Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Shaggy Rogers
Barclays Sues Bear Stearns Over Collapsed Hedge Funds
Wall Street Journal 
By KATE KELLY
December 19, 2007 5:26 p.m.

Barclays PLC, stung this summer when two big hedge funds run by Bear Stearns Cos. collapsed, is suing the Wall Street firm and two of its fund managers, claiming Bear misled them about the risks of the highly leveraged funds.

In a complaint filed late Wednesday in U.S. District Court in New York, Barclays alleges that Bear, its money-management unit, Bear Stearns Asset Management, and two senior BSAM executives, Ralph Cioffi and Matthew Tannin, defrauded it in seeking and investing borrowed capital.

The two funds they managed, known as the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund, collapsed in July, wiping out $1.6 billion in investor capital. Barclays was a big lender to the enhanced fund, which started operations in 2006.

The funds melted down after facing a cash shortage that made them unable to meet investor or lender requests for their money back when risky bets on the market for loans to borrowers with weak credit went bad.

As the High-Grade funds faltered, alleges the Barclays complaint, their desperate state was concealed from bank officials, whose calls and e-mails were dodged as they sought performance information.

"It is now clear that the BSAM Defendants have long known that the Enhanced Fund and its underlying assets were worth far less than their stated values in the early months of 2007," asserts the complaint, referring to Messrs. Cioffi and Tannin, "and were at great risk for further losses."

The Barclays suit, which demands a jury trial, is seeking damages of an unspecified amount. A spokeswoman for Bear declined to comment.

Write to Kate Kelly at kate.kelly@wsj.com


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Nye Lavalle
The complaint shows how sleazy and corrupt the sleeping bear is...

http://online.wsj.com/public/resources/documents/12192007barclays.pdf


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BARCLAYS FYI

http://www.financialnews-us.com/?page=ushome&contentid=1045195407

 
Barclays buys US mortgage servicing business
23 Jun 2006

Barclays, the UK bank, has become the latest firm to buy a US mortgage originator to boost its mortgage securitization business with its $469m purchase of HomEq Servicing from Wachovia.

Grant Kvalheim, co-president of Barclays Capital, said: "This transaction will enable us to grow our existing US mortgage securitization franchise. It will improve our ability to price deals, manage risk and expand our list of counterparties."

Barclays will finance the transaction out of existing cash resources.

 

There have been a lot of posts here on HomeEq's servicing practices.  Looks like having a crooked servicer in their stable didn't help Barclays manage their risk so well afterall. 

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Skrubear

http://www.finalternatives.com/node/3161

Body Blows Will Keep Coming For Bear

By Jake Zamansky

When I first disclosed in August that I had filed claims on behalf of investors in the failed Bear Stearns structured credit hedge funds, some media pundits were incredibly skeptical. “Hedge funds are inherently risky,” they frothed. “Investors shouldn’t expect legal redress if they go south.”

But the truth is that many investors, including those I represent, had good reason to believe that the Bear funds were “conservative” investments. Yes, the offering memorandum contained the standard boiler plate, “This is a risk investment and you should be prepared to lose all your money,” but that isn’t how the funds were marketed to investors. Quite the contrary: Some of my clients were assured that the funds were conservative, with upside returns of between 10-12% and a downside risk decline of only 10%. 

The Bear funds were anything but conservative. As excellently chronicled by BusinessWeek, more than 60% of the net assets in one of the funds were so illiquid or obscure that management randomly assigned their value. And with the advantage of hindsight, we know that at the least Cioffi and his cohorts were wearing very high amplification rose-colored glasses when they concocted these values.

My initial skepticism about the Bear funds has attracted some impressive company:

• The U.S. Attorney’s Office and the SEC are examining whether Cioffi engaged in insider trading by removing $2 million of his own investments out of the funds while continually marketing the funds as a great investment opportunity.
 Massachusetts Secretary of State William F. Galvin has charged BSAM with engaging in inappropriate trading of complex securities from its own account with hedge funds without the required notifications to the funds' independent directors. 
• Barclays has filed a claim likely worth  over $400 million alleging Bear Stearns was unloading its “toxic waste” in the form of bad debt, presumably before the debt would have to be written down as a loss.  Barclay’s alleges fraud, conspiracy and a breach of fiduciary duty.

Bears’ clients should all take note how the firm is handling the collapse and treating its clients. First, the company insisted that the funds’ bankruptcy proceedings be held in the management-friendly Cayman Islands, making any meaningful recovery for investors exceptionally difficult. Bear also tried to use its muscle to prevent the overthrow of its asset management arm from being dismissed as the overseer of the funds’ liquidation. Bear has allocated a measly $500,000 to the accounting firm KPMG to investigate the funds’ collapse, thereby assuring that no meaningful findings will be discovered or revealed.

Investors are employing several different legal strategies in order to recoup losses. Some attorneys are pursuing litigation claims in the courts, a somewhat risky strategy because there are no guarantees that judges will allow the cases to proceed. Moreover, Wall Street firms have the resources and financial muscle to drive up costs with incessant motions and appeals, so the legal costs of pursuing recovery could be extremely prohibitive as the proceedings will likely drag on for years.

Some attorneys, including me, are filing arbitration claims. Filing arbitrations through FINRA assures an expedited case that will be heard and decided probably within two years. Moreover, it is rare for a FINRA arbitration claim to be dismissed. Another critical advantage to arbitration is that appeals rarely succeed – so a win in arbitration usually sticks.

If recent weeks are any indication, the body blows will keep coming for Bear Stearns. Cioffi has quietly left the firm and CNBC’s Charlie Gasparino has reported that Bear Stearns’ board may even be discussing the departure of CEO Jimmy Cayne. The next shoe likely to drop is the U-5 form that Bear Stearns is required by law to file disclosing the reasons for Cioffi’s departure.

My firm this week served Bear with a request for a wide swath of documents that should shed some additional light on why the firm’s hedge funds collapsed. In preparing the documents I couldn’t help but feel a sense of déjà vu. Some six years ago I served Merrill Lynch with a similar document request relating to the firm’s now infamous tech analyst Henry Blodget.

Sadly, not much has changed in the interim on Wall Street.

Jake Zamansky is a partner at Zamansky & Associates, a New York-based securities arbitration law firm. His firm focuses on helping victims of securities fraud recover money lost due to negligence or unscrupulous actions on the part of stockbrokers or other investment professionals. More of Zamansky’s musings can be found on his blog at http://www.zamansky.blogspot.com/

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