That Was The Year That Was - 2007 (January - February)

Here's a note of some of the stories which hit the headlines in January and February 2007.

JANUARY

Police in Japan arrested Kaori Mihashi for the murder of her husband Yusuke, a Morgan Stanley group property banker. The accused was alleged to have killed her husband, chopping him up and burying parts of his body in three locations around Tokyo. The gruesome details of Mrs Mihashi allegedly taking her husband's severed head in a bag on the train to bury it, and cutting off his hands in order that he couldn't be identified from his fingerprints, hit the headlines around the world.

24-year-old Stanislav Shpigelman was regarded as one of the 'brightest of the best', the former Merrill Lynch M&A analyst had a brilliant academic record, came from a respected family, and had a great career in the financial markets ahead of him. That's all gone now, and Shpigelman was sentenced to 37 months in clink after pleading guilty to insider trading.  Shpigelman said he was foolish enough to become involved with two former junior Goldman staff, and admitted to providing tips on 6 pending M&A deals. Whilst the others, who allegedly plotted a number of schemes to obtain price sensitive information (including using strippers, engaging a Croatian seamstress and planting spies in a business which printed Business Week magazine), are said to have made $6.7m from the alleged insider trading, Shpigelman received just $12,000. And 37 months in clink.

Citigroup's then CEO Chuck Prince let go Todd Thomson, the company's 45 year-old wealth management head, partly because of a spat over expenses. Prince was under the cosh over costs (Citigroup's operating expenses increased 15.2% in 2006 to $52.02bn, while revenues rose just 7.1% to $89.62bn), and is said to have blown his top when he discovered that Thomson had used over $5m from his unit's marketing budget to sponsor a new TV programme for the Sundance Channel. Prince was believed to have told his board that Thomson was guilty of a number of judgement lapses, from the 'improper use of Citigroup's corporate jet to installing a wood-burning fireplace in his office'.


Finally, Citigroup executives decided to change the name of their business. The new name of the company eventually turned out to be simply 'Citi'. The red umbrella logo also went, replaced by an upside down smile.  

FEBRUARY

Reuters reported that rumours were circluating that Citi and Goldman Sachs might merge. The story went that Goldman executives would run the show and the firm's investment bankers would immediately set about using their contacts to break-up Citi - ending up with the mother of all integrated wholesale banks, taking in investment banking, private banking, asset and hedge fund management. The news agency also reported that shares in Fortis rose at one point in the month on speculation that the Belgian-Dutch financial services group was to merge with ABN AMRO.

The Evening Standard reported that 'dozens' of traders who worked in London at Bank of America's investment banking unit were mighty miffed over what was described as 'derisory' bonuses. According to the newspaper's unnamed source, 'massive numbers of people would leave after bonuses hit bank accounts later that month. One trader who claimed to have made almost $50m for the firm last year, says he bagged a bonus of less than $2m (poor old soul). Not too many left.

In a surprise move, Credit Suisse announced that 47-year-old Brady Dougan, who headed up the group's investment banking division (previously CSFB) and an American to boot, would become Group CEO when the then-current boss Oswald Gruebel stepped down in May. No-one saw that one coming.

Finally, there was a predictable outcry from the investment banking industry after Peter Hain, the UK's Northern Ireland Secretary, told the Sunday Telegraph that he thought that City bonuses had created a 'grotesque' wealth gap, and suggested that bankers give two thirds of their wad to deprived communities. Hain told the newspaper that 'there's a real problem of people on average incomes feeling there's a sort of super rich class right at the top. What is it ? Four thousand City workers receiving more than a million pounds each in bonuses. People don't feel that's proportionate'. The Minister then suggested that City workers 'give two-thirds of that £8.8bn (City bonus pot) and invest it in charity or invest it in regeneration schemes for unemployed kids'. Hain continued by threatening that 'in the interests of the City, particularly if they don't want to invite attacks for greater regulation or changes in taxation, if they don't (want to) get into that kind of arena, then they have to show a lead'. The City laughed, and no other Cabinet Member came out and said anything in support of Mr Hain.


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