Fraud, greed, and market tops go hand in hand like clockwork. We saw that in housing, we are seeing it other places as well such as a Fraud, Antitrust Investigation Involving JPMorgan, Jefferson County, and a Fraud Probe At Moody’s.

The third fraud story in two days is More indictments for Wall Street as stock-loan probe widens.

Five additional people, including former employees of Morgan Stanley Co and Janney Montgomery Scott LLC, were indicted on Thursday as part of a large federal investigation into the stock-loan industry.

The latest indictments on securities fraud and other charges arise out of an ongoing probe into bribery and kickbacks in the industry, where people called “stock loan finders” seek stock to cover short sales of shares.

Investigators have found some stock-loan traders steered millions of dollars of fraudulent finder fees to conspirators, often in exchange for no services, in exchange for outright bribes or payments to relatives. So far, 18 people have pleaded guilty in connection with the schemes, said a statement from the U.S. Attorney’s Office in Brooklyn, New York.

Those indicted Thursday were named as Darin DeMizio, a former Morgan Stanley supervisor; Robert Johnson of Tyde Inc; and Joseph Lando, a former manager of the stock-loan desk at Janney. Andrew Caccioppoli, another former manager at Janney’s stock-loan desk, had been indicted previously but was re-indicted along with his sister, Donna Macli and her husband Thomas Macli.


Moody’s is back in the news again, this time with cohorts in crime, Fitch and S&P.; Here is the Latest in Ratergate.

Moody’s Corp’s credit rating unit Moody’s Investors Service switched analysts from covering deals of particular investment banks after the banks requested changes, the Wall Street Journal said on Friday, citing people familiar with the matter.

An analyst in a group that rated collateralized debt obligations was moved off an investment bank’s deals after bankers requested an analyst who raised fewer questions about their deals, the newspaper said.

Moody’s also moved another investment banking official to its surveillance unit, which monitors the performance of deals already rated, after an official agreed with an investment banker’s opinion that the analyst was too fussy, the newspaper added.

According to the newspaper, Moody’s and Fimalac’s Fitch Ratings acknowledge they have switched analysts who rate bonds after issuers or bankers asked that they do so.

Standard & Poor’s, a unit of McGraw-Hill also made sporadic analyst changes following complaints from bond issuers, the newspaper said, citing a person familiar with the situation. S&P; recently began rotating some analysts.

Moody’s, S&P; and Fitch are paid by issuers for the securities they rate, and critics regularly question the conflict of interest they say this arrangement poses for the rating agencies.

I have been talking about these problems for years. If you have not yet done so, please read Time To Break Up The Credit Rating Cartel.

Mike “Mish” Shedlock
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