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2. BONY Mellon gender bias charge rebuffed by jury

Steven Cohen perhaps breathed easier once it became clear that prosecutors, for now anyway, did not intend to bring criminal charges against him, which means he won't be facing jail time. But prosecutors certainly are trying to hit him where it otherwise hurts the most: they are going after his personal money.

A debate has broken about the extent to which Cohen could have his personal fortune somehow confiscated. Bloomberg notes that if illegal funds are "commingled with clean money, such as a hedge fund's main account, there is some precedent" for confiscating the combined amount. "A judge could rule there are sufficient links between the two types of funds, and that the amount involved is appropriate given the nature of the offense. To get access to commingled funds, the government has to show it traced profits from SAC's alleged insider trading activities to other funds within the firm."

That said, just because it can go after nearly all assets of a firm doesn't mean it actually will.

In any case, given that the case itself seems like a lock for the prosecution, the real drama may be in the penalty phase. No one would be surprised if the Justice Department goes for the kill.

For more:
- here's the article

Read more about: SAC Capital
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By Jim Kim

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3. The end of the commodities business on Wall Street

You have to be strong to bring a bias case against a bank these days. In so many ways, the deck is stacked in favor of the company. Indeed, formal legal actions by employees rarely make it to trial, which makes the case of a 56-year-old female portfolio officer at Bank of New York Mellon all the more interesting.

Rochelle Cohen lost her $124,000-a-year job in 2010, in one of the rounds of post-financial crisis layoffs at the bank. Ten women lost their jobs and one man. She sued in 2011.

Cohen testified at trial "that two years before she was fired, she asked her managers why she was not getting paid as much as the men. She contended that her managers became critical of her after she brought up gender issues," according to DealBook.

The jury didn't quite see it her way, ruling that she was not a victim of discrimination.

For plaintiffs that make it this far, the reward is having your career dissected publically. The jury ended up hearing a lot about her performance, including a glaring "mistake," which was hard to explain away, and her compensation. In the end, it's hard to definitively interpret the facts. There is always some spinning that can be done.

For example, Cohen "generated revenue of $1,695,000 for the bank in 2009, and her lawyer mentioned several times over the course of the trial that one of the male portfolio officers who earned more money had generated only $1,555,000 that year. Witnesses for the bank have testified that there were aspects of Ms. Cohen's revenue base that caused her accounts to be less profitable than some of her colleagues'."

The bank lost too, as some dirty laundry about some of the male employees was also aired. In the end, the bank will have to take a look at how it might prevent these sorts of situations, and that's progress, if only a bit.

For more:
- here's the article

Read more about: gender bias, Discrimination Suits
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By Jim Kim

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4. The jury speaks on Fabrice Tourre verdict

"Just being able to trade financial commodities is a serious limitation because financial commodities represent only a tiny fraction of the reality of the real commodity exposure picture…. We need to be active in the underlying physical commodity markets in order to understand and make prices." So said Blythe Masters about 3 years ago, as noted by the Financial Times. The occasion was a then-groundbreaking deal to buy RBS Sempra Commodities, which owned a lot of physical storage space.

This was a groundbreaking move by Wall Street to move much deeper in the commodities machinery, right down to the housing of physical goods. For years, the conventional wisdom held that investment banks ought to jump in.

But now the bloom is off the rose in so many ways. JPMorgan has announced it would exit the physical commodities business, preferring to stick to trading. Goldman Sachs has come under fire for the practices of the Metro metals warehousing unit.

"The fact that JPMorgan is considering a sale is the clearest sign yet that Wall Street's commodities trading boom has fizzled out. Coalition, a consultancy, reports that the combined revenues of the top 10 banks in the commodities sector was $6bn last year, down 22 per cent on 2011. Revenues peaked at $14.1bn in 2008, the same year the oil price peaked," notes the FT.

One issue here is why JPMorgan so quickly decided to exit the business. Some might argue that it had no choice in the face of terrible PR. But others note that the business might not have been as profitable as it hoped for.

All eyes for the moment are on Goldman Sachs. If it decides to sell its Metro unit, which I doubt it will, it will likely be seen as a sure sign that the returns lagged expectations somewhat.

For more:
- here's the article

Read more about: Commodities Trading
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By Jim Kim

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5. Within Goldman Sachs, cheering for Tourre

In the end, the jury in the trial of ex-Goldman Sachs mid-level executive Fabrice Tourre seemed to agree that he was being made a scapegoat---to think that he's taking one for all the higher-level executives on this is laughable. At the same time, they seemed to think that a scapegoat was necessary. The big issue in the minds of the jurors seemed to be Wall Street greed, according to an article in DealBook, which was based on interviews with five out of the nine jurors.

"In his opening argument to the jury, Matthew T. Martens, the leading lawyer for the agency, depicted the case against Mr. Tourre as an assault on 'Wall Street greed,'arguing that the former trader had created a deal 'to maximize the potential it would fail.'

"Mr. Tourre, Mr. Martens later declared in his closing remarks, was living in a "Goldman Sachs land of make-believe" where deceiving investors is not fraudulent.

"That argument resonated with the jurors."

Still, they seemed to get that Tourre was hardly the executive with the most authority in this area. One juror, a priest, was quoted: "It is a shame lower-level employees get pulled in. There's a part of me that felt it was very unfair."

Another put it well: "They portrayed him as a cog, but in the end a machine is made up of cogs and he was a willing part of that."

In the end, it was a victory for the SEC. But they would be wise to keep this all in perspective. They got the capo but not the don. So this victory doesn't mean that they are once again riding herd on crime on Wall Street. The perception that they fell down on the job, fairly or not, still lingers.

For more:
- here's the article

Read more about: Goldman Sachs, Fabrice Tourre
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By Jim Kim

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