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Friday, 1 April 2016

Did Blackstone Sponsor Insider Trading?



The past is often an indicator of the present and even of the future! 

Or simply the reverse and, may not be at all indicative of anything - à double entente! The point being: the title of this Loud Calumny post could equally have been “Does Blackstone Sponsor Insider Trading?

Fund Portfolio Management - FPM, examines the increasingly accepted normality of "systemic corruption in corporate and political activities", and which the mainstream media  labels as “crony capitalism”.  A public induction information or label which grossly understates the scale of fraud, theft and malfeasance in the name of economics, by a cabal of business leaders. The deduction from such misrepresentation in the media is  that the beguiled public believes that this is the natural corrupt state of ethics in business. FPM prefers the nomenclature "Sickly Paradise", for the current mode of collusive capitalism referred to as technically as "oligarchies".

The damning evidence for this systemically rigged aspect of international economic life is through understanding the latent double-meanings in financial services, particularly nowadays.  Looking at a period of the last 30 years and inspecting the advent of financier billionaires, FPM have tracked and listed many purely self-serving professionals (and implicitly professions too), that are organised in society as worthwhile liquidity financiers for the public good (see relevant list below of the 5 billionaires at just Blackstone Group, which was founded in 1985 - 30 years ago!).

Public Reputation is a media-hyped generalisation to respect that these listed and other billionaires made money legitimately through industry skill luck and whatever else to succeed. The misused corporate intelligence by mainstream media is simply the requisite "organised lying" by various classes of mercantilism. This organised lying extends to the profession of government and politicians, who by their complicity as legislators condone and even perpetuate duplicitous activities. The stark “wealth inequality” in society in the new millennium is concomitant of this sickly paradise of billionaires.  FPM revealed the embodiment of this “sickly paradise” in its enterprising examination of Blackstone Group (BX) and S.A.C. Capital; the latter hedge-fund-sytematic cheat is abbreviated to "S.A.C." henceforth.

Even after the multi-billion dollar legal settlement with the government authorities in winter 2013 for a guilty corporate criminal conviction, Steven A. Cohen still has not, and probably cannot, be indicted on criminal charges. His management of an organisation culture manifest with insider trading suspicions since at least 1992, formerly bearing the initials of his full name, S.A.C. Capital, is much benignly reported in the sycophantic journalism of mainstream media. Mr Cohen's embroilment  in insider-trading allegations stem from as far back 1985, as alleged by Patricia Cohen, his former wife - she effing should know! S.A.C. changed its name to Point72 Asset Management after its guilty-plea and record penalty-fine conviction; a superficial makeover representing a shallow marketing and re-branding exercise. Done in complicity with #msm and #PublicRelations duplicity. Part of the main-name re-branding is "Point72", which is actually based on its current address! And would you believe it, S.A.C's address is and was, 72 Cummings Point Road, Stamford, Connecticut.

General Ethical Digression: This symptom of “too-big-to-jail” (as headlines satirically underplay), speaks hideous volumes of the protagonists’ natures and their ethical modus operandi in financial services, and extended organisations, if told in the context of reputation and calumny. Especially following that the decade long multi-agency investigation and legal prosecutions  turns out in the main to be a dumb-show of reprimanding white collar financial perpetrators for the cause and public-cost of “The Great Recession”. A public cost which imposed austerity instead of prosperity on the majority of the taxpaying population. The explanation of this dubious empty tactic is embedded in the political atmosphere of the day, where the tag “politicianRcriminals” seems highly appropriate. This latter aspect of crony capitalism is relevant, when considering that the President of The U.S. (#POTUS2016) elections is in November this year. American primaries or caucus for the nomination of the respective party leaders is currently underway.

In respect of serving the public interest - which is the genuine part of FPM’s mission and aim - the worst possible ending to a decade long investigations and prosecutions for insider-trading illegality / fraud and conspiracy has come about. This is the 30-years carry-on of excessive capitalism, mentioned as the sickly paradise, or corrupt crony capitalism, and elaborated with an inaugural case-in-point enterprise.

Back to our case-in-point protagonists: Not only that a civil liability proceedings was the only punitive action against the targetted kingpin of this era's insider-trading enforcement, Mr Cohen as a reputed "Artful Dodger", has been given a mere proverbial “slap on the wrist” by the regulator and U.S. Justice. Government funded regulator of the securities laws in America, the Securities and Exchange Commission - S.E.C, in conjunction with Department of Justice - D.O.J. and even the Federal Bureau of Investigations - F.B.I. have all been expediently outwitted by the "Disgracefully Dubious Coign". View below and disseminate electronically the FPM poster showing Mr Cohen's public reputation, awarded 20th Jan 2016:


Does the occasional multi-billion settlement compensate for the systematic fraud that creates 1% of billionnaires while 99% wallow in austerity and debt-servitude? There is name-and-shame reprisals if not the furore of the public revolution still to face. Watch this space. For financial operators playing within the written rules of the zero-sum investments game, this “slap” is hardly appropriate for the grand larceny in the conduct of investment management, that S.A.C Capital admittedly conducted. Some real-money equity traders know their positions were shafted by illegal confidential information - right?

To date, the greatest future detriment to the long-term-saving publics' portfolios (pensions, endowments, sovereign wealth funds etc), has been that in this era of insider-trading crackdown, the law has been made EASIER to commit IT, of course without being caught. S.A.C. has been caught and punished for some USD$ 2 bn, yet Mr Cohen its undoubtable orchestrator is scott free, and has reportedly net worth of approximately, USD$ 10 bn - astonishing!  Is that the cost of a firm willing to sell their employees' souls to the devil, and for potentially doing some jail-time?! (Ed note: I do mere over-time when working, that's all!)

Preet Bharara, representing U.S. justice and acting as district attorney for Manhattan in this era of enforcement, is the running parody that FPM dub “The Punch and Judy Show”. The Department of Justice – DoJ in the U.S., have now had their numerous convictions and jail sentences for insider trading being vacated / quashed. The exoneration of insider-trading perpetrators,  yet earlier judged and convicted in U.S. Court proceedings, demonstrates disproportionate justice in financial services as at a historic low, not to say farcical shambles. Acquitted on a technicality of insider-trading laws, include S.A.C. heavyweight honcho Michael Steinberg. The other small fry at S.A.C. who is serving time for his crime is Mathew Martoma.

In the era of insider-trading investigations following the TMT-bubble crash at the turn of this century, Arthur J. Samberg, founder of Pequot Capital Management, and others were prosecuted largely on circumstantial evidence, given that insider trading by its ambiguous nature is difficult to prove. Read more of this historic account in New York Times from 2006: S.E.C. Is Reported to Be Examining a Big Hedge Fund. Again, remarkably some 30 or so years ago, these hard working Jewish coterie (See picture below, Dennis Levine later), actually served jail time as senior executive financiers in that era of insider-trading rackets. Lady Justice worked then, sadly she has nowadays been bought and paid-for!
Insider Traders Properly Punished in 1986 - left to right: Ivan Boesky, Michael Milken and Martin Siegel
No Smoke Without Fire: Of Repuatation
#NSWF:Reputation 

1) From the inaugural exhaustive study of insider trading, FPM grants the S.E.C. “Dog Without Teeth” Degree. FPM elaborating on this Federal regulator's stymied enforcement would not be as pertinent as a former trial attorney at the S.E.C. Jim Kidney's parting shot at his retirement. Read about it in extracted form here (The original full speech has been removed from public domain by S.E.C. workers union!)

2) One of S.A.C. Capital’s earliest and biggest backers was Blackstone Group’s division, Blackstone Alternative Asset Management - BAAM. A NSWF:Reputation Degree awarded to BAAM: “Sham Sponsoring Schwarz[1] 

BAAM bragg on their corporate website:
Blackstone Alternative Asset Management (BAAM®) is the world’s largest discretionary allocator to hedge funds, with $69 billion in assets under management as of December 31, 2015". 

Blackstone Group, as a prominent sponsor and investor in the discredited, disreputable and now defunct in name S.A.C. Capital, is attributed a degree of guilt by association, as well as others (on the “FPM Reputation Blacklist”). Our induction and deduction suggests that certain executives, especially its chief executive officer J. Tomlinson Hill, also known as Tom Hill, probably did know about illegal activities at Mr Cohen's firm, and perhaps actively encouraged it for the spectacular returns; and that Blackstone even chose to turn a blind eye about early suspicions and reputation for insider trading by S.A.C. Capital’s owner manager. FPM adduces this thick-as-thieves conclusion from its template analysis, and is not intended as any slighting slander, and indeed to speculate on reputation:

Mr Hill, did you know about Steven A. Cohen’s insider trading reputation, and what was your basis for investing with a reputed cheat; was his evasion of legal indictment a reputable kudos as source of exceptional trading returns?FPM Princpal

FPM cite below a summary of "Circumstantial Evidence", once used in law to convict illicit traders. From these, FPM adduces between the hidden motivations with the public pretext:

1) Blackstone Pulled-Out Its Investment With S.A.C. At The Last Hour -
By fleeing a sinking ship at the last moment demonstrates conviction and faith in S.A.C. being able to survive the regulatory and legal enforcement onslaught. FPM belives the last minute exit was less about courage and support that their man was innocent, and more about face-saving exercise done to avoid guilt by association, and to limit wild-fire damage to its reputation. Remember that hedge fund investing firms that had wittingly or otherwise invested in Bernard Madoff's fraud lost a lot of credibility for their due diligence e.g. Union Bancaire Privee - UBP

2) Blackstone Sponsored Convicted DiamondBack as Investors Too -
The S.A.C. related insider-trading investigations also included, now failed, Diamondback Capital. The fund manager there was Todd Newman. As a former S.A.C. Capital workers, along with another convicted manager and co-founder of Level Global Investors, Anthony Chiasson, they both were handed a landmark verdict in the appeals court. Their criminal inider-trading convictions verdict from December  2012 was overturned and reimbursement of fines to them is underway. Blackstone connections to those with an edge in hedge funds is well known in inner circles but discussing it publically is much a taboo as anti-semitic construed remarks. FPM has made lists of associates of Blackstone principals, potentially acting-up as rogue traders - talk about "laying off risk"!

3) Blackstone and S.A.C. Have Relationship of Decade or More -
Aside of the opportunity for complicity and duplicity in a long marriage, FPM is also concerned about the quality of relations between the principals of these billionaires. We have looked into their occasional functional "meetups" like Council For Foreign Relations - CFR:...  

4) Founders of Blackstone and SAC Both Share A Jewish Heritage - 
The social or racial grouping provide both exclusivity and mutuality for operating as a cabal (a word with Hebrew origins), helping traditionally to keep the wealth within a family. The darker behavioural aspects of such ethnocentric groups are numerous and many for the report, needless to say that secrets, especially confidential business information may be passed without expectation of betrayal. The term "thick as thieves" comes to mind for this context of insider-trading rings.

5) Blackstone's Stephen Schwarzman Worked with Dennis Levine - 
Mr Schwarzman, a co-founder of Blackstone and Mr Levine as convicted insider-trader in the mid-1980s worked together as Mergers and Acquisitions bankers at Great Recession blow-up bank Lehman Brothers.
Insider trader of mid-1980s Dennis Levine (Source: "Den of Thieves" / FPM)
"Dennis was stealing my deals... It’s the most traumatizing thing that’s happened in my business career, to know that the person…in the next office, is a thief... When we started Blackstone I vowed that would never happen, and it hasn’t... Stephen Schwarzman

From the practical experience of Milken, Levine, Siegel and Boesky era of insider-trading enforcement cira 1986, Mr Schwarzman understood the mechanism of insider trading, as well as the super easy certain investment returns, from the special relationship between deal-makers and traders, who under Glass-Stegall were prohibited from co-operation by Chinese Walls.

6) J. Tomilson Hill (Tom Hill),  Managed Dennis Levine -
Mr Hill, now head of Blackstone Alternative Asset Management - BAAM, had as then head of "Mergers and Acquisitions at Smith Barney in New York 1979 recruited, or correctly, hand picked and groomed Dennis Levine (notice the old school slivked back similarity of the two men?)

7) Dennis Levine Alleged That Tom Hill Was Insider Trading -
Mr Levine claimed J, Tomilson Hill had a secret trading account and was swapping inside information with an investment banker at Dillion, Read and trading on deals leaked by others. Levine had remonstrated  that:

"I could bring Hill down with what I know!" 
(Source: James B. Stewart, "Den of Thieves", 1991)
etc etc!
(N.B. Mr Hill and Mr Schwarzman, as far as FPM principals know, have never been formally accused of any misuse of confidential information; Mr Levine has been convicted and is unashamedly whistle-blowing)/


Among other smoke signals, the smoke from the reputation wild-fire which FPM tracks, was that FPM's check of Form 4 and 13F filings for listed Blackstone suggests an opportunity to buy into the correction before the impending market crash. Aside of the geopolitical bomb, we believe a market-led crash catalyst to be high-yield debt bust in oil and other fossil fuels, or perhaps a hedge fund blow-up - ala Long Term Capital Management - LTCM.

 Blackstone redeemed its investment just before SAC Capital was expected to be found guilty of insider trading. Any respectable organisation connected with a firm spawning a litany of insider trading advocates (see FPM's "SAC Capital's Litany of Litigation and Proceedings" from an post from xxxx), could reasonably be expected to disassociate themselves for lasting reputation sake. Especially, as they seemingly promote such ethical corporate governance values (cough cough!) – see screen-dump below explaining Blackstone’s “Guiding Principles”:



Bullshit! No, indeed they can manage this corporate perfidy?!
For disregarding the Blackstone Group's Guiding Principles, and even betraying them, as the potential fall-guy. FPM's ©NSWF:Reputation, with considered and adduced opinion, award J Tomilson Hill a Degree of "Schwarz Bullshit Artist". Indeed, James B. Stewart's epochal coverage of the insider-trading era of mid-1980s with Milken and Boesky, in "Den of Thieves" suggests that, Mr Hill sensed that Dennis Levine was in his terms, a "bullshit artist". Hence FPM's NSWF:Reputation Degree.  What goes around comes around eh!

In summary, FPM's three posters advertising FPM's ®NSWF:Reputation: 


S.E.C: “Dog Without Teeth” Degree
B.A.A.M: "Sham Sponsoring Schwarz"
J Tomilson Hill "Schwarz Bullshit Artist"







Of the person's mentioned or the protagonists of this ©NSWF:Reputation post, whom FPM are careful not to falsely accuse and slander, or in high-English “calumniate”. Bearing in mind that a) it is not slander if it is the truth and b) a reputation verdict is merely that, and everyone and everything can or does have one, even under constitutional freedom of speech laws, and c) in a context of financial services research being especially speculative in their nature. FPM's reputation enterprise is based on ‘mosaic’ research is indeed a veritable due diligence.
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Advert for ©NSWF:Reputation:





[1] This NSWF:Reputation Degree is no way implies that Stephan A. Schwarzman, co-founder of Blackstone, is guilty by association; simply that “Schwarz”  has German etymology, from schwarz, an adjective for black)
 

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