Into the Second Quarter, Just Like the First

Into the Second Quarter...Just like the First?
    We started April with Frank and Stephen slashing at one another like two big cats in a small cage.  It was Frank’s fault we hadn’t finished birthing this elephant; no, it was Stephen’s.  It was the issuer, his mandate, CSOB and Barclays.  It was the wind, it was the rain.  Can you deduce, gentle reader, that I’d had enough of these two?  
    April 1st was definitely All Fools Day in more ways than one.  Was that Bank Guarantee genuine, but someone along the chain of command wanted a 15 million euro fee?  Was it phony, and it was just coming to light?  Was it all of the above?  Scott managed to interject a note of reason, but it somehow got lost in the miasma:
    If that BG really doesn't exist, than what would be the intention behind a bogus transaction involving an amount of the magnitude?  The repeated checks and surveys during the process would uncover a murky activity.  That may or may not be the case here with Susan Donnelly.  I'm sure it's not out of the question that a bad transaction could be going on here but, I don't know. 
    My suggestion is to let the Swiss platform & the issuer sort things outs. If a bogus activity is involved than I'm sure one of them will take steps to put the brakes on everything. 
Dear Team,

    During the past two weeks of dealing with the Swiss platform and all the secrecy surrounding the origin of the Bank Guarantee there has been a lot of speculation about fraud and false-dealing.  It is clear that there is someone involved in this deal, somewhere down the line, who is either doing something fraudulent or attempting to block progress.  Clearly Susan Donnelly was some kind of a 'shill' for this -- at this point there appears to be only two possibilities of pulling this thing out of the crapper.
1.  On Monday the issuer is scheduled to speak with the investigators for the Swiss program.  If they are able to reach an agreement, it should proceed from there.  If they cannot, I
withdrawn from trade.
2.  Officials at Barclays have now entered the fray to determine who or what is double-dealing within their bank.  Perhaps they can assist in progress, perhaps they will mean the end of this particular deal.
    There are several things that must be explained and verified in order for this to work in any way.  First, the Bank Guarantee has never been verified due to the finagling of whoever is working with the person calling herself Susan Donnelly.  Second, there is a good possibility that 15 million fee (to the mandate?  no one seems to know) could very well be illegal and if not, then as Steve Glanz has pointed out, it still doesn't work with the current plan to put the Bank Guarantee directly into the trading platform.
    I don't know if these are barriers which can be overcome or not.  Steve G has suggested that he might be able to trade the Bank Guarantee but only if he is directly to the issuer (no mandate or other brokers in between) and if it is certified genuine by Barclays.  This might actually be the best plan, if the Swiss program doesn't work out.  Or, abandoning this Bank Guarantee and attempting to work with the issuer in another way might work.
    There is one more possibility -- the issuer is putting up roadblocks in an attempt to cut through the broker chain, make contact with the Swiss people and do his deal without payout anyone in the middle.  Wouldn't be the first time that happened.
    But first and foremost, is the Bank Guarantee genuine?  Until and unless this can verified on Monday, nothing else can progress.  Agreed?
Sincerely, Debora
April 4, 2011
Dear Debora, Stephen and Frank,
    I had reported to you that my German client could not move his $3M into Escrow to begin the Bayside deal with Gary Bras.  He had tried to move funds into his Spanish account from his German account, and from there he was going to move funds to Escrow.  After that, he would have to approve the Escrow agreement, and then he and Gary's capital provider would have to approve the transaction (PPP) I provide to them, go through compliance and execute the contract. 
    As you may recall, the deal is that $3M put in Escrow, which represents 3% of $100M.  The capital provider comes forward with $100M for the PPP.  After it begins to fund, the $3M is returned to my German client.  If the PPP does not perform, his $3M is returned. 
    My German client had already pre-approved the Escrow agreement overview, and both sides had already pre-approved my PPP overview.  All sides agreed to the Bayside program described in the previous paragraph, including an informal agreement to pay a referral fee from PPP profits to LMI/Stephen Edwards which (details we had previously discussed) - to be formalized before any contracts are approved, issued and executed.
    The Spanish bank had issues with some funds coming from my client's German bank.  Instead of targeting the suspect despositors, they made a request of the German regulatory, BAFIN, to freeze all funds transfers from all depositors at the German bank.  My German client was never a suspect, but his funds were frozen for a few weeks.  Those funds were part of his business.  As a result of the freeze, his business could not function for those few weeks, and his clients became upset. 
    As I reported to you about 10 days ago, the freeze was finally lifted.  But the damage had already been done to my client's business.  He had to focus his attention on salvaging his clients and his business. 
Unfortunately, he is still working to resolve some of those issues.  Here is his latest email he sent to me, Gary and our German translator:
    "First I have to apologize for the delayed statement. We were working hard on Friday and the weekend to find a solution for our now less dramatic but still existing financial problems which the BAFIN investigation caused.
    Unfortunately for the time being I can’t present a satisfying solution. To make sure that my business doesn’t run into new trouble, I still need the 3 million as a cash reserve and therefore they can’t be sent to the escrow account.
    I admit that this is a very disappointing development for all of us, but I have no other choice, at least for now. What is the perspective? To be honest, I don’t know. I am still seriously interested in our deal and as soon as I can work with the 3 million again, I will contact you. When is that going to happen? Let me try an educated guess, if everything goes according to plan, in two to four weeks we should be back on track.
    So, please give me that time to work things out. If you don’t want to wait that long I would appreciate if you let me know. I am sorry that I can’t come up with better news today, but with some additional patience there finally might be a happy ending."
    Gary and I answered that we were both willing to wait.  We have requested an update on April 20.  I don't know if he will have one by then, as his letter states "3-4 weeks" from April 4, and that is only an educated guess.  I will keep you updated when he updates us. 
    If I happen across any other clients at the $3M level who would be willing to participate in this program, I'll let you know.  So far, I have not run across anyone.  If you find anyone that may be interested, please send them my way and I will work the deal. 
Steve Glanz
    Well, perhaps it was reassuring that this kind of thing happened to other people as well as ourselves.  Another battle between Stephen Edwards and Frank Cmero was gearing up, and the first shots were fired on the 5th of April.
Dear Debora,
    The buyer called Barclays yesterday and found out something is not OK with the guarantee.  After that I had a Skype chat with stephen and was probably annoying enough that he lost patience and finally released the phone number of the mandate.  He also said the bg was established under some special terms and it's not a standard guarantee. I sent the mandate's number to the buyer and they are supposed to contact him. It was 11 pm my time when I sent the contact, so we’ll have to wait for an update from the buyer in few hours.
    Stephen also gave me some guy in Africa who has a buyer that doesn't require a copy of the bank guarantee. He was talking about some one and two-way guarantees; I discussed this with steve yesterday and nobody knows about such types of guarantees. This guy’s email that I received overnight is attached.  He said it's ‘one way’ because the bank will not monetize the bg, but if you read the Swift which was sent to CSOB it clearly states that the issuing bank will pay at maturity.  There's something wrong with all this.  I will see what the result of the phone call between buyer and mandate was and let you know.
From Buyer: “Your BG is one way, thus you cannot sell it because at maturity the issuing bank will not monetize it.
    What you can do is to have your beneficiary bank send it to my lender,
blocking it for one year and one day via Mt760, and he will fund you
at a rate of 20% monthly for that duration.
    Your bank must be able to verify the Mt760, and first payment is
released within 24hrs to 72hrs.  My lender can also accept a 30 day blocking where he pays out 3%, and a 90 day blocking where he will pay out a one time payment of 10%.”
Dear Frank,
    I've said from the beginning and it deserves repeating.  There's a heck of a lot of phonies out there.  You're the guy who is front and center working this deal.  You should have been introduced to the BG Owner and the BG itself from day one! 
    So now after two months you have the phone number for the mandate.  Take advantage of it.  Call the mandate and demand he introduce you to the BG owner.  Ask to see the BG.  They must introduce you to the Bankers who have set this weird policy and definition of "one-way" vs. "two-way" BG.  You need to understand this 100% directly from the horse's mouth.  No more fooling around. 
    Once you have access to principles and bankers, all the documents, and clarity, you can decide where to take this.  The Swiss Platform, the African Lender, the Buyer.  Or you will discover that the whole thing is a scam.  Susan Donnelly, no hard copy, obfuscations for two months - all of that points to a scam.  I hope it's not. 
    These idiots need to know that you've put hundreds of hours, money and your reputation at stake over this deal.  The best apology is that they give you the best deal.  And if they don't, report them to the authorities.  They all go to jail. 
Steve Glanz
    As the original Bank Guarantee languished and was assumed dead, we had to decide if Stephen Edwards was a part of what appeared to be a scam.  In the meantime he came forward with several smaller Bank Guarantees handled by a broker in India and wanted Frank to sell them.  I wasn’t sure at that time if Frank would be willing to continue after the original BG mess, so I left it up to him.  On the 11th they declared that original BG officially dead...but they were wrong.  The good news about the Bank Guarantees that followed was that they had hard copies and all back-up documents provided, which had always been a problem with that original BG.
    On the 12th Stephen brought forward another deal that scared us in that no one in the U.S. or Europe would be able to handle it as it was issued by a bank in Iran – the largest bank in the Middle East and also one sanctioned by most Western countries as being suspected of providing money to terrorists.  Suddenly everything seemed very James Bond-like.
Hello Frank:
    See if your contacts can handle this?  It came from Richard in India who is bringing the BG.
Dear Stephen,
    We are a consultancy company in Finance affairs and have the authority to check the valuable Financier company.  Please just note that is your financier: SADERAT BANK( as issuer of bank Guarantee against the Iran Sanction from the USA -- can handle this deal?
    Also, what is your procedure and Interest rate for project financing of Bgs.  Please be informed that this is a Governmental Company and the issuer of the BG is the Ministry of Economic and Financial Affairs.
We are providing the feasibility study and as soon as we complete it we will send it to you.
    There is some good information on their website, and be informed that SADERAT BANK is on the USA sanction from the EU council from 28july2010.
The BG for the subway project is 2Billion$.
The BG for the Complex residential project is 8Billion$.
The Bg for the Drilling project is 1.6Billion$.
    There are so many projects available in Iran and after we complete the feasibility Study we will send it to you.
    The BG was issued by the SADERAT BANK in Rials currency, the iran Central bank Confirmed, the Ministry of Economics Confirmed and the only problem for us is How we can transfer the total Funds to the Iranian bank. If your bank can send an MT799, our banks can approve by MT799 and then by MT760 transfer.  Please check your Bank to see if they can Send MT to Iranian banks?
On the 12th Stephen sent me a deal he hoped we could do in the states.
    there’s a new client who has an sblc for 500m & wants to use it as collateral to obtain funding for $300m which is about 55% or 60% of the sblc value -- he would repay the funds after one year.
    what I have done is to arrange to have the sblc directly issued to your bank. Before then, however, the issuing banker will call to speak with your bank officer to confirm that the funding will take place if the sblc is issued.
    we are working a contract to reflect all that.  I will want this case to be solely with your company and Steve G alone.  I will keep you posted as it develops. This sblc is from an American bank. We can use the sblc for one of Steve G's programs and then fund the issuer for his 55 or 60% and pay off the mandate who arranged this package 10% as requested.
    The income from the sblc will be distributed as usual based on our agreement.  Let’s see what happens in the next few days...
    Thanks for your continued efforts.  From past experience, I have found that bankers are reluctant to commit either verbally or in writing, pre-commitments to issue credit lines on instruments, especially those which are not already on deposit at their banks.  In most western countries, and in the "top" banks, regulations prevent such pre-commitments.  I believe it is considered a form of arbitrage or solicitation. 
     Often times, an instrument has not been issued.  The game is that a business owner will try to obtain a pre-commitment letter first, and then use that as an incentive to have his bank issue an instrument (such as an SBLC or a BG) because the pre-commitment letter itself, then becomes a negotiable instrument.  It takes the issuing banker off the hook because another bank has reduced his risk by giving a credit line on the instrument, before he has even issued it!  It is one of those chicken-and-egg games. 
    When mediated by brokers, this becomes an even more tenuous prospect, ie. when pre-commitments for specific percentage credit lines are demanded, and broker fees agreed to.  All of this is under scrutiny by regulators. 
By the way, the term "mandate" is often a misnomer, as we recently discovered with the BG that Frank was working on for so long.  An asset owner can make informal agreements, such as POA's with their advisors.  A POA is meaningless in real financial terms.  Only a Corporate Resolution giving someone else the legal right to negotiate, and/or signatory authority over the owner's account, is legitimate and practical.  If someone says they are a "mandate," ask them to produce documents immediately (POA, Corporate Resolution, Signatory Authority). 
    The most legitimate way to engage in a paper transactions is for an instrument to be issued first, and ideally listed on Euroclear and/or other services which are charged with validating those instruments (not that they always succeed at doing this correctly).  Bankers have their tools - the SWIFT system, bank-to-bank phone calls and verifications, etc.  However, they rely heavily on Euroclear and similar agencies to do this work for them, and to manage transactions and settlements.  There are a lot of bogus instruments floating around broker networks, and many game players.  There are also launderers.  Which brings me to the next point.  
    Cash or instruments in Iranian banks are non-negotiable in the world of bank debenture financing, due to international sanctions.  The bank debenture community is a closed one - the nations participating in it on the same political playing field as the US.  If an Iranian instrument is monetized and the cash is moved, a regulator would still question whether the cash can be used for trade.  If it is a clear case of laundering (hiding history of funds) then the answer is no, and could get participants in trouble.  If the cash is clean and cleared, then it could be used for trade.  I suppose there could be some exceptions or loopholes.  We are not compliance officers or regulators, so we can't answer that question in advance. 
    Getting back to your SBLC proposal to Debora:  In my opinion, a preferred approach would be for the instrument to already exist, be listed, and verified by Debora's bank officer.  Show it to Debora first, and I'll take a look at it as well.  Many times, even an amateur can spot phony instruments, and that would save Debora the risk of embarassing herself and getting in trouble with her bank officer. 
    Once Debora and I believe it has potential, then Debora's bank officer can look at it and decide if they will issue a pre-commitment letter for monetization should the instrument be sent to their bank.  I doubt that Debora's bank will quote a credit-line percentage in advance of seeing/validating the instrument, let alone in advance of having it on deposit at their bank, but I could be wrong.  And pre-agreements for paying off "mandates, " brokers, JV Partners, etc. - should be done informally and privately, ulitimately handled through a Paymaster. 
    The same logic applies to placing an SBLC directly into trade, say, through one of my sources.  In that case, Debora's bank would either keep the instrument inside her bank and block it for trade, or SWIFT it to the trade bank.  In any trade, someone has to take responsibility to validate the collateral.  My trade sources would not give a preliminary estimate of LTV or ROI without first validating the instrument, and negotiating the deal.  Even if Debora's bank validates and receives the SBLC, when it is submitted for trade, it will have to go through separate compliance. 
    These are just my opinions.  I don't claim absolute expertise.  Debora should consult her bank officer on this, but in my opinion, should wait until such time as Stephen's co-brokers come forward with a solid and do-able offer. 
Steve Glanz
    Say a big thanks to Steve G for his profound comments & ideas....I have picked up more than necessary wisdom and would ask for further details on the sblc as we make progress. If they are ready to proceed, then I can ask them to have their bank write a letter saying that the client's bank is RWA- ready, willing & able to issue the sblc for the stated amount – they would then want LMI's banker to liaise with them to confirm acceptance to receive, then when this happens, Steve G can also extend some advice to your banker on how she should handle step @ a time. 
    On the 13th there was a rather intense Kerfuffle caused by Frank Cmero’s threatening to withdraw from the entire procedure because he had convinced himself that Stephen Edwards was a crook and in cahoots with other crooks to destroy us.  I wrote to some of Stephen’s references on Linked In – a woman there wrote to him and to me, and it hurt Stephen’s feelings so I had to explain the whole thing and apologize, which I did.  It was a messy, gruesome time, exacerbated by Mercury Retrograde and frayed nerves all round.  The same day Stephen and I straightened things out between us matters started to get back on-track, beginning with Frank receiving several contracts he needed to further some of the European Bank Guarantees.  Even more amazing was what happened on the 15th:
    A very surprising turn of event happened today!!! A potential buyer of the Barclay's BG whom we approached about 4 weeks ago came to MBC with the information they were able to verify the BG was issued. The buyer is an Israeli investment fund with offices in the Czech Republic and London, and their UK office confirmed the BG after weeks of investigation. It was unfortunate the contacts we gave to them and to the Swiss bank had no knowledge of the BG, which caused lots of confusion, problems, and delays. However, the good news is the Israeli company is interested in the purchase. The value of the guarantee decreased for them because it can be used in the program for a much shorter period of time but by Monday I will have further details regarding the price. They are able to re-swift the BG to their trading bank and pay the cost of the transfer. I will update you on Monday; lets hope we can finally do something with the guarantee.
    The following week I discovered from Stephen that Frank had been in charge of arranging four bonds of 250,000 euros each for trading in the 
Swiss platform.  And right after learning about the bonds for the first time, Stephen Edwards informed me that there was no fee agreement in place for he and Frank to receive a commission for setting up the sale of the bond and the trading platform.  This was on April 19th.
    Please send an email to Frank to inform the trader that irrespective of anything else, we (frank&us) are entitled to be paid at least a referral fee if we can’t get the name of the mandate who brought the bond forward to us to be delivered to the trader: how can they now say if by 09:00GMT we don’t come up with the name, then we will be cut off the contract...we can’t allow such behavior because we are talking of $2b here 500m x4 bonds which are legitimate, and we need to derive payment for our hard work.
    We have all been calling Mr John Obi in Spain who brought the Bonds to me without response, because he’s the one who knows the mandate directly.
I have just been informed from one of my sources that we can still get the information we need, today hopefully. but Frank should keep the trader on hold.
    We cannot allow our good work & efforts to go unrewarded.
    Thanks.  Stephen.
    Oh, sure.  Ask me to weigh in on an issue I knew nothing about until a few hours before.  But I did as Stephen requested, and wrote to Frank.  He couldn’t be bothered to write back to me, but then he never did anymore.  Almost his entire communication with me had to do with whining about how everyone else was a crook and he was going to quit this insanity and get a ‘real’ job (he never stated what that would be, since the global economy collapse had pretty much put paid to jobs for people with his skill set).  That same day Stephen brought two deals to Steve Glanz, who outlined with his usual care and forethought how he thought he could handle them and what would need to be done before he could consider taking them on.  
April 20, 2011
    Stephen gave me the bonds weeks ago, and originally I sent it to the Swiss people before they spoke to the Barclay's BG mandate.  Milan gave it to some of his contacts after that and we received interest from a trader who can use it in a program a couple of days ago. However, the program people are asking for mandate's name because they need to contact him. Stephen's friend who gave him the bonds tried to find out the name of the mandate all day yesterday. I have a message on my phone from Stephen with the name, so I will contact the trader in Europe later today and see what we can do here.  They said if we don't give them the name they will do it without us anyway. I will try to salvage the business but the mandate’s just causing all the trouble so far.  The problem is there are too many intermediaries in every offer I receive and often no direct contact to the mandate or owner. It's very difficult to work like this.
    Around the middle of the week before Easter we learned that in Europe and Australia Easter is a four-day holiday, Friday through Monday.  Then the Tuesday after Easter was, for 2011, a holiday in Australia as well.  That would probably set us back a good week before anyone actually did any work again.  At the same time any good feelings between Stephen and Frank pretty much evaporated, and this would continue with some repercussions we didn’t need, given the stress of the situation.
    Debora’s Flow Chart 4/20
Barclays BG
Resurrected by Israeli buyers second week of April.
CIS accepted 4/19 -- MBC to notarize document.
MT 760 to be sent 4/20 -- beneficiary will remain MBC.  Sale price 250m euros
Is this money still going to the Swiss program?
Still valid but client on hold until ?  End of April, probably
As of 4/19 the Swift will be sent by Friday or possibly next week due to holiday.
Frank waiting for signed LOI?
Sent to Frank beginning of April through Stephen E.
Some miscommunication problems with mandate 4/19 must be resolved by 4/20

Waiting for LOI from Stephen E.  First introduced to us 4/12
Introduced 4/19 by Stephen E. to Steve G.   
Chris Marco (POA to issuer) to contact Steve G.        
    Stephen’s Responses to Debora’s flowchart
    Let me say this: any deals that go to the usa and are handled via steve G, should not form any portion for frank until we see performance from him on the Barclays Bank Guarantee and how he handles the distribution of profits.
    Let me answer you on the following and then steve G will update you all on those he’s handling:
1-Barclay’s Bank Guarantee - Frank has done the Notarization and sent the docs, and the Israelis should move today/Friday with the swift out. Yes, 100m out of the funds would go into a program and the issuer gets 50m first and the balance later, while I suggested to frank that the balance of 50m be split 3 ways to accommodate the mandate, MBC & LMI.
2-On the VTB - I will know more from frank by the end of the week.
3- Bonds - I will get the mandate’s info today and we will take it from there.