The Men Who Stole the World (and got away with it)

It was July 1, 2009 I was living in Hamburg Germany at that time I was in my apartment with my wife who had just gotten married two men knocked on the door I didn't recognize them I didn't open the door minutes later I left the building I walked to the car and two unidentified German police officers appeared in front of me and in German basically identified themselves and said they were there on an FBI warrant, come with us, that was not at all what I expected, he obviously looked at his wife and sucked her off. a kiss and I was pretty sure he would never see her again, that is a feeling of total fear because you have the total unknown of what the future holds.

Philip Baker was flown to Chicago, where he was criminally charged and entered the United States. The United States justice system is a truly terrifying place. I was facing charges of absconding with $460 million from the FBI for fraud. My name is Philip James Baker and I am the former managing partner of a billion-dollar investment fund that collapsed during the financial crisis. crisis my story is a rise and fall in the story of Redemption I have been rich I have been on top I have been behind bars I know what it is like to be called a financial criminal I admit my guilt but now I am free and I want to speak out for what I saw because I've been there.

I can say that if we do nothing, everything can happen again. They had no consequences. The titans of Wall Street basically face nothing for the life of me. I went to prison. Some people. I would say, well, you know what you did wrong, that's fair, it's just that the argument could be: I agree, but what about the people and the titans of Wall Street? I was born here in Toronto, Canada in August 1965. Philip started in our house downstairs. It doesn't tell us much about it other than there was a partnership and that's when he started getting investors, etc., the business started in my parents' basement and this company grew into a billion dollar company.

The Lake Shore company was a hedge. The fund firm Philip Baker created a hedge fund that was designed to trade commodities, so oil prices, coal, things like that, he was a trader, he was the client, he was the one who went to people or rich institutions and got them. shorted your money with Lakes, our clients were global investment banks around the

world

Goldman Sachs Royal Bank of Canada Canadian P Bank of Commerce HSBC Bank of Nova Scotia credit Swiss UBS, so that's a big list that we operate on in nearly 40 different countries around the

world

. world Brazil Peru Panama Colombia Japan Taiwan Hong Kong obviously across Europe was for a time a very successful hedge fund manager.

He set up offices in Switzerland and London in the United States and Canada and the marketing and business development was based in London, so I was based in Mayfair, which is the hedge fund capital of the world, I lived a very nice life and He was always trying to prove himself to people who doubted he had the ability to succeed, so he built this life where you know he had a luxury car driven by a chauffeur who would take him all over London. He had a beautiful apartment on the river. The life I lived was a life of luxury.

He had a butler who didn't care about the expenses of anything. I've sponsored an ocean racing team competing against Hugo Boss UBS and that was just for fun? He wasn't a sailor, so that meant that he basically had to pay his way into these Elite sailing crews and I think he would do these very competitive races. from New Zealand to Australia we earned millions a month accounts abroad without paying taxes I was living a dream I was not worried at all but in my particular case I had something to worry about all kinds of investors around the world were very eager to put their money with them because it was generating very good returns and that is what investors want.

It turned out that he was doing something else: he was misappropriating investors' money and the investors thought they were making these great returns, they weren't actually Philip. Baker and his partners were essentially making it up, they were lying, the second and in some ways the most damaging problem is that while they were looking to recruit additional investors, new investors who were essential because they needed to hide the money they had. They had already lost, it was in their prospectuses in the documents they provided to investors to show them how well they had done, they were also lying there and saying that instead of having lost 50% of their assets in the first year, they were saying : oh look at us, we have a long history of very impressive returns.

They lied not only about the returns but also about the longevity of the fund, so they said they had, I think, a 14-year track record that just wasn't true that they hadn't been trading for 14 years. The trading results were falsely reported and therefore it was a fraud that cannot be done. A penny that was not reported correctly is wrong. The victims were all those who had invested with him, the investors who lost his money. Initially, investors who put their money in after the initial fraud occurred, so hundreds of millions of dollars disappeared as a result of this.

They asked me why I broke the line. He wanted to protect what he had, the money, the family power. Everyone does that, don't they? What are you talking about? How many people say no, I don't want the power, I don't want the money and they leave? We had to accept that he had made a terrible mistake and, uh, there was a penalty. because for making that mistake and uh, that's going to be something you're going to have to live with for the rest of your life, would you say you're a criminal of color right? Yes, it's very interesting when you see your name Philip James Baker versus the United States of America it's overwhelming, then you face the assistant US attorney while he looks you in the eyes and when you go through that circumstance there are no words that can really describe the depth of loneliness you feel at that moment.

I finally completed a plea deal. United States Government I was sentenced to 20 years for wire fraud. There is no way to really describe the process and life when you are detained in a maximum security federal institution before trial. In the United States, you have gangs, you have gangs among the gangs you have violent criminals there is no separation between a white collar criminal and very hardened criminals they are all together there is no explanation for the world they let you into it is about survival the days They just come and go it becomes the routine of doing nothing you have no hope you have absolutely no future and you have no reason to continue there is no reason to look forward Bigger Phil is a criminal he is the kind of financial mastermind that caused the financial crisis absolutely not, this is a guy who wasn't very sophisticated about his crime, wasn't very malicious about his crime, but he admitted that he committed a crime.

This is a classic example of where the justice department takes a shortcut, they want to generate publicity for themselves as if they are going after financial criminals. and everyone wants them to do that and yet time and time again the people they go after are these little minnows, they don't go after the big fish, they don't go after the bankers for the most part, they certainly don't go after the big guys. executives of the banks or other large financial institutions that made the ERS decisions that led to the financial crisis 10 years after the financial crisis except Iceland how many white criminals are behind bars Kareem selan of Credit Swiss he is the only one The banker of Wall Street went to jail in connection with the crisis.

He lost only a few million. He's not a really important fish. He's not a real Al Capone. Could you just tell me the name of a senior executive at a big bank? Here is the number of people convicted of crimes related to the crisis. crisis in the US according to the Financial Times 324 people on Main Street Zero Wall Street CEOs have been in prison, although today there is absolutely no doubt that Wall Street executives and politicians were complicit in the creation of the crisis. This is the story of how massive global banks made billions by packaging toxic mortgage loans and financial products and selling them around the world.

American politicians pulled the trigger. It all started with the great political and philosophical ambition of allowing everyone to own a home. Our government supports homeownership because it is good. for America it's good for our families it's good for our economy part of the American dream dream that was driven by you know all kinds of presidents Clinton Bush whatever for years the home ownership authorities kept interest rates very you go down to make money. very easy to borrow Wall Street and politicians had agreed to work together Wall Street with the pursuit of profits politicians with the government's pursuit of economic growth that could turn into electoral victories in the years to come this was the beginning of the housing bubble When bubbles expand, everyone wins, everyone is a genius, the lender makes money, the real estate development companies make money, the construction workers make money, everyone loves bubbles, but this was a diabolical deal between politicians and Wall Street, the scene of a perfect storm.

What happens in a boom is that lenders take on more and more risks and borrowers take on more and more risks because they both think things are safer than they seem and one of the ways they convince themselves to take on more risk is through the financial innovations that Wall Street created. Risky loans called subprime Americans who couldn't afford to pay back the bank loans they had just taken out from the public were given access to zero low income and even jobless loans, so if you wanted absolute insanity, it would be the loan ninja, so ninja. means no income, no job and no assets, so the idea is that you would lend money to people who did not give you information about whether they had any income, if they had any job or if they had any assets, that will allow you to grow enormously because now can lend in the US context to tens of millions of people who cannot repay the loan.

How many people are there who can't? They can't get it. Tens of millions of people in the United States, tens of millions of people in France, under these circumstances, this falls into the general category of predation. In the United States, the people who received the worst loans were overwhelmingly a combination of all four demographic factors, black Latinos, the elderly, and women, which is incredibly immoral. That's why in almost the entire world these things are crimes these toxic loans became oxide gold for the entire US banking and financial industry all the major players on Wall Street wanted a piece of some major party Goldman Sachs Leman Brothers Morgan Stanley maror Lynch Bear Sterns JP Morgan City Group, etc., the frenzy spread when the public applied for loans by falsifying their own financial situation in the loan applications, therefore, the public and the banks were complicit in committing fraud banking.

My name is Richard Bowen. I was senior vice president and head of business. City Group's insurer at the time City Group was the largest bank in the world and it was my responsibility to ensure that the $90 billion a year we acquired in mortgage loans originated by other banks and mortgage companies met our policy standards. in early 2006 i discovered that over 60% of these mortgages did not meet our guidelines, by definition they were defective when i discovered this, in june 2006, fool i thought it was my job, i started issuing warnings because i was supposed to made sure they followed our policy guidelines and sent an email.

I put it in my weekly report. I made presentations to the committee. I mean, I'm not a shy guy. I cornered people in the hallways by the water fountain and they all said yes, yes. We know that we need to fix that but nothing would happen and during 2006 and 2007 the volumes continued to increase and the rate of defective mortgages increased from 60 to an excess of 80% 80% 80% of these mortgages which in turn we were to sell and give our representations and warranties that they met our policy guidelines did not meet our policy guidelines this is a misrepresentation that is true in fact it was fraud I have seen many documents alone with my own eyes uh that were forged and the borrowers still signed them as if If they were correct people who were typically hairdressers, gardeners and reported income of over $100,000 a year now their actual income would be in the range of approximately 16,000 in those cases their income is inflated by Six times you would have waiters in a restaurant showing that they made $150,000 year.

I mean, that's clearly out of line, but still the type of loanallowed that to happen. The wealthy Bowen and his staff are very carefully and professionally documenting that these loans, his representatives and guarantees are false, but the city is overwhelmingly turning around and reselling these loans. City Group didn't want to know because if they looked at these places they wouldn't be able to continue using them, it was about generating the income that people had. who worked on Wall Street conceived the idea of ​​securitizing mortgages by packaging the mortgages into Securities, they actually arranged to buy the mortgages, they would package them into Securities, they would file documents with the Securities Exchange Commission that they had to be able to call security and then they would sell them to investors from all over the world and all along the way they were making money it was almost like it was a perfect product that anyone who touched a mortgage would make money with it on November 2nd. 2007 sitting at my kitchen table I prepared an email and sent it to Robert Ruby, who the next day on Sunday at the board meeting was named president of the board.

I also sent it to the boss, the risk officer, the CFO and the chief auditor, I said urgent, read immediately. Financial matters, I put it in capital letters. I call for an external investigation. I said come here from outside and investigate what is happening here because everyone is already here. He knows it and no one contacted me throughout November, throughout December there was no contact, no one said a word. I will tell you that at that particular moment, before I even got in my car, I was doing what they do in the movies. I was looking underneath. my car and I opened the hood and looked uh it was a very scary moment on February 6th I received uh there was an email that went out regarding the reorganization and in that reorganization they stripped me of all my underwriting responsibilities which the next week they put me on put on administrative leave and was told I would not be returning to the bank, greed was definitely the driving factor in all of this, as it is in most frauds.

I was told that City Group was not the only one that had a comparable level of fraudulent home loans. All major Wall Street banks have been seen ignoring the risk of bankruptcy. Banks began to borrow huge amounts of money to buy more and more mortgage loans and package them into derivatives. The top insurer in the peak years of 2005 and 2006 was Leman Brothers at $106 billion. Leman was one of the largest originators and sellers of the most toxic loans in the entire world. Leman Brothers was one of the largest vectors of fraud in the history of the world.

My name is uh Anton vcas. My name is Tony. In 2009, approximately 3 months after the Leman bankruptcy, I was appointed by the federal court in New York to act as an examiner. He was independent of either party and among the responsibilities the court charged me and my team was to determine how and why. Leman filed for bankruptcy and when you talk about Leman's bankruptcy, you're talking about the largest single bankruptcy in the history of financial institutions. The total amount of the bankruptcy was $693 billion, so we tell the story of what happened. The Lman brothers were the fourth oldest in the world.

Investment bank in the world led by famous CEO Dick Fold Hello, my name is Dick Fold. I am the president and CEO of Leman Brothers. Now is a great time to join Leman Brothers. I've been here 30 years, but I can't. I can't think of a better time for you to participate in the changes and opportunities happening here if I say shitty food, what would be the first thing that pops into your head? A person who was seen as a lion on Wall Street. that in 2008, the same year of the bankruptcy, he was named by Forbes as one of the top 10 executives in the country, they called him the gorilla and I think they called him that for a reason, he was a gruff and boring guy, don't take prisoners. you know, run through a wall for Leman Brothers uh hyper competitive uh hyper narcissistic squeeze some of those shorts squeeze them hard not that I want to hurt him don't get that please because that's not who I am I'm soft I'm adorable but what What I really want to do is rip out their hearts and eat them before they die.

The man who lost the Lumen brothers. The man who presided over his L and fall. The man who could have done something about it but chose. not the man who refused to see the writing on the wall, the man who, you know, in many ways started what became the Great Recession. My name is Oliver Buddha and I was in-house counsel at Leman Brothers for 8 years. I just discovered it. many things that were at least unethical, if not illegal, and I finally decided to quit. I was making a lot of money, but it wasn't enough to turn a blind eye to everything that was happening around me.

The tone that came from the upper fold of the cock. The guys around him were willing to push him to go beyond the limits, the key in Leman was to evaluate the risk and reward and regardless of the law that could be in between if the reward is high enough and the risk is low enough. We'll do it and we'll figure it out later this was a risk culture and it was all about money Leman Brothers risk analysis program was considered a model on Wall Street I mean it was brilliantly conceived the problem was it was simply ignored to understand you talking about dick fol dick folz made his fortune at Leman Brothers he was a multi-millionaire so if you say well I think he was wrong I would ask you are you a multi-millionaire?

Have you made a billion dollars in trading? I have and he. In the years leading up to the crisis, Leman Brothers' financial health could not have been better, at least on paper, they expanded the use of their toxic deras and the loan ratio increased in 2008. LeMans was enormously leveraged. Leman Brothers had one. Of the highest leverage ratios in American financial institutions a leverage ratio is a ratio of your debt to your equity, another word for equity is equity. His ratio, depending on the exact moment, was 30 to 40 to 1, in other words, for every dollar of supposed capital he had. was between $3 and $40 in debt.

Leman became the center of global attention because they were perceived as the next weakest link; They were the next domino to fall, so Leman got involved in a plan and an accounting plan to make it look better and what they did was it involved what was called rbo 105, this was something that Leman used every quarter to hide some of the borrowed money. Leman would borrow money and they would pledge securities that they had as collateral in the end was $50 billion every quarter, they would borrow $50 billion and they would give $50 billion as collateral, but in reality they would say that it was a sale, that It was not a promise of a loan, but it was a sale of those assets for 50 billion dollars and they would treat that 50 billion dollars not as debt but as cash that they just received and by doing that and using that cash to pay other debts, they could significantly reduce that leverage ratio and as soon as the quarter was over and they had released their number, they would undo that transaction and Voila, they would return the money, get the securities back and they would be as leveraged again as they were before they did this just to mislead the public and no other reason.

The effect of that was that in June they were able to demonstrate that their leverage. had dropped dramatically and the streets said wow leman okay our company is strong today and we will come out of this cycle even stronger we have done it before and we will do it again so they manipulated the number yes in my opinion they absolutely manipulated the numbers in those who participated in the trans even in their own emails referred to it as a drug they were taking, a sham, an accounting trick to make themselves look better, so they knew what they were doing and they were adding information to the public, yes, that It is my opinion, that was the opinion that we can reach in the report, is it not illegal?

Well, if you file a misleading statement and you knowingly file a misleading statement and a judge concludes that you have done it or the jury does, that's against it. the law yes, there was a basis on which such a claim could be made yes we did, including against dick the CE yes yes, but no one was arrested or charged for no, there were no arrests, there were no charges, there was no jury trial, there was no uh, civil case started where the jury heard the case and then decided the case, none of those things happened. No, let me start by saying that I have absolutely no recollection of hearing or seeing any documents related to repository 105 transactions while I was Leman CEO, do you think it's possible that Dick didn't know that?

No, of course not, of course not. There were senior executives at Lhan who were interviewed by Mr. Wcas and others who said yes, he did know that emails were sent to him. that showed the 105 uh repository part of finance to show the effect of this and then Dick Fold's response was well, they may have sent me emails, but I don't know how to use a computer. I don't know how to open an attachment. that would have a spreadsheet to show this so i never saw it i never went this was his story once again wall street misrepresented its financial situation at the same time millions were spent on bonuses for traders this was a jackpot the place to make money and the largest amount of money was Wall Street the bonuses reached levels that had never been approached in the world millions of dollars a year it's like the best job you can imagine without putting any of your own capital at risk whatever, beautiful apartment in Park Avenue and Fifth Avenue beautiful house in Hampton beautiful art collection buy the house you want have a nice vacation home have two or three cars have a boat have whatever you want I mean, once you're a million there are no limits they had styles of excessive lifestyle, they were willing to take risks to support that lifestyle, there is a lot of narcissism and antisocial personality disorders and with this they could feel that they have a sense of entitlement or that they are above the law or that they are also above the law.

It's good to get caught, so it's dominance, it's power, it's status. I'm tougher, better gifted than you. I have a bigger cock than you. They are thrill seekers. They get some kind of euphoria from taking risks. They do it in their career. So naturally it extends to their personal lives, a lot of drugs, a lot of cocaine use, even prostitution, indiscriminate sex, people were spending a lot of money on sex, people were spending a few hundred to a few thousand dollars a week. in a sea of ​​greed, but the important thing is who will dominate in this sea of ​​greed, that's the real thing, who will have the power, who can take on the other guy on Wall Street, these CEOs, they can.

With some of them he would make $100 million a year and Dick Fold had several years where it was 70 80 90 $100 million in one year. He had a multi-million dollar home in Greenwich and that's where he lived most of the time, but he also had a fancy multi-million dollar apartment on Park Avenue. He had another house in Florida that was also worth $105 million. Another place in Idaho, Sun Valley, kind of a cabin in the woods, but again a multi-million dollar property since 2000. you have taken home more than 480 million dollars, that is almost 500 million dollars, your company is now in bankrupt our economy is in a state of crisis, but you are left with 480 million dollars.

I have a very basic question for you: is this fair? I would say that you, the number 500 is not accurate and I think the amount that I took out of the company above that was, I think, a little less than 250 million, it is still a big number, although it is still a big money, of In fact, both numbers were wrong and both. the numbers were low, the real figure was 530 million between 2000 and 2007 and Dick F said yes, I only made 310, that's over 200 million dollars that he deducted from his sworn total. I swear to tell the truth, the whole truth, he did it on television for the world and this thing stood up, take it, take it, I don't even think I could resist if you gave me the chance to win 550 million dollars and everything I had to do out hurt six billion people.

I would think so, Temptation is there people are simple, they do what they are rewarded for, so if you are rewarded for taking a big risk with other people's money, that's what you're going to do. I think it was Voler sincere who wrote about a British general who lost a battle in France and when he returned to England he was killed in an exam, you know, Voler is a very intelligent guy, right, that's human nature, people do what that she is rewarded for doing. The real message is that we don't care how we did it we don't care if it's real we don't care if it's honest just do it because you'll be rich and I'll be rich in the financial context modern executive compensation not only created the most criminogenic environment but created the biggest crimes in financial history and there is nothing like it this is absolutely stunning Wall Street has seen very few days like this the inevitable happened the house of cards collapsed Lan Brothers a158-year-old company filed for bankruptcy brought down by Bad Mortgage Investments Leman, which has 25,000 employees, will be liquidated Someone said he knows corporations die of cancer.

Investment banks die of heart attacks. There was a time when these assets were completely toxic and when they are completely toxic, whoever owns it has a terrible problem and that is the situation he found himself in people basically ran

away

, stopped lending to him and the government did not support him, so it collapsed on September 15, 2008 Leman Brothers bankrupts the New York Stock Exchange had its biggest drop in a single day since on September 11 banks began to stop lending money to each other the collapse of Leman Brothers caused turbulence in markets around the world stocks fell in Taiwan and India and then plummeted in Europe the financial crisis of 2008 showed what the world now identifies as financial contagion there was a global recession, you know the value of goods roots collapsed, people lost their homes, you could go around the southwest side of Chicago and see foreclosures, foreclosures, foreclosures, house after house after house that were going bankrupt as a result of numerous businesses going out of business. a fraud this is not random it's not oops everyone was hurt I mean the impact on the entire world was measured in trillions of dollars the value of what was lost during that period of time is almost incalculable we have never seen anything like this since 1929 this The crisis has changed our world in many lasting ways without the crisis, Brexit would not have happened and Donald Trump would not be president of the United States.

This is a major turning point that you never know what it will be, but the 1930s transformed the world because of course, it brought us World War II. Hitler certainly wouldn't have become Chancellor of Germany without the Great Depressions, so that changes everything. None of the executives of the major companies were brought to justice. I lost everything, all the money, everything I had, my wife, my family connections, I lost everything. I still owe the US government money. I have 154 million reasons to know what I did wrong, you owe me how. a lot of 54 million plus interest I'm just a small fish and they brought me to justice everyone was free the system is what it is and until the system changes the powerful keep walking you have already seen that there were some very big agreements that were made but they never admitted that they did anything wrong there was no admission of guilt there were no charges of any criminal activity and I have always stated that those payments were nothing more than extortion payments to the Department of Justice to seal the evidence so that the public would never see how widespread and omnipresent was the fraud that was committed and I really believe that these crimes are much bigger than any blue crime, it's just off the charts, not comparable in terms of these things, it's um What Balzac really said behind each fortune that you can't explain is not just a fraud, but a fraud executed so well that it was not prosecuted.

You are now in Midtown Manhattan on Park Avenue. This is the old one. It's where Leman was after 911 and this building across the street is where Dick F, the CEO, is working today at his new company Matrix Capital nothing has changed he's in the same business he always was some people may think of him like some kind of uh you I know a guy who was banished forever, but no, he's fine, the world collapsed, there were trillions of dollars in damage, it didn't cost him a dollar, the man put up 550 million dollars in his pocket, he kept everything and that pile has probably grown. considerably, perhaps he already has a billion.

The stock market has done very well since the crisis. What is the difference between a gangster who robs a bank and this banker? Oh, the gangster who robs a bank, he gets an average of about $2000 and B uh. He is practically always successfully prosecuted and Cu he spends 20 years in prison and none of those things happen to the CEO and he is filthy rich and can maintain his reputation. The prison was the beginning of Redemption. The judge told me to do something good with your life and that's why I'm trying to make a difference by talking to the public about my failures and how they can be aware of what the world is facing, as someone described it to me, you drive down the road. street in a school zone and you see a sign that says you know 30 km per hour you see a police car you slow down to the right you go slowly and drive a little further you drive a little more the police car is behind you you forget about that police office and everything Suddenly you start speeding up and you start speeding up, you start speeding up, right, that's what happens, it's human nature, we forget the disaster and keep moving forward, you know like that, then, I think it can happen again , I think that's how I am.

I think so, I do, the seeds of the next financial crisis have already been planted, they are growing, we can't see them yet, but there are many signs everywhere that there is trouble brewing. I think there is no doubt that we are entering another crisis of greater severity than the one we have just gone through. I can't predict what the instruments will be. I can't predict the details, but I know it will be driven by greed and misbehavior has no consequences. We have shown that the public and the decision makers basically have not learned because we never understood much of the crisis, but the bankers have learned the lessons and the lesson was this is sweet this is perfect this is a sure thing I will be fabulously rich and I will pay no price for this thank you Lord