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In the News: Madoff Pleads Guilty; AG Cuomo Says Merrill Mislead Him, UBS Retail Unit Stumbled in ’08, Fund Manager Steve Leuthold Is (Still) Very Bullish

Is New York AG Cuomo Eliot Spitzer incarnate? How much in client assets did UBS's U.S. retail brokerage lose in 2008? Why is Steve Leuthold still bullish?

This morning, Signore Ponzi walked a gauntlet of reporters and photographers before entering the Manhattan courtroom of U.S. District Court Judge Denny Chin. He pled guilty to 11 counts of fraud. He apologized and said he was “ashamed,” the recession and the high-expectations of his well-heeled clients made him do it. Judge Chin denied Madoff bail, calling him a flight risk.
Sentencing is set for June 16. Madoff faces up to 150 years in prison. Prosecutors recently said they are seeking to recover $177 billion related to the fraud. And with the investigation open and ongoing, it appears likely more people will be implicated in the fraud, a colossal one for one man to have pulled off alone. Madoff’s attorney, Ira Sorkin, called the prosecutor’s $177 billion figure “grossly overstated.” To read more about Bernie Madoff’s day in court or see a photo gallery of Signore Ponzi (as we’ved decided to start calling him), see the New York Post story, here.

At his plea hearing the 70-year old swindler expressed regret for his now estimated $65 billion fraud: “I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed,” Madoff told Judge Chin. “As the years went by, I realized my risk, and this day would inevitably come,” he said. “I cannot adequately express how sorry I am for my crimes.”


In the continuing bonus battle between the New York Attorney General Andrew Cuomo and BofA/Merrill Lynch, the AG is upping the ante. Apparently, Cuomo made no headway with the letter he and Congressman Barney Frank (D-MA), chair of the House Financial Services Committee, sent to Ken Lewis on Monday, in which they politely asked for the names of the recipients of bonuses greater than $1 million. “Taxpayers have a right to know where their tax dollars go once received by TARP recipients,” it reads. (View the letter, here.)

According to a report in the Financial Times, Cuomo is asking a state judge to force BofA to disclose the names of Merrill employees who received bonuses. He called Merrill’s actions in regard to the bonuses “misleading.” BofA has refused to supply names, saying it wants to preserve the confidentiality of employees—and not scare off talented executives. In Cuomo’s filing with the state judge, he included a copy of a letter sent to Rep. Henry Waxman (D-CA) from Merrill’s law firm, Hogan & Hartson, dated November 24, 2008, that says incentive compensation decisions at Merrill are made “at year end” and that such decisions for 2008 “have not yet been made.” From the FT story: “At that point, no incentive compensation decisions had been made, but Mr. Cuomo’s filing said Merrill’s board decided on November 11 to accelerate the bonus payments, and finalized the bonus plan a month later. He described the letter to Mr. Waxman as ‘misleading.’”

Speaking of banks facing scrutiny, UBS released its 2008 annual report yesterday. There’s plenty of ugly history to rehash in this 418-page tome, but here’s some specific damage: Global Wealth Management & Business Banking, which encompasses the firm’s international and U.S. wealth management operations, as well as its corporate and retail banking, saw CHF123 billion in client money exit the firm during the year, nearly erasing the CHF156 billion of net new client assets the firm brought in during go-go 2007. For 2008, the Wealth Management U.S. division lost CHF10.6 billion in client assets and recorded a pre-tax loss CHF698 million. Results were heavily dampened by a CHF1.5 billion auction-rate-securities settlement. That compares to a profit of CHF674 million in 2007. With the firm on the recruiting warpath, paying as much as 260 percent for top-producing FAs, better times could be ahead.

Lastly, Steve Leuthold, the curmudgeonly Minneapolis fund manager of the Leuthold Weeden Group, is “very bullish” on equity markets, calling U.S. markets “very cheap” but “some foreign markets are cheaper and growing faster.” Leuthold, who turned bullish in the third quarter last year, is not often a raging bull. He has been right about bottoms before; see here for a November interview with him in Registered Rep. magazine. “Buy ‘em when they hate’em,” he says. See his recent report, emailed to clients today, here.

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