The Fiduciary Trust

April 28, 2009 | Filed Under Anti-Americanism, Barack Obama, Budget, Business, Congress, Dan Scott, Democrats/Leftists, Economy/Finances, Government, Corruption, Liberals, Media Bias, President, Socialism, Society/Culture, Taxes | Comments Off

-By Dan Scott

Everyone who is responsible for financial transactions and decisions that effect the wellbeing of others understands the term, fiduciary. There is a code of ethics and duty which governs that relationship. I will quote the on line Business Dictionary to help you understand this idea of fiduciary so you may see how essential it is in the conduct of business affairs: (bold is mine)

Special relationship of trust and confidence which, in the words justice Benjamin Nathan Cardozo (1870-1938; US Supreme court judge from 1932 to 1938) is “something more than the ordinary honor of the marketplace … the very punctilio of honesty and forthrightness.” Fiduciary relationships exist between an agent and principal, testator and trustee, testator and executor, ward and guardian, customer and bank, client and attorney, patient and doctor, partner and partner, stockholders (shareholders) and directors, etc. In these relationships law demands a higher than ordinary degree of care and responsibility from the dominant or trusted party.

The fiduciary relationship is acted out on a daily basis by the officers of a corporation in regards to the stockholders. This trust requires, no, demands a certain amount of transparency between them. A fiduciary is required by law to inform their employer or investor of any known material information that may cause a significant financial loss upon them. The employer or investor has a right to know from people who handle their finances if there is information they are unaware of that may harm their interest. We call this knowledge, material information. Any corporate officer who is in possession of knowledge that may or will lead to financial loss and then fails to tell their employer or investor is in material breach of trust. A fiduciary when presented with material information must give the employer or investor the opportunity to exercise their own express wishes regarding this information. This breach of trust has serious legal consequences to those who violate the high standards of the fiduciary trust. Those consequences depending upon the seriousness (fraud) and the manner of how the information was withheld can lead to lawsuits and even prison time.

I would like to direct your attention to some events in the news lately in order to connect some dots that reveal a disturbing picture coming into creation. Recently, the CEO of Bank of America (BofA) Mr. Lewis was questioned by the New York Attorney General regarding his company’s actions. During the course of that questioning on other matters it was discovered that Mr. Lewis deliberately withheld material information regarding the merger of Merrill Lynch and BofA that affected the stock price of BofA, a publicly traded company. The withholding of this information cost the BofA and stockholders literally billions of dollars in losses requiring government intervention to the tune of billions. Mr. Lewis used the “devil made me do it” defense to rationalize his material breach. Who were the devils? Bernanke and Paulson. He claimed he was forced to not inform the stockholders that their vote to merge with Merrill Lynch was going have deep financial repercussions to BofA and all of this was rationalized under the greater good. Had the information been released to the stockholders before the vote, the merger would never have been approved. Thus Lewis violated his fiduciary trust (a criminal offense) to tell the stockholders and Bernanke and Paulson engaged in a criminal conspiracy abusing their office to defraud the stockholders costing them billions of dollars. Given the number of other shotgun marriages both Paulson and Bernanke performed against the shareholder’s interest, one must wonder if Bernanke, Paulson and now Geithner similarly bullied the CEOs of the other firms? After all, isn’t the Treasury refusing to take back TARP money and imposing onerous rule changes also a form of bullying? By what legal authority can they do these things? I say we have a major crime spree on our hands by government officials. It matters not what Bernanke’s or Paulson’s claimed intent, what they did was ILLEGAL. Since BofA is a publicly traded company, these actions squarely fall into the jurisdiction of the SEC. What is the SEC doing? … Since there was a criminal conspiracy involving public officials it is the FBI’s responsibility to investigate and arrest those involved. What is the FBI doing? …

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. — a deal that later triggered a government bailout of BofA — according to testimony by Kenneth Lewis, the bank’s chief executive.

Mr. Lewis, testifying under oath before New York’s attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by …

…Lewis testified that the government wanted him to remain silent while the two sides negotiated government funding to help BofA absorb Merrill and its losses, the paper said, citing transcripts of the testimony.

Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren’t normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.

“Isn’t that something that any shareholder at Bank of America…would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript…

…Paulson repeatedly told Lewis that “the U.S. government was committed to ensuring that no systemically important financial institution would fail,” the Journal cited the former Treasury Secretary’s spokeswoman as saying…

A tragedy befell the Kellerman family; David Kellerman apparently committed suicide for some unknown reason. David Kellerman was the acting CFO of Freddie Mac. Now we come to find out that this CFO was in a fight with “certain” government officials about reporting the disclosure of Obama’s mortgage program that cost Freddie Mac an additional $30 billion. Who are these officials that attempted to pressure the CFO to commit fraud in not reporting the $30 billion loss? Since Freddie Mac sells mortgage-backed securities to the public, what is the response of the SEC? … Is the FBI investigating those certain government officials who attempted to induce David Kellerman to commit fraud? …

The Post said Kellermann and other Freddie officials “tussled” with the Federal Housing Finance Agency early last month as the company prepared to file a quarterly report with the Securities and Exchange Commission. Top executives, including Kellermann, were insistent that Freddie Mac inform shareholders of the cost to the company of helping carry out the Obama administration’s housing recovery plan, the two newspapers reported. The Post, citing several unnamed sources, said the regulators “urged the company not to do so.” An unnamed FHFA official who spoke to the Post disputed that, “saying the regulator did not oppose disclosure but how the information was portrayed in the filing.”

In the end, FHFA reportedly retreated and Freddie formally disclosed that the Obama anti-foreclosure plan could force the firm, which is in a federal government conservatorship, to take a pre-tax charge of $30 billion.

While the Obama administration might not want to have the pricetag for its foreclosure efforts look too big, the reason regulators may have pressured Fannie to understate the cost of the program is pretty simple: both Obama and Geithner said publicly that it wouldn’t have a material financial impact on Fannie or Freddie.

Which brings us to another secrecy-laden action by the Treasury concerning the TARP funds. It was reported widely that certain publicly traded companies were not given a choice in the acceptance of those funds, CEOs were forced to sign binding financial agreements without the express permission of the stockholders. The refusal to sign those papers carried the threat of their company being taken over by the government. This was all done under the guise of the greater good to save the financial system. The acceptance of the funds has come as negative financial consequences to the stockholders of those companies. In the same vein are the results of the so-called Stress Test; this follows the continuing theme of Obama Admin officials telling people not to disclose material facts in violation of their fiduciary trust. The Stress Test is a legal fiction dreamed up by Geithner as a means to not allow companies to pay back the TARP funds. Let me underline how preposterous the idea behind the Stress Test is. This is like you as a credit card holder deciding to pay off your outstanding balance to avoid further interest charges. Then the credit card company sends your check back saying we cannot accept your payment because you might need to borrow money from us again in the future based on a series of hypothetical situations we devised. Therefore you must continue paying interest on the debt we refuse to allow you to pay off, you are not allowed to find alternative financing and you must do as we say based on any other rules we unilaterally decide to impose. That is exactly what Geithner is doing to the banks. Is it little wonder then the Ford Motor Company refused to accept bailout money from Congress? Look at the micromanagement GM and Chrysler are being subjected to due to their acceptance of the bailout moneys and yet they still will end up in bankruptcy. In addition, the legal fiction aside, how is it ethical not to tell the shareholders that their company has not met or barely met the so-called stress test or if they passed the test with flying colors? The results have a future material bearing on the price of the stock, especially to those who are considering buying the stock. Isn’t this a violation of the corporate officers fiduciary trust? In fact isn’t it a violation of SEC rules not to disclose material facts that may affect the price of a publicly traded stock or the health of the corporation? So much for transparency!!! There is a clear pattern of secrecy or lack of transparency by the Obama Administration. I use a saying for these kind of repeating themes, “once is an incident, twice is a coincidence and three times is a pattern.”

The Obama Administration is acting as nothing more than a criminal enterprise by its behavior. Fraud is fraud, no matter who they are, whom they claim to represent or the rationalizations to commit this crime. The point of keeping a secret is to cover up activities you don’t want publicly known which may either destroy the image you are trying to project or protect yourself from prosecution. Violating the fiduciary trust by keeping secrets is a crime, when the crime costs money it’s called fraud. I’ve said before the Democrats have acted like a criminal organization shaking down businesses for campaign contributions and quid pro quo of the bailouts or did you not notice that EVERY company without exception who accepted or were forced to accept government money were generous campaign contributors to the Democrat Party and specifically to Barack Obama’s election campaign? They are an organized criminal gang using the guise of a political party to achieve enough power to pillage the country like Al Capone. They use the Robin Hood model to seduce the population into accepting their benevolent thuggery. The Democrat Party offers all kinds of goodies to people in order to induce them to accept their insidious gift, these people in turn vote to keep them in power in order to keep getting more gifts. The money of course comes from the ill-gotten gains the Democrats looted from the whole of the country via taxes and the borrowing power of the Treasury. Why else do you think the community organizer in chief claimed he is targeting those making over $250k for a tax increase? The public good? There aren’t many of them but there are lots of people who will to accept the illicit gift. Voting for government benefits is like accepting a legal job from the mob, but being paid with money derived from their illegal activities.

This has to stop. Our entire financial system is based upon trust, the fiduciary trust between those who handle money and those who invest it. When government agents elevate the financial system to the level of national security in order to keep secrets and use the cloak of secrecy to engage in actions that harm the stockholder, they undermine the entire system of trust. I will point out that everyone who has money in an IRA or 401k plans, which invests in the market, is a stockholder and is affected by the actions of government agents overstepping their authority. Or have you not noticed lately the losses to your retirement accounts? Did you or anyone else you know agree to this meddling and secrecy by the government in your financial affairs? No? It is time for the SEC and FBI to uphold the Law, investigate these crimes violating the fiduciary trust and start prosecuting the offending parties, no matter whom they claim to be or what they claim their intent was. I will remind the FBI and SEC, former Illinois Governor Blagojevich made the same claims of acting in the public best interest using secrecy and shakedowns.
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Dan Scott calls himself a “Member of the Global Capitalist Cabal preaching Capitalism and personal responsibility as the economic solution to world poverty.” He is also a member of the 14th Amendment Society — victimhood is a liberal code word for denying the civil rights of others. He is also a proud member of the Global Warming Denier Cabal, insisting that facts not agendas determine the truth.

Dan can be seen on the web at http://www.geocities.com/fightbigotry2002/ as well as http://www.geocities.com/dscott8186/saidwebpage.htm, And can be reached for comments at dscott8186@yahoo.com.

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The Fiduciary Trust

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