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Sham' Timing Loans Cost CIBC $125M in Settlement

Canadian Imperial Bank of Commerce's $125 million settlement with the SEC and Eliot Spitzer last week was for granting $1.3 billion worth of what the government characterized as "sham" market-timing loans, which CIBC routinely hid by rotating trades, or in industry vernacular-"flying under the radar."

"Subterfuges and false pretenses to fraudulently disguise or conceal market-timing transactions," is how U.S. Fed News described the sophistry.

In an unusual twist, New York Attorney General Eliot Spitzer praised CIBC for responding swiftly and cooperatively to his and the Securities and Exchange Commission's joint investigation, which was supported by the office of the United States Attorney General, the Investment Protection Bureau, the Criminal Prosecutions Bureau and the SEC Northeast Regional Office.

Moving On

"CIBC provided significant cooperation to authorities and embraced reform," Spitzer said in a statement. Of the $125 million settlement, $100 million is for restitution, and $25 million for civil penalties. "This agreement compensates the investors who were harmed and allows the company to move forward," the New York A.G. continued.

As a result, whichever company antes up to acquire the bank will get a "clean slate," The Toronto Star reported.

Nonetheless, Standard & Poor's credit analyst Donald Chu warns of exposure to future lawsuits.

CIBC Chief Executive Officer John Hunkin issued a statement at press time saying that the bank is "pleased to have settled this matter. We cooperated fully with these investigations [and] added policies and procedures to enhance our abilities to monitor and recognize such activities if they ever were to occur again."

CIBC neither admitted nor denied the charges.

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