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Banking

Scandals fraud and losses in the financial markets

May 2nd's FT.com carried an article "HSBC THWARTS ATTEMPTED £70.5M FRAUD", reporting on the latest bank to be hit by attempted fraud. Euromoney's 'HSBC calls in police for €90 million fraud investigation', published 30 April, was the first to report this story. <br><br> Have a look at euromoney.com's summary of previous financial frauds and scandals.

Subscribers to Euromoney with an active password can access this story now and keep an eye on euromoney.com for further updates.

'HSBC calls in police for €90 million fraud investigation'

HSBC is the latest bank to be hit by attempted fraud. According to sources, police were called in to the Canary Wharf head office to remove two operations staff members on Friday April 25. 

Wall of shame

2008:
HSBC

€90 million in estimated losses

Two operations staff members suspected of fraud

 “Jagmeet Channa, 25, has been charged with conspiracy to defraud, money laundering and abusing a position of trust. He has been remanded to appear at Southwark Crown court on June 25. Another man, 27, has also been arrested and a further two men, 33 and 38 remain on police bail in connection with the enquiry.”

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2008:

Société Générale 
Jérôme Kerviel

€4.9 billion in estimated losses

2008:
Credit Suisse
£1.4 billion

Intentional "pricing errors" by a small number of traders involved in complex investments linked to the mortgage market.

2006:
Amaranth Advisors
more than $6bn
in losses 

Largely due to bad natural gas contracts

The rogue trader:  Brian Hunter, an energy trader who tried to manipulate gas futures contracts on the NYMEX.


2005: 

Tyco International

US conglomerate 

$10bn in estimated losses

Dennis Kozlowski, former chief executive, and Mark Swartz, the former finance chief, were convicted and jailed for up to 25 years.

2005:
Mizuho

Japanese bank 

£128m in losses

A broker sold 599,999 more shares in telecoms company J-Com  than he wanted to by typing incorrect details into a computer.

Instead of selling a single share for 600,000 yen (about £3,000) he instead paid 1 yen for 600,000 shares.

2003:
Allfirst Financial
Subsidiary of Allied Irish Banks

$691m in trading losses

The rogue trader: John Rusnak

Sentenced to seven and a half years in prison


2003:
Parmalat
Dairy corporation

€14bn in debts, eight times greater than it claimed when filed for bankrupcy.

Calisto Tanzi, head of Parmalat was involved in a series of financial and accounting frauds.

In 2005 it was charged with market-rigging.

2002:
WorldCom
American telecommunications firm 

$3.8bn of fraudulent assets

Filed for bankruptcy after a routine audit by KPMG discovered the fraudalent assets; further investigation by the US Securities and Exchange Commission revealed Worldcom had inflated its total assets by around $11bn. Bernie Ebbers, ex-WorldCom chief executive received a 25-year sentence.

2001:
Enron
US energy giant 

$144.9 million in numerous concealed debts and financial irregularities; the biggest ever biggest bankruptcy case for a bluechip company.

Jeffrey Skilling, Enron’s former chief executive was sentenced to 24 years and four months in prison; Kenneth Lay, Enron’s former chairman, was found guilty but died of a heart attack in 2006 and avoided jail. 

1996:
Sumitomo
,

Japanese trading house

$2.6bn in losses

One of its traders had been manipulating the copper price

The rogue trader: Yasuo Hamanaka

sentenced to eight years in jail in 1998, but was released in 2005.

1995:
Barings Bank
£827m
in losses

Largely attributed to futures contract speculation and fudged financial records by trader

The rogue trader: Nick Leeson, jailed until 1999.

1994
Kidder, Peabody & Co
., owned by General Electric

$210 in losses 

Trading fraud involving US Treasury bond strips, from 1990-1994. After the scheme was discovered, over $300 million in fraudulently booked trading profits were reversed.

The rogue trader: Joe Jett. NASD and the SEC ruled Jett did not committ securities fraud, but  the SEC charged Jett with a record-keeping violation.

Corruption: The search for the smoking gun 

September 1996 

Watch out! A hit squad of World Bank auditors could be making a surprise visit to a project near you. This is the Bank's first serious attempt, led by president James Wolfensohn, to address corruption head on. But nailing the culprits ­ some of them dictators and governments ­ is not so easy.

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