Archives for September 2012

Due Dilligence Problems at JP Morgan Securities: Pension Report Snafu

Due diligence appears to be lacking at JP Morgan Securities. I reported today for Growth Capitalist the mega-bank’s clearing business was using valuation reports from a notorious hedgie manager who has been sued for fraud by regulators and outed from his fund. The inaccurate reports then went to pension investors.

JPM Clearing manages the asset valuation reports Hedge Funds have to file for investors who used IRA pension dollars to join a hedge fund. There are all kinds of special tax treatments this type of investor gets so banks like JP Morgan often act as custodians between investors and the hedge fund managers. Except in this case JP Morgan forgot to do a simple google search to learn Long Island hedgie Corey Ribotsky, of NIR Group, hasn’t had the rights to send any info on the value of the investments in his AJW funds since January.

NIR Group was a large investor in the PIPE space and at its height boasted around $800 million of fund assets. But investors had a rude awakening last month when I reported the court appointed liquidator, PwC, was sending out reports showing the funds had lost 97% of their value. So it’s kind of troubling to see Ribotsky out there trying to get JP Morgan to spin a story for him, by having them deliver reports with inaccurate valuations, during the same week the Liquidator is trying to tell these poor investors they are only getting pennies back.

There is a bunch of great details about other tax related errors (possible manipulations to avoid the IRS knowing taxes should be collected) the hedge fund manager did with JPM Clearing; so go read the story at Growth Capitalist while registration is still free.

New Canaan Murder-Suicide Man worked on Wall Street

UPDATE 4:15pm: Clusterstock’s reporter Julia La Roche found Owen’s FINRA records which shows he was unemployed before the Bank Street Group job

Bank Street Group response is at the end of the story.

UPDATE 9-26-12:NCPD says the person who called 911 to report shots fired was none other than James Owen. So this Wall Streeter shot his wife, then called to report it from his cell phone, then shot himself in the head.

Original Text
The New Canaan man who shot his wife and then killed himself with a gun shot on Friday was a seasoned Wall Streeter. James D. Owen, 48, worked for years at Stamford-based The Bank Street Group doing merger and acquisition and mid-marketing financing for the wireless/satellite space.

Bank Street Group is made up of a lot of ex Bear Stearns guys and apparently has a flow of people coming and going from the firm. James Owen’s photo and director title was taken off the company’s website sometime after June and his name is no longer in the company phone directory. You can see the 15 person team here in a google cache; the company’s website shows the firm has been reduced to eight. An other New Canaan resident Peter P. Buckley, who was a managing director at Bank Street, confirmed for me today that James was still working there in April when he left the company and didn’t know if he’d been fired or quit or just removed from the website.

When Buckley was asked if he was surprised Owen had been involved in a murder/suicide he said, “You never like to hear something like that.” Buckley, who works in the PIPE financing space, said he didn’t know if Owen had financial troubles and never worked on deals with him because they worked in different sectors.

Owen’s bio at Bank Street Group says he left Bank of America Securities were he led a group focusing on the Wireless Telecom space for the job at Bank Street. He’d also worked on telecom M&A at Lehman Brothers were he held a low-level Vice President title and at Bear Stearns. He got his undergrad business degree from University of Louisiana where some public records show his wife, Billie, is from. Owen also had an M.B.A in finance and corporate accounting from the University of Rochester.

Emails to Bank Street Group senior managing director James Henry asking if James was fired or left on his own accord went unanswered. I found no bankruptcy filings for Owen in CT state or federal court. The New Canaan police haven’t told the public if there was a note left or if a motive could be identified.

The New Canaan Patch reported a store owner across the street from Owen’s residence on Park Street speculating she thought the killings were motivated by financial distress but also states she didn’t know the couple so that was pretty much a useless quote the Patch reported. No other media outlets have figured out where James Owen worked yet but the New Canaan Advertiser was first to report the couples name Friday night before the New Canaan police released it Saturday afternoon. The wife’s family isn’t commenting on the murder and I could not reach members of James Owen family.

Murder-Suicide is pretty rare in this wealthy town packed with people who work in high-finance and now we’ve got a crime without an identified motive. If you ever worked with James Owen I’d love to hear from you.

UPDATE 9-24-12 1:50pm: Bank Street Group has finally responded to my emails. Richard Lukaj says, “We are shocked and deeply sadden by this tragedy.” He then confirmed what the FINRA records showed, Owen started with their firm in 2005. He also said Owen was still employed at the time of his death and they took his photo off the company website when they learned he was dead.

Well if that’s true then these guys moved fast to try to avoid bad PR. They also won’t answer questions if Owen was on Garden leave or even at work Friday morning (the shooting happen at around 4pm Friday). What’s odd is Peter Buckley’s photo and managing director title was left on their website for a few months after he left in April (which you can see in the google cache) but before the NCPD announce Owen’s name they have his photo taken down? The firm also made a statement “we ask that everyone please respect the privacy requested by the affected people during this most difficult time.”

Really now? When journalist get PR statements like that something doesn’t smell right and when you kill your wife and then your self you’ve just made your family part of the news cycle and lost any notion of privacy.

Net-Net we still are left without a motive.

What Bear Stearns Whistleblowers told the SEC: New Details of RMBS Fraud & Cover Up

Remember all those whistleblowers the monolines found in their RMBS fraud litigation against Bear Stearns and JP Morgan? The ones JPM’s lawyers tried to publicly out their names so they’d be afraid to testify in the monoline’s case. Well the bank’s dirty legal tactic didn’t work and newly released whistleblower testimony from people who worked for third-party due diligence firms, hired by Bear to get the mortgage security insurers to back their bonds, shows a whole another layer of orchestrated deceit. One so bold it borders on mafia like RICO actions.

Filed in Connecticut state court at the end of August by monolines lawyers at Patterson Belknap is a motion to enforce a New York subpoena that calls for RMBS due dilly firm, Clayton Holdings, to turn over the historical loan review reports that were sent to Bear Stearns. The motion is on behalf of Ambac; the RMBS insurer who first brought the explosive fraud suit against Bear Stearns traders for stealing billions from their own clients. You know the one that led to JP Morgan, Bears’ successor, telling investors last quarter they now have at least $120 billion of possible mortgage security putback suits they could be forced to pay out. Well it looks like Abmac wants the public to know more of the dirt they have on Bear/JP Morgan because in exhibits with the motion they filed there’s some nasty whistleblower sworn testimony.

Clayton Holdings along with a firm called Watterson Prime were the main third-party firms Bear hired to do re-underwriting due diligence. According to the monoline suits this extra level of inspection was designed to prevent defective loans getting packed into the security in the first place. In the heyday of the mortgage boom there was so much competition to get the RMBS bonds insured and sold Bear came up with a novel ideal of paying for ‘independent reviews’ that the monolines use to do themselves before they got so busy picking which bonds to insure. It was a process Bear claimed would add a level of integrity. But new sworn testimony by whistleblowers from Clayton and Watterson Prime shows this was just a ‘veneer of control’ instead of a practiced method to fret out defective loans.

What’s worse is when Clayton or Watterson Prime due dilly workers actually found the bad loans and coded them in the system (called CLAS for Clayton) their supervisors would change the coding to reflect the loans were ok. This enabled the Bear Stearns traders working under Tom Marano to hide the fact loans they’d bought, from the banks like Greenpoint or Countrywide, were garbage but still went into the security because allegedly Bear traders didn’t want to spend the time or money to go back to the originators and buy quality loans. If the courts find the whistleblower statements are true, it’s a clear violation of the monoline rmbs insurance contracts along with possible insurance fraud and violations of the Martin Act.

The whistleblowers names are redacted in the filing but they swore they worked for both Clayton and Watterson prime as freelance due diligence consultants on loan file reviews for Bear Stearns mortgage securities. Their job was to take the original loan files EMC had used to pick which loans would go into a security and make sure it fit Bear’s underwriting standards. Their testimony says they’d find a file with borrower documents they thought were fraud, report it to their supervisor (such as Mr. Weeks at Watterson Prime) and the supervisor would say just move it along and overlook the documents.

“Usually the instruction were just go ahead and keep it moving, enter the information, we will take care of that with the seller or we will try and get correcting documents later,” states one whistleblower talking about working at Watterson Prime in court filings. “Once a lot of the documents were missing or it was prevalent that we don’t have these documents, we were told to ignore, ignore and grade them as normal.”

But it’s wasn’t just ignoring missing documents that was encouraged. The loan reviewers also stated they’d find W-2’s in the files that were logged at ‘stated loans’ (this mean the borrower just claims his income without documentation) and the W-2’s would contradict what the borrower had stated. Meaning the loan clearly had fraud in it.

The whistleblower says when they told their boss at Clayton or Watterson Prime this they were told to “pull out those documents”.
“We would put them in a pile and either they shredded them or they disappeared. They were destroyed but it was not by the underwriter,” said the whistleblower as he testified to how the due dilly firms covered up Bears bad loans for them.

Another whistleblower said at Clayton they were berated in front of their team if they didn’t rate the loan files as normal and feared not getting more contract work if they didn’t find creative ways to make the loans look ok. One method was in the case of couples getting a mortgage; they used the income of one and the credit rating of the other to make the quality rating match up as normal. This process was known as ‘finding compensating factors”.

“When loans did have deviations from loan to value ratios Bear had set as a standard we were told to find compensating factors and approve the loan anyway. On many jobs our team leaders gave us a cheat sheet of compensation factors to make it easier for us to find them,” says another whistleblower in sworn testimony.

In over 50 pages of testimony we learn the team leaders at Clayton Holdings and Watterson Prime were getting this direction from people on the mortgage team at Bear Stearns. According to people familiar with the suit the Securities and Exchange Commission has already interviewed some of these whistleblowers. And the whistleblowers named names regarding who at Bear Stearns was directing the third-party due dilly firms to change loan files and rate them better quality than they really were. One Bear Stearns executive that showed up in court filings directing the due dilly team to basically lie in their reports was John Mongoluzza.

I was told the SEC interviews were done before JP Morgan announced in their last quarterly financial statements the SEC had them given them a Wells Notice saying they were considering suing them for mortgage security violations relating to Bear Stearns.

Former New York Attorney General Andrew Cuomo told the media a few years ago he’d given Clayton immunity for helping with his investigation into possible criminal wrong doing by banks like Bear Stearns. But no charges were brought by Cuomo before he became Governor and it’s unclear what NY’s new AG will do with Clayton.

Ambac’s latest motion filed in Connecticut state court says Clayton is still playing favs with Bear/EMC/JP Morgan by eagerly assisting their lawyers and ignoring a compulsory subpoena to produce documents to Ambac. Clayton who claims they don’t have files Ambac is asking for magically found one of the whistleblowers personnel files that Bear’s lawyer ended up using to cross examine the whistleblower.

So here we have Clayton handed a get out of jail card from NY’s AG and they uses it to help the alleged criminal (JPM/Bear) hide evidence to possibly avoid losing a mega-billion fraud suit?

A recent Abmac filing says they reviewed 5,000 loan files valued at around $2 billion and 85% of the loans had deficiencies problems that Bear should have known were there and thus never put the loan in the security in the first place. Last week Reuters legal columnist Alison Frankel found a new lawsuit filed with similar allegations against Bear/JPM by the RMBS trustee for pension fund investor Baupost. The suit claims after they reviewed Bear/EMC loan files they found an alarming 88% breach rate of the loans in the mortgage securities. So now we have monoline insurers AND investors finding similar malfeasance in the methods of creating and selling RMBS by Bear Stearns.

The examples of cover up described in the recently filed whistleblowers testimony runs deep. Now that I’ve confirmed the SEC has interviewed these whistleblowers we have to wonder if JP Morgan is aggressively negotiating for a settlement or if the SEC is waiting to file suit because it doesn’t want to publicly shame JP Morgan with a securities violation charge before the election. Just think if Bear’s insurers or investors had been given the chance to see Clayton or Watterson Prime due dilly reports that weren’t manipulated – would they have ever bought billions of RMBS from Bear and helped traders under Tom Marano’s team earn millions and go on to run mortgage divisions at Goldman Sachs and Bank of America? It’s those questions investors in Bear’s toxic rmbs hope the SEC doesn’t wait forever on the sidelines to answer.

The case was filed August 24th in Milford,CT Superior Court. Ambac Assurance vs. Clayton Holdings. Ambac’s motion against Clayton asks a CT judge to force Clayton to produce reports reflecting the rate at which Bear Stearns overrode Clayton’s finding with respect to due diligence conducted during the securitization process.

NIR Group Investors Scream Valuation Fraud after Report of 97% Loss on Investments

Investors in a troubled hedge fund founded by Corey Ribotsky were told by the funds’ liquidator last week their hopes of recovering any real money was slim. I reported on the 97 percent drop in valuation for Growth Capitalist today in a story that details how main street investors who gave their pension money to NIR Group’s AJW Funds are shaking their heads in utter disgust. Investor frustration stems from the notion that the SEC has gathered a ton of new evidence to support their claims of asset valuation fraud in a new amended complaint against the hedge fund manager yet the Eastern District of New York DOJ hasn’t charged Ribotsky with any criminal wrong doing yet.

Ribotsky even came to investors with his dick in his hand this March trying to claim he’d been burned by the market and lost millions also via the fees he says he invested back into the fund. This effort is spelled out in a seven page letter sent to NIR Group investors that you can read below. Keep in mind Ribotsky wrote this letter after a court appointed liquidator kicked him out as fund manager in January and then the liquidator showed investors a cash flow report that reflected a completely different picture than Ribotsky had told them for years.

There is a ton of new details in the story on NIR at Growth Capitalist so go ahead and register for free to read it.

Editors Note: Growth Capitalist is a new trade publication founded by one of my former Dealflow Media editors, Brett Goetschius, who has a ton of experience reporting on finance for the institutional and main street investors. If you’re looking for news that helps you with the kind of investment research that hedge funds pay big banks millions of fees for Growth Capitalist could be a good starting point.

2012-03 Ribotsky Letter to NIR Group Investors

Ridgefield Bank wins Auction of Ruth Jones New Canaan McMansion: Forcing Vacate

UPDATE 9-13-12:Prices paid at auction by the banks on Jones six properties are at the end of the story

New Canaan’s queen of McMansion sales is being forced by local bankers at Ridgefield Bank to vacate her home of sixteen years. The Connecticut District Court judge denied Ruth Jones appeal for a stay yesterday so the auction of her six homes went forward. According to Ruth’s daughter, Stephanie, no outside parties entered viable bids so banks like Ridgefield Bank, Connecticut Community Bank & Country Bank won the homes using their credit bids. This means Jones lost five rental investment homes that will now sit as REO assets on the books of the local banks. Her beautiful 7,500 sq ft McMansion, that she built in the mid 90’s and raised her three children, is now property of Ridgefield Bank who held two secured loans in total of $3.5 million against the 75 Beacon Hill home.

A court order filed by Judge Shiff today says Jones six-year lease to her brother Alton who is sick with cancer is now null and void. Jones had set up the lease after she filed chapter 11 bankruptcy in 2009 so her brother could live in an in-law suite at her primary residence. As result of the court order, Ridgefield Bank got the home free and clear of all liens and leases at yesterday’s auction. The secured creditors, who had not been paid in three years since Jones filed for bankruptcy, get possession of the homes fast. The bankruptcy docket says the closing date for her five investment properties is set for September 28th. And Ridgefield, who started dolling out million dollar loans to Jones in the early 2000’s, is moving fast to kick her out. Court records show next week, September 18th, they’ll hold a hearing for a vacate date.

I previously reported on Jones battle with her bankster creditors last month. New Canaan resident David C. House who invested in one of Jones rental investments was awarded a credit bid in April after he sued Jones for false representation and fraud. Court records show the case settled and the judge wouldn’t allow Jones to discharge the settlement House won in bankruptcy. House picked up Jones beach front vacation rental near tony Watch Hill, RI yesterday for about half of what Ruth paid in 2006.

Richard Coan, the New Haven-based bankruptcy trustee in charge of the bankruptcy assets, can now use the $300k in the DIP account to pay himself and unwind the bankruptcy by dolling out the rest of the DIP cash to the secured creditors (the banks). Coan said the prices Ridgefield bank and others paid will be loaded in public court filings (PACER) by tomorrow. Stephanie Jones wrote me today saying she thinks the banks paid less than what her mother Ruth had offered in her modification plans–plans none of the banks accepted over the course of the three year bankruptcy battle.

Ridgefield Bank gets to play landlord now and spend the banks money to manage maintenance on the large Beacon Hill home till they sell it. So far Ridgefield Bank did not recover anywhere near the $3.5 million they lent Jones but are about to succeed in making Jones and her family homeless.

New Canaan Homes sold at Auction are:

139 – 141 River Street, New Canaan, Connecticut to Country Bank; $393,000
75 Beacon Hill, New Canaan, Connecticut to Ridgefield Mortgage; $2,250,000
279 Old Stamford Road, New Canaan, Connecticut to Residential Credit; $1,564,150
277 Old Stamford Road, New Canaan, Connecticut to Connecticut Community Bank; $1,750,000
42-44 Urban Street, New Canaan, Connecticut to Bank of America; $380,000
994 Charlestown Beach Road, Wakefield, Rhode Island to David C. House; $910,000

New Canaan Realtor Ruth Jones McMansion up for Bankruptcy Auction Next Week

UPDATE 9-12-12:Jones homes were bought by her bank lenders yesterday at auction with credit bids. See Forced to Vacate story.

New Canaan real estate titan Ruth Jones lost her motion to halt the bankruptcy auction on five investment properties and her primary home of sixteen years. Last week Judge Shiff in Bridgeport, Conn. Federal bankruptcy court ruled regardless of her motion for appeal in Federal District court the trustee should move forward with the September 11th auction.

Jones, a real estate agent who in 2009 was named the ‘New Home Broker of the Year’ by the Home Builder’s Association of Connecticut for the 11th straight year, has been battling a chapter 11 reorganization for three years with over half a dozen banks. Rents on her New Canaan investment homes have been locked in a DIP account controlled by a court appointed trustee for over a year and banks like Ridgefield Bank and Greenwich Bank and Trust stated in court filings they haven’t been paid for three years. I previously reported how local banks were not willing to modify the 1st and 2nd loans she took out on most of her homes. The lack of ability for either party to negotiation led Judge Shiff to rule this July the homes must get sold on the court house steps at auction.

According to New Canaan town records Jones built her primary residence at 75 Beacon Hill rd in 1995 with her husband who bought the land for $420,000 in 1994. Then in May 2001 she got a first lien loan from Ridgefield Bank for $1.5 million and the next year the town assessed the 7,510 square ft home for $1.649 million. The assessed value for homes in New Canaan is 70 percent of the appraised value.

During the go-go years of the real estate boom Jones was earning commissions selling mega million dollar McMansions designed by builder Rick Girouard. Girouard was found guilty of bid rigging fraud, went to jail for two years, and was just released last month. The millions earned from commissions helped Ruth build her rental home empire. She also took advantage of her investment in a startup local bank run by Fred DeCaro Jr., and took out 2nd and 3rds on homes in her rental empire. Her loan to values were not near the 100% we saw a lot of real estate investors make from 2002-2007 but after the 2008 financial crises the appraised value tanked driving Jones to be stuck with little to no equity in the homes. (In 2010 Decaro’s USA Bank was shut down by the FDIC and I reported last year the FDIC is still investigating the Bank executives for abusive leading and fraud.)

By the time she filed for bankruptcy in August 2009, Jones had amassed 13 investment properties along the Gold Coast of Connecticut. Jones bookkeeper, Elizabeth Santaus, told me last month if all properties had paying tenants they earn around $45,000 a month. Accept for a $5,000 trustee approved management fee Jones can’t get access to most of that rental income because the banks have it tied up in a debtor in possession account.

“That was supposed to my income for my retirement,” Jones told me this summer over lunch.

Before Jones began loading up on loans from USA Bank to buy more rental properties she refinanced the loan on her primary residence adding on another $500k to the principle with a 5.25% interest rate. Court record show interest and some principle was paid till 2009 but the principle balance is currently $1,986,035. As the home grew in value, court records show, she then set up a credit line, via a home equity 2nd loan, for $1.5 million with an interest rate of 7% in August 2005.

Jones then used $750,000 from her credit line with Ridgefield Bank (also known as Fairfield County Bank) to make a short term investment in early 2007 with a Darien, CT couple who was setting up a pay telephone service to the public in Puerto Rico. Ronald and Margaret Massie of 451 Mansfield Ave, Darien CT ended up being fraudster and Jones filed a civil suit that year against them for a 90-day loan that was secured by their Mansfield home valued at $3 million. Unfortunately the Massie’s had also made deals securing the primary residence with other creditors. The IRS also had a $347,917 federal tax lien on the home since 2003. After over a year of litigation the couple ended up filing bankruptcy leaving Jones with no cash to pay back the credit line as interest was mounting from the Bank. In 2009 the beautiful McMansion, which housed her mother with Parkinson’s disease and an older brother with cancer, was saddled with near $3.5 million of debt. The inflated 2008 town appraised value was $3.25 million, which put her at least $250,000 underwater. Local New Canaan realtors I interviewed said a house like that would sale for only $2 million these days. Jones idea of a modification was to ask the bank in the Spring of 2008 to wipe out $2 million of the loans. She wrote the Bank’s board saying she could make the mortgage payment if the principle was reduced to $1.5 million. A steep discount the bank had no interest in making.

After Jones filed chapter 11 she signed an in-kind 6 year lease with her sick brother Alton to live in an apartment they’ve built in the home. Richard Coan, the court appointed bankruptcy trustee, filed motions last week to have the lease null and void so he could sell 75 Beacon Hill free and clear of liens and leases in the September 11th auction. Judge Shiff will hear that motion on the same day as the auction so it’s unclear if potential buyers will be picking up a home with a sick person locked into a lease living in it.

Steve Dibert CEO of MFI Miami, a foreclosure fraud expert, said, “An in-kind lessee can still be held valid in court assuming the lease, her brother, can perform the in-kind task.”

Last week Jones filed a Hail-Mary motion as an appeal for a stay in Federal District Court to halt the one-day auction of six of her homes. Judge Alvin Thompson heard her argument on September 7th and as of press time a ruling was not filed in court. In the last two days, four of the secured creditor banks and Trustee Coan have filed strong objections to the stay in the District Court. They haven’t been paid in three years, home values are still going down in Fairfield County, and they want the homes sold so they can take whatever cash they can get. Cash that could be used to make new loans to buyers who can afford homes. They also state they don’t believe Jones has a workable plan to pay them back. Unfortunately, the court is refusing to take into consideration that Jones has two sick family members living with her because the court is ruling on economic factors not emotional ones.

Ridgefield Bank went as far to tell the District Court they will be economically harmed by a possible two-year appeal because Jones has admitted her primary residence has some structural damage and she is not spending money to fix it. Ridgefield’s attorney also pointed out there is no equity in the house and asked if the court was to grant a stay Jones would have to put up a supersedeas bond in the amount of $418,335. The bank calculated this taking the principal amount of the two mortgages ($1,986,035 and $1,498584), applying the contractual interest rates (5.25% and 7%), and determining the interest that would accrue over the next two years. That means on the off-chance the District Court grants a motion to stop the auction until her appeal is heard, she still has to fork over $400k in cash to be held by the court. Ouch!

Christopher Fountain, a popular Greenwich blogger and real estate agent who focuses on distressed home sales wrote about Jones troubles after I broke news of the upcoming auction. You can see the local sentiment here – net net this tony lower Fairfield County community doesn’t appear to have a lot of empathy for the methods Jones used to build a real estate empire that federal courts are about to unwind. Nor do they hold bankers not willing to negotiate with troubled over leveraged homeowners as the bad guys.

Parties interested in placing good faith bids need to send 10% of the proposed purchase price and bid in writing to: Timothy Miltenberger at Coan, Lewendon, Gulliver, & Miltenberger, LLC 495 Orange St, New Haven, CT 06511, phone 203-624-4756.

Swiss Criminal Investigation into Barclays’ GoldenKey fail Moving Forward

That Barclays criminal complaint I told you about this winter is still alive in Geneva courts. I heard from people involved in the case that after news of Barclays role in the Libor scandal broke, the Swiss judge reviewing evidence brought by high net worth investor Philippe Rebourg took the case a lot more serious. Rebourg lost millions from a Barclays billion dollar structured investment vehicle, called GoldenKey, who failed in spectacular fashion in 2007 through his investment with Avendis Capital. Avendis ran a hedge fund called AEIF fund, which used about 50 percent of their investors assets to buy positions in GoldenKey and then levered up their stake in the SIV. Avendis was also a collateral manager for BarCap, who according to Rebourg’s claim; happen to get some easy money from Barcap to buy their over leveraged position in GoldenKey.

It’s a sordid tangle of relationships involving the America offices of BarCap, with executives like Kelsey Burr and John Parker playing the central role of evil banksters. Burr magically left the bank last year around the time Rebourg showed Barclays a slew of internal emails detailing his alleged role in the fraud. Burr and Parker built products called SIV-lite that would raise capital, borrow money in the short-term commercial paper debt market, and then invest all of this money in higher interest rate bearing products like mortgage-backed securities. The criminal claim tries to show, among other things, Barclays created these SIV’s to off-load their toxic mortgage products at the beginning of the financial crisis and sell them to unsuspecting investors via hedge funds the bankers were friendly with. It’s a tale that highlights how every firm from raters to auditors involved in these high finance products somehow played a role to cheat main street investors.

After I broke news highlighting the case, the judge temporarily gagged people involved from talking with the media. But insiders came forward this week with an update.

“The Swiss judge has done a deep dive into the evidence and charges could be brought within a month,” said a person involved in the Swiss criminal investigation.

The Swiss judge had to sort through multiple offshore entities BarCap set up within the GoldenKey transaction. Finding criminal liability is tough because the complexity of financial products like GoldenKey, which are very difficult to understand even for a specialized judge familiar with financial instruments, have been structured in order to make sure all the potential legal liability was outsourced to some external managers, like Avendis Capital, or domiciled in different bankruptcy remote jurisdictions.

There are questions to how in the heck some raters gave Barclays’ GoldenKey a stellar rating towards the end of the SIV’s heyday in 2007. Why was S&P so nice to Barclays? Now thanks to Rebourg’s case the Swiss judge is looking at email evidence that shows a level of arrogance and RICO like behavior by Barclays. One such email written in 2007 by a Barclays executive who was talking about the bank arranging GoldenKey says “…we can always strong-arm S&P if they become difficult over the CIO position as we use them day in day out for rating so many of our deals.”

The case also involves international auditor BDO because they were assigned as a court trustee for the liquidation of AEFI fund. Rebourg told me last year he couldn’t figure out why BDO was reluctant to go after Barclays to recover funds for investors harmed by the banks role in the alleged fraud. It was especially confusing since they found out that BDO had also been invested, via one of their companies, in the AEFI fund. The hope was BDO would be motivated to help investors get every dime possible after they kicked the AEFI managers out. Then investors in AEFI fund found out one of the partners of BDO was member of the board of Barclays Switzerland branch and figured some favoritism towards Barclays was at play.

Rebourg told me last year, “The attitude of Barclays’ employee, under Bob Diamond tenure, has been one of reckless brinkmanship. Convinced that they were above the law, they have repeatedly plucked clients and investors alike without fear of the law.”

With public sentiment turned against the bank from their admitted role in Libor manipulation this would be an easier time for the Swiss to use their unique financial crime laws against Barclays. But for anything serious to come out of Rebourg’s criminal claim it will have to be Geneva Attorney General Michael Lauber taking the Swiss judge’s opinion of the claim and Rebourg’s evidence to heart if we are going to see criminal charges drive that fear into Barclays’ bad actors.