Another Oprah Book Fraud

The "Angel at the Fence, The True Story of a Love that Survived" by 79 year old Herman Rosenblat is like a number of other book frauds promoted by Oprah Winfrey. It is the latest in a list of memoirs in which the author has been accused of fabrication and could put greater pressure on publishers to fact check books more carefully.

In 2006, U.S. author James Frey admitted he had fabricated key parts of his drug and alcohol memoir "A Million Little Pieces," the top selling non-fiction book in the United States in 2005.

In February 2008, Misha Defonseca admitted most of her bestselling autobiography, which told of a young Jewish girl saved by wolves while hiding from the Nazis in wartime Europe, was made up.

Also in 2008 was "Love and Consequences," a memoir by a Margaret B. Jones about a mixed-raced girl growing up in a gang-ridden neighborhood of Los Angeles, and supposedly a participant and perpetrator of violence was revealed to be a fabrication.

I suppose this is the down-side of promoting reading - you get a few duds. But what does it do to the craft (when editors do not even bother to check basic facts - even though it is being portrayed as non-fiction - it would be fine otherwise) and memory of those who died?

Spotlight on failure in MADOFF disaster

The unraveling of the how the disaster occurred continues.

Apparently, a former assistant director of the office of compliance inspections and examinations in Washington at the SEC named Eric Swanson left in 2006 and in 2007 married Bernie MADOFF's niece, Shana Madoff.

Other personal connections are surfacing.

NY Times Tuesday Dec 16. "A Vienna bank, Bank Medici, became the latest major institution to acknowledge it was a client of Mr. Madoff, saying it had $2.1 billion invested with him. Institutions and individuals have now reported losses of more than $20 billion."

Other "Red Flags" are not that convincing to me, as the first 4 could equally apply to all Wall Street managers. For me the most telling is the rampant nepotism at MADOFF. There is a certain "intellectual Darwinism" that occurs in Money Management, in fact it should be embraced and it sends a troubling message when ignored by hiring your own kids. Now perhaps 1 or 2 of the MADOFF sons/daughters were pretty smart and skilled in the investment business, but not ALL OF THEM CAN BE. If they are THAT talented, Dad should help them fund their own enterprises outside of his operation. I see the same problem arose at Noel's Fairfield Greenwich Group.

The most important flag was that a very small accounting firm did the audit of a $17 bn fund! Come one now that is taking "friendship" (as I presume that would have been the response if queried") way too far. Another was this apparent reply to the question "why don't you charge fees?" in a May 2001 MAR/Hedge column, "Madoff Tops Charts; Skeptics Ask How". Get serious.

My previous "breaking" post on MADOFF.

Madoff Fraud

It is almost beyond belief - US$50 billion for upto 4 years!

Bernard L. Madoff's fraud is almost big enough to give "a Ponzi scheme" a bad name. The fact he was "turned in" by his 2 sons almost makes it read1 like a segment of TV sitcom "Arrested Development". The question on everyone's mind? How such an incredible manipulation so large, (itself suspicious as Madoff's firm reportedly only had US$17 billion last January) could have happened and been undetected for so long. This truely was a master stroke as it would have required massive complicity or gross incompetence by someone. The NYT has reviewed some client statements and notices without finding anything extraordinary, unless they were all completely false (I note that they were not custodial account statements, but brokerage account statements, itself a potential red flag as it is not common for brokerage account to segregated such accounts.) Another issue was the murky division of "trading from safekeeping" functions so activity can be properly audited. Madoff reportedly operated on the 17th floor, separate and distinct form the market-dealing/making operations below.

Among one of the largest effected is HSBC Bank who gave Madoff a $1 billion mandate. It is noteworthy that many of the investors were very large and sophisticated clients who would have been wise to any obvious fraudulent behaviour. Apparently there were rumours of some problems with Madoff in 2001 and a number of investigations were undertaken but nothing was found. The fallout will be to shake the confidence of many private money-management clients in their managers and raise the volume on demands for greater oversight of Wall St. from the SEC and other regulators.


Footnotes
1) In Season 1, the family patriarch George BLUTH (played by Jeffery TAMBORE) is arrested for SEC fraud.

Behaviour & Criminality

The term "Criminality" is of course derived from the word "crime" - itself a term rarely critically examined.

Crime consists of the breach of a rule or law for which some governing authority or force may ultimately prescribe a punishment. When society deems informal relationships and sanctions insufficient to create and maintain a desired social order, there may result more formalized systems of social control imposed by the State. Agents of the State thereby compel individuals to conform to behavioural codes and punish those that do not.

A normative definition views crime as deviant behavior that violates prevailing norms – cultural standards prescribing how humans ought to behave "normally". This approach considers the complex realities surrounding the concept of crime and seeks to understand how changing social, political, psychological, and economic conditions may effect the definitions of crime and the form of law enforcement, legal and penal responses made by society. Such responses can be very contentious.

For example, as cultures change and the political environment shifts, behavior may be criminalised or decriminalised, which will directly affect the statistical crime rates, determine the allocation of resources for the enforcement of such laws, and influence the general public opinion. Similarly, changes in the way that crime data are collected and/or calculated may affect the public perceptions of the extent of any given "crime problem". All such adjustments to crime statistics, allied with the experience of people in their everyday lives, shape attitudes on the extent to which law should be used to enforce any particular social norm.

There are many ways in which behaviour can be controlled without having to resort to the criminal justice system. But where there is no clear consensus on a given norm, the use of criminal law by the group in power to prohibit the behaviour of another group may be considered an improper limitation of the second group's freedom, and the ordinary members of society may lose some of their respect for the law in general whether the disputed law is actively enforced or not. [November 2008 - Wikipedia.org]

Therefore, "Criminality" refers to the measured condition of crime in a society according to the standards of existing law. When we discuss the level or degree of criminality in a society we are referring to a flexible barometer of criminal activity. Yet many people believe in an inherent condition of criminal behaviour - a "natural level of immoral aberrant behaviour" rooted in the collective DNA of society similar to the biblical story of Cain and his brother Able. Others conflate the two meanings.

Imagine if we made Jaywalking a crime, we should find the "level of criminality" very high as well as our law schools, courts and jails overflowing with new recruits and unfortunates. Tax burdens would rise to finance building jails to incarcerate the flood of new "criminals" and the economy would lose productive, tax generating members. On release, these ex-cons may have lost their old job, maybe sanctioned due to their criminal record or most likely would just be shunned by employers and former business acquaintances. Social dislocations like family poverty and lost parenting would present themselves. Psychological health consequences like loss of self-esteem, depression and suicide would increase. All because of a law.

In this article1 the authors designed six psychology experiments to test the "broken window" theory which - in their opinion - confirmed that people are more likely to break rules when they believe others have done so. This reinforces that the idea that maintaining social order prevents the spread of disorder.

[TBD = In our society, many laws are "civil" in nature and are largely administrative regulations intended to impose a monetary fine or punitive condition (like parking tickets or zoning regulations) and thereby inhibit citizens behaviours in some fashion. Other more serious laws address "criminal" activities/behaviour and are involve server sanctions needing the courts and penal system to determine guilt and punishment.]


Footnotes:
1) "The Spreading of Disorder" Kees Keizer,* Siegwart Lindenberg and Linda Steg, Faculty of Behavioral and Social Sciences, University of Groningen, Netherlands. Study Shows How Degraded Surroundings Can Degrade by Constance HOLDEN, Science Magazine, 2008 Nov 21. (also see National Post)

How totalitarian regimes remain in power

This is a shocking first-hand account by Jean-Baptist KIM, a former "official spokesperson" of North Korea - on how propaganda and naivete are carefully cultivated within that country. Unfortunately, despite believing his disclosures, this fellows susceptibility to be a "useful idiot" must make one pause about the veracity of his interpretation. Nonetheless, it is a cruel indictment of North Korea and many other totalitarian regimes operating with careless impunity and UN complicity around the world. How sad that a noble ideal of "power of the proletariat working classes" is being so abused.

A key trait of such propaganda is controlling communication and silencing/repressing anyone who does not accept or parrot the "party line". The "Official Policy" is determined by government through control of various departments - education, health care, police and justice system. Anyone rash enough to voice an opposing opinion to someone they do not know or trust are harshly disciplined or disabused of the idea. (Does this sound vaguely familiar yet?)

In a similar vein is this account of journalistic collaboration in willfully ignoring the plentiful evidence in plain sight of all during the Ukrainian Famine of 1932-33 by the Moscow correspondent of the New York Times. Today (Nov 22, 2008) marks the 75th Anniversary of that terrible legacy created by Josef STALIN and his New York Times patsy, Walter DURANTY (see photo). As a committed socialist, DURANTY rarely let the opportunity pass without cheerleading many of Stalin's plans and was awarded the Pulitzer Prize almost entirely on the basis of his reports from Soviet Russia.

In fact DURANTY coined the famous phrase:

"You can't make an omelett with out breaking a few eggs"

He used it to describe the harsh methods employed by Stalin. It was a variant of "the ends justify the means" philosophy of ideologues and tyrants down through history.







Finally, the National Post has also printed brief profiles of famous Soviet hero, Mikhail KALASHNIKOV on the occasion of his 89th birthday. The AK-47 assault rifle bearing his name has sadly become the weapon of choice for many guerrillas around the world because of its reliability and functionality.

The People's Courts - Canadian Style

Ezra LEVANT has described the threats to our freedom of speech that we face from the various Human Rights Tribunals across our country. He makes his case very well in this recent speech to media lawyers - and indeed, I find the similarities chilling.

Walter SCHNEIDER of www.fathersforlife.org has also alluded that the various HRC's remind him of the hated "People's Court" (or "Volksgerichtshof") of Nazi Germany (and he should know, as he was young child during WWII in Germany).

This court was established to deal with treason after a disturbed communist sympathizer - Marinus van der Lubbe - was found guilty of starting the Reichstag fire on 27 Feb 1933. He was attempting to disrupt Hitler from gaining greater political power after assuming the position of Chancellor on 30 January 1933. Hitler used the fire as a pretext to incite fears of a "communist plot" to destabilize Germany and suceeded. In the ensuing election on 05 March 1933 the Nazi's (National Socialist Party) increased their share of the vote to 44% and with support of the National People's Party were able to claim a 52% majority.

The Volksgerichtshof were "special courts" operating outside the constitutional framework of law and had jurisdiction over a broad array of "political offenses". This included crimes like black marketeering, work slowdowns, and defeatism. Such crimes were viewed by the court as Wehrkraftzersetzung ("disintegration of defensive capability") and were punished severely. From 1934 - 1945 over 2,500 political prisoners were executed at Plötzensee Prison in Berlin after being found guilty by the Peoples Court.

Why was Kyle WEESE Free?

Fast on the heels of Mr. GUNTERS article on "Why Gun Bans won't work" came the news of this shooting death of an innocent bystander in Toronto.

Incredibly, the jerk-kneed editorials of Liberal rags like the Toronto Star AGAIN suggested the problem would have been solved if a "handgun ban" was in place. INCREDIBLE! No exploration of the fact that the perpetrator was a career criminal out on bail on a previous handgun charge.

Lorne GUNTER makes a completely common-sense suggestion in sayoing that a good first step towards preventing such murders of innocent bystanders would be rational sentences with no parole for violent crimes - rather than tying to impose onerous useless regulations of ordinary law abiding citizens. Amen.

Guns bans do not prevent murders.

Lorne GUNTER makes this point in the National Post very well - so I will not repeat it.

Yet today I heard Mayor David MILLER repeat for the umpteenth time that the problem is guns. That is simply not true - as supported by the facts. That he refuses to address the real problems that drive such heinous crimes - state-sponsored family breakdown, increased criminalization of men, increased substance abuse and gang activity - we will never successfully attack the real problems.

I would also argue that the indifference of local police to rising minor crimes - like car break-ins and theft - is part of the problem that drives citizens to own guns (despite the high regulatory burden and cost). As a friend of mine put it, more and more the police seem to practice "crime management" - that is triaging events into emergency, major and minor (with minor ignored or investigated by the victim with prompting by police via telephone) rather than prevention. And they wonder why the public is losing confidence in their ability.

Source: Statistics Canada Online Juristat. "Homicide in Canada" 85-002-X, Oct 2008.

Tragedy for family of Jennifer HUDSON

What a terrible tragedy for this talented young women. I believe Johnathon KAY is correct when he says this will effect Ms. Hudson in a terrible fashion.

This is the crisis that Sen. Barack OBAMA should dedicate himself to repairing.

St. Crispin's Day

Sadly, a 15 yr-old boy in Barrie ON named Brandon Crisp has been missing for over a week (since Thanksgiving Monday, Oct 13) after an argument with his parents over excessive Xbox use and online playing of Call of Duty 4. In this article from the National Post, "experts" indicate that any obsessive compulsive behaviour should be a red flag to parents about "possible deeper emotional turmoil within their kids lives".

Still another media outlet (CTV) interviewed an expert who said that parents underestimate the degree of social interaction such games involve. In many cases, children derive a high degree of personal identity from the fantasy world of the game and the other participants they meet online. In some cases they can avoid uncomfortable social circumstances because of their online skills and in this way their online "memes" - with whom they may have a huge amount of interactions with - become an important part of their social network.

To help in the search, a number of community volunteers have begun looking for the boy. Microsoft Canada (who produces the Xbox) has contributed to a reward for tips that lead to Brandon being found. They also maybe able to provide information about some of Brandon's online gamer friends. A growing concern is that he may have been aided in his runaway or possibly abducted by a fellow online gamer.

October 25 was before Vatican II1 known as Saint Crispin's Day and was the feast day of the twin Christian Saints Crispin and Crispinian (also known as Crispinus and Crispianus, though this spelling has fallen out of favour), twins who were martyred circa A.D. 286.

I know it primarily for the Battle of Agincourt in 1415, dramatised by William Shakespeare in Henry V, with his famous battle-rousing speech, but is was also the day of other famous battles: the Battle of Leyte Gulf in the Pacific theater in 1944, the Battle of Balaklava (Charge of the Light Brigade 1854) during the Crimean War.

[Update: 2008NOV10 The body of this young boy was found by hunters about 8-10 km from his bike at the base of a tree. It is thought that he suffered critical injuries when he fell from it. A sad story to be sure and the couple and two older sisters are doubtless wracked with guilt and grief over this tragic turn of events. I do feel for them.]

Footnotes:

1) Vatican II was the twentieth century Ecumenical Council of the Roman Catholic Church. It opened under Pope John XXIII in 1962 and closed under Pope Paul VI in 1965. These saints were removed from the liturgical calendar (but not declared to no longer be saints) during the subsequent reforms. The feast remains as a 'Black Letter Saints' Day' in the Calendar of the Anglican Book of Common Prayer (1662) and a 'commemoration' in Common Worship (2000).

The reasoning used by Vatican II for this decision was that there was insufficient evidence that Saints Crispin and Crispinian actually existed. Indeed, their role as shoemakers, their relationship as twins, and the timing of their holiday are suggestive of the possibility that they could have represented a local Celtic deity (Lug-Mercury) which had been made into a saint as a result of syncretism.

Sins of Commissions or Omissions

Today Aug 23 (tomorrow is the last day of the Beijing Olympics) is the 1st Anniversary of the Asset Backed Commercial Paper (ABCP) meltdown in Canada. And it looks like the end is finally in sight as most retail holders voted and approved the bailout package. Only Corporate (such as Robert Friedland's First Dynasty Mines, is a holdout as $200+ million in proceeds from an equity financing were placed in ABCP prior to project approval - but there is no sympathy for the devil) and large Institutions remains as holders.

Soon after this story broke I found myself wondering how some of these retail investors could sleep with themselves at night. In the old days, before the new cyber-sins were invented, sins fell into two categories; Sins of Commission - things you did but shouldn't have and Sins of Omission - things you didn't do but should have.

Yet, in every market cycle Financial Advisor's learn the wages of these sins the hard way.

Clients are often disappointed to learn that they can't get unlimited returns without undertaking higher risks. But for those truthful enough to reveal the truth are often fired for doing so or replaced by someone else who tells the client what he wants to hear.

There is lots of blame to go round when individual investors claim - as I have read in the past year - that 1) a retail investor placed 100% of his widowed father's home sale proceeds because ABCP had higher much yields that comparable GIC's or TBill's. This fellow acknowledged going against his advisors advice but still wants to be compensated!

HELLO! What was he thinking!