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The Hunt for Financial Culprits: The Bloodhounds Are Out
Handcuffs on Wall Street: From the corner office to the corner cell

By Bob Stokes
Wed, 25 Jul 2012 17:30:00 ET
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Why didn't more wrongdoers go to jail for their roles in the 2007-2008 financial crisis?
 
Lots of people have asked that question in recent years.
 
But even if justice has been delayed after this much time, it still may not be denied if the Securities and Exchange Commission has its way.
 
Time is running out for U.S. securities regulators to file civil charges for alleged wrongdoing during the financial crisis.
 
Federal laws under which the Securities and Exchange Commission usually goes after alleged fraud and other misdeeds have a five-year statute of limitations. The five-year limit is causing SEC officials to race to file lawsuits in some cases and ask lawyers representing the targets of certain investigations to give the agency more time.
Wall Street Journal, July 11
 
The hunt for financial criminals will intensify as the financial downtrend escalates.
 
Financial regulators will seek to punish misconduct that might have been overlooked during a financial mania. It's already happening. The June 2012 Elliott Wave Financial Forecast observed as much in this headline:
 
The Blame Game Goes Ballistic
 
Here's an excerpt of the text:
 
One important side effect of a bursting financial bubble is the outbreak of financial scandal. It always appears as the new downtrend in mood prompts people to uncover all sorts of unsavory antics that flourished in the bygone atmosphere of unbridled euphoria...In September 2011, the Elliott Wave Financial Forecast stated that the scandals that had come to light so far would turn out to be mild compared to the “breadth of the financial crime wave” to be revealed in the next leg down in the ongoing bear market.
 
The issue reminds us of the investigations related to JPMorgan's trading losses, the botched Facebook initial public offering and the collapse of MF Global Holdings.
 
Why Corporate Fraud is So Rampant
 
That's the title of a statement by the United States Attorney for the Southern District of New York, published by CNBC on July 23. This edited excerpt virtually provides advance notice of the prosecutions that are ahead:
 
Almost two years ago, I was invited to speak to the New York City Bar Association about the future of white collar crime enforcement.
 
I spoke bluntly about what I had seen in a little over a year as United States Attorney for the Southern District of New York. To the apparent surprise of many in the room, I observed publicly that insider trading appeared to be rampant.
 
From coast to coast, the FBI and Securities and Exchange Commission have ensnared people not only at hedge funds, but at technology and pharmaceutical companies, consulting and law firms, government agencies, and even a major stock exchange.
 
What might be most astonishing (and disappointing) is that some of the most egregious securities frauds have occurred at institutions with seemingly robust compliance programs — at least on paper. They have occurred not at fly-by-night outfits but at prominent and powerful companies. And they have been enabled and perpetrated by the highest-flying money managers on Wall Street. 

The next leg of the market's downtrend may bring many more headlines like these:  

  • Research analyst John Kinnucan will plead guilty in an insider-trading probe - Wall Street Journal, July 24
  • Libor Scandal: Why Criminal Charges are Now Likely - CNBC, July 23
  • Students Victimized by ‘Subprime-Style’ Lending - Bloomberg, July 20
  • U.S. to Launch Broad Review of Futures Firms - Wall Street Journal, July 16
  • Citigroup Sued Over Executive Pay Packages - Reuters, April 20 
Prepare now for the financial chaos ahead.
 
Elliott Wave International offers you ideas for financial safety in EWI's premier Financial Forecasting Service, which consists of three separate services in one easy-to-navigate package. These three distinct services -- each one valuable by itself -- are The Elliott Wave Theorist, The Elliott Wave Financial Forecast and The Financial Forecast Short Term Update.                                     

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