Virtual Bank, Real Scam?

    Second Life is a popular “virtual world” in which people across
the real world interact with each other using “avatars.” [1]  Avatars
are three-dimensional alter-egos that can be completely customized;
users can change their avatar’s clothing, height, weight, and even add
features like wings. [2]  Unlike other virtual worlds, which are
basically interactive computerized versions of fantasy role-playing
games, Second Life is not a game in the traditional sense. [3]  It does
not have goal or end; there are no monsters to fight, mysteries to
solve, or princesses to rescue. [4]  Rather, Second Life provides its
users with a toolkit with which they can create items within the
virtual world. [5]  Users can create pretty much anything they want:
buildings, vehicles, clothing, even games. [6]

  Much of the activity in Second Life centers on commerce with users
“buying” and “selling” “land” and each other’s creations. [7]  … Read the rest

China Makes Plans to Diversify its Currency Reserves

People’s Bank of China Governor Zhou Xiaochuan announced at a
meeting of central bankers in Frankfurt this past Friday that his
nation plans to diversify its $1 trillion currency reserves. [1] Zhou
stated that China has a clear diversification plan that includes
“currencies, investment instruments, [and] emerging markets,” but does
not include the sale of any of its dollar denominated assets, which
make up approximately 70% of China’s total reserves. [2] Despite Zhou’s
assurances that China would not be selling off its dollar denominated
assets, the dollar fell to a two and a half month low against the Euro
and gold prices rose to a two month high. [3]

analysts believe that China is unlikely to sell off a large amount of
its dollar denominated assets; as to do so would be against China’s
interests. [4] If China were to make such a sale, the sudden influx of
U.S. … Read the rest

Banks Cheating Workers Out of Overtime Pay Are In Trouble


There is
a common practice among banks to classify their brokers in such a way
that makes them ineligible to receive overtime pay, and now their
brokers are fighting back to receive the pay that they feel is
rightfully theirs. Morgan Stanley, Citibank, Wachovia, and Bear Steams
have all been sued for failing to pay overtime to eligible employees.
The U.S. Department of Labor is now chiming in to say which employees
must be paid overtime, and it is not looking good for the banks.

Stanley has agreed to pay up to $42.5 million to settle a class action
suit against 4,000 of their employees and former employees for failing
to pay overtime to them even though they were eligible for overtime pay
under the law. [1] Similar cases have been filed against Citibank,
Wachovia, and Bear Steams Cos. [2]

The plaintiffs alleged that improper deductions were taken

Read the rest

Bank of America Settles Money Laundering Suit for $7.5 Million

The Bank of America recently settled a money laundering suit brought
by Manhattan District Attorney, Robert M. Morgenthau for $7.5 million,
$6 million in penalties and $1.5 million in costs, ending an almost
three year investigation conducted in coordination with foreign
authorities. [1]

Attorney Morgenthau said that a series of transfers, totaling more than
$3 billion, prompted the investigation because they possessed some of
the ear-marks of terrorist financing, much of which comes from South
America. [2] The transfers originated in offshore shell companies owned
by illegal Brazilian money services and were routed through the Bank of
America account of a Uruguayan money remitter. [3] Although officials
do not know the identity of many of the recipients, District Attorney
Morgenthau believes that some of the transferred funds went to Mideast
terrorist organizations. [4]

Under the terms of the settlement, Bank of America admitted that it
failed to adequately asses … Read the rest

China Approves Citibank-led Consortium’s buy-into Guangdong Development Bank

China’s approval of the Citibank consortium’s buy-into Guangdong
Development Bank ends a year-and-a-half battle for control of the bank.

The Citigroup consortium, which includes China’s largest insurance
company and one of China’s largest electricity distributors, offered
approximately three billion dollars for an eighty five percent stake in
Guangdong Bank. [2]

Citibank consortium beat out its closest rival a consortium led by
France’s Societe Generale. [3] U.S. based, private investment firm, The
Carlyle Group, pulled out of the bidding. [4] Despite a last minute
attempt to get back into the race, Ping An Insurance's bid was hobbled
when they tried to make large donations to the Guangdong provincial
government a portion of their bid. [5]

Despite their leadership position in the consortium, Citibank will
only take a 19.9 percent stake in Guangdong Development Bank, as
Chinese law currently forbid a single foreign bank from owning more
than 20 percent … Read the rest

Insider Trading Scandal at Goldman and Merrill

Prosecutors recently charged three employees at Goldman Sachs and
Merrill Lynch with participating in a $6.7 million insider trading
scheme. [1]  Authorities claim that Stanislav Shpigelman, an analyst at
Merrill, sold inside information on upcoming mergers and acquisitions
to Eugene Plotkin, an associate at Goldman, and David Pajcin, a former
Goldman analyst. [2]  Plotkin and Pajcin then used this information to
buy stocks before the public announcement of the deals and then sell
them after the announcements for a significant profit. [3]

The trio also recruited
two employees of a printing plant in Wisconsin that publishes Business
Week. [4]  The plant employees stole advance copies of the magazine and
informed Plotkin and Pajcin of companies mentioned favorably in the
“Inside Wall Street” column. [5]  As a favorable mention in the column
usually leads to an increase in the price of those stocks, the
conspirators were able to purchase the stocks … Read the rest

FDIC Increases Deposit Insurance For Retirement Accounts

On April 1st the Federal Deposit Insurance Corporation (“FDIC”) will
increase its deposit insurance coverage of retirement accounts from
$100,000 to $250,000. [1]  This change represents the first boost to
coverage in over twenty-five years. [2]  Despite coverage for
non-retirement accounts staying at the current level of $100,000, the
increase in coverage for retirement accounts will be beneficial to
consumers and banks alike. [3]

last increase in deposit insurance coverage took place in 1980 when it
was raised from $40,000 to $100,000. [4]  However, many Americans now
have much more than $100,000 in retirement savings.  [5]  This meant
they were forced to bank at multiple institutions in order to have all
of their retirement funds insured. [6]  Under the new law, individuals
will be able to have up to $250,000 in retirement funds at one bank.
[7]  This will make banking easier for consumers and increase profits
for banks. … Read the rest

Illegal Long-Distance Tax Continues To Be Enforced

Despite the invalidation of communications excise tax, I.R.C. §
4251, by numerous federal courts the IRS is demanding that collection
of the tax continue. [1] The three percent communications excise tax
was originally imposed in 1898 as a temporary luxury tax to help fund
the Spanish-American war. [2] The tax applies to a number of
communications services among which is long-distance or “toll
telephone” service and is paid by everyone, both individuals and
businesses, who makes long-distance calls. [3]

purposes of the communications excise tax, the IRS defines toll
telephone service as “a telephonic quality communication for which . .
.there is a toll charge which varies in amount with the distance and
elapsed transmission time of each individual communication.” (emphasis
added) [4] The IRS contends that the word “and” in the statute should
be read as “either,” while those fighting the tax contend that “and”
should be read … Read the rest