The pathology of greed

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http://www.sec.gov/news/speech/1936/111236douglas.pdf


ADDRESS

by

WILLIAM O. DOUGLAS

Commissioner, Securities and Exchanee Commission

At the

NEW YORK STOCK EXCHANGE INSTITUTE

Thursday, November 12. 1936 8:45 a.m.

Customers' Men

Since this is a little university in Wall Street, I wish to speak to you in terms of education. I have no concern over the lack of any adequate opportunity which this institution will afford you to obtain necessary training and equipment for your professional work.

n I believe that you will be introduced to many of the mysteries of Wall Street.
n I believe your studies in economics, accounting and finance-will stand you in good stead and give you a broader perspective on your vocation.
n I believe you will be well trained to master the complicated financial machinery of which this spot is the physical center.
n I believe you will receive instruction designed to draw the line for you between legitimate and illegitimate; honorable and dishonorable business.
n I have no worry on the quality of your instruction.

n My only worry is what will happen to you as you move forward in your business.

I am particularly happy to discuss with you some of these problems, because you are and represent youth.

n Youth has both ambition and ideal-ism—an ambition to conquer; an idealism to make the homely virtues living realities.
n Youth is anxious to preserve the best from the past and to discard the worst.
n Youth is eager to repair the damage of these who preceded them and to build constructively and permanently.
n Youth is open-minded and forward-looking, not oppressed by prejudices engendered by habit, routine, and convention.
n Youth is the generating force whereby we move forward towards a fuller and better national life.

Hence, I welcome this opportunity to lay before you some constructive ideas for your consideration—ideas which relate to the business into which you are fast being integrated. One of the most difficult jobs is to view objectively one's own activity and conduct. This is likewise true of one's vocation or business. But I feel it will be worth your attempt if you undertake to do so.

In this connection, youth faces perplexing problems. There always have been and always will be subtle and subversive influences at work to corrupt the high functions which business, finance, and the other professions perform. For this reason one of the chief problems of youth is an ethical one. Friends, associates, environment, indeed time alone, work for this corruption. When I speak of corruption I do not mean gross extravagances in the form of larceny and the like. I refer to the practice of gentlemen teaching youth gentlemanly ways of redistributing the wealth of their clients so that they may get an inordinate share of it in extravagant ways.

n I mean the youth of the ideal of freedom of opportunity and private initiative to warrant or excuse exploitation.
n I mean the application of pressure from employers that these high virtues be exercised solely to the end that their earnings will increase.
n I include temptation to ape the activities of clever market operators so that acquisition of material wealth may be easy, effortless, and immediate.
n I refer to the urge to keep the customers' portfolios well churned so that by the quick inflow of commissions one may the sooner join the elite of high finance.

Some of your elders say that the thing that was wrong with 1929 as that they were too commission hungry. But human nature has not change. I see no reason to believe that youth cannot develop as ravenous an appetite. There will be inducements to do so, for the pressure to move onward and upward, according to cash-register standards will be almost irresistible. Hence, that which will at times appear to you, either by example or by precedent, as the end of the rainbow will be a carnation in your lapel and the comfortable club life of your city. These .are not matters which should depress youth and make it jaundiced and bitter. Rather they constitute a challenge-to youth to make constructive conquests and to capitalize opportunities missed by their elders.

Your profession has no particular claim to distinction in this respect. The same elements appear as a corroding influence in other professions. Our educational system has been too virile in production of men immunized from a sense or feeling of social responsibility; trained in the ,art of plunder in gentlemanly ways; imbued with the false ideal that the American way means exploitation. There has been too little emphasis on the principle that the basic essential of an education is the ability to think – to think in terms of human values, to think in terms of social responsibility, to think in terms of what the cumulative effect of your daily activities are in terms of your clients' welfare and of your character. This need, while not peculiar to your profession, is especially accented there because in final analysis yours is a profession affected with a public interest.

I can perhaps sharpen and make more specific some of the matters which cause this worry and concern, if I restrict my comments to one vocation which at least some of you will enter and which doubtless holds out bright prospects and hopes, especially as we move forward on the road of prosperity. This is the vocation of the customers' man.

I suppose you would say that a customers' man is not a salesman but an order clerk who transmits customers' orders, who makes sure that the orders are executed, and who reports the execution of the orders to his customers. You might say that although he contacts customers and solicits business for his employer, he does not have an inventory of securities to sell. When a customer makes a purchase through his firm, the firm does not (or certainly should not) sell the security which the customer buys. But, in spite of all this, the customers' man is a salesman, though he has nothing to sell but himself, his services, and his counsel.

The function of providing a mechanism where buyers and sellers can be brought together is..an important function to perform. Its importance is not restricted to the securities field. If you have mice and I have a mouse trap, the one who supplies the ready machinery whereby we may come together is performing an important function, at least judged from the viewpoint both of those who do not like mice and of- those who desire to sell mouse traps.

Securities exchanges similarly serve high function in providing the mechanism whereby buyer and sellers can readily come together. One of the problems raised by the institution of customers' men is the basic question of how far these markets should go towards providing salesmanship as distinguished from a market where purchases and sales can be effected.

Salesmanship like its brother, advertising, may be an indispensable ingredient of our system of business organization.

Salesmanship in the field of securities, however, has given rise to such a host of abuses that the most conservative safeguards are necessary.

Finance has used salesmanship as a short cut to profits.

Salesmen have not been able to forego those profits by telling customers not to buy this or that because it is not economically justified.

Salesmen have been told and have believed that their task is to sell customers whatever they want, and, if necessary, make them want what the salesmen have, at any price which the traffic will bear.

Those who have selling organizations on their hands would not take the larger view, as that is against their financial interests.

These selling organizations clamor for salable securities.

They like merchandise which is stylish and which has a popular demand, even though such merchandise usually reflects an exploited situation.

Hunger for commissions thus becomes at times the sole arbiter of the process of capital distribution and preservation.

When that happens, the securities business has become not a legitimate enterprise conducted for a profit but a business engaged in exploitation.

This type of salesmanship which I have described has no necessary relationship to the business of securities exchanges. These could be conducted without it and it could be conducted without them. And I do not wish to attribute to the exchanges, as such, the evils and abuses which such salesmanship has engendered. But it is important to consider the impetus to excesses which is provided when salesmanship of the type supplied by the customers' man is added to exchange trading. There is then added a stimulating factor. The glamorous limelight of exchange trading is sufficient in and of itself to attract the moths of speculation and investment. Customers' men may make that light seem brighter and more attractive than is warranted.

History teaches that the interest of customers' men frequently lies in encouraging customers to buy and sell not only often but promiscuously and indiscriminately; to be satisfied with small profits or to accept small losses; and to make the daily pace and direction of the stock market their measurement of value. Customers' men, being in constant contact with tickers and news, are frequently influenced by short-term considerations, rumors, inside dope and the like, and disseminate this influence among their customers and prospects. Furthermore, they have not only distributed other people's rumors; they have manufactured and distributed their own. Customers' men frequently have been 'primarily interested in generating trading by speculators, since their compensation is dependent, indirectly at least, upon the volume of business transacted through them. At times their activities reach the proportions of high pressure salesmen whose frantic telephoning and whose conduct are more compatible with the boiler room than with customers' rooms of member firms. Accordingly, they become an influence which stimulates speculation and encourages active and in-and-out trading.

Perhaps the tendency to such speculative activity has been accentuated by the nature of the customers’ men, since as I have said, they are primarily engaged in the solicitation of commission business in securities. In a sense they are order clerks who see to the interests of their -customers in transmitting orders, in making sure that the orders have been properly executed, and in reporting the execution of orders to the customers. By their constant observation of the market, of news and of tickers, they also keep their customers apprised of price trends of securities in which they cause their customers to be interested and of new developments affecting those securities. But it should be remembered that, as to counselor advice rendered by customers' men. they are not, for the most part, trained statisticians or economists. Their experience with securities has been largely gained in the street or financial district. At times their contacts in the financial district and elsewhere give them insight into the merits of certain securities. Yet even though they may make at times studies of corporation reports and statistical data, the advice or counsel which they are generally prepared to offer is neither that of the statistician nor that of the professional investment counsel. Thus it is that there is a growing belief that customers' men are of no use to bona fide investors; that persons who desire to invest money have ample facilities among the many sound and reliable institutions and member firms of securities exchanges without the necessity of the intervention of an additional agency like the customers' man.

These facts emphasize one of the dangers of attaching such a person to our already complicated and impersonal market machinery. It tends to separate by one further degree values from things. It tends to accentuate the dominant characteristic of securities exchanges as inanimate objects – impersonalized to such a degree that human and social values disappear' and economic facts become blurred and indistinct.

This separation of values from things is one of the most conspicuous danger points in our entire system. The progressive movement from barter, tokens and coins to paper money and securities has enabled finance to treat business as mere conglomerations of stocks. bonds, notes, debentures. Finance has not neglected the opportunity thus afforded. Through complicated financial structures, holding companies, collateral trusts, tribute in the form of hidden charges, and the like, it has created a system which at times makes almost impossible any intelligent determination of the relation between values repretsented by the securities and the things which securities represent. Or if the determination of such relationship is possible, the tendency is to treat the facts of transportation, manufacture, wholesaling, retailing, as secondary rather than primary. The weather vane of business becomes not the profit and loss account and the balance sheet, but the gyrations of these pieces of paper as revealed on the ticker. Under such influences, the ticker cannot become the pulse of business. Under such influences, the ticker cannot follow business -- the tendency is the false illusion: of business following the ticker. In other words, economic facts disappear from the picture or become blurred and indistinct. The fact that people who have saved are involved, and that their future and security are at stake is also forgotten. The social and human values disappear. When that transpires, the market becomes a place for games rather than orderly investment and liquidation processes. The consequence.is, as I have stated, an inanimate and impersonalized market devoid of human or social values and irresponsive for periods to economic facts. Tragedy in-the form of social disintegration is the end result.

Customers' men to the extent that they stimulate trading by their solicitation methods, accentuate this tendency. They add an artificial element to the market processes. They breed excitement and feverish interest. In their small way, they add to the churning of portfolios which in terms of basic economic functions has no significance. It is important only as measured in terms of cash-register standards. The activities of customers' men can have no other effect, so long as they parade themselves as understanding and knowing markets, market trends, and securities values, when in fact they do not have such understanding and knowledge.

These facts make abundantly clear that the whole institution of customers' men is at least of unestablished value. They stress anew the question of whether or not such a stimulating influence has any proper place in our sensitive and delicate market mechanism. They challenge you who are moving forward towards that profession to produce living evidence that the economic, human and social values involved in the exchange process not only will not be sacrificed, but, in fact, will be enhanced by virtue of your activity. If you do not produce that evidence, society or your exchange may feel that your function performs such a distinct disservice to investors as to justify a change in the system.

But if, and so long as, this vocation continues there are certain practices which need be eschewed, lest you further corrupt it and lest it corrupt you. In this brief paper I cannot mention all of them. A few will suffice for illustration.

The first relates to the fiduciary position of customers' men. He who holds himself out as rendering this investment counsel and this service to customers should be held to high fiduciary standards of conduct. If he who gives this advice and encourages and stimulates his customer's purchases and sales, has a self-interest in the transaction over and above his salary or regular compensation, his customer is apt to receive not unbiased and disinterested advice but advice discolored by the self-interest which such purchases and sales will serve. The presence of this self-interest will deprive the customer of the benefit of disinterested and impartial advice, the very thing which presumably the customer thinks he is getting. The courts of law have refused to admit that the average individual could stand the stress and strain of such dual interests. When the issue is resolved in final analysis, it means that the counsel given will be likely to follow the bias and self-interest of the agent rather than the best interests of the customer. In any given case the factors in motivation are too subtle and tenuous to result in anything but guesses. But human experience teaches that a man cannot serve well two or more masters. In terms of customers' men, this fundamental principle of fiduciary relationship should mean at least two things.

(1) First and foremost customers' men should have no interest, directly or indirectly in any security for themselves, except that which they, have acquired for bona fide investment purposes. To many this will appear to be not only a mistake in business judgment but also a meticulous and unnecessary stretching of these ethical and legal rules. To be sure, such standard of conduct outruns the rule of law. But as a working rule of thumb, it is essential if the market place is to be rid of some of the subtle influences of biased and discolored advice by those who purport to be objective advisers. The question is not simply one of preventing specific transactions wherein the customers' man or his firm has a special adverse interest, transactions which should be beyond the pale, it is broader than that. It entails also avoidance of a situation whether by the customers' man, influenced consciously or otherwise, by his own glowing prospects in particular speculative transactions and impressed by his own infallible judgment, proceeds to advise his customers to follow in his footsteps. Meticulous regard for these standards should be had by reliable and competent persons purporting to render investment counsel. Needless to say, this would entail prohibition of margin accounts for customers’ men, directly, or indirectly through their wives, fathers, brothers, etc. In such cases, there are further reasons:

Not only will judgment be warped and biased; fair-weather customers' men will be so concerned with their own margin accounts that their clients' interests will suffer especially in times of market reactions.

(2) Customers' men should be prohibited from having any interest in an operation designed to distribute securities. Great abuses have occurred in the past by reason of the presence of such an interest. The practice of paying customers' men, directly or indirectly, for the placement of securities with their customers has not been abolished. Reputable firms will shun and avoid this practice. Eager and ambitious (and hungry) customers' men will be tempted by it. The temptation will always be present. Operators engaged in a secondary distribution will be vitally concerned with the task of putting the securities away in permanent hands. If they can work through the good offices of the customers' man and reach such purchasers, their operations will be made easier. Accordingly, they will attempt to buy the customers' man for a consideration. The end result is that for that consideration the customers' man is giving not disinterested advice but advice corrupted and biased – irreconcilable with his fiduciary status. His corruption violates legal and ethical standards of conduct of ancient origin. He then becomes not a useful or permissible cog in the financlal system, but a corroding influence. He may be able to ,survive the fair weather, of the markets. But the day of accounting comes sooner or later if he departs from the standard of giving advice on any basis other than his own free belief in the merits of the security.

In the second place~ the extravagances of the customers' men in connection with margin trading and discretionary accounts, weaken the case and challenge the justification for their existence.

Justifiable criticism of customers' men has been directed to their tendency to encourage over-trading by their customers. Frequently they have had no regard for margin regulations and they have permitted their customers to load up their accounts beyond the point of conservatism. Some customers' men have ~encouaged customers who have a limited or restricted, account to make new commitments which they cannot afford and which they must liquidate within the limit of the three business days allowed by Regulation T. Thus the spirit, if not the letter, of such regulations has been violated. This malpractice is not, to be sure, traceable entirely to the door of the customers' man but is one for which his employer should receive equal, if not greater, blame. The problem, as you know, has been recognized by your Exchange in its rather recent ruling that no member shall permit a customer "to make a practice" of effecting transactions requiring a margin and then either defer the furnishing of a margin beyond the time when such transactions would ordinarily be settled or cleared, or of meeting such demand for margin by the liquidation of the same or other commitments in his account. But the problem from the point of view of the customers' man is not only to see that there is no such regular practice but to prevent all other transgressions. As to the prevention of such excesses, the customers' man stands in a peculiarly strategic position and is recalcitrant in the performance of his obligations if he neglects to insist on meticulous fulfillment of such rules.

More important, however, are the abuses which have arisen in the past as a result of the employment of discretionary powers by customers' men. After your Exchange had adopted a rule according to which customers might delegate discretionary powers only to partners, it was known that such powers were in turn delegated by partners to customers' men; so that the spirit, if not the letter, of the rule was violated. That rule has, as you know, been altered by the Exchange so that no discretionary accounts may be handled either by partners or by customers' men without the consent of the Committee on Customers' men. But there appears to be valid consideration for a rule which would effectively prohibit customers' men from employment of any discretionary trading power. The interests of customers' men in general and those of their customers would be well served by such a prohibition.

The dangers of any other course are self-evident. Compensation of a customers' man will always be dependent indirectly, if not directly, on the commissions he brings the firm. If he has a discretionary account, the temptation will always be almost irresistible to keep that account well churned for the sake of commissions. Discretion, in other words, will tend to disappear. The daily or weekly record of the customers' man can be bolstered by a few transactions in the discretionary account. The guiding principle will tend to be the record of the customers' man in terms of commissions rather than his record in terms of sound and conservative judgment in the interests of his client. Here again motivation is a complex thing. Cause and effect will not always be easy to determine. But human experience (the record of the past) teaches us that an employee in such a position will tend to sacrifice the client's interest for his own record of achievement in terms of commissions.

In sum, if the institution of customers' men is to survive, it must have meticulous regard for the standards of conduct governing fiduciaries. It cannot survive if it ostensibly serves the customers but actually serves the employees and employers. It must redefine its functions. It must forsake the idea of salesmanship and concentrate on investment ser-vice. If the institution desires to survive,
· let customers' men become serious students of corporations;
· let them be in a position intelligently to advise clients on reorganization plans;
· let them qualify to render counsel to those solicited in proxy campaigns;
· let them be competent to advise on mergers, consolidations, recapitalizations and the like;
· let them lose their consuming interest in intermediate price movements;
· let them desist from calling their customers unless requested or except in serious emergencies;
· let them become studiously concerned with the fundamentals of business and of finance.

The only social vindication of that institution is to be found in such a course. Whether or not such a program of achievement can be attained will be in issue. Perhaps it is impossible of realization. Perhaps the fact that the customers' men are not paid by the clients but by the firms, from which the pressure to produce business will be strong, will provide an irreconcilable factor.

But as I stated earlier, the institution of customers' men has at present an unestablished value. In the past it has served as a method of churning portfolios, of creating frenzy and excitement, of manufacturing and distributing rumors and tips – in short, of serving as a fair-weather device to make the market a gaming place. 'Whether it can be made a valuable investment service adjunct to organized exchanges rests in the hands of your generation. It will not and should not survive if the corruption of which I earlier spoke intrudes.

[admin]

.......or as Jim Roache of Ottawa so simply tells it:

“This recession was caused by corruption, plain and simple. Larry Elford, tells his story but amazingly gets other insiders to do likewise. I was blown away!
Jim Roache, Ottawa

sorry for the plug, but he was speaking in reaction to seeing the film journey BREACH OF TRUST at www.breachoftrust.ca
(view ten minutes of chapter 8 if you want the short and sweet summary version)

(It is probably not as good as Jim suggests, but investors are pretty damn starved for any message that comes from the real world, and not the "make believe" world of finance

[admin]

NEW YORK TIMES
By CALVIN TRILLIN
Published: October 13, 2009
“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”

The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.

“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”

He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.

“O.K.,” I said. “Let’s hear it.”

“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.

“But weren’t there smart guys on Wall Street in the first place?” I asked.

He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said. “One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”

I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks.

“That actually sounds more or less accurate,” I said.

“Of course it’s accurate,” he said. “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”

“So what happened?”

“I told you what happened. Smart guys started going to Wall Street.”

“Why?”

“I thought you’d never ask,” he said, making a practiced gesture with his eyebrows that caused the bartender to get started mixing another martini.

“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”

“But you still haven’t told me how that brought on the financial crisis.”

“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”

“Why do I get the feeling that there’s one more step in this scenario?” I said.

“Because there is,” he said. “When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”

“So having smart guys there almost caused Wall Street to collapse.”

“You got it,” he said. “It took you awhile, but you got it.”

The theory sounded too simple to be true, but right offhand I couldn’t find any flaws in it. I found myself contemplating the sort of havoc a horde of smart guys could wreak in other industries. I saw those industries falling one by one, done in by superior intelligence. “I think I need a drink,” I said.

He nodded at my glass and made another one of those eyebrow gestures to the bartender. “Please,” he said. “Allow me.”

Calvin Trillin is the author, most recently, of “Deciding the Next Decider: The 2008 Presidential Race in Rhyme.”

[admin]

As I was out walking the dogs yesterday, I pondered some simple, common sense explanations for our recent economic collapse. How to explain the complex world of derivatives, credit default swaps, hedges, bets and whatever else the rocket surgeons on wall street and Bay Street were making and using to skim millions in bonus money. Here is what I cam up with:

It is like new and exotic hallucinogenic drugs that are made in back alleys and meth labs around the country. They are new, unnatural, cooked up from chemicals and cough medicine that never should be cooked up together, including some toxins from less than scrupulous drug makers....?

If you apply that kind of mentality to the financial world. A childish sandbox mentality of "me, mine, more" with regard to anything and everything in the world, then you end up with financial scientists, alchemists and creationists who cook up complex products for sale to the world.
Why? Is it because they can create something new and valuable?
No. It is simply this. They can create something that is new and can be sold. The entire reason for existence of some areas of finance is to generate a commission or a fee. A new product, however foolish or misguided, can often be touted up (think of lipstick on a pig) and sold with mass misrepresentation to the public.

If you are tired of earning hundreds of thousands, in the investment business, you just need to find (or make) something to sell that will earn millions for you. Tired of earning millions, then build a synthetic investment that will earn billions. Since they are synthetic, they can be a distant relative to anything tangible or intangible. Your imagination (and your ethics) are your only limiting factor.

And here in Canada? No prosecutions. No matter how damaging, how dangerous and how misleading. We simply do not have a police of prosecution system to take care of financial crime in Canada.

So if you are having a hard time understanding Bay Street or Wall Street wizards, ignore all the technical stuff, and remember the image of a criminal in a crystal meth lab. You will be far closer to understanding current economic problems than any image I can think of.

I posted this message after just pondering it, and then today reading the following in the New York Times. I found it similar enough to my own thoughts that I decided to put it below.

[admin]

I am coming to the realization that as far as regulators are concerned, there is a huge problem in paying them a huge salary. The problem is that when that huge salary is being paid by the very industry they are supposed to regulate, it turns them into automatons, willing to say and do anything to keep that salary.

Despite job descriptions, public protections, codes of conduct etc. The human instinct of self preservation seems to take priority over all else (for those who are less than professional) and they cave in. They become "bought" by the financial industry and they serve the needs of this industry very well.

This seems to be the case with Canadian securities regulators, where some 90 Ontario Securities Commission employees at one time earned more money each than the TOP man at the SEC in the United States earned. A hugely bought and paid for example.

You would think that with more money would come more responsibility and accountability, but in fact, the evidence points to an opposite conclusion. With more money, it could be that more people are just willing to sell their souls.

[admin]

Success - Its Not What You Think

Alain de Botton has a different idea; here’s a quote from his entertaining lecture (below) dealing with career crisis and the modern ideas about success:

“It is not the material goods we want, it is the rewards. (…) The next time you see someone driving a Ferrari, don’t think this is someone who is greedy, think this is someone who is incredibly vulnerable and in need of love.”
http://www.bankr.co.uk/2009/08/success- ... you-think/

see the video link above for a greater understanding of what drives those who appear pathalogically greedy

[admin]

Prison for Madoff? Send him to rehab
Article Comments (79)
SARAH HAMPSON
From Monday's Globe and Mail
January 18, 2009 at 10:48 PM EST
For a moment, at least, feel sorry for Bernard Madoff.

The disgraced New York investor, accused of running a $50-billion (U.S.) Ponzi scheme, may be a cash-oholic.

People become addicted to work, video games, sex, exercise, food. Why not to money?

Some people have an urge to make more and more of it – through any means. Could it have been a sickness beyond Mr. Madoff's control?
Maybe the guy needs rehab, not prison.

Money, after all, is like a drug in many ways. A boy I knew in my childhood, now a successful entrepreneur who has made and lost millions over his career, loved money from an early age. At 10, he had a paper route, and when he had collected the money from his customers, he would pull out the wad of dough from his pocket and waft it under my nose.

“Smell the money,” he would exhort. “Isn't it great?” Money – at least for him – was a mood enhancer.

Certainly, it has morphed into an entity well beyond its original and rational economic purpose: a unit representing a value, used as a means of exchange. While it retains its function as a mere utility, money has acquired surplus meanings and powers.

Karl Marx, the father of communism, thought of it as a form of capitalist exploitation. Freud had a theory about it as feces: a prized possession that each person creates. Georg Simmel argued in his tome, The Philosophy of Money, published in 1900, that it had come to embody the modern spirit of calculation and abstraction.

People in almost every culture in the world have an intimate dance with it. We love it. We hate it. We eschew it. We lust after it. It has the potential to create panic, status, sexual allure, power, wellbeing.

And some people who have a lot of money want (and need) to make more. Seemingly, they can't stop. They have more than they could possibly ever need or even spend, but they keep working (and in some cases, committing fraud) in pursuit of its accumulation.

Is greed your fault, though?

There is an underlying biochemical reason, some psychologists say.

“The chemical dopamine is excreted in our bodies when something exceeds our expectations, like a new purchase,” explains James Gottfurcht, a clinical psychologist and president of Psychology of Money Consultants in Los Angeles, California. “A lot of people self-medicate. There's alcohol, food, pills or purchases and money. You buy a shiny new car and it excites you. You are getting an emotional hit, but after a while it wears off because you have adapted to it, and you start at neutral again. So, you need to replace or repeat that high, in this case with money or purchases.”

Call it an acquisition addiction, which gives a new twist to the popular pastime known as retail therapy.

“It's a vicious cycle,” Dr. Gottfurcht says. “You can never fill an internal void with an external. If you're missing love, acceptance, belonging, empathy – whatever didn't happen for you in your life – you are not going to fill it for any length of time with any of these external [agents].”

Obsession with money is complex, of course, and a rich subject for psychologists. Some explain the accumulation of vast wealth less as a biochemical cycle of emotional highs and lows and more as a driving need to boost self-esteem and increase social rank.

“People's concern with status and reputation are really important,” says Paul Webley, an author and economic psychologist at the University of London in England. “And money is a convenient marker of that. If you are concerned with your status and rank in society or in your rank in the criminal fraternity, having more and more of this substance is like having more and more Olympic medals. But is someone like [decorated British rower] Stephen Redgrave addicted to Olympic medals? I don't think so. I think he was wanting to prove he is the best rower now or the best rower ever.”

Money as power is also a driving incentive, Prof. Webley says. “It is a very flattering position for someone to be wooed by those who act like supplicants because they need your money.”

Observations of what he calls “curiosities” of human behaviour about money led Prof. Webley to co-author a paper in 2005, while he was at the University of Exeter, titled Money as Tool, Money as Drug: The Biological Psychology of a Strong Incentive.

“The idea of money as a drug is a useful one because it captures the explanation of the apparent irrationality of behaviours around money and it also helps explain behaviour, which on the face of it is self-destructive,” he explains.

Addiction does come into play. “There are instances in which people are striving after money not for status reasons,” he says. “Money can have a druggy effect, drawing people into wider addiction. That is what you see with the lack of reduction in work hours, for example. You see quite the opposite across the board: an increase in the amount of working to gain more money – money as substance – and to borrow money … so you can go and spend it. In our societies, money has captured behaviour in ways that aren't particularly good for people's happiness and contentment.”

Which leaves us with Mr. Madoff, whose character, motives and movements are the cultural discussion du jour. He was reportedly wearing a bulletproof vest as he left for the Manhattan federal courthouse last week – followed by paparazzi and filmed by cable news shows.

Perhaps his best move would be to make a plea for a little empathy.

X-Files actor David Duchovny went public with his sex addiction, after all. He entered rehab and months later was pictured with his wife, Téa Leoni, and children at a basketball game, as if everything was on the way to normalcy again.

Redemption, or at least the hope of it, always comes in the admission of weakness.

[admin]

Easy To Become Addicted To Money
By Linda Leatherdale, Toronto Sun | Published 10/16/2006 | Money Management |
Easy To Become Addicted To Money
We've all heard about addictions to sex, gambling, drugs and alcohol.

But what about being addicted to money?

Believe me, there are many out there who are obsessed with money. And sometimes their lusting after the almighty dollar can lead to a life of ill-gotten gains.

Take famous swindler Patrick Kinlin, who died in jail after defrauding 75 investors of $ 20 million.

This Bay Street financial adviser loved the good life. Chauffeur-driven Mercedes, luxurious residences, expensive champagne, trips abroad -- all at the expense of his clients.

Kinlin also loved the ladies, and having money made the ladies love him. He married three times, and had a string of affairs, even while in jail.

But as with any obsession, there's always a Day of Reckoning. By the time the house of cards finally collapsed, fraud police found Kinlin in the psychiatric ward of a U .S. hospital, where he was frail and on suicide watch.

He got five years in the slammer, but only lived to serve two of them.

Then, there's Perry, a Bay Street dynamo, who lived for the deal. He worked night and day to give his family the good life -- a mansion, expensive cars, trips, private school, etc.

But when markets soured, and a deal of a lifetime went south, he couldn't handle it. Secretly, he borrowed and borrowed as he tried to stay a float while slowly sinking into a deep depression.

Finally, he jumped off a bridge. To this day, his family is devastated -- emotionally and financially.

"It's easy to get addicted to money in this industry," admits Bay Street veteran Fred Ketchen, director of equity trading with ScotiaMcLeod. "There's always a carrot dangling in your face -- a bigger commission, a bigger bonus, a bigger deal, a bigger office."

Ketchen preaches the key to survival is living a balanced life, "not chasing money for 20 hours, sleeping for four, then waking up cranky."

He also warns burn-out can come quickly for the Stars of the Street, who've always got to watch their backsides.

Patricia Lovett- Reid, senior vice-president of TD Waterhouse, points out our new addiction to technology, like BlackBerrys, are only encouraging the money obsessed to become even more obsessed, by allowing instant access to trading and dealing.

Lovett- Reid, also author of Live Well, Retire Well, has a few mottos in life. She says her mother always told her: "Patti, you do not want to be the richest person in the graveyard."

Other mottos include, "Life is not about money, but money will allow you to live the lifestyle you want to live," and, "you can't work 24 -7 and you can't spend 24 -7."

Which leads to this: The other obsession with money. Spending it, even if you don't have it.

"Overspending is a compulsive problem and it's usually masking problems in a person's personal or professional lives, like low selfesteem and depression," says Laurie Campbell, executive director of the Credit Counselling Service of Toronto (creditcanada.com).

"If they spend, it gives them an instant high. So they go on a spending binge and blow the budget. Then, they hide what they bought and feel remorseful," Campbell said.

But even though there's a sense of guilt, they feel compulsed to overspend again, she adds. As in combatting addictions to gambling, drugs or alcohol -- only going cold turkey can cure the spendaholic, she says.

"It may be tough love, but you've got to cut off the access to credit. Cut up the credit cards, get rid of the line of credit and never allow access to equity in a home," she said.

If the problem's serious enough, psychological counselling may be needed. But for sure, go for credit counselling, she said. Then let the healing begin.

[admin]

THE LUCIFER EFECT refers to a book by that name, which does the best job I have seen of explaining how good people can be morphed into doing evil things. It is required reading in my opinion to understand the underlying causes of this latest financial pandemic, to understand how "everyone" in the entire financial business became complicit in the cause.

To give you a glimpse of another explanation or illustration of the Lucifer Effect, see the article below:
althought this document has no source, and no confirmed writer, it is written and hinted as if it came from Bernie Madoff. No proof of this exists, but yet it provides a pretty decent explanation for the question of what financial porn is.............



The PACIFIC GATE POST
Challenging Perception on Business, Culture & Politics

- "Raider of The Lost Bark" by JAMES RAIDER

Monday, January 19, 2009
Bernie Madoff - A Letter Of Explanation?
The Editors of The Pacific Gate Post received an envelope from persons unknown, containing a letter apparently discarded in an alley behind an Upper East Side, Manhattan apartment building. The letter had been crumpled up into a ball and partially torn, possibly having been thrown out of a penthouse window. Its reconstruction was completed and we publish it hereunder, confident that even though it is a piece of fiction, it may contain shreds of clarification on recent economic events.

Dear Friends,

As I sit in my Upper East Side apartment living room, with nowhere to go, I watch the news and read as many publications as I can have sent up. It’s almost like I am observing some other person everyone is talking about. That characterization in the news is not the Bernie I know. I feel an urgent need to clear the air because, I’m not the person being portrayed. This whole thing has been completely contorted by the media. I am not so different from the rest of Wall Street. So please bear with me.

I am under house arrest, and the authorities are even searching my mail. I have more than enough time to contemplate the last 48 years. It’s been that long since Ruth and I formed this business of ours, and I feel bad that the downturn in the economy has been so destructive. I was always a very private man, have never liked public affairs and I’ve pretty well stayed to myself. Although my wife, Ruth, who is also my best friend, dragged me out to functions, I like peace and quiet. I’ve been accused by some of being antisocial, but that’s not the case. I just like being by myself. Just ask her. Even when we go out for dinner, it’s just the two of us. That’s it. She’s very patient with my mood swings, and she’s the best thing that’s happened to me. I prize privacy as much as I despise failure.

I also can’t stand blowhards and the investment business is full of them. Since in the past I did not wish to cast insult on anyone by excluding him or her, Ruth and I mostly stay by ourselves, or with our family. These people running hedge funds and investment banking companies have overinflated perceptions of themselves. Everyone worships them. Hard working Americans think these money managers know what they’re doing, because CNBC, or Barron’s, or the Wall Street Journal tells them they do. I’ve spent my life with these people. I’ll tell you what. They don’t know anything extraordinary, but they’re good at pretending. They don’t produce much, but they get paid more than anyone who actually works for a living.

Let me explain something here. For years I ran a successful business. I was a trader and my goal was to become the most successful fund manager on Wall Street and build the biggest fund on the planet. We did it all. Hedge fund, broker-dealer, trader. We had the latest and best technology, which gave us an edge. Technology was critical. Our software made it possible for me to manage the reports and payouts on the enormous amount of money that were thrown at me. I developed a reputation, a really outstanding reputation. No one could touch me. I had the Midas touch and from Miami to London every money manager running anything bigger than a bingo scurried energetically to attract my attention. I understood the big money boys, and I delivered exactly what they wanted, reasonable and steady returns.

I’ve noticed that some people, who invested with us, now appear indignant and are claiming losses. Such hypocritical behavior is downright pathetic. Ask them how much they made with me, year after year. If they were fund managers or fund aggregators, here’s a hint, check their overseas travel schedules from past years. Check the files of travel agents. They’re full of good news for any investigator worth his salt. When you think of Geneva, what do you see? You probably envision an idyllic, very European city overlooking beautiful Lake Geneva surrounded by the Swiss Alps. For years when I saw Geneva, and a few other cities like it, they were deep wellsprings of cash exchanged for a piece of the action. I am using Geneva as a metaphor here. A metaphor suggesting mountains of cash sitting discreetly in banks and safety deposit boxes around the world from kickbacks or commissions.

Private bankers are guys who manage pools of capital. No one can check how much he or she gets in “kick backs” because there is usually no conspiracy. By that I mean, … there are only two people in the room. That’s not a conspiracy. Just check some of the feeder funds, or the funds of funds, and their deal-maker managers. Not all of them of course, but some. That’s where I started the game for crying out loud. I arranged for others to set up funds, and they fed that capital into my companies. Initially it was just small investment groups, but those snowballs grew, and grew and grew. I became bored with repeating the refrain about my split conversion strategy using both put and call options, but before you knew it, we were raising more money than anyone could invest intelligently.

So many money managers would come with their exasperating questions, and the pretence of due diligence. Some of the idiots who really took themselves seriously even came with forms, asking about trading strategies, governance, compensation and using terms like fiduciary standards or benchmark performance. Like these barnstormers had a shred of any moral standards. These were the same crackbrains who charged their clients millions for “reinvesting” the money elsewhere because they couldn’t run a fund themselves. They are the modern version of snake oil salesmen. Getting them out of my hair was easy. I just made myself unavailable. You want in, give me a check. If not, get out. It worked. They couldn’t wait to hand over money.

The principal key to success for me was “perception.” Great PR is absolutely everything. That’s something my father never had the privilege of understanding. He tried to get into the money game, but had little success. I somewhat fell into the character of the aloof and insulated investment banker by accident. I didn’t want to answer questions about my trading strategies, and even when I consented to meeting with potential investors directly, I kept all meetings short. My aversion to meet, worked wonders and the more I became unmeetable, the more people wanted access. This evolved to the point where people threw hundreds of millions at us, just so that they could get twenty minutes in my office, or so they could be seen having lunch with me. How weird is that? I made sure that I joined the right organizations, which provided me some credibility, but in fact they would end up bragging that I was on their board, or part of their group, or that I was an advisor. Through goodwill, I created a long series of what you might call recursive loops of gullibility that brought me an infinite source of investors.

The games in the investment business may have a few rules but these are just veneer. The complexities that have evolved are intended to circumvent or confuse oversight. How can anyone, even those intimately familiar with trading, catch a trader worth the name who’s front-running, or naked short selling, for example? Unless you’re sloppy, you can get around legal restrictions without detection. Investigators know the game, but they have insurmountable difficulties when it comes to getting hard evidence. Today, volume and technology make illicit trading difficult to detect, yet many people on Wall Street do it. You do what you have to do in order to remain ahead of the next guy. If you don’t believe me, do your own research on how many of the major firms have been fined over the last thirty years with timid slaps of the hand. What they were doing was illegal, but who went to jail?

Loyalty was critical to me, and a central part of my strategy was to make sure that all investors understood unambiguously, if they took their money out of my hands, they would never be allowed back in. As a result, most investors never asked for their principal. If someone invested, we also demanded that they not divulge anything about their investment, or our business. That guaranteed that they would spread the word in hushed voices, punctuating our image of exclusivity. No one can keep a secret, least of all an ego with a pressing need to brag of its admittance into the most exclusive investment club in the nation. They can’t now be accused of gullibility when greed was their motivation.

In the past decade or so our total volume under management created momentum. The size of our volume provided us a perceived ability to affect the markets. Investors assumed that we could manipulate market sectors to our financial advantage. They were willing opportunists and ardent participants, knowing full well that such manipulation would have been illegal. This was another critical element in my strategy. These deliberate and enthusiastic partners in my game asked no questions once they were in. Even people with serious money “don’t want to know” although they might suspect. No one is innocent. As I said, good, effective PR is everything. With the right image everything is overlooked, including what you have or have not done.

How do you think all those salaries and bonuses on Wall Street are justified? Their image. They don’t call it Ponzi, but what’s the difference? Money is vanishing. Why do you think no one is getting any accounting of where the bailout money of the banking industry has really gone? Well over a trillion dollars has mysteriously disappeared into a giant black hole. Bailout money is being used to pay hundreds of millions in bonuses? Is anyone accountable? Oh, sure, Congress pretends it is going to ask questions. That will be about as effective as those questions I was asked by those investors who wanted to understand my bookkeeping. Why so much complacency when there is so much anger at me? Am I just a scapegoat, and the object of venting, that is a necessary relief valve absolving all of Wall Street? All cameras are focused on my front door while taxpayer bailout money is siphoned off to distant islands and yachts not registered in the U.S.?

There has been an assumption about my sons, Andy and Mark, and other family members having participated in my schemes. They worked with me but had nothing to do with it. Nothing. I needed them to take care of our private family interests and our charitable work. That was a central component of the family’s communal focus. My kids turned me in. I asked them to. They just pulled the trigger a little early though, I had some plans for a few days before the authorities showed up at the door. Same goes for my brother, Peter, who has been a loyal associate taking his instructions from me, overseeing our trading operation, but leaving all of the senior fund management alone. He is a lawyer by training, confused by investment strategy as most people are, and he knew nothing about trading and money management.

You will read of endless “trusting” investors having been swindled and you’ll hear their rationalizations. Most of them were just greedy. I also predict that you will read about the closing of hedge funds, and funds of funds over the next couple of years. Their leadership will not be questioned, although their actions were not much different from mine. They will simply slip away into the night. I am proud that I have at least had the decency to step up and take the blame. I decided to plead guilty in order to end the stress on everyone around me. I have taken a giant leap onto my sword, and I have instructed my lawyers to make sure any deal they conclude with the District Attorney is final, and all-inclusive.

People are told, “don’t manage your own money, hire a professional.” Think about that statement. Why is it that money is such an enigma to so many people? Why do they listen to the so-called experts? Why do they persist in asking to get ripped off? Investors continue to place their money in the hands of people they don’t really know. Do you really know an acquaintance? Do you truly know a friend? We barely know ourselves, yet we trust others with our hard earned cash?

I am not like Wall Street, I am Wall Street. Today I will ask my lawyers to see if I can do consulting for the investigators and legislators. I know this game. I could be the best thing that’s happened to cleaning up The Street in a hundred years.

Sincerely,
Bernie

[admin]

Peter Puck's last stand
In 2002, former Oilers owner Peter Pocklington moved to California, leaving bailouts and ill will in his wake. To Canadians, he disappeared. For unwitting new partners in the U.S., a golden entrepreneur seemed to have swept into town

BRENT JANG
From Friday's Globe and Mail
December 23, 2008 at 7:00 AM EST
Outside the exclusive condo, two "foo dog" sculptures protected the front door. The symbols of good fortune and wisdom are known in Asia for guarding the gates of heaven. But they couldn't halt what was about to transpire on a sweltering July day in Indian Wells, a resort town in the California desert. Three U.S. marshals waited patiently at the third-floor entrance, expecting Peter Pocklington to answer the door.

But Pocklington was in the shower. His wife, Eva, and a maid heard the knocking and went to see why anyone would bother them at 10:30 a.m. during a heat wave. Shown some documents, the women let the marshals walk into the expansive condo. It overlooked a private 18-hole golf course—just one of the accoutrements of the Vintage Club, a gated community where the Pocklingtons rubbed shoulders with the likes of Bill Gates.

Emerging wet-haired, the 66-year-old Pocklington was handed a copy of a court order that allowed the marshals to seize valuable artwork from the condo. Minutes later, one of the marshals motioned to others to come inside. Naomi Balcombe and four people supporting her quest for justice marched in. If Pocklington wasn't going to make good on the purchase of Balcombe's company, she, thanks to the court order, would be reimbursed another way—with his prized possessions. Six specialty movers followed her.

For Balcombe, a 34-year-old entrepreneur, the raid was a dream come true. "I had to pinch myself," she remembered later. For Pocklington, it was a day of reckoning. He'd used the trappings of wealth and his high-profile past in Canada to impress potential business partners in the United States. But Balcombe and others who had been seduced, and then disappointed, were now turning against him. Even the Alberta government was after him about some unfinished business.


Peter Pocklington was shocked when artwork and other possessions—even a bust of Pocklington himself—were seized from his California condo (Justin Fantl)


Balcombe heard an angry Pocklington talking loudly on the phone, informing his lawyer about the raid. Neatly arranged in a row on a wall behind Pocklington's ornate desk were five Andy Warhol prints of Mick Jagger. On the floor beneath the desk, there was a life-sized bronze head of Pocklington himself. Before the day was over, the movers packed and crated 56 works of art, including the Warhols, the bust and the impotent foo dogs.

This was only the first of three raids that would turn Pocklington's world upside down. When it was over, much of the condo was as bare as Whoville in the wake of the Grinch. Pocklington has refused to let the dramatic events defeat him, countering that the art and most other goods were unfairly taken because they belong not to him but to Eva. "They took everything that they could get their hands on, and it'll all come back," he says with trademark defiance during one in a series of short interviews. "In the U.S., in some cases, it's a bit of a police state. It's sickening. California seems the worst in the country. They have so many lawyers per square inch, and they're all just trolling. It's sad."

Balcombe's bold move opened the gates for dozens of other creditors. "Mr. Pocklington has been successful dodging creditors throughout the world and is extremely sophisticated in this regard," lawyers for Balcombe argued in U.S. District Court in the application to seize assets. "He is comfortable deceiving people and ignoring the law." Pocklington, however, denies any wrongdoing. None of the allegations has been proven in court.

Peter Hugh Pocklington slipped off Canadians' radar screen in 2000, when he left Edmonton, seemingly reduced to nothing—stripped of his assets by angry creditors, and with little to show for having owned the National Hockey League's Edmonton Oilers. Yet the hard-nosed entrepreneur, born and raised in London, Ontario, once controlled a sprawling business empire.

A Grade 12 dropout, Pocklington started out as a car salesman in Southern Ontario. In 1971, 30 years old, he arrived in Edmonton and opened a Ford dealership. He soon used his profit from car sales to diversify into other interests, including financial services, real estate and the Oilers. He signed Wayne Gretzky in 1978 in a deal with Vancouver businessman Nelson Skalbania. Gretzky was then a skinny 17-year-old, but his prodigious skills were already dazzling hockey fans across Canada. The Oilers, in the World Hockey Association at the time, joined the NHL one year later.

The '80s were the prime of the man who became known as Peter Puck. But if the decade showed how business success can open doors leading as far as the highest office in the country, it also revealed the downside of being in the public eye.

In the spring of 1982, during an intruder's botched attempt to kidnap Eva, Pocklington was taken hostage at gunpoint for 11 hours in his mansion in Edmonton. He suffered a wound from a police bullet during the incident. Eva managed to escape unscathed, and two servants were released unharmed.

Pocklington endured a particularly turbulent year in 1983, first because the federal Department of Insurance placed his Fidelity Trust Co. on probation. Fidelity, which boasted former U.S. president Gerald Ford as a special consultant, was ailing because of bad real estate loans. The company's ultimate collapse resulted in the federal government's Canada Deposit Insurance Corp.'s bailing out depositors to the tune of $359 million.

In the summer, Pocklington ran for the federal Progressive Conservative leadership. The arriviste faced long odds against a field of party heavyweights, all of whom were comparative moderates. In statements made prior to the campaign and in its wake, Pocklington made clear his contempt for the civil service ("rules, regulations and bureaucratic control"), Crown corporations (an "abomination"), the Liberals ("a socialist party"), the press ("80% socialist") and organized labour ("scrap the unions").

Pocklington ran on a platform that emphasized a flat tax of 20%, a proposal that would lighten the tax burden on the rich. Pocklington and future finance minister Michael Wilson withdrew after the first ballot, both throwing their support to Brian Mulroney, the eventual winner. But during the campaign, Wilson had clashed with the maverick from Edmonton. "I'm fighting against a Pocklington who says, 'I'm going to fire the whole civil service,'" Wilson complained.

Finally, the year showed the public one more layer to Pocklington besides controversial businessman and aspiring politician—new-age enthusiast. In the fall, a Supreme Court of Ontario jury dismissed a $7-million claim against Pocklington by a psychic, Rita Burns, who alleged that he had failed to pay for advice on personal and business issues. "There have been a lot of snickers already, but the people I care about will understand," Pocklington said. He once told an interviewer that he leaves his body for nocturnal trips to foreign locales like the Pyramids. Although he would later explain that those remarks were exaggerated, he was steadfast in his belief in destiny.

As the decade progressed, Pocklington collected enemies like kids collect hockey cards. In 1986, two years after the Oilers won their first Stanley Cup, Pocklington brought in replacement workers during an ugly strike at his Gainers Inc. meat-packing plant in Edmonton. Union leaders never forgave him for the use of strikebreakers.

The six-month strike was a turning point for the industry, placing pressure on Canadian producers to narrow the wage gap between its workers and lower-paid ones in the United States. The strike also led to a boycott from which the company couldn't recover. (After three ownership changes, Maple Leaf Foods decided to close the meat packer for good amid a strike in 1997.)

Then came the infamous trade on Aug. 9, 1988. Pocklington will forever be vilified by Oilers fans as the man who sold Gretzky to the Los Angeles Kings for $18 million. It turned out to be the beginning of the end for Pocklington's grip over the Oilers.

Over the next 10 years, even as his corporate debts steadily grew, the Pocklingtons avidly pursued their hobbies as collectors. Eva favoured Buddhas, designer handbags, jewellery and Inuit carvings, while her husband accumulated art, Cuban cigars and wine. Some 40 Renoir sketches covered the walls of their home, while Pocklington's office was graced by the Group of Seven.

The fine fabric of Pocklington's life began unravelling in 1998, when Alberta Treasury Branches, a savings institution owned by the province, forced Pocklington to sell the Oilers, alleging that $100 million in loans to Pocklington had gone awry. The next year, he placed his main holding company, Pocklington Financial Corp., into bankruptcy, clearing the way for creditors to pick away at his crumbling empire. Other holdings that slipped away included a Triple-A baseball team in Edmonton and Canbra Foods Ltd., a margarine company based in Lethbridge. Alberta Treasury Branches seized Canbra and sold it for $64 million. Pocklington was also forced to relinquish his private jet, the Group of Seven paintings and even his $750,000 wine collection.

Pocklington performed good works, too, helping to organize charity golf tournaments and backing fundraising dinners for Junior Achievement, a group teaching teens about business. But he left Edmonton without accolades for his charitable work or for bringing five Stanley Cup championships to the city. Instead, critics labelled him as Peter Porker. Gainers, his hog-slaughtering operation, cost the Alberta government $209 million in bailout expenses. This pattern of acquisition, financial trouble, and legal fallout would later become familiar to U.S. creditors.

After three decades in Edmonton, the Pocklingtons moved to a Toronto condo, where they resided for two years. In 2002, they settled year-round in their winter getaway in Indian Wells.

Pocklington started charming Naomi Balcombe over the phone in early 2005. In May of that year, she found herself sitting in his condo, poring over his purchase offer for her firm, Ageless Foundation Inc., a manufacturer and distributor of nutritional supplements such as amino acids, plant extracts and vitamins. She had launched Ageless in her home state of Florida in her early 20s, after graduating in biology from Florida Atlantic University in 1997.

Balcombe's breath was taken away by the California condo, inside and out. The retractable ceiling seemed to bring the blue sky right into the room. The condo's contents were themselves overwhelming to the eye—a brimming mash-up of art gallery and souvenir shop.

Pocklington went for a workout with his personal trainer to give Balcombe time to read his preliminary takeover offer. She was impressed. What's more, Pocklington was also in the midst of acquiring control of a larger firm in her sector. Founded in 1926, Naturade Inc. sold soy-based protein foods and arthritis pain products, bringing in $14 million in 2004. (All currency is in U.S. dollars from here on in, except as noted.)

The Pocklingtons asked Balcombe to join them for dinner. The wine flowed, and Balcombe felt she was in on a terrific business deal. In closing the transaction in August, Pocklington gave his personal guarantee on a promissory note from Naturade.

But the sale of Ageless quickly soured: Pocklington wouldn't pay. Balcombe, having witnessed his wealth, refused to believe he couldn't come up with the money. She filed suit against Pocklington and one of his holding companies in late 2005. Sixteen months later, a Miami judge awarded her $806,475.

Although the judgment had been relatively speedy, Balcombe's case did not move ahead quickly. But in the spring of 2008, Balcombe got a call from California entrepreneur Donald Courtney, who said he'd come across her name in legal filings. Courtney wanted to see if he could gather ammunition to help his friend, Toru Kamatari, who was also sparring with Pocklington.

Kamatari founded Sonartec Inc., a maker of high-end golf clubs, in 1999 and built it up for nearly eight years, even garnering an endorsement for the company's clubs from pro golfer Nick Price. Like Balcombe, Kamatari found himself at Pocklington's condo, awestruck as he considered a purchase offer in late 2006. Kamatari was smitten by tales of Pocklington's colourful career as an entrepreneur back in Canada, capped by a two-decade stretch as owner of the Oilers. The Vintage Club address by itself blew Kamatari away. "I was on his balcony, and he pointed in the direction of Bill Gates's house. I saw the pictures of Gerald Ford and the Bushes. Pocklington drove a nice BMW. I trusted him."

The Japanese-born Kamatari, 44, has regretted the meeting ever since. He filed a breach-of-contract lawsuit in February, 2008, alleging Pocklington didn't live up to his end of a deal to acquire Sonartec. Kamatari has despaired so much that he can't even enjoy a round of the game that was his passion: Pocklington not only didn't pay him for Sonartec, but it fell apart on his watch. The firm had $4.5 million in revenue in 2006, but within a year of taking control, Pocklington set the wheels in motion to place it into Chapter 7 of the U.S. Bankruptcy Code—in other words, destined for liquidation rather than attempted resuscitation (which Chapter 11 provides for). Kamatari is now listed in U.S. Bankruptcy Court as one of 110 Sonartec creditors who are owed a total of $4 million by Pocklington and his corporate entities. Kamatari and a business partner from Japan, Hidetsugu Koyama, claim that they are each owed more than $1 million. "Toru's life dream disappeared when he lost Sonartec," his friend Courtney says.

By the time he called Balcombe, Courtney had noticed common threads in three other disputes with Pocklington besides his friend Kamatari's. As with Sonartec, Pocklington had been accused in court documents of having fraudulently gained control of firms, and of then having misappropriated assets and dodged creditors. Apart from Balcombe's company, the other cases were Naturade and another golf equipment firm, GolfGear International Inc. In 2007 in Nevada, Pocklington placed GolfGear into Chapter 7; the company's unsecured creditors are allegedly owed more than $1 million. As for Naturade, Pocklington ended up losing it to Redux Holdings Inc. in a messy legal dispute that left Naturade in bankruptcy protection for nearly 15 months, finally emerging in November, 2007.

After their conversation, Courtney introduced Kamatari's California lawyers to Balcombe. "Don was the orchestra leader," Balcombe says. "He put Toru and me together, and then we worked with the lawyers." Kamatari's lawsuit against Pocklington has stalled. But Kamatari's lawyers took on Balcombe's case separately, and successfully had her $806,475 Florida court judgment registered in California in July, 2008. In a pleasant surprise for Balcombe, a U.S. District judge in California then granted a court order to seize dozens of Pocklington's prized assets, allowing her lawyers to take temporary custody of the belongings.

A posse of creditors took note. Apart from more than $2 million owed on mortgages from Palm Desert National Bank and Washington Mutual Inc., Pocklington allegedly owes money on a BMW auto lease ($73,000) and revolving lines of credit at Bank of America ($18,634) and Citibank ($7,800).

Balcombe names one of Pocklington's holding companies, Bahamas-based Quincy Investments Corp., as a defendant in her lawsuit, but Quincy was dissolved in mid-2007. A new Bahamian entity, Dempsey Investments Corp., acquired Quincy's assets. Pocklington submits that he was being altruistic in creating Dempsey, an entity

that is overseen by trustees for the benefit of 50 charities and his 12 grandchildren. (Pocklington and Eva have one son from their marriage, as well as three and two children, respectively, from their first marriages.) Pocklington emphasizes in court filings that "I do not control, manage or derive a benefit from Dempsey Investment Corp. and all control of this entity is handled by the trustees of the trust, of which I am not a trustee or beneficiary." He denies that Quincy and Dempsey have ever been "my alter egos."

Balcombe's lawyers aren't swayed, alleging in court filings that Pocklington "is a professional con man who bilks people and entities, and then uses offshore (Bahamian) entities to hide the assets taken."

Pocklington counters that he got sold a bill of goods by Balcombe's Ageless, saying bitterly that "the high hopes for her company when we bought it turned out to be half of what we expected it to be. Welcome to the U.S." As for Kamatari's company, Pocklington says, "I'm not interested in fighting lawsuits with people who have no interest in settling anything. It's just mean-spirited."

Kamatari thinks back to how he was influenced by Pocklington's own "authorized website," which portrays him as civic-minded, serving on the board of directors of the Betty Ford Center, providers of drug and alcohol rehabilitation services. On the site, Pocklington also expresses his admiration for entrepreneurs, proclaiming that "small businesses are what made America great and will continue to make America great." Pocklington wrote that "businesses fail for a number of reasons, including under-capitalization, no vision by the owner/founder, lack of product and not spending 48 hours a day on making it successful. Business is tough! You have to be dedicated."

The sprawling, intensely private Vintage Club is a vacation home to billionaires such as Philip Anschutz, Roger Penske and Cargill MacMillan Jr. The Vintage made headlines in 2000 for having reprimanded Bill Gates for wearing a T-shirt on a practice tee, attire deemed too casual under club rules. If the place is a bit formal, residents appreciate how security staff protect the entrance like a border crossing. Outsiders who drive along the grand paving-stone entrance can view two cascading waterfalls, but are turned away from the community.

A California process server discovered just how hard it can be to get in. Acting on behalf of yet another aggrieved company, Protein Ingredient Technologies Inc., the server made a dozen unsuccessful attempts to contact Pocklington in the summer of 2006. Vintage security rejected a request from the process server to stake out the condo. Protein claims that it suffered $221,206 in damages after Pocklington failed to live up to a distribution deal. After Pocklington didn't pay Protein as he had pledged to do in a settlement agreement, a California judge awarded the company a $50,000 judgment against him in 2007.

In the summer of 2008, after doggedly clearing legal hurdles and persuading Vintage Club security of the validity of her court order, Balcombe could hardly believe that she was finally at Pocklington's doorstep. After walking in, she saw the place anew. It was a sort of time capsule of selectively preserved memories, staged to impress visitors like herself. Dozens of framed photographs arrayed on ornate furniture told a tale of an entrepreneur who once associated with a who's who of the sports, political and entertainment worlds. In one photo, Gretzky is the proud Oilers captain giving Pocklington a hug. In another, superstar tenor Luciano Pavarotti puts his arm around a beaming Pocklington. Former U.S. presidents George H. W. Bush and Gerald Ford pose with Pocklington on a golf course. No fewer than five former U.S. presidents and first ladies beam from autographed photos.

When Balcombe showed up, neither Pocklington nor his wife recognized her at first. Pocklington could do nothing to prevent the seizure. So he tried to keep his emotions in check, even playing a game of solitaire on his computer at one point. Looking back, he reflects, "That's the way life is—you deal with it and carry on." Pocklington has threatened that he will seek a $5-million judgment, alleging that the goods were seized wrongfully.

The 56 items taken in the first raid included an estimated $1 million in paintings, sculptures and other art. In the two additional seizures that followed over the next two weeks, authorities carted off another 190 items. The haul was polyglot: two hockey sticks autographed by Gretzky, numerous Buddha statues, Inuit soapstone carvings, two sculptures by French artist Antoniucci Volti, Christofle silverware, pieces of the Berlin Wall, a set of Rosenthal white china plates, a cannon round fired in the 21-gun salute at President Ford's funeral in 2007.

To the Pocklingtons, it seemed as if nothing was safe from the authorities—not even their safe. During the second raid, a locksmith spent 30 minutes removing the safe's door. The movers also went through the condo's garage, taking a motorized golf cart and a set of high-end golf clubs from Pocklington's storage unit. "I know that he was angry," Balcombe says. "When the movers were loading the golf cart, he started cursing and freaking out." The agitated entrepreneur managed to retrieve a handful of his Cohiba Cuban cigars from the golf cart, "and then stomped off," she adds.

The movers even rifled through Eva's walk-in closet, seizing a long list of luxury possessions. Hermès purses. A collection of Louis Vuitton bags and notebooks. Yves Saint Laurent evening gowns. Chanel shoes. "The bags and purses alone could be worth a lot," Balcombe says.

But her right to take them is being contested. Eva's lawyers say in filings in U.S. District Court that the vast majority of assets seized belong to her. They state that Eva has her own property trust, and allege that Balcombe and her lawyers acted "carelessly, recklessly" by seizing the possessions. Balcombe's lawyers counter that under California law, assets claimed by Eva are either jointly owned with Pocklington or simply owned by him. But Eva, 66, is wondering in particular why her closet was targeted. In court filings, her lawyers emphasize the "nature of many of the items seized, which included women's evening gowns, women's shoes, women's handbags and lifelong heirlooms gifted to Eva Pocklington by her family, which heralded from the Canadian Arctic." (Eva was raised in Yellowknife.) "Unless they're saying Peter Pocklington is a cross-dresser, I don't think a handbag is the personal property of a man," Pocklington's lawyer, Michael Lusby, says. "There's no way that you can reasonably assume that her evening dresses were his property."

For years, Pocklington has lived by guidelines dubbed "Peter's Laws of Business" on his website, including, "If you can't win, change the rules! If you can't change the rules, ignore them!" Lusby agrees that it's a dog-eat-dog world when it comes to doing deals, whether big or small. "Hard business deals rest essentially on taking advantage of somebody. You buy something because you feel it's worth more than what somebody else is selling it for." Lusby notes that Balcombe and Kamatari signed deals, knowing what they were getting into: "We aren't talking about consumers and little old ladies. We're talking about sophisticated businesspeople who understand the risks."

Days after the third and final raid, Pocklington declared personal bankruptcy. In U.S. Bankruptcy Court, Pocklington's personal liabilities are listed at $19.7 million. In his declaration, Pocklington claimed that his net worth totalled just $2,900: $200 in his wallet, a $500 watch, a $500 set of golf clubs, $300 of clothing and shoes, $450 in appliances and furnishings, $450 worth of personal goods seized and $500 worth of memorabilia, trophies and art. But lawyers for Balcombe argue in U.S. District Court that Pocklington is far from a pauper—that he has vastly understated his personal assets in California and is also hiding money in the Bahamas. They wonder what happened to his valuable hockey memorabilia, notably five Stanley Cup rings.

The bankruptcy was, of course, a red flag to creditors. They want the seized assets to be sold to the highest bidder, so they can recover at least a portion of what they are owed. "Peter Pocklington has systematically looted several companies and willfully breached his contractual promises to both the plaintiff/judgment creditor here and several other companies and entities, including the government of Alberta," wrote Balcombe's lawyers.

Having bailed out Gainers and absorbed bad loans to the Oilers and other Pocklington businesses, the Alberta government was not unhappy to see Pocklington leave the province. As for the losses, he was considered a cold case. But lately the government has picked up the trail. Belying the notion that Pocklington had few assets when he left the province, a multitude of valuables were moved to California from Edmonton. Indeed, an estimated three-quarters of the condo's contents were moved down from Canada.

Alberta is trying to recover $12 million (Canadian) from Pocklington for defaulting on loans to Gainers. In Alberta Court of Queen's Bench in 2007, a judge granted an order to award the government's original claim of $2 million (Canadian), plus $10 million (Canadian) in accumulated interest over the years.

Pocklington dismisses Alberta's efforts. "Oh boy, I don't know where to start on that crock of crap," he says. "You can't win in an Alberta court anyway, if you're me." He questions the validity of Alberta's base claim of $2 million, and also, "How the hell do you get to that much interest? It's just ridiculous. Life is too short to continue this kind of quarrel." He also argues that he never received the $2 million in the first place, saying the funds were paid to Gainers as part of the strike settlement. "No good deed goes unpunished."

But the quarrel has since grown bigger. In late November, Balcombe joined forces with Kamatari and the Alberta government to file a bombshell complaint against Pocklington in U.S. Bankruptcy Court. Their lawyers allege that Pocklington listed his net worth at $20 million in obtaining a life insurance policy within the past five years, a far cry from his claim of having $2,900 to his name. The lawyers also allege that Pocklington receives $50,000 a month through Dempsey, the Bahamian holding company that he claims not to benefit from.

"Pocklington has been able to hide funds coming into his possession from various fraudulent schemes, and simultaneously wire funds to Mrs. Pocklington on a monthly basis in sufficient sums to support his lavish lifestyle," according to the filing, which asks the court to deny Pocklington's application to have his personal debts discharged. The complaint also requests that the court deny his separate moves to be discharged as a debtor to Ageless, Sonartec and the Alberta government. "Pocklington not only siphons the assets of companies he fraudulently acquires into the offshore entities, as well as any monies he raises from investors in these companies, but he also uses them to fund a lavish lifestyle, while avoiding taxes and judgments." Adding to the pressure, the Nevada bankruptcy trustee in the GolfGear dispute has asked the court to reject Pocklington's moves to have his GolfGear debts discharged.

Balcombe realizes that there will likely be many more months of legal manoeuvring by creditors to obtain their share of the spoils from the raids. She began her lawsuit against Pocklington in a quest to recoup the money that she lost in selling Ageless. Now, the legal process is out of her hands. She has resigned herself to seeing only a small portion of any proceeds, but hopes to see Pocklington get his just deserts. "I was basically conned by Peter, but I'm a private person. I don't want to get any more involved in his world," she says.

Pocklington's Vintage Club condo now sits empty, but doesn't appear to have much equity value. There's a $1.3-million mortgage on it with Washington Mutual, the failed savings and loan giant that was sold last fall to JP Morgan Chase. There are also two other mortgages listed in court, held by Palm Desert National Bank, totalling nearly $1.1 million.

In early 2008, Pocklington listed the condo for sale for $2.35 million. Facing the sharp downturn in California's real estate market, the unit remained unsold through late 2008. According to lending documents, Pocklington's mortgage obligations to Washington Mutual alone are $7,109 a month, but he hasn't made a payment since August. Washington Mutual, a secured creditor, said in a court filing that a suggested relisting price for the condo could be $1.295 million—a price chop of 45%.

Pocklington has been a Vintage member since 1990. He originally bought the condo that year, gifted it in Alberta to Eva in 1996, registered that change in California in 1998, and then transferred it again to various corporations over the years, the latest owner being Dempsey Investments Corp., according to mortgage documents.

The Pocklingtons vacated last fall, deciding instead to rent half of a bungalow duplex in nearby Palm Desert. Their new address, Lakes Country Club, doesn't have the cachet of the Vintage, but it nonetheless offers a private setting on a 27-hole golf course, with 24-hour security patrolling the entrance gate. The disparity is better captured by golf fees: While the Vintage commands $350,000 in initiation fees and $28,200 in annual dues, the Lakes charges $10,000 and $4,920.

How long the couple intend to live at the Lakes is unclear. Pocklington says that he misses "the civility" of Canada, but on his website, he makes his allegiance clear. "I love the United States, and I fully intend to become a United States citizen. I like the wide-open attitude of Americans. Americans generally praise success." Just how Pocklington can declare himself a success at this point is unclear. His personal bankruptcy filing is scheduled to go to court in February. He's also dealing with the liquidation case of Sonartec.

Pocklington has his own version of events, though he doesn't wish to go into detail. He says he will tell the behind-the-scenes story about his past business dealings in Canada, including the Oilers and the Gainers controversy, in a book that he's co-writing with an Edmonton journalist. Pocklington doesn't view Balcombe as the victim; rather, it's he who has been wronged.

Indeed, Pocklington is unfazed by all his troubles, saying his legal squabbles are "quite frankly, nobody's business. This is all bullshit. They can say whatever the hell they want and I really don't care." He says he isn't ready to give up his passion for business, even though the legal battles are wearing on him. "I'm in the middle of three more things. But I am so sick and tired with dealing with the American court system. It's just crazy." Asked about whether it's tempting to spend more time golfing, he replies: "Not interested in that."

Pocklington, who's now 67, is trying to keep things in perspective. Having hundreds of familiar and valuable possessions seized isn't driving him to distraction, he insists.

"I don't want to get involved in the public again. You never win. It's 'he said, you said.' I don't really give a shit what people say any more. I really don't care. You can write whatever the hell you want. Thirty or 40 years from now, who gives a shit," he says. "With all the shit that I've been through in my life, I don't really mind. I'm not a bitter person. People who are bitter end up having heart attacks. That's why I'm healthy at my age. I don't internalize things."

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Peter Puck's last stand
In 2002, former Oilers owner Peter Pocklington moved to California, leaving bailouts and ill will in his wake. To Canadians, he disappeared. For unwitting new partners in the U.S., a golden entrepreneur seemed to have swept into town

BRENT JANG
From Friday's Globe and Mail
December 23, 2008 at 7:00 AM EST
Outside the exclusive condo, two "foo dog" sculptures protected the front door. The symbols of good fortune and wisdom are known in Asia for guarding the gates of heaven. But they couldn't halt what was about to transpire on a sweltering July day in Indian Wells, a resort town in the California desert. Three U.S. marshals waited patiently at the third-floor entrance, expecting Peter Pocklington to answer the door.

But Pocklington was in the shower. His wife, Eva, and a maid heard the knocking and went to see why anyone would bother them at 10:30 a.m. during a heat wave. Shown some documents, the women let the marshals walk into the expansive condo. It overlooked a private 18-hole golf course—just one of the accoutrements of the Vintage Club, a gated community where the Pocklingtons rubbed shoulders with the likes of Bill Gates.

Emerging wet-haired, the 66-year-old Pocklington was handed a copy of a court order that allowed the marshals to seize valuable artwork from the condo. Minutes later, one of the marshals motioned to others to come inside. Naomi Balcombe and four people supporting her quest for justice marched in. If Pocklington wasn't going to make good on the purchase of Balcombe's company, she, thanks to the court order, would be reimbursed another way—with his prized possessions. Six specialty movers followed her.

For Balcombe, a 34-year-old entrepreneur, the raid was a dream come true. "I had to pinch myself," she remembered later. For Pocklington, it was a day of reckoning. He'd used the trappings of wealth and his high-profile past in Canada to impress potential business partners in the United States. But Balcombe and others who had been seduced, and then disappointed, were now turning against him. Even the Alberta government was after him about some unfinished business.


Peter Pocklington was shocked when artwork and other possessions—even a bust of Pocklington himself—were seized from his California condo (Justin Fantl)


Balcombe heard an angry Pocklington talking loudly on the phone, informing his lawyer about the raid. Neatly arranged in a row on a wall behind Pocklington's ornate desk were five Andy Warhol prints of Mick Jagger. On the floor beneath the desk, there was a life-sized bronze head of Pocklington himself. Before the day was over, the movers packed and crated 56 works of art, including the Warhols, the bust and the impotent foo dogs.

This was only the first of three raids that would turn Pocklington's world upside down. When it was over, much of the condo was as bare as Whoville in the wake of the Grinch. Pocklington has refused to let the dramatic events defeat him, countering that the art and most other goods were unfairly taken because they belong not to him but to Eva. "They took everything that they could get their hands on, and it'll all come back," he says with trademark defiance during one in a series of short interviews. "In the U.S., in some cases, it's a bit of a police state. It's sickening. California seems the worst in the country. They have so many lawyers per square inch, and they're all just trolling. It's sad."

Balcombe's bold move opened the gates for dozens of other creditors. "Mr. Pocklington has been successful dodging creditors throughout the world and is extremely sophisticated in this regard," lawyers for Balcombe argued in U.S. District Court in the application to seize assets. "He is comfortable deceiving people and ignoring the law." Pocklington, however, denies any wrongdoing. None of the allegations has been proven in court.

Peter Hugh Pocklington slipped off Canadians' radar screen in 2000, when he left Edmonton, seemingly reduced to nothing—stripped of his assets by angry creditors, and with little to show for having owned the National Hockey League's Edmonton Oilers. Yet the hard-nosed entrepreneur, born and raised in London, Ontario, once controlled a sprawling business empire.

A Grade 12 dropout, Pocklington started out as a car salesman in Southern Ontario. In 1971, 30 years old, he arrived in Edmonton and opened a Ford dealership. He soon used his profit from car sales to diversify into other interests, including financial services, real estate and the Oilers. He signed Wayne Gretzky in 1978 in a deal with Vancouver businessman Nelson Skalbania. Gretzky was then a skinny 17-year-old, but his prodigious skills were already dazzling hockey fans across Canada. The Oilers, in the World Hockey Association at the time, joined the NHL one year later.

The '80s were the prime of the man who became known as Peter Puck. But if the decade showed how business success can open doors leading as far as the highest office in the country, it also revealed the downside of being in the public eye.

In the spring of 1982, during an intruder's botched attempt to kidnap Eva, Pocklington was taken hostage at gunpoint for 11 hours in his mansion in Edmonton. He suffered a wound from a police bullet during the incident. Eva managed to escape unscathed, and two servants were released unharmed.

Pocklington endured a particularly turbulent year in 1983, first because the federal Department of Insurance placed his Fidelity Trust Co. on probation. Fidelity, which boasted former U.S. president Gerald Ford as a special consultant, was ailing because of bad real estate loans. The company's ultimate collapse resulted in the federal government's Canada Deposit Insurance Corp.'s bailing out depositors to the tune of $359 million.

In the summer, Pocklington ran for the federal Progressive Conservative leadership. The arriviste faced long odds against a field of party heavyweights, all of whom were comparative moderates. In statements made prior to the campaign and in its wake, Pocklington made clear his contempt for the civil service ("rules, regulations and bureaucratic control"), Crown corporations (an "abomination"), the Liberals ("a socialist party"), the press ("80% socialist") and organized labour ("scrap the unions").

Pocklington ran on a platform that emphasized a flat tax of 20%, a proposal that would lighten the tax burden on the rich. Pocklington and future finance minister Michael Wilson withdrew after the first ballot, both throwing their support to Brian Mulroney, the eventual winner. But during the campaign, Wilson had clashed with the maverick from Edmonton. "I'm fighting against a Pocklington who says, 'I'm going to fire the whole civil service,'" Wilson complained.

Finally, the year showed the public one more layer to Pocklington besides controversial businessman and aspiring politician—new-age enthusiast. In the fall, a Supreme Court of Ontario jury dismissed a $7-million claim against Pocklington by a psychic, Rita Burns, who alleged that he had failed to pay for advice on personal and business issues. "There have been a lot of snickers already, but the people I care about will understand," Pocklington said. He once told an interviewer that he leaves his body for nocturnal trips to foreign locales like the Pyramids. Although he would later explain that those remarks were exaggerated, he was steadfast in his belief in destiny.

As the decade progressed, Pocklington collected enemies like kids collect hockey cards. In 1986, two years after the Oilers won their first Stanley Cup, Pocklington brought in replacement workers during an ugly strike at his Gainers Inc. meat-packing plant in Edmonton. Union leaders never forgave him for the use of strikebreakers.

The six-month strike was a turning point for the industry, placing pressure on Canadian producers to narrow the wage gap between its workers and lower-paid ones in the United States. The strike also led to a boycott from which the company couldn't recover. (After three ownership changes, Maple Leaf Foods decided to close the meat packer for good amid a strike in 1997.)

Then came the infamous trade on Aug. 9, 1988. Pocklington will forever be vilified by Oilers fans as the man who sold Gretzky to the Los Angeles Kings for $18 million. It turned out to be the beginning of the end for Pocklington's grip over the Oilers.

Over the next 10 years, even as his corporate debts steadily grew, the Pocklingtons avidly pursued their hobbies as collectors. Eva favoured Buddhas, designer handbags, jewellery and Inuit carvings, while her husband accumulated art, Cuban cigars and wine. Some 40 Renoir sketches covered the walls of their home, while Pocklington's office was graced by the Group of Seven.

The fine fabric of Pocklington's life began unravelling in 1998, when Alberta Treasury Branches, a savings institution owned by the province, forced Pocklington to sell the Oilers, alleging that $100 million in loans to Pocklington had gone awry. The next year, he placed his main holding company, Pocklington Financial Corp., into bankruptcy, clearing the way for creditors to pick away at his crumbling empire. Other holdings that slipped away included a Triple-A baseball team in Edmonton and Canbra Foods Ltd., a margarine company based in Lethbridge. Alberta Treasury Branches seized Canbra and sold it for $64 million. Pocklington was also forced to relinquish his private jet, the Group of Seven paintings and even his $750,000 wine collection.

Pocklington performed good works, too, helping to organize charity golf tournaments and backing fundraising dinners for Junior Achievement, a group teaching teens about business. But he left Edmonton without accolades for his charitable work or for bringing five Stanley Cup championships to the city. Instead, critics labelled him as Peter Porker. Gainers, his hog-slaughtering operation, cost the Alberta government $209 million in bailout expenses. This pattern of acquisition, financial trouble, and legal fallout would later become familiar to U.S. creditors.

After three decades in Edmonton, the Pocklingtons moved to a Toronto condo, where they resided for two years. In 2002, they settled year-round in their winter getaway in Indian Wells.

Pocklington started charming Naomi Balcombe over the phone in early 2005. In May of that year, she found herself sitting in his condo, poring over his purchase offer for her firm, Ageless Foundation Inc., a manufacturer and distributor of nutritional supplements such as amino acids, plant extracts and vitamins. She had launched Ageless in her home state of Florida in her early 20s, after graduating in biology from Florida Atlantic University in 1997.

Balcombe's breath was taken away by the California condo, inside and out. The retractable ceiling seemed to bring the blue sky right into the room. The condo's contents were themselves overwhelming to the eye—a brimming mash-up of art gallery and souvenir shop.

Pocklington went for a workout with his personal trainer to give Balcombe time to read his preliminary takeover offer. She was impressed. What's more, Pocklington was also in the midst of acquiring control of a larger firm in her sector. Founded in 1926, Naturade Inc. sold soy-based protein foods and arthritis pain products, bringing in $14 million in 2004. (All currency is in U.S. dollars from here on in, except as noted.)

The Pocklingtons asked Balcombe to join them for dinner. The wine flowed, and Balcombe felt she was in on a terrific business deal. In closing the transaction in August, Pocklington gave his personal guarantee on a promissory note from Naturade.

But the sale of Ageless quickly soured: Pocklington wouldn't pay. Balcombe, having witnessed his wealth, refused to believe he couldn't come up with the money. She filed suit against Pocklington and one of his holding companies in late 2005. Sixteen months later, a Miami judge awarded her $806,475.

Although the judgment had been relatively speedy, Balcombe's case did not move ahead quickly. But in the spring of 2008, Balcombe got a call from California entrepreneur Donald Courtney, who said he'd come across her name in legal filings. Courtney wanted to see if he could gather ammunition to help his friend, Toru Kamatari, who was also sparring with Pocklington.

Kamatari founded Sonartec Inc., a maker of high-end golf clubs, in 1999 and built it up for nearly eight years, even garnering an endorsement for the company's clubs from pro golfer Nick Price. Like Balcombe, Kamatari found himself at Pocklington's condo, awestruck as he considered a purchase offer in late 2006. Kamatari was smitten by tales of Pocklington's colourful career as an entrepreneur back in Canada, capped by a two-decade stretch as owner of the Oilers. The Vintage Club address by itself blew Kamatari away. "I was on his balcony, and he pointed in the direction of Bill Gates's house. I saw the pictures of Gerald Ford and the Bushes. Pocklington drove a nice BMW. I trusted him."

The Japanese-born Kamatari, 44, has regretted the meeting ever since. He filed a breach-of-contract lawsuit in February, 2008, alleging Pocklington didn't live up to his end of a deal to acquire Sonartec. Kamatari has despaired so much that he can't even enjoy a round of the game that was his passion: Pocklington not only didn't pay him for Sonartec, but it fell apart on his watch. The firm had $4.5 million in revenue in 2006, but within a year of taking control, Pocklington set the wheels in motion to place it into Chapter 7 of the U.S. Bankruptcy Code—in other words, destined for liquidation rather than attempted resuscitation (which Chapter 11 provides for). Kamatari is now listed in U.S. Bankruptcy Court as one of 110 Sonartec creditors who are owed a total of $4 million by Pocklington and his corporate entities. Kamatari and a business partner from Japan, Hidetsugu Koyama, claim that they are each owed more than $1 million. "Toru's life dream disappeared when he lost Sonartec," his friend Courtney says.

By the time he called Balcombe, Courtney had noticed common threads in three other disputes with Pocklington besides his friend Kamatari's. As with Sonartec, Pocklington had been accused in court documents of having fraudulently gained control of firms, and of then having misappropriated assets and dodged creditors. Apart from Balcombe's company, the other cases were Naturade and another golf equipment firm, GolfGear International Inc. In 2007 in Nevada, Pocklington placed GolfGear into Chapter 7; the company's unsecured creditors are allegedly owed more than $1 million. As for Naturade, Pocklington ended up losing it to Redux Holdings Inc. in a messy legal dispute that left Naturade in bankruptcy protection for nearly 15 months, finally emerging in November, 2007.

After their conversation, Courtney introduced Kamatari's California lawyers to Balcombe. "Don was the orchestra leader," Balcombe says. "He put Toru and me together, and then we worked with the lawyers." Kamatari's lawsuit against Pocklington has stalled. But Kamatari's lawyers took on Balcombe's case separately, and successfully had her $806,475 Florida court judgment registered in California in July, 2008. In a pleasant surprise for Balcombe, a U.S. District judge in California then granted a court order to seize dozens of Pocklington's prized assets, allowing her lawyers to take temporary custody of the belongings.

A posse of creditors took note. Apart from more than $2 million owed on mortgages from Palm Desert National Bank and Washington Mutual Inc., Pocklington allegedly owes money on a BMW auto lease ($73,000) and revolving lines of credit at Bank of America ($18,634) and Citibank ($7,800).

Balcombe names one of Pocklington's holding companies, Bahamas-based Quincy Investments Corp., as a defendant in her lawsuit, but Quincy was dissolved in mid-2007. A new Bahamian entity, Dempsey Investments Corp., acquired Quincy's assets. Pocklington submits that he was being altruistic in creating Dempsey, an entity

that is overseen by trustees for the benefit of 50 charities and his 12 grandchildren. (Pocklington and Eva have one son from their marriage, as well as three and two children, respectively, from their first marriages.) Pocklington emphasizes in court filings that "I do not control, manage or derive a benefit from Dempsey Investment Corp. and all control of this entity is handled by the trustees of the trust, of which I am not a trustee or beneficiary." He denies that Quincy and Dempsey have ever been "my alter egos."

Balcombe's lawyers aren't swayed, alleging in court filings that Pocklington "is a professional con man who bilks people and entities, and then uses offshore (Bahamian) entities to hide the assets taken."

Pocklington counters that he got sold a bill of goods by Balcombe's Ageless, saying bitterly that "the high hopes for her company when we bought it turned out to be half of what we expected it to be. Welcome to the U.S." As for Kamatari's company, Pocklington says, "I'm not interested in fighting lawsuits with people who have no interest in settling anything. It's just mean-spirited."

Kamatari thinks back to how he was influenced by Pocklington's own "authorized website," which portrays him as civic-minded, serving on the board of directors of the Betty Ford Center, providers of drug and alcohol rehabilitation services. On the site, Pocklington also expresses his admiration for entrepreneurs, proclaiming that "small businesses are what made America great and will continue to make America great." Pocklington wrote that "businesses fail for a number of reasons, including under-capitalization, no vision by the owner/founder, lack of product and not spending 48 hours a day on making it successful. Business is tough! You have to be dedicated."

The sprawling, intensely private Vintage Club is a vacation home to billionaires such as Philip Anschutz, Roger Penske and Cargill MacMillan Jr. The Vintage made headlines in 2000 for having reprimanded Bill Gates for wearing a T-shirt on a practice tee, attire deemed too casual under club rules. If the place is a bit formal, residents appreciate how security staff protect the entrance like a border crossing. Outsiders who drive along the grand paving-stone entrance can view two cascading waterfalls, but are turned away from the community.

A California process server discovered just how hard it can be to get in. Acting on behalf of yet another aggrieved company, Protein Ingredient Technologies Inc., the server made a dozen unsuccessful attempts to contact Pocklington in the summer of 2006. Vintage security rejected a request from the process server to stake out the condo. Protein claims that it suffered $221,206 in damages after Pocklington failed to live up to a distribution deal. After Pocklington didn't pay Protein as he had pledged to do in a settlement agreement, a California judge awarded the company a $50,000 judgment against him in 2007.

In the summer of 2008, after doggedly clearing legal hurdles and persuading Vintage Club security of the validity of her court order, Balcombe could hardly believe that she was finally at Pocklington's doorstep. After walking in, she saw the place anew. It was a sort of time capsule of selectively preserved memories, staged to impress visitors like herself. Dozens of framed photographs arrayed on ornate furniture told a tale of an entrepreneur who once associated with a who's who of the sports, political and entertainment worlds. In one photo, Gretzky is the proud Oilers captain giving Pocklington a hug. In another, superstar tenor Luciano Pavarotti puts his arm around a beaming Pocklington. Former U.S. presidents George H. W. Bush and Gerald Ford pose with Pocklington on a golf course. No fewer than five former U.S. presidents and first ladies beam from autographed photos.

When Balcombe showed up, neither Pocklington nor his wife recognized her at first. Pocklington could do nothing to prevent the seizure. So he tried to keep his emotions in check, even playing a game of solitaire on his computer at one point. Looking back, he reflects, "That's the way life is—you deal with it and carry on." Pocklington has threatened that he will seek a $5-million judgment, alleging that the goods were seized wrongfully.

The 56 items taken in the first raid included an estimated $1 million in paintings, sculptures and other art. In the two additional seizures that followed over the next two weeks, authorities carted off another 190 items. The haul was polyglot: two hockey sticks autographed by Gretzky, numerous Buddha statues, Inuit soapstone carvings, two sculptures by French artist Antoniucci Volti, Christofle silverware, pieces of the Berlin Wall, a set of Rosenthal white china plates, a cannon round fired in the 21-gun salute at President Ford's funeral in 2007.

To the Pocklingtons, it seemed as if nothing was safe from the authorities—not even their safe. During the second raid, a locksmith spent 30 minutes removing the safe's door. The movers also went through the condo's garage, taking a motorized golf cart and a set of high-end golf clubs from Pocklington's storage unit. "I know that he was angry," Balcombe says. "When the movers were loading the golf cart, he started cursing and freaking out." The agitated entrepreneur managed to retrieve a handful of his Cohiba Cuban cigars from the golf cart, "and then stomped off," she adds.

The movers even rifled through Eva's walk-in closet, seizing a long list of luxury possessions. Hermès purses. A collection of Louis Vuitton bags and notebooks. Yves Saint Laurent evening gowns. Chanel shoes. "The bags and purses alone could be worth a lot," Balcombe says.

But her right to take them is being contested. Eva's lawyers say in filings in U.S. District Court that the vast majority of assets seized belong to her. They state that Eva has her own property trust, and allege that Balcombe and her lawyers acted "carelessly, recklessly" by seizing the possessions. Balcombe's lawyers counter that under California law, assets claimed by Eva are either jointly owned with Pocklington or simply owned by him. But Eva, 66, is wondering in particular why her closet was targeted. In court filings, her lawyers emphasize the "nature of many of the items seized, which included women's evening gowns, women's shoes, women's handbags and lifelong heirlooms gifted to Eva Pocklington by her family, which heralded from the Canadian Arctic." (Eva was raised in Yellowknife.) "Unless they're saying Peter Pocklington is a cross-dresser, I don't think a handbag is the personal property of a man," Pocklington's lawyer, Michael Lusby, says. "There's no way that you can reasonably assume that her evening dresses were his property."

For years, Pocklington has lived by guidelines dubbed "Peter's Laws of Business" on his website, including, "If you can't win, change the rules! If you can't change the rules, ignore them!" Lusby agrees that it's a dog-eat-dog world when it comes to doing deals, whether big or small. "Hard business deals rest essentially on taking advantage of somebody. You buy something because you feel it's worth more than what somebody else is selling it for." Lusby notes that Balcombe and Kamatari signed deals, knowing what they were getting into: "We aren't talking about consumers and little old ladies. We're talking about sophisticated businesspeople who understand the risks."

Days after the third and final raid, Pocklington declared personal bankruptcy. In U.S. Bankruptcy Court, Pocklington's personal liabilities are listed at $19.7 million. In his declaration, Pocklington claimed that his net worth totalled just $2,900: $200 in his wallet, a $500 watch, a $500 set of golf clubs, $300 of clothing and shoes, $450 in appliances and furnishings, $450 worth of personal goods seized and $500 worth of memorabilia, trophies and art. But lawyers for Balcombe argue in U.S. District Court that Pocklington is far from a pauper—that he has vastly understated his personal assets in California and is also hiding money in the Bahamas. They wonder what happened to his valuable hockey memorabilia, notably five Stanley Cup rings.

The bankruptcy was, of course, a red flag to creditors. They want the seized assets to be sold to the highest bidder, so they can recover at least a portion of what they are owed. "Peter Pocklington has systematically looted several companies and willfully breached his contractual promises to both the plaintiff/judgment creditor here and several other companies and entities, including the government of Alberta," wrote Balcombe's lawyers.

Having bailed out Gainers and absorbed bad loans to the Oilers and other Pocklington businesses, the Alberta government was not unhappy to see Pocklington leave the province. As for the losses, he was considered a cold case. But lately the government has picked up the trail. Belying the notion that Pocklington had few assets when he left the province, a multitude of valuables were moved to California from Edmonton. Indeed, an estimated three-quarters of the condo's contents were moved down from Canada.

Alberta is trying to recover $12 million (Canadian) from Pocklington for defaulting on loans to Gainers. In Alberta Court of Queen's Bench in 2007, a judge granted an order to award the government's original claim of $2 million (Canadian), plus $10 million (Canadian) in accumulated interest over the years.

Pocklington dismisses Alberta's efforts. "Oh boy, I don't know where to start on that crock of crap," he says. "You can't win in an Alberta court anyway, if you're me." He questions the validity of Alberta's base claim of $2 million, and also, "How the hell do you get to that much interest? It's just ridiculous. Life is too short to continue this kind of quarrel." He also argues that he never received the $2 million in the first place, saying the funds were paid to Gainers as part of the strike settlement. "No good deed goes unpunished."

But the quarrel has since grown bigger. In late November, Balcombe joined forces with Kamatari and the Alberta government to file a bombshell complaint against Pocklington in U.S. Bankruptcy Court. Their lawyers allege that Pocklington listed his net worth at $20 million in obtaining a life insurance policy within the past five years, a far cry from his claim of having $2,900 to his name. The lawyers also allege that Pocklington receives $50,000 a month through Dempsey, the Bahamian holding company that he claims not to benefit from.

"Pocklington has been able to hide funds coming into his possession from various fraudulent schemes, and simultaneously wire funds to Mrs. Pocklington on a monthly basis in sufficient sums to support his lavish lifestyle," according to the filing, which asks the court to deny Pocklington's application to have his personal debts discharged. The complaint also requests that the court deny his separate moves to be discharged as a debtor to Ageless, Sonartec and the Alberta government. "Pocklington not only siphons the assets of companies he fraudulently acquires into the offshore entities, as well as any monies he raises from investors in these companies, but he also uses them to fund a lavish lifestyle, while avoiding taxes and judgments." Adding to the pressure, the Nevada bankruptcy trustee in the GolfGear dispute has asked the court to reject Pocklington's moves to have his GolfGear debts discharged.

Balcombe realizes that there will likely be many more months of legal manoeuvring by creditors to obtain their share of the spoils from the raids. She began her lawsuit against Pocklington in a quest to recoup the money that she lost in selling Ageless. Now, the legal process is out of her hands. She has resigned herself to seeing only a small portion of any proceeds, but hopes to see Pocklington get his just deserts. "I was basically conned by Peter, but I'm a private person. I don't want to get any more involved in his world," she says.

Pocklington's Vintage Club condo now sits empty, but doesn't appear to have much equity value. There's a $1.3-million mortgage on it with Washington Mutual, the failed savings and loan giant that was sold last fall to JP Morgan Chase. There are also two other mortgages listed in court, held by Palm Desert National Bank, totalling nearly $1.1 million.

In early 2008, Pocklington listed the condo for sale for $2.35 million. Facing the sharp downturn in California's real estate market, the unit remained unsold through late 2008. According to lending documents, Pocklington's mortgage obligations to Washington Mutual alone are $7,109 a month, but he hasn't made a payment since August. Washington Mutual, a secured creditor, said in a court filing that a suggested relisting price for the condo could be $1.295 million—a price chop of 45%.

Pocklington has been a Vintage member since 1990. He originally bought the condo that year, gifted it in Alberta to Eva in 1996, registered that change in California in 1998, and then transferred it again to various corporations over the years, the latest owner being Dempsey Investments Corp., according to mortgage documents.

The Pocklingtons vacated last fall, deciding instead to rent half of a bungalow duplex in nearby Palm Desert. Their new address, Lakes Country Club, doesn't have the cachet of the Vintage, but it nonetheless offers a private setting on a 27-hole golf course, with 24-hour security patrolling the entrance gate. The disparity is better captured by golf fees: While the Vintage commands $350,000 in initiation fees and $28,200 in annual dues, the Lakes charges $10,000 and $4,920.

How long the couple intend to live at the Lakes is unclear. Pocklington says that he misses "the civility" of Canada, but on his website, he makes his allegiance clear. "I love the United States, and I fully intend to become a United States citizen. I like the wide-open attitude of Americans. Americans generally praise success." Just how Pocklington can declare himself a success at this point is unclear. His personal bankruptcy filing is scheduled to go to court in February. He's also dealing with the liquidation case of Sonartec.

Pocklington has his own version of events, though he doesn't wish to go into detail. He says he will tell the behind-the-scenes story about his past business dealings in Canada, including the Oilers and the Gainers controversy, in a book that he's co-writing with an Edmonton journalist. Pocklington doesn't view Balcombe as the victim; rather, it's he who has been wronged.

Indeed, Pocklington is unfazed by all his troubles, saying his legal squabbles are "quite frankly, nobody's business. This is all bullshit. They can say whatever the hell they want and I really don't care." He says he isn't ready to give up his passion for business, even though the legal battles are wearing on him. "I'm in the middle of three more things. But I am so sick and tired with dealing with the American court system. It's just crazy." Asked about whether it's tempting to spend more time golfing, he replies: "Not interested in that."

Pocklington, who's now 67, is trying to keep things in perspective. Having hundreds of familiar and valuable possessions seized isn't driving him to distraction, he insists.

"I don't want to get involved in the public again. You never win. It's 'he said, you said.' I don't really give a shit what people say any more. I really don't care. You can write whatever the hell you want. Thirty or 40 years from now, who gives a shit," he says. "With all the shit that I've been through in my life, I don't really mind. I'm not a bitter person. People who are bitter end up having heart attacks. That's why I'm healthy at my age. I don't internalize things."

[admin]

the article below, is a good explanationof how people get on the slippery slope of doing wrong.
Read also the book , "THE LUCIFER EFFECT", author's name Zimbardo, for a complete explanation of why good people do bad things.

The slippery slope to doing wrong

Editor's letter
Investment Executive trade mag for the financial industry

By Tessa Wilmott



Harvin C. Moore III made a very persuasive case. The gentle-spoken Texan recounted the path he took from running a large development company and a savings and loan operation to serving time in a federal prison.

In the end, the reason for his downfall was simple, really. He made a mistake in judgment.

Now, many of us make mistakes in judgment. Hopefully, they’re little ones — like thinking the new puppy didn’t really mean it when she asked to go outside. And the messes we clean up are small ones.

But in Moore’s case, he allowed himself to think that what he was doing was OK in the circumstances — that the circumstances led him into a grey area in which right and wrong blended, that he may be doing the wrong thing but for the right reason.

But when Moore spoke to the Institute of Advanced Financial Planners’ 2008 symposium in Regina at the end of September, he made it clear that there is no grey area when it comes to ethics. Right is right; wrong is always wrong.

Moore’s troubles date back to the 1980s, when the real estate development market died in Texas. And it stayed dead. That jeopardized Moore’s development company and its ability to repay its loans. But Moore was also co-owner of an S&L. Essentially, the S&L made loans that carried conditions, that some of the money came back to Moore’s development company so he could pay off its loans and stave off bankruptcy.

It was illegal — and unethical. Moore was found out and convicted of bank fraud. He did two years. He also lost his wife, his businesses and his ability to practise law.

A sad story — but I didn’t feel sorry for Moore. He wasn’t there asking for anyone’s pity.
He was there to remind people of how easy it is to get off track, that the path to wrongdoing is a slippery slope and you can convince yourself step by step that your conduct is OK in the circumstances.
He referred to humans’ unerring ability to justify wrongdoing. Everyone is doing it. (Unfortunately, in the S&L scandal, everyone was.) Or the ability to convince yourself that a particular course of action or decision is best because you will save other people from being hurt. It isn’t about you; it’s about them.

Moore also talked about the “little” laws we break every day and our ability to negotiate our way around the ethical questions. It’s OK, for example, to speed on the freeway. You’re breaking the law, but everybody does it.

(I admit I speed — but it’s better for traffic flow if I keep up with the other speeders; it’s the slow drivers who are dangerous. I don’t, however, talk on my cellphone while driving, as do so many idiots when they’re on the road. Now, that is dangerous!

How is that for self-justification?)

So, much of what Moore said struck a chord, and it certainly has application for advisors. If you can pick and choose the laws you obey, what’s to stop you from selling a product your client may not need because you need to generate some commissions. Your need is greater. And, really, it is a good product. It’s not like you’re putting the client into some dog. And it’s just this once.

Or how about that product with the very attractive commission structure (think: Portus). That would really diversify your client’s portfolio. You’re really doing it for your client.

It is a slippery slope. But don’t kid yourself. As Moore made very clear, there is no grey zone when it comes to right and wrong. Handling other people’s money is a grave responsibility. There is no room for unethical behaviour; only for clear heads.

— TESSA WILMOTT, EDITOR-IN-CHIEF

[admin]

Wall Street's 'Disaster Capitalism for Dummies'

14 reasons Main Street loses while Wall Street sinks democracy

By Paul B. Farrell
MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, we're dummies. You. Me. All 300 million of us. Clueless. We should be ashamed. We're obsessed about the slogans and rituals of "democracy," distracted by the campaign, polls, debates, rhetoric, half-truths and outright lies. McCain? Obama? Sorry to pop your bubble folks, but it no longer matters who's president.

Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Imagine:

Greed, arrogance and incompetence create a massive bubble, cost trillions, and
still Wall Street comes out smelling like roses, richer and more powerful!
Yes, we're idiots: While distracted by the "illusion of democracy" in the endless campaign, Congress surrendered the powers we entrusted to it with very little fight. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy."
Why did this happen? We're in denial, clueless wimps, that's why. We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism." Here's how it happened:

■ Three decades of influence peddling in Washington has built an army of 42,000 special-interest lobbyists representing corporations and the wealthy. Today these lobbyists manipulate America's 537 elected officials with massive campaign contributions that fund candidates who vote their agenda.

■ This historic buildup accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown.

■ Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. Millions of homeowners and marginal banks suffered huge losses. Taxpayers stuck with trillions in debt. But giant banks emerge intact, stronger, with virtual control over government and the power to use taxpayers' funds. They're laughing at us idiots!

Amazing isn't it, Wall Street's Disaster Capitalists screwed up, likely planned or let happen this meltdown and recession. Yet America's clueless taxpayers just reward them by giving the screw-ups massive bailouts, control over more than $2 trillion of tax money, and the power to clean up the mess they made. Oh yes, we are dummies!

This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Democracy is too cumbersome. It had to be marginalized for Disaster Capitalism to take over. Reagan, Bush and Paulson were Wall Street's "Trojan Horses."

Naomi Klein summarizes the game in "Shock Doctrine: the Rise of Disaster Capitalism." This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters. Natural (Katrina) or manmade (Iraq), either way "disaster capitalism" creates fortunes.

So you, me and the other 300 million better get out of denial. America is no longer a democracy. Voting is irrelevant. Best case scenario: We're a plutocracy, a government ruled by the wealthy, the richest 1%, the Forbes 400, the influential wealthy elite, while the other 99% are their "servants." Meanwhile, the inflation-adjusted income of wage-earners has declined for three decades.

Worst case scenario: America's no democracy and as a result of the meltdown and the surrender of our power to Wall Street's new Disaster Capitalism we are morphing into what one WWII dictator called "corporatism," a "merger of state and corporate power," kind of like what's going on now with Goldman Sachs' ex-boss as de facto president.

Wolves in sheep's clothing

Yes, a strong charge. But like a lot of our readers, I don't like what's happening to America. I'm a patriot. I volunteered for the Marines. Served four years. Volunteered for Korea. I don't like how our freedoms, rights and value system are being subverted in the name of greed, arrogance, self-righteous intolerance and other false gods.

We know for the last eight years disaster capitalists ignored obvious warnings of a coming meltdown. They apparently planned it. They road the bull, got very rich. Now they have the ultimate disaster capitalist weapons, trillions in tax money, virtual control of government.

That's why I fear we're on the edge of a dangerous line between Wall Street's version of disaster capitalism and a toxic "merger of state and corporate power." The wolf is in sheep's clothing. Wall Street pretends we're a democracy. Yet America more closely resembles the kind of "corporatism" that Laurence W. Britt wrote about five years ago in Free Inquiry magazine.

We adapted his historical analysis of 14 key traits for today's discussion. Notice how they have a huge impact your investments and retirement:

1. Wall Street rich get first priority

Think "bailout." Wall Street's greedy con game spins out of control globally. Millions of homeowners misled, lose. Who gets hundreds of billions first? Wall Street's con men.

2. National security obsession

Think of the expansion of executive powers in the name of national security: Preemptive wars, wiretapping private citizens, Gitmo, torture; driven by a dark wealthy neocon elite.

3. Superpower with massive military

Think of our $3 trillion Iraq/Afghan War. Disaster capitalists love the thrill of military power. We outspend all nations, over half the federal budget to strut before the world.

4. Extreme nationalism

Signs are everywhere: Flags, lapel pins, "support the troops" slogans, all to get huge military budgets passed. Challenge them and you're un-American and unpatriotic.

5. Rally the masses by scapegoating enemies

Think "axis of evil," mushroom clouds, "Islamofascists," more terrorist attacks on the homeland. Propaganda creates "enemies" in the public's mind and distracts from real issues.

6. Corruption and cronyism

Think earmarks, no-bid defense contracts, paid mercenaries outnumbering military in Iraq, superlobbyist Jack Abramoff, biofuels, bridge to nowhere, millions donated to campaigns.

7. Obsession with crime

Think of prison-building as just another investment opportunity, rather than focusing on reforming our criminal justice system. Stoke irrational fear of criminals and extremists.

8. Labor and low wages

Think corporate earnings versus the wages paid to workers. No "trickling down," leaves more for tricklers: Rich insiders, stockholders. Wages dropping as CEO salaries skyrocket.

9. Contempt for human rights

Think of abuses of habeas corpus, loss of right to trial, bogus charges, plus "demonizing" the victims, all in the name of national defense and homeland security.

10. Mass media manipulation

Think of leaking false information, Joseph Wilson, Valerie Plame, Scooter Libby, Colin Powell's United Nation's testimony, Condoleezza Rice's mushroom clouds, WMDs, all to suppress the truth.

11. Obsession with sexism

Think of paternalism, antigays, antiabortion, subordinate women -- then codify the system as the law of the land reinforcing a male-dominated society, punish violators.

12. Disdain for intellectuals

Think of conservative intellectuals Francis Fukuyama and Bill Buckley. Contrast them to Sarah Palin and Joe Sixpack conservatism, Bush's funding cuts for arts and science education.

13. Religion in government

Think of all the faith-based programs versus antiscience in drug approvals, creationism vs. evolution, Ten Commandments enshrined in public buildings, public money to churches.

14. Fraudulent elections

Think of police and prosecutorial intimidation and threats to voters, challenging minority voters, ballots disappearing, party election officials committing outright fraud.

Yes, officially America is still a democracy. We have enough signs and rituals to support that illusion. But the truth is America has become a plutocracy run by and for the wealthy. And since Wall Street's Disaster Capitalism coup de grace, we are rapidly morphing into a dangerous new government.

[admin]

Weekend Edition
October 17 / 20, 2008
The Charmed Lives of the Crony Capitalists



How the Banksters are Making a Killing Off the Bailout

By Pam Martens, CounterPunch

October 17 / 20, 2008.

It's going to take about 20 years to repair the damage from the huge rip off created under the guise of "free market" capitalism.

Today, we hand our 8 year olds a $13 trillion national debt while our Congress hands Wall Street banksters the national purse without so much as a hearing to determine the cause of the collapse.

Worse still, the money is doled out to the very same individuals who leveraged their institutions to casino status.

Americans are correctly outraged at the spectacle of crashing stock and bond markets around the globe while watching the poster boys of crony capitalism march up the granite steps of the US Treasury building in their Armani shoes and heist a fresh $125 Billion.

Henry Paulson's, $700 billion bailout plan to buy up distressed mortgage assets has spun off its own $250 billion subsidiary plan to inject $125 billion into 9 of the biggest commercial and investment banks in the country. Another $125 may go to smaller regional banks and thrifts, assuming they sign on to the deal.

And what will taxpayers get for their investment as the public recoils in revulsion at what they have done to our financial system? A paltry 5% dividend, exactly half of what Warren Buffett received for his recent investment in General Electric, a company that actually makes something real, like jet engines and light bulbs.

Now we learn from the U.S. Treasury web site that it has hired the law firm of Simpson, Thacher & Bartlett to represent our taxpayer interests going forward at a cost to us of $300,000 for six months work. But we're not allowed to know their hourly rate; that has been blacked out on the Treasury's contract.

The Treasury has named specific lawyers it wants to work for us. Two of those are Lee A. Meyerson and David Eisenberg. Mr. Meyerson has been a central player in facilitating the bank consolidations that have led to the present train wreck, including building JPMorgan Chase from the body parts of Chemical Bank, Chase Manhattan and Bank One.

Mr. Eisenberg has played a central role in the proliferation of the credit derivatives blowing up on the books of the Frankenbanks created by Mr. Meyerson.

Here's what the Simpson, Thacher & Bartlett web site says about its relationships and Mr. Eisenberg's work:


"The Firm's practice benefits from established relationships with all of the major investment banks. Mr. Eisenberg is responsible for creating the asset-backed practice at the firm and has represented clients involved in the structuring of the first asset-backed commercial paper program, the first public offering of credit card-backed securities by a bank and the first offering of asset-backed securities supported by dealer floor plan loansMr. Eisenberg represents JPMorgan Chase Bank, as issuer, in its ongoing program of public offerings of its credit card receivables backed notes. In addition Mr. Eisenberg represented JPMorgan Chase Bank in connection with the issuance of notes backed by commercial loans and in connection with its offerings of Leveraged Notes for Credit Exposure, a credit derivative product. Mr. Eisenberg has also represented underwriters, issuers and sponsors of modeled index catastrophe bonds. Mr. Eisenberg has represented sellers and buyers of credit protection in connection with synthetic securitizations of consumer loans, commercial loans and high yield bonds."

This is an unconscionable conflict of interest given that JPMorgan Chase is receiving $25 billion of taxpayer funds under this bailout and that the program is very likely to be buying the very toxic waste for which Mr. Eisenberg wrote legal opinions and assisted in proliferating.

Most Americans do not understand the incestuous relationship between the U.S. Treasury and this band of financial marauders who busted the entire financial system with insane levels of leveraged derivatives.

The bulk of the $125 billion will be dispersed among Uncle Sam's own brokers, or Primary Dealers. Without these firms, the U.S. Government would have no means of financing its own funding needs.

Treasury, therefore, has an obvious conflict of interest in keeping these firms alive, even when they are the walking dead. Here's how much of the $125 Billion the Fed's Primary Dealers will collect: Citigroup, $25 Billion; JPMorgan Chase & Co., $25 Billion; Bank of America and its soon to be acquired brokerage, Merrill Lynch, $25 Billion; Goldman Sachs, $10 Billion; Morgan Stanley, $10 Billion. In other words, of the first $125 billion outlay from the emergency bailout fund, 76% is going to shore up Uncle Sam's brokers and $300,000 is going to retain one of Wall Street's favorite law firms.

In 1988 there were 46 primary dealers. In June 2008 there were 20, in no small part as a result of the mergers facilitated by Simpson, Thacher & Bartlett. In rapid succession since July, three more have disappeared from bad bets: Countrywide (shotgun marriage with Bank of America); Lehman Brothers, bankrupt; Bear, Stearns (shotgun marriage with J.P. Morgan Securities). That leaves 17 and that number will drop to 16 when Merrill Lynch is folded into Bank of America. (The rest of the 16 are not getting part of the $125 billion are foreign banks.)

In addition to the repeal of the depression era, investor protection legislation known as the Glass Steagall Act, the removal of credit default swaps from regulation by the Commodity Futures Modernization Act of 2000, various U.S. Supreme Court decisions upholding Wall Street's ability to run its own private justice system shrouded in darkness, there was one more key regulatory change that set the stage for this train wreck.

January 22, 1992 the Federal Reserve announced that its New York region would "discontinue the 'dealer surveillance' now exercised through regular on-site inspection visits by Federal Reserve surveillance staff."

In other words, the Federal Reserve amazingly dropped inspections. Who was at the helm of the Federal Reserve when this nutty decision was made: the same man who lobbied for the repeal of the Glass Steagall Act that ushered in the merger of depositor banks with casino investment banks and brokerages; the same man who lobbied for the passage of the Commodity Futures Modernization Act of 2000 to allow for unregulated derivatives markets. The man, of course, is Alan Greenspan former Chairman of the Federal Reserve.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article. She writes on public interest issues from New Hampshire. She can be reached at pamk741@aol.com

[admin]

http://www.guardian.co.uk/business/2008 ... es-banking

The Guardian October 17 2008

Top Wall Street bankers to receive $70bn pay deals

Simon Bowers

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40.4bn), a substantial proportion of which is expected to be paid in bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup will pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted widespread criticism. The government cash has been poured in on the condition that excessive executive pay will be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased today when Germany's Deutsche Bank said many of its leading traders would join chief executive Josef Ackermann in waiving millions of euro in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and - most controversially - bonuses appear to bear no relation to the heavy losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year; Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week Morgan Stanley's $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP MorganChase $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the amount accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of September by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m. None of the banks the Guardian contacted wished to comment on the record about their pay plans.

Behind the scenes, one source said: "For a normal person the salaries are very high and the bonuses seem even higher. But in this world you get a top bonus for top performance, a medium bonus for mediocre performance and a much smaller bonus if you don't do so well."

Many critics of the investment banking model have questioned why firms continues to siphon off billions of dollars of bank earnings into annual bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions. One banking source said: "That's a fair enough question - and it may well be that by the end of the year the banks start [to] review the situation."

Much of the anger about investment banking bonuses has focused on boardroom executives such as former Lehman boss Dick Fuld, who was paid $485m in salary, bonuses and options between 2000 and 2007. Last year Merrill Lynch chairman Stan O'Neal retired after announcing losses of $8bn, taking a final pay deal worth $161m. Citigroup boss Chuck Prince left last year with a $38m in bonuses, shares and options after multibillion-dollar write-downs.

In Britain, Bob Diamond, Barclays president, is one of the few investment bankers whose pay is made public. Last year he received a salary of £250,000, but his total pay, including bonuses, reached £36m.

One London-based banking source, who worked for a US bank, said many in the City were expecting star traders to see little reduction in their bonuses.

"The real 'rain-makers' will not notice an impact. It will be the more middle-ranking people who will be really hit."