The Naughty List: The People Behind the Greatest Financial Foul-Ups of 2012
Filed under: Buyer Beware, Consumer Complaints, Credit Cards, Fraud
Things happen every year that make you say "WTF?" and on the heels of a record year for financially-related screw-ups in 2011, from MF Global's Bankruptcy to the real-life Rudy Ruettiger, of the classic sports film Rudy, being charged with fraud by the Securities and Exchange Commission, we wanted to see what kind of financial foul-ups were had in 2012.
There weren't as many that were as big as last year, but the one's we found, and the people behind them, came as a true surprise. Highlighted by perhaps the single biggest financial scandal of all time, some of these will just leave your mouth hanging open. Some of these frauds and scandals had been underway for years, but only just came to light in 2012.
The Libor Manipulators
If you thought The Bernie Madoff Scandal was bad, then you were blown away by The Libor Scandal. In June 2012, criminal cases involving London's Barclay's Bank revealed evidence of collusion between member banks across Europe and North America in artificially raising or lowering the Libor interest rate they would all expect to pay for borrowing from each other. The London InterBank Offered Rate [LIBOR] is supposed to be calculated as the average among interest rates estimated and submitted by London's leading banks. Prior to the scandal it was thought to be one of the key indicators of financial health and stability across the globe. Now, it's the greatest financial theft of all time, to the tune of potentially $88 billion and rising, but we may never even know for sure.
The HSBC Money-Launderers
Britain's banking system took another hit when the British-based HSBC agreed to pay $1.9 billion U.S. to settle a money-laundering probe by the American federal government. The bank, with influence and branches around the world, admitted some culpability in transferring billions of dollars to enemies of the western world, like Iran and North Korea, as well as Mexican drug cartels.The bank won't be prosecuted further if it meets certain conditions, such as strengthening its internal controls to prevent money laundering. It is also far from the only English bank to come under fire from America since 2009. Lloyd's and Barclay's also agreed to pay penalties for ignoring U.S. sanctions and doing business with enemy nations. Switzerland's Credit Suisse and Dutch Bank ING were also not immune.
Grover Norquist
If the U.S. does go over the fiscal cliff, it won't just affect Americans, but Canadians too and Grover Norquist will be largely responsible. The founder of Americans for Tax Reform is known for his staunch position on taxes and had, prior to the U.S. election in November, convinced 95% of the Republican Members of Congress to sign his Taxpayer Protection Pledge that opposes marginal increases in income tax rates for individuals and businesses. However, as the fiscal cliff – and with it the possibility of another recession – draws near, a slew of Republicans have backed off from the pledge and no newly elected Republicans have signed it. But, if the Democrats and Republicans can't come to consensus and the fiscal cliff becomes unavoidable, than it will likely be because the majority of Republicans in Congress refuse to raise taxes, which will place the blame at least partially on the shoulders of Norquist as the mastermind.
Rob Ford
This one is just for Canadians. For all his efforts to make a mockery of the office of Mayor in Toronto, (driving while reading, commandeering an in-use street car just to give his football team a ride home and shutting out the Toronto Star from city hall) it was his use of his position to raise money for the Rob Ford Football Foundation that put him on the road to ruin. Using official city letterhead and city resources, he raised $3,150 and the city's Integrity Commissioner recommended in a report that Ford should pay back the money. With his trademark bullish audacity, he then participated in the discussion of the commissioner's report and the vote on whether he should have to pay back the money. This, even after Council-Speaker Sandra Bussin warned him that he would be in conflict of interest. Sure enough, the matter was brought before the courts and on November 26, 2012 the judge ruled he had indeed broken the law. But corruption is not a problem for Rob Ford for now because he is still in office until his appeal is adjudicated in January.
Google Engineers
The Federal Trade Commission slapped Google with a $22.5 million fine after the web search giant placed tracking cookies on the computers of Safari users who visited sites within Google's DoubleClick advertising network, after it had already assured these users they would be automatically opted-out because of Safari's handling of third-party cookies. The fine was the largest ever given in violation of an FTC privacy order. A Google spokesperson set about giving the usual assurances that the company takes privacy very seriously and set about apparently removing the cookies right away. Still, there's nothing like having your worst fears about the world's largest search engine at least briefly realized.
Russell Wasendorf Sr.
The extent to which the founder and CEO of Peregine Financial Group had been stealing the funds customers had on deposit with this Cedar Falls, Iowa-based commodities broker, only came to light in the note Wassendorf left after a failed suicide attempt. The robbery had appearently had been going on just as long as the Bernie Madoff Ponzi Scheme and in the letter he laid out exactly how he did it. n his note, Wasendorf said , he'd used the ill-gotten gains to build the company's $18 million headquarters and to "pay fines and fees charged by regulators." They did it by pretending they had more on deposit than they actually did. When the thievery was uncovered, Peregine supposedly had $200 million on the books, but it was actually more like $5 million. Once again, the regulators and overseers were nowhere to be found and, Wasendorf admitted, were easily fooled.
Richard Fairbank
The CEO of CapitalOne probably should've been minding the store a little better because on July 18th the bank settled a $35 million civil penalty with the Office of the Controller of Currency and was asked to pay back $150 million to the 2.5 million customers who were pressured into buying unnecessary and costly account features and then misled about benefits, requirements and eligibility. Each wronged customer will get a payment of about $70 each, but the bank itself only partially admitted any kind of culpability in the matter. It blamed much of the incident on third-party vendors, but admitted that it was ultimately responsible for the actions of those contractors. However, this wasn't the only incident. Also in July, they settled with the U.S. Justice Department because of alleged violations of the Servicemembers Civil Relief Act, which gives active-duty military a temporary break from some debts, and puts a cap on interest rates they can be charged. Appearently, CapitalOne just kept right on charging them, resulting in overcharges and wrongful foreclosures on outstanding loans. They then paid them $12 million in restitution.
There weren't as many that were as big as last year, but the one's we found, and the people behind them, came as a true surprise. Highlighted by perhaps the single biggest financial scandal of all time, some of these will just leave your mouth hanging open. Some of these frauds and scandals had been underway for years, but only just came to light in 2012.
The Libor Manipulators
If you thought The Bernie Madoff Scandal was bad, then you were blown away by The Libor Scandal. In June 2012, criminal cases involving London's Barclay's Bank revealed evidence of collusion between member banks across Europe and North America in artificially raising or lowering the Libor interest rate they would all expect to pay for borrowing from each other. The London InterBank Offered Rate [LIBOR] is supposed to be calculated as the average among interest rates estimated and submitted by London's leading banks. Prior to the scandal it was thought to be one of the key indicators of financial health and stability across the globe. Now, it's the greatest financial theft of all time, to the tune of potentially $88 billion and rising, but we may never even know for sure.
The HSBC Money-Launderers
Britain's banking system took another hit when the British-based HSBC agreed to pay $1.9 billion U.S. to settle a money-laundering probe by the American federal government. The bank, with influence and branches around the world, admitted some culpability in transferring billions of dollars to enemies of the western world, like Iran and North Korea, as well as Mexican drug cartels.The bank won't be prosecuted further if it meets certain conditions, such as strengthening its internal controls to prevent money laundering. It is also far from the only English bank to come under fire from America since 2009. Lloyd's and Barclay's also agreed to pay penalties for ignoring U.S. sanctions and doing business with enemy nations. Switzerland's Credit Suisse and Dutch Bank ING were also not immune.
Grover Norquist
If the U.S. does go over the fiscal cliff, it won't just affect Americans, but Canadians too and Grover Norquist will be largely responsible. The founder of Americans for Tax Reform is known for his staunch position on taxes and had, prior to the U.S. election in November, convinced 95% of the Republican Members of Congress to sign his Taxpayer Protection Pledge that opposes marginal increases in income tax rates for individuals and businesses. However, as the fiscal cliff – and with it the possibility of another recession – draws near, a slew of Republicans have backed off from the pledge and no newly elected Republicans have signed it. But, if the Democrats and Republicans can't come to consensus and the fiscal cliff becomes unavoidable, than it will likely be because the majority of Republicans in Congress refuse to raise taxes, which will place the blame at least partially on the shoulders of Norquist as the mastermind.
Rob Ford
This one is just for Canadians. For all his efforts to make a mockery of the office of Mayor in Toronto, (driving while reading, commandeering an in-use street car just to give his football team a ride home and shutting out the Toronto Star from city hall) it was his use of his position to raise money for the Rob Ford Football Foundation that put him on the road to ruin. Using official city letterhead and city resources, he raised $3,150 and the city's Integrity Commissioner recommended in a report that Ford should pay back the money. With his trademark bullish audacity, he then participated in the discussion of the commissioner's report and the vote on whether he should have to pay back the money. This, even after Council-Speaker Sandra Bussin warned him that he would be in conflict of interest. Sure enough, the matter was brought before the courts and on November 26, 2012 the judge ruled he had indeed broken the law. But corruption is not a problem for Rob Ford for now because he is still in office until his appeal is adjudicated in January.
Google Engineers
The Federal Trade Commission slapped Google with a $22.5 million fine after the web search giant placed tracking cookies on the computers of Safari users who visited sites within Google's DoubleClick advertising network, after it had already assured these users they would be automatically opted-out because of Safari's handling of third-party cookies. The fine was the largest ever given in violation of an FTC privacy order. A Google spokesperson set about giving the usual assurances that the company takes privacy very seriously and set about apparently removing the cookies right away. Still, there's nothing like having your worst fears about the world's largest search engine at least briefly realized.
Russell Wasendorf Sr.
The extent to which the founder and CEO of Peregine Financial Group had been stealing the funds customers had on deposit with this Cedar Falls, Iowa-based commodities broker, only came to light in the note Wassendorf left after a failed suicide attempt. The robbery had appearently had been going on just as long as the Bernie Madoff Ponzi Scheme and in the letter he laid out exactly how he did it. n his note, Wasendorf said , he'd used the ill-gotten gains to build the company's $18 million headquarters and to "pay fines and fees charged by regulators." They did it by pretending they had more on deposit than they actually did. When the thievery was uncovered, Peregine supposedly had $200 million on the books, but it was actually more like $5 million. Once again, the regulators and overseers were nowhere to be found and, Wasendorf admitted, were easily fooled.
Richard Fairbank
The CEO of CapitalOne probably should've been minding the store a little better because on July 18th the bank settled a $35 million civil penalty with the Office of the Controller of Currency and was asked to pay back $150 million to the 2.5 million customers who were pressured into buying unnecessary and costly account features and then misled about benefits, requirements and eligibility. Each wronged customer will get a payment of about $70 each, but the bank itself only partially admitted any kind of culpability in the matter. It blamed much of the incident on third-party vendors, but admitted that it was ultimately responsible for the actions of those contractors. However, this wasn't the only incident. Also in July, they settled with the U.S. Justice Department because of alleged violations of the Servicemembers Civil Relief Act, which gives active-duty military a temporary break from some debts, and puts a cap on interest rates they can be charged. Appearently, CapitalOne just kept right on charging them, resulting in overcharges and wrongful foreclosures on outstanding loans. They then paid them $12 million in restitution.
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