Bloomberg News

GE Muni-Bond Settlement, Austria’s Alizee Bank, FCC: Compliance

December 29, 2011

Dec. 27 (Bloomberg) -- General Electric Co. agreed to pay $70.4 million to settle a criminal probe and civil claims for conspiring to rig bids on U.S. municipal-bond deals, overcharging state and local governments on investments.

GE Funding Capital Market Services, a former unit, is the fifth company to settle in a more than five-year federal investigation that exposed “widespread corruption” in a segment of the municipal market that deals with the investment of proceeds from bond issues, the SEC said.

The deal entered into by GE Funding will resolve probes by the Justice Department, the Securities and Exchange Commission and the Internal Revenue Service as well as attorneys general in 25 states, the Justice Department said Dec. 23 in a statement.

The settlement will bring to $743 million the amount that banks have paid to end the case, some of which is being returned to localities that were overcharged, the SEC said in a news release. Bank of America Corp., JPMorgan Chase & Co., UBS AG and Wells Fargo & Co. previously settled similar cases.

GE’s settlement stems from an investigation that centered on three now-former employees at a unit the finance division discontinued in April 2010, the Fairfield, Connecticut-based company said in a statement Dec. 23. The conduct took place between 1999 and 2004, GE said.

The settlement won’t have a “material impact” on earnings, according to GE, the world’s biggest maker of jet engines and power-generation equipment.

The Justice Department said it agreed not to prosecute GE Funding because it admitted its illegal conduct, cooperated with the investigation and took steps to address anticompetitive conduct. The department also cited GE Funding’s commitment to make restitution.

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Compliance Policy

FCC Plan to Ease Cross-Ownership Rules Points to Consolidation

The Federal Communications Commission agreed to propose easing limits on one owner holding a television station and newspaper in a top 20 U.S. market.

The FCC plan keeps existing caps on TV and radio station ownership. “The public interest is best served by these modest, incremental changes to our rules,” the agency said in its notice on the proposed rule.

Approval of the FCC action may spur acquisitions, increasing the value of media companies.

The FCC proposal said that some newspaper and broadcast cross-ownership restrictions are needed to preserve a diversity of viewpoints in communities.

The FCC plans to take comments on the proposal, and no date has been set for a vote. Neil Grace, an FCC spokesman, declined to comment.

This is the second proposed change in cross-ownership rules in the past four years.

Consumer groups and members of the media differed over whether changes to the regulations are needed because the rules have become obsolete or the changes would do harm by consolidating media power.

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Compliance Action

Austria Takes Control of Alizee Bank to Protect Creditors

Austria’s financial regulator took control of Alizee Bank AG, a specialized lender to solar and wind-power projects, by assigning a state supervisor charged with protecting creditors’ interests.

The regulator, FMA, Dec. 22 assigned Dorotea Rebmann as state supervisor to the bank to “safeguard the financial interests of creditors and the assets entrusted to the company,” the agency said in an e-mailed statement Dec. 23. A state supervisor is assigned if “there is a risk to the ability of a credit institution to serve its liabilities to creditors.”

Alizee, based in Vienna, confirmed the appointment in an e- mailed statement, adding that it didn’t mean the bank lacked liquidity. Alizee plans to raise fresh capital soon, it said.

The bank had assets of 41 million euros ($53.5 million) at the end of last year, according to its annual report. Its net loss widened to 2.25 million euros in 2010, from 1.36 million euros a year earlier.

CVC Drops Takeover of ConvergEx Amid Probes by SEC, Justice

ConvergEx Inc., a trading-software company partially owned by Bank of New York Mellon Corp., said its July agreement to be bought by CVC Capital Partners Ltd. was terminated amid regulatory investigations of its Bermuda unit.

The parallel probes by the U.S. Securities and Exchange Commission and the Department of Justice mainly involve certain non-electronic trade-execution practices by the ConvergEx Global Markets unit, which is expected to produce 7 percent of revenue this year, New York-based ConvergEx said Dec. 23 in a statement. The audit and risk committee of the board has hired outside counsel to conduct a review, the company said.

“Since becoming aware of the matters under review, we have taken strong actions to remedy any lapses that have occurred,” Joseph Velli, chief executive officer of ConvergEx, said in the statement. “We are taking additional steps to ensure that we are in full compliance with our own policies and procedures as well as all other regulatory requirements.”

John Nester, a SEC spokesman, and Gina Talamona, a Justice Department spokeswoman, declined to comment on the investigations. Claire Ellis, a spokeswoman for CVC, wasn’t immediately available for comment. Ron Gruendl, a spokesman for New York-based BNY Mellon, declined to comment beyond the statement.

Four Swiss Banks Told to Improve Finances, Le Temps Reports

The Swiss Financial Market Supervisory Authority gave four banks until the end of this month to improve their finances, Le Temps reported, without citing anyone.

The regulator, known as Finma, declined to comment. Finma, which regularly puts the country’s biggest banks, through stress tests, said in July that it has started doing similar exercises for smaller lenders.

Hottinger, one of two banks identified by the Swiss newspaper, hasn’t been approached by Finma about its financial situation, Chief Executive Officer Joerg Auf der Maur said Dec. 23 in a telephone interview from Zurich.

“Our bank is in good financial health and we fulfill all of Finma’s capital requirements,” he said.

Nobody at Faisal Bank in Geneva, the other firm cited by Le Temps, could immediately comment when called by Bloomberg News.


SEC Backs Lehman Brokerage in $3 Billion Barclays Dispute

The U.S. Securities and Exchange Commission sided with the Lehman Brothers Holdings Inc. brokerage in a $3 billion dispute over assets with Barclays Plc, saying a judge ruled correctly that the U.K. bank’s claim to securities in customer reserve accounts was conditional.

If the SEC prevails, Barclays may lose its claim to as much as $1.3 billion reserved for customers, according to an SEC court filing Dec. 22.

Michael O’Looney, a Barclays spokesman, declined to comment on the SEC filing.

Barclays and Lehman Brothers Inc. both appealed U.S. Bankruptcy Judge James Peck’s ruling that told Barclays to return $2 billion in margin assets to the bankrupt brokerage, and said it had “only a conditional right” to $769 million in the customer reserve account. Brokerage trustee James Giddens is fighting Peck’s order to give the bank at least $1.1 billion, and possibly the $769 million, if it leaves enough in the reserve account to satisfy remaining customer claims.

Both sides were expected to file court papers Dec. 23 in their appeals.

The district court case is Giddens v. Barclays Capital Inc., 11-cv-06052, U.S. District Court, Southern District of New York (Manhattan).

MF Trustee Disputes $700 Million With U.K. Affiliate

The trustee for the MF Global Inc. brokerage said he’s disputing as much as $700 million in customer assets with the administrators of a U.K. affiliate.

Trustee James Giddens, who has said he’s trying to retrieve U.S. commodity customers’ assets from foreign affiliates, told the administrators the funds were held for customers’ foreign trades and should be returned, he said in a statement Dec. 3. The administrators said the assets didn’t fit the classification of segregated funds under U.K. law, he said.

Monica Fiumara, a spokeswoman for KPMG LLP, administrators of MF Global’s U.K. unit, couldn’t be reached for comment.

Giddens’s third transfer of assets to customers of $2.1 billion is underway, he has said. Two previous payouts to commodity customers totaled about $2 billion. The transfers would still leave customers short of about 28 percent of their assets, he has said.

The assets he’s fighting for in the U.K. aren’t part of an estimated shortfall in customer property of at least $1.2 billion, Giddens said in the statement.

The parent company filed for bankruptcy protection on Oct. 31.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Dakin Campbell, Linda Sandler, Martin Z. Braun and Devin Banerjee in New York; Boris Groendahl in Vienna; Carolyn Bandel in Zurich; Eric Engleman and Chris Strohm in Washington. Editor: Mary Romano.

To contact the reporter on this story: Carla Main in New Jersey at

To contact the editor responsible for this report: Michael Hytha at

The Aging of Abercrombie & Fitch
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