A segment titled “Jack Abramoff: The lobbyist’s playbook” showed to Naïve Americas something that has, is and will continue at the highest levels of politics in our country.  When you are not a politician you might be faced by business situations in which you are privy to some information that could make you money called “insiders trading”.  For example, if a company is about to purchase a second company, making the stock of the second company be worth much more that its current value, and based on this information which is only known to top executives, you go and buy stock on the second company, you have the opportunity to make a nice profit in a matter of hours or days.  The laws of the United States of America forbid such behavior to typical Naïve Americans.  As a deterrent such actions are punishable by several years in prison.  BUT if you are a politician passing laws that will make a company’s stock go up in price and based on such information purchase stock and after the law is passed, sell it at a profit (insiders trading), you do not have to worry.  The law, made by and for politicians, does not consider your unethical and immoral actions as a crime.

During the 60- Minutes segment, Democratic and Republic politicians were asked if they had profit from “insiders trading”.   Most of them denied it.  Some acknowledge it by stating that for them it is not unlawful.  This is why 99% of politicians leave office millions of dollars richer that when they were elected.

About a decade ago, I was looking into doing business with countries in Latin America.  One of the forms I obtained from the US government to consider expenses for tax purposes had an entry labeled:   Bribes.  It is considered common business practice in Latin America to bribe politicians as part of regular business.  Of course, in the USA no one would ever consider bribing politicians.  We have laws that make legal all types of bribes placing our politicians on the top of corruption.  The only difference is that we make it legal.

I know of a couple brothers in the Twin Cities area that paid off politicians to move the location of Interstate 35 in order to have it pass by their property considerably raising its value.  During the 60 Minutes segment, it was mentioned, a politician that knowing that a road was going to be built, purchased land at discounted prices and after he made the new road pass by his new property, he cashed in a nice profit.

Not sure if the 60 Minutes segment brought up something new to most Naïve Americans, but politicians have been taking advantage of their position since the USA became an independent country.  With time, politicians have made huge advances in power allowing them to make millions of dollars in office while many Naïve Americans part of their constituency have, are and will be loosing their jobs.  I guess we called this the American way of life.

Next time you are going to the polls, make sure that the politicians you are electing are less prone to corruption.  Try to push current politicians to change the law making it a crime to take advantage of their political status.

The Naïve American

I have been working with computer software and have formal computer hardware and software education.  I have been developing computer programs and systems for about 35 years.  Really enjoy it and hope to continue doing so during the next few decades.  Because of this I am able to appreciate what can and cannot be done and how simple or complex is to get done some of the things covered in the 60 Minutes broadcast.

Something that called my attention was a comment regarding China and the USA.  Chinese nationals are undoubting hacking into our systems.  But so are nationals from Russia and other Eastern European countries among others.  The USA is doing the same to others (including China) so why is it so bad for others to do it to us?  The answer from an expert was something like “We [the USA] have so much more at stake”.  Not sure what this meant but it sure gave me the impression that the USA does not have the brainpower to stop such intrusions.  As a matter of fact we do not have enough power to win a war.  The USA can bomb a country for a few days, perhaps invade it and then … we can only withdraw.  The times when we had power to impose our ideas and ways has long gone by.  Today the USA has very few friends (i.e., Australia, UK).  Most countries (i.e., Brazil, Russia, India, China, etc) do not care about the USA or are just openly our enemies (i.e., Iran, Iraq, most Middle East countries, Venezuela, etc).

Using the Internet to break into secure sites is not that simple and in general not possible.  Typical breaches are due to some other factors that have nothing to do directly with the Internet.  For example, someone found / stole a laptop with access codes to bank accounts.  These are the most common ones.  Others are due to technical glitches found in the software used by institutions on their machines.  These are the typical vulnerabilities of all operating systems.  We are all aware of the Microsoft Windows and Apple Macintosh updates.  From time to time hackers find new ways to exploit vulnerabilities and then take advantage of them to gain access to computer systems.  Hackers belong to clubs that dedicate hours each day to see who can break into the most coveted computer systems in the world (e.g., financial, defense, law enforcement).  For them it is a thrill.

There is nothing new with hackers.  They have been breaking into computers before the Internet was around.  The Internet has just provided another avenue.

For this Naive American the big issue is China.  As we all know China produces most of the good sold in the USA.  Few American companies offer products that are designed and manufactured in the USA.  Because of this, China could be adding at manufacturing time circuits and software into computers and computerized devices that could deliver confidential information once they are in the hands of end users.

If you think this is farfetched, the 60 Minutes segment touched on some cases in which mysterious circuits have appeared in chips manufactured in the USA for defense purposes.  In my opinion, such cases are typically associated with insiders that have allowed access to specific systems.  Once access is granted, anything is possible.  By building the means at design time all bets are off.

We need to think how many systems in defense, financing and utilities have already been compromised and no one knows.  The circuits and software could be dormant for years until it is enabled by some event or signal.  When that happens there will be nothing to do, just pay the price.

Why is it that China has so much power?  The reason is American Royalty and our politicians.  In the past few decades Democrats and Republican politicians have been allowing the American Royalty (wealthy upper management in American companies) to move manufacturing and development to China so they can make a few more Dollars a year in dividends for their stock holders so in return they can justify receiving dozens of Millions of Dollars a year in compensation.  What about the Naive American employees that have and will loose their jobs?  Some of such companies have been doing poorly as we know (e.g., AIG, GM, etc) but they finance politicians via lobbyist, which makes it all completely legal and foolproof.

In conclusion China has been manufacturing most and is starting to design and develop some products sold by American companies.  China has trillions of Dollars in their coffers.  China and most countries in the world were affected by the recession caused by American Royalty about a year ago, but in contrast to the US that is still in a recession with 10% unemployment, most countries have experience a shorter recession and are already out of it.

Mr. Obama was telling today our veterans that WE (the USA) have not forgotten them.  Things will get better (by magic) for them and for the rest of Americans.  HOW is this going to happen when China has the money, power and smarts to run the world?  I believe Mr. Obama was preaching CHANGE during his election campaign.  What are you going to CHANGE Mr. President?

A week or so ago, Chrysler announced that they had done 30% less in sales during the month of October 2009 than a year ago.  In an attempt to improve sales Chrysler is NOT going to improve their awful products.  They are going to start selling FIAT cars.  Yes, cars designed and manufactured by Italians.  Imagine how many sustainable new jobs is this decision going to provide for Naive Americans.  A week or so ago, KIA introduced a new model for 2010, the Forte Koup.  I invite my readers to take a look at that model.  Why can Chrysler come up with something like this Korean manufacturer?  Chrysler and the USA are in need of a fundamental CHANGE.

Yesterday I changed channels to the local CBS station just before 06:00 PM EDT.  “60 Minutes” was scheduled to start at that time but given what I have observed in the past, I was expecting as usual some delay.  CBS was showing a game between The New England Patriots and the Tennessee Titans.  The Patriots won the game 59 – 0.  I do not care for watching football games.  As a matter of fact I do not care for watching sports at all.  I have a hard time watching people play a game and getting paid millions of Dollars for something that should just be done for entertainment and health.  During my life I have done that and had a good time.

The game went on and on and on.  Finally as soon as it finished CBS decided to switch to the game between the New York Jets and the Buffalo Bills.  In that match The Bills defeated the Jets by 16 – 13 in overtime.  This game was also as boring as they come.

When the games were done, CBS broadcasted “60 Minutes” (no Andy Rooney) and then “Amazing Race”.  “60 Minutes” interesting as usual.  “Amazing Race” entertaining as expected.

Getting back to the football games, if CBS is willing to delay other shows and cancel one of them (whatever followed Three Rivers) it is obvious that they do it for economic reasons.  More people (fans) must watch football than the program that was canceled last evening.

A few weeks ago I was watching the local news and they mentioned that the Metrodome in the Twin Cities of Minneapolis and St. Paul was packed with fans watching the Twins (local professional baseball team).  Apparently the Twins won that particular game.  After that they were flying to New York City for the next set of games.  The newscaster mentioned that for the next local game seats were priced between $45 to $500 US Dollars (not Monopoly money).  What is wrong with Naive Americans?  Our economy is in shambles and the future for the US is extremely dim.  Yet we are willing to pay up to $500 per seat to watch a game of baseball.

Who are the fans cheering for?  It appears they cheer the players and the team.  The players who make millions of dollars a season and they are willing to change teams as soon as their contracts expire going to play for the team that offers the most money.  Given this fact, do you honestly believe that any player cares about their team or fans?  They only are in it for the money.  That is OK is you are a player, but were does it leave the fans?  I would say in need of some psychiatric evaluation.

In the past couple weeks it has been in the news that the contusions incurred by most football players eventually lead to different mental illness being the most common dementia.  Again, as a Naive American fan, are we routing to see how people injure themselves for our amusement and pleasure?  Please take a few moments and get acquainted with the events at the Coliseum in Rome about 2,000 years ago.  Are we in the same boat today?  Are sports events, specially football, an indicator of where our society and country is going?  I can bet that if we could travel back in time and ask any fan that attended the events in Rome 2,000 years ago about the decline of the Roman Empire, they would at least have laugh at us (probably would throw us into the arena to be slaughter).  Are we in the SAME boat and we do not realize it?

 The 60 Minutes story touched on two names that have been lately in the news:  Bernard Lawrence Madoff and Harry M. Markopolos.  Let me first provide some background on these individuals and provide facts on what they allegedly have done.

I will cover a very well known term that describes what Mr. Madoff allegedly did.  Finally I would like to reflect on what this means to Naive Americans like you and me and what could be done.

Bernard Lawrence “Bernie” Madoff (born April 29, 1938 in New York City) is a Jewish American businessman and former chairman of the NASDAQ stock exchange charged with perpetrating what may be the largest investor fraud ever committed by a single person. He founded the Wall Street Company Bernard L. Madoff Investment Securities LLC in 1960 and served as its chairman until his arrest on December 11, 2008.  Madoff said that his Company had liabilities of approximately $50 billion US Dollars.  Mr. Madoff was running the world’s largest unregistered hedge fund.  Banks from all over the world have announced that they have potentially lost billions in dollars as a result.  Madoff’s Company was one of the top market maker businesses on Wall Street.  Madoff was also a prominent philanthropist who served on the boards of nonprofit institutions, many of which entrusted his Company with their endowments.

Harry M. Markopolos (born October 22, 1956 in Erie, Pennsylvania) is a former securities industry executive turned independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise.  Mr. Markopolos tipped off the SEC repeatedly starting in 1999 (the US economic melt down occurred in late 2008), when he argued that it was not legally possible for Madoff to deliver the returns he was claiming (steady 12% year after year).

A term associated with the alleged crime committed by Bernie Madoff is:  ”Ponzi scheme”.  A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit.  The term “Ponzi scheme” is used primarily in the US; in other parts of the world it is called a pyramid scheme.  The Ponzi scheme usually offers abnormally high (in this case about 12%) short-term returns in order to entice new investors.  The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.  The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903.  Ponzi did not invent the scheme, but his operation took in so much money that it was the first to become known throughout the United States.

Now that we are acquainted with the players and the term, how should Naive Americans react to the alleged actions from Mr. Madoff?

Harry Markopolos figured out that Mr. Madoff was doing something illegal in about five minutes.  Mr. Markopolos then spent about four hours working on mathematical models to prove that the hedge fund ran by Mr. Madoff was a scam.  We Naive Americans need to think about this.  About 65 Billion US Dollars lost and a single individual in a few hours able to prove what was going on.  Why did the SEC, Wall Street executives and the US government did nothing?

The SEC (that is our government) according to Harry Markopolos is staffed with lawyers that know nothing about financing.  They could probably easily spot a form or document improperly composed or filled (similar to what a computer program could do at a much reduced cost), but apparently the SEC staff is not trained or is incapable to detect financial crimes.  Perhaps the SEC needs to revise their staffing needs.

So what about Wall Street executives?  The answer from Harry Markopolos was simple.  When you [Wall Street executives] live in a glass house, you do not throw stones.  Our financial system public and private is corrupt to the core.  Most (one should never generalize) people in financial positions making from hundreds of thousands of to Millions of Dollars a year are not going to upset the status quo.  If there are no police officers to enforce speed limits, we will speed on all and any types of roads, if we could retrieve money from our accounts over our current balance we would, if we would have the opportunity to cheat on our spouses and not get caught, we would, etc, etc, etc.  Suddenly what Bernard Madoff allegedly did to many Naive Americans does not seem so bad.

According to records the list of people and organizations that Mr. Madoff allegedly ripped covers about 162 full pages.  At about 66 names per page it adds up to about 10,000 people and / or organizations.  The greed and lack of morals and ethics of, at the time, very well respected and influential person, affected 10,000 people and organizations.  If you take the entirety of unscrupulous Wall Street executives and higher management, you can easily come to the conclusion that what is going on with the US economy is the result of such individuals.

Naive Americans should contact politicians and demand that legislation be enacted to protect us from Mr. Madoff and people like him.  Sounds like a good idea, but Mr. Markopolos went a step further and did it many years ago in front of the SEC and nothing happened.

Mr. Madoff was so sure of his scam, connections and power that he publicly told investors on several occasions (you can see one of them on-line by visiting the 60 Minutes web site) that it was impossible for a financial institution to violate SEC rules and go undetected.  The public (he meant Naive Americans) does not understand such a simple fact.  The aftermath is that nothing of that was or is true.  Bernard Madoff stole 65 billion US dollars with little consequence.

So what should Naive Americans do about Wall Street?  I would say nothing directly.  What we can do is put extreme pressure on politicians to pass new legislation to put check and balances in our financial system to avoid what some greedy people did and will do over and over again.  Stiffer penalties should be made mandatory for people convicted of financial crimes.  The fathers of our nation did not trust each other.  They wrote into our constitution checks and balances to avoid some family or group of people to rule the United States of America like a monarchy.  At the time, that was their main concern.  With time the main concern has shifted to greed.  Naive Americans in general want to make money but do not wish to work for it.  This is not a problem specific to Wall Street.  This is a problem spread through our entire society.

Please press your local and federal representatives to pass legislation to induce CHANGE and most important make sure we CHANGE our personal ways.