Author: Mr. X

Warren Buffett owns lots of companies through his investment vehicle subsidiary Berkshire Hathaway.  X will give Buffett credit, he does give out very good investment advice such as; taking a long view on the market as opposed to trying to time it, and buying a wonderful company at a good price instead of buying a good company at a wonderful price.  Turn on CNBC or Fox Business and the program’s host will probably mention Buffett several times throughout the day. He is known as both the “oracle of Omaha” and the “greatest investor ever.”  For the most part this is true; however, let’s delve into a few select companies he owns and how they fleece the poorest people living in our country.

One such company is Clayton Homes. Berkshire Hathaway (Buffett) acquired them back in 2003 for 1.7 billion dollars.  Clayton Homes builds and sells manufactured homes. X has no issue and actually believes Buffett made a smart decision to buy a company like Clayton.  Manufactured homes are generally lived in by people who do not have much financially and that is not an issue; people do need to live somewhere.  Clayton sells its products on sales lots similar to an independent car dealer. Typically, when customers visit Clayton’s lots, they encounter flashy signs and banners specifically to target their preferred demographic, the poor, and minorities. (More on this later).

Clayton was expanded over the years to produce many varieties of the same types of homes under different names, smart move as automakers do the same thing.  Many towns have multiple Clayton Homes dealers but they were intentionally branded under different names to deceive shoppers.  In some sparsely populated parts of the Midwest and South, one would have to drive past as many as five Clayton Homes dealers to find a non-Clayton dealer.  In Texas, there are 12 Clayton dealers and not one competitor for over three hours away!  In Carrolton, Texas—just north of Dallas, Buffet’s Clayton Homes controls 90% of the manufactured home market, yeah think about that for a minute.

Manufactured home selling isn’t unethical or anything so, why is X white hot at Rich Uncle Pennybags?  It’s the way he markets, insures, and finances them.  Clayton markets directly to the poor, but more so to minorities. One former Clayton supervisor said “We market to that demographic because they are not as smart as whites and don’t ask questions like whites do.”  That’s not racist at all is it?  Manufactured homes are a horrible investment to begin with because they depreciate in value extremely quickly, and if you don’t have the $45k to buy the unit outright then Buffett can finance it for you!  Yup, he owns Vanderbilt Mortgage, a low income, high risk lender.  Vanderbilt was the preferred lender for Clayton sales associates to steer their unexpected customers toward at financing time.  Vanderbilt paid Clayton a royalty for each placed loan, and Buffett got a cut as well. (Kinda sounds like the Wells Fargo debacle right?)  Vanderbilt charges very high fees, and the interest rates are exorbitant, often seven points higher than a typical home loan.  So in today’s terms that would be around 11% interest a year.  Other lenders charged around 3.8% higher than a conventional home loan, but remember Uncle Warren wants to get paid at every point of the process.  Vanderbilt Mortgage has a staggering 40% of the manufactured home loan market, the second largest controls just 6%, that would be Wells Fargo.

Additionally Clayton has an insurance subsidiary, HomeFirst Agency. They were the preferred provider of insurance on all the homes sold by Clayton and financed by Vanderbilt.  Again, the sales associates were telling customers that their current insurance company does not insure mobile homes so you should go with our in house option.  So once again he duped unsuspecting people.  So at this point of the sales process Buffett has profited several different times: the loan Clayton got from Berkshire to build the unit, Shaw Carpet and Benjamin Moore Paints to finish the interior (both owned by Buffett), the loan through Vanderbilt Mortgage, and the insurance through HomeFirst.  Sounds like a heck of a gig if you can land it.  However of the three main players in this article, Vanderbilt Mortgage literally may be the devil re-incarnated.

Vanderbilt doesn’t verify or ask for income statements from the individual getting the loan.  This happened on purpose folks, Vanderbilt does this to make a profit up front on the fees and interest for the first few months, then they could repossess the unit and sell it again; lather, rinse, repeat.  Or in the words of the Blogfather, Dewey, Screwem and Howe.  Vanderbilt would tell the customers the loans could be refinanced at a lower rate in the future; not true, Vanderbilt did this so they could repossess.  Vanderbilt customer service members would tell clients that called in pleading to refinance that they should and I quote “not buy medication or medicines, and encourage them to pawn off or sell any items they could to make that payment.”  The customers could not refinance the loans as units depreciate extremely quickly. As a result, many customers lost their homes.  Even worse, many customers lost their land which they had put up as collateral.  In one case, while foreclosure was being introduced, Vanderbilt had already taken the unit and had it listed for sale on a Clayton lot again.  These companies are so corrupt and unethical they defied the orders of a judge.

So once again to recap, the nice guy Warren Buffett who laments that his secretary pays a higher income tax rate then he does, owns companies that allow him to profit at every turn and plays by his own set of rules when it comes to steering customers into making poor financial decisions.  Buffett is a fraud, plain and simple. He is a very greedy human being who is ruthless to the working people while he profits hand over fist.  He should not be regarded as a great person or great investor, as in these cases with Vanderbilt Mortgage and Clayton Homes some people and families literally lost everything to a phony empire know as Warren Buffett.  Wait until I unveil the next hit on him, regarding his profits over employee’s dealings.

Until next time,

X

As we begin part 2 of our series detailing the fraud known as “the greatest investor in the world,” we want to open with a developing story out of Omaha this week.  Warren Buffet was asked to comment about the Wells Fargo banking fraud scandal; remember the company he owns about 10% of? Well Ole Warren belched out a doozy; he is not going to comment on the matter until November.  That’s interesting, that also happens to be after the election for President and congress will be decided.  Great leadership, I would love to work for him, be directly involved in fraud and not have to suffer any consequences.  Maybe if Hillary wins the election she will put him in charge of the Department of Justice?  One could argue he would actually be better than either of the two that served as head of the DOJ under President Obama.

Maybe Buffett will care to comment on this scandal emulating from his subsidiary Berkshire Hathaway Applied Underwriters.  A bicycle courier company is suing the snake from Omaha’s company after being duped by their workers compensation so called insurance policy bought through Berkshire Hathaway.  The company—Breakaway Courier Company—that is suing Buffett calls the policy they bought a reverse Ponzi-scheme.  Insurance—as most people know—is paid by an individual or corporation to minimize or transfer risk.  Workers compensation insurance carries very steep premiums as a result of worker misclassification and fraud that occurs regularly.  In this case, Breakaway Courier paid in over $863,000 in premiums over the years and they were promised by Buffett’s conglomerate that the premium was being placed in a “cell” which means they would get the money back if not used to pay claims.  So in essence, companies were covering each other’s losses, and Breakaway found out the money was not going to be returned as promised.

Here is an excerpt from Bloomberg Markets;

In the lawsuit, Breakaway Courier Corp. accused Omaha, Nebraska-based Berkshire of creating what it called a “reverse Ponzi scheme” that requires workers’ compensation customers to cover each other’s losses. According to the complaint in state court in New York, companies are led to believe their premiums are being paid into “protected cells” and will eventually be returned to them.

“Instead, Berkshire Hathaway illegally siphons off premiums,” leaving “employers and injured workers without the funds that New York State requires to be available to cover losses,” according to the complaint.

Oh it gets much better folks, the Department of Insurance in; Wisconsin, California, and Vermont have banned further sale of these policies saying they duped the companies that bought them.  It’s worse, in California you are required to get approval for all insurance premium rates by the commissioner, but apparently not Buffett, he is too big to fail.

“California’s insurance commissioner ruled against Berkshire in June over workers’ compensation policies after determining that the company duped a small business, Shasta Linen Supply, and circumvented a review of rates. Earlier this month, the company agreed to stop selling the policies in dispute in California. The regulator said the Berkshire businesses charged customers’ rates which hadn’t been approved by the regulator.”

No surprise here either, when asked to comment about this small matter of being honest, Buffett had no comment.  Hopefully Hillary will bail him out and make all this go away?  This scheme actually runs through multiple shell companies set up by Buffett so he could pocket money during each transaction and buy stock in companies like Wells Fargo.  Typically, Buffett wants to profit at every point of the transaction, not just the final product.  Pretty awesome job ripping off a small business of 63 based in Sacramento ole Warren. Is this the type of thing you and Charlie Munger speak about during your annual meeting?

X has the 3rd installment ready to go as well, once again targeting subsidiaries of Buffett; Clayton Homes and Vanderbilt Mortgage.  Get in the underground bunker Buffett fans, the A-bomb is about to drop.

Til next week “X”

Loyal readers, as I am sure you have heard by now, the largest bank in the United States—by market value, Wells Fargo—just paid out a record $185 million dollars in both fines and penalties deriving from opening fraudulent accounts for their “customers.”

A common misconception about the banking industry is that you go to a teller window to open a new account or product at said bank.  Tellers do not have the ability or access to your Sensitive Personal Information (SPI) only personal bankers (the people that work in cubicles they refer to as offices) have access.  SPI is a term very common in the financial service industry.  SPI refers to a customer or potential customer’s date of birth, driver’s license number, social security number, and wife’s maiden name, etc.  We refer to this as sensitive because this information is what makes you unique in our country and these numbers are supposed to be kept confidential.  I will lay out in this installment how the fraud went down, and an executive getting a large “golden parachute.”

The banking industry is notoriously low paying. Tellers usually start around $11 or so dollars an hour. Their only path to promotion is to become a personal banker. Once established at this level they might eventually venture off into mortgages, retirement accounts, insurance etc.  Personal bankers may make around $14 an hour but usually get generous bonuses based on “multi-lining” or “upselling” as some call it.

X has had this happen to him before. I opened a checking account at Bank of America, and ended up leaving with said checking account as well as a savings account; nice job by the banker, likely netting him a fair bonus.

This is not what happened at Wells Fargo. You see, at Wells Fargo the bankers are put on strict quotas, and failure to hit “the numbers” each quarter results in no bonus, additional training and sometimes termination.  Enter the fraudsters, every time a bonus exists people will naturally find a way to game the system.  You would think only a small group of rogue employee’s right – say 10-15 companywide?  Maybe a few more give or take?  Try 5,300 folks, over a span of about five years!  This is serial fraud, and should have ended up with a US attorney starting a federal investigation.

These “employees” (and I use that term very loosely) would open an account for a customer legitimately, then unbeknownst to the customer open several other accounts and even credit cards!  Yes, that meant filling out and likely forging a signature for someone on a credit application.  Even more appalling is the fraudsters changed the mailing address to various PO boxes so the customers never had any idea this fraud was going down.  To make the whole situation that much more bizarre the customers were even charged fees associated with these accounts.  Talk about arrogance, and extreme double dipping.

This type of fraud likely came from an intra company memo. I find it hard to believe 5,500 employees could all be on the same page as far as running a fraud scheme like this.  These orders came from the top, more specifically the C-suite. I think the world’s most famous and well known investor was involved personally.  Yes folks I am talking about the snake from Omaha, Warren Buffett.  You see Buffet makes money based on how big his conglomerate (or as I call the USA’s first legal monopoly) does on investments, insurance and dividends from the companies he owns.  Buffett—through Berkshire Hathaway—owns almost 7% of Wells Fargo Common Stock shares, or a measly 320 million shares of stock.  Wells Fargo also pays a dividend and has been growing its disbursements over the years since the housing crash.  Wells Fargo like most financial institutions reports earnings but also puts an emphasis on new accounts opened during the quarter.  This is where the scam comes full circle, Buffett wants good earnings so his portfolio grows in value, the company wants more new accounts, and executives and employees get bonuses.

So you tell me, you think only a few rogue employees were in on this fraud scheme?  Well we know a vice president was canned over it; Carrie Tolstedt was terminated last week; however,  for her expertise in running fraud schemes, she netted $125 million dollars in severance pay.  Warren Buffett was behind or knew all about this.

X is writing a three part series and is going to continue to expose the serial fraud that the snake from Omaha is behind.  Once you read what I have uncovered about this guy, it will likely change your mind. Warren Buffett—through his conglomerate—is a very horrible human being. Like the Robber Barons of old, he enriches his family and friends while screwing the common working man.  All of this will be laid out in an in depth report likely worthy of a Pulitzer Prize—if only they were given to people with Conservative views.

Back to a serious note, what happened at Wells Fargo is extremely upsetting.  An executive got rewarded, employees got paid bonuses for engaging in fraudulent activity, Buffett made millions, and common people got nothing except the privilege to pay bogus fees and fines to the bank.  After the fraud was detected; Wells Fargo was fined a hefty sum, the federal government got their pound of flesh, the City and County of Los Angeles got their pound of flesh, but what did the common person who was a victim get?  Oh that’s right a whole lotta nothing.

The Consumer Finance Protection Bureau was created to stop this kind of behavior, but nothing happened.  When they were needed they were impotent to do their job.  So what about the consumer?

Now eventually a class action lawsuit against Wells Fargo will happen and customers who were affected by this fraud will likely get a $10 rebate back for each $50 fee they were forced to pay, not exactly justice.  Again, the lawyers will get more than the victims. But hey everyone important got paid in this scheme so maybe we just let it pass, right?  Besides, Wells Fargo is too big to fail, or so we were told. Good Lord

Until next time,

X