Basel Endorsed, Nomura Assets, SAC Approval: Compliance

European Union banks will be forced to boost capital, disclose more information on their activities than ever before, and face tougher scrutiny of how they measure risks, after lawmakers formally endorsed a law to overhaul the bloc’s financial rulebook.

The European Parliament backed the sweeping changes, which also include a cap on banker bonuses at twice fixed pay, at a meeting in Strasbourg, France. The EU’s biggest banks had a combined 112.4 billion-euro ($147.3 billion) shortfall as of June 2012 in the reserves needed to meet the tougher capital standards, according to European Banking Authority data.

The assembly’s vote follows 18 months of talks in which lawmakers insisted on expanding the scope of the legislation to include tougher banker pay rules, while governments baulked at provisions that would transfer some responsibility for setting capital requirements to the Brussels-based European Commission. The agreement will now be sent to ministers to be rubber-stamped.

The new rules, which are scheduled to apply fully starting in 2019, more than triple the core capital that banks must hold compared to previous international standards. They will also force banks to maintain stocks of easy-to-sell assets that they could use to generate cash in a crisis, and hand powers to the London-based EBA to police the mathematical models lenders use to calculate their capital needs.

Other parts of the text will compel banks to publish country-by-country figures on the taxes they pay, profits they make and subsidies they receive.

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Compliance Policy

EU Seeks to Force Companies to Publish Anti-Corruption Measures

The European Union may force large companies to disclose more information on safeguards they have put in place against bribery and corruption as part of a push by the bloc to hold businesses to account over their social and environmental performance.

Michel Barnier, the EU’s financial services chief, proposed yesterday that companies with more than 500 employees should be forced to “disclose relevant and material environmental and social information” in their annual reports. Businesses would also be expected to set out steps they have taken to boost boardroom diversity, and whether the measures have worked.

The plans need approval from governments and the European Parliament before they could take effect.

Compliance Action

Paschi Prosecutors Seizing $2.4 Billion of Nomura Assets

Italian prosecutors are seizing about 1.8 billion euros ($2.4 billion) of assets from Nomura Holdings Inc. as part of a probe into Banca Monte dei Paschi di Siena SpA’s use of derivatives to hide losses.

Sadeq Sayeed, Nomura’s former European head, and Raffaele Ricci, a managing director in fixed-income sales, are also being probed for colluding to obstruct regulators and making false statements, prosecutors in Siena, where the bank is based, said in a statement yesterday. They are also sequestering 14.4 million euros of assets from three of the Italian lender’s former managers who are already being investigated.

The seizures are linked to allegations of fraud and usury, prosecutors said. Monte Paschi has claimed Nomura colluded with its former managers to devise one of two derivatives in 2008 and 2009 that hid total losses of much as 557 million euros. Nomura reaped at least 88 million euros from the transaction, dubbed Alexandria, according to Italian lender.

Monte Paschi sought a 4.1 billion-euro bailout in February, its second in four years, as its capital shortfall widened.

Lawyers for the three former Monte Paschi executives didn’t immediately answer their mobile phones. Rob Davies, a spokesman for Nomura in London, declined to comment. The bank isn’t under probe, according to prosecutors. Sayeed, 59, said he denied any allegation of wrongdoing against him. Ricci didn’t return a call and an e-mail seeking comment.

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Parker Drilling Settles U.S. Bribery Probes for $15.9 Million

Parker Drilling Co., a Houston-based oil services company, agreed to pay $15.9 million to settle U.S. allegations it tried to bribe a Nigerian government panel to reduce fines for violating the country’s customs laws.

The company gave a middleman $1.25 million knowing it would go to a foreign official to lower a legally imposed fine, the U.S. said in a filing yesterday in federal court in Alexandria, Virginia. Parker Drilling agreed to pay $11.8 million to settle prosecutors’ charges it violated the Foreign Corrupt Practices Act.

The company also agreed to pay $4.1 million in disgorgement and interest to settle a civil complaint by the Securities and Exchange Commission that alleged violations of anti-bribery and record-keeping provisions of the FCPA, the Justice Department said in a statement.

“After an extensive investigation, with which we fully cooperated, we are pleased to have reached agreement with the DOJ and SEC, and we will continue to maintain a vigorous FCPA compliance program,” Gary Rich, Parker Drilling’s president and chief executive officer, said in an e-mailed statement.

The SEC settlement is contingent on approval by a federal judge, according to a company announcement accompanying Rich’s statement.

The case is U.S. v. Parker Drilling, 13-cr-00176, U.S. District Court, Eastern District of Virginia (Alexandria).

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Goldman Sachs Gets U.K. Regulatory Approval to Operate Bank Unit

Goldman Sachs Group Inc., the fifth-largest U.S. bank by assets, gained regulatory approval to run a branch of its commercial bank in the U.K.

Goldman Sachs Bank USA received the license on March 21, according to a filing with Britain’s Financial Conduct Authority. The branch will be able to accept deposits, advise on investments and arrange the safeguarding and administration of assets, according to the filing.

Goldman Sachs and Morgan Stanley were the largest U.S. securities firms before they converted to bank holding companies after the September 2008 bankruptcy of Lehman Brothers Holdings Inc. Both became subject to regulation by the Federal Reserve and won access to central bank programs such as the discount window, which are designed to protect deposit-taking banks. Goldman Sachs Bank USA was set up as a New York State-chartered bank in 2008.

Financial News reported the approval for a commercial-bank branch earlier.


Ex-MF Global Broker Sentenced to 5 Years for Illegal Trades

Former MF Global Inc. broker Evan Brent Dooley was sentenced to 5 years in prison for making unlawful unauthorized trades that caused the now-defunct futures firm to lose more than $141 million in 2008.

The sentence, half of what the government sought, was imposed yesterday by U.S. District Judge Robert M. Dow in Chicago. Dooley, 45, pleaded guilty in December to two counts of violating speculative position limits under the Commodities Exchange Act. He was also sentenced to one year of supervised release and must pay $141 million in restitution.

While Dooley was indicted in 2010, more than a year before the bankruptcy filing of brokerage parent MF Global Holdings Ltd., the incident was cited as an example of risk management weakness in a 124-page report released this month by trustee Louis Freeh analyzing the firm’s failure.

MF Global Holdings filed for bankruptcy in October 2011 after making a $6.3 billion wrong-way trade on its own behalf of the bonds of some of Europe’s most indebted nations. The company won final approval April 5 of its plan to repay creditors.

Prosecutors asked Dow to impose a 10-year sentence and require full restitution to Freeh as trustee.

Keri Ambrosio, Dooley’s lawyer, asked for a sentence of probation and extended supervised release, pointing out family circumstances that caused Dooley to panic and act “out of desperation.”

“He did not scheme to steal from MF Global,” Ambrosio said in a filing.

Dooley, of Olive Branch, Mississippi, worked in MF Global’s Memphis, Tennessee, office. He was associated with the New York-based firm from September 2006 to February 2008 and permitted to trade on his own account and for clients, prosecutors said in announcing his indictment in April 2010.

The case was brought in Chicago because the transactions were conducted through CME Group Inc.’s Chicago Board of Trade.

The case is U.S. v. Dooley, 1:10-cr-00335, U.S. District Court, Northern District of Illinois (Chicago).

Porsche Criminal Probes May Boost Hedge Funds’ German Lawsuits

Hedge funds and institutional investors seeking 4 billion euros ($5.2 billion) from Porsche SE over its failed takeover of Volkswagen AG may be hoping, unlike most plaintiffs, that three German civil court suits take a long time to resolve.

After U.S. judges largely rebuffed similar suits, investors will focus on Germany, where a court in Braunschweig will hear three cases today. Drawn-out criminal probes into former executives, board members and beyond, may eventually give the plaintiffs an advantage, said Robert Heym, a lawyer at Graf von Westphalen.

Ever since Porsche, the maker of the 911 sports car, disclosed on Oct. 26, 2008, it controlled 74.1 percent of Volkswagen’s common stock and was seeking another 1 percent to reach the threshold usually required for a takeover under German law, the company has battled allegations it lied about its plans and tried to manipulate the price of VW stock. The announcement, made on a Sunday, caused the shares to surge to record highs as short sellers scrambled to cover positions.

In the aftermath, the chief executive officer and the chief financial officer were fired and Porsche agreed to be acquired by Volkswagen after racking up more than 10 billion euros of debt during the hostile bid.

The merger between the companies was scrapped in 2011 because of uncertainty from the litigation. The three suits being heard today are the biggest in Germany over the failed VW bid.

The Stuttgart criminal probe started in 2009 after the Porsche takeover bid faltered.

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SAC’s Record $602 Million SEC Settlement Approved by Judge

SAC Capital Advisors LP’s record $602 million insider trading settlement with the U.S. Securities and Exchange Commission was approved by a federal judge, who conditioned his ruling on a future appeals court decision in an SEC settlement with Citigroup Inc.

U.S. District Judge Victor Marrero in Manhattan approved the settlement, while saying it remains subject to a ruling by the U.S Court of Appeals in New York in the Citigroup case on whether defendants in SEC cases may be permitted to neither admit nor deny fault in such agreements. Marrero expressed concern about such a provision in the SAC settlement in a hearing on March 28. Marrero’s ruling, which was made public yesterday, is dated April 15.

The court in the Citigroup case hasn’t said when it will rule.

The settlement conditionally approved by Marrero would resolve SEC claims that Stamford, Connecticut-based SAC and its CR Intrinsic Investors LLC unit profited from illegal tips about an Alzheimer’s drug received by a former portfolio manager, Mathew Martoma.

Prosecutors claim Martoma shared the inside tips on the drug with SAC founder Steven A. Cohen, helping SAC make $276 million in illegal profit and in losses avoided on shares of Elan Corp. and Wyeth LLC. Cohen, who hasn’t been charged or sued, has denied any wrongdoing. Martoma has pleaded not guilty.

Jonathan Gasthalter, an SAC spokesman at Sard Verbinnen & Co., declined to comment on Marrero’s ruling.

The case is Securities and Exchange Commission v. CR Intrinsic Investors LLC, 12-cv-08466, U.S. District Court, Southern District of New York (Manhattan).

U.S. Charges French Citizen Tied to BSGR in Bribery Probe

A French citizen with ties to BSG Resources Ltd. was charged with witness tampering and attempting to obstruct a probe into whether a mining company paid bribes to win “lucrative” rights in Guinea, according to court documents.

Frederic Cilins, 50, was arrested and charged with plotting to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act, according to a criminal complaint filed yesterday in federal court in New York.

Guinean Justice Minister Christian Sow said in a statement issued by the office of President Alpha Conde that Cilins was an agent of BSGR, a company controlled by Israeli billionaire Beny Steinmetz. BSGR said last month that Guinea is preparing to strip its joint venture with Vale SA of its mining rights in the country.

The venture is planning a $10 billion iron ore mine in the country at Simandou. The dispute intensified amid a government review into the agreements signed with mining companies.

BSGR said in an e-mailed statement that Cilins isn’t one of the company’s 6,000 employees and that allegations of fraud in obtaining its mining rights are baseless.

The U.S. probe is seeking to determine the circumstances surrounding the acquisition of mining licenses in Guinea by BSGR, Conde’s office said in its statement. The criminal complaint against Cilins doesn’t identify the company at the center of the investigation.

Rio de Janeiro-based Vale identified the entity cited in the complaint as BSGR. The company said it was “deeply concerned” about the allegations and intends to cooperate fully with the governments of the U.S. and Guinea.

The case is U.S. v. Cilins, 13-mj-00975, U.S. District Court, Southern District of New York (Manhattan).


King Says Central Bank Crisis Policies Carry Risks

Bank of England Governor Mervyn King spoke about the goals and limits of monetary policy, and risks to the independence of central banks in their “extraordinary measures” to fight the financial crisis.

King participated in an International Monetary Fund panel in Washington along with Federal Reserve Board Vice Chairman Janet Yellen and former European Central Bank Executive Board member Lorenzo Bini Smaghi.

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Gary Stern Discuss Possible Successor to Bernanke

Former Federal Reserve Bank of Minneapolis President Gary Stern talked about Federal Reserve policy and a possible successor to Fed Chairman Ben S. Bernanke.

Stern spoke with Erik Schatzker and Sara Eisen on Bloomberg Television’s “Market Makers.”

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Fed’s Duke Comments on Banking Industry and Regulations

Federal Reserve Governor Elizabeth Duke spoke about the U.S. economy, the banking industry and financial market regulations.

The Fed’s Carol Evans and Kevin Bertsch also spoke at the American Bankers Association meeting in Washington.

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Armajaro Says Warehouse Queues Destroying Futures Price

If a party has to wait for delivery of a spot product for two years because of warehouse queues, “it’s not a spot contract anymore,” said Anthony Ward, founder of Armajaro Holdings.

Ward made the remarks at the FT Global Commodities Summit in Lausanne yesterday.

“If you can’t get physicals, it destroys futures price, which is bad for price discovery,” Ward said. “Regulators should talk to exchanges about queues,” he said.

High-frequency trading increases volatility and doesn’t help price discovery in smaller markets, according to Ward.

Comings and Goings

OPEC Said to Consider Saudi Arabian for Research Head Role

Saudi Arabia, the world’s largest oil exporter, has put forward a candidate to replace Hasan Qabazard as head of research at OPEC, according to two people with knowledge of the matter.

The nominee, along with any others proposed by fellow members of the 12-nation Organization of Petroleum Exporting Countries, will be discussed at an OPEC board of governors meeting scheduled for May 6 to May 7, they said, declining to be identified because Qabazard’s departure hasn’t been publicly announced. Two other people with knowledge of the matter also said that the producer group is looking for a new head of research, speaking on condition of anonymity.

An official at OPEC’s Vienna headquarters declined to comment. Qabazard, a Kuwaiti, couldn’t be reached for comment when called yesterday on his office or mobile phones.

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