Frank Schaeffler.

Compliance Action

U.S. Seizes $150 Million Tied to Hezbollah Money-Laundering

The U.S. seized $150 million in connection with a Hezbollah-related money laundering scheme that involved the defunct Lebanese Canadian Bank, the U.S. Attorney’s office in Manhattan said.

The funds came from a U.S.-based account of Beirut-based Banque Libano Francaise SAL, which is holding money in escrow from the $580 million sale of the defunct Lebanese Canadian Bank to Societe Generale de Banque au Liban, prosecutors said in a statement.

Lebanese Canadian Bank, based in Beirut, was accused by federal prosecutors in December of helping launder at least $329 million for the Hezbollah, designated as a terrorist organization by the U.S. State Department, in a scheme that involved buying and selling used cars. Cash from the car sales as well as proceeds of narcotics trafficking were funneled to

Societe Generale de Banque au Liban, based in Beirut, and Banque Libano Francaise SAL are not accused of any wrongdoing, prosecutors said.

The case is U.S. v. Lebanese Canadian Bank SAL, U.S. District Court, Southern District of New York (Manhattan).

Rank’s Purchase of Gala Unit Referred for U.K. Antitrust Probe

Rank Group Plc’s proposal to buy the casino unit of Gala Coral Group Ltd. for 205 million pounds ($322 million) was referred by a U.K. regulator for a full antitrust review.

The deal may “substantially reduce competition in the casino sector” and should be investigated by the U.K. Competition Commission, Britain’s Office of Fair Trading, which conducts initial merger reviews, said in a statement yesterday.

“The OFT is concerned that the merger would reduce competition both at a national level and in nine local areas,” the watchdog said. “A reduction in competition in the casino sector could result in a worse deal for consumers.”

Rank offered to buy 23 casinos in the U.K. and three non-operating licenses, the Maidenhead, U.K.-based gambling and bingo group said in May. The company said it would finance the purchase with new three-year bank facilities totaling 175 million pounds, as well as existing loans.

Marc Cohen, a Rank spokesman, declined to comment when reached by phone.

Wendel Not Aware of Insider Trading, Will Cooperate on AMF Probe

Wendel SA, France’s largest publicly traded investment firm, said it’s not aware of any events that may have led the national stock market regulator to open an investigation into insider trading in its shares.

The probe focuses on share trading and not specifically on any “insider trading at Wendel,” the company said in an e-mailed statement. Wendel pledged full cooperation with the Autorite des Marches Financiers in its investigation. A spokeswoman for the company wasn’t immediately available for comment.

Autorite des Marches Financiers, the French market watchdog, is investigating possible insider trading relating to Wendel, Le Point reported last week, without saying where it got its information.

The market watchdog is looking into the increase in Wendel’s share price that followed the company’s announcement in November that it had entered exclusive talks to sell Deutsch Group SAS to TE Connectivity Ltd., the magazine said on its website Aug. 16.

Barbara Frugier, a spokeswoman for AMF, and Christine Anglade Pirzadeh, a spokeswoman for Wendel, declined to comment, the magazine said.

Argentina Complains at WTO Over Spanish Curbs on Biodiesel

Argentina yesterday filed a complaint at the World Trade Organization against the European Union over Spanish curbs on imports of Argentine biodiesel.

Argentina said Spain in April applied a rule that discriminates against its biodiesel in favor of that produced in the 27-nation EU, the Geneva-based WTO said.

Yesterday’s request for consultations is the first step in WTO dispute proceedings and means the governments must now hold talks for at least two months in a bid to resolve the dispute. If the discussions fail, Argentina can ask WTO judges to rule.


Whitman Capital’s Doug Whitman Guilty of Insider Trading

Whitman Capital LLC’s Doug Whitman was convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent.

A jury in Manhattan federal court yesterday found Whitman guilty of all four counts against him after deliberating since Aug. 17. Prosecutors claimed he traded on illegal tips about Polycom Inc., Google Inc. and Marvell Technology Group Ltd. His sentencing is scheduled for Dec. 20.

Whitman, 54, is the first defendant in the government’s crackdown on hedge-fund insider trading to testify at trial. Jurors also heard testimony from three witnesses who pleaded guilty to passing illegal tips, including Roomy Khan, a key government informant who helped prosecutors convict Galleon Group LLC co-founder Raj Rajaratnam.

Whitman’s conviction follows 66 insider trading guilty pleas and verdicts won by prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan since August 2009.

Whitman was charged with two counts of conspiracy and two counts of securities fraud. The securities-fraud charges, the most serious Whitman faced, carry a possible sentence of as long as 20 years in prison.

The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).

Ex-Polly Peck CEO Nadir Found Guilty of Theft at U.K. Trial

Asil Nadir, the former Polly Peck International Plc chief executive officer who fled the U.K. in 1993 for Northern Cyprus to avoid trial, was found guilty of stealing from the company.

Nadir was convicted yesterday on three counts of theft and cleared on one, Jina Roe, a spokeswoman for the Serious Fraud Office, which prosecuted the case, said in an e-mail.

Nadir, who testified he fled Britain as a “broken man” with no hope of receiving a fair trial, returned to the country in August 2010 to face the charges after prosecutors said he would be granted bail. He has been on trial since January. The jury has been deliberating for more than a week at London’s Central Criminal Court, known as the Old Bailey.

Prosecutors alleged that, between 1987 and 1990, Nadir and his associates withdrew money from the now-defunct food-packaging firm’s U.K. accounts, funneling it to Swiss and Bahamian firms. When London-based Polly Peck collapsed in 1990, administrators found more than 700 million pounds ($1.1 billion) owed to creditors was unrecoverable from units of the company, which Nadir built up during the 1980s by expanding into electronics and hotels and acquiring the Del Monte fruit brand.

The SFO accused Nadir of 13 counts of theft totaling about 34 million pounds, using a selection of “sample” transfers. Prosecutors said on the first day of trial that the actual amount is about 150 million pounds. Yesterday’s verdicts found Nadir guilty of stealing 5.55 million pounds and not guilty of another 2.5 million-pound theft.

Prosecutors said Nadir stole from the company’s accounts at National Westminster Bank Plc and Midland Bank Plc through at least 70 transfers, and that the money was used to secretly buy shares in Polly Peck and other companies. Under Nadir’s leadership, Polly Peck loaned hundreds of millions of pounds to its subsidiaries in Turkey and Cyprus in the years before the company’s collapse. Nadir later said the money was for a capital expenditure program and advance payments to citrus growers, according to the SFO.

Comings and Goings

Japan FSA to Keep Staff Increases to ‘Minimum,’ Matsushita Says

Japan’s banking regulator must improve supervision by using existing resources more efficiently and any staff increases would be kept to a “minimum,” Financial Services Minister Tadahiro Matsushita said.

Supervision improvements are needed after scandals such as those involving AIJ Investment Advisors Co.’s accounting fraud, according to a statement by Matsushita.

Matsushita spoke at news briefing in Tokyo.

Earlier, he said after his appointment in June that he would like to bolster staff at the Securities and Exchange Surveillance Commission.

Shasky Calvery to Head U.S. Treasury’s Law Enforcement Unit

The U.S. Treasury Department selected Jennifer Shasky Calvery as the new director of its Financial Crimes Enforcement Network, which maintains financial transaction data and analyzes information for law-enforcement purposes.

The department said Shasky Calvery is expected to begin her new job in September and will replace director Jim Freis, who has led the network, known as FinCEN, for more than five years. The director of FinCEN is appointed by the department’s secretary and reports to the undersecretary for terrorism and financial intelligence.

Shasky Calvery joins FinCEN from the Justice Department.

JPMorgan Picks Raymond to Head ‘London Whale’ Probe, WSJ Says

JPMorgan Chase & Co. picked former Exxon Mobil CEO Lee Raymond to head an inquiry into the activities of Bruno Iksil, the trader known as the “London Whale,” the Wall Street Journal said, citing people familiar with the investigation, whom it didn’t identify.

Raymond will be joined by real-estate developer Laban Jackson and William Weldon, a former CEO of Johnson & Johnson who is still the company’s chairman, the newspaper reported.

Raymond, a board member of JPMorgan, heads the bank’s remuneration committee.