Here's another priceless story from Blue. We've had plenty of branch and regional-level tales on this blog, so it's great to see that there was so much nonsense going on at the corporate level as well. Enjoy....
When our beloved (hah!) CEO turned 75, it was decided that to honor the occasion, there would be a party for him, and gifts and such. My manager wanted to get something for him anyways, but somewhere along the line the management team got an email from "the favorite son" basically TELLING all of them the gift the "management team" was going to get him and how much it would cost.
Apparently the family had major connections within the jewelry industry, and the old man really wanted an expensive watch - not sure of the brand, but I'm pretty sure it cost upwards of $20,000 or so on the retail market. In his note to his management team, the favorite son basically told all the managers that "even though he could OBVIOUSLY afford to buy this watch for his Dad, it would be a nice gesture if all of them contributed and also they would engrave something special on the back just for him." And apparently the sons would make up the difference on the gift (more on this later).
So basically all the managers had to cough up something like $300-500 each for the old man's birthday gift!! And from the sounds of it, this was a MANDATORY thing (in other words, if you didn't pony up, don't expect the family to keep you employed after that, since you obviously were not a team player!) So all of them pony-ed up, and I know my boss and a few of the others grumbled privately about it (well if they told me, maybe it wasn't so "private!") because it wasn't like they were sll earning the millions of dollars the family was, and after all, would you spend $500 on a birthday gift for your own family, let alone for YOUR BOSS???
The real kicker came after the fact. They had a little gathering, and if most of you remember, we all had to have group photos taken of our teams (what a joke that was) to be framed and presented to the old man. From what I heard, the old man basically thanked his sons for the watch, and didn't genuinely thank the other managers that actually paid for it.
And here's the real kicker, one that the old man himself will love if he is still actively reading this blog. Apparently, the not-as-favorite-son (the one who always resented taking a back seat to his brother) went around afterwards and confessed that, thanks to the wholesale deal they were able to get with their jewelry friends, there was enough money collected from the management team to pay 100% for the watch!!
So neither he nor his "favored" brother actually commited a penny of contribution to a gift for their old man, yet they took the majority of the credit for it!! How classic is that!!! :) And papa never knew!! In fact, it was probably the only gift papa got from them for his 75th birthday, and the sons didn't contribute at all!!
Now that's demonstrating effective management of your employees if ever there was an example!! Get them to pay for something, and then take all the glory for yourself.
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This appeared in the Wall Street Journal today. Looks like the FBI are investigating 15 subprime firms. One can only hope FBR and FNLC will be part of this probe.
FBI Investigates Countrywide
U.S. Scrutinizes Filings
On Financial Strength,
Loan Quality for Fraud
By GLENN R. SIMPSON and EVAN PEREZ
March 8, 2008; Page A3
WASHINGTON -- The Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives.
The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized.
"We are not aware of an investigation being conducted by the FBI," Countrywide spokeswoman Jumana Bauwens said in an e-mail. A spokesman for Bank of America Corp., which is in the midst of acquiring Countrywide, declined to comment.
Fifteen other subprime companies also are under scrutiny by federal agents and prosecutors in a broad look at the subprime industry sparked by huge losses on residential mortgages and the securities used to fund them. The investigations are examining mortgage-origination fraud, conflicts of interest and undisclosed relationships within the industry, and the practices used to package mortgage-backed securities for sale to investors.
Countrywide issued more than $100 billion in mortgage-backed securities between 2004 and 2007, according to the newsletter Asset Backed Alert. More than two dozen Wall Street firms helped construct those deals, making it possible that some of them will also face law-enforcement scrutiny.
While Countrywide is based in Calabasas, Calif., near Los Angeles, the inquiry is being handled in New York and overseen in Washington, people familiar with the matter said. Federal prosecutors in New York have primary jurisdiction over securities-fraud cases, while FBI and Justice Department officials are coordinating the subprime probes here.
Federal investigators are looking at evidence that may indicate widespread fraud in the origination of Countrywide mortgages, said one person with knowledge of the inquiry. If borne out, that could raise questions about whether company executives knew about the prospect that Countrywide's mortgage securities would suffer many more defaults than predicted in offering documents.
Another potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed.
Countrywide, which agreed in January to be acquired by Bank of America for $4 billion, already is under investigation by the Securities and Exchange Commission for possibly improper accounting. SEC investigators are working closely with FBI agents on several subprime investigations, officials said. The attorneys general of Florida and Illinois have launched probes too.
Countrywide also is the subject of a class-action, securities-fraud civil lawsuit by various government pension funds and their managers, including the city and state of New York. The lawsuit identifies more than 25 firms that helped Countrywide package and sell mortgage-backed securities, including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Lehman Brothers Holdings Inc. The firms have denied any wrongdoing.
Countrywide "misled investors by falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity that would not be jeopardized by negative changes in the credit and housing markets, and a conservative approach that set it apart from other mortgage lenders," the suit alleges.
Anna, I was not sure how to e-mail you directly but I have a question. If possible how can I e-mail you directly? Thanks, have a great day.
Here's a great article that appeared today in the Washington Post. It's no wonder the Henschels failed at keeping their company afloat. Read about the ineptitude of the FBR team and some of the decisions they have made over the years. I think this is the tip of the iceberg and we will see FBR also disappear by year's end.
FBR's Awful Truth
By Steven Pearlstein
Friday, March 14, 2008; Page D01
There was a time when lots of us were rooting for Friedman, Billings, Ramsey, the homegrown investment bank. With its strong bench of analysts, its focus on financial services and technology, its scrappy trading desk and a loyal network of institutional investors eager to buy up whatever it was selling, FBR was the Washington upstart determined to beat Wall Street at its own game.
But in the decade since it began selling its shares to the public, FBR seems to have careened from one disaster to another, losing billions of dollars for its customers and investors and constantly restructuring itself to give the illusion of reinvention. One of the founders was forced to resign from the firm after a federal investigation into whether the company had given inside information about one of its customers to another. Its own stock is so beaten down -- from a high $28 four years ago to yesterday's close of $1.93 -- that investors are pricing it at less than the company's book value.
Sad as it is to say, I'm coming to the conclusion that FBR has come to represent everything that's bad about Wall Street, quick to jump on every fad, substitute hype for solid research and earn big fees for peddling junk.
Let us recall, for example, that FBR was an active financier and cheerleader for the tech and telecom boom of the late '90s, putting its customers' money and prestige behind dozens of flameouts that included LifeMinders, WebMethods and Varsity Books.
In between bubbles, it took the lead in funding a Bermuda reinsurance company that entered the market just in time to get buried under two of the worst hurricanes in history.
FBR became an underwriter for the residential real estate bubble, helping to finance New Century Financial, Luminent Mortgage Capital, Thornburg Mortgage and American Home Mortgage.
In 2005, FBR decided to jump into the subprime pool with both feet, paying more than $100 million to acquire originator First NLC and losing hundreds of millions of dollars more before taking the firm into bankruptcy earlier this year.
A financial whiz I know compiled for me a list of all the stock offerings FBR underwrote between 2001 and 2007, both public IPOs as well as the private placements in which FBR specialized. He found that if you'd invested in all of them on the day they started trading, you'd be down now by about 20 percent. That compares with a gain of 20 percent on the Standard and Poor's 500-stock index, or a loss of 9 percent on the S&P Financial index.
Of course, investment banking is only part of FBR's business -- and at this point, the only profitable part, although even that is now questionable, given the market turmoil and the dramatic slowdown in new issues. But it's worth noting that in the past two years, when other financial firms were posting record profits from proprietary trading (buying and selling securities with the firm's own money) and asset management (collecting fees for running hedge funds and mutual funds), FBR managed to lose money in both areas.
Not that it would have been easy for an investor -- or a business journalist -- to come up with a clear picture of what was going on at FBR. No sooner would something go wrong than a press release would appear announcing some new strategy or structure or the shift of assets from one pocket to another. One day FBR is an investment bank, the next a tax-free real estate investment trust with a taxable investment bank subsidiary. Then, when the REIT starts to crash, it spins off the investment bank as a separate entity, selling part to a private-equity firm and then, a few months later, another part to the public.
This is the kind of hocus-pocus that financial sharpies engage in when they can't succeed by delivering good value to customers and investors. With FBR, it's a case of being too clever by half.
What's most galling, however, is how well FBR's top executives have done for themselves despite all the misjudgments and setbacks. One founder, Russ Ramsey, was clever enough to cash out and leave shortly after the initial public offering. And before the recent troubles, Manny Friedman and Eric Billings made themselves two of the highest-paid executives in the region, with annual compensation packages approaching $10 million each.
But for pure chutzpah, nothing tops the recent announcement that, following a year in which the company posted an operating loss of $740 million, Billings and three other top executives were awarded bonuses and stock grants worth $30 million, at the time equal to nearly 9 percent of FBR's market value.
The rationale given by FBR's compensation committee is a model of twisted logic that now infects the minds of corporate directors. It noted that these executives had gone years -- yes, two entire years! -- without a bonus because of the company's poor performance due to a subprime mortgage crisis that was outside their control. And it lauded them for their great success in selling off the subprime assets for which they grossly overpaid, and for raising $220 million through the IPO of the investment banking subsidiary to investors who, in the space of eight months, have seen the value of their shares fall by two-thirds.
One can only imagine what bonuses the FBR directors would have lavished on Billings and his associates if they had sold stock that had actually increased in value.
But equally absurd was the rationale for granting Billings $2 million and an additional 3.5 million shares of FBR stock as a retention award, so he won't go leave the company over the next three years. This is the founder of the firm with his name on the door, who, with 6 percent of the common stock, is already the firm's largest individual shareholder. By his own admission, he bet the firm on residential real estate and subprime mortgages -- and lost. So where else is he going to go? Does anyone really believe that recruiters from Goldman Sachs are banging on his door?
Of course, the better question is why, rather than picking the pockets of beleaguered shareholders to pay big retention bonuses, FBR's directors haven't sent Billings packing. After all, that's what happened at Citigroup, Merrill, Morgan Stanley and Bear Stearns in the wake of similar misjudgments. At FBR, by contrast, not a single top executive has lost his job as a result of the mortgage debacle.
Steven Pearlstein can be reached atpearlsteins@washpost.com.
Nepotism is pretty much dead in corporate america, save for the government -- and companies like First NLC (and FBR too, as I understand the Tonkels and the Billings had many sons/brothers/nephews working there too). I always felt that working for a company that makes it a practice to hire relatives and friends/neighbors or anyone willing to pucker up and sychophant their way to the top, would ultimately be doomed. First NLC proved that theory correct. now let's see if FBR explodes as well.
Lord have mercy. Ugh!!!
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