senior executives

DealBook: Barclays Names a New Chairman

August 10, 2012 by NewsMaker Leave a Comment

Andrea Merola/European Pressphoto AgencyDavid Walker
Will Oliver/Agence France-Presse — Getty ImagesMarcus Agius, the outgoing chairman of Barclays.

LONDON — Barclays, whose top management was toppled amid an interest rate manipulation scandal, on Thursday turned to a former Bank of England official to be its next chairman.

The British bank has named David Walker, 72, a longtime London banker and former official of the central bank and the British Treasury, to be chairman, replacing Marcus Agius. Mr. Agius and other senior executives of Barclays, including its chief executive, Robert E. Diamond Jr., resigned last month during an investigation into the manipulation of the London interbank offered rate, or Libor.

Mr. Walker’s first major task when he takes over in November will be to lead the search for a replacement for Mr. Diamond.

With the appointment of a new chairman, Barclays is hoping to draw a line under the Libor scandal, which has raised questions about the governance and culture at the British bank. Senior British officials had raised questions about the management style of Mr. Diamond, with concerns dating to his appointment to the top spot in late 2010, according to documents released by the Bank of England.

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Scrutiny of Mr. Diamond and the firm’s governance came months — and in one case, years — before Barclays came under fire for trying to manipulate key interest rates.

Mr. Walker has decades of experience that he will have to draw upon for the new role.

He has led government-mandated reviews into practices of the country’s financial services industry, as well as an inquiry into the Royal Bank of Scotland, which is 82 percent owned by the government after receiving a bailout during the financial crisis.

He has called on banks to disclose more information about the bonuses that they pay top executives, and is well respected within the industry as a corporate governance expert.

“David commands great respect within the financial services industry and will bring immense experience, integrity and knowledge to the role,” Mr. Agius said in a statement.

Mr. Walker is the former chairman of Morgan Stanley International, and currently holds a senior adviser position at the American bank. He also has held senior posts at the Lloyds Banking Group and the pension firm Legal and General.

As part of the transition, Mr. Walker will become a nonexecutive director at Barclays at the beginning of September, before assuming the chairmanship later this year. While the bank continues to search for a new chief, it is unlikely that a final decision will be made on who will take over the top spot until Mr. Walker assumes his responsibilities.

The British bank has moved quickly in finding a replacement for Mr. Agius, who was the first Barclays executive to resign over the Libor scandal.

After agreeing to a $450 million settlement with American and British authorities in late June in connection with the manipulation of Libor, Barclays has remained under fire from politicians on both sides of the Atlantic.

Local regulators have highlighted problems with the firm’s corporate governance, including efforts to avoid paying about $770 million in taxes, and questioned some of the bank’s accounting methods.

“Barclays often seems to be seeking to gain advantage through the use of complex structures, or through arguing for regulatory approaches, which are at the aggressive end of interpretation of the relevant rules and regulations,” Adair Turner, chairman of the Financial Services Authority, the country’s regulator, said in the letter to Mr. Agius earlier

An earlier version of this post misstated the age of David Walker. He is 72, not 73.

Article source: http://dealbook.nytimes.com/2012/08/09/barclays-names-a-new-chairman/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: david walker, robert e diamond, senior executives

DealBook: Red Flags Were Raised on Client Cash, MF Global Inquiry Is Told

June 4, 2012 by NewsMaker Leave a Comment

Andrew Harrer/Bloomberg News Christine Serwinski, the former North American chief financial officer, was on vacation during much of MF Global’s final week.

Federal investigators are conducting a final round of interviews with former MF Global employees, as they weigh whether to file criminal charges against some senior executives and grant another one immunity from prosecution.

In interviews with investigators, two former back-office employees said they had raised red flags about the firm’s possible misuse of customer money in the final week before it filed for bankruptcy, according to people briefed on the matter. The employees disclosed that a report produced early on Friday, Oct. 28, MF Global’s final day of business, showed a deficiency in customer cash accounts.

Despite the warning, MF Global continued to transfer customer money without fully disclosing the potential problem to regulators, said the people, who spoke on the condition of anonymity because they were not authorized to speak publicly. The revelations raise questions about potential communication breakdowns between the employees tracking the customer money and those transferring the funds.

The wire transfers are at the heart of a seven-month effort to recover more than $1 billion in customer money that disappeared from MF Global.

Federal investigators have homed in on Edith O’Brien, a former treasurer at MF Global official who oversaw some of the transfers. In interviews last month with former employees, investigators focused their questions on Ms. O’Brien’s actions and behavior during the week leading up to the firm’s bankruptcy filing on Oct. 31, one of the people briefed on the matter said.

Ms. O’Brien has sought immunity from prosecution. After conducting a number of interviews with Ms. O’Brien’s lawyers, federal prosecutors and the Federal Bureau of Investigation are nearing a decision about her request for immunity, the people briefed on the matter said.

The latest steps by investigators come as other new details emerge on MF Global’s collapse. On Monday, the trustee overseeing the return of customer money, James W. Giddens, is expected to issue a detailed report on the firm’s demise. The report will outline where customer money was transferred and what certain key employees were doing during that tumultuous period, according to people with knowledge of the report.

Until now, Mr. Giddens has indicated only that he had traced the missing customer money to an array of banks and some of MF Global’s trading partners. He has been reluctant to disclose specifics, fearing it might compromise negotiations to recover the money.

In the days before MF Global filed for bankruptcy, the firm misused client funds to meet its own obligations. Since then, farmers, hedge funds and other customers have been without at least a third of their money.

The trustee’s report has prompted some concern among federal investigators, who fear it could put pressure on them to wrap up their case quickly. But the report, which comes at the request of the bankruptcy judge, does not appear likely to jeopardize the investigation since much of the information is already known.

No one at MF Global, including Ms. O’Brien, has been accused of wrongdoing. And despite revelations that a potential deficiency in customer money was detected on Oct. 28, some investigators have expressed doubt about bringing a criminal case, people close to the matter have said.

Investigators have scoured tens of thousands of e-mails and documents without unearthing a smoking gun. They instead chalk up some of the wire transfers to sloppy record-keeping and mass confusion at the firm.

Regardless of whether a criminal case materializes, civil regulators are pursuing their own investigations. The Securities and Exchange Commission, for instance, is examining whether top MF Global executives failed to publicly disclose the firm’s exposure to European sovereign debt, people briefed on the matter have said. The positions, once fully detailed, prompted the firm’s investors and rating agencies to panic.

The future of the criminal investigation, being led by prosecutors in New York and Chicago as well as the F.B.I., may hinge in part on Ms. O’Brien. On Oct. 28, she oversaw a crucial transfer of $175 million to replenish an overdrawn account at JPMorgan Chase in London. The money used belonged to customers, though it is unclear whether Ms. O’Brien knew its origin at the time.

Some investigators are hesitant to grant Ms. O’Brien immunity, fearing she might be responsible for the breach of customer accounts. But they also say that with the promise of immunity, she may reveal fresh information about wrongdoing at higher rungs of the firm.

Ms. O’Brien has remained mum. When appearing before Congress in March, she declined to testify, invoking her constitutional right against self-incrimination.

Other back-office employees are cooperating with federal investigators. In recent weeks, employees in Chicago and New York have delivered so-called proffers, in which they detail their knowledge to the investigators.

Some employees have focused on the internal report that showed a deficiency in customer cash accounts amounting to hundreds of millions of dollars. The internal report, produced on Oct. 28, reflected end-of-day figures for Oct. 27, a person briefed on the matter said.

The employees who are said to have noticed the deficiency, Matthew Hughey and Mike Bolan, reported to Christine Serwinski, the firm’s North American chief financial officer. The two were unable to immediately confirm whether the deficiencies were real or the result of an accounting error, according to one of those briefed on the matter.

The new details raise concerns about whether Ms. O’Brien’s staff and Ms. Serwinski’s team were isolated from one another during the crucial period. Some say tensions have mounted between the two units in the aftermath of the collapse, with each pointing fingers at the other.

Some people close to the case have said Ms. O’Brien’s staff sent wire transfers on Oct. 28 without checking the reports showing the level of customer cash. Others have countered that Ms. O’Brien was not given access to reports on that final day of operations.

Adding to the disorder, the people say, was that Ms. Serwinski was on vacation much of that final week. One of her deputies, a person briefed on the matter said, also spent part of the week away at a conference.

Article source: http://dealbook.nytimes.com/2012/06/03/red-flags-were-raised-on-client-cash-mf-global-inquiry-is-told/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: criminal charges, revelations, senior executives

Mine Owner to Pay $209 Million in West Virginia Explosion

December 7, 2011 by NewsMaker Leave a Comment

The deal includes $46.5 million for the families of the victims and those who were injured in the blast, and includes terms that protect Alpha — but not individual Massey executives — from criminal prosecution, said Steven R. Ruby, an assistant United States attorney for the Southern District of West Virginia.

But for the families of the miners killed in the accident — the worst such disaster in 40 years — the settlement was justice denied. Many were hoping for criminal charges against the people who ran Massey, the company that, according to the federal government’s own review, knowingly put their relatives in harm’s way.

“Families believe that senior executives should be prosecuted, but they don’t have any great faith that they will be, and that’s what they are afraid of,” said Mark Moreland, a lawyer who represents the families of two victims.

Federal prosecutors say they are trying to do just that, pursuing cases against a number of individuals involved in the explosion. But industry observers warned that because of weak mining safety laws, prosecutors face a steep uphill battle pursuing the biggest prize — criminal convictions of the powerful people who ran Massey.

Under the federal mine act, safety violations, with the exception of falsifying records, are categorized as misdemeanors. That limitation that could make it hard to build a case against senior managers, like Don Blankenship, the former chief executive of Massey, lawyers said.

In all, 18 Massey executives have refused to be interviewed by federal investigators, invoking their Fifth Amendment rights.

“Until someone goes to jail, there will be no justice done here,” said Cecil E. Roberts, president of United Mine Workers of America International.

Only the mine’s security chief at the time of the blast, Hughie Stover, is facing criminal charges so far. But observers said he was so low in the hierarchy that any sentence would do little to satisfy the families.

Proposed changes to the mine act did not make it out of the House at the end of the last session of Congress, because of what a Democratic staff member on the Education and Workforce Committee described as an intense lobbying effort by the coal industry. A sponsor of the bill, Representative George Miller, Democrat of California, called on Congress to “close gaping loopholes that allow some mine operators to put their miners at needless risk.”

Tony Oppegard, a lawyer based in Kentucky who represents miners, said, “Even though you have the biggest mine disaster in 40 years, there’s been absolutely no federal legislation flowing from it.”

Still, many argued that the disaster brought a turning point in the way federal inspectors from the Mine Safety and Health Administration dealt with the industry. Inspectors have sharply increased their efforts, industry observers said, and more closely monitor mines, including by taking control of internal communication systems during surprise inspections so miners cannot coordinate with one another.

“We have certainly seen a change,” said Keith Heasley, a professor of mining engineering at West Virginia University. “They have stepped up their enforcement, and they are issuing more paper.”

The mining industry has taken notice, but executives say the increase in inspections has generated more violations and paperwork without necessarily making mines safer.

“The regulation quite often isn’t placed with the best focus,” said Vic Svec, a senior vice president of Peabody Energy. “MSHA still needs to target real improvements in mine safety. They hand out a lot of citations, but don’t focus necessarily on things that will bring about real safety improvements.”

Dave Blankenship, director of safety and environmental affairs for Teco Coal, a company based in Kentucky that has one of the better safety records in the industry, complained that inspections had become onerous.

“They write up violations for normal activities of mining,” Mr. Blankenship said, like everyday spills from conveyor belts and small leaks in hydraulic pumps. “They slow you down.”

Sabrina Tavernise reported from Washington, and Clifford Krauss from Houston.

Article source: http://feeds.nytimes.com/click.phdo?i=ad3093323f1c70be76056a376b6d28f4

Filed Under: Business News Tagged With: criminal convictions, safety laws, senior executives

DealBook: Goldman Sachs Draws Up Deeper Cuts

September 27, 2011 by NewsMaker Leave a Comment

Scott Eells/Bloomberg NewsThe headquarters of Goldman Sachs. The bank is bracing for what could be one of its worst quarters since it went public.

Goldman Sachs, bracing for what could be one of its worst quarters since it went public 12 years ago, is preparing to expand its cost-cutting initiative by hundreds of millions of dollars, a move that could lead to additional job losses at the Wall Street bank.

This summer, Goldman said that it would wring out $1.2 billion in costs from its operations by mid-2012 and cut roughly 1,000 jobs, about 3 percent of its work force. But as the market turmoil has weighed on trading and other businesses in recent weeks, senior executives have been debating even deeper reductions, according to people briefed on the matter who were not authorized to speak publicly.

With the company’s third quarter closing on Friday, Goldman has been revising its plans, potentially raising the cuts by as much as $250 million, to $1.45 billion. Based on its 2010 spending, such reductions would amount to 5 percent of the firm’s expenses.

Along with the possibility of additional layoffs, the firm is expected to reduce employee pay, much of which is handed out later in the year. It is also sharpening its focus on noncompensation expenses, like real estate and travel, according to one of the executives with knowledge of the discussions.

The executive warned that no final decision had been made on size of the cuts, and that the numbers could change quickly if the market improved or weakened. The financial firm may address the matter when it releases its earnings on Oct. 18, he added.

Goldman’s move underscores the broader problems on Wall Street. Financial firms have been under pressure for months, amid the European debt crisis and an economic slowdown in the United States, and a raft of regulatory changes is expected to crimp future profits. But the financial situation has deteriorated in recent weeks, as the market rout has ravaged revenue across Wall Street.

With the stock market slumping, analysts are quickly revising their estimates for third quarter earnings, which the banks are set to report in mid-October. Analysts are tempering their predictions for JPMorgan Chase, Morgan Stanley, Citigroup, Bank of America and others. Goldman is now expected to earn $1.35 a share in the third quarter, less than half what the firm earned in the same period of 2010, according to consensus estimates from Thomson Reuters. A month ago, analysts predicted the bank would make $2.65 a share.

The financial picture could be even more bleak, as analysts at both Barclays Capital and Bank of America Merrill Lynch have predicted a loss for Goldman. The company has reported a quarterly loss only once since going public in 1999; it lost $2.12 billion in the fourth quarter of 2008, months after Lehman Brothers filed for bankruptcy.

“This is an extremely challenging environment, and I am sure every bank will be taking another hard look at expenses after the recent market downturn,” said Glenn Schorr, an analyst at Nomura, the Japanese bank.

In anticipation of a slowdown, banks began trimming their budgets earlier this year and took aim at the biggest expense: compensation. Bank of America, which continues to have losses from the mortgage crisis, has had some of the most severe cuts. It has announced that it would eliminate 30,000 jobs, nearly 10 percent of its total work force, over the next few years. Over all, the bank is looking to cut $5 billion in annual expenses.

JPMorgan Chase is in the midst of a five-year, $1.3 billion cost-cutting plan that will eliminate roughly 3,000 jobs. Morgan Stanley cut some low-producing brokers in its wealth management division, and Credit Suisse laid off administrative assistants in its investment banking unit last week as part of a larger reduction of 2,000 employees.

Wall Street executives are also preparing their staffs for smaller year-end bonuses, although the change is not yet reflected in the expenses. During the first six months of the year Citigroup, JPMorgan, Goldman, Morgan Stanley and Bank of America set aside $65.69 billion to cover compensation and benefits, up 8 percent from a year ago, according to data provided by Nomura. But financial firms tend to wait until the fourth quarter to make the call on the annual payouts.

“The third quarter was rough and revenue is sure to be down, so compensation levels will follow,” said Mr. Schorr.

As Wall Street looks to drive down costs in a bid to protect profits, no expense has been overlooked. Goldman Sachs recently downsized the drinking cups in its New York headquarters to 10 ounces from 12 ounces, saving thousands of dollars. It has also gone mostly cashless in the cafeteria and other areas, eliminating the need to pay armored truck companies to haul away the money.

Barclays, which has said it plans to cut 3,000 jobs this year, recently issued a memo reminding employees that work-issued cellphones are to be used “for valid business purposes only.” In addition to closing two-thirds of its 63 data centers, Bank of America did not host an annual field day for its municipal bond department, a country club affair in New Jersey that in past years included sport stations outfitted with beer kegs.

Even foliage is not safe from the chopping block. James P. Gorman, the chief executive of Morgan Stanley, faced questions about plants at a town hall meeting this summer. An employee told Mr. Gorman that he had noticed decidedly less greenery around the office.

“Every dollar we don’t spent is a dollar available for the bottom line,” Mr. Gorman responded.

Article source: http://feeds.nytimes.com/click.phdo?i=cfa80db8751bdca4b585558a92bdd475

Filed Under: Business News Tagged With: economic slowdown, layoffs, senior executives

DealBook: Ex-Lehman Officials to Pay $90 Million to Settle Suit

August 26, 2011 by NewsMaker Leave a Comment

Jim Young/ReutersRichard S. Fuld Jr., Lehman’s former chief, is among those being sued.

Former officials of Lehman Brothers, including Richard S. Fuld Jr., its former chief executive, have agreed to pay $90 million to settle a shareholder lawsuit that accused them of misleading investors about the investment bank’s health in the months leading up to its collapse.

In a court filing on Thursday in Federal Bankruptcy Court in Manhattan, 13 Lehman executives and directors asked a judge to release insurance proceeds that would pay for the settlement.

The potential settlement, which would be the largest to date of a lawsuit against Lehman’s top officials, would not affect the status of any outstanding government investigations of the company and its management.

Three years ago next month, Lehman Brothers filed for the largest corporate bankruptcy in history, an event that helped set off the global financial crisis. The company has been protected from litigation since it filed for Chapter 11 bankruptcy.

But investors filed several lawsuits against former Lehman officials, including one filed by a group of pension funds that asked for billions of dollars in damages, accusing the bank’s senior executives and directors of lying about its financial state.

The pension fund lawsuit contends that Mr. Fuld; Erin Callan, the bank’s former chief financial officer, and others “concealed the true extent of the company’s exposure to subprime-related assets and financial positions, and materially misled the investing public.”

If the bankruptcy judge agrees with the Lehman officials‘ request and releases the insurance proceeds to settle this lawsuit, Mr. Fuld and his former colleagues will not have to bear any personal expense in resolving the case. They would also neither admit nor deny wrongdoing.

Lawyers say it is common for insurance proceeds to cover corporate directors and officers in shareholders’ lawsuits.

“It is unusual for individual executives to pay out of their own pockets,” said Kevin Lacroix, a lawyer and author of the DO Diary blog. “Companies buy insurance for exactly a situation like this where it is insolvent and cannot indemnify their directors and officers.”

Only in rare instances do directors and officers have to make out-of-pocket payments in shareholders’ suits. In 2005, former Worldcom directors paid about $25 million of their own money to resolve a lawsuit with the company’s investors. Enron directors also paid roughly $13 million to settle shareholders’ claims.

In those cases, the companies’ insurance policies did not cover the cost of the settlement. In the case of Lehman Brothers, the investment bank’s policies are valued at a total of $250 million, according to the court filing.

Other litigants are scrambling to settle cases with Lehman before the company’s insurance coffers are empty.

The former Lehman officers have has also asked the bankruptcy court to release $8.25 million in insurance proceeds to settle a separate claim by the state of New Jersey against Mr. Fuld and his former colleagues.

Article source: http://feeds.nytimes.com/click.phdo?i=57abb638ec9990f6d6618c8fcf786c88

Filed Under: Business News Tagged With: corporate bankruptcy, pension fund, senior executives

Report Criticizes High Pay at Fannie and Freddie

April 1, 2011 by NewsMaker Leave a Comment

The companies, whose fates are to be decided by Congress this year, paid a combined $17 million to their chief executives in 2009 and 2010, the two full years when Fannie Mae and Freddie Mac were wards of the state, the report found. The top six executives at the companies received $35.4 million over the two years. Since Fannie Mae and Freddie Mac were taken over in September 2008, the companies’ mounting mortgage losses have required a $153 billion infusion from taxpayers. Total losses may reach $363 billion through 2013, according to government estimates.

Charles E. Haldeman Jr., a former head of Putnam Investments, the giant fund management concern, joined Freddie Mac as its chief executive in 2009. He made $7.8 million for 2009 and 2010. Fannie Mae’s chief is Michael J. Williams, who has worked at the company since 1991. He received $9.3 million for the two years. Company officials declined to comment.

With hundreds of billions in government support necessary to keep the companies running, questions are arising about the nature of the pay packages and how performance goals are determined. The pay was approved by the housing finance agency, which is charged with conserving the assets of Fannie and Freddie on behalf of taxpayers.

“F.H.F.A. has a responsibility to Congress and taxpayers to efficiently, consistently, and reliably ensure that the compensation paid to Fannie Mae’s and Freddie Mac’s senior executives is reasonable,” ’said Steve A. Linick, the newly appointed inspector general of the agency, in a statement. “This is especially true when you realize that the U.S. Treasury has invested close to $154 billion to stabilize Fannie Mae and Freddie Mac,” and they “are spending tens of millions of dollars for executive compensation.”

The report cited a “lack of standardized evaluation criteria, documentation of management procedures and internal controls” at the oversight agency, missing steps that may have led to overpayments.

For example, the inspector general said that taxpayer support of the companies may have made performance benchmarks easier to meet for executives. In 2009, Fannie Mae issued 47 percent of new mortgage-backed securities, far exceeding its goal of 37.5 percent. But, as the report noted, this hurdle was almost certainly cleared because the Federal Reserve purchased almost all the mortgage securities issued by Fannie and Freddie in 2009.

In response to the report, the housing agency said that it would “institute a more formal and systematic approach” to its review of the performance benchmarks and the assessment of whether they were reached by the companies’ executives. A spokeswoman for the agency said its officials declined to comment.

Lavish executive pay that does not track a company’s performance has led to anger among shareholders in recent years. When the government stepped in to support some of the nation’s biggest financial institutions in 2008, compensation became an issue of concern to taxpayers. Executive pay at institutions receiving support under the Troubled Asset Relief Program, for example, was subject to approval by an overseer, the special master for TARP. Fannie and Freddie were not required to submit to this process because their assistance did not come from TARP.

As the primary regulator and conservator of both companies, the housing agency has broad powers to direct the companies’ activities; it has replaced board members and senior officers, for example. And it can bar the companies from making golden parachute payments to executives. It consulted with the TARP special master on executive pay at Fannie and Freddie after they were rescued by the government.

Nevertheless, the agency delegates pay decisions to the companies’ boards, accepting their recommendations “unless there is an observed reason to do otherwise,” according to the inspector general’s report. The F.H.F.A. receives advice from its own compensation consultant as well as the work of those hired by Fannie and Freddie.

The inspector general’s report noted that the executives at Fannie and Freddie received far more than their counterparts at other federal housing agencies. The top executive at Ginnie Mae, for example, received an annual salary of less than $200,000. The inspector general suggested that the agency review the discrepancy and account for it to taxpayers.

Agency officials say the salaries and deferred compensation awarded to executives at Fannie and Freddie are necessary if they are to attract and keep talent required to run those operations effectively. They say that current pay at Fannie and Freddie is roughly 40 percent less than it was before the bailout and maintain that the compensation plans are based on the companies’ ability to meet financial and performance targets, like providing liquidity and affordability to the mortgage market.

Edward J. DeMarco, acting director of the Federal Housing Finance Agency, testified before Congress on Thursday about proposals to overhaul Fannie and Freddie. “I am concerned that legislation to overhaul the compensation levels and programs in place today with the application of a federal pay system to nonfederal employees carries great risk for the conservatorships and hence the taxpayer,” he said.

Last year, Mr. DeMarco testified that the executive compensation plans at Fannie and Freddie were designed to achieve the goals of the conservatorship and “align executive decision-making with the long-term financial prospects of the enterprises, and minimize costs to the taxpayer.”

Because shares of both Fannie and Freddie have little value, the companies’ executive compensation consists solely of cash paid out in base salary, deferred salary and long-term incentive pay.

But Brian Foley, a compensation consultant in White Plains questioned the characterization of the companies’ incentive pay as long term, given that it is paid entirely within two years. “One hundred percent of the compensation is paid for two-year performance and a fair portion of that is without regard to performance,” he said. “I understand the stock is worthless, but that doesn’t mean you can’t have cash on the table for a long period. If anybody needs to have good long-term performance, isn’t it Fannie Mae and Freddie Mac?”

Article source: http://feeds.nytimes.com/click.phdo?i=0db6fa1ff989725c0e830be48171c9e3

Filed Under: Business News Tagged With: evaluation criteria, government estimates, senior executives