What Is a Bucket Shop?
A bucket shop is a brokerage firm that engages in unethical business practices. Historically, the term was used to refer to firms that allowed their customers to gamble on stock prices, often using dangerously high levels of leverage.
More recently, the term is associated with firms that practice bucketing, which involves profiting from a client’s trades without their knowledge.
- A bucket shop is a brokerage firm that engages in unethical business practices.
- Historically, they would facilitate gambling on stock prices, often encouraging their clients to use dangerous levels of leverage.
- Today, bucket shops are associated with so-called bucketing transactions, which involves illegally profiting from clients’ trades.
Understanding Bucket Shops
Bucket shops are brokerage firms that have clear and unmitigated conflicts of interest with their customers. Traditionally, they functioned as gambling houses in which customers were encouraged to take on substantial leverage in order to speculate on future stock prices. When customers occasionally profited on their trades, the gains would be advertised by the bucket shop to recruit new customers. In most instances, however, the customers would face large or even total losses. As with all gambling activities, the bucket shops benefited from their customer’s losses.
Bucket shops became common in the late 1800s, when the spread of new communications technologies, such as the telegraph, made it possible to speculate on stock prices in a timely manner. Bucket shops emerged to let clients gamble on stock prices in the same way that they might otherwise bet on racehorses,
One possible explanation for the origins of the name “bucket shop” has to do with another technique used by these firms to profit off their clients. After executing their trades throughout the day, bucket shops would sometimes throw the trade tickets into a bucket. After mixing the tickets together, the firm would then allocate winning and losing trades to specific clients based on their assessment of which clients would likely generate the most profit for the firm. This practice is of course prohibited by today’s legal and regulatory standards.
Today, the term is used more precisely to refer to brokerage firms that unethically profit from their clients’ transactions. Specifically, it refers to firms that engage in bucketing, which is the practice of misleading clients about the actual price at which a requested transaction was executed and using this deception to profit from their trades.
Real World Example of a Bucket Shop
To illustrate bucketing, consider a case where a client asks to purchase 1,000 shares of stock at a price of $20 per share. An unscrupulous broker might tell the client that the shares were purchased for $20, when in fact they were purchased for $19.
The difference of $1 per share would be pocketed by the broker as profit, without disclosing this fact to the client. Effectively, the broker would have stolen $1,000 worth of profit from the client. This type of transaction is known as bucketing, and firms which engage in it are described as bucket shops.
Mick Mulvaney was a young businessman and budding politician 11 years ago when he became co-owner of a company that wanted to build a strip mall near a busy intersection in this upscale bedroom community outside Charlotte.
All that was needed was money.
The company cobbled together the financing — which included borrowing $1.4 million from a family firm owned by a prominent local businessman named Charles Fonville Sr., according to court records and interviews.
Eventually, the project fell apart. The mall never got built. And Mulvaney moved on, building a political career as a firebrand fiscal hawk and tea party pioneer in Congress who railed against out-of-control government deficits — eventually rising a few weeks ago to be President Trump’s acting chief of staff.
Fonville, however, said his company has not received the $2.5 million with interest that he said it is owed. In explaining the debt to a Senate committee during his 2017 confirmation hearing, Mulvaney cast it as a casualty of a bad real estate deal, saying the sum “will go unpaid.”
Today, their dispute is at the center of a legal battle playing out behind the scenes in South Carolina as Mulvaney guides Trump through a high-stakes budget showdown with congressional Democrats.
.. The fight threatens to tarnish Mulvaney’s image as fiscally responsible, just as he has reached the most influential position of his career.
Fonville’s company has filed a claim in a South Carolina court against two companies in which Mulvaney has an ownership stake, accusing them of
- “intent to deceive,”
- “fraudulent acts” and
- “breach of contract” to avoid repayment. ]
The heart of Fonville’s allegation: When a new Mulvaney-linked company was formed and sought to foreclose on the first company Mulvaney co-owned, it was a maneuver to avoid paying the debt owed to Fonville.
.. Mulvaney was not sued individually, but late last year — while he was running the Office of Management and Budget and carrying out his duties as acting director of the Consumer Financial Protection Bureau — he traveled to Charlotte to be deposed in the case, his attorney said.
.. “I can’t believe he treated me the way he did,” Fonville said during interviews about the case, including one last month as he visited the property that kicked off the dispute. “It is not a small piece of money. You are talking about a couple of million dollars.”
“I have tried to call him,” said Fonville, 83, who said he is a Republican who voted for Trump. “He never called me back. I had thought Mick was an ethical person.”
Mulvaney declined to comment. The White House referred questions to Mulvaney’s lawyer, John R. Buric, who said Mulvaney has done nothing wrong.
President Trump’s advisers and allies are increasingly worried that he has neither the staff nor the strategy to protect himself from a possible Democratic takeover of the House, which would empower the opposition party to shower the administration with subpoenas or even pursue impeachment charges
.. The president and some of his advisers have discussed possibly adding veteran defense attorney Abbe Lowell, who currently represents Trump son-in-law and senior adviser Jared Kushner, to Trump’s personal legal team
..Trump announced Wednesday that
- Donald McGahn will depart as White House counsel this fall, once the Senate confirms Supreme Court nominee Brett M. Kavanaugh. Three of McGahn’s deputies —
- Greg Katsas,
- Uttam Dhillon and
- Makan Delrahim — have departed, and a fourth,
- Stefan Passantino, will have his last day Friday.
That leaves John Eisenberg, who handles national security, as the lone deputy counsel.
.. McGahn and other aides have invoked the prospect of impeachment to persuade the president not to take actions or behave in ways that they believe would hurt him, officials said... Trump has told confidants that some of his aides have highly competent lawyers such as Lowell, who represents Kushner, and William A. Burck, who represents McGahn as well as former White House chief of staff Reince Priebus and former White House chief strategist Stephen K. Bannon.“He wonders why he doesn’t have lawyers like that,” said one person who has discussed the matter with Trump.Another adviser said Trump remarked this year, “I need a lawyer like Abbe.”Giuliani said that he has not heard of Trump considering adding Lowell to the team but that he would be a great choice because of his thorough and aggressive style.
“This president might like that better,” Giuliani said. “If he thinks someone isn’t being tough enough, he has a tendency to go out to defend himself. And that’s not good.”
.. “I would think that the type of lawyer most able to handle the impeachment scenario would be someone from the appellate and Supreme Court bar — someone of the Ted Olson or Paul Clement or Andy Pincus level, someone who knows how to make the kind of arguments should it come to a vote in the Senate,” Corallo said.
.. Emmet Flood, a White House lawyer and McGahn ally who handles the special counsel’s Russia investigation, has long been considered a top prospect to replace McGahn.
.. Flood, often described as a lawyer’s lawyer, is in many ways the opposite of Trump and Giuliani, yet the president has told advisers he is impressed by Flood’s legal chops and hard-line positions defending the prerogatives of the White House.
.. White House aides, including deputy chief of staff Johnny DeStefano and political director Bill Stepien, have tried to ratchet down Trump’s expectations for the elections, saying that projections look grim in the House.
.. Another concern is that the White House, which already has struggled in attracting top-caliber talent to staff positions, could face an exodus if Democrats take over the House, because aides fear their mere proximity to the president could place them in legal limbo and possibly result in hefty lawyers’ fees.
“It stops good people from potentially serving because nobody wants to inherit a $400,000 legal bill,” said another Trump adviser.
.. the West Wing staff is barely equipped to handle basic crisis communications functions, such as distributing robust talking points to key surrogates, and question how the operation could handle an impeachment trial or other potential battles.
Trump sees the administration as having a singular focus — him — and therefore is less concerned with the institution of the presidency and not aware of the vast infrastructure often required to protect it, according to some of his allies.
.. Jack Quinn, who served as White House counsel under Clinton, said his office had at least 40 lawyers and as many as 60 during key times.
.. “I appreciate that Rudy Giuliani is doing a lot of the public speaking and perhaps some other things,” Quinn said. But, he added, “it’s a little bit of a mystery to me who is doing the outside legal work.”
A major donor to President Trump agreed to pay $10 million to the president’s then-personal attorney if he successfully helped obtain funding for a nuclear-power project, including a $5 billion loan from the U.S. government, according to people familiar with the matter.
The donor, Franklin L. Haney, gave the contract to Trump attorney Michael Cohen in early April to assist his efforts to complete a pair of unfinished nuclear reactors in Alabama, known as the Bellefonte Nuclear Power Plant, these people said.
.. Authorities are investigating whether Mr. Cohen engaged in unregistered lobbying in connection with his consulting work for corporate clients
.. Mr. Cohen made several calls to officials at the Energy Department in the spring to inquire about the loan guarantee process, including what could be done to speed it up
.. James Thurber, a professor of government at American University, said success fees are “outside the ethical norms” among Washington lobbyists and are frowned upon.
Century-old court rulings deemed fees contingent on lobbyists obtaining public funds or killing legislation unenforceable and counter to public policy, saying they encouraged corruption, he said. Several lobbyists contacted by the Journal said $10 million was an unheard-of sum to pay a consultant for government-related work.
.. Mr. Cohen’s other consulting clients, including AT&T Inc. and Novartis AG , the Journal has previously reported, citing people familiar with the matter. Those companies said they paid Mr. Cohen a total of $1.8 million since Mr. Trump took office for his insights into the administration. Both have said he didn’t do any substantial work for them.
According to Comey’s account in a new memoir, Trump “strongly denied the allegations, asking — rhetorically, I assumed — whether he seemed like a guy who needed the service of prostitutes. He then began discussing cases where women had accused him of sexual assault, a subject I had not raised. He mentioned a number of women, and seemed to have memorized their allegations.”
The January 2017 conversation at Trump Tower in Manhattan “teetered toward disaster” — until “I pulled the tool from my bag: ‘We are not investigating you, sir.’ That seemed to quiet him,” Comey writes.
Trump did not stay quiet for long. Comey describes Trump as having been obsessed with the prostitutes portion of the infamous dossier compiled by former British intelligence officer Christopher Steele, raising it at least four times with the FBI head.
.. Trump offered varying explanations to convince Comey it was not true. “I’m a germaphobe,” Trump told him in a follow-up call on Jan. 11, 2017, according to Comey’s account. “There’s no way I would let people pee on each other around me. No way.” Later, the president asked what could be done to “lift the cloud” because it was so painful for first lady Melania Trump.
.. In his memoir, Comey paints a devastating portrait of a president who built “a cocoon of alternative reality that he was busily wrapping around all of us.” Comey describes Trump as a congenital liar and unethical leader, devoid of human emotion and driven by personal ego.
.. Interacting with Trump, Comey writes, gave him “flashbacks to my earlier career as a prosecutor against the Mob.
- The silent circle of assent.
- The boss in complete control.
- The loyalty oaths.
- The us-versus-them worldview.
- The lying about all things, large and small, in service to some code of loyalty that put the organization above morality and above the truth.”
.. The result, in Comey’s telling, is “the forest fire that is the Trump presidency.”
.. “You can’t be kicked out of the room so he can talk to me alone,” Comey told Sessions, according to the book. “You have to be between me and the president.”
.. “Sessions just cast his eyes down at the table, and they darted quickly back and forth, side to side. He said nothing. I read in his posture and face a message that he would not be able to help me.”
.. Comey delivers an indirect but unmistakable rebuke of the GOP’s congressional leaders as well: “It is also wrong to stand idly by, or worse, to stay silent when you know better, while a president brazenly seeks to undermine public confidence in law enforcement institutions that were established to keep our leaders in check.”
.. “I have one perspective on the behavior I saw, which while disturbing and violating basic norms of ethical leadership, may fall short of being illegal,” he writes.
.. “They lose the ability to distinguish between what’s true and what’s not,” Comey writes. “They surround themselves with other liars . . . Perks and access are given to those willing to lie and tolerate lies. This creates a culture, which becomes an entire way of life.”
.. Comey also writes that in a post-election briefing for senators, then-Sen. Al Franken (D-Minn.) confronted him about “what you did to Hillary Clinton.” Comey responded, “I did my best with the facts before me.” A teary-eyed Senate Minority Leader Charles E. Schumer (D-N.Y.) grabbed him by the hand afterward and said, “I know you. You were in an impossible position,” Comey writes.
.. Comey is critical of then-Attorney General Loretta E. Lynch, saying she had a “tortured half-out, half-in approach” to the Clinton investigation and that he considered calling for the appointment of a special prosecutor.
.. “As he extended his hand,” Comey adds, “I made a mental note to check its size. It was smaller than mine, but did not seem unusually so.”
.. Comey recalls being struck that neither Trump nor his advisers asked about the future Russian threat, nor how the United States might prepare to meet it. Rather, he writes, they focused on “how they could spin what we’d just told them.”
.. “I decided not to tell him that the activity alleged did not seem to require either an overnight stay or even being in proximity to the participants,” Comey writes. “In fact, though I didn’t know for sure, I imagined the presidential suite of the Ritz-Carlton in Moscow was large enough for a germaphobe to be at a safe distance from the activity.”
.. Comey writes that he believed Trump was trying “to establish a patronage relationship,” and that he said: “I need loyalty. I expect loyalty.”
.. Trump broke the standoff by turning to other topics, Comey writes, speaking in torrents, “like an oral jigsaw puzzle,” about the size of his inauguration crowd, his free media coverage and the viciousness of the campaign. He talked about the Clinton email investigation as in three phases, as if it were a television series: “Comey One,” “Comey Two” and “Comey Three.” Trump also tried to convince Comey that he had not mocked disabled New York Times reporter Serge Kovaleski at a campaign rally, and then turned to the detailed allegations of sexual assault against him.
“There was no way he groped that lady sitting next to him on the airplane, he insisted,” Comey writes. “And the idea that he grabbed a porn star and offered her money to come to his room was preposterous.”
.. And then Trump brought up “the golden showers thing,” Comey writes. The president told him that “it bothered him if there was ‘even a one percent chance’ his wife, Melania, thought it was true.” Comey writes that Trump told him to consider having the FBI investigate the prostitutes allegation to “prove it was a lie.”
.. As the dinner concluded, Trump returned to the issue of loyalty.
“I need loyalty,” Trump tells Comey, according to the book.
“You will always get honesty from me,” Comey replies.
“That’s what I want, honest loyalty,” Trump said, reaching what Comey writes was “some sort of ‘deal’ in which we were both winners.”.. “But he’s a killer,” O’Reilly told Trump.The president’s reply: “There are a ton of killers. We’ve got a lot of killers. What do you think? Our country’s so innocent?”
Trump fumed to Comey about the media criticism he received.
“I gave a good answer,” Trump said, according to Comey. “Really, it was a great answer. I gave a really great answer.”
Trump sought validation: “You think it was a great answer, right?”
Comey replied, “We aren’t the kind of killers that Putin is.”
Trump apparently did not take the correction well. Comey writes that the president’s eyes changed and his jaw tightened, and Priebus escorted him out.
.. Comey describes soon receiving an “emotional call” from Homeland Security Secretary John F. Kelly.
“He said he was sick about my firing and that he intended to quit in protest,” Comey writes. “He said he didn’t want to work for dishonorable people who would treat someone like me in such a manner. I urged Kelly not to do that, arguing that the country needed principled people around this president. Especially this president.”
Kelly did not resign. Two and a half months later, he was named White House chief of staff.
Meanwhile, Trump is back to publicly berating Attorney General Jeff Sessions, who responded with a pointed statement — and then went out to dinner with Deputy Attorney General Rod J. Rosenstein in a very public sign of solidarity.
Noel Francisco, the solicitor general, was there too. You may recall that Francisco is in line for the No. 3 spot at the Department of Justice after the departure of Rachel Brand.
.. anyone who is surprised by the utter chaos, the ethical sleaze, the policy incoherence and the nepotism/cronyism was not paying attention during Trump’s career in real estate or during his campaign. This is how Trump ran his family operation, stumbling through one failed venture after another.
.. This is how Trump wound up declaring bankruptcy multiple times. No one — not Kelly, Ivanka, Jared, the GOP Congress or even Hicks — can keep him on task.
.. Trump will either be compelled to leave office or will continue to spin out of control. Aides tell the press this is a new level of chaos. Don’t worry — it’ll get worse.