HP Pays for Bribing Polish Police

Our correspondent Andreas Frank calls attention to some of the mess Meg Whitman has to clean up at Hewlett Packard. Polish prosecutors alleged that a local executive with U.S. firm Hewlett-Packard Co. paid bribes worth over $500,000 in exchange for help winning contracts to supply computer equipment to the Polish police headquarters.

Poland’s Interior Minister Bartlomiej Sienkiewicz said HP would make an announcement later on Wednesday acknowledging its Polish unit had been involved in “corrupt activities”. A spokeswoman for HP declined to comment.

Polish officials said dozens of people had been charged as part of an industry-wide investigation of corruption dating from 2007 to 2009, among them representatives of major information technology (IT) companies, government officials and former police officers.

The minister said Poland had cooperated on the investigation with the U.S. Federal Bureau of Investigation (FBI) and the Securities and Exchange Commission (SEC).

The U.S. Foreign Corrupt Practices Act makes it illegal for U.S. companies to pay bribes to officials with foreign governments to win business. Firms found to have violated the act have in the past been ordered to pay multi-million-dollar settlements.

Polish prosecutors said their case centered around a former government official who was initially in charge of IT with the national police headquarters, and later became head of the IT Projects Center, a state agency at the Polish Interior Ministry.

Zbigniew Jaskolski, a spokesman for the Appellate Prosecutors’ office in Warsaw, which handles major cases, said the official gave favorable treatment for firms, including HP, which were bidding for IT contracts with the police headquarters that were worth a total of $39.71 million.

In exchange, the executive in HP’s Poland unit, who is no longer with the company, gave the official a payment of $529,500 as well as computer, audio and video equipment worth $36,400, Jaskolski said.

The Appellate Prosecutors’ office named the former government official as Andrzej M., and the former HP executive as Tomasz Z., without giving their full last names in accordance with the Polish law.

The former HP executive also promised the same official a bribe worth $827,400 in exchange for including in the tender documents provisions which favored bidders designated by the executive, Jaskolski said. Both the former executive and the former official have been charged with offenses which carry prison sentences of between two and 12 years, he said.

Polish Police

Cyber Hacking in China

Only Google objects.  The ECONOMIST reports that China’s hackers may be the terror of the Earth, but in fact most of their attacks are rather workaday. America and Russia have hackers at least as good as China’s best, if not better. What distinguishes Chinese cyber-attacks, on anything from governments to Fortune 500 companies, defence contractors, newspapers, think-tanks, NGOs, Chinese human-rights groups and dissidents, is their frequency, ubiquity and sheer brazenness. This leads to an unnerving conclusion.

“They don’t care if they get caught,” says Dmitri Alperovitch, who used to work at McAfee, a computer-security firm, where he helped analyse several Chinese hacking operations in 2010 and 2011, and is a co-founder of CrowdStrike, another cyber-security firm. The indiscriminate tactics of China’s 2010-11 campaign made it relatively easy to track. His team identified more than 70 victims (among many more unidentified ones), dating back to 2006, and found that the average time the hackers stayed inside a computer network was almost a year. “They’ll go into an organisation and then stay there for five, six years, which of course increases the chances that they get caught.”

Mr Alperovitch offers two reasons for the careless abandon of China’s hackers. The first is that their attacks are on an industrial scale—“thousands of continuous operations”—so they could hardly be expected to go unnoticed. The second is that “they don’t see any downsides to being caught. They have so far not suffered economically or politically for being caught.”  Cyber Hacking

Cyber Hacking

Entrepreneurial Success with Safety Vests

Lynette Mayne always give her clients what they ask for. DHL said please tender on this gear and had a corporate design and corporate colour. We gave them that, but recommended they slightly change the colour to a brighter orange so it will meet Australian safety standards. They said that is one of the reasons they gave us the tender. We are extremely flexible in the way we go about things.  Making a Success of Work Wear


Safety Vest

Going After Individual Wrongdoers in the Banking Industry

Benjamin Lawsky, New York State’s Banking Regulator. wants to bypass corporations which are legal fictions and go after individuals and ‘name and shame’ them.

“People do cheat. We want to preserve the reputation of our financial sector and make people realize the vast majority of people on Wall Street and banking do good work,” Mr Lawsky said.

Mr Lawsky, a former federal prosecutor, worked closely with Andrew Cuomo – formerly New York’s attorney-general now the state’s governor. Mr Cuomo created DFS three years ago by merging the state’s banking and insurance regulators and tapped Mr Lawsky to run it. DFS supervises 4,400 entities, with assets of about $6.2tn.

Mr Lawsky’s ambition is to establish New York as the financial technology capital of the world. He’s working on a regulatory blueprint that will woo Bitcoin exchange operators to set up in the state.

He sees regulators as having to adapt and be more nimble to developing technologies – and that includes striking a balance between a bank’s application that can take a year to be approved and the reality that a new technology can become outdated in six months.

Mr Lawsky has personally adopted a revolutionary approach to bank regulation. He tweets from a personal Twitter account – with a modest 2,113 followers – and last month participated in a two-hour long “ask me anything” session on reddit, an open forum social media website, to discuss and learn from users of Bitcoin.

He noted that more than “14,000 people from 117 countries tuned into those hearings online, which was not the usual turnout we get!”

DFS continues to investigate foreign banks for violating US sanctions laws saying the number of existing cases is “not as small as a handful but not dozens”. His office is also actively investigating consulting firms for failing to act independently when advising banks.

Going After Individuals

US Clamping Down on Yanukovych

Our correspondent Andreas Frank reports:  The U.S. Treasury formally warned banks Thursday to watch out for transactions by ousted Ukraine President Viktor Yanukovych and his relatives and associates, citing sanctions by Canadian and European officials.

Mr. Yanukovych, some of his family members and other former government officials have been accused by the new government in Kiev of stealing state assets. The European Union and Canada signed orders to freeze the assets of 18 people incriminated by Ukrainian prosecutors.

“The measures being taken against these former Ukrainian officials and their close associates increase the risk that they will seek to move their assets in a deceptive fashion,” Treasury’s Financial Crimes Enforcement Network said in an advisory.

FinCEN’s notice updates an advisory last week warning that banks need to apply “enhanced scrutiny” to transactions by either Mr. Yanukovych or former senior officials in his government. The advisory was designed to protect against “misappropriated or diverted state assets, the proceeds of bribery or other illegal payments, or other public corruption proceeds.”  FINCEN Advisory

 

70 Billion Dollars Leave

Sochi as Entrepreneurial Inspiration

One of the five Olympic rings malfunctioned and online stores in China are offering variations of the glitch.  Hospital administrator Zhang Zhen recognized it as a great business opportunity.  “I thought, ‘since everyone thinks this is funny, why don’t I make some T-shirts out of it’ – turn it into something memorable,” Zhang said.

Zhang and partner Yan Wenjuan took time out from their day jobs and transformed his spartan apartment into a workshop

The International Olympic Committee is very protective of its five rings and the newspaper quoted Wang Li, professor of Olympic Study at Beijing Sports University as saying: “Marketing an image that is suggestive of an official symbol without a permit is still (copyright) infringement.

For their part online sellers say is just a bit of fun, and that their image is different – just four rings and a malfunctioning snowflake.  They have made a quick buck with this ingenious and instant response.

Sochi Snowflake

Has the Cold War Shifted to the Pacific

Journalists and scholars are studyng the possibility of conflict in the Far East.  Some think China and Japan will shoot at each other in the next five years.

Financial Times reporting: The new era of military competition in the Pacific may become the defining geopolitical contest of the 21st century.  China’s turn to the seas is rooted in history and geography in a manner that transcends its current political system. It was from the sea that China was harassed during its “century of ­humiliation” at the hands of the west. China was one of the most prominent victims of 19th-century gunboat diplomacy, when Britain, France and other colonial powers used their naval supremacy to exercise control over Shanghai and a dozen other ports around the country. The instinct to control the surrounding seas is partly rooted in the widespread desire never to leave China so vulnerable again. “Ignoring the oceans is a historical error we committed,” says Yang Yong, a Chinese historian. “And now even in the future we will pay a price for this error.”

Anxieties about history and geography have meshed with broader concerns about economic security. One of the key turning points in China’s push to the high seas took place when it started to import oil for the first time, in 1993. By 2010, China had become the second-biggest consumer of oil, half of which is now imported. New great powers often fret that rivals could damage their economy with a blockade. For every 10 barrels of oil that China imports, more than eight travel by ship through the Strait of Malacca, the narrow sea channel between Indonesia, Malaysia and Singapore, which is patrolled by US ships. Fifteenth-century Venetians used to warn, “Whoever is the Lord of Malacca has his hand on the throat of Venice.” Hu Jintao echoed these sentiments when he warned in a 2003 speech that “certain major powers” are bent on controlling this crucial sea lane. Until now, China’s maritime security has been guaranteed largely by the US Navy. But, like aspiring great powers before it, China has been forced to confront a central geopolitical dilemma: can it rely on a rival to protect the country’s economic lifeline?

The US has not lost an aircraft carrier since the Japanese sank the Hornet in 1942. Both practically and symbolically, the aircraft carrier has been central to American power projection over the six decades during which it has dominated the Pacific. But it is those same vessels that are now potentially under threat from China’s vast new array of missiles. The loss of a carrier would be a massive psychological blow to American prestige and credibility, a naval 9/11. The mere prospect that carriers might be vulnerable could be enough to restrict their use. Even if the US Navy commanders thought their carriers would probably survive in a conflict, they might be reluctant to take the risk. As a result, the US needs a Plan B.

In the bowels of the Pentagon, that new plan has been taking shape. It is not actually described as a plan – instead, Pentagon officials call it a new “concept” for fighting wars. But it does have a name, AirSea Battle, which echoes the military doctrine from the later stages of the cold war called AirLand Battle, when the massive build-up in Soviet troops appeared to give the USSR the capacity to over-run western Europe. Many of the details about AirSea Battle remain vague. But the few indications that have been made public suggest an approach that, if pushed too far, could be a manifesto for a new cold war.

Then there are the allies. Asian governments are keen on a US military that can push back against Chinese aggression and are eager to enlist US help in this regard. But some allies might balk at the prospect of a plan to attack deep into mainland China, especially if it involved launching bombing raids from their territory. Ben Schreer, an Australian military strategist, says AirSea Battle is suited to “a future Asian cold war scenario”. Rather than providing assurance, Washington’s new battle plan could easily rattle some of its friends and allies.

Is AirSea Battle politically viable? Given the risks, especially the chance of nuclear escalation, it is not at all clear that a US president would endorse a war plan that involved such a rolling bombing campaign. Successful deterrence relies on being able to demonstrate a military threat that is credible and realistic. Pentagon planners hope the Chinese military will be cowed by the mere thought of an American military strategy based on AirSea Battle. But, equally, the Chinese might come to see it as a one great big bluff.

At the very least, AirSea Battle concentrates the mind. It is prompting a much broader debate in the US about how to respond to the Chinese challenge. With its superiority now under threat, Washington faces a choice: it can try to retain its primacy at all costs or it can shift to a more defensive approach that is geared towards preventing another power from ever controlling the region. Deterrence is not always the same as dominance.

Such bleak outcomes are not inevitable, of course – powerful economic connections narrow the space for reckless behaviour. Yet a previous era of globalisation failed to prevent the UK and Germany from going to war. Shinzo Abe, the Japanese prime minister, is not alone in comparing the current situation in Asia to Europe in 1914. Asian militaries lack the meticulous war plans that helped push Europe into conflict then but the region offered a familiar mixture of nationalism and the potential for miscalculations that can spin out of control. The western Pacific may now be the cockpit of the world economy but it is also turning into one of its most dangerous flashpoints.

AirSea Battle in Pacific?

SEC and Credit Suisse in 196 M Settlement

Our correspondent Andreas Frank writes:
Credit Suisse Group AG agreed to pay $196 million and admitted that it improperly solicited thousands of American clients, ending a U.S. regulatory probe while a broader criminal investigation of tax evasion still looms.  The settlement today includes almost $82.2 million in disgorgement, $64.3 million in prejudgment interest and a $50 million penalty.

The bank collected about $82.2 million in fees and amassed as many as 8,500 U.S. client accounts from at least 2002 through 2008, the SEC said in an administrative order today. The accounts held an average total of $5.6 billion in securities assets, the SEC said.

Credit Suisse has been ensnared in a wider Justice Department probe for the past three years into Americans’ use of off-shore bank accounts to avoid taxes. Eight bankers, including Credit Suisse’s former head of North America offshore banking, were charged in 2011 with conspiring to help American clients evade taxes through secret bank accounts.

“As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance,” Andrew Ceresney, director of the SEC’s enforcement division, said in the statement. “The broker-dealer and investment adviser registration provisions are core protections for investors.”

Credit Suisse admitted to the facts in the SEC order, which concluded that the bank “willfully violated” securities laws, and agreed to hire an independent consultant, according to the regulator.

Creidit Suisse has a history:
In 2012, Credit Suisse come into the spotlight when Christos Bagios a former banker at UBS AG and Credit Suisse was indicted and pled guilty supporting wealthy Americans hide millions of dollars from U.S. tax authorities.
In 2011 Credit Suisse was fined 149 million euros to settle allegations against the bank for helping German citizens to evade taxes.
In 2009 Credit Suisse was fined $536m  for money laundering and sanction violations by the DOJ.   SEC Credit Suisse Settlement

Credit Suisse

 

Financial Crises Are the Same

In their introduction to “This Time It’s Different” the story of the origin of the phrase is told.  Vincent Reinhart worked for the Federal Reserve for twenty-five years.  Attending a meeting of the board of governors and market practitioners, one trader with an uncharacteristically long memory declared, “More money has been lost because of four words than at the point of a gun.  Those words are, “This time it’s different.”

This Time It’s Different by Carmen Reinhart and Kenneth Rogoff

 

Financial Regulation