Compliancex

Mortgage-Fraud Crackdown Brings 485 Arrests, U.S. Says

According to figure released by the Department of Justice, federal and state law enforcement authorities have arrested close to 500 since March.

In what has been called the “largest nationwide mortgage-fraud crackdown of its kind,” Bloomberg News reports that more than 1,200 criminal defendants are responsible for $2.3 billion in losses. These defendants face “some type of legal action” says the DOJ, and that means either civil penalties, time in the pokey, or both.

The initiative was organized by the Obama Administration in response to the lingering contagion of the subprime mortgage collapse. The law enforcement operation has been dubbed “Operation Stolen Dreams.” In addition to the criminal cases authorities have also brought more than 190 civil cases that recovered close to $150 million in ill gotten gains.

“This represents the largest collective enforcement effort ever brought to bear in confronting mortgage fraud,” said US Attorney General Eric Holder.

And there are more cases in the works as the FBI is said to have “more than 3,000 pending mortgage-fraud cases, almost double the number in fiscal year 2008.”

 CFPB Student loan options

The Consumer Financial Protection Bureau announced last week that it has formed an alliance with the Department of Education to help student loan borrowers who have fallen behind on their loans.

The two federal agencies are releasing a “new web tool” to help delinquent borrowers understand their options and to “communicate effectively” with their servicer or debt collector. Of course, student loans cannot be charged off like other consumer debt and must ultimately be paid back. And it has long been a practice to offer struggling borrowers with options to apply for hardship deferments that allow them to defer payments until their finances improve.

Another option that has long been available for student loan programs is to make interest only payments. In so doing, the IO payments are lower than the total monthly principal and interest payments. This option allows borrowers at least to mitigate interest costs that would escalate if a deferment option were chosen.

The CFPB notes that “over a quarter of all student loan borrowers are at least one monthly payment behind” and that “millions” of borrowers have defaulted on their loans because they were “hit hard by the recession.” The bureau then goes on with this shocker: the unemployment rate among college graduates “is more than twice the rate of their older counterparts.”

In short, the real solution is for college grads to find J.O.B.S.

SEC Charges STEC CEO with Insider Trading

The SEC announced last week that is has charged the chairman and CEO of Santa Ana-based STEC Inc with insider trading in a secondary offering of stock shares.

The complaint claims that Manouchehr Moshayedi gamed the uptick in the stock price of STEC by selling a “a significant portion of his stock holdings as well as shares owned by his brother, a company co-founder.” The secondary offering was slated to coincide with the release of the company’s financial results for the second quarter of 2009. But Moshayedi apparently knew that “critical nonpublic information” would adversely affect the stock price.

The SEC’s complaint charged him with violating the anti-fraud provisions of U.S. securities laws and seeks a final judgment to disgorge his own ill-gotten gains and the trading profits of his brother Mehrdad Mark Moshayedi, pay prejudgment interest and financial penalties, and that both men be permanently barred from future violations and from serving as officers and directors of any registered public company.

UK Review Calls for Investor Body to Tackle Boards

A UK-backed report calls for has called for a “new institutional investors forum” to help shareholders engage with companies more effectively and prevent Barclays-style board implosions.

In a Reuters report run by the New York Times, the UK study claims that fund investors can improve returns for their investors if they “engaged collectively with company boards rather than individually.” The Kay Review of UK Equity Markets and Long-Term Decision Making was commissioned by Business Secretary Vince Cable.

The study was ordered in response to the takeover of confectioner Cadbury by U.S. rival Kraft Foods and some critics argue that the deal was “driven by short-term investors seeking a quick reward.”

In sum, the report contends that restoring confidence in the markets requires pension funds, fund managers and companies to “refocus on fiduciary standards with the aim of putting the interests of savers and customers first.”

HSBC Needs CEO Who Will Clean Up and Break Up the Bank

In the wake of the AML fiasco at HSBC that came to light last week, there is a growing narrative that the big bank’s big wheel should also hit the highway. Moreover, some contend that the banking behemoth needs to be split up into smaller units.

The narrative has quickened since the firms compliance head honcho, David Bagley, announced at Senate hearing last week that he would resign. Mr. Bagley told lawmakers last week that the bank’s compliance function needs to be restructured and that “someone new” should serve as the head of a newly formed compliance group.

Now, a number of news sources are beating the drum for the firm’s CEO, Stuart Gulliver, to take responsibility by resigning. According to Bloomberg News, Senate investigators led by Sen. Carl Levin (D-MI) found a decade-long pattern of behavior where HSBC provided money-laundering services to drug traffickers in Mexico and criminals around the world. The bank also broke U.S. laws restricting transactions with Iran.

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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.