IBM reinvents the 401K
EXCERPT:
1) Even so, critics hammered IBM's move as one more sign of retreat from the secure retirement benefits of the past.
2) An earlier fumble
The path to IBM's 401k epiphany was marred by at least one big blunder. In 1999, IBM redesigned its pension and put in place a hybrid called a cash-balance plan. Legally, this is a defined-benefit plan, but it has more in common with a 401k. The company contributes money, and employees receive the funds as a "cash balance" in their accounts rather than as lifetime income in retirement.

There was nothing paternalistic about this shift, which was all about costs. Employees fumed over lost benefits, and a class action followed, claiming the change discriminated against older workers. The dispute went all the way to the U.S. Supreme Court, which, in 2007, declined to hear the case and left standing an appeals court ruling in IBM's favor. But by then the case had become one of the biggest human-resources debacles in Big Blue's history.

FAQ consumer cash balance plans
EXCERPT:
How do cash balance plans differ from traditional pension plans?
While both traditional defined benefit plans and cash balance plans are required to offer payment of an employee’s benefit in the form of a series of payments for life, traditional defined benefit plans define an employee's benefit as a series of monthly payments for life to begin at retirement, but cash balance plans define the benefit in terms of a stated account balance. These accounts are often referred to as hypothetical accounts because they do not reflect actual contributions to an account or actual gains and losses allocable to the account.

Janus Capital Group wikipedia
2003 Mutual Fund Scandal
Janus was implicated in the 2003 Mutual-fund scandal. On August 18, 2004, the SEC announced that JCM would pay $262 million. [5][6] This included $100 million in disgorgements and penalties. JCM also consented to a cease-and-desist order and a censure, and to undertake compliance and mutual-fund governance reforms.

More on Janus Capital Mgmt. LLC
EXCERPT:
In late 2003, Eliot Spitzer filed a complaint against Janus and Canary Capital Partners for allegedly engaging in late trading and market timing activities. These trading allowances let Canary Capital to make low-risk profits at the expense of individual shareholders. Janus internal memos suggest that Canary's business could generate up to $50 million in additional profits for the fund company (SNL Financial). The complaint filed by Spitzer alleges that in the spring of 2002, Janus allowed Canary partners to engage in after hours trading of their funds. Because a number of companies report their earnings just after market close, Canary was able to make trades in Janus funds based on new information but at the old prices. When Janus allowed these trades to take place, they were diluting the returns of existing mutual fund shareholders. For example, if an earnings report about a major holding in a Janus fund announced spectacular earnings after market close, we would expect that stock to do well the following day. But investors typically cannot trade on this information because the new information is already integrated into the stock price. However, the news will not be reflected in the Janus fund share price until the close of business the next day. So when Janus allowed Canary the opportunity to trade their shares at the old prices which were not based on the new information, they allowed the company to make a very low-risk profit. And the shareholders are the ones who get hurt. First, since Canary invests additional money in the fund, the number of shares that benefit from the news is increased, diluting each individual's share of the fund returns. Second, when Canary would buy after market close, they would often sell the following day, increasing transaction costs for existing shareholders. Rule 22c-1 of the Investment Company Act of 1940 states that all purchase and redemption orders received before a fund's close of business, usually 4:00 p.m. Eastern Time, are processed at a price based on the fund's net asset value as of the close of business on the day received (Securities Lawyer's Deskbook). This means that all trades in a fund based on that day's NAV must be received by close of business. Because Janus allowed Canary to trade in and out of their funds as late as 9:00 p.m., they clearly and intentionally violated the 1940 act, which was implemented to protect individual investors. Not only were Janus' actions morally questionable, but they were also illegal according to the 1940 act.

Eliot Spitzer also alleged that Janus allowed Canary Partners to market time their funds..............

THE MARKET PENALTY FOR MUTUAL FUND SCANDALS
STEPHEN CHOI* AND MARCEL KAHAN** pdf 37 pages
EXCERPTS:

1) INTRODUCTION ................................................................. 1021
I. DATA AND METHODOLOGY................................................................... 1026
II. EMPIRICAL ANALYSIS OF FUND FLOWS .........................................
A. The Base Model .........................................................................1032
B. Scandal Severity and Type.......................................................................... 1035
C. The Risk of Continuing Harm to Fund Investors.............................. 1040
D. Who Discovers the Scandal .......................................................................1047
III. ANALYSIS OF FUND FAMILY FLOWS ........................................................................ 1050
CONCLUSION.................................................................... 1055
INTRODUCTION
Mutual funds have experienced enormous growth over the last forty years.
In 1965, open-end mutual funds held assets of $35 billion.1 By 2004, mutual
fund assets had grown to $8.1 trillion, an increase of over 20,000 percent.2
During this period, the percentage of all corporate stock held by mutual funds
increased from 4%3 to 21%.4 Mutual funds as a group now constitute the
largest institutional holder of corporate stock, far exceeding private pension
funds (13%), public pension funds (10%), and insurance companies (7%).5
* Murray and Kathleen Bring Professor of Law, New York University School of Law.
** George T. Lowy Professor of Law, New York University School of Law. Thanks for
helpful comments to Yakov Amihud, Jennifer Arlen, John Coates, Massimo Massa, Un
Kyung Park, Eric Roiter, Eric Sirri, Mark Weinstein, and the participants at the American
Law and Economics Association 2006 Annual Meeting, the 2006 Conference on Empirical
Legal Studies, the Yale Corporate Roundtable, the Stern Law and Finance Workshop, the
Fordham Law and Economics Workshop, the Murphy Conference at Fordham Law School,
and the Vanderbilt Law and Business Speaker Series.
1 INVESTMENT COMPANY INSTITUTE, 2005 INVESTMENT COMPANY FACTBOOK 59 tbl.1
(45th ed. 2005). For the remainder of the article, we will use the term “mutual fund” to
refer to open-end funds.
2 Id.
3 BD. OF GOVERNORS OF THE FED. RESERVE SYS., FLOW OF FUNDS ACCOUNTS OF THE
UNITED STATES 1965-1974, at 82 tbl.L.213 (2006), available at http://www.
federalreserve.gov/releases/z1/20061207/annuals/a1965-1974.pdf.
4 BD. OF GOVERNORS OF THE FED. RESERVE SYS., FLOW OF FUNDS ACCOUNTS OF THE
UNITED STATES 1995-2005, at 82 tbl.L.213 (2006), available at http://www.
federalreserve.gov/releases/z1/20061207/annuals/a1995-2005.pdf.
5 Id.
1022 BOSTON UNIVERSITY LAW REVIEW [Vol. 87:1021
Mutual funds are typically organized as corporations or business trusts that
are owned by mutual fund investors who elect the directors or trustees of the
fund. The actual management of the fund, however, is performed by a fund
management company rather than the elected board. The management
company, in turn, is paid a management fee by the mutual fund.6
For example, the Janus Fund (assets of $11.9 billion)7 is managed by Janus
Capital Management L.L.C., which receives an annual advisory fee of 0.64%,8
and an administrative fee of 0.05% of the fund’s assets.9 Janus Capital
Management, in turn, is a subsidiary of Janus Capital Group, a large mutual
fund management company (and itself a publicly-traded corporation).10
Mutual funds, in many respects, resemble ordinary publicly-traded
corporations. They have a large number of dispersed shareholders/investors,
and neither the fund management company nor the individual fund managers
have a significant equity stake in the fund. This gives rise to the classic agency
problem, where fund management companies and managers may pursue their
own interest at the expense of fund investors.

2) For example, the Janus Fund (assets of $11.9 billion)7 is managed by Janus
Capital Management L.L.C., which receives an annual advisory fee of 0.64%,8
and an administrative fee of 0.05% of the fund’s assets.9 Janus Capital
Management, in turn, is a subsidiary of Janus Capital Group, a large mutual
fund management company (and itself a publicly-traded corporation).

Mueller Capital Management ponzi scheme in Colorado (largest ever in Co.?)
EXCERPT:
Mueller Capital Management - allegedly another Colorado multi-million dollar Ponzi scheme
Tue, 2010-04-27 16:48 | Jake Berzon
I just spoke to the fine folks at State of Colorado DORA (Department of Regulatory Agencies), Division of Securities and, apparently, they have not yet put the information about this latest alleged Ponzi scheme based in Colorado online. I could also not find online Friday's court order freezing the assets of Mueller and his companies, Mueller Capital Management, LLC. and Mueller Over Under Fund LP. So, here is the information as reported by Denver Post and 9News - at least somebody is on the ball informing consumers!

Kidder Peabody wikipedia
EXCERPT:
Kidder and the 1980s Insider Trading Scandal
Shortly after GE bought Kidder in 1986, a skein of insider trading scandals, which came to define the Street of the 1980s and were depicted in the James B. Stewart bestseller Den of Thieves, swept Wall Street. The firm was implicated when former Kidder executive Martin Siegel—who had since left for Michael Milken's junk-bond investment firm, Drexel Burnham Lambert—admitted to trading on the inside information.

Also implicated by Martin Siegel was Richard Wigton, head of arbitrage trading for Kidder Peabody. Wigton was the only executive handcuffed in his office as part of the trading scandal, an act that was later depicted in the movie Wall Street. Later, the US prosecutor Rudy Giuliani admitted that Wigton was innocent.[citation needed]

[edit] 1994 Bond trading scandal
Kidder, Peabody was later involved in a trading scandal related to false profits booked over the course of 1990–1994. Joseph Jett, a trader on the government bond desk, was found to have systematically exploited a flaw in Kidders computer systems, generating large false profits. When the fraud was discovered, it was determined that Jett had lost 75 million dollars over the four years instead of the apparent profit of 275 million dollars over the same period. The SEC later concluded Jett had committed securities fraud and banned him from the industry.

In the rush of bad press coverage following the disclosure of the overstated profits, General Electric sold Kidder Peabody's assets to PaineWebber for $670 million in October 1994, closing the transaction in January 1995.

[edit] September 11, 2001, Terrorist Attacks
On September 11, the former offices of Kidder, Peabody (who were occupied by Paine Webber as they had assumed the lease as part of the acquisition in 1994) were among many businesses impacted by the terrorist attacks. The company had offices on the 101st Floor of One World Trade Center, also known as the North Tower. Two Paine Webber employees lost their lives.

Joseph Jett wikipedia
EXCERPT:
Joseph Jett is a former bond trader, best known for his role in the Kidder Peabody trading loss in 1994.[1] At the time of the loss it was the largest trading fraud in history.[2]

[edit] Jett's Background
Joseph Jett grew up near Cleveland, Ohio. At age of 8, he began working as a paperboy. During high school he worked as a dishwasher and short order cook at a steakhouse. The son of a conservative businessman, Jett was a fan of Richard Nixon, worked in Ronald Reagan’s 1980 Presidential campaign and disdained affirmative action programs so much that he refused to identify his race on his application to the Harvard Graduate School of Business Administration. He was picked on by fellow blacks whom he constantly challenged to do better. In ninth grade, Jett stepped onto a basketball court at a city park and stole the ball proclaiming, "It's time that we as a people stop making baskets and start making A's!" He was beaten up for his efforts. To defend himself, he became a dedicated disciple of weightlifting and the martial arts. [3]

Jett earned bachelor's and master's degrees in Chemical Engineering at MIT and after working two years at GE Plastics went on to Harvard Business School[4] . In his book Black and White, Joseph Jett states that his Harvard MBA degree was not awarded due to his failure to pay final college tuition, which he was not aware of, and which the New York Times reported in 1994[5]. He finally paid for his tuition and was awarded his MBA degree in 1987. A confirmation from Emily Hayden, a Harvard MBA representative and the Harvard MBA school confirmed that Joseph Jett was indeed awarded a Harvard MBA in 1987 [6]. Jett was hired by Kidder, Peadbody & Co in July 1991. At the time he was 33 years old. He had worked previously as a bond trader at Morgan Stanley for two years and at First Boston for eighteen months. In one of them he was laid off, in the other one he was fired.[7]

[edit] Kidder Peabody
In 1994, following a number of scandals and losses in the fixed income department, the investment bank Kidder, Peabody & Co. was hurriedly sold to Paine Webber. On April 17, 1994, GE CEO Jack Welch identified Jett on the GE-owned TV network CNBC as a rogue trader who had singlehandedly caused $250 million in losses.








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