Money Laundering & Repurchase Agreements…

Anti-money laundering enforcement… 

According to data from the Federal Reserve, there was $4.5 trillion of fixed income securities financed with repurchase agreements by 2008 (Gorton and Metrick 2012).  A repurchase agreement, also known as a “repo” is defined as “a form of short-term borrowing for dealers in financial assets.  The dealer sells the financial assets to investors, while simultaneously agreeing to buy back the security at a specified price and specified time, typically on a short-term basis” (Garbade and Fleming 2003).   In essence, the structure of the transaction has the look and feel of a collateralized loan.  Central banks, hedge funds, mutual funds, broker dealers, and commercial banks are typical participants in these transactions.  Other non-bank financial organizations have begun to enter the repo market since the financial crisis of 2008.   Examples include pension funds, endowments, corporate treasuries, and insurance companies.  (source: Journal of Finance and Accountancy, Volume 19, March 2015)

Shadow banking, off-balance sheet accounting, and repurchase agreements, have created a trilogy of terror within our retirement industry today.  Just as Trilogy of Terror (1975) is remembered as one of the scariest productions to air on prime-time television, repurchase agreements may well be the closest comparison of terror in our financial markets tomorrow.  Financial institutions, especially insurance companies that provide retirement solutions for millions of Americans today, may well soon be the villains of the industry tomorrow.  The reason for that possibility is that they have ready access to billions of dollars in cash, received from 401(k) depositors ever week, and there is literally no existing regulations that can stop their use, and abuse, of your retirement dollars.

While I have focused my efforts to expose Principal Life Insurance Company in recent years, most, if not all, insurance companies engage in some form of money laundering of their client’s offerings.  The main reason is because insurance companies are not considered “fiduciaries” under ERISA regulations.  When you, as the Plan Administrator or Plan Sponsor, decide to retain an insurance company to service and administer your 401(k) plan offerings, you are literally taking your personal financial health and placing it in the hands of a possible fraudster.  While there are possibly hundreds of insurance companies capable of stealing your retirement savings, Principal Life has proven themselves as being perhaps the most culpable.

During the years of 2006, 2007, and 2008, Principal proved themselves capable of stealing billions of dollars directly from retirement plans.  They accomplished this feat in part through the use of repurchase agreements with large banking institutions.  Like myself, many investors have never heard of the term “repurchase agreement,” or “repo” agreement that insiders call the investment protocol.  Described earlier in this blog post, repo agreements represent trillions of our investment dollars, and pension plans comprise the majority of those funds:REPURCHASE aGREEMENT

This LOAN PURCHASE AGREEMENT is attached to a “Reverse Repurchase Agreement,” in which Principal agrees on behalf of the Principal U.S. Property Separate Account to purchase a $13,200,000 loan in the event of a default.  Failing to repay the loan, a “straw borrower” defaults and the account pays off the loan along with accrued interest and any other “swap” agreements.  By then, Principal had already pocketed the $13,200,000, which was pocket change when compared to the “swap” agreement referenced in the loan document.  I uncovered a commercial loan in Everett, Washington, to which a $70 million “swap” was attached to a loan involving a land purchase consisting of a hazardous waste dumpsite, similar to this one in Henderson, Nevada. It is the “swap” agreement that pays a major role in this transaction, because the swap value (aka repurchase agreement) could be any amount of money agreed with the “bank” who is the alleged lender.  The swap agreement is the repurchase agreement discussed in this blog post, and could amount to millions of dollars more in investor’s funds that are being laundered into Principal’s general account as an asset.

It isn’t you or me engaging our pensions in these funds.  It is the financial advisors we expect to have our best interest, to be responsible for our money.  If you search the internet, there is a wealth of resources published that continually warn us of the perils of repurchase agreements.  In fact, there is a common belief that repo agreements were the root cause of our financial crisis in 2008, and a repeat of that event is predicted soon.  If it does happen, possible within the next few months, your retirement plan will be in crisis mode.  Principal life included a withdrawal restriction option in their Principal U.S. Property Separate Account investment in 2008 that enabled them to freeze the fund, then reduce its value to a small fraction of what it was prior to the restriction.  Today, principal has added that same limitation to ALL their separate account offerings, which leads me to believe they have continued the practice of money laundering, only now from most, if not all, their accounts.

President Trump has promised to limit federal regulations, a decision I heartily support since most laws were not enforced anyway.  With that decision comes the responsibility for the new Administration to prosecute the criminals that exist in the financial industry today, and my vote would be to prosecute Principal Group of Companies, since they are most likely the greatest direct threat to your retirement security.  Once Trump’s watch-dogs ferret out these wrong-doers, other violators will take note and will possibly curtail their criminal activities before they are caught as well.

Since we have no guarantees that our government will take action, I strongly believe it is the citizen’s responsibility for preserving our freedoms, especially to protect our financial futures.  The only way we can preserve our futures is to boycott the wrong-doers to prove our point.  That being said, you will meet opposition.  If you watch a  recent TV series on Netflix called “Ozark,” there was a segment in the show where a Mexican drug lord was wanting to hire a financial advisor to wash his drug money, and the advisor was resisting the job offer.  When asked why would the drug lord want to hire him, the reply was that he needed to “find someone who’s not just brilliant, but who also has integrity… because integrity, my friend… is the shield to greed and vanity.”

Principal wears a shield of integrity that at times seems to be impossible to penetrate… but then I uncover another loan document that supports the likelihood of washing more investor owned funds.  My sympathies vanish quickly, because I realize the stolen money represents hard-earned income from hard working individuals.  They entrusted their money with Principal because of a veil of integrity, disguising their true nature.  All you as an investor can do is to invest your 401(k) earnings where you know they will not lose value.  There are several options, even a handful of options with Principal… find the absolute safest investment you can make, because the financial markets have virtually capped out according to the experts, and before the next collapse occurs, I guarantee the insurance companies will be moving their anticipated losses into your separate account offerings. 

NOW  is a CRITICAL time to take control of your financial resources…

 

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Author: Dennis Myhre

Mr. Myhre can be contacted at..... dmyhre@fiduciaryfactor.com