Sunday, March 11, 2012

Wall Street Cry Babies

After several years of record bonuses, some execs on Wall Street are now crying the blues.

William Bryan Jennings, the Morgan Stanley U.S. bond-underwriting chief, was recently arrested for stabbing a New York taxi driver over a cab fare. He pleaded not guilty to assault and hate-crime charges based on the man’s Middle Eastern descent.

Another Morgan Stanley exec, David S. Walker, is a broker who was recently linked to a suspected big-money Manhattan madam millionaire. He was placed on administrative leave a day after he was publicly identified as having hosted a meeting where prosecutors say the woman was trying to raise money for a business venture.

What's going on with these Wall Street executives?

Morgan Stanley swung into the red in the fourth quarter of last year, reporting a loss of $275 million. The firm took a one-time $1.7 billion loss related to a legal settlement with a financial services company, the bond insurer Municipal Bond Insurance Association*.

* MBIA has lawsuits pending against three other banks over securitizations that MBIA says it was defrauded into guaranteeing. Last week MBIA’s chief financial officer, C. Edward Chaplin, told analysts that MBIA had raised its expected payouts during the final quarter of 2011 because mortgage delinquencies were higher than anticipated.

As confidence in the soundness of some of the world’s biggest banks was falling, investors were selling off their shares of one financial institution after another. The fears about Morgan Stanley were especially acute. Investors were worried about the bank’s exposure to the European debt crisis, its ability to weather a turbulent trading environment and its reliance on short-term borrowing to finance its operations.

Morgan Stanley had previously announced that it had set aside $16.4 billion in 2011 to pay its employees, 51.2 percent of its net revenue. In 2010, Morgan Stanley paid $16.05 billion to employees, which also came to roughly 51 percent of its revenue. In 2011, with money "tight", Morgan Stanley decided to cap all cash bonuses at a "measly" $125,000 for the year.

But James Gorman, the boss at Morgan Stanley, is taking home $10.5 million

The smaller bonus checks that hit accounts across the financial-services industry are making it difficult to maintain the lifestyles that many Wall Street execs had expected, this according to interviews with bankers and their accountants, therapists, advisers and headhunters.

But executive salaries do not always include non-cash compensation given for last year, and so may not give the full picture, given that many banks dole out a larger portion of their annual payouts in stock options.

And even execs at bankrupted firms with billions in missing money (such as MF Global Holdings) could also get bonuses for as much as several hundred thousand dollars each.

Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy, said in interview: "People who don't have money don't understand the stress. Could you imagine what it's like to say I got three kids in private school, and now I have to think about pulling them out? How do you do that?" Boo hoo!

Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC, bemoaned, "It's a disaster!" Boo hoo!

Mister Arbeeny, the managing principal at New York-based CMF Partners LLC, an executive-search veteran whose work with hedge funds and banks earn him about $500,000 in good years, said he no longer goes on annual ski trips to Whistler, Tahoe or Aspen. Boo hoo!

Cry Baby Andrew Schiff

Andrew Schiff, the director of marketing for broker-dealer Euro Pacific Capital recently complained in an interview to Bloomberg that the lower bonus he earned ($350,000) doesn't cover his family's private-school tuition. And he and his wife can no longer afford their Kent, Connecticut summer rental - - or the upgrade they had wanted to make on their Brooklyn duplex. (Schiff's brother is CEO at Euro Pacific Capital.)

His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

"I can't imagine what I'm going to do," Schiff said. "I don't have a dishwasher, we do all our dishes by hand!"

He and his family also rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 (that's net, after taxes, health-insurance and 401k contributions). "I wouldn't want to whine," Schiff said. "All I want is the stuff that I always thought, growing up, that successful parents had." Boo hoo!

Cry Baby Hans Kullberg

Hans Kullberg, 27, is a trader at the Wyckoff, New Jersey-based hedge fund Falcon Management Corp. He earns about $150,000 a year, but is adjusting his sights, too. Before that, he worked on an emerging-markets team at Citi Bank that traded and marketed synthetic collateralized debt obligations.

Since then, his tastes for travel got "a little bit more lavish," he said. Kullberg went to a bachelor party in Las Vegas in January after renting a four-bedroom ski cabin at Bear Mountain in California as a Christmas gift to his parents. He went to Ibiza for another bachelor party in August, spending $3,000 on a three-day trip. In May he spent 10 days in India.

Earlier this month, a friend invited Kullberg on a trip to Mardi Gras in New Orleans. The friend was going to be a judge in a wet T-shirt contest. But this time he turned down the offer. Now he says it wouldn't have been "the most financially prudent thing to do. I'm not totally sure about what I'm going to get paid this year - how I'm going to be doing." Boo hoo!

He thinks more about the long term and plans to buy a foreclosed two-bedroom house* in Charlotte, North Carolina, for $50,000 next month.

* The New York Times reported that the auction houses have been busy thriving with bargain hunters on foreclosed homes. People from around the world have scooped up houses that are often sold for less than half of the value of the mortgage. (It's a good time to have some extra cash to spend.)

But most people like Schiff, Kullberg, and the other Wall Street whiners can only dream of Wall Street's shrinking paychecks. According to the U.S. Census Bureau median household income in 2010 was only $49,445, lower than the previous year. That is less than 1 percent of Goldman Sachs CEO Lloyd Blankfein's $7 million restricted-stock bonus for 2011.

Unemployment is still high. In 2012 almost 30 million Americans are either under-employed or unemployed. Even if the unemployment rate stays the same, many will still face foreclosures and evictions.

The percentage of Americans living in poverty has climbed to 15.1 percent, the highest in almost two decades. Almost half of all working Americans earned less than $27,000 a year - - when the poverty line for a family of four is $22,314. (Read: Obama's Welfare State)

According to the USDA, about 43% of households on food stamps had gross incomes at 50 percent or less of the poverty line. A full 85% had gross incomes below 100 percent of the poverty line -- that's only $10,830 a year for a single person such as myself. The remaining 15% were often elderly beneficiaries on fixed incomes such as Social Security.

And homelessness is still on the rise. One in 200 Americans spent the night in a homeless shelter. Did those Wall Street executives cry for them?

But things on Wall Street aren't bad for everyone - - the bosses are doing OK. Citigroup Chief Executive Vikram Pandit got his payday. The third biggest U.S. bank company paid Pandit $14.86 million in 2011.

Although JPMorgan CEO Jamie Dimon is making something of a sacrifice. His $18.8 million package represents a 17% cut from last year.

Even the bosses at Freddie Mac and Fannie Mae can survive on their salary cuts, earning only $500,000 a year.

So maybe things aren't so bad for the other Wall Street execs either. Wall Street bonuses may have hit bottom in 2011, and they are now poised to rebound about 20% in 2012.

Boo hoo! Just think...all that crying for nothing! Just like Mitt Romney had said, we shouldn't worry about the rich. So everybody can just stop crying.

A few more examples of some other Wall Street cry babies, those who didn't think they already had enough money, so they cheated other people to get more.
  • Bernie Madoff holds the world-record for biggest Ponzi scheme in history. Madoff stole billions while chairing the Nasdaq and maintaining cushy relationships at the SEC. He received the maximum sentence of 150 years in prison.
  • Jon Corzine, the former CEO of Goldman Sachs and of MF Global, a financial services firm specializing in futures brokerage. The company filed for bankruptcy protection in October 2011, and he can't account for over $1 billion that's missing.
  • Joseph P. Nacchio - The CEO of Qwest Communications International. He was convicted of 19 counts of insider trading in Qwest stock and was sentenced to six years in federal prison
  • Kenneth Lay and Jeffery Skilling -- Enron!!!
  • Thomas Joseph Petters - The former CEO and chairman of Petters Group Worldwide and convicted for turning his company into a $3.65 billion Ponzi scheme. He received a 50 year federal prison sentence.
  • Eugene Plotkin and David Pajcin, both formerly of Goldman Sachs, were the masterminds behind a complex Wall Street con and a scam using strippers to solicit information from Wall Street bankers.
  • Richard Scrushy - He was once the superstar CEO of HealthSouth, a huge provider of outpatient rehab services until federal prosecutors accused him of masterminding a $2.7 billion fraud.
  • Samuel Israel III turns his wall street hedge fund Bayou Investments into a Ponzi scheme after poor management, then attempts a fake suicide to flee prosecution.
  • Dennis Kozlowski - He was once described as "The Most Aggressive CEO in America," now sits behind bars. A poster boy of excess, the former CEO of Tyco stole millions from his company, using the money for a lavish party, a gilded shower curtain and expensive art.
  • Anthony Elgindy - "The Mad Max of Wall Street" - The founder of Pacific Equity Investigations waa a short seller who made millions in a trading scam using government secrets.
  • Lou Pearlman - The manager of bands like *NSYNC and The Backstreet Boys and masterminded scams of $500 million from investors in the longest running Ponzi scheme.
  • Al Parish - An economics professor and a trusted financial advisor was sentenced to federal prison after pleading guilty to financial fraud. Nearly 600 people lost up to $90 million invested in Parish Economic's private investment pools.
  • Sholam Weiss - He helps fix the National Heritage Life Insurance's gaping $35 million accounting hole, and ends up partnering up with them - and bilking customers out of $500 million. He was sentenced to 845 years in prison.
  • Robert W. McLean - An investment manager and arts patron who traveled by limousine and ran a Ponzi scheme that had siphoned tens of millions of dollars from close friends and business associates. He eventually killed himself.
  • Stephen Trantel was once a Wall Street insider, a broker making hundreds of thousands of dollars in the Manhattan trading pits. After becoming unemployed, he started robbing banks.
  • Nancy Kissel murders her husband Robert Kissel, who had been a vice president in Goldman Sachs' Asian special situations group. His brother, Andrew Kissel, who had been accused of defrauding a New York co-op board of millions of dollars, was found murdered at his rented Greenwich, Connecticut estate.
  • Alberto Vilar - An investor who was known as "a patron of opera". He was tried and convicted in November 2008 on charges of money laundering, investment advisor fraud, securities fraud, wire fraud and mail fraud, and was sentenced in February 2010 to nine years in prison.
  • Danny Pang - He was the CEO of Private Equity Management Group who ran a Ponzi scheme and made millions betting on when people will die. His wife, ex-stripper Janie Louise Pang, was murdered in the Villa Park house, possibly by a contract killer, after she took steps toward a divorce. He has also since died. Wall Street Journal
  • Marc Harris promised financial freedom to people with off-shore bank accounts as a way to keep assets out of the reach of government. But the "guru" was running a Ponzi scheme and bilking clients out of millions of dollars.
  • Robert Allen Stanford - He was the chairman of the now defunct Stanford Financial Group and was a sponsor of professional sports - - now accused of a massive Ponzi scheme.
  • William “Boots” Del Biaggio III - A venture capitalist and former co-owner of the hockey team San Jose Sharks. He was sentenced to eight years in prison and more than $67.4 million in restitution for misappropriating funds from individual investors he advised.
  • Martin Frankel - A financier and con-man who vanished with $200 million dollars. A story of money laundering, prostitution, bizarre sex and drug abuse.
  • Bernard Ebbers - The CEO of WorldCom becomes the poster child for everything that went wrong on Wall Street in the 1990s. WorldCom's eventual downfall shakes the financial community and the lives of thousands of investors.
  • Stefan Wilson - Operated a fraudulent investment fund. His Ponzi scheme took almost $13 million from over 50 investors and landed him 20 years in prison.
  • Marc Dreier is a high-powered lawyer with celebrity clients. But Dreier is a conman and steals more than $700 million from hedge funds.
  • Arthur Nadel - Manages the hedge fund Scoop Management Co, a $350 million fund. In the blink of an eye, he disappears and leaves clients without their life savings.
  • Kenneth Starr - An accountant to stars like Sylvester Stallone, Diane Sawyer, and Wesley Snipes, but mismanages his clients’ money, pockets millions, and then he marries an exotic dancer. But then later he gets more than seven years behind bars for a multimillion-dollar investment scheme.

* American Psycho is a story told in the first person by Patrick Bateman, a serial killer and Manhattan businessman. Watch CNBC's series American Greed for more.

My Related Posts:

Most Recent CEO Arrests

Michael Gilliland, the CEO for large grocery store chain in Austin Texas has resigned following an arrest in a child prostitution sting.

Don Vaccaro, the CEO of TicketNetwork Inc. was arrested for hurling a racial insult at a bouncer who said Vaccaro had been making unwanted advances to a woman.

David Jelenik, the CEO and manager of Jelenik Construction surrendered to State Police at Malta barracks after being charged with nine felonies for tax fraud.

Gary Butler, former CEO of Automatic Data Processing, Inc. was arrested on a criminal domestic violence charge a few days before the payroll processor announced his retirement.

Gerard Jay Tollett, the former president and CEO of the Greater Houston Convention and Visitors Bureau has been charged with driving while intoxicated for the second time within a five-year period.

Bob Bartosiewicz, the CEO of CGI Communications got into a scuffle with officers and charged with resisting arrest, harassment and trespassing.

Carlton DeWayne Dunko, the CEO of the American Shingle Roofing Company was accused of bilking hundreds of people in 10 states out of their money and was charged with "theft by conversion".

Roger Berkowitz, the CEO of Legal Sea Foods has been charged with drug possession and trafficking.

etc, etc, etc...

Bud Meyers on Twitter

Also, check out this website TooMuch -- and sign up for their weekly newsletter.

No comments:

Post a Comment