Once Again Proving that High Finance Can Destroy Everything

In this case, it's Univision that they have run into the ground:

This is the story of how corporate raiding, complacency, excess, and incompetence are gutting a media company that matters to tens of millions of people. It’s not a novel story, and perhaps not even scandalous by the standards of corporate opulence: A shark-obsessed boss, millions wasted on consultants, and an executive who insisted on publishing softcore porn are more embarrassing buffoonery than insidious greed. The main problem—the billions in debt the company ran up in the process of its owners buying it and weighing it down—is practically routine in media and beyond; that doesn’t make it any less infuriating.

This company is Univision, which until recently obligingly filled the role of absentee stepfather to Gizmodo Media Group, our employer. Now, Univision’s business is struggling, and GMG has suddenly found itself under a very watchful eye.

Once upon a time, Univision, an American broadcasting operation aimed primarily at Spanish speakers in the United States, was a tremendous golden goose laying tremendous golden eggs: It made incredible amounts of money and had to do essentially nothing for it other than run programming produced by Televisa, a Mexican broadcasting operation. The fairy tale ended long ago. Univision has been in decline for years, thanks to a disastrous private equity buyout finalized in 2007; an aging audience; a burdensome program-licensing deal with Televisa; competition from Telemundo and Netflix; layers of overpaid and useless middle management; and a general failure to position itself for a digital future.

………

From routine human resources f%$#ups to vastly overselling the prospects of an IPO whose ultimate doom this March precipitated the company’s current cost-cutting spree, Univision has been deeply mismanaged and is in the midst of making huge cuts that have, among other things, already claimed vast swaths of Univision Noticias—the most vital newsgathering operation serving the Spanish-speaking community in the U.S.—and Fusion Media Group. Consultants from Boston Consulting Group, who have reportedly recommended budget cuts of up to 35 percent in some parts of the company, have been combing through the books for months, and more than 150 people have been laid off so far. Plenty more cuts are pending (Univision president of news Daniel Coronell reportedly described them as “catastrophic” to his newsroom), including at GMG, the staff of which fears the newsroom may be cut by up to a third by the end of June, perhaps as part of a broader pivot toward video and branded content. What is happening to the company is not ultimately a failure of editorial or even executive management, though: If Univision was a mammoth whose failure to adapt slowed it down, it was private equity investors, consumed by the thought of turning their riches into more riches, who brought it down and bled it dry.

(emphasis mine)
You'll notice a pattern: Company has problems, or potential problems, takes said company private with other people's money, bleeds it dry, and leaves bleached bones.

Rinse, lather, repeat:

In 2007, a consortium including Texas Pacific Group, Thomas H. Lee, Madison Dearborn, Providence Equity, and Saban Capital took Univision private for $13.7 billion. These firms—executives of which still shape Univision’s board—borrowed heavily to finance the deal, saddling their new prize with more than $10 billion of debt. According to an FCC filing, each firm holds between 20.6 and 7.1 percent of Univision’s equity, and between 27.3 and zero percent of the voting interests. Thomas H. Lee, the only firm with no voting rights, has no official members on Univision’s board, but two of THL’s employees, James Carlisle and Laura Grattan, are listed as Univision board observers in their company bios; Univision would not say if the firm had appointed members to the board or who they were. Univision, for its part, declined to answer questions about the board, while all the involved firms either declined to comment or did not respond to questions about their involvement with Univision.

Leveraged buyouts such as the ones by which these companies acquired control of Univision were common in the years leading up to the financial crisis: Investors borrow a huge amount of money to purchase a company and then make that company responsible for paying back the debt. The amount of borrowing required is often large relative to a company’s earnings. This relationship—known as leverage—is used to gauge whether a company is likely to be able to pay back its lenders. The financial world commonly measures this through the ratio of “debt to EBITDA,” or earnings before interest, taxes, and depreciation and amortization of various assets. (The finance industry’s inscrutable jargon is a feature, not a bug. Just think of this ratio as a company’s debt compared to how much money it makes each year.)
Univision’s ratio, estimated at 12.5-to-1, made it highly leveraged even by the standards of the pre-crisis boom period. (In 2013, Obama administration regulators would urge banks to limit companies’ leverage to roughly half this level to reduce the risk of default.) Still, in 2007—when the company maintained a tight grip on the then-swelling U.S. market for Spanish-language media, and before media enterprises came to be viewed as dead investments—Univision found itself in a position of relative strength.

One of the reasons that we see this is because our regulatory and tax regimes subsidize such behavior.

As to a fix, on the mild side are things like changing the bankruptcy code to allow for private equity management fees, and all paid received by executives in excess of $1 million a year to be clawed back.

On the more severe side, and I think that this might be necessary, completely eliminating the deductability of interest payments would be a good thing.

I am sure that there is a middle ground, but I want to fiddle while Wall Street burns.

Feet of Clay

It appears that Warren Buffett's mortgage companies aggressively redline, steering affordable mortgages away from black borrowers:

Trident Mortgage Co. helps more families buy homes in Philadelphia and neighboring Camden, New Jersey, than any other company, but it primarily serves one demographic: white people.

That is no coincidence: Trident employs a nearly all-white team of mortgage consultants, and all of Trident’s offices are in white neighborhoods, where it makes the overwhelming majority of its loans to white homebuyers.

It’s a division of Berkshire Hathaway Inc., the giant holding company led by Warren Buffett, which has dramatically expanded its mortgage brokerage portfolio in recent years, reporting nearly 28,000 loans worth $7.3 billion last year.

“I originally paid little attention to HomeServices,” Buffett wrote in his most recent shareholder letter, referring to Berkshire Hathaway’s real estate brokerage operation, HomeServices of America Inc., which controls Trident and two other mortgage companies. Then, he said, its “growth exploded.”

………

But as they’ve become major players in cities across America, Berkshire Hathaway’s affiliated mortgage companies have followed a consistent pattern. Government lending data reviewed by Reveal from The Center for Investigative Reporting shows the companies direct their lending toward white borrowers and white neighborhoods, even in population centers such as Philadelphia where a majority of residents are people of color.

The analysis is part of Reveal’s ongoing coverage of modern-day redlining in America, which found 61 metro areas, from Jacksonville, Florida, to Tacoma, Washington, where people of color were significantly more likely to be denied a conventional home loan than their white counterparts. This was true even when people of color earned the same amount of money as white loan applicants, wanted to take on the same size loan or buy in the same neighborhood.

Reveal’s analysis found people of color were far more likely to be turned down for a loan in many of Berkshire Hathaway’s largest markets, including Philadelphia, Atlanta and Washington, D.C. It makes loans through three firms, Trident Mortgage, HomeServices Lending LLC and Prosperity Home Mortgage LLC. Here’s a breakdown:

• In Philadelphia, Trident Mortgage made 1,721 conventional home purchase loans in 2015 and 2016, 47 of them to African Americans and 42 to Latinos.
• In Atlanta, HomeServices Lending made 1,358 conventional home purchase loans, 63 to African Americans and 46 to Latinos.
• In Washington, Prosperity Home Mortgage made 2,650 conventional home purchase loans, including 167 to African Americans and 144 to Latinos.

Legal experts said Berkshire Hathaway’s mortgage companies were carrying out the very practices outlawed by the Fair Housing Act, a 50-year-old law that banned racial discrimination in lending, by locating their branches in white neighborhoods, employing mortgage consultants who – from their websites – appear to be overwhelmingly white and lending mostly to white borrowers.

“It sounds to me like they are intentionally avoiding doing business with people of color,” said Allison Bethel, director of the fair housing clinic at the John Marshall Law School in Chicago.

………

The analysis compared the racial breakdown of mortgage lending for every lender in every city in America. It showed Berkshire Hathaway’s mortgage companies took in a far greater proportion of their conventional loan applications from white homebuyers than their competitors in its largest markets in 2015 and 2016.

The figures were especially stark for Trident, which placed all of its 55 loan centers across Delaware, New Jersey and Pennsylvania in majority-white neighborhoods, Reveal’s analysis found. The analysis also showed 92 percent of the company’s conventional home loan applications came from borrowers in majority-white neighborhoods. When Trident did lend in neighborhoods where the majority of residents were people of color, most of the loans still went to whites.

Berkshire Hathaway’s mortgage business has the hallmarks of one that could be prosecuted for “failure to serve” under the Fair Housing Act, according to Eric Halperin, a former federal prosecutor who oversaw fair lending cases during President Barack Obama’s first term.

………

The government lending data analyzed by Reveal also showed Trident served a much smaller and whiter section of the Philadelphia area than the region’s No. 2 lender, Wells Fargo, which overall took in a slightly smaller number of conventional home purchase applications. Trident made 26 times as many conventional loans to white homebuyers as black homebuyers in Philadelphia in 2015 and 2016, the data shows. For Wells Fargo, that ratio was 7 to 1.

It seems to me that Oracle of Omaha might have a blond blind spot when it comes to issues of people of color.

Corrupt Son of a Bitch

Mick Mulvaney, head of the OMB and the Consumer Financial Protection Bureau, just admitted that he requires a payment from some people to talk to them in an official capacity.

Why hasn't he been frog marched out of his office in handcuffs?

Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, told banking industry executives on Tuesday that they should press lawmakers hard to pursue their agenda, and revealed that, as a congressman, he would meet with lobbyists only if they had contributed to his campaign.

“We had a hierarchy in my office in Congress,” Mr. Mulvaney, a former Republican lawmaker from South Carolina, told 1,300 bankers and lending industry officials at an American Bankers Association conference in Washington. “If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.”

………

Mr. Mulvaney, who also runs the White House budget office, is a longtime critic of the Obama-era consumer bureau, including while serving in Congress. He was tapped by President Trump in November to temporarily run the bureau, in part because of his promise to sharply curtail it.

………

Asked about the comments, John Czwartacki, a spokesman for Mr. Mulvaney, said: “He was making the point that hearing from people back home is vital to our democratic process and the most important thing our representatives can do. It’s more important than lobbyists and it’s more important than money.”

No, he was describing how he extorted donations from lobbyists.

Seriously, even by the standards of the Trump administration, this is brazenly corrupt.

Journalism Fail

If you read stories about student loans in new sources like, "The Washington Post, The Boston Globe, and CNBC," you have probably seen quotes from student loan expert "Drew Crowd".

The kicker is that Drew Cloud does not exist. He is a fraud promulgated by the student loan firm Lend EDU:

Drew Cloud is everywhere. The self-described journalist who specializes in student-loan debt has been quoted in major news outlets, including The Washington Post, The Boston Globe, and CNBC, and is a fixture in the smaller, specialized blogosphere of student debt.

He’s always got the new data, featuring irresistible twists:

One in five students use extra money from their student loans to buy digital currencies.

Nearly 8 percent of students would move to North Korea to free themselves of their debt.

Twenty-seven percent would contract the Zika virus to live debt-free.

All of those surveys came from Cloud’s website, The Student Loan Report.

Drew Cloud’s story was simple: He founded the website, an "independent, authoritative news outlet" covering all things student loans, "after he had difficulty finding the most recent student loan news and information all in one place."

He became ubiquitous on that topic. But he’s a fiction, the invention of a student-loan refinancing company.

After The Chronicle spent more than a week trying to verify Cloud’s existence, the company that owns The Student Loan Report confirmed that Cloud was fake. "Drew Cloud is a pseudonym that a diverse group of authors at Student Loan Report, LLC use to share experiences and information related to the challenges college students face with funding their education," wrote Nate Matherson, CEO of LendEDU.

Before that admission, however, Cloud had corresponded at length with many journalists, pitching them stories and offering email interviews, many of which were published. When The Chronicle attempted to contact him through the address last week, Cloud said he was traveling and had limited access to his account. He didn’t respond to additional inquiries.

And on Monday, as The Chronicle continued to seek comment, Cloud suddenly evaporated. His once-prominent placement on The Student Loan Report had been removed. His bylines were replaced with "SLR Editor." Matherson confirmed on Tuesday that Cloud was an invention.

One hopes that editors at the publications that were taken in by the fraud are busy cutting their reporters new assholes over this one.

There is Nothing that High Finance Cannot Ruin

Who has been let go since 2013

Though it should be noted that destroying a newspaper is not one of the more difficult failures out there:

Demoralized by rounds of job cuts, journalists at San Jose’s Mercury News and East Bay Times in Oakland, Calif., took their case to the public last month. At a rally in Oakland, they handed out a fact sheet detailing the “pillaging” of their papers, accompanied by a cartoon of a business executive trying to milk an emaciated cow.

“Dude! I’d produce more milk if you fed me!” read the caption.

The drawing was a barely veiled swipe at the newspapers’ majority owner, a little-known hedge fund called Alden Global Capital.

Headquartered in New York with investment funds domiciled in the tax-lenient Cayman Islands and a clientele that is mostly foreign, Alden has been investing in American newspapers since 2009. Through its majority control of a management company called Digital First Media, Alden owns nearly 100 daily and weekly papers, including such big-city dailies as the Mercury News, the Denver Post and the St. Paul Pioneer Press. The company’s holdings are notably concentrated in California, where it effectively owns every major newspaper around Los Angeles and the San Francisco Bay area with the exception of the Los Angeles Times and the San Francisco Chronicle.

………

In an extraordinary rebellion last Sunday, the Denver Post devoted its editorial pages to series of commentaries about its parent company’s practices. “Denver deserves a newspaper owner who supports its newsroom,” the paper’s lead editorial said. “If Alden isn’t willing to do good journalism here, it should sell the Post to owners who will.”

………

Two things about the newspapers Alden owns are clear: They’re profitable, and they’ve been hit with far steeper cutbacks than other newspapers.

In a memo to employees last summer, then-chief executive Steve Rossi said the company was “solidly profitable” in fiscal 2017, and that its “performance in advertising revenue has been significantly better than that of our publicly traded industry peers over the past couple of years.”

………

Alden’s alleged practice of diverting resources from its newspapers is detailed in a lawsuit filed last month by another hedge fund, Solus Alternative Asset Management, which owns a minority stake in Digital First Media.

It is increasingly clear that the financial industry is primarily a parasitic activity.

When they aren't looting, they are scamming their clients.

I Propose Renaming Goldman Sachs to "Sirius Cybernetics Corporation"

Because the latest bit of analysis on healthcare from these guys, basically says that, there is no money on curing disease, we need to work to make everything chronic.

I believe the phrase, "A bunch of mindless jerks who'll be the first against the wall when the revolution comes," should apply here:

One-shot cures for diseases are not great for business—more specifically, they’re bad for longterm profits—Goldman Sachs analysts noted in an April 10 report for biotech clients, first reported by CNBC.

The investment banks’ report, titled “The Genome Revolution,” asks clients the touchy question: “Is curing patients a sustainable business model?” The answer may be “no,” according to follow-up information provided.

Analyst Salveen Richter and colleagues laid it out:

The potential to deliver “one shot cures” is one of the most attractive aspects of gene therapy, genetically engineered cell therapy, and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies... While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow.

For a real-world example, they pointed to Gilead Sciences, which markets treatments for hepatitis C that have cure rates exceeding 90 percent. In 2015, the company’s hepatitis C treatment sales peaked at $12.5 billion. But as more people were cured and there were fewer infected individuals to spread the disease, sales began to languish. Goldman Sachs analysts estimate that the treatments will bring in less than $4 billion this year.

I want the guillotine concession on these rat-f%$#s.

I'd be a wealthy man.

Data Point of the Day

Top 20 all-time recipients of hedge fund money:

1. Barack Obama
2. Hillary Clinton
3. Chuck Schumer
9. Kirsten Gillibrand
16. Cory Booker#NeverBooker #NeverGillibrand "Hedge-Fund Ownership" pic.twitter.com/wPqQcalrCG

— Rob (@philosophrob) April 8, 2018

Well, that explains all the bankers who were jailed when Obama was President.

It also gives the lie to the myth to the myth of the Obama small donor juggernaut during his Presidential campaign.

Yeah, Pretty Much

#resist #TuesdayThoughts pic.twitter.com/QSmw2g0cYI

— Occupy Wall Street (@OccupyWallStNYC) April 3, 2018

Toys 'R' Us liquidates, and executives get bonuses, and employees get shafted.

Fun With Data Mining

Some people looked at taxi dispatches around meetings of the FOMC comittee meetings at the Federal Reserves, and found strong evidence that Fed officials are leaking information to large banks during, and immediately after, the blackout period:

Everyone in the financial markets would like to know what U.S. Federal Reserve policymakers are thinking. Will they raise interest rates? Where do they believe that the economy is going? What is their next move, and how will it affect my pocketbook?

In a perfect world, everyone would get an answer to those questions at the same time. But new research from the University of Chicago Booth School of Business finds evidence that suggests Federal Reserve insiders systematically engaged in informal or discreet communication with the financial sector around the time of important policymaking meetings, increasing the probability of at least accidental leaks.

In the working paper, “What Insights Do Taxi Rides Offer into Federal Reserve Leakage?” Chicago Booth PhD candidate David Andrew Finer analyzed more than 500 million New York City taxi rides and finds “highly statistically significant evidence of increases in opportunities for information flow” between the Federal Reserve Bank of New York and major commercial banks around Federal Open Market Committee meetings.

“These inferred meetings might pertain to monetary policy or could be social in nature,” said Finer. “The data don’t tell us. What we do know is that every interaction entails the risk that an outside party might gain valuable insights into the Fed.”

………

Since this study captures only New York City yellow taxi rides, Finer said he believes that the results of this study represent the lower end of possibilities for changes in interactions around FOMC meetings and that the actual number of additional occurrences might be significantly greater.

I am shocked I tell you, shocked, that gambling is going on in this establishment.

H/t Naked Capitalism.

And Mylvaney's Anti Consumer Jihad Continues

He is now asking Congress to emasculate the Consumer Financial Protection Bureau:

The acting director of the Consumer Financial Protection Bureau (CFPB) on Monday asked Congress to restrain the power of his agency.

Trump budget director Mick Mulvaney, who is pulling double duty as the acting CFPB chief, asked Congress to take control of the bureau’s funding, make his successors fireable at will by the president, install an inspector general and give itself the sole power to finalize the bureau’s rules.

All four measures would be drastic blows to the CFPB’s power and independence.

They are in line with the views that Mulvaney had as a member of Congress. In fact, Mulvaney voted for the changes as a Republican lawmaker from South Carolina in 2017.

Mulvaney wrote in the CFPB’s semiannual report that “Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism.”

“The Bureau is far too powerful, and with precious little oversight of its activities,” wrote Mulvaney, who as a congressman had opposed the CFPB’s existence.

Mulvaney and the CFPB make Ann Gorsuch Burford and the EPA look like a pie fight, and the EPA is still damaged from her efforts 35 years later.

Mulvaney believes that it is the right of banksters to steal from ordinary people, and that any meaningful attempt to prevent their fraudulent activities is an affront to their free market gods.

Any Democrat who supports these so-called reforms, and my guess is that there are dozens in the House and a few in the Senate. should be primaried, and any one who wins their primary should not be voted for in the general election.

This Sh^% Just Got Real

The good folks at Naked Capitalism made note of a lawsuit where Current trustees of the Kentucky Retirement System are considering joining a lawsuit against them.

Basically, they are considering including former trustees and staff as targets for the roughly $1½ billion that the hedge funds lost at the dog track.

The fact that they are going after their predecessors is significant, but to my mind, the thing that makes this more than a legal long shot is the fact that the hedge funds have been sufficiently spooked to ask the judge to have the bulk of the proceedings sealed.

If the hedge funds are worried enough about this to do this, than this suit has a real possibility of holding them to account.

I've Heard This Story Before

It appears that the top of the Manhattan real estate market is in retrenchment mode:

Luxury homes in Manhattan are selling at the biggest discounts on record as owners grow tired of waiting for buyers to match their price.

Homes priced at $4 million or more that went into contract in the first 12 weeks of the year had their asking prices cut by an average of 10 percent, the most in data going back to 2012, according to Olshan Realty Inc. Final sale prices, which won’t be known until the deals close, will probably reflect even greater reductions, said Donna Olshan, president of the brokerage that compiled the report.

“Most things at $4 million and above are selling 15 to 20 percent below the original ask,” Olshan said. “It’s a data point that screams: The market is overpriced!”

Owners who prevail in selling their homes are conceding that Manhattan’s luxury market is brimming with choices, and that even well-heeled buyers are sensitive to price. Shoppers with cash are no longer bidding up properties to record levels, and sellers who recognize the new reality are the likeliest to succeed, Olshan said.

If things are bad now, what happens when there is crack-down on money laundering?

Also, what happens when banks start getting burnt by this?

Two words, "Lehman Brothers, 2008."

OK, that's two words and one number.

A Good Point on the Qualcomm/Broadcom Mess

It's has the kibosh put on this because CFIUS determined that it was a threat to US security.

This was not because the Singaporean firm Broadcom was a security risk by its actions or its location, but because it is aggressively leveraged to grow through acquisitions, while Qualcomm invests heavily in technology.

They explicitly said that the Private Equity/Hedge Fund type operations constitute a threat to American technological accomplishments, because it results in disinvestments.

The only conclusion that one can reach then is that the whole Private Equity/Hedge Fund business model is a threat to America:

By the normal standards of U.S. national security, the government’s ruling on Tuesday to delay and potentially derail the acquisition of high-tech company Qualcomm by the Singaporean company Broadcom was startlingly smart and gobsmackingly wonderful.

It was smart because it extended its definition of U.S. security interests to maintaining our advantage in the development of the most advanced forms of technology, in this case, the 5G communications systems that will be critical to both driverless cars and network security in coming decades. The government’s Committee on Foreign Investment in the United States (CFIUS for short) wrote that it feared that if Qualcomm, the nation’s leading developer of 5G technology, were purchased by Broadcom, its research would suffer and a Chinese high-tech company, Huawei, would likely surge past it to become the global leader in security technology.

In the past, CFIUS has blocked several Huawei attempts to purchase U.S. tech companies because they would have involved the transfer of security-related technology to a company that CFIUS has demonstrated has ties to the Chinese military. CFIUS—an interagency committee headed by the Treasury Department, but also consisting of more than a dozen departments and agencies, ranging from Defense to Commerce—is in the business of ruling on potential foreign purchases of U.S. companies that have national security implications. Tuesday’s ruling was groundbreaking in that the issue wasn’t whether Singapore’s Broadcom itself posed a security risk by favoring the Chinese—nothing in the CFIUS letter even hinted at that—but rather, that the purchase might simply reduce Qualcomm’s capacity to conduct high-end research, thereby enabling Huawei and the Chinese to develop advanced technology before we do, which could give them a military advantage.

But why would Qualcomm’s purchase by Broadcom diminish Qualcomm’s commitment to research? This is the gobsmacking part of the CFIUS letter.

Because, in the words of the letter, “Broadcom’s statements indicate that it is looking to take a ‘private-equity’-style direction if it acquires Qualcomm, which means reducing long-term investment, such as R&D, and focusing on short-term profitability.”

Let that sink in for a moment. The staffers of CFIUS—probably the most business- and security-savvy civil servants in the government, headed by those at Treasury—are saying that the private-equity control of companies, which is a dominant feature of current American capitalism, reduces investment and results in profit extraction. CFIUS does not go on to say that the purchase of U.S. companies not only by foreign companies but by U.S. private equity firms, too, also leads to reduced investments and the kind of profit extraction that has enriched the 1 percent at the expense of other Americans; that’s not CFIUS’s mission. But having baldly stated that private equity leads to profit extraction, that’s the inescapable conclusion that any reader of CFIUS’s letter must reach.

The CFIUS letter goes on to specify the way in which Broadcom follows the private equity model of purchasing companies by taking on debt, and paying off that debt by reducing expenditures and funneling revenue into profits. “Broadcom has lined up $106 billion of debt financing to support the Qualcomm acquisition,” CFIUS writes, “which would be the largest corporate acquisition loan on record. This debt load could increase pressure for short-term profitability, potentially to the detriment of longer-term investments. The volume of recent acquisitions by Broadcom has increased the company’s profits and market capitalization, but these acquisitions have been followed by reductions in R&D investment.”

This is not something I would expect from the Trump administration.

I can only conclude that the higher ups only read the recommendations, and not the explanation.

The way I would, and have, put this, is that, "There is nothing that cannot be ruined by an application of modern American Financial techniques."

Silly Rabbit, Jail Is Not for White Folks

This is one Very white person

And corporate criminals don't come any whiter than Elizabeth Holmes:

Elizabeth Holmes, the founder of blood testing startup Theranos, has been charged with engaging in a "massive fraud" by the Securities and Exchange Commission. The SEC says she and the company's president raised more than $700 million using an "elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance."

No, she won't be going to jail over this. In fact, even though she faces some serious penalties over the charge — she's losing control of the company and won't profit if it is sold — she also doesn't have to admit wrongdoing as part of a settlement with regulators.

To recap, Theranos was once a Silicon Valley favorite because of its promise that its technology could allow for a wide variety of blood tests with just a droplet of blood. That all began to fall apart when the Wall Street Journal raised serious questions about the accuracy of the tests, prompting a government agency to shut down one of its labs.

………

Here's are some of the things Holmes has agreed to do to settle with the SEC.

She'll give up financial and voting control of the company.

• Holmes has to pay a $500,000 fine.
• She cannot be a director or officer of a publicly traded company for 10 years. Theranos is a privately-held company, which means she can continue to be CEO.
• She has to return 18.9 million shares of Theranos stock.
• She will give up her majority voting control of the company by converting her shares to Class A Common shares from Class B Common share

She should be in jail, and she should be banned from managing publicly traded companies for life, but she does not even have to admit liability.

Well, I suppose she's commiserating with David Petraeus about how unfair this all is.

Quote of the Day

One of the reasons why Russia can credibly meet or beat the US in terms military-related technological superiority is that top mathematical and physics grads have been going into finance since the mid 1980s.

—Yves Smith

It's interesting how, when people complain about crowding out from government deficits, it never seems to extend to how a parasitic financial industry is diverting intellectual capital to unproductive uses.

In fact, if you read trade magazines like Aviation Week, it becomes clear that a major hurdle for high tech operations is the fact that there is no one is stepping up to replace the current (near retirement)  cadre of technical employees.

These folks know how to count, and so are going to finance where it is more remunerative.

One down, Nine Thousand Nine Hundred and Ninety Nine to Go

Martin Shkreli has been sentenced to seven years in prison for fraud.

The obvious follow-up question is, "What about the other guys?"

People like Lloyd Blankfein, Tim Sloan, Jamie Dimon, Brian Moynihan, etc.

A federal judge on Friday sentenced Martin Shkreli, the notorious former hedge fund manager, to seven years in prison for defrauding his investors of $10 million.

In imposing the sentence, U.S. District Judge Kiyo Matsumoto roughly split the difference between the 15 years prosecutors asked for and the up to 18 months sought by Shkreli’s defense team. Shkreli, 34, who delivered a tearful speech to Matsumoto apologizing for his conduct and pleading for leniency, did not react to the sentence.

A complicated picture of Shkreli emerged from the trial, said Matsumoto, who said the case had given her a case of insomnia. “It is more than clear that Mr. Shkreli is a gifted individual with a passion for science,” she said. But his crimes are serious and it is important to send a message that such fraud should be not tolerated, she said. “White collar offenders like Mr. Shkreli use their intelligence and acumen to elude detection,” she said.

Shkreli, best known for raising the price of an AIDS drug by 5,000 percent when he was chief executive of Turing Pharmaceuticals, was convicted last August of defrauding the investors in his hedge funds, MSMB Capital and MSMB Healthcare. Shkreli lied to obtain investors’ money and then didn’t tell them when he made a bad stock bet that led to massive losses, prosecutors argued. Instead, they said, he raised more money to pay off other investors, or took money and stock from Retrophin, a drug company he founded.

We need to throw a whole bunch more people in jail, but it ain't gonna happen.

Should I Start a GoFundMe?*

Poster child for backpfeifengesicht, a face that needs to be punched

Pharma bro Martin Shkreli will have to forfeit $7.6 million, including his copy of the Wu-Tang Clan album Once Upon A Time in Shaolin as a result.

My heart bleeds borscht:

The disgraced pharmaceutical executive and hedge fund manager Martin Shkreli must forfeit $7.36 million in assets (PDF) to the federal government following his fraud conviction, a judge ruled Monday. The assets set for forfeiture (PDF) include the single copy of the Wu-Tang album Once Upon A Time in Shaolin that Shkreli reportedly bought for $2 million, as well as a painting by Pablo Picasso.

The forfeiture follows Shkreli’s conviction last October on three of eight counts of securities and wire fraud. The federal government had indicted Shkreli in December of 2015 for running a Ponzi-like scheme, alleging he defrauded investors in two hedge funds he managed and siphoned millions from his pharmaceutical company, Retrophin, to cover losses.

Oh, the horror.

^*For the snark impaired, if I do actually start a GoFundMe, it will be done ironically.

It's Bank Failure Friday!!!

We just had the 3^rd credit union failure of the year, First Jersey Credit Union of Wayne, NJ, but still no commercial bank failures.

This is just plain weird

It's Bank Failure Friday!!! (On Sunday)

Still no commercial bank failure failures, but on Friday, the 2^nd credit union was closed, the Ukrainian Future Credit Union​ in ​Warren, MI.

Here is the Full NCUA list.

So, no implosion among retail financial institutions yet.

How it Should Be Done

If you want to run for office as a real liberal, watch Jeremy Corbyn and take copious notes:

Jeremy Corbyn pledged that a Labour government would make it harder for asset strippers to take over U.K. companies while vowing to make finance the “servants of industry not the masters of us all.”

While his full-throttle attacks on bankers have been become familiar to the City of London, his prescription for blocking hostile takeovers is specific and likely to rattle the world of business.

In a speech to the EEF manufacturers’ organisation, he will evoke the case of Melrose Industries Plc’s bid for GKN Plc as an example where action to fend off the turnaround specialist is justified. If elected, Corbyn would broaden the scope of the “public interest test” to allow the government to act.

“Take GKN, one of the world’s oldest and most prestigious engineering firms, which employs 6,000 workers across the U.K.,” Corbyn will say on Tuesday. “And yet GKN is currently facing a hostile, allegedly debt-fuelled takeover bid by Melrose, a company with a history of opportunistic asset-stripping.”

“It’s an all too familiar story, like when Kraft took over Cadburys,” Corbyn will tell an audience of manufacturers at their annual conference in London. “A valuable company could be sacrificed so that a few can make a quick buck.”

Understand that it is important to actually have credibility to make such a claim, which means that things like paid speaking gigs at Wall Street or fundraising appeals to that same boulevard tend to eliminate this as a valid tactic.

If you want to talk the talk, you have to walk the walk, as Corbyn has done for decades.