Saturday, May 3, 2008

Prepping for Warren Buffett: The Art of the Elevator Pitch (Videos)


The Oracle of Omaha, the world’s richest man. (Photo: Stephanie Kuykenal/Bloomberg News/Landov)

It’s 1:33am in Omaha and I can’t sleep.

Much like pre-Santa jitters as a 7-year old, I’m so excited to potentially meet Warren Buffett tomorrow for the 1st time that my little reptile brain won’t turn off. Ridiculous? Perhaps, but he (Warren, not Santa) is perhaps the greatest investor the US has ever produced.

So what do you say to the world’s richest man if you, by some miracle, end up standing at the urinal next to him? You better know in advance or you’ll sound like a Hannah Montana fan.

This is why learning to elevator pitch — how to deliver your message is 60 seconds or less — is one of the most important skills to develop if you ever plan on interacting with real players and demi-gods like the Oracle of Omaha…

Why? One example: there are 10,000+ people camping in the rain overnight just to attempt to meet Warren when he walks into the annual shareholder meeting tomorrow morning. 10,000 people.

Here are two examples of my elevator pitches, both related to the book.

The first was impromptu answer to “what is your name and what do you do?”, and the latter was filmed late one night for my new page on German Amazon.com.

For meeting VIPs in crowded settings, the goal should be to do 3 things in an introduction of no more than 60 seconds:

1st. Establish credibility. Cite 1-2 examples of social proof like media or association with reputable companies/organizations. Do not speak quickly during an elevator pitch. Slow and calm.

2nd. Make it clear you are not looking for money (unless you are) but have something of interest to discuss after much research, and then ask how you can follow up in a less hectic environment. Give them your card with below #3 handwritten on it.

3nd. Mention something very, very hard to forget about you that separates you from the rest. It doesn’t need to have anything to do with your reason for wanting to meet them. For me, tango is my default. I’ll close with something like: “Just so you remember, as I know you’ll meet a million people today, I’m the world record holder in the tango. Happy to give you and Astrid a lesson sometime if the stars align.” Referring to this odd fact will be important when you follow up.

If you meet them at an event or around other people, do not follow up within the next 3 days, as everyone else will. I like to give at least one week and then cite the bolded reason in the previous sentence as my reason for waiting.

Enjoy the below videos, and check out the timing on both ;)

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Original here

Amazon Sues Over State Law on Collection of Sales Tax

Amazon.com has filed a lawsuit challenging New York State’s new law forcing online retailers to collect sales tax on shipments to state residents.

On Friday, Amazon filed a complaint in State Supreme Court in Manhattan objecting to the law, which was approved as part of the $122 billion state budget that Gov. David A. Paterson signed last week. The law is expected to raise about $50 million.

The issue is not whether people should pay tax when they buy goods from out-of-state sellers like Amazon. For decades, the state has required them to pay sales or use tax.

The question is whether the vendors must collect that tax on behalf of the state. Generally, only those companies that have a physical presence — like an office or store — in the state where the purchase is made are required to collect the tax.

The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer. Amazon has hundreds of thousands of affiliates — from big publishers to tiny blogs — that feature links to its products. The state law says that thousands of those have given an address in New York State, although the addresses have not been verified.

The law says that if even one of those affiliates is in New York State, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate. This is an extension of an existing rule that companies employing independent agents or representatives to solicit business must collect taxes for the state.

Amazon’s suit challenges the constitutionality of this interpretation and seeks a declaratory judgment that it is invalid.

The company’s complaint argues that the statute is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State.

Amazon says that its affiliates are not agents, but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argues.

And it further claims that the new rules violate the equal-protection clause of the Constitution because they specifically took aim at Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax.’ ”

Tom Bergin, a spokesman for the New York State Department of Taxation, said that the department would not comment on the suit until it filed a formal reply with the court. The state’s defense will be coordinated by the attorney general’s office.

Original here

Potential Employee Uprising Quelled With Free Pizza


NEW YORK—A massive employee backlash over low wages and increased workload was narrowly averted this week when company management arranged to have eight large pizzas delivered to the design firm Cobalt Media, instantly quelling months of mounting resentment and dissatisfaction.

The pizzas—topped with pepperoni, mushroom, and extra cheese—effectively cooled down the angry mob, which had reportedly reached its boiling point. According to Cobalt sources, the free Italian pies arrived approximately 20 minutes after a company-wide e-mail detailing upcoming cutbacks was sent out late Friday morning.

"Everyone's been fed up and ready to explode at management for weeks," production designer Carolyn Wurster said. "But then all those pizzas showed up, and it just didn't seem like the right time to start demanding a legitimate healthcare plan or salary raises that reflect the amount of work we do."

Added Wurster, "They ordered like 10 huge pies."

Purchased from nearby restaurant chain Antonio's, the complimentary pizzas had an acute calming effect on the tense office environment within minutes. Heated discussions about managerial incompetence were quickly replaced with friendly banter about favorite junk foods, while angry rumblings over a series of unexplained layoffs were supplanted by conversations about upcoming weekend plans.

A number of Cobalt employees still committed to protesting with a possible work stoppage were silenced upon seeing that, in addition to the tasty pizzas, a two-liter bottle of Pepsi had also been supplied.

"Almost every day I think about quitting and never coming back," said Michael Schappel, whose duties often require him to work on weekends for no additional pay. "However, seeing those pizzas, it made me wonder if I hadn't been too hard on management."

Enlarge Image List Of Demands

Frustrated employees carefully outlined all of their complaints in this passionate and convincing document.

"At least the garlic knots showed they were thinking about us," Schappel continued.

Besides suppressing the overwhelming office acrimony, the pizzas appeared to subdue frustrated employees on a physical level, leaving many full and slightly fatigued. Art director Craig Warren, who was seen just two hours earlier pacing back and forth in anger, skulked quietly back to his desk after consuming four slices of sausage and ham; and receptionist Margaret Doyle reportedly forgot all about a meeting she had scheduled with Cobalt supervisors to discuss her dismay over being denied maternity leave.

"We were going to hand in a petition giving management an ultimatum, but it's not like the whole thing can't wait until next week," project coordinator Phillip Beinart said. "I don't have much time to finish the drawings for our newest account—especially after taking that extra-long lunch break."

Cobalt upper management has successfully tempered employee hostility in the past. In 2006, growing resentment over the lack of a 401(k) plan was successfully allayed by a surprise order of gourmet cupcakes. And in 2007, a $25 gift certificate to an online novelty store effectively convinced employees that converting storage closets into offices and sharing them with three coworkers was not as bad as they had initially thought.

While no measurable improvements have been observed since the free lunch, Cobalt employees said they believe the pizzas—particularly the more expensive Hawaiian-style pies—signaled an important turnaround in management philosophy, and could eventually lead to more substantial changes.

"Today, they give us free pizza, but a month from now it might be those new computers they've been promising, or even those vacation days they took away a couple of years ago," veteran designer Chuck Meyer said. "Or maybe it's more free pizza, which would be pretty good, too."

Cobalt president Robert Weinblatt, who is based at the company's headquarters in Chicago, said ordering the pizzas was the right thing to do.

"After hearing that our staff was so unhappy, I wanted to make it clear to everyone how much our workers mean to us," Weinblatt said. "Also, Antonio's Pizzeria is one of our clients, so it didn't cost the company a dime."

Original here

Economic Clouds? Wall Street Sees Signs of Sunshine

Main Street may be struggling, but Wall Street is on a bit of a roll.

Despite a drumbeat of bad economic news, the stock market is up — almost 11 percent in the last few weeks. Junk bonds, those risky corporate I.O.U.’s, are rallying. The value of financial shares, bank loans, tricky credit derivatives — up, up, up.

Many on Wall Street, the epicenter of the credit mess, seem to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in the second half of this year, a prediction some market strategists call hopeful at best.

For now, policy makers are echoing the mood on Wall Street. Treasury Secretary Henry M. Paulson Jr. said in an interview with Bloomberg Television on Thursday that “we are closer to the end of this problem than we are to the beginning.”

A report from the Bank of England, meantime, concluded that mortgage securities, which have been at the heart of the financial troubles, probably have fallen too far. The central bank said prices of such securities should “improve gradually in the coming months.”

Financial stocks and the broader market surged on Thursday as the dollar strengthened and oil prices fell for the third day in a row. The Standard & Poor’s 500-stock index closed up 1.7 percent, to 1,409.34 points; the Dow Jones industrial average notched a 189.87-point gain, to 13,010; and the Nasdaq composite jumped 2.8 percent. Another day or two like that, and those market benchmarks will be in the black for the year.

It is a remarkable reversal in attitudes from just a few months ago, when the broader economy seemed relatively healthy but Wall Street was traumatized by billions of dollars in mortgage-related losses. Now, bankers and investors appear ready to look past the crisis to more profitable times, while consumers find themselves in a more precarious position as the job market weakens and banks make it harder to borrow money.

It is, of course, not uncommon for Wall Street to run ahead of the broader economy. Investors, after all, make money by anticipating the future. The job market, by contrast, improves more slowly than other aspects of the economy.

But specialists say the two sides will eventually converge. Either the markets will give up their recent gains or, if the optimists are right, the broader economy will show greater strength as tax rebate checks and lower interest rates stimulate the economy.

There have been false dawns before. Last spring, after several mortgage companies collapsed, Mr. Paulson and the chairman of the Federal Reserve, Ben S. Bernanke, said the problems appeared to be “contained.” In early October, just two months after credit markets froze up, the stock market climbed to an all-time high.

The optimists believe it is different this time. The catalyst for the change, they say, was the Fed-arranged deal that sold a troubled investment bank, Bear Stearns, to JPMorgan Chase in mid-March. The central bank further restored order in the markets by lending directly to investment banks, assuring that big securities firms could not be undone by a crisis of confidence.

In the last month, the cost of insuring against the failure of banks and other companies has fallen sharply. Pressures on financial firms also appear to have eased somewhat because banks have tended to borrow less from the Fed in recent weeks than they did in March and early April. The cost of interbank borrowing has also fallen.

“There has been a huge change of sentiment in all of the markets, a lot of the fear has been gone,” said William Knapp, investment strategist for MainStay Investments, a division of New York Life.

Still, skeptics say the optimism on Wall Street is premature. These people argue that even if the Fed has defused the immediate liquidity crisis facing the financial system, much pain lies ahead in the housing market and the broader economy.

“We should be very grateful that things appear to have improved in the financial sector and that significantly reduces the risk of a financial meltdown,” said Bernard Connolly, chief global strategist for Banque AIG in London. “But it doesn’t mean that there is not going to be a deeper and more protracted U.S. slowdown than people had thought.”

Foreclosures are climbing at a strong clip and the decline in home prices has picked up speed in recent months. Rod Dubitsky, an analyst at Credit Suisse, estimates that falling home prices, tighter lending standards and job losses could force an additional 2.8 million mortgages into foreclosure in 2008 and 2009. That would be on top of the 1.2 million loans that were in foreclosure in January.

One sign that the mortgage market remains unsettled is that the national average for a 30-year fixed mortgage has climbed modestly, to 6.06 percent on Thursday, up from 5.85 percent at the end of March, according to Freddie Mac, the government-sponsored mortgage lender.

The job market is also weakening. The unemployment rate, which measures the number of people without jobs who are actively looking for work, remains low at 5.1 percent, but the percentage of working-age Americans without a job has risen significantly in recent months. The Labor Department will release the employment report for April on Friday, and a big reduction in jobs and increase in unemployment could put a damper on Wall Street’s enthusiasm.

In addition to the employment picture, the market closely follows corporate earnings. Profits have fallen every quarter since the third quarter of last year, largely as a result of write-offs at financial firms and losses at homebuilders and other firms that rely on discretionary consumer spending.

“The nonfinancial sectors are doing pretty well,” said Robert C. Doll, vice chairman at BlackRock, the investment firm. He added: “I am not making the case that the consumer and the economy is not weak, but I think it’s a lot stronger than the bears are saying.”

Analysts expect a sharp upturn in profits in the second half, in part because the earnings will be compared with weak results from 2007 but also because exports are surging. The $117 billion in federal tax rebates that will start going out this month should also help bolster profits.

But some specialists say that the market’s expectations for profits are too lofty. They assert that slowing consumer spending will offset the gains corporate America is reaping from rising exports, which may also suffer because economies in Europe and Asia are starting to slacken.

Analysts have been lowering their profit forecasts in recent weeks. At the start of April, for instance, second-quarter profits were expected to fall 2 percent; now analysts are estimating earnings will fall 6 percent, according to Thomson Reuters.

“I don’t think it’s a definite by any stretch of the imagination that we are in for a recovery in the second half,” said K. Daniel Libby, a senior portfolio manager at Sands Brothers Select Access Management Fund. “There are still plenty of downside risks to the economy.”

Some specialists say the market is bouncing between despondency and exuberance, as it often does when the future is cloudy. The S.& P. index fell about 10 percent in the first three months of the year, its worst quarterly performance in more than five years. In April, however, the market jumped 4.8 percent, its best month in four years.

“Sentiment had gotten so pessimistic that it was the perfect opportunity for the rally that we have had,” said Liz Ann Sonders, chief investment strategist for Charles Schwab. “Now, you have seen a pretty quick reversal. That’s natural for the market.” Ms. Sonders added, “I think in general, we ought to hold off on either extreme.”

Original here

Warren Buffett to draw biggest crowd ever

By Jonathan Stempel

OMAHA, Nebraska (Reuters) - Few 77-year-olds could hold thousands of people in rapt attention for five hours. Sean Connery, maybe; Clint Eastwood, perhaps. Warren Buffett? Definitely.

Buffett will be the center of attention on Saturday at the annual shareholder meeting for Berkshire Hathaway Inc, his roughly $200 billion holding company.

Berkshire estimates that 30,000 to 32,000 people, up from 27,000 last year, will fill the Qwest Center in Omaha for what has become known as "Woodstock for Capitalists."

Shareholders will listen to Buffett and his effervescent sidekick, 84-year-old Berkshire Vice Chairman Charles Munger, answer questions on business, the economy and life.

"It restores your enthusiasm for what we know in our heart is right in investing, management ethics and everything that is good about capitalism," said Frank Betz, a principal at Carret/Zane Capital Management LLP in Warren, New Jersey. "I hate to sound so corny, but that is exactly what happens."

Berkshire had a good year in 2007. It boosted profit 20 percent to $13.2 billion, and revenue the same amount to $118.2 billion, despite increased competition in insurance and several of its more than 70 businesses hurting from the housing slump.

Shares of Berkshire, meanwhile, rose 29 percent. Buffett is worth $62 billion, making him the world's richest person, Forbes magazine said. Most of that amount is in Berkshire stock, and all of that stock will someday go to charity.

The meeting may have less controversy than last year, when some shareholders demanded that Berkshire divest its stake in PetroChina Co because of the oil company's links to Sudan. Buffett later sold the stake based on valuation.

SPENDING CASH

Berkshire sells such items as bricks, candy, car insurance, carpets, ice cream, jewelry, knives, paint and underwear. About half its business comes from insurance and reinsurance.

The company ended the year with $44.3 billion of cash, but has since agreed to spend some.

In March, it paid $4.5 billion for three-fifths of Marmon Holdings Inc, whose products are used in construction and energy. Then on April 28, it deployed $6.5 billion tied to Mars Inc's purchase of chewing gum maker Wm Wrigley Jr Co.

Berkshire's $75 billion stock cache has included blue-chip names such as American Express Co, Coca-Cola Co Procter & Gamble Co and Wells Fargo & Co.

Buffett may weigh in on how politicians, regulators and greedy investors mess up the markets.

Shareholders may want to know more about Berkshire Hathaway Assurance Corp, a bond insurer that Buffett created late last year as rivals struggled with subprime mortgages. Berkshire's bond insurer quickly won "triple-A" credit ratings.

"He's prepared to share state secrets," said Thomas Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania, attending roughly his 25th meeting. "People won't duplicate him because they don't invest as patiently."

Succession will also be on people's minds. Buffett has said Berkshire has three internal candidates to replace him as chief executive officer, and four "young to middle-aged" candidates to become chief investment officer.

And Buffett could offer his views on the 2008 elections. He has said he plans to support the Democratic Party, but has not endorsed either of its leading candidates for the presidency, Barack Obama or Hillary Clinton.

"I go to hear the 10 or 20 percent of new stuff," said Steven Check, chief investment officer of Check Capital Management Inc in Costa Mesa, California, a 15-year attendee. "You get reinforced by the other 80 to 90 percent."

Even so, Buffett gets some things wrong.

Last year, he said subprime mortgages did not pose a "huge danger" to the economy, and that absent surges in unemployment and interest rates, "it's unlikely that that factor triggers anything of a massive nature in the general economy."

HOLDING A TUNE NOT NECESSARY

Official festivities begin Friday evening, after Berkshire releases first-quarter results.

Cocktails, food and very long lines will await shareholders visiting Borsheim's, a Berkshire-owned jeweler west of downtown that will hawk memorabilia such as a Berkshire Monopoly game, towels, and license-plate frames.

The festivities end at Buffett favorite Gorat's, which last year served 915 dinners on "Shareholder Sunday." Shareholders, meanwhile, will host their own events throughout the weekend.

Many attendees live in Omaha, and most are ordinary investors. Attendance is up sixfold since Berkshire in 1996 created Class B shares worth 1/30th of Class A shares.

Yet some have greater reknown. Bill Gates, the Microsoft Corp chairman and Buffett bridge partner, is a Berkshire director and has attended past meetings.

And Betz recalls dining with the legendary Chicago Cubs shortstop and Hall of Famer Ernie Banks at the 1999 meeting.

But it's the meeting itself that's the centerpiece.

Last year, as Buffett milled about a Qwest Center hall featuring goods from Berkshire companies, he snacked on a Dairy Queen vanilla orange bar, flopped on a bed from Nebraska Furniture Mart, and strummed a ukulele while singing -- sort of on key.

Later, Jimmy Buffett (no relation) regaled shareholders with a parody of his best-known song, "Margaritaville." The title: "Berkshire Hathaway-a-Ville."

He forgot some lyrics. Wasn't exactly on key, either.

(Editing by Brian Moss)

Original here

Starbucks Earnings Sink 21%

SAN FRANCISCO — Starbucks, faced with a sharp drop-off in customers, reported on Wednesday that earnings declined 21 percent during the second quarter.

Starbucks reported that net income declined to $108.7 million, or 15 cents a share, from $150.8 million, or 19 cents a share, in the year-ago quarter. The company said revenue rose 12 percent, to $2.5 billion.

The report came just a week after Starbucks, the world’s largest coffee chain, warned of lower-than-expected earnings and cut its full-year forecast, citing a decline in quarterly sales and describing the economic environment as the weakest in the company’s history. Wall Street analysts had forecast 19 cents a share for the quarter.

“Fiscal 2008 is a transitional year for Starbucks and, while our financial results are clearly being impacted by reduced frequency to our U.S. stores, we believe that as we continue to execute on the initiatives generated by our transformation agenda, we will reinvigorate the Starbucks Experience for our customers,” Howard Schultz, who is chairman, president and chief executive, said in a statement.

Mr. Schultz returned as chief executive in January in hopes of turning the company around, replacing James Donald.

Shares of Starbucks closed up 3 cents, at $16.23, before the report was issued.

Mr. Schultz said the results were heavily influenced by the company’s American business, which accounted for 77 percent of total net revenue.

Starbucks, which had 125 stores when it went public in 1992, now has 15,000 stores in 44 countries. But the company has struggled to maintain its differentiation in the face of growing competition. Most recently, Starbuck’s has suffered the effects of the crisis in the housing market, which has put a pinch on sales, particularly in California and Florida. Mr. Schultz said that customers were simply not visiting Starbucks stores at the rate they once did.

Mr. Schultz is expected to lay out a turnaround plan in a conference call with financial analysts late Wednesday. Among the many changes Mr. Schultz is expected to unveil in coming months, in addition to cutting costs, is the addition of a line of fruit smoothie drinks, the start of a broad effort to offer healthier drinks and expand beyond coffee beverages.

Original here

Yahoo maintains silence

(Fortune) -- No news isn't always good news. Four days have passed since the expiration of Microsoft's deadline for Yahoo to accept its buyout offer or face a hostile takeover.

Microsoft declared it would launch a proxy fight to oust Yahoo's board or walk away from the deal if the two failed to reach an agreement by April 26.

So far the software giant has not indicated what it will do, although the Wall Street Journal reported that it could make its next move as early as Wednesday. A Microsoft (MSFT, Fortune 500) spokesman said Tuesday the company has "nothing to report." A Yahoo representative also offered no news.

While everyone waits for Microsoft to act, industry watchers have been busy speculating what will happen next.

"My guess is that Microsoft will follow through with its threat to file a slate of directors by the end of the week," says Ryan Jacob, a portfolio manager with the Jacob Internet Fund, which holds a stake in Yahoo.

The alternative is for Microsoft to abandon its deal. Microsoft executives last week strongly hinted that they would be willing to walk away.

But analysts have said that scenario is unlikely to happen. "By making a move for YHOO, Microsoft has clearly acknowledged that their organic efforts to ramp-up online business have not met their own expectations," wrote Collins Stewarts analyst Sandeep Aggarwal in a note to clients.

If Microsoft proceed with a proxy battle, the question is how much will it offer to Yahoo (YHOO, Fortune 500) shareholders. Jacob predicts a carrot-and-stick approach in which Microsoft would sweeten the bid slightly while initiating a hostile takeover.

"The stick is launch the proxy battle and the carrot is convert the deal to cash," he says. Yahoo has repeatedly rebuffed Microsoft's advances because it says it wants a better price. The original cash-and-stock deal, valued at $31 a share, is now worth $29.15 based on Microsoft's share price Tuesday.

At stake is Microsoft and Yahoo's ability to compete with Google as advertising worth billions continues to flood the Internet.

According to eMarketer, advertisers worldwide spent $41 billion online in 2007 - a figure that is expected to double by 2011 as advertisers chase after consumers who are spending more time on the web and less time watching TV, reading newspapers or listening to the radio. Google controls 40% of the overall online ad market while Yahoo and Microsoft's MSN have 15% and 5.2%, respectively, according to Nielsen.

Microsoft fears that Google (GOOG, Fortune 500), which makes most of its money from small text ads that appear next to search results, will seizer an even bigger piece of the online ad pie as MSN falls further behind. In March, Google acquired DoubleClick, a big player in the increasingly lucrative market for online display ads.

Microsoft isn't the only one worried about Google. A number of media and Internet giants have eyed Yahoo - one of the last independent large-scale online players. In recent months, Yahoo has discussed a variety of tie-ups with Time Warner (TWX, Fortune 500), News Corp (NWS, Fortune 500). and Google.

"Microsoft's forcing ... everyone to make a move," says Frank Addante, CEO of the Rubicon Project, which helps publishers manage their online ad inventory.
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Xiaonei, the Facebook of China, raises $430M — better funded than Facebook

Xiaonei, the company that likes to call itself the “Facebook of China” has raised a whopping $430 million from financial backers, VentureBeat has learned from the company’s investors.

The backing gives it a larger financial warchest than Facebook itself, and sets the scene for a showdown with the American company. Facebook has just started to get serious about entering the huge, fast-growing Chinese market.

The backing of Xiaonei could be a statement that the company intends to fend off China from Facebook’s advances. Xiaonei’s site sports the soothing blue border colors almost identical to Facebook’s; its thus not entirely surprising that Xiaonei would also copy Facebook’s ambitious fundraising strategy.

Recently, Facebook took $100 million (in two tranches) from Hong Kong business mogul Li Ka-Shing, in what is widely considered a strategic move to get help to enter that market. Facebook hasn’t entered China yet. But Ka-Shing’s company, Hutchison Whampoa Ltd, runs everything from major port facilities to mobile, location-based 3G services in China and other countries — all of which could be attractive to Facebook in China’s vibrant mobile market.

Xiaonei is owned by Oak Pacific Interactive (OPI), a holding company with a number of online communities.

The lead investor in this latest round is SOFTBANK Corp.

The huge investment in OPI translates into about 35 percent of the company, according to its investors, meaning the overall company is now worth more than $1 billion on paper. But that’s still far less than Facebook’s value — which is $15 billion, at least based on the value Microsoft gave it when the giant backed Facebook last year.

Facebook has raised $378 million in total over several rounds, including from venture firm Accel Partners, which has also invested in OPI.

While the investment was made into OPI, the money will mainly be used to helping expand Xiaonei.com, the company said. Xiaonei is China’s largest social-networking site. Two other groups, SBI and JOHO Capital, participated in the funding.

Xiaonei.com’s features include include multiplayer gaming and wireless services for mobile users. In the college market, Xiaonei.com claims a dominant market share, but hasn’t released any specific user data [update: Xiaonei had “22 million registered users and 12.7 million daily users by March,” reports Communication Information, cited via Pacific Epoch. Xiaonei had 280 million page views in March, according to the report. Thanks to Christian, from comments.]

It’s true, though, that in China, there are few Facebook-like sites. Most social sites are like MySpace, where people are freer to use false identities. OPI also owns and operates Mop.com, the largest entertainment portal, and Donews.com, one of the leading IT blogging services in China.

Oak Pacific also announced that Masayoshi Son, chief executive of SOFTBANK Corp. will join the board.

Existing investors of OPI include General Atlantic, DCM, Technology Crossover Ventures, and Legend Capital. OPI had already raised $48 million from those investors two years ago.

Update: I just talked with David Chao, a partner at venture firm DCM and early investor in OPI, and one of its six board members. When I asked him about the Facebook clone-like blue color, Chao said he thinks the blue “looks like IBM to me.” He added that most sites these days are either blue, green or orange.

Chao was on the board two years ago when it decided to acquire Xiaonei, at the time a small startup. OPI invested heavily into the company, to make it a Facebook-like site. When combined with the traffic of OPI’s other property, Mop (which is more like a MySpace), they make up China’s fourth most visited site in China.

Notably, Chao said the company is cash flow-positive, meaning it didn’t really need to raise money. But Chao said that, after some debate, the company decided to “put the pedal to the metal, and really dominate the market,” he said.

As for Facebook, Chao said he doesn’t see the companies competing closely short-term, because Facebook isn’t even present in China. He noted most strong Chinese companies are home grown, from Alibaba, to 51Job, Baidu, Ctrip and Sina. “There might be an exception, but history tells us there’s not going to be too much to worry about an outside, non-Chinese born company taking a big chunk of the Chinese market.”

Update II: Reuters and WSJ are reporting the investment was only $96 million, but they seem to have gotten it wrong. There was also a reference to warrants, which is also wrong. Here’s what I think happened: They must have taken an Nikkei article about the investment (which referred to yen) and converted to dollars mistakenly. The Nikkei article refers the company’s draw of $100 million, as the first tranche of the total round. But the $100 million was assumed a 100 yen rate - so it ended up as 100 oku yen in the Nikkei article then it got recalculated at 105 yen to a dollar and ended up with 96 million. In the same article it clearly states total round will be 400 mil (oku) - so it got converted twice wrongly.

ソフトバンク、中国ネット大手を傘下に――最大市場に攻勢

ソフトバンクは中国のインターネット大手、オーク・パシフィック・インタラクティブ(OPI、北京市)を傘下に収めることで同社と合意した。約400億円で株式の40%を取得、経営権を握る。急成長する中国ネット市場で携帯電話経由の情報提供など新サービスの拠点とする。中国のネット人口は今年、22000万人超と米国を抜き世界最大に浮上する。国内大手のミクシィや米グーグルなど米国勢も事業展開を加速しており、巨大市場を巡る攻防が激化する。

ソフトバンクはOPI株式の約14%を約100億円で取得。20数%分の新株予約権も得た。最終的に総額400億円を投じて出資比率を約40%に高める。同社創業者のジョー・チェン最高経営責任者(CEO)を上回る筆頭株主となり、孫正義ソフトバンク社長は取締役に就任する見通し。

[430/日本経済新聞 朝刊]

Update III. Furthermore, there were no warrants, as discussed by some sources. Next, the amount discussed in Nikkei article was $400 million, but that’s just the Softbank portion. It didn’t count the $30 million contributed by Joho and SBI.

Finally, there are no milestones - the pulling down of the first $100 million (instead of the full amount of $430M) is just cash timing that is best for both sides - nothing to read between the lines.

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CEOs Rake It In When Their Companies Tank

Being a CEO these days, according to the people at Forbes magazine, is like playing on a kiddie soccer team: everyone gets a prize ... often a very expensive prize.

CEOS
Kevin Sharer, left, chairman and CEO of Amgen Inc., in July 13, 2006, and Countrywide Financial Corp CEO Angelo Mozilo, right, on Oct. 29, 2007.
(left: Elaine Thompson/AP Right: Ric Francis/AP )

"Supposedly, you get paid for performing in corporate America — but you don't," Forbes senior editor Neil Weinberg said. "It's like a fourth grade soccer league where everyone gets a trophy."

Forbes ranked the worst performing CEOs in America by comparing executive pay to stock performance.

The magazine's list of "Worst Performing Bosses" includes James Tobin, CEO of Boston Scientific, who made an average of $8.2 million while his company stock inched up by an average of 1 percent. It also included Kevin Sharer of the Biotech company Amgen, who made an average of $12.3 million a year while his company's stock dropped, on average, 4 percent a year. Another CEO on the list, Michael Perry of Indymac Bancorp, raked in $6.8 million while his company's stock plummeted 23 percent.

But the best paid, worst performing CEO, according to Forbes, is Angelo Mozilo of Countrywide, the nation's largest home lender. He raked in an average of $66 million a year while his company nearly collapsed, the stock falling an average of 9 percent a year. That's not including the hundreds of millions he got cashing in his own company stock.

"The fact that he has been making so much money, $102 million a year over the last year, is what people find egregious," Weinberg said. "They can't understand why this company is melting down, why it's having to be rescued from virtual bankruptcy. yet this man, who's been talking up the company, has been selling stock, is not really paying the price for it."

CEOs have advantages that the average American worker does not, that might allow them to get paid for failure. Critics say that all too often, boards of directors, which set CEO pay, are filled with the CEO's cronies.

"It's a very incestuous business," Weinberg said. "People are on each other's boards, they are hired by the chief executive, they are thankful to be a part of the club.

Overall, CEOs were paid 15 percent less last year, but they still make more than 10 times the amount they did two decades ago. In 1980, the average CEO once made 40 times what the average worker makes. Now it's 433 times, and many CEOs get paid handsomely, even if they fail.

When Gary Forsee, the CEO of Sprint, was fired, he got $40 million, an $84,000-a-month pension for life, and help finding a new job as a university president.

Weinberg said it's all evidence that, in the business world, "the game is rigged" in favor of CEOs. But some say there have been major reforms in recent years and that most CEOs are fairly compensated.

John Castellani, president of the Business Round Table, said that evaluating CEO performance is more complex than Forbes makes it out to be.

"The outliers are just that — outliers. You have to look at the preponderance of CEOs and how they're performing and how their pay matched performance."

But Weinberg says the examples in his article show there need to be serious changes before CEOs are no longer paid for failure. Most notably, he says, shareholders should be able to vote on who sits on corporate boards, something the Securities and Exchange Commission proposed, but corporate leaders fought tooth and nail to defeat.

"It's called shareholder democracy right, and that's what we need in this country," Weinberg said. "We have something more akin to [President Vladimir] Putin in Russia right now than we do to a representative democracy."

Only when there's democracy in corporate America, he says, will the playing field truly be level.

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Hard Times, but Your Lips Look Great


Natasha Calzatti for The New York Times

Cristina Bartolucci, creative director of DuWop Cosmetics, has introduced Prime Venom, a lip plumper, to take advantage of these uncertain times.

LAST month, Betsy Stein made a beeline for Bloomingdale’s to buy a shirt, but the Nanette Lepore top she found was $280. Ms. Stein, 33, a business manager for a classical music composer in Manhattan, told herself that in the current economic climate, she shouldn’t charge it.

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Annie Tritt for The New York Times

Ann Feather bought a $22 Vincent Longo lip gloss instead of an $855 Ralph Lauren dress.

“With the scare of the downturn,” she said, “I decided to cut back on my shopaholic problem and exercise some restraint.”

But the next day at Sephora, she made a substitute purchase. “I could buy one or two lipsticks for about $40,” she said. “That’s far less than $280.”

Ms. Stein’s rationale for buying lipstick echoes a theory once proposed by Leonard Lauder, the chairman of Estée Lauder Companies.

After the terrorist attacks of 2001 deflated the economy, Mr. Lauder noticed that his company was selling more lipstick than usual. He hypothesized that lipstick purchases are a way to gauge the economy. When it’s shaky, he said, sales increase as women boost their mood with inexpensive lipstick purchases instead of $500 slingbacks.

Beauty brands remain true believers in the theory, even though in the last few years the lipstick market has fallen on hard times as its glistening cousin, lip gloss, has had robust sales.

With the specter of another recession, brands like Clinique and DuWop Cosmetics are preparing for a big year in lip color, for two reasons.

First, they would like to see a return to lipstick, which usually costs slightly more than gloss. Second, the companies believe that in down times women will continue to splurge on lip lacquer even as they make do with last season’s dress.

But do economists, and not just companies that need to move a lot of lip color, believe that lipstick sales could skyrocket as the economy tanks? And what’s the draw of lipstick in particular for women worried about having to pay as much for gas as they would a handbag?

Not only is the lipstick theory plausible, “it’s perfectly consistent with all kinds of economic theory,” said Richard DeKaser, the chief economist with National City Corporation, a financial holding company and bank in Cleveland.

Three sorts of products sell robustly during tough times, said Lou Crandall, the chief economist at Wrightson ICAP, an independent research firm.

The first is what economists call traditional inferior goods, what people have to buy when they can no longer afford their favorites. If you’re a salmon lover eating tuna casserole, you’re chewing on inferior goods.

Lipsticks aren’t inferior goods, economists say, but they could be small indulgences, an inexpensive treat meant to substitute for a bigger-ticket item. Or lipsticks could also be morale boosters, like Charlie Chaplin films were during the Depression. A warm shade that perfectly matches your skin tone might make you forget how far your 401(k) has tanked.

Although this relationship exists, Mr. Lauder was wrong about one thing: counting lipstick purchases won’t confirm whether we’re in a recession. “It doesn’t surprise me that lipstick sales go up,” Mr. Crandall said, “but if I had to choose my top economic indicators to take to a desert island with me, I’m not sure it would make my top 20.”

Not the least because lipstick sales aren’t exactly economic indicators used by the news media.

“ABC News samples consumer confidence every week,” Mr. Crandall said. “We don’t have lipstick sales on a weekly basis. This is because they are more granular. The smaller the economic data becomes, the more volatile it tends to be, and the harder it is to extract the underlying signal.”

Indeed, lipstick sales for the first 12 weeks of this year ending March 23 don’t validate the lipstick theory. Sales of lipstick in supermarkets and drugstores have decreased 3.3 percent compared with the same time period in 2007, according to Information Resources Inc., a market research firm that tracks sales of mass consumer products. Sales of lipstick are also down 13 percent in department stores from the same quarter last year, said Karen Grant, the senior beauty industry analyst for the NPD Group, a market research firm. But the actual decline, Ms. Grant cautioned, is slightly lower because more weeks were counted in 2007 than this year.

Still, old hunches die hard. Banking on an economic downturn, Cristina Bartolucci, the creative director of DuWop Cosmetics, introduced Prime Venom, her first matte plumper designed to be worn under lipstick. “One of the main reasons we came up with this product is that we’re in a recession, or a difficult time with the war,” she said. “You always think of the classic lipstick and stockings doing well in wartime.”

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Annie Tritt for The New York Times

Grace Clem on lipstick: “I’m spending money without really spending money.”

Annie Tritt for The New York Times

“Gas prices are unbelievable,” so Melissa McQueeney only indulged herself with a $6 lip gloss.

Getty Images

Prime Venom is the same formula as the company’s 1999 best seller, Lip Venom, which claims to inflate your pout without collagen shots. In the last month, Ms. Bartolucci said, Prime Venom’s sales have been double that of the original Lip Venom.

This spring, for the first time, Marissa Shipman, the chief executive of the Balm, a lip gloss brand, included lipsticks in her line. She hopes that Mr. Lauder’s theory will pan out for her. For their initial order, retailers like Sephora have ordered twice the amount of the lipstick as they did the glosses she started selling in 2003, Ms. Shipman said. She doesn’t have qualms about profiting in an economic downturn, because she’s glad she can provide something for $16 that makes women feel good. “I would feel more guilty if I were taking $400 from someone,” she said.

Ms. Grant suggested beauty companies are engaging in some wishful thinking hoping that if they promote a new wave of lipsticks then customers will come. “The early adopters of trend are getting onto the lipstick bandwagon and are seeing increases in lipstick sales,” she said. “But it’s not an overall trend. This is more like a gut feel, like when you say it’s time for skirts to come back.”

In the last four years, gloss has increased its market share by 2.5 percent, while lipstick has lost 5.8 percent, according to Information Resources. So to lure gloss-happy customers back to lipstick (which tends to cost more), brands are aping the charms of lip gloss.

Last fall, Estée Lauder reformulated its Signature Lipstick by using a blend of oils that had been typically reserved for glosses, and it eliminated the harsher beeswax smell in favor of a subtle fig and vanilla scent.

This fall, Clinique plans to add eight shades to its Colour Surge Butter Shine Lipstick line, which is a mashup of lipstick and gloss. “It’s a bridge, for when she wants a more grown-up look,” said Janet Pardo, the senior vice president for global product development at Clinique. “We’re transitioning people from gloss into that hybrid place.”

Any woman with a few lines around her lips should be reaching for moist — not matte — lipsticks, said Kriss Soterion, the makeup artist who worked with Hillary Clinton before a New Hampshire debate last year. “No matter how you cut it,” she said, “dewy looks young.”

April Lane Benson, a psychologist in Manhattan who works with compulsive spenders, said there are two reasons why women would want lip color more than other affordable pleasures. Lipstick can be applied as many times a day as you’d like. “It’s very primal,” Dr. Benson said. “The mouth is an organ of so much pleasure. Kissing is what you do with your lips.”

Lipstick also helps a woman look poised, even when her bank account is overdrawn. “When women use lipstick in times of stress,” Dr. Benson said, “they’re doing it to put forward an image that they are more alive and more vibrant, and not as down in the mouth. It’s part of the uniform of desirability and attractiveness. A shirt or a cup of gelato is much farther removed from that.”

Melissa McQueeney, 34, a fifth-grade teacher in Shelton, Conn., refuses to stop buying lipstick, even though her bills have increased considerably in the last year, mostly because of rising gas prices. Her fiancé has a 70-mile commute.

“It’s how I freshen up,” she said. “It makes me feel feminine, even if I’m in sweats and sneakers.” Last month, at a Sephora outpost, she chose a $6 gloss over one for $25, and held it up triumphantly as she walked to the register. “I didn’t even try it on,” she said. “I’m just splurging.”

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ASU study: Super Bowl generated $500 million for state

A research team of students from ASU’s W. P. Carey School of Business combed the metropolitan Phoenix area before, during and after Super Bowl XLII earlier this year to gauge the game’s economic impact on Arizona.

The three-month study, led by 24 students in the W. P. Carey sports business MBA program, concluded that the game and its related activities generated a record $500.6 million in direct and indirect spending by visitors and organizations in town for Super Bowl week. The game was played Feb. 3 in Glendale.

Ray Artigue, executive director of the sports business MBA, says the study was far more complicated than similar projects because events surrounding the game were staged all over the metro area. He said the research team drove a collective 500 miles to interview fans at the various events.

“We crisscrossed the town,” Artigue says. “The people we needed to interview about their spending were spread out among dozens of hotels, numerous parties and the weeklong NFL fan experience. We spent 10 days gathering data before the game and finished at the airport two days afterward.”

The students collected 1,594 surveys to represent a cross-section of the visitors who traveled to Arizona for the game and related events.

Respondents were asked a variety of questions, including the events they were attending, the number of nights they were staying and what they were spending money on while in town.

The research team also contacted out-of-state companies after the game to determine how much they spent on sponsorships and private events during Super Bowl week, all in an effort to calculate organizational spending.

The W. P. Carey Sports Business MBA program was hired to conduct the study by the Arizona Super Bowl host committee. The sports program has conducted similar economic impact studies for several other sporting events, including college football’s BCS national championship games in 2003 and 2007; the FBR Open in 2006; and Phoenix International Raceway events and the LPGA Safeway International in 2007.

“We had many choices of research firms from across the country to conduct this study,” says Bob Sullivan, president of the host committee.

“Based on their methodology, thoroughness and professionalism, we made a correct decision to work with ASU.”
In 2006, the W. P. Carey MBA Sports Business program was lauded by the Wall Street Journal as one of the top five graduate sports programs in the country.

Hal Mattern, hal.mattern@asu.edu
(480) 965-5577
W. P. Carey School of Business

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Consumers may get benefit from a Fed rate pause

WASHINGTON - While the Federal Reserve's aggressive drive to lower interest rates appears to be over, there could be benefits for consumers in other places — like some relief from soaring gasoline and food costs.

"With the Fed on hold and the dollar firming, oil and gasoline and food prices may all top out some time in the next few months," said Mark Zandi, chief economist at Moody's Economy.com.

On Wednesday, the Fed cut interest rates for a seventh straight time. But the reduction was a much smaller quarter-point move — not the half-point and three-fourths-point moves of earlier this year. It pushed the federal funds rate down to 2 percent.

Commercial banks immediately followed suit by cutting the prime lending rate, the benchmark for millions of consumer and business loans, to 5 percent, the lowest level since late 2004.

That may be as low as consumer rates go during this Fed easing cycle because the central bank sent a number of signals that it believed it may have done enough to keep the economic slowdown from deepening into a severe recession.

Several analysts said the central bank was recognizing the realities of the situation that it may have done all it should do to try to boost growth through rate cuts, given growing threats from inflation.

"The Fed may have gotten to the point where it could start hurting economic prospects in terms of the value of the dollar and oil prices and grain prices," said Sung Won Sohn, an economics professor at California State University. "It think it was time for the Fed to slow down and take a pause."

Lower U.S. interest rates tend to make the dollar's value against other currencies weaker because investors dump their U.S. holdings in favor of investments in other countries where they can earn a higher interest rate.

As the dollar falls, that tends to drive the cost of oil higher because oil is priced in dollars and producers start demanding higher prices to compensate for a weaker dollar. Those forces are also at work in terms of driving up other globally trade commodities such as metals and food including wheat and other grains.

With the Fed lowering the prospects for further rate cuts, the dollar can be expected to stabilize and perhaps rebound from the record lows it had hit in recent weeks against the euro and other currencies. That should help various commodities including oil and food to backtrack from their recent record highs, a process that may have already started.

Oil, which fell on the Fed's Wednesday announcement, dropped further in trading on Thursday as the dollar continued strengthening against the euro and other currencies. In trading on the New York Mercantile Exchange, crude oil dropped $3.03 to $110.43 a barrel, its lowest level since April 14 and down significantly from the record near $120 per barrel earlier in the week.

Analysts said it will take time, however, for motorists to see the benefits in lower gasoline costs, which hit another record nationwide average of nearly $3.623 per gallon of regular on Thursday, according to a survey of stations by AAA and the Oil Price Information Service. Analysts said gasoline is likely to keep heading higher for a time because refiners have not been able to raise their prices fast enough to recoup the crude oil surge that has already occurred.

But private economists believe that if the dollar does stabilize and oil and other commodities begin to fall in a sustained way, consumers will start seeing benefits in two to three months.

Of course, part of that forecast depends on the Fed deciding to stay on the sidelines and not cut rates further, an expectation that is heavily dependent on the course of the overall economy. There was some good news Wednesday in that the gross domestic product did expand — albeit at a tiny 0.6 percent rate — in the first quarter rather than contracting.

But analysts say the country is not out of the woods in terms of avoiding a recession, and many believe GDP growth could turn negative in the current quarter. As long as the downturn is mild, analysts believe the Fed will keep rates unchanged because of their worries that further rate cuts could fuel a rise in inflation that may be hard to deal with, risking a repeat of the stagflation nightmare of the 1970s.

"The Fed lost control of inflation in the 1970s by pushing interest rates too low and boosting inflation expectations," said David Jones, chief economist at DMJ Advisors. "The Fed more than anything else wants to avoid a repeat of that episode."

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Oregon Offers Tuition Waiver

Oregon's State Legislature passed a law that provides a full-tuition waiver for a bachelor's or master's degree at an Oregon University System institution for children or spouses of servicemembers who died on active duty, became 100 percent disabled in connection with military service, or died as a result of a disability sustained on active duty after Sept. 11, 2001. Information on the tuition waiver as well as the application form can be found Oregon University System website under "Featured Documents and Links."

Remember: Not applying for scholarships is like turning down free money. Get started on your search for scholarships today - visit the Military.com Scholarship Finder.
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A new torch controversy: the battle for Everest


William Holland was only thinking of the photograph. When he got to the top of Everest he planned to take the rolled-up flag saying "Free Tibet" from his rucksack, pose for posterity with the banner as a backdrop and then roll it away again before starting back down. He was not looking to make a scene.

But that is exactly what transpired. Someone in the group he was climbing with informed the Nepalese authorities of Mr Holland's flag. When he reached Everest Base Camp he was ordered from the mountain and told to go straight to Kathmandu. From there he was deported from Nepal with an order not to return for two years.

The 26-year-old US climber's treatment at the hands of the Nepalese authorities is just one indication of how the world's highest mountain has in recent days become engulfed by the politics and controversy surrounding China and its relationship with Tibet.

As Chinese climbers seek to reach Everest's summit carrying a replica of the Olympic torch, the Nepalese government has closed down the upper areas of the mountain within its own borders and ordered everyone to stay away from the summit. It has even told the dozens of security personnel dispatched to the mountain they can shoot protesters seeking to disrupt the Chinese ascent.

The behaviour of the Nepalese has been widely criticised, not only by pro-Tibet activists and human rights campaigners but also by mountaineers who say that the 29,029ft peak – straddling the border of China and Nepal – should remain loftily above politics. They insist the actions of the Nepalese government – which is desperate to remain on good terms with China – are a severe overreaction.

"It's ridiculous. The Chinese have basically bought themselves a mountain. It's all about money and politics," said Mr Holland, now home in Virginia.

"I don't know if the Nepalese are filling their coffers because of this. It's not as though the Tibetan flag is banned in Nepal – you see it all over the place." The embroiling of Everest in the controversy surrounding the China-Tibet issue dates from April last year when the Beijing Games organising committee revealed the route the Olympic torch would take. The committee said it would pass through more than 20 countries on six continents and travel more than 85,000 miles, the longest journey of any Olympic torch.

"The Olympic torch relay is one of the most important ceremonies and a major means to spread and promote the Olympic spirit," claimed the committee's president, Liu Qi. "As one of the grand ceremonies for the Beijing Olympic Games, the torch relay of the Beijing 2008 Olympic Games has set its theme as the Journey of Harmony."

As part of the journey of harmony envisaged by Liu Qi, it was announced that once the Olympic flame was transferred from Greece to Beijing, another torch would be lit and this new flame would then be carried to the top of Everest, known in China as Mount Qomolangma. "One of the highlights of this leg will be the attempt to bring the Olympic flame to the highest peak in the world," said the Chinese.

Just as the main torch has become a lightning rod for pro-Tibetan protests wherever it has appeared, the attempt to bring the second flame to the summit of Everest has also run into problems and controversy. The protests followed the violent crackdown by the Chinese authorities of protests in March in Lhasa and surrounding areas in support of Tibetan autonomy.

So fearful are the Chinese that the second flame will attract similar protests, the authorities have instituted a media clampdown. This included the farcical ending of a BBC correspondent's attempts to film for an online diary at a base camp on the Chinese side of the mountain.

"Clambering breathlessly down from the ridge we were herded towards our next briefing. In a week that has seen a lot of pointless briefings, this one broke new ground," wrote Jonah Fisher. "A crew of firemen explained how in this rocky, barren and almost entirely plantless landscape there was a severe risk of fire. There followed a demonstration of their surprisingly powerful hose."

Last night, the Chinese climbers and their propane-fuelled torch were holed up at 21,300ft at Advanced Base Camp, waiting for better weather before heading for the summit.

On the other side of the mountain, the authorities in Kathmandu have announced a 10-day ban on all climbing beyond Everest's Base 2, located at 21,300ft.

Apparently acting on a request from Beijing, they have banned the unauthorised use of satellite phones, video recorders and radios. Any mountaineer found speaking to journalists could also be expelled from the mountain. Police and troops have been authorised to fire at any protesters who make their way to Everest.

Yesterday, Human Rights Watch said it had written to the Nepalese authorities urging them to rescind the order. "The Nepal authorities should be using whatever means necessary to protect basic human rights, not violate them," said spokeswoman Sophie Richardson. "With the world watching, this is the moment for Nepal's new government to prove that it aspires and adheres to international standards."

The response of Nepal to the pro-Tibet protests that have broken out around the world has been among the most harsh of any government other than China. Hundreds of Tibetan monks and activists were arrested and detained after demonstrations outside the Chinese embassy in Kathmandu.

Its behaviour has been driven by its desire to cement good relations with its powerful neighbour, a policy that is unlikely to alter following the recent elections that saw the country's Maoist party win the largest number of seats. Trapped between China and India, Nepal believes it needs to have good relations with both huge countries. But does Nepal need to go so far in doing China's bidding, especially in regard to Mount Everest? Many believe not.

Those who have ascended the mountain say it retains a unique symbolism and insist it should not become a political battle ground. Sir Chris Bonnington, the climber from Cumbria who has led four expeditions to Everest and who himself stood on the summit in 1985 at the age of 50, said: "It's just a real pity and very, very sad a whole mountain has to be closed down because the Chinese are worried that someone will interfere with their precious flame."

Sir Chris said that the decision to award the Olympics to China came with an undertaking that journalists would be allowed to report freely on preparations for the Games and the country would improve its human rights record. He said that had not happened. "This whole thing is political ... as was the decision to give the games to China," he added. "But, so was the decision to award the games to London."

Stephen Venables, the first Briton to climb Everest without additional oxygen, described what was happening on the mountain, as a "circus". "My view is that the Chinese claim to sovereignty in Tibet is spurious to say the least, that the whole Olympic circus has become an absurd political propaganda charade and that it's monstrous that not only should [the Chinese] stop climbers going to Tibet but that they can tell people what to do on the other side," he said. "It just seems outrageous that they can tell Nepal to stop people climbing the mountain so they can continue with this circus of blatant propaganda."

Yesterday an expedition headed by the explorer Sir Ranulph Fiennes, who is climbing Everest to raise funds for the Marie Curie Cancer Care charity, said it was told that the Nepalese ban would only last for two days. At the moment this group is waiting at Base Camp on the Nepalese side for permission to continue their ascent.

What is certainly true, is that the quicker the Chinese complete their ascent with the Olympic flame and take their own photographs (without the backdrop of banner saying "Free Tibet"), the quicker the soldiers and police will be told to lower their weapons and life will get back to what passes for normal on Everest.

Meanwhile, thousands of miles away in Midlothian, Virginia, Mr Holland, the climber who has been sent home, prepares to return to his day job with a tree cutting company. Since being ordered out of Nepal, he has had time to reflect both on what happened to him and what is happening to the country whose flag he was carrying.

"I feel the Tibetan cause is a worthy cause but I would not describe myself as a hardline activist," he said last night. "I definitely think it's a shame what is happening."

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Contractors Gone Wild

News: Theft, hookers, melting down Iraqi gold to make cowboy spurs—all in a day's work for private military contractors in Iraq?

Allegations of widespread mismanagement and corruption among private contractors in Iraq are nothing new; if anything, tales of cronyism, over-billing, and embezzlement have become so frequent that our national tolerance for them seems only to have increased as the Iraq War has drawn on. Even so, the testimony earlier this week of three whistleblowers before the Senate's Democratic Policy Committee (DPC) stands out for the sheer outrageousness of their accusations—namely that U.S. private contractors looted Iraqi palaces and ministries, stole military equipment, fenced supplies destined for U.S. troops, and even operated a prostitution ring that may have contributed to the death of fellow contractor. Yet despite its focus on such salacious matters as sex and corruption, the session earned little media attention.

The first to testify was Frank Cassaday, a former KBR employee who worked as an ice plant operator in Fallujah in 2004 and 2005. "Ice was a very valuable commodity in Iraq that was regularly stolen and bartered for other goods," he told the committee. He recalled how a convoy of U.S. Marines, in preparation for an operation that would take them outside the wire for several days, requested 28 bags of ice to keep their food fresh in the desert heat. They received only three. "The ice foreman was cheating the troops out of ice at the same time that he was trading the ice for DVDs, CDs, food, and other items at the Iraqi shops across the street," Cassaday said. "This foreman would change the ice tally sheets at the distribution area I worked in to make it seem as though we had handed out more ice to the Marines than we actually did."

Cassaday said he later observed his colleagues returning to KBR's camp with equipment they had stolen from the U.S. military, including refrigerators, artillery round detonators, two rocket launchers, and about 800 rounds of small arms ammunition. After he informed the KBR camp manager of the thefts, Marines searched the camp with dogs to recover the stolen property. For his trouble, Cassaday said, KBR security officers jailed him in his tent for two days. He then spent another four days in "protective custody" before being transferred, against his will, to work in a laundry.

The practice of stealing equipment and supplies destined for the U.S. military was so pervasive that KBR employees invented a slang term to describe it: "drug deals." But thefts were not limited to military supplies, said Linda Warren, another former KBR employee who testified at the hearing. Upon her arrival in Baghdad in 2004, she was shocked by the number of contractors involved in criminal activity. "KBR employees who were contracted to perform construction duties inside palaces and municipal buildings were looting," she said. "Not only were they looting, but they had a system in place to get contraband out of the country so it could be sold on eBay. They stole artwork, rugs, crystal, and even melted down gold to make spurs for cowboy boots." Like Cassaday, when she complained to her superiors about the thefts, she was punished. She said her vehicle was taken away, her movements were closely monitored, and her access to phones and the Internet were cut off. Eventually, she was transferred out of Baghdad.

Perhaps more shocking than any of this was the accusation from Barry Halley, a former project manager for Worldwide Network Services, a Washington, D.C.-based firm that was working on subcontract for DynCorp. According to Halley, his site manager in Iraq, who he said was employed by a "major defense contractor," moonlighted as the leader of a prostitution ring serving American contractors in Iraq that indirectly caused the death of a colleague. "A co-worker unrelated to the ring was killed when he was traveling in an unsecure car and shot performing a high-risk mission," he told the committee. "I believe that my co-worker could have survived if he had been riding in an armored car. At the time, the armored car that he would otherwise have been riding in was being used by a manager to transport prostitutes from Kuwait to Baghdad." The prostitution ring was shut down when the company's home office learned of it, but, Halley said, the manager who controlled it retained his job, moving on to work another contract in Haiti.

A theme running through all three witnesses' testimony, aside from the pervasiveness of corruption among private contractors in Iraq, was that blowing the whistle on abuses rarely did any good. As is often the case with whistleblowers, speaking out was a shortcut to getting fired or demoted. "There's a no-talk, no-speak policy in effect in Iraq about what goes on," Halley said.

According to Cassaday, although contractors for KBR are trained to report irregularities, the practice is generally frowned on by managers in the field. "In Houston at the training camp that I was at for two weeks before we went over to Iraq, they told us that, 'Our door is always open. If you have a problem, just come on in,'" he said. "But what they don't tell you is there's a back door to that office. If you come in and you complain about something, you're going to be going out that back door. You're going to either be transferred someplace you don't want to be, or you're going to be fired."

Arriving nearly two weeks after the military awarded a 10-year logistical contract worth up to $150 billion to DynCorp, KBR, and a third firm, the DPC hearing was the thirteenth in a series designed to look into contractor fraud and abuse in the reconstruction of Iraq. Although, as a partisan committee, it has no powers to pass legislation, DPC members do refer allegations to the Department of Justice and the Pentagon's Inspector General for further investigation, says Barry Piatt, the DPC's communications director. Committee chairman Senator Byron Dorgan of North Dakota has been advocating for the creation of a permanent, bipartisan Wartime Contracting Commission to look into the types of accusations raised this week, but so far, says Piatt, Senate Republicans have blocked the measure. Until he is able to obtain the necessary 60 votes, Dorgan will continue to negotiate with the opposition in hopes of peeling away enough support to establish the commission. In the meantime, "the hearings that need to be done will be done," says Piatt. "The Republicans won't able to block that, and by continuing to do them, [Senator Dorgan] is showing the work that a committee like that would do."

Photo by flickr user James Gordon used under a Creative Commons license.

Bruce Falconer is a reporter in Mother Jones' Washington, D.C., bureau.
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Too scared for school: the plight of Zimbabwe's teachers

A Zimbawean schoolboy heading home from school in Harare Zimbabwe

(Richard Mills/The Times)

A boy heads home from school as Zimbabwe’s new school term begins. Thousands of teachers stayed away

was May Day and the schools were out for the holiday but Tatenda Makura had come to St Peter’s Secondary School anyway, looking for the headmaster. He joined the queue of other boys in the corridor, hoping to win a place at the sought-after church school. “This is the only one that has enough teachers,” Tatenda explained.

When the new term began this week at his own school, Harare High, only two out of eight of his teachers turned up. “Maths, science, geography, accounts, history,” the earnest 17-year-old reeled off — “we are not getting any of these. I need to learn these but the teachers are not there.”

As Zimbabwe’s new school term began after a six-week election break, thousands of teachers failed to turn up, kept away by violence, intimidation or simply poverty caused by the hyperinflation that has soared even higher since March’s disputed elections.

Teachers’ unions declared that 9,000 teachers failed to report for work on Tuesday, exacerbating the woes of an education system already crippled by a national brain drain and chronic underfunding,

Hundreds of rural schools are struggling to reopen at all after teachers fled a campaign of violence against local activists for the opposition Movement for Democratic Change (MDC) and officers for the Zimbabwe election commission. Thousands of teachers took employment as election officers during the school break to supplement their shrinking incomes. In the past week at least 100 teachers, including several school principals, have been arrested on suspicion of electoral fraud.

The main trade union federation announced yesterday that two teachers had been beaten to death at their school in the northwestern Guruve region, apparently by ruling party militia. “These are being accused of rigging the elections in favour

of MDC,” Raymond Majongwe, secretary-general of the Progressive Teachers’ Union of Zimbabwe, said.

Others who worked as presiding officers have been the subject of violence from militias terrorising the Opposition in rural strongholds, such as Mudzi and Mutoko, where schools have been hit hardest.

Arthur, a secondary school English teacher, was asleep at home in Kumburai village, Mudzi, two weeks ago when 40 Zanu (PF) militiamen smashed into his home. “They asked me: ‘Where are your colleagues?’ I said I didn’t know and they began to beat me. They said: ‘If you don’t tell us, we will kill you.’ ” He fled to Harare with two other teachers for medical treatment. One of them, Harold, was tortured for seven hours before he escaped. All are in hiding.

“Hate speeches are being uttered against teachers. Some are being systematically assaulted,” Mr Majongwe said. “There is no way that they can go back to such dangerous areas.”

Tatenda has little idea why his teachers did not turn up at the start of term. He has seen dozens leave for other countries and two die “from tuberculosis” — most likely Aids-

related — over the past five years. St Peter’s has been less affected than some other schools: teachers say the faith-based ethos has kept them loyal to the profession despite their own crushing economic needs.

Joseph Magorimbo, 18, had arrived from Kwekwe, 100km (60 miles) southwest of Harare, to seek a place at St Peter’s, after a handful of teachers turned up at his own school the start of term. His mother was a teacher there but she died four years ago from Aids. “My granny brought me up here because she said my mother would want me to have an education above anything,” he said.

Education is highly prized in Zimbabwe, not least because of President Mugabe, a former teacher himself, who prioritised school building and teacher training in the early years of his rule. Every morning, from the slums of Mbare, children emerge in a rainbow of coloured uniforms, heading off to lessons.

“Even if the uniforms are torn, they all have them,” Lucy, a secondary teacher, said. “The parents make sure of that.” She did not return to work this week because she can no longer survive on her salary, Z$5 billion a month, shrinking every day through hyperinflation at 165,000 per cent.

The schools themselves are struggling too, and not just from lack of teachers. At St Peter’s, as the prospective pupils waited, a parent-teacher committee had given up a day’s holiday to hammer out a rise in school fees. Last term they were Z$80 million; they had done their sums and worked out that this term would need

Z$4 billion per pupil just to keep running. “This school is a good

one and even it is nearly bankrupt,” Gilbert Musintonga, a teacher from the primary department, said. But this will put a severe strain on parents struggling to pay off last term’s debts. “That is the situation,” Grace, a committee member shrugged. “They will try their best because they want education for their children. Without education, they can do nothing. Some will refuse. It will be tough for them.”

The Government, anxious to keep up appearances, has stuffed schools full of relief teachers, unqualified for the job, so even when they do show up the teaching is a far removed from what it used to be. Zimbabwe’s trained teachers, meanwhile, wait in their thousands on the restaurant tables of Johannesburg and elsewhere.

“I am worried for the future of these children,” Mr Musintonga sighed. “We don’t have books, we don’t have equipment, we don’t even have chalk. We only have our teachers but without them, the children cannot learn anything. This term, we have five classes without teachers and we don’t know where they are, or whether they will come back.”

The poor children

1.7m Zimbabwean children are orphans, the highest per capita figure in the world

30% of children in rural areas suffer from malnutrition

160,000 children under 14 have HIV

50% of Zimbabwe’s population are under the age of 18

105 children out of every 1,000 die before their fifth birthday — up from 76 15 years earlier

Sources: Unicef, Save the Children

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Police: Slain student apparently dialed 911; help not sent

MADISON, Wis. - A college student apparently called 911 from her cell phone shortly before she was killed but a dispatcher hung up, failed to call back and never sent police to investigate, authorities said Thursday.

Madison Police Chief Noble Wray said it was too early to know whether a better response could have prevented the April 2 slaying of Wisconsin-Madison student Brittany Zimmermann or helped police capture her killer.

Authorities refused to release the content of the phone call, but Wray said it should have been enough for the Dane County 911 Center to take it seriously.

"It would be accurate to state that there is evidence contained in the call, which should have resulted in a Madison police officer being dispatched," Wray said at a news conference. "The 911 center did not call back to the telephone number, Madison police were not notified and no officer was sent."

Zimmermann, 21, was found slain in her apartment in an apparently random crime. Police believe someone broke into her apartment before killing her. They have not identified a suspect but have ruled out her fiance, who found her body in the apartment they shared.

Dane County Public Safety Communications Director Joseph Norwick said the dispatcher who received the call from Zimmermann's cell phone inquired several times to determine whether an emergency existed. The dispatcher hung up after receiving no answer and then answered another 911 call that was waiting, he said.

The dispatcher failed to call the number back as required under the department's policy, Norwick said.

Norwick said he was investigating the incident and reviewing whether policies should be changed and employees should be disciplined. But he also said, "I don't think there's anything to apologize for at this time."

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