Why no Wall St. bigwig has been prosecuted

By Roger Lowenstein


Business Week

updated 5/15/2011 12:17:42 PM ET 2011-05-15T16:17:42

Share Print Font: +-"Forgive me," began Charles Ferguson, the director of Inside Job, while accepting his 2011 Oscar for Best Documentary. "I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that's wrong." The audience erupted in applause.


Ferguson is not the first to express outrage over the lack of criminal cases to spring from the financial crisis, and his speech triggered a wave of similarly prosecutorial sentiments. Since that February night, financial journalists, bloggers, and who knows how many dinner party guests have debated the trillion-dollar question: When will a Wall Street executive be sent to jail?


There are those who have implied that prosecutors are either too cozy with Wall Street or too incompetent to bring cases to court. Thus, in a measured piece that assessed the guilt of various financial executives, New York Times columnist Joe Nocera lamented that "Wall Street bigwigs whose firms took unconscionable risks … aren't even on Justice's radar screen." A news story in the Times about a mortgage executive who was convicted of criminal fraud observed, "The Justice Dept. has yet to bring charges against an executive who ran a major Wall Street firm leading up to the disaster." In the same dispassionate tone, National Public Radio's All Things Considered chimed in, "Some of the most publicly reviled figures in the mortgage mess won't face any public accounting." New York magazine saw fit to print the estimable opinion of Bernie Madoff, who observed that the dearth of criminal convictions is "unbelievable." Rolling Stone, which has been beating this drum the longest and with the heaviest hand, reductively asked, "Why isn't Wall Street in jail?"

PIMCO's Largest "Equity" Holding - Gold

Many have been wondering why Bill Gross, with his atavistic aversion to holding US paper, has not yet branched out into precious metals which are the natural hedge to surging rates (not to mention sovereign default). Probably the primary reason for this is that the firm's flagship credit funds do not have the mandate, nor permission, to invest in such asset classes. As such, the firm's $200+ billion TRF flagship fund, at least, is limited to fixed income securities. However, the same limitation does not apply to the firm's other funds, especially the recently launched $1.2 billion equity fund, the Pimco EqS Pathfinder. The fund was launched in 2009 under the stewardship of Anne Gudefin and Charles Lahr, who jointly ran the $16 billion Mutual Global Discover mutual fund. So in an interview recently granted to Fortune by Gudefin, we were not very surprised to hear her response on what her largest investment position is in: "The largest position in the fund is gold, which we think is a very good form of protection against what can go wrong. We were encouraged by the fact that a lot of the central banks, especially in Asia, are big buyers. We think that's an underlying trend that's very favorable for gold." So to all those asking why Gross does not invest in the yellow metal, here is your answer.Should the EqS Pathfinder fund grow in AUM, one can assume that an increasingly bigger pro rata portion will be allocated to precious metals.

WPI Students Flip the Bird to CEO of Exxon Mobile Rex Tillerson

Comment by: Francis Soyer 5/16/11
Here is an example of why WPI is ranked as one of the top engineering schools in the world. Looks like they are getting a good education on not just how things work but WHY things work they way they do. Bravo and hats off to the WPI clan!

See article below:

Peak Oil: A Chance to Change the World

For advice about life after graduation, students at Worcester Polytechnic wanted to hear from peak oil scholar Richard Heinberg instead of Exxon's CEO. Here's what he told them.

by Richard Heinberg

posted May 14, 2011

Photo by schoCreative

Worcester Polytechnic Institute in Worcester, MA invited Rex Tillerson, CEO of ExxonMobil, to give the commencement speech at its 2011 graduation ceremonies on May 14. When students heard this, many were surprised and upset. As Linnea Palmer Paton of Students for a Just and Stable Future put it in a letter to the college president, “[W]e, as conscientious members of the WPI community and proud members of the Class of 2011, will not give [the Exxon CEO] the honor of imparting ... his well-wishes ... for our futures ... when he is largely responsible for undermining them.”
The students then invited Richard Heinberg, Senior Fellow of Post Carbon Institute, to give an alternative commencement speech. After a few days of negotiations, the college administration agreed to give Heinberg the podium immediately after the main ceremony. Many students chose to walk out during Tillerson’s address. This is what Richard Heinberg had to say.

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"We will not give the Exxon CEO the honor of imparting his well-wishes for our futures when he is largely responsible for undermining them.”
-Linnea Palmer Paton,
WPI student

ExxonMobil is inviting you to take your place in a fossil-fueled twenty-first century. But I would argue that Exxon’s vision of the future is actually just a forward projection from our collective rear-view mirror. Despite its high-tech gadgetry, the oil industry is a relic of the days of the Beverly Hillbillies. The fossil-fueled sitcom of a world that we all find ourselves still trapped within may, on the surface, appear to be characterized by smiley-faced happy motoring, but at its core it is monstrous and grotesque. It is a zombie energy economy.
Of course, we all use petroleum and natural gas in countless ways and on a daily basis. These are amazing substances—they are energy-dense and chemically useful, and they yield enormous economic benefit. America started out with vast reserves of oil and gas, and these fuels helped make our nation the richest and most powerful in the world.

The End of the Cheap Oil Economy

But oil and gas are finite resources, so it was clear from the start that, as we extracted and burned them, we were in effect stealing from the future. In the early days, the quantities of fuel available seemed so enormous that depletion posed only a theoretical limit to consumption. We knew we would eventually empty the tanks of Earth’s hydrocarbon reserves, but that was a problem for our great-great-grandkids to worry about.
Yet U.S. oil production has been declining since 1970, even with huge discoveries in Alaska and the Gulf of Mexico. Other countries are also seeing falling rates of discovery and extraction, and world crude oil production has been flat-lined for the past six years, even as oil prices have soared. According to the International Energy Agency, world crude oil production peaked in 2006 and will taper off from now on.
ExxonMobil says this is nothing we should worry about, as there are still vast untapped hydrocarbon reserves all over the world. That’s true. But we have already harvested the low-hanging fruit of our oil and gas endowment. The resources that remain are of lower quality and are located in places that are harder to access than was the case for oil and gas in decades past. Oil and gas companies are increasingly operating in ultra-deep water, or in arctic regions, and need to use sophisticated technologies like hydrofracturing, horizontal drilling, and water or nitrogen injection. We have entered the era of extreme hydrocarbons.
This means that production costs will continue to escalate year after year. Even if we get rid of oil market speculators, the price of oil will keep ratcheting up anyway. And we know from recent economic history that soaring energy prices cause the economy to wither: when consumers have to spend much more on gasoline, they have less to spend on everything else.
But if investment costs for oil and gas exploration and extraction are increasing rapidly, the environmental costs of these fuels are ballooning just as quickly. With the industry operating at the limits of its technical know-how, mistakes can and will happen. As we saw in the Gulf of Mexico in the summer of 2010, mistakes that occur under a mile or two of ocean water can have devastating consequences for an entire ecosystem, and for people who depend on ecosystem services. The citizens of the Gulf coast are showing a brave face to the world and understandably want to believe their seafood industry is safe and recovering, but biologists who work there tell us that oil from the Deepwater Horizon disaster is still working its way up the food chain.

Never mind starving polar bears—we’re facing the prospect of starving people.

Of course the biggest environmental cost from burning fossil fuels comes from our chemical alteration of the planetary atmosphere. Carbon dioxide from oil, gas, and coal combustion is changing Earth’s climate and causing our oceans to acidify. The likely consequences are truly horrifying: rising seas, extreme weather, falling agricultural output, and collapsing oceanic food chains. Never mind starving polar bears—we’re facing the prospect of starving people.

The Misinformation Machine

But wait: Is this even happening? A total of nearly half of all Americans tell pollsters they think either the planet isn’t warming at all, or, if it is, it’s not because of fossil fuels. After all, how can the world really be getting hotter when we’re seeing record snowfalls in many places? And even if it is warming, how do we know that’s not because of volcanoes, or natural climate variation, or cow farts, or because the Sun is getting hotter? Americans are understandably confused by questions like these, which they hear repeated again and again on radio and television.

Why We Find it so Hard to Act Against Climate Change

Now of course, if you apply the critical thinking skills that you’ve learned here at WPI to an examination of the relevant data, you’ll probably come to the same conclusion as has been reached by the overwhelming majority of scientists who have studied all of these questions in great depth. Indeed, the scientific community is nearly unanimous in assessing that the Earth is warming, and that the only credible explanation for this is rising levels of CO2 from the burning of fossil fuels. That kind of consensus is hard to achieve among scientists except in situations where a conclusion is overwhelmingly supported by evidence.
I’m not out to demonize ExxonMobil, but some things have to be said. That company plays a pivotal role in shaping our national conversation about climate change. A 2007 report from the Union of Concerned Scientists described how ExxonMobil adopted the tobacco industry’s disinformation tactics, and funded some of the same organizations that led campaigns against tobacco regulation in the 1980s—but this time to cloud public understanding of climate change science and delay action on the issue. According to the report, between 1998 and 2005 ExxonMobil funneled almost $16 million to a network of 43 advocacy organizations that misrepresented peer-reviewed scientific findings about global warming science. Exxon raised doubts about even the most indisputable scientific evidence, attempted to portray its opposition to action as a positive quest for “sound science” rather than business self-interest, and used its access to the Bush administration to block federal policies and shape government communications on global warming. All of this is well-documented.

This is a big victory for ExxonMobil, but it is a disaster for democracy, for the Earth, and for your generation.

And it worked. Over the course of the past few years one of our nation’s two main political parties has made climate change denial a litmus test for its candidates, which means that climate legislation is effectively unachievable in this country for the foreseeable future. This is a big victory for ExxonMobil. Its paltry $16 million investment will likely translate to many times that amount in unregulated profits. But it is a disaster for democracy, for the Earth, and for your generation.
But here’s the thing. Everyone knows that America and the world will have to transition off of fossil fuels during this century anyway. Mr. Tillerson knows it as well as anyone. Some people evidently want to delay that transition as long as possible, but it cannot be put off indefinitely. My colleagues at Post Carbon Institute and I believe that delaying this transition is extremely dangerous for a number of reasons. Obviously, it prolongs the environmental impacts from fossil fuel production and combustion. But also, the process of building a renewable energy economy will take decades and require a tremendous amount of investment. If we don’t start soon enough, society will get caught in a trap of skyrocketing fuel prices and a collapsing economy, and won’t be in a position to fund needed work on alternative energy development.
In my darker moments I fear that we have already waited too long and that it is already too late. I hope I’m not right about that, and when I talk to young people like you I tend to feel that we can make this great transition, and that actions that have seemed politically impossible for the past forty years will become inevitable as circumstances change, and as a new hearts and minds comes to the table.
Even in the best case, though, the fact that we have waited so long to address our addiction to oil will still present us with tremendous challenges. But this is not a problem for ExxonMobil, at least not anytime soon. When the price of oil goes up, we feel the pain while Exxon reaps the profits. Even though Exxon’s actual oil production is falling due to the depletion of its oilfields, corporate revenues are flush: Exxon made almost $11 billion in profits in just the past three months. This translates to jobs in the oil industry. But how about the renewable energy industry, which everyone agrees is the key to our future?
For the past forty years, every U.S. president, without exception, has said we must reduce our country’s dependence on imported petroleum. Addiction to oil has become our nation’s single greatest point of geopolitical, economic, and environmental vulnerability. Yet here we are in 2011, still driving a fleet of 200 million gasoline-guzzling cars, trucks, and SUVs. The inability of our elected officials to tackle such an obvious problem is not simply the result of ineptitude. In addition to funding climate denial, fossil fuel companies like Exxon have contributed to politicians’ election campaigns in order to gain perks for their industry and to put off higher efficiency standards and environmental protections. Denying looming fuel supply problems, discouraging a transition to renewable energy, distorting climate science—these are all understandable tactics from the standpoint of corporate self-interest. Exxon is just doing what corporations do. But once again, it is society as a whole that suffers, and the consequences will fall especially on your generation.
Mr. Tillerson may have informed you about his company’s Global Climate and Energy Project at Stanford University. Exxon is now funding research into lowering the cost and increasing the efficiency of solar photovoltaic devices, increasing the efficiency of fuel cells, increasing the energy capacity of lithium-ion batteries for electric cars, designing higher-efficiency engines that produce lower emissions, making biodiesel fuel from bacteria, and improving carbon capture and storage. This is all admirable, if it is genuine and not just window-dressing.
Here’s a reality check in that regard: Exxon is investing about $10 million a year in the Global Climate and Energy Project—an amount that almost exactly equals Mr. Tillerson’s personal compensation in 2010. Ten million dollars also equals about three hours’ worth of Exxon profits from last year. You tell me if you think that is a sensibly proportionate response to the problems of climate change and oil depletion from the world’s largest energy company.
Even if Exxon’s investments in a sustainable energy future were of an appropriate scale, they come late in the game. We are still in a bind. That’s because there is no magic-bullet energy source out there that will enable world energy supplies to continue to grow as fossil fuels dwindle.
Renewable energy is viable and necessary, and we should be doing far more to develop it. But solar, wind, geothermal, tidal, and wave power each have limits and drawbacks that will keep them from supplying energy as cheaply and as abundantly as we would like. Our bind is that we have built our existing transport infrastructure and food systems around energy sources that are becoming more problematic with every passing year, and we have no Plan B in place. This means we will probably have less energy in the future, rather than more.

A Chance to Change the World

Again, I am addressing my words especially to you students. This will be the defining reality of your lives. Whatever field you go into—business, finance, engineering, transportation, agriculture, education, or entertainment—your experience will be shaped by the energy transition that is now under way. The better you understand this, the more effectively you will be able to contribute to society and make your way in the world.

You will have the opportunity to participate in the redesign of the basic systems that support our society—our energy system, food system, transport system, and financial system.

We are at one of history’s great turning points. During your lifetime you will see world changes more significant in scope than human beings have ever witnessed before. You will have the opportunity to participate in the redesign of the basic systems that support our society—our energy system, food system, transport system, and financial system.
I say this with some confidence, because our existing energy, food, transport, and financial systems can’t be maintained under the circumstances that are developing—circumstances of fossil fuel depletion and an unstable climate. As a result, what you choose to do in life could have far greater implications than you may currently realize.
Over the course of your lifetime society will need to solve some basic problems:

• How to grow food sustainably without fossil fuel inputs and without eroding topsoil or drawing down increasingly scarce supplies of fresh water;
• How to support 7 billion people without depleting natural resources—including forests and fish, as well as finite stocks of minerals and metals; and
• How to reorganize our financial system so that it can continue to perform its essential functions—reinvesting savings into socially beneficial projects—in the context of an economy that is stable or maybe even shrinking due to declining energy supplies, rather than continually growing.

Each of these core problems will take time, intelligence, and courage to solve. This is a challenge suitable for heroes and heroines, one that’s big enough to keep even the greatest generation in history fully occupied. If every crisis is an opportunity, then this is the biggest opportunity humanity has ever seen.
Making the best of the circumstances that life sends our way is perhaps the most important attitude and skill that we can hope to develop. The circumstance that life is currently serving up is one of fundamentally changed economic conditions. As this decade and this century wear on, we Americans will have fewer material goods and we will be less mobile. In a few years we will look back on late 20th century America as time and place of advertising-stoked consumption that was completely out of proportion to what Nature can sustainably provide. I suspect we will think of those times—with a combination of longing and regret—as a lost golden age of abundance, but also a time of foolishness and greed that put the entire world at risk.

It’s a time when it will be possible to truly change the world, because the world has to change anyway.

Making the best of our new circumstances will mean finding happiness in designing higher-quality products that can be re-used, repaired, and recycled almost endlessly; and finding fulfillment in human relationships and cultural activities rather than mindless shopping. Fortunately, we know from recent cross-cultural psychological studies that there is little correlation between levels of consumption and happiness. That tells us that life can in fact be better without fossil fuels.

In the Face of this Truth
It’s time to talk honestly about collapse–no matter how others may respond.

So whether we view these as hard times or as times of great possibility is really a matter of perspective. I would emphasize the latter. This is a time of unprecedented opportunity for service to one’s community. It’s a time when it will be possible to truly change the world, because the world has to change anyway. It is a time when you can make a difference by helping to shape this needed and inevitable change.
As I travel, I meet young people in every part of this country who are taking up the challenge of building a post-petroleum future: a 25-year-old farmer in New Jersey who plows with horses and uses no chemicals; the operator of a biodiesel co-op in Northampton; a solar installer in Oakland, California. The energy transition will require new thinking in every field you can imagine, from fine arts to banking. Companies everywhere are hiring sustainability officers to help guide them through the challenges and opportunities. At the same time, many young people are joining energy and climate activist organizations like 350.org and Transition Initiatives.

Police seek evidence of sex attack from IMF chief

By JENNIFER PELTZ AND ANGELA CHARLTON, Associated Press Jennifer Peltz And Angela Charlton, Associated Press– 1 min ago

NEW YORK – The head of the International Monetary Fund was examined for evidence that could incriminate him in the alleged sexual assault of a hotel maid, charges that stunned the global financial world and upended French presidential politics.
Dominique Strauss-Kahn, a married father of four whose reputation with women earned him the nickname "the great seducer," faced arraignment Monday on charges of attempted rape and criminal sexual contact in the alleged attack on a maid who went into his penthouse suite at a hotel near Times Square to clean it.
Strauss-Kahn was taken into custody on Saturday and spent more than 24 hours inside a Harlem precinct, where police say the maid identified him from a lineup, then headed to a hospital for a "forensic examination" requested by prosecutors to obtain more evidence in the case, defense lawyer William Taylor said. He was taken to a Manhattan court early Monday.
Another defense attorney, Benjamin Brafman, said the IMF managing director "intends to vigorously defends these charges and he denies any wrongdoing."
A member of France's Socialist party, Strauss-Kahn was widely considered the strongest potential challenger next year to President Nicolas Sarkozy, whose political fortunes have been flagging.
Environment Minister Nathalie Kosciusko-Morizet lamented the shadow the incident could cast on all of France.
"I'm very surprised to see at what speed in France we rush to political conclusions about a subject that is a serious one. He is accused of very serious acts. We are hardly speaking at all of the alleged victim," she said Monday on Canal-Plus television. In addition to the hotel maid, Koscuisko-Morizet said there is another "clear victim, which is France."
Strauss-Kahn, 62, was nabbed less than four hours after the alleged assault, plucked from first class on a Paris-bound Air France flight that was just about to leave the gate at John F. Kennedy International Airport.
He was alone when he checked into the luxury Sofitel hotel, not far from Times Square, on Friday afternoon, police said. It wasn't clear why he was in New York. The IMF is based in Washington, and he had been due in Germany on Sunday to meet with Chancellor Angela Merkel.
The 32-year-old maid told authorities that when she entered his spacious, $3,000-a-night suite early Saturday afternoon, she thought it was unoccupied. Instead, Strauss-Kahn emerged from the bathroom naked, chased her down a hallway and pulled her into a bedroom, where he sexually assaulted her, New York Police Department spokesman Paul J. Browne said.
The woman told police she fought him off, but then he dragged her into the bathroom, where he forced her to perform oral sex on him and tried to remove her underwear. The woman was able to break free again, escaped the room and told hotel staff what had happened, authorities said.
Strauss-Kahn was gone by the time detectives arrived moments later. He left his cellphone behind. "It looked like he got out of there in a hurry," Browne said.
The NYPD discovered he was at JFK and contacted officials at the Port Authority of New York and New Jersey, which runs the airport. Port Authority police officers arrested him.
The maid was taken by police to a hospital and was treated for minor injuries. Stacy Royal, a spokeswoman for Sofitel, said the hotel's staff was cooperating in the investigation and that the maid "has been a satisfactory employee of the hotel for the past three years."
Strauss-Kahn was arrested on charges of a criminal sex act, attempted rape and unlawful imprisonment. Authorities were looking for any forensic evidence and DNA.
His wife, Anne Sinclair, defended him in a statement to French news agency AFP.
"I do not believe for one second the accusations brought against my husband. I have no doubt his innocence will be established," said Sinclair, a New York-born journalist who hosted a popular weekly TV news broadcast in France in the 1980s and '90s.
The arrest could throw the long-divided Socialists back into disarray about who they could present as Sarkozy's opponent. Even some of his adversaries were stunned.
"It's totally hallucinating. If it is true, this would be a historic moment, but in the negative sense, for French political life," said Dominique Paille, a political rival to Strauss-Kahn on the center right, on BFM television. Still, he urged, "I hope that everyone respects the presumption of innocence. I cannot manage to believe this affair."
Candidates need to announce their intentions this summer to run in fall primary elections.
"If he's cleared, he could return — but if he is let off only after four or five months, he won't be able to run" because the campaign will be too far along, said Jerome Fourquet of the IFOP polling agency.
"I think his political career is over," Philippe Martinat, who wrote a book called "DSK-Sarkozy: The Duel," told The Associated Press. "Behind him he has other affairs ... I don't see very well how he can pick himself back up."
Strauss-Kahn is known as DSK in France, but media there also have dubbed him "the great seducer." His reputation as a charmer of women has not hurt his career in France, where politicians' private lives traditionally come under less scrutiny than in the United States.
In 2008, Strauss-Kahn was briefly investigated over whether he had an improper relationship with a subordinate female employee. The IMF board found his actions "reflected a serious error of judgment" yet deemed the relationship consensual.
But attempted rape charges are far more serious than extramarital flings and could do far more damage to his reputation in France and abroad.
"It's sure that a future president already mired in judicial problems is not well seen by the French," said Patricia Bous, a lab researcher in Paris' Left Bank on Monday.
"It's obvious that this is someone a lot of people were counting on, and because of this all of the cards are being reshuffled. So I don't know what's going to happen, but for me there is a presumption of innocence and we await the proof so we'll see," said university employee Hubert Javaux, also in the Left Bank.
French newspapers all put Strauss-Kahn on their front pages Monday morning, with grim headlines and photos. "DSK Out" read the banner headline on the left-leaning Liberation. "The Doors of the Elysee Are Closing for DSK" read that in Le Soir.
The New York allegations come amid French media reports about Strauss-Kahn's lifestyle, including luxury cars and suits, that some have dubbed a smear campaign. Some French raised suspicions about the sexual assault case as well.
"Perhaps this affair will unravel very quickly, if we learn that there is in the end no serious charge and that what was said by this woman was not true, and we all wish for this," former Socialist Party boss Francois Hollande said on Canal-Plus television. "To commit an act of such seriousness, this does not resemble the man I know."
A former economics professor, Strauss-Kahn served as French industry minister and finance minister in the 1990s, and is credited with preparing France for the adoption of the euro by taming its deficit.
He took over as head of the IMF in November 2007. The 187-nation lending agency provides help in the form of emergency loans for countries facing severe financial problems.
Sarkozy, who did not comment publicly Sunday, had championed Strauss-Kahn to run the IMF. Political strategists saw it as a way for Sarkozy to get a potential challenger far from the French limelight.
Caroline Atkinson, an IMF spokeswoman, issued a statement Sunday that said the agency would have no comment on the New York case. She referred all inquiries to Strauss-Kahn's personal lawyer and said the "IMF remains fully functioning and operational."
The fund's executive board was expected to be briefed on developments related to Strauss-Kahn on Sunday, but the meeting was postponed. John Lipsky, the IMF's first deputy managing director, would lead the organization in an acting capacity in Strauss-Kahn's absence.
Strauss-Kahn was supposed to be meeting in Berlin on Sunday with Merkel about increasing aid to Greece, and then join EU finance ministers in Brussels on Monday and Tuesday. The IMF is responsible for one-third of Greece's existing loan package, and his expected presence at these meetings underlined the gravity of the Greek crisis.
___
Charlton reported from Paris. Associated Press writers Elaine Ganley in Paris, Colleen Long, Cristian Salazar and Verena Dobnik in New York and Martin Crutsinger in Washington contributed to this report