http://optionsforemployees.com/articles/article.php?id=146
As readers will recall, J.P. Morgan received the first large bail-out from the New York FED of $55 Billion, guaranteed by Bear Stearns' worthless assets, to prop up its own liquidity position and buy Bear Stearns stock.
This article is about how J.P. Morgan's executives , instead of receiving easy to detect cash bonuses, received very large bonuses in the form of Stock Appreciation Rights (SARs) and Restricted Stock Units. These equity compensation securities are not easy to understand or value by other than experts in the field.
SARs are very similar to employee stock options and Restricted Stock Units are very similar to Restricted Stock.
These SARs were granted on January 20, 2009, the day that the J.P.Morgan stock reached its lowest in five years. The stock quickly rebounded as illustrated in the graph below. The arrow indicates the day and the price of the stock when the grant was made.
On January 22, 2008 we see a repetition of the grants of SARs with the stock hitting a low point followed by a substantial rebound in the next days.
Let's examine the size of the bonuses of the top 15 executives, at J.P. Morgan, that were granted on January, 20, 2009 and reported two days later.
See the link below:
http://www.secform4.com/insider-trading/19617.htm
Stock Appreciation Rights Granted
SARs Amounts Name of Exercise Value 2/4/09
Granted Grantee Price
700,000 Winters 19.49 $11,300,000
700,000 Black 19.49 $11,300,000
500,000 Staley 19.49 $8,100,000
300,000 Scharf 19.49 $4,890,000
250,000 Drew 19.49 $4,075,000
200,000 Miller 19.49 $3,260,000
200,000 Rauchenberger 19.49 $3,260,000
200,000 Smith 19.49 $3,260,000
200,000 Zubrow 19.49 $3,260,000
200,000 Bisignano 19.49 $3,260,000
200,000 Mandelbaum 19.49 $3,260,000
200,000 Cavanaugh 19.49 $3,260,000
200,000 Cutler 19.49 $3,260,000
200,000 Maclin 19.49 $3,260,000
100,000 Daley 19.49 $1,630,000
----------------------------------------------------------------------------------------
Total value (2/6/09) of SARs Granted = $81,405,000
Restricted Stock Units Granted
RSUs Amounts Name of Market Value RSUs Value
Granted Grantee of stock 2/4/09 2/4/09
115,474 Staley 24.10 $2,782,923
102,644 Miller 24.10 $2,473,720
102,644 Scharf 24.10 $2,473,720
102,644 Smith 24.10 $2,473,720
102,644 Bisignano 24.10 $2,473,720
102,644 Cavanaugh 24.10 $2,473,720
102,644 Drew 24.10 $2,473,720
102,644 Maclin 24.10 $2,473,720
89,813 Zubrow 24.10 $2,164,493
89,813 Cutler 24.10 $2,164,493
59,662 Daley 24.10 $1,364,542
35,926 Rauchenberger 24.10 $865,816
--------------------------------------------------------------------------------------------------
Total value (2/6/09) of RSUs Granted = $30,500,000
Total value (2/6/09)of Grants to top 15 executives= $111,905,000
These totals are far more than the top executives of Merrill Lynch were to receive as their year end bonuses in cash and equity. The New York Attorney General is supposedly investigating Merrill's executives for criminal wrong doing
An interesting question arises from an examination of the fact that for the past two years grants were made on or around January 20. It just happened that the stock dropped prior to the grant and moved upward immediately after the grants. Its hard to accept the idea that those executives just got very lucky for two years in a row. Yes, I am suggesting collusion in the manipulation of the stock to accommodate the grants of options etc.
Some refer to this as spring-loading the options grants.
Is J.P. Morgan immune from investigation?
Now what we find is that bankers' errand boy extraordinaire CEO, James Dimon, is popping off about the ridiculous idea that J.P. Morgan does not need further bail-out money after Morgan grabbed $55 Billion in the Bear Sterns deal and another $25 Billion of TARP money in banker welfare payments. See:
http://www.bloomberg.com/apps/news?pid=20601109&sid=azVLk.22AkLI
If they do not need the bail-outs, let Morgan and Goldman return the welfare payments.
Perhaps also an explanation is in order of why James Dimon is not prosecuted for violations of Title 18 Section 208 U.S.C. in his role as Director of the New York Federal Bank in approving the J.P. Morgan/Bear Stearns deal.
The link below is the Title 18 Section 208. See for yourself if his actions constitute a violation of the Statute.
http://law.onecle.com/uscode/18/208.html
Neither J.P. Morgan, Goldman Sachs or any other bank will return the TARP monies because the actual values of the Preferred Stock and Warrant packages were 50% lower than what the taxpayers were forced to pay. And the actual values of those packages have dropped considerably in every case since the welfare payments to Goldman, Morgan, Bank of America etc. were made.
Perhaps the Oracle of Omaha will accept 5% when the going rate is 11%.
In the case of Bank of America and Merrill, the warrants purchased by the Treasury are down over 88% since the bail-out.
John Olagues
P.S.
A full reading of the SEC Form 4.com link above shows that there were sales of stock by most of the 15 executives at 23.2 in the days following the issues of the SARs and RSUs granted when the stock was 19.49. Mr. Jamie Dimon also sold 137,033 shares of stock at 23.2.
The sales and the grants are trades of equity securities within 6 months and are considered matching trades for Section 16 b of the Securities Act of 1934. Section 16 b requires those profits from the buys and sales to be "short swing" profits and are returnable to J.P. Morgan.
Now, securities attorneys will say that the grants of the SARs and RSUs are exempt under SEC Rule 16 b-3. They will also claim that since the shares sold were formerly restricted stock which has become vested with a tax liability, that the sale to pay those taxes are exempt from Section 16 b of the Act of 1934.
However, thse SEC Rule effectively defeat the Statute and therefore is beyond the SEC's Rule making authority and is void. SEC Rule 16 b-3 is just another part of the SEC accommodating the executive compensation abuses including back-dating and spring loading.
If you are a holder of JP Morgan stock you can request that Jamie and his boys return their "short swing" profits. If they do not return the money, any share holder has a private right of action against Jamie and his boys to get the profits returned to the share holders.
P.P.S
Also in the linked secform4.com info is a mention that Jamie purchased 500,000 of JPM stock on Jan 16, 2009, and spent another $10,000,000 on another form of JPM stock on the same day, one day after the earnings report of Jan 15, 2009. The 17th was a Saturday and Monday the 19th was MLKs holiday. He just couldn't wait until Tuesday, when all the options were granted.
I am not certain but I believe that those purchases violate JPMs black- out period and is a violation of SEC Rule 10 b-5.
2-8-2009 at 6:00pm
You may remember the ilast nsult to injury - the post dating of options to the senior employees of particularly technology companies in the early 2000's. The giveaway here was that the options were miraculously issued at the stock prices yearly lows, My hunch is that this may have ocurred here. Just a hunch...
2-8-2009 at 6:00pm
realist
ALL these idiots and ANYONE who has EVER worked at Goldman should go to jail FOREVER!!!!!!! Milken goes to jail never did a thing worng and these scumbag get new jets = i hope they and Warren the cheerleader eat dogfood for their last meals or are victims of the civil unrest which probally happens in this coutry via their actions .....
2-8-2009 at 6:00pm
You forgot about the $138B the fed gifted them during the Lehman bailout. http://tinyurl.com/6j5p7j
2-13-2009 at 6:00pm
lets not forget the 10 billion they received indirectly via AIG the day AIG received their bailout. This money was related to positions JP had with AIG in default swaps.
2-14-2009 at 6:00pm
Garbage
Jamie Dimon should receive an academy award for his "soothe talk". Just remember his mentor: Sandy Weill. Along with Alan Greenspan one of the architects of the situation we now find ourselves.
2-14-2009 at 6:00pm
Garbage II
...and Cramer has all but fallen over himself for GS. FYI Jimmy Boy: you've no street cred now. The inbreeding and 10x PARLAY of assets needs to be investigated now! First, they bought and paid for our government and now ruined our republic.
2-15-2009 at 6:00pm
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