Former LPS Exec - 1 Million Fraudulent Documents? More on Auditors; Explanation of Europe
The ability to send a petition directly to the White House brings out the
interesting folks. Who doesn't want cat-girls? Here you go.
Hey, we still have 6 business days left in November - but funders know
that there are only 20 in December (including Christmas Eve and New Year's Eve,
which I guess count from the government's perspective). Today we are privileged
to see riots in the streets and stores, full of excited mobs of people with too
much debt and little fiscal responsibility trying to obtain more possessions.
This scene, however, could be here in the United States OR in Athens or Lisbon.
But we'll stick with the United States, where Black Friday is the annual
celebration of American consumerism. Yesterday we all sat with our families,
gained 5 pounds, and watched some meaningless football match involving the
Detroit Lions. But whether it is here, or in Europe, both groups want the
same thing: to have their creditors give them more goods in exchange for debt
that will ultimately be inflated or defaulted away. And now instead of the
election we'll have the press yammering about a) consumer's shopping trends,
and b) the fiscal cliff.
One person who won't be doing much shopping is a former executive of
Lender Processing Services, Inc. (LPS) who pled guilty last week to mail and
wire fraud charges, admitting her participation in a six-year scheme to
prepare and file more than 1 million improper mortgage documents as part of the
so-called robo-signing scandal. Lorraine Brown, former CEO of DocX LLC, a
subsidiary of LPS, faces a maximum penalty of five years in prison and a
$250,000 fine, or twice the gross gain or loss from the crime. Assistant
U.S. Attorney General Lanny A. Breuer said, "Lorraine Brown participated
in a scheme to fabricate mortgage-related documents at the height of the
financial crisis. She was responsible for more than 1,000,000
fraudulent documents entering the system, and directing company employees
to forge and falsify documents relied on by property recorders, title insurers &
Andrew Liput, with Secure Settlements, sent out, "The robo signing
scandal that has infected the foreclosure process in judicial states has caused
millions in losses to banks as litigation has been prolonged or placed on
indefinite hold so courts can sort out the mess. These fraudulent
activities highlight the lack of transparency and accountability of those few
who fail to take their roles as fiduciaries of banks seriously. The days are
long gone unfortunately when banks, or the public, can assume that a licensed
attorney or any licensed professional is exempt from bad acts. This is
precisely why Secure Settlements favors individual vetting and ongoing
monitoring on top of licensing and insurance. When those entrusted with bank
funds and documents know that they are being checked out, monitored and rated,
and that banks and consumers will be expecting independent verification of
their credentials and identity, I am certain it will be a significant
deterrence to cutting corners and outright fraud. Criminals don't like to work
in the sunlight."
Wednesday the commentary discussed some auditing information/suggestions.
Audits and exams are a way of life for banks, mortgage companies, and so
forth - most believe it is only a matter of time until other "handlers" of
money, such as Realtors, title companies, attorneys, and so on are subject to
the same scrutiny. One of the offshoots of the work of internal auditors,
and their process, is to make sure that the integrity of the audit process is
maintained, remove undue management influence and while it can sometimes put management
and staff on edge, it is designed to serve and protect the bank. Such processes
are common in banking. As audits unfold, teams will commonly seek answers to questions
that surface from their discussions with staff or management. To ensure
accuracy, anything of note that surfaces should be double-checked again to make
sure nothing is misunderstood. This is the time when management or staff has an
opportunity to respond or clarify things. All of this back and forth process is
then incorporated and final results are provided to the audit committee of the
Auditing is important and to make sure the process is thorough, fair and
effective; it is also critical to make certain the function is independent
of the audited activities. That sounds like common sense, but when expertise
resides in one area and a community bank doesn't have extra people to throw around,
it can be more complex than it seems at first blush. Community banks just don't
have teams of experts lying around that are unused, so care must be taken to
ensure the audit process is followed. In a community bank stretched for
resources, it seems to make sense that the internal audit function should be
able to design and implement processes to correct findings, but this should be avoided.
There are simply too many potential conflicts that can arise, so the audit
function must remain independent of operational management. Questions and
discussion are common and helpful, but the audit team should not be directly
involved in the development or implementation of internal controls. Finally,
it is important for companies to train their audit staff to keep them at the
top of their game. Understanding where risks are coming from is important, but
equally important is making sure the auditor has the understanding and training
to handle the bank's situation. Here the report indicates auditors should have
the ability to collect and understand information, to examine and evaluate
audit evidence and to communicate with stakeholders of the internal audit
function. Pacific Coast Banker's Bank notes, "It makes sense to not only
boost training for audit teams, but to share knowledge gained throughout the
bank that is obtained as a result of the audit process. Doing so will help your
bank maintain best practices, as risk management is further enhanced."
For economic commentary, David Zervos with Jefferies did a great write up a
while back on Europe, and an analogy, that I wanted to share. "Imagine
that the state of California could not fund itself in the private capital
markets. And as the state unemployment rate pushed north of 25 percent, basic
government services ceased, pensions were slashed, house values plummeted and
there was growing social unrest on the streets. California needed a massive
fiscal adjustment to wean itself off decades of mismanagement, abuse and
unsustainable debt accumulation. Default was imminent and it was going to be an
ugly end to the great California bubble! Of course, if that were to happen,
California would appeal to Washington for help. And given our pork filled
federal government structure, there would be immediate relief via fiscal
transfers. But imagine a US constitutional set-up like that of the Eurozone -
one with no federal transfers for states. As California sank deeper into the
abyss, there would be no fiscal lifeline - and the negative externalities from
a statewide depression would start to feed into the other states, contaminating
the entire financial system, and threatening the longer term growth prospects
for all of the United States."
He continued, "In this 'European' version of a US downturn, there would
only be one institution that could act - the Fed. But even as the Fed lowered
rates to 0, and expanded its balance sheet to counteract the systemic
effects from this localized depression, a funny thing happened - none of the
stimulus got to California. There were "Draghian blockages" in place!
The lower rates went to North Dakota and Texas instead. In fact, the states
with sound finances were even able to fund at negative nominal yields. And
corporates in those states could fund at record low rates. But those low rates
did not actually entice much municipal or corporate investment since folks were
simply too worried about the negative Californian externalities. Further,
everyone saw what too much leverage did to California and they were rightly
nervous. To be sure, there were windfall gains from refinancing existing debts
at lower rates in the healthy states, and consequently businesses in those
states saw their equity valuations rise sharply, but there was little new
investment or job growth. In this hypothetical world, easy monetary policy
blanketed the entire US, but the elixir did not make it to the source of the
problem. Further, the negative sentiment associated with a California
depression kept overall US sentiment depressed - even with record low rates. So
what would the Fed's answer be - just do more QE. And as the dosage of monetary
policy accommodation increased ad nauseum, the temptations would become too
great in the uncontaminated areas - bubbles in Texas and North Dakota would
develop. Deja vu all over again!"
Lastly, "Meanwhile, after decades with California living beyond its
means, many ordinary US folks would push for them to leave the US. Their profligate
ways would be seen as a stain on the rest of the country. And of course
many in California would begin to push for an exit from the United States.
Their solution would be to redenominate the existing debts into a new currency
that featured pictures of their heroes from the old days. The currency would be
called 'the bubble' - Kim Kardashian would be on the one bubble bill, Paris
Hilton on the five, Lindsay Lohan on the ten, Brittany Spears on the twenty,
David Hasselhoff on the fifty and of course Charlie Sheen on the C-note.
And a hundred bubbles would basically buy a big gulp a 7 eleven!" Very
well done, Mr. Zervos.
anyone who cares about where rates are today, they're about unchanged from
Wednesday's levels with the 10-yr at 1.67%.)
New Federal Golf Rules
Major rule changes in the game of golf became effective in November, 2012.
This is only a preview as the complete rule book (expect 2,716 pages) is being
rewritten as we speak.
Here are a few of the changes:
Golfers with handicaps:
- Below 10 will have their green fees increased by 35%.
- Between 11 and 18 will see no increase in green fees.
- Above 18 will get a $20 check each time they play.
The term "gimmie" will be changed to "entitlement" and will
be used as follows:
- Handicaps below 10, no entitlements.
- Handicaps from 11 to 17, entitlements for putter length putts.
- Handicaps above 18, if your ball is on the green, no need to putt, just pick
These entitlements are intended to bring about fairness and, most importantly,
equality in scoring.
In addition, a Player will be limited to a maximum of one birdie or six pars in
any given 18-hole round.
Any excess must be given to those fellow players who have not yet scored a
birdie or par.
Only after all players have received a birdie or par from the player actually
making the birdie or par, can that player begin to count his pars and birdies again.
The current USGA handicap system will be used for the above purposes, but the
term "net score" will be available only for scoring those players
with handicaps of 18 and above.
This is intended to "re-distribute" the success of winning by making
sure that in all competitions every Player above an 18 handicap will post only
"net score" against every other player's "gross score".
These new Rules are intended to CHANGE the game of golf.
Golf must be about Fairness. It should have nothing to do with ability, hard
work, practice, and responsibility.
This is the "Right thing to do."
So, please remember; if you shot a round of golf under par, you didn't shoot it
yourself. Someone else built that course, and someone else cut the grass so
that you could play on it. Someone else built the clubs and the cart.
You need to share with everyone and anyone who made you a successful golfer.