Frontline: The Untouchables – Exposes how Wall Streeters Commit Fraud but Escape Jail

UPDATE 1-23-13 5pm: The Washington Post is reporting the DOJ’s Lanny Breuer, who was highlighted in The Untouchables, is stepping down. Now reporters had heard he was on his way out for a bit so WAPO could be reporting old news but it sure makes the Frontline film and my reporting seem to have made quite a stink at the DOJ today. Is this a case were great investigative journalism actually went to work for the American people?

1-23-13: There is a live chat with The Untouchables film maker Martin Smith today. I’d ask him if he thinks DOJ’s Lanny Breuer should still have his job.

Original Text
Tom Marano and his team of bandits at Bears Stearns mortgage trading desk took Wall Street for a ride in the last decade. I first broke news about them stealing billions from their own clients, which included pension funds, in January 2011 for The Atlantic. Tonight you’ll see how widespread their action went in a Frontline documentary film called The Untouchables.

Emmy winning documentary film maker Martin Smith contacted me this summer about my reporting on the Bear Stearns traders and the saga it entailed for JP Morgan. A bank who is now facing a Civil fraud suit by the NY AG, has $140 billion in civil RMBS fraud suits against them, and has setteled with the SEC for the double dipping scheme that attorney Eric Haas at Paterson Belknap first figured out.

When I first came about this story in early 2010 Reuters and Fortune, who asked me to pitch them, passed on it because they said the topic was too complicated. But it took only 24 hours for Dan Indivilgo (who is now writing for Reuters BreakingViews) to figure out this was a blockbuster piece of reporting and as a business editor at The Atlantic he convinced them to buy it. I only made $150 selling the story to The Atlantic instead of the few thousand dollars I’d make if I had sold it to a trade publication behind a paywall but I knew this story just had to printed online for the world to read. And they did.

Hundreds of Wall Streeters started to email or call me after they read it. People who might have never read my byline at the New York Post or Hearst Newspapers were calling to see what else I had on the outright fraud these financial titans committed. Their big takeaway was “I knew those Bear traders were always making too much money but I could not figure out how.” And the civil securities lawyers who called just wanted to play catch up to the sordid details the lawyers at Patterson Belknap had already figured out for their clients the mortgage bond insurers. Even the FHFA had an analyst call me to find out behind the scenes info and then copied Patersons Belknap’s suit when then filed for around $22 billion in civil fraud against JP Morgan.

You can see whistleblowers on camera tonight telling details I first reported about the level of due diligence Bear (and other banks) hired to mask the level of out right fraudulent loans the traders were aware of before they even put them into the mortgage securities they sold to the public.

Yet still we saw the NY AG only sue for civil fraud and not criminal fraud. Filmmaker Martin Smith got people to admit the DOJ was afraid if they actually charged these Wall Street bad boys with criminal fraud it would rock the financial system. An absurd notion for the DOJ to even consider. They are not bank regulators or butt boys for the banks like Tim Geithner. They are suppose to go after crime regardless of how it effects an industry. I consider this fraud against the American people– the DOJ didn’t do their job when the evidence was handed to them by reporters like me and Nick Verbitsky and sharp lawyers like the team at Patterson Belkanp.

But the real want-to-make-me-throw-up moment in the film came when I saw the DOJ’s Lanny Breurer tell Martin Smith he didn’t think journalist had found any whistleblowers who the DOJ hadn’t already interviewed. That’s was either an out right lie or he’s really in denial because as Nick Verbitsky said in the film he knows his unnamed whistleblowers were never contacted by the DOJ even though the lawyers at Paterson Belknap eventually got some them on the record for their civil suit against Bear Stearns/ JP Morgan. I second that…the DOJ has flat out not tried to reach a single whistleblower in my series of reporting on Bear Stearns/ EMC / JP Morgan.

The failure of the DOJ is the real crime we should never forget.

Editors Note:This news publication is funded by the generous donations of my readers. If you like what you saw in the Frontline Film or news report you see on this site please donate. You can do so via Paypal at teribuhl@gmail.com. Micro donations of $25 plus go a long way when readers like you contribute.

After Arrest Spongtech Fraudster Metter loaded Radio Stations with Debt: Greenwich’s WGCH facing Eviction

UPDATE 4:45pm: The head of the Greenwich DTC, Frank Farricker, tells me he’s been try to reach BTR’s receiver, Michael Craven, and his Delaware attorney at Morris James LLP to make an offer on the Greenwich Radio station but so far they’ve refused to call him back. Craven has also refused to return multiple request for comment.

Original Text
The Greenwich Radio Station, WGCH, run by alleged penny stock fraudster Michael Metter has been sued for eviction after racking up over $140k of unpaid management company bills. Court documents filed this week show Metter, who was arrested for criminal fraud in 2010, has racked up near a million of unpaid debt while the courts allow him to run the radio stations after he was released on bail.

Metter was removed as CEO of the Greenwich station last month and the former COO, Jeff Weber, was rehired as a consultant to run the stations while they are trying to be sold. A receiver, Michael Craven, was appointed to monitor the assets of WGCH’s parent Businesstalkradio.net. The stations were forced into sale after the SEC was able to claim BTR as a relief defendant in the securities fraud suit against Metter and his penny stock company Spongetech because the regulator claims Metter used the station for money laundering in his Spongetech scam.

Since Metter’s arrest he’s loaded up BTR with so much debt that they are also behind on paying Connecticut state taxes, federal taxes, the stations’ vendors, and even some employees–but court documents show Metter continued to pay himself between $16,000 to $18,000 a month over the last two years.

The total bill for BTR vendors and creditors is $991,900 of which the Greenwich Broadcasting Company owes $195,362.

The Greenwich station landlord served a notice to quit the property as a result of nonpayment on July 24th asking WGCH to vacate their station at 71 Lewis St in downtown Greenwich, Conn by the end of the month. WGCH didn’t do it. The landlord stated the monthly rent was $5,647. Harrison Management Company then sold the overdue 10-yr lease, signed in August 2006 to 100 Maison St LLC, on September 7th. Harrison is listed in court records as being owed over $140,000. The new landlord filed suit on September 26th to evict and BTR’s receiver says he is now trying to negotiation with them to stay in the property. A fact the Greenwich Time reporters could have easily picked up on when they reported that Jeff Weber had been brought back after Metter was removed as CEO the first week of October– but they didn’t.

Weber is also the president of the Greenwich Chamber of Commerce. The receiver’s creditor spreadsheet, filed in court, shows the Chamber is owed $950 and even Weber has a claim of $24,000 against the radio company he’s working for again.

I previously reported on some of the BTR assets finally being sold at trade publication Growth Capitalist. This money is intended to go to the SEC for victims of Metter’s penny stock fraud. The Brockton Mass. station sold for $250,000 but after deal fees and cost the deal only netted $100,268 which has been placed in a court escrow account. Now BTR’s receiver is asking he court for $50,000 of the sale proceeds to pay some back rent so the radio stations aren’t forced out by their landlords.

There is also a sale contract signed, but not closed, for the Vegas station (KNUU) in the amount of $950,000. But that station is also facing eviction because Metter didn’t pay the rent. The Greenwich and Pittsburg stations have no sale offers. Metter has previously stated in court documents filed in the SEC’s case against him that he thought BTR assets would be worth around $6mn and the Greenwich station was listed for sale at $1.25mn. It’s unclear how Weber or Metter ever thought the Greenwich station would fetch a million sale price considering WGCH was unable to operate during Hurricane Sandy’s power outages because Metter had not bought the station a working back-up generator.

Unfortunately, the SEC’s plan to use money from the sale of the four BTR stations as restitution for mom and pop Spongetech investors has hit a big snag. BTR receiver, Michael Craven, hired a forensic accountant to validate a third-party secured claim against the assets of BTR by a New Jersey hard money lender Solutions Funding LLC. Last week Craven filed court documents stating Solutions Funding claim of $3.08 million is valid–this means the third-party lender will get paid before the SEC can collect any money for investors. Craven actually settled with Solutions Funding for $2.5 million and is waiting court approval to make them the senior secured creditor.

Court documents show the Vegas station has the most assets so it’s not likely the Greenwich or Pittsburgh station would generate a $950,000 price tag like the Vegas station has (a deal that still isn’t closed). So far the net proceeds to pay off Solutions Funding from the sale of the Brockton, Mass. station is only $50,000. So it’s not looking like SEC’s move to get any dollars out of Businesstalkradio.net is going to work out. The regulator did succeed in forcing Metter to sale the stations but now we see the beneficiary is going to be a high-interest hard money lender. What’s unclear is why did the SEC not inspect how Metter was using cash flow at BTR till it was too late. Why was he allowed to receive a six-figure income while rent wasn’t paid? Isn’t it their job to weed out people who habitually abuse the markets and securities laws?

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