Dantas’ Inferno: “Fed v. Fed Over Satyagraha Arrests”

"A federal police divided." Source: Terra Magazine, clipped from the Hoje em Daily daily.

PF viveu guerra e espionagem para prender Dantas: The online Terra Magazine, edited by the veteran Bob Fernandes — Spanish-language editions are being readied for other markets in which the Terra portal operates, it looks like (the portal has recently been redesigned, and for the better, for once) — tells quite a story from behind the scenes of the federal police operation dubbed Satyagraha.

The investigation allegdly discovered Daniel Dantas, Paulo Maluf, Celso Pitta, Naji Nahas and many others, all laundering money through the same omnibus account at JP Morgan New York, administered by Beacon Hill on behalf of one of Brazil’s biggest doleiros, or black-market currency operators.

And tells it in Portuguese prose that is equal parts Mickey Spillane and Rubem Fonseca.

Quite a read.

I clip it for my notes, and future reference. Will annotate as time permits. My translation. Draft quality. Sentence fragments. Terseness is tension.

The federal police worked hard to make sure Daniel Dantas was arrested. The federal police did not want Daniel Dantas arrested under any circumstances. The federal police did everything it could to arrest Daniel Dantas. The federal police did everything it could to prevent the arrest of Daniel Dantas.

The federal police worked against the federal police.

Just another chapter in our descent into the bowels of Brazil. Under arrest are the Opportunity banker, the big-time speculator Naji Nahas, former São Paulo mayor Celso Pitta and another 17 of the 21 persons for whom warrants have been issued. It’s Tuesday, July 9, 2008.

Manhattan Connection: “Dantas’ Inferno Case Began in the City So Nice They Named It Twice”

The Times' Man in Copacaban, ca. 2001. Uncanny resemblance to Capt. Beefheart. Editorialized that Maluf money-laundering indictment was "bizarre"

“We are not going to become a Grand Caymans on the banks of the Hudson” — Manhattan D.A. Morgenthau on the indictment of Paulo Salim Maluf. See Rohter on Maluf: The Blind Eye Misreading the Blind Eye

Headline from the Jornal do Brasil today: “[Operation Satyagraha] began in the United States.”

On the police action in question, which targeted money-laundering, tax evasion, racketeering and corruption and landed a number of prominent business figures here in Brazil in the xilindrô, see

• Dantas’ Inferno: Fiscal Paradise Lost?
• Dantas’ Inferno: The Official Word
• Buemba! Buemba! Bob Fernandes on Dantas’ Inferno
• Dantas’ Inferno: The “Big-Eared Banker” Is Under Arrest

Specifically, part of the case was developed based on cooperation with the Manhattan District Attorney’s Office.

I had been wondering about that.

When the federal investigator in charge accused investor Naji Nahas of having insider information about interest-rate deliberations by the Fed — the U.S. Fed, that is — I was pretty surprised, for example. This claim may be exaggerated, according to this report. But we shall see.

I am clipping local reporting about the story as heavily as I have time for.

A Operação Satiagraha, da Polícia Federal, recorreu a documentos obtidos pela Promotoria de Manhattan em investigações sobre a empresa Beacon Hill, responsável pelos negócios de doleiros, empresários e políticos como Paulo Maluf. A PF teria revelado a investigadores dos EUA que a rede obteve informações privilegiadas no Fed.

The federal police operation dubbed “Satyagraha” used documents from the Manhattan D.A. in New York in its investigations into Beacon Hill, which handled transactions for black-market dollar traders, business executives and politicians such as Paulo Maluf.

Maluf was indicted by the Manhattan District Attorney last year. Larry “We Are All Prostitutes” Rohter, the New York Times‘ former man in Copacaban — editorializing in the news hole, as seems to be his habit — called the international money-laundering indictment “bizarre.”

Which was itself really bizarre, I thought.

Diogo Mainardi and Daniel Dantas: His Master’s Voice

The old Lacerdism. Click to zoom.

Over the last several months, I have been translating as much of Luis Nassif’s series on the decline of journalism at Veja magazine (Editora Abril, Brazil) as I can.

The great virtue of the series is as a case study in Journalism 101 — or Journalism 1.0, if you like.

The principles involved are simple and straightforward. Anyone who can understand Toulmin’s argument model can understand the epistemological underpinnings in play.

And Nassif’s documentation of Veja‘s deliberate and systematic violation of those principles is careful, thorough, and devastating.

I do think Nassif exaggerates when he says that the viciousness of the toxic sludge produced by the leading Brazilian newsweekly, Veja, is unprecedented in the history of Brazilian journalism.

The press campaign against the “personal corruption” of Juscelino Kubitschek after the 1964 “revolution” (military coup), for example — orchestrated from behind the scenes by ruling generalissimos who feared the ex-president’s electoral popularity and the prospects of a premature return to democratic elections in 1966 — provides a perfect template for present-day Veja journalism.

Veja is just Binômio with better color printing, glossy paper, and lots of advertorial for the iPhone and Starbucks.

The magazine has explicitly assumed this legacy, in fact: In an edition from several years back — I have it around here somewhere, I never throw things away, though my wife wishes I would — the password provided for access to online content was “NOVOLACERDA.”

“The new Lacerda.”

Attached, the latest installment:

• Diogo Mainardi: His Master’s Voice

SEC On “The Issuer Pays”: Ratings Agency Facelift Falls?

SEC Staff Report on Credit Rating Agencies, July 2008

Rating agencies do not appear to take steps to prevent considerations of market share and other business interests from the possibility that they could influence ratings or ratings criteria.

The SEC (PDF) report on the ratings agencies classified as NRSROs — nationally recognized statistical ratings agencies — tells a pretty simple story.

1. The major rating agencies — Fitch, Moody’s and Standard & Poor’s — were told to develop and enforce policies to prevent conflicts of interest from potentially throwing a bias into analyst rating reports.
2. The major ratings agencies developed those polices.
3. But they do not enforce them.

The issue acquires particular poignancy at a time when the public is looking carefully at the performance of these agencies to determine their “failed prognostication rate” (FPR) — which is actualy just a piece of pseudoterminology I made up myself, but you get what I mean, right?

Freedonia sovereign debt is as solid as the Rock of Groucho, they say.

The Rock of Groucho turns out to have feet of clay. Citibank fires 20,000 employees. Goldman Sachs ponders vacating its Death Star building on Pearl Street and decamping for Tony Sopranoland.  The mayor of New York City — who is in the information and numbers business himself, and is actually quite good at it — looks at his tax revenue projections for the next five years and contemplates jumping out the window.

Each of the NRSROs examined uses the “issuer pays” model, in which the arranger or other entity that  issues the security is also seeking the rating, and pays the rating agency for the rating. The conflict of interest inherent in this model is that rating agencies have an interest in generating business from the firms that seek the rating, which could conflict with providing ratings of integrity. The Commission’s rules specify that it is a conflict of interest for an NRSRO being paid by issuers or underwriters to determine credit ratings with respect to securities they issue or underwrite. They are required to establish, maintain and enforce policies and procedures reasonably designed to address and manage conflicts of interest.35 Such policies and procedures are intended to maintain the integrity of the NRSRO’s judgment, and to prevent an NRSRO from being influenced to issue or maintain a more favorable credit rating in order to obtain or retain business of the issuer or underwriter

“Nahas Had Inside Dope from the Fed”

Sem detalhar, PF diz que Nahas dispunha de informações privilegiadas do Federal Reserve: How did Brazilian investor Naji Nahas get access to inside information about U.S. Federal Reserve interest rate decisions, if allegations by the Brazilian federal police to that effect are correct?

That is some accusation.

It will be interesting to see where this leads.

On Nahas, see also

• “The Man Who Broke the Brazilian Bourse”

For some basic information about his previous business dealings with Daniel Dantas, see also

• Whatever Happened to the Secret Offshore Bank Account of Brazil’s Top Cop?

That account does not exist, but Dantas approached Veja magazine with a dossier purporting to show that it did, and was stuffed with bribes.

Veja magazine ran the “dossier.”

The “top cop” accused was later appointed head of ABIN, Brazil’s federal intelligence agency.

The report is from Valor today.

Entre as acusações que levaram à prisão do investidor Naji Nahas, realizada hoje pela Polícia Federal (PF), chamou a atenção a de que ele teria utilizado informações privilegiadas do Federal Reserve (Fed, o banco central americano) para operar no mercado financeiro. No entanto, a PF não detalhou a forma pela qual Nahas chegou a obter tais informações.

Notable among the charges that led to the arrest of Naji Nahas today by the federal police was the allegation that he used privileged information from the Federal Reserve, the U.S. central bank in his dealings in the financial markets. The Brazilian feds, did not, however, provide details of how Nahas came by that information.