Business News

First U.S. Offshore Wind Farm Will be in Texas

2011-08-18T23:56:00.000-07:00

by Brian Merchant, Brooklyn, New York

Photo Credit: Slaunger via Flickr/CC BY-SA 2.0

The mostly highly publicized offshore wind farm in the U.S. is undoubtedly Cape Wind, which was finally approved for construction in Cape Cod after a decade-long battle and the protestations of wealthy NIMBYs and grumpy Kennedys. But it still has a ways to go before it will be going online -- and it looks like another 12 megawatt project in Texas will swoop in and grab the distinction of being the nation's first offshore wind farm.

Here's Renewable Energy World:

Texas has pulled ahead in the final stretch of getting the nation's first offshore wind farm and will win the race against long-announced project, Cape Wind. After achieving a major milestone in 2010 with more than 10,000 MW of installed onshore wind energy capacity, the state will now erect the first offshore production wind turbines in the U.S. this year off the coast of Galveston. The 12 MW project must clear one final hurdle in obtaining a Purchasing Power Agreement, but with all the designs and permits already in hand, the installation could go up as soon as late 2011.

So by the end of the year, there could be a sizable wind farm just off the coast of Galveston, setting the precedent for a sector that should have gotten a jump start long ago. One interesting side note to the story of how a small project in Texas has quietly vaulted past the major one in a liberal east coast state, according to REW, is that:

"Offshore wind has undoubtedly benefited from the state's distinctive business environment. With stable, long-term policies, and its own transmission network, Texas offers unrivaled business opportunities for the offshore wind industry."

Stable, predictable long-term policies (tax rebates, etc) are, of course, what we need on a national level to encourage similar projects elsewhere.

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How Dracula Hedge Funds Are Sucking Us Dry

2011-07-11T01:58:00.000-07:00

What notion of economics or ethics justifies the fact that it would take the average family more than 35,000 years to earn as much as the top hedge fund managers earn in one year?

TAKE ACTION

The official June unemployment rate is 9.2 percent. The real rate is 18.5 percent (which includes involuntary part-time workers and the unemployed who haven’t looked for jobs in the past 4 weeks.) Nearly 30 million Americans are unemployed and we need more than 21 million jobs to get back to full-employment (defined as 5 percent).

Meanwhile, the top 10 hedge fund elites make on average nearly $1 million an HOUR. We’ll never find the resources to solve the unemployment crisis until we redistribute some of this obscene wealth.

It starts by putting to rest the notion that hedge fund elites are just like any other. They are not. They make more money than everyone else, including our top movie stars and athletes...and they pay lower taxes.

While working on my next book on financial elites, we dredged up a variety of “Top Ten Income Lists” (from sources like Forbes and Equilar) for just about every kind of high-rolling celebrity and CEO imaginable. Here are previews:

Oprah led the pack by hauling in an incredible $290 million in 2010.
U2 at $190 million was the top pop musical group.
Leonardo DiCaprio ($77 million) is the leading Hollywood star.
Tiger Woods ($75 million) remains the highest paid athlete even though he doesn’t play much golf these days.
Half of the highest paid non-financial CEOs are in the entertainment business, led by Phillipe Dauman of Viacom ($84.5 million).
Only six out of the 100 highest income Americans on these lists are women.

You also might find it interesting that the top Wall Street bankers are keeping a low-income profile these days. Maybe it’s an attempt to avoid stricter regulatory curbs on their financial casinos. Jamie Dimon of J.P. Morgan Chase led the bank/insurance top 10 list with an income of $20 million (which, by the way, is half as much as Glenn Beck’s 2010 income). Lloyd “Doing God’s Work” Blankfein of Goldman Sachs was 10th on the banker list with an income of $14.1 million.

All in all, we’re talking about serious money --- except for the fact that hedge funds make 100 times more than bankers.

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Chase Bank Is Finally Very Sorry for Having Man Thrown in Jail for No Reason

2011-07-11T01:55:00.000-07:00

By Curtis Cartier

Ikenna Njoku

There are tales of corporate arrogance and idiocy. And then there's this.

As KING 5 reported this week, 28-year-old Ikenna Njoku went to a Chase Bank inside a Fred Meyer in Auburn on June 24 of last year with a $8,463.21 tax-refund check. This check was actually issued by Chase itself, as it had been deposited in Njoku's closed Chase account by the government and had fees deducted by the bank for past overdrafts. Finally the difference was mailed to him in the form of a bank-issued cashier's check.

So Njoku apparently went into the bank to cash this check, and the teller immediately became suspicious of him. She supposedly started asking things like what he did for a living and where he got the check, and "looking [him] up and down."

The teller was so suspicious, in fact, that she refused to cash the check and instead had it held. Njoku eventually got frustrated and left the bank, then he called a customer-service agent who told him to come back the following day to get his money.

But when he showed up at the bank the next day, the police were waiting, and he was quickly arrested for a felony charge of trying to cash a forged check.

The check wasn't forged, of course, but nonetheless Njoku was taken to jail.

The next day--a Friday--Chase apparently realized it had made a big mistake and had someone put a call in to the Auburn Police detective handling the case. But the detective was off that day and didn't get the message until Monday morning.

The agent never bothered to call anyone else at the police station.

So for four nights and five days total, Njoku stayed in jail. His car was towed and impounded. And he was fired from his job for not coming in.

When he finally got out, Chase still wouldn't give him his check immediately, which he needed to cover things like the impound and tow fees that his car had racked up. So when he couldn't afford to get the car from the impound lot, it was auctioned off.

Worst of all, for a solid year, Njoku apparently tried to get an answer or some compensation from Chase, and for the whole year the bank ignored him.

That is, until he finally lawyered up and talked to the press.

Now, Chase is suddenly very apologetic. The bank issued this statement on Thursday:

"This is a very unfortunate and unusual situation. We apologize to Mr. Njoku and deeply regret what happened to him. We are working quickly to understand all the details so we can reach a fair resolution.

Working quickly on month 13. Waydago, guys.

Now here's Njoku's lawyer's letter to Chase.

Chase Letter

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Markets force Merlin to postpone £2bn flotation

2010-02-11T21:02:00.000-08:00

By Helia Ebrahimi

The London Eye, on the bank of the River Thames, is one of the assets owned by Merlin

The theme park operator, which is backed by private equity firm Blackstone Group and Dubai International Capital, was due to press the go button on a formal stock market process next week.

However, Blackstone’s decision to pull the listing of airline and hotels business Travelport last night after institutional investors failed to support it at the required price has meant Merlin’s IPO is no longer viable. A source close to Merlin added that the company was still evaluating all its options.

Merlin’s strong 8pc annual growth and its £230m of earnings before interest, tax, depreciation and amortisation (Ebitda) made it a rare jewel in the crown amongst a long pipeline of private equity IPOs.

Its decision not to seek a market listing despite performing strongly in the face of the recession underlines a growing crisis in the IPO market where a long pipeline of private-equity owned businesses have been clamouring for a financial exit.

Retailer New Look – owned by Permira and Apax – has already filled its intention to float and sent out research to perspective investors but is now considering whether to progress with its plans.

At a crisis meeting held by the company’s board yesterday the company decided not to pull plans and to continue to try to make the flotation work.

However, insiders say that it will become increasingly difficult to press forward given the market’s loss of appetite for new listings.

In the end, Travelport was derailed not only by market fluctuations that stemmed from sovereign default fears, but also from company specific issues. These were a mixture of the company’s heavy debt levels and the emergence of a controversial incentive plan for the company’s executives.

Travelport’s larger rival Amadeus is also believed to be reviewing its plans to raise €3bn on the Spanish stock exchange in a listing that could value the group at €8bn.

The company, owned by Cinven and BC Partners, had been on course for a flotation in the first half of this year and was seen as a comparable business to Travelport.

Earlier this week BC Partners successfully floated its French healthcare business Medica in Paris. Despite the float price being lowered before the IPO, the shares have since risen about 10pc.

Fund managers, which have been very cautious about debuts by private-equity backed companies, say that not enough equity is left on the table when the debt levels are brought down to fit with the stock market.

“We have pumped £80bn into the stock markets already – but these were for companies where we already owned equity,” said Andy Brough, a fund manager at Schroders.

“In these private equity floatations, where is the upside for investors if all we are doing is re-financing the companies where the PIK notes are eating up everything in sight?”

With a debt to Ebitda ratio of five times, Merlin is among the most under-geared companies in the leisure sector.

Sources say there is no immediate need to refinance the business, which gives its backers the option of taking their time in looking for the deal that gives the group the best long term returns.

Blackstone bought Merlin in 2005 for £102.5m in the buy-out house's smallest financial investment. It backed chief executive Nick Varney’s ambitious plans to consolidate the theme park sector and within three years it had added the £1bn Tussauds Group, Legoland and Italian theme park Gardaland to its London Dungeons and Sea Life portfolio.

In the process it grew the £7m of ebitda to £230m, giving the group eight years of double digit growth.

Earlier this year the group paid $22.3m (£13.8m) for Cypress Gardens, a US theme park close to Orlando, where it is looking to invest more than $100m to convert it into the the world’s biggest Legoland.

Visitors to attractions Merlin has owned for more than a year rose 17pc in 2008 to 38 million, just as the industry worldwide saw attendance fall by 0.4pc.

Original here

Tycoon trades high life for bedsit

2010-02-11T21:00:00.000-08:00

HENRY SAMUEL

Giving it all away ... Karl Rabeder.

PARIS: An Austrian tycoon is giving away every penny of his £3 million ($5.3 million) fortune, having realised that his riches made him unhappy.

Karl Rabeder, 47, a businessman from Telfs, near Innsbruck, is selling his villa with lake, sauna and spectacular mountain views over the Alps, valued at £1.4 million.

Also for sale is his old stone farmhouse in Provence, on the market for £613,000. Already gone is his collection of six gliders valued at £350,000.

Mr Rabeder has also sold the interior furnishings and accessories business - from vases to artificial flowers - that made his fortune.

''My idea is to have nothing left. Absolutely nothing. Money is counter-productive - it prevents happiness.''

He will move out of his Alpine retreat into a small wooden hut in the mountains or a simple bedsit in Innsbruck, surviving on £800 a month while the proceeds go to a charity he set up in Latin America. He will draw no salary from it.

''For a long time I believed that more wealth and luxury automatically meant more happiness. I come from a very poor family where the rules were to work more to achieve more material things, and I applied this for many years.''

But over time a conflicting feeling developed. ''More and more I heard the words: 'Stop what you are doing now - all this luxury and consumerism - and start your real life'. I had the feeling I was working as a slave for things that I did not wish for or need.''

For many years, he said, he was not brave enough to give up his comforts. The tipping point came during a three-week holiday with his wife in Hawaii.

''It was the biggest shock in my life when I realised how horrible, soulless and without feeling the five-star lifestyle is.

''In those three weeks we spent all the money you could possibly spend. But in all that time we had the feeling we hadn't met a single real person - that we were all just actors. The staff played the role of being friendly and the guests played the role of being important, and nobody was real.''

Mr Rabeder decided to raffle his Alpine home, selling 21,999 tickets at £87 each. The Provence house, in the village of Cruis, is on sale at the local estate agent.

All the money will go into his microcredit charity, which offers small loans and advice to self-employed people in El Salvador, Honduras, Bolivia, Peru, Argentina and Chile.

Since deciding to sell up, Mr Rabeder said he had felt ''free, the opposite of heavy''. But he did not judge those who chose to keep their wealth. ''I do not have the right to give any other person advice. I was just listening to the voice of my heart and soul.''

Telegraph, London

European Swift bank data ban angers US

2010-02-11T20:56:00.000-08:00

Tracking funding has been a priority for the US since 9/11

The European Parliament has blocked a key agreement that allows the United States to monitor Europeans' bank transactions - angering Washington.

The US called the decision a "setback for EU-US counter-terror co-operation".

The vote was a rebuff to intensive US lobbying for EU help in counter-terrorism investigations.

EU governments had negotiated a nine-month deal which would have allowed the US to continue accessing the Swift money transfer system.

Top US officials - including Vice-President Joe Biden, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner - had contacted MEPs in recent days to urge them to consider "the importance of this agreement to our mutual security", the Associated Press news agency reported.

But Euro MPs said the deal provided insufficient privacy safeguards.

Lawmakers in Strasbourg voted 378-196 against the deal, with 31 abstentions.

Secret access

The US started accessing Swift data after the 11 September 2001 terror attacks on New York and Washington.

But the fact that the US was secretly accessing such data did not come to light until 2006.

Last week the Greens' home affairs expert, Jan Philipp Albrecht MEP, said that in backing the new deal the European Commission and EU governments had "not respected the fundamental criticism about the lack of sufficient protections with regard to privacy and the rule of law".

The leader of the Socialist group, Martin Schulz MEP, said: "We want a new and better deal with proper safeguards for people's privacy."

Tracking the funding of terror groups globally has been a priority for Washington since the 2001 attacks.

Swift handles millions of transactions daily between banks and other financial institutions worldwide. It holds the data of some 8,000 banks and operates in 200 countries.

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Brands We Loved and Lost in 2009

2009-12-20T00:22:00.000-08:00

by Ben Rooney

provided by

Popular auto makes, magazine publishers and retailers were among the businesses laid to rest in 2009. Here's a list of familiar names you won't see in the future.

1. Circuit City Retail Stores

Circuit City became one of the largest retailers to go out of business this year, after the 60-year old electronics chain declared bankruptcy at the end of 2008.

The fall of Circuit City was mainly a result of the prodigious belt tightening that took place in households across America during the depths of the recession. But the company's demise had its roots in poor management decisions dating back several years.

In 2007, for example, Circuit City laid off several thousand experienced sales people and replaced them with cheaper but less knowledgeable workers. That took a toll on customer loyalty, and ultimately benefited rivals like Best Buy.

Circuit City also found itself in the unfortunate position of having to compete with Wal-Mart as the world's largest retailer aggressively moved into the electronics market with low prices.

Meanwhile, the Circuit City brand has been resurrected online. Systemax Inc., a direct seller of consumer electronics, acquired the trademark and Internet domain name for Circuit City in April.

Courtesy: General Motors

2. Saturn

GM dubbed Saturn "a different kind of car company" when it launched the brand in 1990. Alas, it was not different enough.

Saturn was one of four GM brands orphaned when the largest U.S. automaker went bankrupt early this year. The brand was originally intended to help GM compete with smaller, imported cars. But sales were generally tepid and the Saturn languished as Americans became increasingly fond of big SUVs.

After a protracted, and ultimately futile, courtship with car dealership operator Penske Automotive Group, GM announced in October that the 2010 model year would be Saturn's last.

Courtesy: General Motors

3. Pontiac

Gear heads across the nation mourned the loss of Pontiac, when a bankrupt General Motors decided to discontinue the long-standing brand earlier this year as part of a restructuring plan.

Pontiac, best known for muscle cars such as the GTO and Firebird, had been a staple of GM's product line since it began production in 1926. But it didn't make the cut when the automaker emerged from bankruptcy in July with a new focus on its "core" brands.

In April, after an effort to salvage it as a "niche brand" failed, GM officially announced that Pontiac would be dropped, and that all remaining models would be phased out by the end of 2010.

Courtesy: Kodak

4. Kodachrome

When Kodak introduced Kodachrome in 1935, it became the first commercially successful color film.

But demand for traditional films evaporated over the last decade as digital photography became increasingly available. At the time it was retired in June, sales of Kodachrome were less than 1% of Kodak's still picture film revenue.

Kodachrome was also difficult to manufacture and process. In fact, there was only one processor left in the United States that still developed Kodachrome when it was discontinued.

The Kodachrome brand, however, may be best remembered as the subject of a 1973 song in which Paul Simon begged, "Mama, don't take my Kodachrome away."

5. Home Depot Expo

Home Depot, the No. 1 home improvement chain, announced plans early this year to shutter its Expo Design Centers as demand for granite countertops and custom window treatments withered.

Launched in the early 1990s, Expo offered a variety of upscale home decor items and custom-installation services. The brand was aimed at homeowners who wanted a luxury remodel without having to hire an interior designer.

Home Depot officially pulled the plug on Expo in January as part of a plan to focus on its "core" stores. While the weak economy, sluggish housing market and lack of available credit were the final nails in Expo's coffin, the company acknowledged that it had never performed well financially.

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No Checks Please, We’re British

2009-12-20T00:20:00.000-08:00

UK Banks Vote to Phase Out Paper Checks—Will the US Follow?

Somewhere in my files, there are photos of me holding up those giant checks that foundations love to hand out to charities. It was 1995 and I was raising money in Los Angeles for victims of the Great Hanshin Earthquake that leveled Kobe in Japan. Over the course of a few weeks, I lugged shopping bags full of checks—more than 10,000 donations amounting to millions of dollars—over to our accounting firm. The giant checks were great, but the bags of small, individual donations were like offering of personal prayers written on each slip of paper.

I’m not sure I would have felt the same sentimental satisfaction holding up a printout of a large electronic debit.

This week, the British banks governing the UK Payments Council decided to phase out their check clearing system by October 2018. In effect, they set an expiration date for the use of paper checks (or “cheques” as they prefer). In a statement, the group’s chief, Paul Smee, noted: “There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement.”

Like letters of credit, demands for payment and bills of exchange, bank drafts can trace their history to Roman times, when checks were known as “praescriptiones.” Paper drafts analogous to today’s checks were in use in the Islamic world in the 9th century and as early as the 12th century Templars honored pilgrims’ checks from one chapter house to the next. In England, clearing houses have had responsibility for settling checks since the early 1800s (before that they were often cashed in coffee houses).

Bankers complain that many British retailers don’t accept checks anymore, that young people don’t even have checkbooks, and that it’s costing them as much as a pound (about $1.63 today) to process every check. But the decision certainly has its critics—especially advocates for the elderly and small business owners. On one hand, a generation uncomfortable with electronics will be forced to risk carrying and handling more cash. On the other, mom and pop stores have one more disadvantage against giant competitors (some of whom are starting to act as banks themselves). The move will also put the “unbanked”, who have to pay fees to cash checks but also lack access to accounts capable of electronic payments.

Will the US Follow?

The cost of cash keeps going up while the cost of using credit cards and electronic payments keeps going down. More retailers accept credit cards than checks these days. But while US banks also worry about the costs of handling cash and checks, they aren’t likely to echo the UK decision any time soon. Yes, paper checks are increasingly rare in high-tech countries—whether advanced Scandinavian nations or developing/modernizing regions such as Africa—but the US doesn’t rate as high-tech when it comes to personal finance (present company excepted of course). It has lagged dramatically in the modernization of its financial traditions, such as implementing electronic payments, even compared to Britain.

Instead, US banks such as Bank of America and Chase have been investing in new ATMs that make it easier for customers to deposit checks without envelopes, deposit slips or extra keystrokes. In fact, a law known as “The Check Clearing for the 21st Century Act,” which took effect in 2004, made it easier for banks themselves to settle checks by exchanging scanned images electronically instead of physically managing and transporting paper.

The use of paper checks in the US may have peaked, but they aren’t evaporating in proportion to the explosive rise of electronic payments. According to Federal Reserve statistics, the number of checks written in the US has fallen—but only slightly—from an average of 112 per person in 1971 to 102 in 2006. While the number of checks written in the UK is only a third today of what it was in 1990, the decline isn’t quite as stark here in the USA. British check-writing peaked in 1990 at about 10.8 million drafts. Compare that to some 70 billion written annually in the US by 2001.

Perhaps one reason they aren’t falling more significantly here in the colonies is that we all seem to have so many more monthly bills and accounts these days? Inevitably some of those new store credit cards, nifty home utilities and specialist medical providers still have to be paid by check. And credit cards, electronic debits and automatic payments are easier but often come with service fees, interest charges or “gotcha” surprises. Also, many government institutions, landlords, utility companies and others still preclude (or penalize) electronic payments. It can cost hundreds of dollars to use a credit card to pay your income taxes. Meanwhile, many of us hate walking around with cash anymore, and wouldn’t want to keep more around for house cleaning and home repairs.

The federal government isn’t likely to encourage a return to an uncounted cash economy, either.

A Generational Issue

Using paper, plastic or electronics instead of cash is a generational issue, too. McKinsey & Co. found in a 2006 study that 54% of consumers still pay most of their bills by putting checks in the mail. Another study by Forrester Research found that 71% percent of people who don’t like to pay bills online would rather write checks and receive paper statement for their record keeping. The biggest group of such “traditionalists” is retirees, but regardless of age, most people consider paper to be safer for both security and accounting reasons. (Although a younger sampling might point out that a paper check reveals a lot of personal information, such as address and driver’s license number.)

The idea that electronic fund transfers are more prone to fraud may be more than just perception. As of last year, 76% of US banks reported losses due to debit fraud compared to only 56% losing money to check fraud.

Once, crossing a downtown parking lot on a rainy night, my eye caught two pieces of paper blowing across the concrete. They were checks, that appeared to have been endorsed, deposited and apparently in the process of being transferred from one institution to another. One was for only pennies, but the account belonged to a well-known celebrity. I didn’t recognize the name on the other, but the amount was for something like $55,000. The security department of the bank where the checks had been cashed took little interest, so…

Steve Barth blogs about work, play, society and politics at Reflexions.

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Bank of America names Moynihan next CEO

2009-12-20T00:17:00.000-08:00

NEW YORK/CHARLOTTE, North Carolina (Reuters) - Bank of America Corp on Wednesday tapped insider Brian Moynihan as its next chief executive, ending months of speculation about who would succeed Kenneth Lewis to lead the largest U.S. bank.

Moynihan, who heads the lender's retail bank, will take over as CEO and join the board after Lewis' retirement on December 31. He will move to Charlotte from Boston, easing fears raised during the search that the bank's headquarters might move.

Moynihan said in an interview with Reuters late Wednesday his primary mandate is to carry out the business plan arranged by his predecessor, and the Charlotte, North Carolina-based banking giant must block out the distractions created in the wake of the financial crisis.

"We need to put the last 18 months behind us," Moynihan said. "Now is the time to execute."

Analysts said the new CEO is well positioned to turn around Bank of America, whose massive acquisitions in recent years became a millstone.

"Brian has been a fixer. He's good at getting everyone moving in the right direction," said Nancy Bush, a bank analyst at NAB Research, in Annandale, New Jersey.

Many of Wall Street's elite, including Bank of New York Mellon Corp Chief Executive Robert Kelly, had been widely considered to be prospects for the post after Lewis announced plans in late September to retire.

Speculation about Moynihan's ties to the soon-to-be open CEO post ebbed and flowed with the two-month search.

Initially considered a strong contender by analysts and other bank outsiders, he was considered by some outside observers as a long-shot choice after his U.S. Congressional committee testimony on November 17 about Bank of America's Merrill Lynch purchase was widely criticized by analysts and even the committee's chairman.

U.S. House Rules and Oversight Committee chairman Edolphus Towns, D-NY, said after the hearing that Moynihan "didn't show the kind of leadership a company would seem to need."

Investors appear relieved to have the matter of Lewis' successor settled.

"I'm sure there will be a lot of people that would have preferred to see them go outside the company, to see them have a clean break from everything that happened," said Walter Todd, portfolio manager for Greenwood Capital Management.

"At the end of the day, I think it is good they have got somebody in place."

Moynihan takes over a company that is the largest retail bank in the United States -- with 6,000 branches, 18,000 ATMs and nearly $1 trillion in total deposits -- but is undergoing sweeping changes in its other businesses.

As the new CEO, he must finish the integration of mortgage lender Countrywide Financial and investment bank and wealth manager Merrill Lynch into the company.

He must also steer the bank -- which has reported two quarterly losses within the last year, after posting nothing but profits for the last two decades -- back to profitability.

Moynihan offered the advantage of "a smooth transition," Bank of America Chairman Walter Massey, who led the search for the new CEO, said.

"The board decided after listening to shareholders, regulators and others that Brian's experience was commensurate with or better than any of those candidates," he said in a statement.

Moynihan said he believes the bank's so-called financial supermarket model -- offering a cornucopia of financial services to consumers and businesses -- will work, as some are calling for the break-up of the biggest U.S. banks.

"The way we're arranged, we can do a better job for our customer," he said. "To me, its logical."

FINDING A SUCCESSOR

Bank of America publicly identified the heads of each of its five major businesses, and its chief risk officer, as potential successors, with no external candidates ever formally named.

Yet according to some media reports, the bank struggled to field enough interested outside candidates -- Kelly said on Monday he would not take the job -- while some investors chafed at the possibility of an internal candidate replacing Lewis.

The bank missed one self-imposed deadline of naming a new chief by the U.S. Thanksgiving holiday on November 26.

During the search, the bank's board relaxed a requirement that the CEO be based in Charlotte, and considered retaining Lewis beyond his December 31 retirement date if a successor could not be found.

Moynihan will move to Charlotte to assume the top job, which has brought some relief to a Southern U.S. city anxious about the possibility of losing a key point of prestige.

"This sends the signal that a short-term candidate was not an option, and the board clearly wants someone to lead the bank in a post-TARP world," said Bob Morgan, president of the Charlotte Chamber of Commerce, who added he planned to meet with Moynihan as soon as possible.

FALLEN STAR

Lewis, whose acquisitions transformed Bank of America into one of the dominant U.S. banks, was heralded in 2008 as one of the saviors of the financial system as the bank agreed to purchase Merrill Lynch after a whirlwind negotiation.

But he became a CEO under siege at the end of his tenure, as critics berated the bank's deal to buy Merrill Lynch in September 2008.

Bank of America and some of its executive team and board from that time, including Lewis, are the subject of probes by regulators and state attorneys general concerning billions in bonus payments made to Merrill Lynch employees before the deal closed and billions in fourth-quarter losses run up by the investment bank.

Neither was disclosed to shareholders before the deal was consummated, critics argue, while the bank states nothing improper was done in the course of the deal.

Lewis did meet one of his primary goals, however, repaying $45 billion in aid Bank of America received from the government, as he had said he aimed to do before he left.

Earlier this month, Bank of America sold $19.3 billion of shares and repaid the United States.

(Reporting by Paritosh Bansal, Dan Wilchins, Joe Rauch, Steve Eder and Clare Baldwin; Editing by Gary Hill and Muralikumar Anantharaman)

Original here

Canada money launderer shows holes in Vegas casinos

2009-11-22T01:57:00.000-08:00

By Dan Whitcomb and Deena Beasley

LOS ANGELES (Reuters) - Las Vegas has cleaned up since its days as a magnet for ill-gotten mobster gains, but a Canadian insider trading scam has exposed the smaller-scale money laundering still going on in the desert city's casinos.

Canadian Stanko Grmovsek admitted in a Toronto court earlier this year to making $9 million with a law school buddy in a 14-year illegal scheme. Court documents show he said he laundered some of it by gambling wads of cash on games like blackjack in Vegas's world-famous casino strip.

His confession was a flashback to an era when Las Vegas's "Sin City" image made it a playground for gangsters offloading their loot in glittering gambling parlors.

But strict controls have slashed financial crime in Vegas casinos to a fraction of what it once was, and most organized criminals use less scrutinized industries to convert illegal profits into clean money, experts say.

"In a currency intensive industry it's virtually impossible to eliminate entry points for money laundering," said Paul Camacho, special agent in charge for the Las Vegas Field Office of the Internal Revenue Service's criminal investigation arm.

But he said regulators and police were keeping financial crime to a minimum. "We work hand-in-hand with the casinos. We want legitimate folks coming here and having a good time. Nobody promotes this as a den of thieves."

Grmovsek's admission that he laundered chunks of money in Las Vegas came despite efforts to keep gambling parlors clean with strict controls by casinos and authorities.

Many Las Vegas casinos are publicly listed and, with their licenses at stake, they watch closely for any shenanigans at the tables. Internal Revenue Service regulations requiring cash transactions involving more than $10,000 to be reported make large-scale crime difficult.

Criminal gangs can launder money more cheaply and less conspicuously in cash-rich small businesses like used-car lots and family restaurants, yet the Grmovsek case shows casinos can still work for sums small enough to pass under the radar.

"In theory, if you employed numerous people and broke down the transactions into much smaller amounts," laundering can be done, said David Salas, deputy chief of enforcement at the Nevada Gaming Control Board.

RED FLAGS

Grmovsek said he and his friend Gil Cornblum, a Toronto lawyer, made their money from Grmovsek buying stocks based on acquisition tip-offs from Cornblum, who committed suicide as the case was pending.

After cooperating with investigators, Cornblum jumped off a highway bridge and Grmovsek faces three years in jail after pleading guilty to conspiracy to commit securities fraud.

Grmovsek said he transferred profits from offshore accounts to casinos in Las Vegas and the Bahamas where he would bet on sporting events or play blackjack and cash in piles of chips.

Experts say that in a typical scheme, a money launderer approaches the cashier's cage with cash and converts it into chips using a players card to establish his identity.

He later returns without his card to exchange the chips for cash, leaving no named record of the transaction and creating the impression he has gambled away thousands of dollars.

The scheme works in reverse if he takes out a small amount of chips, establishing his identity with a players card, and returns with a large stack, withdrawn anonymously, that he claims to have won at the tables.

David Stewart, an attorney with Ropes & Gray LLP who advises casinos on money laundering, says such behavior is a red flag.

"The biggest suspicious activity you can engage in is if you go to a casino, present a fair amount of money and you don't gamble," he said. "These are publicly traded companies. No single gambler is worth losing their license."

SMALL FRY

Commercial casinos in the United States, not including those run by Indian tribes, took in $32.8 billion in gaming revenue last year, the American Gaming Association says.

Commercial and Indian casinos filed nearly 500,000 reports of currency transactions of $10,000 or above in 2008 and some 11,000 reports of suspicious activity, according to the Treasury Department's Financial Crimes Enforcement Network.

That marks a rise from 6,000 reports in 2004 but is a small fraction of the hundreds of thousands of annual transactions.

Casinos are required to file such reports for transactions totaling at least $5,000 when there is suspicion the funds were acquired illegally, the intention is money laundering or that the casino is being used to facilitate criminal activity.

Camacho said casinos tend to be scrupulous about these reports as weeding out illicit activity is in their interest.

"If a casino willfully avoids these forms it can be subject to criminal fines, so there is a huge penalty. Not only a financial penalty but also somebody can go to jail," he said.

Global intelligence consultancy Stratfor still sees money laundering in casinos as small fry compared to the billions of dollars organized crime gangs pass through small businesses, especially along the border with Mexico.

"There's pretty good oversight generally at the U.S. casinos," said Stratfor expert Fred Burton. "I don't see this being any major shift or trend of Vegas being at the center of gravity for money laundering."

Another scheme used by small-time money launders involves betting money on both sides of a sporting event. If the gambler needs to document a source of income, he shows only the winning ticket, appearing to have won big on the game. If he needs to document a loss, he offers up only the losing ticket.

"I'll be honest, it's a challenge policing the financial highways of Vegas," said Camacho. "People involved in criminal activity ... usually don't save their money. They want to go spend it, they want to live large, and one of their goals is to go live large in Las Vegas."

Original here

Crispin Porter's Gap Ad Leads to Boycott for Not Using the Word "Christmas," Even Though It Does

2009-11-22T01:55:00.000-08:00

By Kyle Munzenrieder in Flotsam

It's almost time for the Holidays, which means it's time to cover your house in lights, find a present for your weird uncle Adolfo, and, oh right, the annual War on Christmas.

The American Family Association kicked things off early this year by calling for a two month boycott on Gap Inc.

"The Gap is censoring the word Christmas, pure and simple. Yet the company wants all the people who celebrate Christmas to do their shopping at its stores? Until Gap proves it recognizes Christmas by using it in their newspaper, radio, television advertising or in-store signage, the boycott will be promoted," reads their website (which also has a page on how Nazis started the War on Christmas).

But Gap's Ad this year, done by our favorite Coconut Grove-based Ad Agency Crispin Porter + Bogusky actually does use the word Christmas, as in "Go Christmas, Go Channuka, Go Kwanza, Go Solstice."

Though, we'll never understand why some groups absolutely insist on making sure their religions are exploited for commercial gain. If it makes the AFA feel any better, Gap also sells these "Merry Christmas" boxers, so you can, uh, celebrate the Birth of Christ in your pants.

Meanwhile, we're boycotting Gap's sister brand Old Navy because of their stupid Super Modelquins commercials. I swear, if I hear the phrase "party cardi" one more time...

Techmeme's Gabe Rivera makes news aggregation profitable

2009-11-22T01:42:00.000-08:00

Gabe Rivera, founder of news aggregator Techmeme. Credit: Mark Milian/Los Angeles Times.

Don't tell News Corp.'s Rupert Murdoch, but technology news aggregator Techmeme is raking in profits.

Rather than visiting the front pages of every newspaper or choosing a few out of brand loyalty, as Murdoch hopes consumers will do, aggregators put all of the Web's big headlines of the moment onto one page.

There's no shortage in news aggregation. General news readers might go to Google News, a computer-generated engine that pulls in more than 25,000 newspaper websites and authoritative blogs. Left-leaning political consumers might visit the Huffington Post; right-leaning ones might go to Drudge Report.

For tech news, Techmeme, with its smart computer algorithm for culling interesting links, is at the top. A space once dominated by sites like Slashdot and Digg, Techmeme is now the undisputed top influence for the Bay Area tech elite.

Today Techmeme launched a mobile site that's formatted for smart phones to appease news junkies on the go.

It sounds almost laughable that a 4-year-old property, being such a powerful voice in tech, took this long to build a phone-optimized interface. But Techmeme founder Gabe Rivera is not trying to build a trendy, cutting-edge site with its own comment system and social media share features.

Rivera is, to an extent, mimicking the medium that loudly whines about his breed of aggregation. "It feels like a newspaper," Rivera said over lunch last week in San Francisco. "It feels like something you can rely on."

Techmeme became even more newspaper-like last year when Rivera hired his first editor. Fans groaned at the idea of trusting a human to select news in a fair and balanced way. But the site is doing just fine. Better, Rivera argues.

Now, Techmeme has three full-time editors -- including Los Angeles-based Rich DeMuro, a former Cnet reporter -- with contributions from Rivera and a part-timer. "We have people who mostly cover, at least during the week, all 24 hours," Rivera said.

However, Rivera's algorithm is still the backbone. It's the secret sauce that allows small, no-name blogs to reach the top of the pile every once in a blue moon. It does so based on a formula that takes into account who's linking to a page and how influential those sources are, Rivera vaguely explained.

But rather than code in small tweaks to the system in order to fix mistakes, as he had been doing for years, Rivera went with the human touch. He realized that "the most cost-effective thing would be to hire an editor," he said.

"The algorithmic changes continue," Rivera said. "But then once we started that, we discovered new opportunities for the two to work in tandem."

Rivera has similar projects covering politics, celebrity gossip and baseball. But Techmeme is the flagship.

"Techmeme is the product that is the most valuable, that I'm most proud of, that pays bills," Rivera said. Indeed, it's profitable and has never accepted an outside investor.

But Rivera predicts that Memeorandum, "the unfortunately named political site," as he calls it, could be the next big thing. Watch out, Google News.

-- Mark Milian

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11 Things Wal-Mart Has Banned

2009-10-04T02:46:00.000-07:00

by Ethan Trex

Retail giant Wal-Mart is the world’s largest public company, and whether or not you’re a fan of shopping at the House that Sam Walton Built, you’ve got to admit that the store stocks just about everything. But not quite, though. There are a number of things that Wal-Mart has banned from its stores at some point. Let’s take a look at a few of them.

1. Barbie’s Pregnant Pal

In 2002 Wal-Mart cleared its shelves of Barbie’s pregnant friend, Midge. The doll, which featured a removable stomach complete with deliverable baby, was part of Mattel’s “Happy Family” set that also included her husband and son. However, customers complained about seeing pregnancy enter into Barbie’s universe, and Wal-Mart pulled all of the Happy Family sets from its stores.

2. This Underwear:

That’s right: panties that say, “Who needs credit cards…” on the front and “When you have Santa” on the rear. The undergarments started showing up in Wal-Mart’s juniors departments in December 2007 and quickly started an Internet firestorm over the perceived message of using Kris Kringle as a sugar daddy. While the same joke would be fairly harmless on, say, a t-shirt, many women felt that its placement on underwear added a sinister sexual undertone aimed at adolescent girls. In response to the public outcry, Wal-Mart pulled the offending underthings from its shelves.

3. Confederate-Themed Barbecue Sauce

You may remember the raucous debate about whether the Confederate flag should be flown over the South Carolina State House in 2000, but you probably didn’t know the battle spilled over into Wal-Mart’s grocery aisles. At the time, 90 Southern Wal-Marts were marketing a mustard-based sauce created by Maurice Bessinger, an outspoken advocate of flying the Rebel flag over the State House and owner of eight Piggie Park restaurants.

During the flag debate, Bessinger replaced all American flags at his eateries with Confederate flags, a move that Wal-Mart saw as objectionable and needlessly provocative, so the company yanked his sauces from its stores. (Don’t feel too bad for Bessinger, though; it took nothing less than a 1976 Supreme Court intervention to force him to serve African Americans in his restaurants.)

4. A Shirt That Read “Someday a Woman Will Be President”

In 1995 a Miami-area Wal-Mart pulled this shirt from its racks after consumer complaints. The shirt, which featured the character Margaret from Dennis the Menace, ran afoul of “the company’s family values,” so it went back to the stock rooms. Eventually more reasonable, non-Stone-Age heads prevailed, and the shirt made it back onto the shelves after three months in limbo.

5. Workplace Romance

In November 2005, German courts ruled that Wal-Mart could not ban all workplace romance at its German stores. The retailer had unsuccessfully tried to force all employees to sign off on a 28-page code of ethics that included prohibitions on “lustful glances and ambiguous jokes” and “sexually meaningful communication of any type.”

6. An Al Snow Action Figure

In 1999 Wal-Mart put the brakes on selling an action figure featuring WWE hardcore wrestler Al Snow. Snow’s wrestling gimmick at the time involved walking to the ring while carrying and talking to a mannequin head. Naturally, his action figure came with the head as an accessory, but two professors at Georgia’s Kennesaw State University saw the inclusion of the head as a problem. They told the press that by selling the action figure society was “normalizing violent treatment of women. We are telling little boys that this is acceptable behavior.” (Please, parents: don’t ever give your sons the impression that carrying and talking to part of a mannequin is acceptable.) Following this high-profile outcry, Wal-Mart quit stocking the Al Snow action figure.

7. Megan Fox

The Wal-Mart in the starlet’s hometown supposedly banned her for life following a teenage shoplifting bust. A 2008 report on contactmusic.com alleged that Fox got the heave-ho after being caught swiping a $7 tube of lip gloss during a rebellious shoplifting spree, which earned her the lifetime ban.

8. Lad Mags

If you’re a frisky 17-year-old looking for the latest Maxim, Stuff, or FHM, don’t head to Wal-Mart. Since 2003 the store has banned the so-called “lad mags” due to their racy photo spreads and bawdy editorial content.

It’s actually not all the uncommon for Wal-Mart to give a single issue of a magazine an ax, too. In the past, the store has refused to stock issues of Sports Illustrated’s swimsuit edition and a 2001 issue of InStyle that featured an artistic nude shot of Kate Hudson.

9. Music

Wal-Mart has long declined to stock any music bearing a parental advisory warning for explicit lyrical content, but the company’s fastidiousness with regards to music doesn’t stop there. When the store carried Nirvana’s album In Utero, it changed the song title “Rape Me” to the less offensive (and less coherent) “Waif Me.” Similarly, the store declined to carry Prince’s 1988 album Lovesexy because of a fairly tame cover that featured a nude photo of the artist.

10. Superbad DVDs

When the comedy Superbad hit store shelves in 2007, it came with a little extra: a replica of the fake Hawaii driver’s license used by the self-dubbed “McLovin’.” Most movie fans would simply see this freebie as a little reminder of one of the movie’s funniest scenes, but Hawaiian authorities simply felt it was a fake ID. Honolulu mayor Mufi Hannemann requested that Wal-Mart pull the DVD from store shelves across the state, and the retailer quickly complied.

11. Cuban Pajamas

Wal-Mart’s Canadian stores found themselves in a pickle in 1997. The Canadian subsidiary had begun selling Cuban-made pajamas at eight bucks a pop across our neighbor to the North, which enraged both the company’s home office and the U.S. Treasury Department.

The stores quickly pulled the offending PJ’s, which led to a second problem: this action may have violated a Canadian law that forbids abiding by the American embargo of Cuba. After the Ottawa government pointed out that Wal-Mart could face a million-dollar fine for pulling the sleepwear from its shelves, the Canadian Wal-Marts reversed the ban after one week. [Underwear & T-shirt images courtesy of Feministing.com.]

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Why the September Jobs Report Is So Brutal

2009-10-04T02:44:00.000-07:00

By Liz Wolgemuth

Employers in the United States continue to be more interested in cutting their payrolls than in keeping their existing employees, let alone adding new ones. Employers slashed another 263,000 jobs last month, the Labor Department reported today. That brings nonfarm employment down to the level of 2004, when there were about 7 million fewer U.S. workers.

Workers are dropping out: The unemployment rate edged up only slightly, to 9.8 percent, but the number of workers in the labor force fell by 571,000, suggesting the unemployment rate could have been much worse. The ranks of the marginally attached--workers who have dropped out of the workforce because they believe they won't find jobs or because they have other responsibilities, such as school--have grown by 615,000 over the year.

There are not enough jobs: A bill that would provide another 13 weeks of federally funded unemployment benefits to hard-hit states sailed through the House last week but may be complicated by some senators' efforts to get benefit extensions for all states. In some states, eligible workers have already received as many as 79 weeks of benefits. Historically, spells of unemployment that lasted a year or more were very rare, says Harvard economist Lawrence Katz, a Harvard economist. These trends are the sorts that haven't been seen since the Great Depression.

Indeed, the number of workers who have been unemployed for 27 weeks or more--called "long-term unemployed"--rose by 450,000, to 5.4 million. Last month, 36 percent of the unemployed had been out of work for at least six months. The unemployed face a market in which job seekers outnumber job openings by a ratio of 6 to 1.

[See the 10 best places for tech jobs.]

Governments are now feeling the heat: While most other industries slashed jobs throughout the recession, the government sector held up pretty well, helping cushion capital cities from the roughest economic patches. Last month, however, strains on local governments started to show. Government employment fell by 53,000, with the largest drop--24,000 jobs--in the noneducation component of local governments.

Progress has slowed: September job losses were much worse than most economists expected--the median estimate was a loss of 175,000. The government also revised the prior data to show 201,000 jobs were lost in August, rather than the 216,000 originally reported, meaning the trend of narrowing job losses really shifted last month. "Today's report suggests that the progress toward a recovery in labor market conditions has stalled," Ted Weiseman and David Greenlaw, economists at Morgan Stanley, said in a morning note. "We continue to expect to see some eventual follow through on the hiring side, given the recent improvement in production and demand, but the September data reinforce the fact that some important headwinds remain."

Hours fell back down: Along with payroll cuts, many employers have slashed their workers' hours to help lower expenses, and there are now 9.2 million "involuntary" part-time workers (those who would prefer full-time work). The average workweek edged up in August, but September erased the gain, and the workweek is again at a record low 33.0 hours.

[See the best careers for 2009.]

Construction and manufacturing are still hurting: Since the start of the recession, 1.5 million jobs have been erased in the construction industry. Employers in construction slashed 64,000 jobs last month, which, at least, was fewer than they were cutting late last year and earlier this year. The pain was greatest in nonresidential components, where 39,000 jobs were cut. Manufacturing lost 51,000 jobs. That's also fewer than were being cut earlier in the recession, but manufacturing payrolls have shrunk by 2.1 million since the start of the downturn.

The future is unclear: One of the most difficult things to understand about September's jobs report is how far the job market reality was from the government's stimulus forecast. The White House estimated that with the stimulus, the unemployment rate would peak at 8 percent. Without a clear plan to stimulate future job growth, it's unclear how long it will take for the 15.1 million unemployed to gain re-employment in any significant volume. Employers tend to shy away from the risk of new hires until they are confident of the state of the economy. Even for the long-term unemployed, "when the economy is chugging along, firms are willing to take a chance" on hiring and training, says Katz.

Still, the market is improving, as job losses are much less than they were last winter. "What is still very much open to question is how fast the move will be to stabilization of payrolls and eventually to job growth," says Joshua Shapiro, chief U.S. economist at MFR. "We continue to believe that the process will be a slow one and that households will be contending with weak income growth and balance sheet issues for some time."

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GM To Pull Plug On Saturn After Deal Fails

2009-10-04T01:35:00.000-07:00

DETROIT -- General Motors Co. said Wednesday it would shut down its Saturn division after an agreement to sell it to Penske Automotive Group Inc. fell apart. The Bloomfield, Mich. dealership headed by auto racing magnate Roger Penske walked away after it was unable to find a manufacturer to supply vehicles to it after a contract with GM runs out in 2011. A tentative deal for Saturn was announced on June 5. Penske was to get Saturn's 371 dealers and promised to retain the 13,000 Saturn employees. The proposed price was never disclosed. This marks an ignominious end for the brand that was supposed to revolutionize the way small cars were built and sold in America. GM Chairman Roger Smith first unveiled Saturn in November 1983, but the project was slow to develop and the brand did not officially launch until 1990. GM put more effort into making higher-profit SUVs and Saturn languished, never making money. Sales did spring up in 2006 and 2007 when gas prices rose, but then plunged along with other segments of the market last year. GM put the unit on the block this year as it battled the financial crisis that caused it to eventually file Chapter 11. GM CEO Fritz Henderson said in statement that Saturn and its dealership network will be phased out. "This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality," Henderson said in a written statement. Penske's announcement "explained that their decision was not based on interactions with GM or Saturn retailers." Shares of Penske fell $1.92 or 10 percent to $17.26 in after hours trading. They rose $1.32, or 7.4 percent to $19.18 in regular trading Wednesday. Penske said it negotiated with another manufacturer to make Saturn cars, but that company's board of directors rejected the agreement. Penske spokesman Anthony Pordon would not identify the other manufacturer. GM had agreed to keep building the Saturn Aura, Outlook and Vue models through 2011. After that Saturn would have to come up with its own products. Without another supplier in place before the deal was signed, Penske couldn't run the risk of taking on Saturn, Pordon said. It takes several years to design new vehicles or engineer foreign vehicles to meet U.S. standards. Penske would risk having no products to sell once the GM contract expired. "There's a pretty long lead time," Pordon said. "You've got to try to time this so as the supply of one ends and the other one comes on board." Pordon said there is little if any chance that the talks could be reopened. GM said Saturn vehicle owners can still go to their Saturn dealer for service and would be able to go to a certified GM dealer for service once Saturn dealerships are closed. It had been expected that GM would announce the completion of Saturn's sale to Penske in the coming days. The news left many of the 371 Saturn dealers across the country stunned and fearful of being left with nothing to sell. "I find this hard to believe," said Carl Galeana, owner of two Saturn dealerships in suburban Detroit. "Everyone's been saying we're right at the goal line." Galeana said he's heard nothing yet from GM or Saturn, but if the plan is to phase out the brand and cut the products, he'll have to come up with another options. "I assumed if you're at the goal line, those things would have been figured out," he said Wednesday. "We're going to try to put some plan Bs in place at this point." Galeana said he's concerned for his employees and still hopes the deal can be resurrected. "It's tough out there, but we'll keep fighting. That's all we can do." Saturn featured the iconic tag-line "a different kind of car company." GM's hope was that Saturn would attract younger buyers with smaller, hipper cars to better compete with Japanese imports. It built a new plant in Spring Hill, Tenn., devoted to Saturn production. Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM. The factory stopped making Saturns in 2007 and currently builds only the Chevrolet Traverse crossover. Today, Saturn production is scattered at plants across North America. In the late 1990s, Saturn took a back seat as GM focused more on high-profit pickup trucks and SUVs. Then in 2006, car buyers began to find Saturn's new models more appealing. But after a good year in 2007, sales dropped 22 percent last year as the U.S. car market withered. GM has been trying to sell Saturn since earlier this year as part of its turnaround plan.

Copyright 2009 by The Associated Press.

British unemployment hits 14-year high

2009-09-16T22:19:00.000-07:00

by Roland Jackson

AFP/File – People queue to enter a job centre in Bromley, Kent. Britain's recession-hit economy took another …

LONDON (AFP) – Britain's recession-hit economy took another beating on Wednesday as official data showed that the labour market was in its worst state for 14 years, with companies slashing jobs to save cash.

The number of unemployed climbed by 210,000 to 2.47 million people in the three months to July -- the highest level since May 1995 -- despite tentative signs of economic recovery.

And the unemployment rate rose to 7.9 percent in the three months to July, hitting the highest level since November 1996, according to data released by the Office for National Statistics (ONS).

News of worsening labour market data comes despite growing expectations that Britain could soon follow France, Germany and Japan out of a deep recession that was sparked by the global financial crisis.

"While the UK economy may now be growing again, the latest labour market figures showed little sign of improvement," said Vicky Redwood, economist at Capital Economics.

"Even if the recession is over, it will continue to feel like one for many people for a long time yet."

However, other analysts sought solace from the fact that the pace of losses was receding.

"The latest round of UK labour market numbers continued to point to a weak labour market. Albeit one that, at the margin, is getting less weak," said Credit Suisse economist Neville Hill.

IHS Global Insight economist Howard Archer agreed -- but warned that unemployment was likely to climb even higher.

"The overall impression that emerges is that the worst of the job cuts are probably over, but unemployment is still likely to rise markedly further."

He added: "Unemployment jumped by 210,000 in the three months to July, thereby taking the number of jobless up to a 14-year high of 2.470 million and the unemployment rate up to a near 13-year high of 7.9 percent.

"At least, though, this was down from increases of 220,000 in the three months to June and 281,000 in the three months to May."

Bank of England Governor Mervyn King had said Tuesday that there were "signs" of a British economic recovery in the third quarter, following a prolonged recession.

"Following a precipitate fall in economic activity at the end of last year and the start of this, there are now signs that growth has resumed in the third quarter," King told lawmakers.

However, he also warned that the effects of the international financial crisis would likely be "pervasive and long-lasting".

Recent official data showed that Britain's economic downturn eased in the second quarter of 2009.

Gross domestic product contracted 0.7 percent in the second quarter of 2009 compared with the first three months of the year, in the fifth quarterly drop in a row. That was a modest improvement on the previous estimate of a 0.8-percent contraction.

On Tuesday, British defence equipment firm BAE Systems announced that it planned to axe 1,116 jobs in Britain and close a key facility in northwestern England in response to falling orders.

Original here

Facebook 'finally making money'

2009-09-16T22:18:00.000-07:00

Facebook says it is now bringing in more money than it is spending.

The social networking site had previously said it expected to achieve this goal sometime next year.

In a blog post on Facebook's website, founder and CEO Mark Zuckerberg wrote that the company became "cash-flow positive" during the last quarter.

"This is important to us because it sets Facebook up to be a strong independent service for the long term," he wrote.

This does not mean that Facebook is profitable by the measurements that most companies use, though.

Cash remaining after expenses could be swallowed up by other costs like taxes, debt payments or other accounting charges.

Zuckerberg also said that Palo Alto, Calif.-based Facebook now has 300 million users worldwide

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25 and Unemployed

2009-09-16T22:15:00.000-07:00

By Joseph Hooper

"I have this vivid memory of that Sunday,” Laurie Barnett, tells me over the disco music pumping into the midtown Manhattan restaurant where we meet, “when everyone figured out that Lehman was going bankrupt and Merrill was merging with Bank of America, and everything basically went to shit.” It’s hard to picture Laurie, 25, athletic and tomboyishly pretty, being a casualty of anything, but, as she’s eager to tell me, she was present at the destruction, an analyst at a distressed major investment bank, when on September 14, 2008, the illusion of Wall Street as an inexhaustible moneymaking machine ceased to exist.

“Just like everyone has their own story from 9/11,” Laurie says, “everyone has a Crash story. I was at home, hungover on a Sunday afternoon, and my friend who works at Lehman said, ‘I just got an e-mail from a managing director who says he’s packing up his stuff and I should too.’ She used to basically live in her office and had everything in her cubicle, like five changes of clothes. Later in the day, she called: ‘Can you actually come help me bring stuff home?’ I walked in the door with two rolling suitcases, and every single person was in the office, and there were news cameramen outside asking, ‘Do you have anything to say?’ All the tourists were looking on. And we had the suitcases with her clothes and company training books in them and she’s carrying her plant in her arm, and we turned to each other and said, ‘We’re going to remember this for a long time.’ It was an iconic moment.”

The story of how a handful of companies concocted exotic financial instruments that pumped up the housing bubble and their own profits, nearly bankrupting the entire country when it burst, has been front-page news for a year. But behind the headlines is another story about a generation of young women like Laurie. They’re the so-called Generation Y, programmed by their baby boomer parents for success, coming of age in an era of almost unprecedented affluence, landing choice corporate jobs, including on the male bastion of Wall Street, in record numbers. They now find themselves the expendable shock troops in a campaign of corporate “downsizing” that has reached its nadir in Manhattan.

The mass layoffs have occurred at a few investment banks that were swallowed by their healthier siblings. But in the ensuing stock market crash, the pain radiated out from Wall Street to the rest of the country as credit froze, consumer confidence plummeted, and businesses all over the country went belly-up, pushing the national unemployment rate to 9.7 percent in August, the highest since 1983. Also hard-hit, according to Batia Wiesenfeld, PhD, a professor of management at NYU’s Stern School of Business, was the lively mix of industries that feed off an idea of luxury bankrolled by the soaring stock market and those Wall Street bonuses: real estate and retail and art, and the media and PR companies that spread the good word— basically, those glamorous-sounding jobs for which Sex and the City–emulating, high-achieving young women have long flocked to Manhattan and other cosmopolises.

Now many of those women find themselves at a premature professional crossroads, their expensive and hard-won degrees languishing. Mandy Hill, 27, had been a fine-arts major at the University of Michigan, but she lucked into an entry-level job at a Manhattan hedge fund because the markets were booming and the finance companies were hungry for young talent with unconventional backgrounds. “As long as you were bright and willing to work,” Mandy says, “they were happy to teach you.” After nearly two years as an analyst, she left finance to get a master’s at Sotheby’s Institute of Art in London so she could segue to a career in the art world. “I finished my dissertation last October,” she says, “when the world fell apart. Christie’s and Sotheby’s laid off something like 25 percent of their staff, so forget about applying for a job there.” She even struck out in an interview for a gallery assistant job with a family friend: “They got so many applicants, guys who could build the crates and hang the shows. It’s been a little discouraging,” Mandy says. (“People who take jobs for love, in fashion or art, for instance, now often find themselves in worse shape than the people in finance because those industries take longer to recover,” Wiesenfeld says.) Now Mandy is living at home in Wayne, New Jersey, with her schoolteacher mom, and commuting to the city by bus for sporadic auction-house work. Her trademark Gen Y self-esteem has been sorely tested. “I know I’m smart,” she says, “and I think I’ve got a lot to offer, so I figured I’d have no problem getting a job. And that was kind of my mistake.”

A varsity athlete with a nice GPA, Laurie was recruited by her firm when she was a junior at a top Northeastern college, lured into the fold with a well-paid and highly social summer internship.“You go to a lot of events, a lot of drinking,” she recalls. “It’s kind of like rushing a fraternity or sorority.” (That alone was a sign of gender progress on Wall Street—almost a third of her “class” were women.) Over the summer, she was exposed to all aspects of the investment business, including creative ways of slicing up, repackaging, and selling different grades of mortgage debt, the so-called Collateralized Debt Obligations. “CDOs are what got us into this mess in the first place,” she says, “but in the summer of ’06, it was blockbuster, with everyone making a ton of money. It was basically running a lot of quantitative models. I didn’t get it, and I was right not to get it. You didn’t actually make anything, you just found new ways to use money to make money.”

By the time Laurie took her place at the leveraged loan desk in fall ’07, credit had dried up nationwide and “my business had practically stopped being a business,” she says. “Some people came in at 10 a.m., left at 3 p.m. Others brought footballs to the office. And everyone went to the gym in the middle of the day.” Not that doing nothing and getting well paid for it added up to much fun. “There were definitely times when I had a pit in my stomach,” she says, “I figured there was a 50/50 chance I was going to make it.” She didn’t, washed out in a wave of October firings.

No one disputes that in this insecure economy, the psychological impact of women being laid off in finance and its dependent industries—the best and the brightest, the leading edge— reverberates loudly. So how will this generation of young female overachievers cope with an underachieving economy? Business consultant Judith Bardwick, PhD, author of One Foot Out the Door: How to Combat the Psychological Recession That’s Alienating Employees and Hurting American Business, worries that too many young women are “hopelessly unprepared” for a job market that’s now in “a permanent wartime condition.” In part, she blames overinvolved boomer parents (“ ‘helicopter parents’ who swooped down on whatever activity their kids were involved in and insisted they were megastars”) who have left Gen-Yers with sometimes unrealistically high expectations.

“These were the incredibly bright young women who, as I like to say, built their first church in Nicaragua at the age of two and were working on their résumés before they could talk,” Janet Hanson, CEO of the women’s career networking group 85 Broads, says. Adds Judith Gerberg, a Manhattan executive coach and president of the Career Counselors Consortium, “These are people who’ve always succeeded at everything they put their mind to. And then their whole department gets laid off and they go into shock.”

I began to collect their stories, starting with the Wall Streeters whose fall from grace quickly came to define our new age of diminished expectations. A friend knew a friend who knew a young woman at Barclays or Citibank, and we’d meet after work. Typically, she’d be eager to talk about what she’d lived through but nervous about losing her job, if she still had one (which is why most opted to use pseudonyms and some workplace details have been blurred). “Wall Street is a scary little world,” Jennifer London, 25, a research analyst at a major Wall Street bank, told me over dinner in Manhattan’s Flatiron District. “If your name ever appears in print next to the firm’s name, even if you’re saying the nicest things in the world, you could be fired.”

Children of middle-class affluence, hardly trust-fund babies, women like Jennifer and Laurie saw finance as the hot ticket in a boom economy (“it became like the NBA draft,” Hanson cracks) and the entry pass to an independent life in the city. “You’re either on Wall Street and supporting yourself,” Jennifer says, “or you’re in a job you love and your parents are paying the rent.” When the crash came, simple survival at work, and being able to make monthly rent, became epic.

One thing Gen Y has in common with its older colleagues is having to deal with the downsizing fallout pretty much on its own without the outplacement help and emotional support provided by Employee Assistance Plans that even supposedly heartless Wall Street routinely offered in the 1980s and the ’90s. “In times of crisis,” Bardwick observes, “everything goes overboard.”

And 9/11 may play a role as well. In the wake of the attack, the Federal Reserve’s Alan Greenspan slashed interest rates to pump up the economy and morale, laying the groundwork for the housing bubble. But Shelley Reciniello, PhD, an organizational consultant who has worked with the major Wall Street firms since the early ’80s, believes that 9/11 was also the high water mark for companies taking responsibility for the emotional well-being of its employees. “We offered so much counseling,” she says, “the corporate powersthat- be came to resent it, unconsciously. They wanted to forget the vulnerability of that time, and the EAP budgets got trimmed.”

Those who remember feeling supported by their company in the wake of 9/11 (the bulk of Gen Y, the oldest of whom have hit their thirties—the youngest are still in high school—had not yet entered the workforce in 2001) experience the new corporate reality as a sad betrayal. Sarah Steiner, fortyish, then a legal counsel at Lehman, says the old guard that worked through the grief of 9/11 (Lehman’s offices were connected by a walkway to the World Trade Center) have had nowhere to take a different sort of pain, from diminished influence within the new Barclays regime, lost paper fortunes—the now worthless Lehman stock—and a complete lack of trust in their employer. What remains is a kind of corporate nihilism. “The guys who have been working here for 20 years while their wives were playing tennis in Connecticut, by and large, they’re not bringing these feelings back home,” she said last spring. “They’ll act out, come to work on Mondays with black eyes, from reckless skiing or even bar fights.” The women mostly vent among themselves. Both sexes have gotten sloppy, she said, in the matter of office affairs: “They used to be conducted with some discretion and now they’re completely flagrant.”

Business management experts have coined a term, “survivor’s syndrome,” to describe the Pandora’s box of bad emotions—depression, anger, guilt—that can attach to surviving employees in a downsizing office who are often as traumatized as their colleagues who actually got fired. “The research shows a spiraling sense of doom among those left behind,” says corporate coach Phillip Sandahl, cofounder of the Washington State–based Team Coaching International. In an influential book, Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations, consultant David Noer writes about what he calls “the metaphor of the surviving children”: You’re a child in a family. You come down to the breakfast table and see that your little sister is gone and you get the message from your parents that you’re not to talk about it, otherwise tomorrow, it could be you.

“I was sitting at my computer when people on both sides of me got either the weird call or the weird e-mail, and that was it, they were gone,” 25-year-old Rebecca Westphal, an analyst at a major investment bank, says. “Security literally appeared on the floor and escorted them out. You’re supposed to go back to work after that but you can’t, you’re so stressed out. And if you talk about it in the office, you feel you’re gossiping, which you’re not supposed to do.” Having shrewdly secured delayed admission to business school, Rebecca, after surviving six waves of layoffs, finally bailed. (The “time-out” option has become so popular, biz schools are glutted with qualified applicants. I was having coffee with one Merrill pink slip–ee when she got an e-mail saying she’d landed an interview at NYU. “Very good,” she murmured. “The opportunity cost of going to business school is never going to be lower.” In civilian English: When business is tough, it’s okay for the tough to go to business school.)

“It’s like the definition of a totalitarian state,” Jennifer says, putting her Ivy League education to good use. “It’s the not knowing that creates the terror. Like the day we were told that 20 percent of the research analysts wouldn’t be here tomorrow. Would that ripple out to us? We had no idea. It’s like a war and you’re sitting in a trench, and you watch one guy in your line get hit by a bullet and go down. Your odds of surviving are actually pretty good, but it’s just so stressful. For a period of a couple months, I would go home and I couldn’t eat. I just felt numb.”

Julie Randolph, a midthirties Manhattan PR executive (which puts her on the cusp of Gens Y and X) who outearns her husband and floats the expenses of their three kids and heavily mortgaged suburban house, feels she must hang on, though lately her jobresembles something out of Ten Little Indians. “You hear there’s a list and you never knew whether you’re on it or off it. The more your colleagues tell you that you’re safe, the more you think there’s probably a big bull’s-eye on your back.”

A gallows humor comes in handy. Julie’s recollection of being told by management that her boss was set to be fired has the ring of a Mafia hit: “I couldn’t have a normal conversation with this woman because I felt dirty. I knew exactly how it was going to go down. Meanwhile, she’s got a smile on her face and she’s saying, ‘Are you ready with the presentation? Do you think this is the right font to use?’ And I felt like screaming, ‘It doesn’t matter! You’re going to be gone before the meeting ever starts!’ ”

Julie’s experience may have overshot survivor’s syndrome and landed her in Stockholm syndrome territory. “You get in this weird place where you’re appreciative of the torture,” she says. “You think about your friends who’ve been laid off with no interviews, no callbacks, and you don’t want to talk to them about all the horrendous things you’re doing at work because you think, Maybe it’s better to be doing something horrible than nothing at all.”

Those without the kids and mortgage (and a reputation among their elders for being “entitled”) can feel almost as trapped, unwilling to give up even a loathsome job for an undignified return trip home or a gig waiting tables. “We’re type A women who are used to being in control of everything,” Wendy Rosen, a 26-yearold Manhattan business consultant, says, “and right now, in this economy, we’re really not. All you hear, like a broken record, is, ‘You’re lucky you have a paycheck.’ That doesn’t make you feel better when you’re miserable at your job.” With all the extra work she and her peers have picked up from their axed colleagues, they often feel stuck in their own life plan—in Wendy’s case, without sufficient leisure to marry the fiancé she moved to the city to be with. “I don’t want to with the way things are at work,” she says. “I can’t take the time to plan a wedding and go on a honeymoon because my utilization numbers [billable hours] would go down, and I’d be passed over for a raise or let go.”

A former sorority sister from a well-to-do Southern background, Wendy is appalled at the coarseness that has crept into recessionary corporate life. She tells me about colleagues who’ve been pressured by their bosses to travel late into their pregnancies. “The senior women will say things like, ‘Well, I worked up to the day before I had my children.’ I felt like telling these women, ‘And look at you, you’re miserable!’ ” Still, she expects to find a satisfying balance between family and work even if the precise blueprint for the future hasn’t revealed itself yet. “I expect I’ll choose a career with flexible hours,” she says, “or one or two days working from home—that’s the part of me that’s Generation Y. In consulting, you hear, ‘This is something to do until you have babies.’ But I’m not going to stay home and knit sweaters. I want to use my brain.”

When Wiesenfeld compares notes with her MBA grads in the workforce, she hears two common refrains. One group, the survivors under fire, are putting off marriage and family in the style of their boomer and Gen X elders. Another group, the layoff victims, will often take the pink slip as an invitation to get pregnant and immerse themselves in family life. “They’ll tell you that they’re off the corporate track and that it’s really for the best,” she says. “Part of it is PR framing, but they really do believe it as well.”

Bardwick makes the point that recent graduates, for all their ambition, lack a feminist ideology that might check a backslide to the days when women sought the security of marriage and a hubby’s paycheck. “For the first time since labor statistics have been kept,” Bardwick says, “we see that educated professional women are beginning to leave the labor force. The absolute numbers are small, but it’s a trend.”

None of my confidantes predicts an imminent return to the ’50s, but Jennifer admits, “I do think the recession has increased the pressure to find a rich husband. Girls get really aggressive about wanting to find a guy who will take care of them. It’s not a pleasant side of the city, the dating for money.” A lack of funds can change the domestic equation even for young women who don’t fit the gold-digger description. Until last February, Jennifer’s friend Eva, 29, a Parsons grad, worked as a retail analyst at a lingerie company. When the retail market contracted, she was let go. Unable to pay the rent, she moved in with her boyfriend, with misgivings. “I’d like to be living with someone because we wanted to,”she says, “not because I had to.”

Wiesenfeld admits she’s seen these sorts of trends in previous recessions and isn’t unduly worried. However dire any individual story, she says, historically, corporate downsizing has been good for young people, creating space for them to move up the ladder if they can focus on the work, not on the
emotions spinning around the workplace. What’s new this time around is the number of women in their twenties and early thirties who are availing themselves of another option, creating their own business: “Young women are looking for meaningful lives, and they’re willing to be quite entrepreneurial to find that.”

Jennifer says, “The gleam has definitely worn off Wall Street. These companies will fire you at a moment’s notice. That’s fine. But I’m hedging my bets with something on the side, a risk, but a very calculated risk.” In other words, don’t get emotional, get even. The new project that she hopes will lead her out of the corporate cubicle? She and a friend from Harvard Business School are launching an interactive health website for young women, ChickRx, that they plan to have up and running by late fall, which connects visitors to a team of doctors on health topics such as contraception, sexual health, diet, exercise, and emotional issues. Résumé-padding college interns are doing much of the grunt labor, and costs are kept bare bones: no loans, not from parents, not from the bank. “My parents have no idea how much I’ve spent on this,” Jennifer says. “I don’t need the added pressure.”

It’s a testament to their cleverness that the business model turns on their generation’s penchant for social networking, the very trait that some experts believe will save them from the long-term unemployment that many of their older colleagues may face. “Middle-aged people are often focused internally on their families,” human resources consultant Alicia Whitaker says, “but it’s the young people who can leverage their social networking skills in a downsizing environment.” They’re hardwired, as it were, to pursue contacts, leads, job openings. “We’re the ‘do you know?’ generation,” Laurie says, “like Facebook. ‘You work at this bank; do you know my friend so-and-so?’ ”

A few months after our first meeting, I catch up with Laurie, who’s sporty in a striped nautical tee and Ray-Bans, a feckless poster child for resilience in tough times. (“I’m young and only have my drinking and my rent to support.”) She leveraged some connections and landed a new job that paid barely half what the old one did, “an administrative assistant with a brain,” but at least she didn’t have to go on unemployment or move home. “If I hadn’t found a finance job,” she says, “I would’ve joined the Peace Corps or something.” Some of her peers haven’t been as lucky, the “next-step kids,” she calls them, trolling the financial website job listings day after day, trying to move on to the next step without taking any detours. By luck or moxie, she recently found a more rigorous and well-paid finance job. (So did the Lehman friend she helped rescue on September 14.) The finance details of what Laurie actually does are beyond me. “As long as it makes sense to you,” I say. “It doesn’t really make sense to anybody,” she laughs. “Trust me, all day long, everyone thinks about what they’d be doing if they weren’t in finance.”

Laurie gets points for her droll tenacity. But if Manhattan is to reclaim its status as the ultimate laboratory for self-invention, ambitious young women need to shoot higher than just hanging on to their corporate finance seats, however lucrative. Chick- Rx offers one example; so does Sunitha Jaikumar (her real name), 26, a vivacious Southern Californian who last year was laid off at Gateway Computers. “They brought in our whole department,” she says, “and told us they were giving us two months to train our replacements or we’d lose our severance. I was like, ‘Severance—sweet!’ It’d always been a dream of mine to live in New York, and now I could afford it. I had a sixmonth budget laid out on a spreadsheet.”

Two weeks after she moved to the city, she says, the market crashed. But before her money ran out, she found a job working for a “green” cosmetics company and, even more amazing to her friends, an affordable apartment on the island, in Spanish Harlem. Of course, in this economy dreams don’t always materialize quite that easily. In the face of declining sales in a tough retail market, last April, the cosmetics company let her go. “I’m going to come out of this,” Sunitha says, “and I’m going to be okay.”

Original here

Rupert Murdoch sees improving ad trends

2009-09-16T22:14:00.000-07:00

By Georg Szalai

NEW YORK -- News Corp. chairman and CEO Rupert Murdoch said Tuesday his conglomerate has seen advertising improvements in recent weeks.

U.S. ad trends have been "very much better," he told the Goldman Sachs Communacopia Conference here, adding, "It's a pretty healthy picture at the moment."

The Fox network is "sold out solid" in the entertainment division until the end of the year, with ad rates down less than 1%, he said.

The firm's TV stations, which have been trending down 20% year-over-year, are seeing September pacing down 8%, Murdoch said. Things seem to be "getting better every week," he said.

Murdoch predicted a bump followed by a fairly slow economic recovery.

News Corp. also is finally seeing the benefit of being the most global media giant, Murdoch said. "Everywhere around the globe there is a slight lift" despite different regions and media doing differently. "India is great," Australia is strong and the U.K. weaker, he said.

Asked about the firm's cost base, Murdoch said "we've achieved a lot of efficiencies" amid the recession, but there is room for more.

Murdoch said News Corp. wants online video service Hulu to add subscription services and/or a PPV offer. His vice chairman, president and COO Chase Carey, had recently signaled interest in paid-for services.

Asked about the relationship between the Fox network and its affiliates, Murdoch said he is looking for network compensation from stations because network shows draw crowds and are costly. He didn't detail possible scenarios.

Asked about his interest in rights to future Olympics, Murdoch initially said, "I wouldn't think so," but he then added that if Chicago gets the 2016 Summer Olympics, that "may be pretty tempting."

Discussing the film business, he said he is "very confident" about Fox's outlook despite a weak market for catalog and smaller movies. Asked about Redbox, he only said that "some of us will try and window it."

He also said the recent return of Carey allows Murdoch to concentrate on bigger ideas. "I trust him 1,000%," he said.

Meanwhile, Murdoch's Wall Street Journal will start charging for mobile access on the Blackberry in the coming months, he said. He mentioned a price of $2 per week for nonsubscribers and $1 for print subscribers.

"News is more valuable than it's ever been" as the digital age provides new opportunities, Murdoch contended, shrugging off the suggestion his firm should change its name to Entertainment Corp.

"If we were Newspaper Corp., I'd say yes, we'd definitely change that," he said.

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The 20 Worst Venture Capital Investments of All Time

2009-09-16T21:56:00.000-07:00

By Inside CRM Editors

Some things were just never meant to be, but that doesn't mean that investors won't pile millions of dollars upon a bad idea — or even a good idea gone bad. Whether they crashed and burned or sucked investors dry, these ventures just didn't work out. Check out our graveyard of dreams and money to get a look at VC (venture-capital) investments that just weren't wise.

Amp'd Mobile: Amp'd Mobile takes the crown for money-burning, with $360 million that ended in bankruptcy. The company's major problem was its customers' ability to pay. While other mobile providers check for an ability to pay bills within 30 days, Amp'd let it go to 90 days and marketed to these risky customers. It has been reported that 80,000 of the company's 175,000 customers were unable to pay their bills.
Procket: Networking company Procket was once one of the most highly valued telecom startups in the U.S. It had $272 million in venture-capital funding and a valuation of $1.55 billion but was ultimately sold to industry behemoth Cisco Systems Inc. for a disappointing $89 million.
Webvan: Webvan was a grocery-delivery business that served nine metropolitan areas. Once valued at $1.2 billion with plans to expand to 26 cities, the company went bankrupt in 2001. Despite millions in sales, the company's demise was brought on by a money-burn that exceeded sales growth. Major purchases included $1 billion for warehouses, enterprise servers and more than 100 Aeron chairs. Additionally, it acquired HomeGrocer just a few months before going under. This fast expansion proved to be too much for Webvan. This company that once had about $800 million in venture capital ended up with $830 million in losses, with about $40 million on hand.
Caspian Networks: Caspian Networks, originally founded as Packetcom Inc., had a number of ups and downs, including a washout in 2002; the company finally shut down in 2006. Caspian Networks fluctuated from more than $300 million in funding and 323 employees to less than 100 employees and closed doors.
Pets.com: This icon of the dot-com bubble died out in November of 2000, going from a listing in NASDAQ to liquidation in just nine short months. The site sold pet supplies and accessories online. Once backed with $50 million by Hummer Winblad Venture Partners, Bowman Capital, and Amazon.com Inc., Pets.com had promise and even bought out competitor Petstore.com. But in the end, its stock bottomed out at 19 cents per share. Remembered for its sock-puppet ads, the expense of its $1.2 million Super Bowl ad, as well as large infrastructure investments, proved to be too much. Pets.com's sock puppet lives on as the icon of BarNone Inc.
Optiva: Optiva, a nanotech company that laminated flat-screen TV sets, had to shut down after it failed to continue to raise funding. It initially raised and ran through $41.5 million in venture capital. The problem was that it took too long to release its product, which was obsolete by the time it came to market.
Kozmo.com: Kozmo.com's small-goods delivery service, while a recipient of around $250 million in investment, and popular with students and young professionals, ultimately met its end and liquidated in 2001. Its business model was criticized as unprofitable because it didn't charge for deliveries. Kozmo.com's demise is profiled in the documentary film e-Dreams.
CueCat: This much-mocked pen-sized bar-code scanner was designed to make finding information about ads easier. Instead, Digital Convergence Corp., CueCat's creator, burned through $185 million from investors like The Coca-Cola Co. and General Electric Co. The device simply failed to catch on, and it was plagued with security problems.
DeNovis Inc.: DeNovis software once attempted to change the medical-claims world but ended up shutting down instead. It raised $125 million in venture capital and had 110 employees. Unfortunately, that wasn't enough, and this promising solution simply didn't have the cash to hang on until the software could be launched.
PointCast Inc.: After tens of millions of dollars in venture capital and a $400 million buy offer, PointCast was finally sold for $7 million. It was originally touted as the next big thing, but failed to live up to its hype when its software and downloads irritated customers.
eToys: Despite being measured as the "benchmark against which all other sites are measured," eToys ended in bankruptcy. The company was largely edged out by Amazon.com, which formed a partnership with Toys 'R' Us, but ultimately, customers just weren't willing to wait a few days for their Legos. It was backed by VC firms Idealab, Highland Capital Partners LLC and Sequoia Capital Partners.
AllAdvantage: AllAdvantage offered Internet users 50 cents per hour to watch banner ads on a "Viewbar." Of course, the problem with their business model was that advertisers didn't see the appeal of the low-pay demographic AllAdvantage offered. This company represents $135 million in venture capital down the drain.
FastForward: FastForward's software and design took a nosedive due to faltering profits. Investors sunk $54 million into the company, which ended with bankruptcy and a selloff designed to raise funds to pay around $2 million in debts.
Xoma: While many pharmaceutical companies enjoy soaring profits, Xoma isn't one of them. This 26-year old company has not earned a profit since its inception in 1981. In fact, it has run through more than $700 million. Its stock has gone from highs of $32 per share to $3.04. Of course, this company's future is much more promising than many of the other companies profiled in this article. There's still a chance that Xoma will see success, even this far down the road. Perhaps you'll see Xoma on a future list of VC turnaround stories.
Flooz.com: Flooz was a digital currency that could be bought online and used somewhat like a gift certificate for online retailers. The company raised more than $50 million in support but, despite backing from big names like Whoopi Goldberg and J. Crew, went broke in 2001 after revenue slowed down. The company also suffered because thieves charged around $300,000 in Flooz to stolen credit cards.
Vanguarde Media Inc.: Vanguarde Media, publisher of Savoy, Heart & Soul and Honey, couldn't stay afloat, filing for bankruptcy in 2004. Even after $60 million in VC funding, the company simply wasn't able to sustain its business model with advertising revenue. Vanguarde Media also had troubles with real estate and Web sites.
Pixelon.com: Although Pixelon's money-burn of $16 million isn't remarkable in comparison to the other all-stars on this list, the way it was burnt certainly is. Pixelon's founder, "Michael Fenne" was more con man than entrepreneur, spending most of the company's investment on a Las Vegas launch party peppered with stars like Tony Bennett, Kiss and The Who. Eventually, it came out that Mr. Fenne was actually David Kim Stanley, a man on the run from the law and living in his car, who previously pleaded guilty to swindling $1.5 million from friends and neighbors.
Bolt Media Inc.: Bolt Media survived the dot-com era but finally met its end. This video site, launched in 1999, had more than $60 million in venture backing, and even went through a number of trials like a management buyout in 2004. In the end, Bolt's lawsuits kept it from being bought out by GoFish Corp., and the company has since shut down.
DigiScents: Would you like to "smell" the Internet? Yeah, we didn't think so. Neither did potential investors for DigiScents. After $20 million in investment, this smelly company was shut down because it couldn't come up with additional cash to go on.
Boo.com: Boo is a prime example of dot-com excess, with $120 million burned on apartments, gifts and a huge site that left dial-up modems struggling. The company had Miss Boo, a sales-assistant avatar, and loads of JavaScript and Flash. Essentially, the site lacked usability. The book "Boo Hoo: A Dot Com Story," chronicles the company's boom to bust.

The original source of this article is InsideCRM.com , part of the Focus network of sites.

12 Economic Bubbles That May Burst

2009-08-14T10:24:00.000-07:00

What’s the next big bubble? Green energy? Gun sales? Food? Nobody knows for sure.

Based on our research, 12 new bubbles already show potential to make and ruin investors. The markets listed below range from bubble-in-the-making to ready to pop:

1. Gun sales

Anticipating anti-gun legislation, certain Americans are snapping up guns to hoard, collect, or safekeep. Some are even stockpiling for investment purposes.

According a gun buyer mentioned in this Wall Street Journal article, a collection of “assault weapons” could triple in value if the federal government re-enacts a ban on their sale. Background checks on potential gun buyers increased by 27% in the past year, according to the article.

Some guns have already appreciated. For example, European-made AK-47s doubled in price between September-December 2008. For savvy buyers, the right to bear arms is also bearing fruit. The question is: When’s this bubble going to burst?

7. Option ARMs

Starting in May 2009, option adjustable rate mortgages (ARMs) have been causing “more delinquencies and foreclosures than subprime mortgages,” according to a Wall Street Journal article written in July.

Option ARMs allow homeowners to pay partial interest on their home loans for a predetermined period of time. In some cases, the unpaid amount of interest is added to the loan’s principal. Once the partial interest window expired, homeowners are left with potentially unaffordable payments.

Combine that will falling property values, and you see yet another loan-inspired disaster. According to the Wall Street Journal,

As of April, 36.9% of Pick-A-Pay loans were at least 60 days past due, while 19% were in foreclosure. In contrast, 33.9% of subprime loans were delinquent, with 14.5% of those loans in foreclosure.

Option ARMs are concentrated in California, Florida, and other hard-hit housing regions, writes the WSJ. Wells Fargo, J.P. Morgan Chase, and the FDIC’s insurance fund hold a large proportion of option ARMs, so a burst bubble will hit them especially hard.

It’s just a matter of time.

3. Cap & Trade

In September, the Senate will vote on the American Clean Energy and Security Act, which should really be called the Clean Energy Securitization Act. The act will create a cap-and-trade market that will create new derivative-friendly asset classes, according to this Christian Science Monitor article.

The government will, if the act passes, activate a market for carbon allowances and carbon offsets. The former are permits allowing companies to pollute; the latter, pollution permits that require companies to offset their carbon emissions elsewhere.

That, writes Mother Jones reporter Rachel Morris, is just the beginning. Once permits hit the market, financial experts will convert them in derivatives with names like “offset futures” and “allowance swaps.”

Bubblemania will ensue if the government shies away from regulation and enables the same kind of chaotic, over-the-counter system that enabled the mortgage-backed securities crisis.

The financial industry is currently lobbying for minimal regulation. If the bill goes through in September, and the government steps back from applying regulation, subprime carbon might not be too far away.

4. Incandescent Light Bulbs (EU)

A pending EU-wide ban on incandescent (traditional) light bulbs is causing consumers to hoard the soon-to-be unlawful products. Manufacturers are enjoying massive sales as a result.

The Spiegel article covering this bright bubble news didn’t mention anything about people hoarding for investment purposes, as they are for guns, but that certainly remains an option. The bubble will burst in September, when stores no longer sell incandescent lighting, and it will really burst when CFL (compact fluorescent lightbulb) technology improves enough to make people toss out their old incandescent.

5. China

Chinese stock markets have been surging, fed by easy credit from government-linked banks. The Shanghai Composite rose 16% in July alone. Banks extended $1.1 trillion in new loans during the first six months of 2009.

What’s more, a Chinese company enjoyed the biggest global IPO of the year. China State Construction Engineering Corp. raised $7.3bn in one day. The Shanghai Composite Index dropped 5% as a result: Investors feared that the same speculation that had increased CSCEC’s stock value by 56% was also overheating the market.

Unfortunately, China’s economy remains export-driven. The numbers are a smokescreen. The Chinese government is powerful enough to “make the right numbers appear” if it thinks the country’s economy needs stimulating, according to Contrarian Edge’s Vitaliy Katsenelson. “(T)he government is more than willing to artificially stimulate the economy, in the hopes of buying time until the global system restabilizes,” he says.

China is experiencing “asset bubbles that look like economic growth,” writes Bloomberg’s William Pesek. Will China’s market manipulation survive the recession, as the government has planned, or will the bubbles all burst?

6. Gold

To many investors, “quantitative easing” is synonymous with “buy gold as fast as you can!”

The problem is that more money in the mint doesn’t necessarily mean inflation. What if the Fed printed less money than was lost in the financial crisis? What if consumer demand remains low and producers can’t increase their prices? Or if, after banks recapitalize, there isn’t any extra money left? Or electronic money messes up the whole notion of quantitative easing?

Gold will spike when in inflation hits, but if there’s no inflation, speculators will be left empty-handed. Then again, if–as some goldbugs claim–the dollar weakens further, global financial systems collapse, and governments fail, it’ll be nice to have some bullion on hand.

7. Higher Education

Elite schools like Harvard and Yale have frozen some faculty salaries. What gives? It’s a widespread endowment dry-up, according to The New York Times’ Steven M. Davidoff. He explains that in recent years, endowments and tuition hikes have enabled universities to expand buildings, programs, and faculty, as well as increase salaries.

With the economic crash, however, endowments have shriveled. The Harvard endowment, on which certain parts of the university heavily rely, used to enjoy handsome portfolio returns: Its private equity portfolio gained 28% during the past decade. Now, it is facing more than 30% losses, according to Davidoff’s calculations. He estimates that up to 40% of Harvard’s assets are illiquid, meaning that it will have to aggressively raise donations or increase its liquid returns to fund itself and its private equity obligations.

“This results in a spiraling decline in Harvard’s liquid assets as each year they go lower to meet these needs and more and more assets become tied up in private equity,” writes Davidoff. Ouch. Overdependence on endowments and private equity is bursting the higher education bubble, especially at the top tiers.

8. Trustafarianism

Photo By Charles Sykes / Rex

Bubbles can be cultural, too. Just ask the hipsters featured in this New York Times article, who freeze in shock after being informed that full-time jobs last eight hours a day. For many, the parental bailout is a bubble that has either deflated or burst.

9. Alternative Energy

The next decade marks the rising of a Brave Green World. Governments are limiting carbon emissions and pushing large alternative energy subsidies. Peak oil makes the search for alternative energy sources more pressing. Cap-and-trade, if it passes, will create a new market for energy-related derivatives, enabling speculation and asset price inflation.

“There must be significant government involvement designed to focus energy and capital on the specific industry — and clearly that’s already happening,” writes Jeff Brady in this NPR article.

A few pieces still have to fall in place for a bubble to form. These include a massive update of the national energy grid, as well as a new source of credit for green ventures, according to Brady. He says that a grid update is in the works. A new source of credit, in my opinion, is just a matter of time. When that happens, brace yourself for the green market overvaluation—err, revolution.

10. Junk Bonds

In late July, average junk bond yields fell into the single digits for the first time in more than a year, according to the LA Times’ Tom Petruno. The KDP Investment Advisors’ index, which covers 100 junk issues, hit a high of nearly 18% returns last December, Petruno reports. Record bond defaults haven’t deterred investors from loading up on the risky bonds, but they have returns on their sides. Petruno says that “the average junk fund is up 27.2%.”

Those returns out-entice the prospect of massive defaults, which are bound to occur eventually. 42% of junk bond issuers have “highly leveraged balance sheets—much more than in previous years,” according to this CNNMoney article. It’s a good time to be in junk bonds—if you can get out before the bubble bursts.

11. ETFs

Vanguard’s John Bogle calls exchange-traded funds (ETFs) a “disaster waiting to happen.” The reason? Short-term traders are using ETFs to pursue short-term gains, according to this Seeking Alpha article. Passive investors try to jump on the bandwagon by buying into high-performing ETFs, not realizing that they chasing performance could spell speculative doom to their savings accounts. They’re good for long-term investing, Bogle says, but only if you use them right.

Bogle isn’t the only one wary of the ETF craze. The genre is facing oversupply to the point of redundancy. Early ETFs tracked “only the broadest indexes,” according Safe Haven’s Tyler Mordy.

Things have changed. “The first ETFs…were rather difficult to push around, and so not much given to speculative excess,” write William J. Bernstein of Efficient Frontier. He cites a “mind-boggling” variety of new ETFs—the HealthShares Infectious Disease Index is one example of how specialized the breed has become—as evidence that a new bubble may be on its way. “With each new wave of yet-more-improbable products, the danger grows,” he writes.

“Do we really need nine ETFs that essentially track the same thing?” Asks HS Dent’s Charles Sizemore. He says that specific supply and demand conditions created previous high returns. These returns caused competitors to enter the market, increasing supply, but diminishing the very returns that drove them into the market in the first place. At that point, “weaker competitors and products leave the market. We would expect there to be some kind of shakeout in the ETF sector in the months or years ahead.”

12. Food

Peak oil is so passé. Peak grain, on the other hand, could be the next big thing. Consider these facts:

-The planet doesn’t have enough high-quality arable land to keep up with the growing population. (The world has already consumed more grains than farmers produced during five of the past six years, according to this IPS article.)

-The amount of clean water in the world is decreasing, meaning less water for edible crops.

-Fossil fuels—commonly used as fertilizer—are getting more expensive.

-Climate change will affect crop production.

-The UN expects 12 billion people to inhabit the world by the end of the century.

It’s a simple supply and demand equation. Big demand for food and water, but little supply, means that prices will increase. It’s just a matter of finding the right agricultural niche to invest in. Right?

Not so fast. A bubble needs more than just supply and demand to foment. In 2008, a commodities bubble came and went. An increase in oil prices—caused by speculation, no less—drove up transportation prices, which in turn drove up food prices. Investors went on an agriculture/commodities binge, only to find their returns destroyed by falling prices, courtesy of the financial crisis.

This short, dramatic spike was of limited significance. A more sustained food bubble could be a ways off, especially if the government starts regulating commodities speculation. Look for persistent news of food shortages, rumors that you can make money by investing in agricultural stocks based on those shortages, and increasing food prices. At that point, a bigger bubble could be in the making.

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Congratulations Americans, We Pay The Most For Cellphone Service

2009-08-14T10:22:00.000-07:00

By Chris Walters

A new survey from the Organization for Economic Cooperation and Development (OECD) compared annual costs around the world for consumers who have cellphones, and the U.S. is in the top three for most expensive. How expensive? DSLReports notes that "on average, the OECD found that Americans pay $635.85 on cell phone service, compared to $131.44 per year in the Netherlands or $137.94 per year in Sweden."

The carriers disagree that we're getting screwed, of course:

As you might expect, the wireless industry issued a press release proclaiming the study was based on "flawed assumptions" that "just don't make sense." If you look at the data the way carriers would like, you're getting quite the bargain. The CTIA does have a point that the OECD's usage categories seem low — particularly when it comes to MMS use. Another reason U.S. prices seem high? Carriers charge a hell of a lot of money for service. They also spend millions on lobbyists who tirelessly work to eliminate consumer protections and price controls.

Additionally, this dumb study isn't taking into account the cutting-edge technology our carriers employ, which is so far ahead of other countries that it's nearly lapped them and is now behind, or something like that. (I'm trying to think like a cellphone executive; it hurts.) As an example of what more than $600 a year buys you, just look at today's column from PC Magazine's editor in chief, Lance Ulanoff:

Back at home, some calls did get through, but all were so poorly connected-with frequent drop-outs-that I had to hang up and try again. I looked at my phone and noticed that 3G connectivity was hovering around a half of a bar. Every once in a while, the tiny bar would disappear. It was replaced by a bar and a half of Edge Network connectivity. I wasn't even moving and the phone was busy dancing around, trying to get me a reasonably good connection. At one point, I even moved outside to try and get a better connection. This helped a tiny bit: I think I got one more bar. Still, the call connection and quality remained unreliable-at best. The other problem was that I wasn't receiving calls. Everyone was getting bumped to voicemail. (I do give AT&T credit for delivering voicemail in a timely fashion. Sprint messages could take days to arrive.)

"Consumers In U.S., Canada Pay More For Wireless" [dslreports via Jesse Harris]
"Mobile phone calls lowest in Finland, Netherlands and Sweden, says OECD report" [OECD]
"Love My BlackBerry Bold, Hate AT&T 3G" [PC Magazine]
(Photos: thisisbossi, AMagill)

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The Internet Is Dead (As An Investment)

2009-07-20T12:33:00.000-07:00

By James Altucher | A Dow Jones Newswires Column

I can live all day inside the Internet. I can talk to my friends, listen to music, watch TV, trade stocks, play games, do work - all on the Internet. From 6 a.m. until 10 p.m. every day I can spend on the Internet and it would be a day well spent.

But run for the hills when it comes to advising clients to invest in the Internet.

Columnist and portfolio manager James Altucher explains to Simon Constable why Google, Facebook and other internet plays are dead from an investment standpoint. Plus what stocks are hot in the rest of the economy.

The days of infinite margins, 1,000% productivity gains, and growth of market throughout the universe are long over. Internet companies now should be treated, at best, like utility companies that get bought at about 10 times earnings and sold at 13 times earnings. Even then, I'm not sure I would give the Internet sector the same respect as the monopoly-protected utility sector.

Don't just ask me. Ask the best. Nobody can figure out a business model.

Time Warner would rather keep their legacy old-media businesses like People magazine than hold onto one of the biggest Internet companies out there, AOL. And News Corp. is shaking up its MySpace business as it figures out its next steps. (News Corp. owns Dow Jones, publisher of this newswire.) Microsoft has spent billions on Internet strategy without a dime of profit. And even Google can't seem to find any other business model other than the one they stumbled into when they bought Applied Semantics in 2001 that had a little piece of software called AdSense. And the new guys: Twitter and Facebook are still scrambling for profits despite blistering usage growth.

What about the nuts-and-bolts guys? Cisco, at 15 times earnings, trades in line with the S&P 500. Buy them when they start giving a steady dividend.

Let's face it. Electricity greatly improved our quality of life. But I'm not going to get excited about buying a basket of utility companies. Same for the Internet. Can't live without it, but can't live with it (in my portfolio).

So what do we do?

In this economy, it's back to the basics. Regardless of how you feel about $1 trillion in stimulus (with more probably on the way), the best growth is going to come from the companies that help us spend that stimulus.

Check out LNN, Lindsay Corporation, that does boring stuff like highway repair (they make those orange cones) and helps upgrade water infrastructure. With half of all hospital beds in the world filled by people with dirty water-related illnesses, this one is a good bet.

Or little known Colfax Corporation, CFX. At nine times forward earnings, this company is in the "fluid handling" business. Boring. But in a resource-starved world we need them to get oil quickly through the pipelines and into the refineries. And we can't forget about ASTE, Astec Industries, which is like the "Amazon of Asphalt" and is a major player in highway repair (think stimulus again).

The exciting plays right now are the companies that are rebuilding the country along with the economy. Save the Internet for your iTunes downloads. But focus client portfolios on the future. Next article: my favorite biotech plays.

James Altucher is a managing partner of Formula Capital, an alternative asset management firm, and an author on investment strategies. Unlike Dow Jones reporters, he may have positions in the stocks he writes about.

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Embattled organic sector worries about regulation

2009-07-20T12:31:00.000-07:00

By Mari Saito

WASHINGTON (Reuters) - California farmer Tom Willey was first attracted to organic farming 21 years ago after noticing how many chemicals he was using in conventional farming.

As a certified organic farmer selling everything from artichokes to zucchinis from his 75-acre farm in the San Joaquin Valley in California, Willey has become a respected pioneer in the organic farming community.

But now with the deep recession in the United States, farmers such as Willey are worried about the future of organic farming that grew sharply during the boom times.

The industry, which prides itself on delivering wholesome and safe products, also is worried and even a little angry about new food safety rules emanating from Washington.

"There is a lot of transparency in the organic food system and we've had it in place for several decades and we do so willingly," said Willey. "The lack of that is what characterizes industrial producers."

The global market for organic food has grown sharply over the past decade, with the United States accounting for about 45 percent of the global share.

Sales of organic food have soared from $1 billion in 1990 to an estimated $20 billion in 2007 and by 2006 became the fastest growing sector in the industry, according to the Organic Trade Association.

But now growth is coming to a halt as Americans tighten their purse strings and opt for cheaper alternatives.

"Millions of people who were occasionally buying organic products have cut back to save money and we're seeing the real decrease in growth in the last nine months," said Ronnie Cummins, the national director of the Organic Consumers Association.

Whole Foods Market Inc, a chain that sells organic and luxury grocery items, reported in May that quarterly sales fell nearly 5 percent from its stores opened at least one year. Profits also fell but the company said it avoided going into the red by cutting prices to keep consumers coming back.

Neil Currie, an UBS analyst said consumers are seeking lower prices and staying clear from luxury food products.

"Organic food comes at a premium price and Whole Foods sales have been quite negative," said Currie.

Growth in the organic sector dwindled to 12.5 percent last year compared to the 20 percent it used to enjoy.

"We might not see that kind of growth again," said Cummins.

An added worry for organic farmers is a new food safety legislation that passed last month in the Energy and Commerce committee of the U.S. House of Representatives that would be the most sweeping reform of the food safety system in close to 50 years.

The U.S. food supply system has been battered by a series of food recalls -- covering a range of products including lettuce, spinach, peanuts and most recently, cookie dough -- since 2006 that have eroded consumer confidence.

Under the new legislation, the industry would have to pay a $500 registration fee per facility to pay for more plant inspections. Farms, restaurants and retail food establishments that sell their products directly to consumers, not businesses, are exempt from this fee. There would be a $175,000 cap on such fees.

Organic farmers still say the definition of a facility is unclear in the legislation and they worry about additional costs that might be incurred on small businesses. Inspections will be more frequent, taking place every six to 12 months at high-risk facilities and between 18 months and three years for lower-risk locations.

As part of a broader food safety overhaul, the Obama administration recently announced the creation of a new post of deputy commissioner for foods at the U.S. Food and Drug Administration. The position would oversee all food safety activities within the agency.

Most organic farmers believe food safety reforms are necessary, but they worry small and medium organic farmers will be unfairly targeted.

"Based on the escalating cost that would be involved in conforming to this legislation -- administrative fees, record keeping and internal labor requirements -- we can force out of business some of the highest quality practitioners," said Mark Kastel, an analyst at the Cornucopia Institute in Wisconsin.

Kastel said organic farmers are tempering their enthusiasm for food safety reform with some skepticism.

"The same players who helped create the problems that exist today are enthusiastically embracing what they say is the answer," he said.

"It's unsettling when grocery associations and major processed food producers get together and agree with the government that they're going to do this without any regard to the high quality organic practitioners."

Original here

Exxon faces $1 billion fine for sabotaging Texas oil wells

2009-07-20T12:28:00.000-07:00

By Daniel Tencer

ExxonMobil’s sabotage of some 100 Texas oil wells in the past 17 years — going so far as to plug up some wells with explosives — means the world’s largest oil company could be liable for penalties of up to $1 billion, the Texas General Land Office says.

Jerry Patterson, commissioner of the state’s land office, released a report earlier this week asking the Texas Railroad Commission — which regulates the state’s oil industry — to investigate “ExxonMobil’s intentional sabotage of oil wells in Refugio County as well as the company’s fraudulent reports covering up the damage.”

“Exxon committed irrefutable, intentional and flagrant violations of state rules regulating the oilfield,” Patterson said in a statement (PDF).

The allegations stem from a lease the company signed with a Texas family, the O’Connors, back in the 1950s to exploit oil fields on the family’s land. When the relationship “went sour,” Patterson states, the energy giant had the oil wells plugged up in such a way that no one else could use them.

Patterson says the company’s reports on the sealing of the oil wells was “fraudulent.”

“When the relationship turned sour in the 1990s, Exxon-Mobil terminated the lease and plugged the wells,” states Patterson’s report. “As per state rules, Exxon filed paperwork with the Railroad Commission outlining its well-plugging procedures and filed sworn affidavits as to the final condition of the wells. The O’Connor family soon learned those reports to the Railroad Commission were fraudulent.

“When an independent producer, Emerald Oil, attempted to capitalize on new legislative incentives to reopen abandoned wells, they found the old Exxon-Mobil wells hadn’t been plugged but sabotaged — filled with junk, cut well casings, contaminated oil tank sludge and even explosives. Many of the wells were left unrecoverable.”

Under Texas state rules, ExxonMobil could be fined as much as $10,000 per sabotaged oil well per day, or some $1 billion in all.

“The allegations paint a false and misleading picture of Exxon Mobil’s involvement in the O’Connor oil and gas leases,” ExxonMobil spokeswoman Margaret Ross stated in a Bloomberg article. “The area in which the wells are located has a water table very close to the surface. It was critical that Exxon protect the groundwater by plugging the wells solidly and thoroughly.”

The Wall Street Journal reports that the Texas Railroad Commission’s attorney “sent a letter to Exxon Mobil’s attorney, asking the company to reply to the complaint by July 31 and stating that the agency would take no action pending receipt of the response.”

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20 Ways for Renters to Stay Cool and Save Money this Summer

2009-07-20T12:24:00.000-07:00

By Chris Baskind in Living

The problem with most articles about summer energy saving is that they’re geared for homeowners. But more people are renting then ever before.

So you’re a renter? That power bill insert suggesting you upgrade attic insulation is probably more frustrating than useful. The same applies for most tips related to improving property. If your appliances are furnished, it’s likely you don’t even have the option to replace them with more efficient models.

What’s a renter to do?

Summertime energy prices can turn a trip to the mailbox into a stressful experience. But while major home improvement projects may be off the table for renters, it’s still possible to take some of the sting out of summer power bills. The key is conservation.

If you can’t change your living space, change your behavior. Reducing consumption is the greenest of green. We’ve rounded-up twenty ways to stay cool and save money through the warmer months. While you may already be doing some of these, you should find a few that will fit your energy saving arsenal.

Take action and save!

Set your air conditioner to 78 or higher. An obvious pointer, but also one of the most ignored. Running your air conditioner at colder temperatures won’t cool down a room any faster than a more moderate setting, but it will force your system to work harder. Worse yet, it’s easy to forget to turn it back up. Stick with the warmest setting you can tolerate, and move on to other stay-cool ideas.

Wear cool, loose clothing — even indoors. Shorts, absorbent fabrics, and loose-fitting clothes all work outdoors. They’ll work inside, too. It’s your space: dress for comfort. The cooler your clothing, the less you’ll need air conditioning.

Indulge your taste for spicy food. There’s a reason Indian and Latin food is hot: It makes you sweat! If you have proper air circulation, sweating is an effective way to cool down. That sheen on your arms, face, and legs is pretty much odorless, by the way. Crank up the heat in your food, and you’ll feel cooler. It may also provide other health benefits, such as improved circulation.

Use box fans to improve air circulation and set existing ceiling fans properly. This goes hand in hand with not being afraid of a little sweat. Fans use a fraction of the energy required by air conditioning. Just as in the case of wind chill outdoors, moving air will substantially lower the perceived temperature. During the summer, a ceiling fan should (in most cases) be running counterclockwise when viewed from below. You want the setting with maximum downdraft. Flip it next winter to bring warm air down from the ceiling. Just keep in mind that fans are for people, not rooms. There’s no point running them when nobody is around.

Take cold showers. If you live in an area experiencing water shortages, skip this one. Otherwise, a quick three-minute cold shower is a fantastic way to cool down. Going longer than three minutes won’t make you feel much cooler, so skip the soap and just enjoy the relief. For regular showers, avoid using hot water during the summer. In most temperate locations, tap water is plenty warm for bathing by July. The cooler you run your shower, the less heat and steam you’ll need to remove from your living space. Use the exhaust fan if it’s vented outdoors.

Drink plenty of water. You can’t sweat if you’re dehydrated. While some traditions, such as Ayurveda, discourage consumption of cold liquids, they’ll temporarily cool your body core. Alcohol and caffeinated drinks tend to dehydrate, so choose wisely.

Draw drapes and blinds on windows exposed to direct sunlight. Window coverings are one of the few home additions tolerated by most landlords. Curtains, blinds, and windowshades can all go with you at the end of your lease. In warm weather, you’ll want to be sure the space at the top of curtain between the rod and the wall is covered, or hot air will rise through the gap. It’s possible to buy curtains and shades with thermal ratings, so shop around or make your own. Window coverings have the added benefit of keeping heat from radiating outward during the winter.

Cook outdoors. Grilling is a classic summer pastime. Best of all, it keeps heat outside. Of course, you want to minimize the environmental impact of outdoor cooking. Digging back in the Lighter Footstep archives, you’ll find a section called “The Green Barbeque” at the top of this article.

Use the microwave. The lowly microwave is your kitchen’s most efficient plug-in appliance. In addition to saving money year-round, microwave ovens are a good bet for summer cooking. Here’s why: Microwaves direct most of their energy into the food, rather than the kitchen. That means you’ll stay more comfortable and burn less energy removing cooking heat from your home.

Eat more smaller meals through the summer months. The bigger the meal, the harder your body must work to digest it. Try splitting mealtimes across the day, opting for more and smaller meals when it’s warmest. This will keep your body from having to stoke its metabolic afterburners. It’s also a great time to experiment with cold foods — perhaps even raw cuisine. Less heat in the kitchen; less heat in your tummy.

Spend more time outdoors or away from home. Why not soak up someone else’s air conditioning? A little window shopping never hurt anyone, and it’s likely there are several ice cold destinations within walking distance or a short bicycle ride from your home. While eating out is a luxury for a lot of people these days, blowing a couple hours with a frosty drink and a book someplace cool isn’t a bad way to spend a sweltering summer afternoon.

Try a cool pillow. It’s tough to sleep when you feel like you’re in a sauna, and the alternative is running a fan or air conditioner all night. In addition to dressing out your bed with seasonally appropriate sheets and bedcovers, consider a “cool pillow.” They’re marketed under names such as Chillow (Lighter Footstep has no current relationship with this company). Cool pillows are designed to draw heat away from your head, where about 30 percent of body warmth is dispersed. They require no power or special preparation. Here’s a low-tech idea for beneath the sheets: Fill a hot water bottle or two with icy water. It’s like a refrigerator for your bed.

Shut down unnecessary electronic devices. Here’s another year-round energy saver. During the summer, however, it’s even more important to pull the plug on home electronics. Anything with a transformer creates heat. Shut down unused desktop computers (they have cooling fans for a reason); televisions; entertainment systems — pretty much everything with a plug.

Wash your clothes at night and line dry them in the morning. Some power companies offer off-peak rates to their customers. Take advantage of these. In any event, even a properly vented clothes dryer radiates heat. Restrict its use to the coolest part of the day. Wherever possible, line dry clothes. It worked for our parents’ generation, and it will work for ours. This should be no problem if you’re renting a house. A simple line between two sturdy supports will do, and umbrella-style clothes lines are an affordable investment. Line drying is more of a challenge for apartment dwellers. You may be able to get away with a small line on a porch — check your lease terms. It’s also possible to dry indoors, and there are many retractable lines and racks made just for that purpose. Indoor drying may be the best choice if your area is dusty, or if you happen to be particularly susceptible to outdoor allergens.

Shut down your furnace pilot light. It’s small thing, but there’s no point running a gas furnace pilot light through the summer months. Locate the gas shutoff valve. There are safety issues here, so if you have any question about how to properly extinguish a pilot light, consult your building supervisor, utility company, or heating and cooling professional.

Close doors to unused rooms and closets. You winter clothes do not require air conditioning, so get into the habit of keeping closets and cabinets closed. Shut unoccupied rooms and their cooling vents. If you’re using window units, close the door in the air conditioned room whenever practical.

Replace or clean your air conditioning filter. Dirty filters dramatically reduce air conditioner efficiency. Check your filter once a week, and replace as often as necessary. Filters are generally throwaway items, but some may be reusable of thoroughly vacuumed. Clean window unit filters once a week. Some window air conditioners have a warning light to indicate when air flow is restricted.

Close your fireplace damper. If you’re fortunate enough to have a fireplace, close the flu during warm weather months. Chimneys are another void you don’t need to cool, so keep fireplace doors shut or construct an airtight screen to close the hearth when not in use.

Replace standard bulbs with low-energy equivalents wherever practical. The heating effects of incandescent bulbs are generally overstated, since most lights are mounted close to the ceiling. But every degree matters when you’re trying to keep power bills under control, and the money saving benefits of year-round CFL or LED light use are obvious. Concerned about the mercury in CFLs? These dangers are usually overstated, also. But proper CFL handling and disposal is a responsibility. See Five Ways to Dispose of Old CFLs. Better yet, take the CFL Recycling Challenge.

Talk to your landlord. Property owners usually take action when it’s in their financial interest. So do your homework and see what might make sense in terms of energy saving improvements. There may be local, state, or federal incentives for things such as improving insulation values or weatherization. Landlords of utilities-provided rentals will be particularly receptive to to projects which save them money over the long term. In any case, you may be able to obtain permission — or even rent credit — for making small improvements on your own. You’ll only know if you ask.

Can you think of more?

While a start, this list is by no means inclusive. Got a tip to add to the list? Show off your green cred in our Comments section, or visit out Contact page and drop us a line. We’ll share your ideas with all the other Lighter Footstep renters!

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Bankruptcies low in states that don't seize wages

2009-07-07T12:18:00.000-07:00

States that allow debt collectors to seize consumers' wages have sharply higher bankruptcy rates than neighboring states that prohibit or strictly limit the practice, an Associated Press analysis has found.

This link highlights a dilemma for credit-card companies and other debt chasers: By going after wages — an increasingly popular maneuver since the recession began, lawyers say — they risk pushing consumers into bankruptcy court, where judges can reduce or wipe away all sorts of financial obligations.

The apparent relationship between so-called garnishment laws and states' bankruptcy rates also bolsters the arguments of consumer advocates, who have long said that intercepting someone's wages to pay their debts only increases their financial vulnerability.

After gathering millions of bankruptcy records from 2006 until now, the AP plotted the number of filings for each U.S. county in its Economic Stress Map — a geographic, chronological and visual depiction of economic misery based on unemployment, foreclosure and bankruptcy data.

While bankruptcy rates vary for many reasons, the five states that prohibit or strongly limit wage seizures — North Carolina, Pennsylvania, South Carolina, Florida and Texas — all have drastically lower rates than their neighbors, with particularly striking differences along borders, where economic conditions are similar but bankruptcy rates are not.

South Carolina's bankruptcy rate is almost one-quarter that of Georgia's; Pennsylvania has half the rate of Ohio; North Carolina has about one-third the rate of Tennessee; Texas has a smaller rate than all its neighbors; and Florida has just about half the rates of Georgia and Alabama.

The Carolinas, Pennsylvania and Texas prohibit wage garnishment, except in special circumstances such as unpaid taxes or child support. Florida prohibits garnishing wages from the head of a household.

The nationwide bankruptcy rate is 42 percent higher than the rate in those five states.

Bankruptcy filings have been steadily rising since the end of 2005, when a change in federal law sent filing rates plummeting. The number of filings in May were 35 percent higher than a year earlier, and more than 1.2 million cases have been filed in the past 12 months.

Debts are usually delinquent for several months before companies target consumers for recovery. Creditors must get court approval to seize a person's wages or other assets. Federal law and state laws restrict how much can be taken — typically 25 percent of "disposable" income, or income after taxes and other legally required deductions.

If a person files for protection under Chapter 7 or Chapter 13 of the federal bankruptcy code, it automatically overrides a court order to seize somebody's wages.

While counties do not maintain statistics on wage seizures, attorneys say the recession and credit crisis have made lenders more aggressive about seeking court orders to grab borrowers' wages. The reason is simple: with the competition for collecting unpaid debts on the rise, a creditor that gets the authority to garnish wages gets the first grab at a person's finances, leaving others to fight over what's left.

The mere threat of a wage seizure is enough to cause some people to seek bankruptcy-court protection, attorneys say.

Still, credit collection companies view wage seizures as a tool of last resort, according to David Cherner, the director of state government affairs at ACA International, a trade group that has hundreds of debt collection members around the country.

"The debt collection industry isn't necessarily enjoying a lot of success at this point," in part because personal bankruptcies are on the rise, Cherner said. "While volume (of credit collection activity) is up, consumers are hurting."

In South Carolina, limits on wage seizures have given people leverage in their negotiations with creditors and have helped keep them out of bankruptcy court, said Carri Grube Lybarker, a staff attorney with the state's department of consumer affairs. Lybarker said those who are behind on their debts because of an emergency medical expenditure, divorce or job loss are sometimes able to regain their financial footing and make good on what they owe.

Professor Rich Hynes, who teaches and researches bankruptcy and finance issues at the University of Virginia School of Law, said he sees signs that garnishment is playing a role in bankruptcy rates, but he added that plenty of other factors are at play.

Bankruptcy rates may be influenced by a variety of state laws that protect consumers, including rules on how foreclosures can proceed, regulations on attorney advertising or debt-to-income ratios. Hynes also said issues such as the culture of local courts can play a role in those differences.

In Tennessee, which has the highest concentration of bankruptcies, Nashville-based attorney Edgar Rothschild said wage seizures frequently tip his clients over the edge, and into a Chapter 7 or Chapter 13 filing. He also said the rates may be influenced by the differences of local judges, trustees and lawyers.

Cheryl Greer of Vinemont, Ala., sought protection from creditors under Chapter 7 of the federal bankruptcy code in May.

Before filing for bankruptcy, Greer, who mainly lives off Social Security checks but also works part-time as a clerk at Wal-Mart, managed to pay off thousands in credit-card debt and keep up with other bills, including the monthly mortgage on an $80,000 home.

But she couldn't escape the unpaid debts of a former roommate she had tried to help out.

Greer agreed a few years ago to help her roommate consolidate debt. That left Greer on the hook for several thousand dollars her roommate owed to a debt collection company, which in February 2008 was granted the authority to begin seizing up to a quarter of Greer's monthly income.

When she eventually filed for bankruptcy, Greer reported $7,112 in non-mortgage debt, most of it stemming from her former housemate.

In Greer's county of Cullman, bankruptcy rates are moderate by Alabama's standards. But over the past year there have been 16 bankruptcy filings for every 10,000 individual tax returns — a higher rate than any county in the five states with stiffest anti-wage garnishment laws.

For people in dire situations, filing for bankruptcy may be the only way to prevent themselves from digging an ever-deeper financial hole.

For her part, Greer said she might have one day been able to pay off her debt — if it wasn't for the court order allowing her wages to be taken away. Although disappointed by her financial failures and somewhat stung by the stigma that comes with a bankruptcy filing, she's also feeling a sense of relief now that she's filed for bankruptcy.

"I don't have (creditors) hounding me," she said.

US lurching towards 'debt explosion' with long-term interest rates on course to double

2009-07-07T12:13:00.000-07:00

In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.

The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”. Mr Laubach’s study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.

Using historical examples for his paper, New Evidence on the Interest Rate Effects of Budget Deficits and Debt, Mr Laubach came to the conclusion that “a percentage point increase in the projected deficit-to-GDP ratio raises the 10-year bond rate expected to prevail five years into the future by 20 to 40 basis points, a typical estimate is about 25 basis points”.

The US deficit has blown out from 3pc to 13.5pc in the past year but long-term rates are largely unchanged. Assuming Mr Laubach’s “typical estimate”, long-term rates have to climb 2.5 percentage points.

He added: “Similarly, a percentage point increase in the projected debt-to-GDP ratio raises future interest rates by about 4 to 5 basis points.” Economists are predicting a wide range of ratios but Mr Congdon said it was “not unreasonable” to assume debt doubling to 140pc. At that level, Mr Laubach’s calculations would see long-term rates rise by 3.5 percentage points.

The study is damning because Mr Laubach was the Fed’s economist at the time, going on to become its senior economist between 2005 and 2008, when he stepped down. As a result, the doubling in rates is the US central bank’s own prediction.

Mr Congdon said the study illustrated the “horrifying” consequences for leading western economies of bailing out their banks and attempting to stimulate markets by cutting taxes and boosting public spending. He said the markets had failed to digest fully the scale of fiscal largesse and said “current gilt yields [public debt] are extraordinary low given the size of deficits”.

Should the cost of raising or refinancing public debt in the markets double, “the debt could just explode”, he said, adding that it would come to a head in “five to 10 years”.

11 Ways Businesses are Cutting Costs Without Firing Employees

2009-05-30T10:08:00.000-07:00

Reducing hours worked per week

(Source)

While reducing the hours each employee works per week is not the most popular tactic, it is infinitely preferable to losing one’s job. Even scaling back from forty hours a week to 35 can go a long way toward keeping the workforce intact without bankrupting the company. And for those employees who aren’t living paycheck to paycheck, the extra time off can even be a welcome change. The New York Times writes about a few maverick managers who have experimented - successfully - with a 24 hour work week.

Offering flexible scheduling

(Source)

One way to soften the blow of reduced hourly workloads is to let employees choose their own schedule. By requiring employees to be present for “peak” hours but letting them choose their remaining schedule, businesses can counteract the unhappy necessity of cutting hours by giving employees a small sense of control over how it gets implemented.

Auditing office supply expenses

(Source)

Trivial as it may seem, runaway office expenses can add up to serious waste. Smart businesses are striving to audit these expenses and cut them to the bone before conducting any layoffs. As EffortlessHR.com correctly remarks:

“Employees need the tools to get the job done, but do you need twelve different colors of Post-Its and six different kinds of pens?”

The bigger the company, the bigger impact these kinds of unexamined office expenses can have on the employment budget.

Eliminating or reducing executive-level bonuses

(Source)

When a company’s economic forecast worsens to the point of pay cuts becoming necessary, these often begin at the executive level. Motorola has set a terrific example in 2009 by announcing that it would be cutting the salaries of its co-CEO’s by 25%. Starting pay cuts at the executive level achieves two goals:

1) Greater cost savings, as executive salaries are higher than rank-and-file; and,

2) A sense of shared sacrifice that gives employees less reason to protest their own pay cuts (if they become necessary).

Percentage reductions in pay

(Source)

The most unpopular cost-cutting measure short of an outright layoff is reducing an employee’s pay. Nevertheless, when times are tough, there is often no other way to keep everyone on board than to temporarily institute a percentage reduction in pay. Common reductions are 5% but these can be as high as 10% or more.

Offering employees unpaid vacations/imposing mandatory holidays

(Source)

Not every employee at every company is living paycheck to paycheck. For these fortunate folks, the unpaid vacations being instituted by a growing number of businesses are a most welcome perk. Others may not be as supportive of this tactic - described by MSNBC as “the vacation no one wants” - but by scheduling unpaid vacations around the same time, businesses can limit employee suffering and save money without layoffs. Another way companies are saving some money is to schedule occasional mandatory, unpaid holidays. While this is heavily criticized under normal circumstances, it is more palatable during recessions, when the alternative could be total loss of income.

Substituting telecommuting for in-person work

(Source)

One of the most painless ways to cut costs without cutting jobs is to substitute telecommuting for in-person work. This is especially attractive for support and IT positions, whose duties can be carried out remotely without the overhead of keeping someone fed, heated, or cooled in an office (or insured, et al). And unlike many of the job-saving measures we’ve discussed, few employees complain about working from their homes.

Eliminating unnecessary traveling and meetings

(Source)

For many of the same reasons telecommuting makes sense, companies that eliminate unnecessary traveling and meetings may find it easier to retain more of their employees. Instead of shelling out big bucks for airfare and hotel stays, cost-conscious companies like Bayer Corp. are conducting meetings virtually using technology that allows people to “chat in real time and watch each other’s life-size images on screens that created the effect of being at the same conference table down to the bottled water, coffee cups and laptops.”

Hiring freezes

(Source)

A company struggling to retain its existing workforce has no business hiring new employees. As a result, many businesses have implemented temporary hiring freezes that limit the workforce to those employees already on the payroll. State and municipal governments have frequently utilized this retention strategy as well.

Salary/raise freezes

(Source)

Going hand-in-hand with hiring freezes are salary and raise freezes. As the name implies, this is simply a company-wide policy of holding everyone’s salary to its current level and agreeing to forgo pay raises while the company gets back on solid footing. As with so many other measures discussed, this policy is never celebrated, but still preferred to layoffs.

Eliminating or scaling back corporate parties, luncheons, and events

(Source)

In the same vein as cutting wasteful office supply spending, eliminating or scaling back corporate events can provide a much-needed boost to a company’s budget. In recessionary times, luncheons and parties are luxuries when it comes down to choosing between them or keeping people employed, and this is one obvious place to save a few bucks when the opportunity arises.

FedEx Aims for 30 Percent Biofuels by 2030

2009-05-02T11:06:00.000-07:00

By ClimateBiz Staff

WASHINGTON, D.C. -- FedEx wants a third of its jet fuel to come from biofuels by 2030, the company’s chief executive said Wednesday in a speech delivered during a U.S. Chamber of Commerce Aviation Summit.

The target, dubbed “30 by 30,” aims to take advantage of second-generation biofuels from feedstocks such as jatropha, algae, switchgrass and camelina, as first reported by GreenWire. FedEx provided text of Smith's remarks to ClimateBiz.com.

“Its goal is 30 percent alternative fuel use for aviation by 2030,” said Fred Smith, FedEx’s CEO and chairman. “And we pledge our support for environmentally friendly alternative fuel projects, which should be stepped up by funds designated for fuel research in the current stimulus package.”

There have been four successful biofuel demonstration flights during the last year, Smith said, using blends of petroleum and jatropha, algae and camelina.

The company is trading in the MD-11s it uses on long-range international routes for new 777Fs, as well as old 727s for new 757s, which are 47 percent more fuel-efficient.

FedEx has set a goal of reducing greenhouse gas emissions from its worldwide air operations by 20 percent by 2020, per available ton mile. Since 2005, it has reduced aircraft emissions by 3.7 percent by pound per available ton mile.

Smith also pushed for electrifying road transportation; its FedEx vans drive less than 100 miles per day. “I realize this isn’t an aviation issue, but we already have the infrastructure for electrification and going electric for short-haul can affect the amount of petroleum much more than biofuel use for aviation,” he said.

While the environmental push is part of the company’s long-term strategy, Smith also lobbied for an overhaul of the country’s decrepit air traffic control system, which he contends has the potential to reduce aviation greenhouse gas emissions by 10 percent to 12 percent.

The Next Generation Air Transportation System will modernize communication, navigation and surveillance technologies and has already showed great promise in reducing air congestion, making routes more direct and increasing aviation safety.

FedEx and rival United Parcel Service are already saving money and fuel using continuous descents in Memphis and Louisville, while flights in Atlanta were able to shave 2.5 minutes from each flight, generating savings of about $105 million since 2006.

Original here

Time Warner to spin off AOL

2009-05-02T11:05:00.000-07:00

U.S. telecommunications giant Time Warner Inc. (NYSE:TWX) said it would spin off "one or more parts" of its struggling AOL division.

The company said its board had not made a firm decision on how to proceed. In its first quarter report, Time Warner said it "anticipates that it would initiate a process to spin off one or more parts of the business of AOL to Time Warner's stockholders, in one or a series of transactions," The Washington Post reported Wednesday.

Time Warner bought AOL in 2001, but few advantages were realized. Time Warner's net income in the first quarter declined 14 percent from a year ago, largely due to declining revenues at AOL, Time Warner's first quarter report said.

In March, Time Warner replaced two AOL top executives with former Google executive Tim Armstrong. At that point, market analysts began to speculate that the company would spin off AOL.

Earlier this month in a Securities and Exchange Commission filing, Time Warner proposed a debt revision in which the company would guarantee AOL debt using proceeds from HBO, rather than AOL, the Post said.

Original here

More bonuses for Citigroup's bankers? Yes

2009-05-02T11:03:00.000-07:00

by Douglas McIntyre

Citigroup (C) has gone to the Treasury to beg for bonuses for some of its most important traders, people who make the banks extraordinary amounts of money. The Treasury’s reaction will probably be that it wants to stay out of a fight with Congress and avoid negative public opinion and will turn the request down.

That would be a mistake.

Wall Street’s primary argument for keeping a high level of compensation for its best investment bankers and traders is that if they leave, overall losses at banks could get worse. People can be profit centers. The most successful ones help offset the red ink created by the series of poor decisions big financial firms made about mortgage-backed paper and commercial credit loans.

It is easy to assess the value of the best traders by looking at a bank’s books.

According to The Wall Street Journal, Citi is asking to lift “pay restrictions that could break apart its legendary energy-trading unit.” If the government turns the request down, it is likely that many of these people will leave for hedge funds, start their own businesses or join banks based outside the U.S. The bank is not making an idle statement. If critical people leave, so does critical income.

The government is going to have to come to grips with the fact that banks have to pay the best bankers even if the idea is unpopular. There is nothing new in this argument, but it is extremely urgent that it be resolved.

The results of bank “stress tests” are about to come out and some firms will be asked to raise capital. One of the banks’ key arguments for keeping new investment to a minimum is that they have some divisions that are highly profitable and will contribute to earnings to help offset losses. Once the government takes away the opportunity for those business to be a success by helping to drive the people who run them out the door, it will insure that its investment in financial firms will only grow.

Original here

This Is What 400 Grand Looks Like

2009-05-02T10:47:00.000-07:00

By Eric S. Page

Nearly $400,000 of suspected drug money was confiscated at the San Clemente Border Patrol checkpoint on Monday afternoon during a traffic stop on southbound Interstate 5.

The dough was hidden in the rear quarter panels of the car -- and that's not all: Investigators said they found counterfeit bills, too. Agents said they searched the Volkswagen Golf near the San Clemente Border Patrol checkpoint because the driver was nervous.

The suspect is a Mexican national. He's in federal custody, charged with (here's a new one on us) "bulk cash smuggling."

Original here

Egypt orders slaughter of all pigs over swine flu

2009-05-02T10:46:00.000-07:00

By MAAMOUN YOUSSEF, Associated Press Writer

CAIRO – Egypt began slaughtering the roughly 300,000 pigs in the country Wednesday as a precautionary measure against the spread of swine flu even though no cases have been reported here yet, the Health Ministry said.

The move immediately provoked resistance from pig farmers. At one large pig farming center just north of Cairo, farmers refused to cooperate with Health Ministry workers who came to slaughter the animals and the workers left without carrying out the government order.

"It has been decided to immediately start slaughtering all the pigs in Egypt using the full capacity of the country's slaughterhouses," Health Minister Hatem el-Gabaly told reporters after a Cabinet meeting with President Hosni Mubarak.

Egypt's overwhelmingly Muslim population does not eat pork due to religious restrictions. But the animals are raised and consumed by the Christian minority, which some estimates put at 10 percent of the population.

Health Ministry spokesman Abdel Rahman estimated there were between 300,000-350,000 pigs in Egypt.

Agriculture Minister Amin Abaza told reporters that farmers would be allowed to sell the pork meat so there would be no need for compensation.

In 2008, following fears over diseases spread by animals, Mubarak ordered all pig and chicken farms moved out of population areas. But the order was never implemented.

Pigs can be found in many places around Muslim world, often raised by religious minorities who can eat pork. But they are banned entirely in some Muslim countries including Saudi Arabia, Bahrain, Kuwait, Qatar, the United Arab Emirates and Libya.

In Jordan, the government decided Wednesday to shut down the country's five pig farms, involving 800 animals, for violating public health safety regulations.

Original here

Mexico Senate OKs bill to legalize drug possesion

2009-05-02T10:44:00.000-07:00

Mexico's Senate approved a bill on Tuesday decriminalizing possession of small amounts of narcotics for personal use, in order to free resources to fight violent drug cartels.

The bill, proposed by conservative President Felipe Calderon, would make it legal to carry up to 5 grams (0.18 ounces) of marijuana, 500 milligrams (0.018 ounces) of cocaine and tiny quantities of other drugs such as heroin and methamphetamines.

Mexico's Congress passed a similar proposal in 2006 but the bill was vetoed by Calderon's predecessor Vicente Fox, under pressure from the United States, which said it would increase drug abuse, but now is worried by the drug-related violence along its border.

Calderon has staked his presidency on curtailing the escalating violence between rival drug gangs as they fight over smuggling routes to the United States, with violence spilling into U.S. cities like Phoenix and Tucson.

Calderon was praised by U.S. President Barack Obama this month for his army crackdown in a visit to the Mexican capital and Washington is sending more agents to its side of the border to curb the flow of guns and cash to the cartels.

Drug violence has killed 2,000 people this year across Mexico after 6,300 deaths in 2008.

The bill, which needs to be approved by the lower house, also allows Mexican states to convict small-time drug dealers, no longer making it a federal crime to peddle drugs. Drug dealers are rarely convicted in Mexico as federal courts are saturated with bigger cases and local judges cannot interfere.

Mexico's Congress convenes for a final session before its recess on Thursday but may call an extraordinary session given the outbreak of deadly swine flu in the country that has forced lawmakers to hold sessions behind closed doors to prevent further contagion. (Reporting by Miguel Angel Gutierrez, editing by Patricia Zengerle)

Original here

Stocks extend 4-week rally; Dow breaches 8,000

2009-04-03T08:26:00.000-07:00

Play Video CBS 2 New York – MoneyWatch: Dow Soars 250 Pts, Above 8,000

By SARA LEPRO, AP Business Writer

NEW YORK – Investors dove into stocks Thursday, extending a rally that gave the Dow Jones industrial average its best four weeks since 1933.

Stocks rose across the board in heavy trading following an accounting rule change that will help banks pare their losses and after commitments from world leaders to toughen regulatory oversight of financial institutions.

The Dow broke through 8,000 for the first time since Feb. 9 but ended slightly below that level ahead of the government's employment report Friday that could easily upset the market if it comes in below forecasts — or send prices rocketing higher if it's better than expected.

The Dow is now up 20.4 percent over the last month, its biggest percentage gain in a four-week period since the spring of 1933. Bits of good news about the economy in recent weeks, including better-than expected-numbers on housing and manufacturing, have given investors more reasons to buy.

The Dow gained 216.48, or 2.8 percent, to close at 7,978.08, after earlier rising as much as 314 points.

"People are worried about this (employment) report, so the last hour we sold off," said Richard Campagna, managing director and chief investment officer of Pasadena, Calif.-based investment manager 300 North Capital.

Broader market indicators also rose sharply. The Standard & Poor's 500 index gained 23.30, or 2.9 percent, to 834.38. The Nasdaq composite index rose 51.03, or 3.3 percent, to 1,602.63.

Industrial and consumer discretionary stocks picked up speed Thursday while demand for safe-haven assets like gold and Treasurys plummeted.

"Everyone is in a buying mood," said Eric Ross, director of research at brokerage Canaccord Adams. "Everyone is feeling good. ... A lot of this is simply confidence."

The market has managed to shrug off some negative data on employment recently such as initial claims for jobless benefits. But a surprisingly bad report on the March job market could easily stifle the market's growing optimism. Economists predict the report will show a loss of 654,000 jobs following a drop of 651,000 jobs in February, which was a record third straight month of job losses above 600,000. The unemployment rate is expected to rise to 8.5 percent from 8.1 percent in February.

Banking shares got a significant boost after a rulemaking body for the accounting industry relaxed financial reporting rules that force banks to value their assets at current market prices.

The change in "mark-to-market" accounting rules, which should help banks reduce losses, sends another lifeline to the troubled financial industry. Many investors believe financial stocks, which have largely carried the market's four-week rally, are a gauge of when the economy is turning.

Among the biggest advancers in the financial industry Thursday were Wells Fargo & Co., which jumped 85 cents, or 5.9 percent, to $15.33, and Goldman Sachs Group Inc., which rose $3.93, or 3.6 percent, to $114.22. Regional banks also rose sharply.

The conclusion of a one-day summit in London of the world's finance ministers sent stocks to their highest levels in early afternoon trading. While the G-20 leaders did not satisfy calls for new stimulus measures, they pledged an additional $1.1 trillion in financing to the International Monetary Fund and declared a crackdown on tax havens and hedge funds.

Another positive indicator on the economy also lifted sentiment on Wall Street. Factory orders posted a large increase in February, coming on the heels of better-than-expected readings on pending home sales, manufacturing activity and auto sales the day before.

In other trading, the Russell 2000 index of smaller companies jumped 21.03, or 4.9 percent, to 450.19.

For every three stocks that fell, nearly nine stocks rose on the New York Stock Exchange where consolidated volume came to 7.36 billion shares.

The Dow is still down about 9 percent for the year, while the S&P 500 is down nearly 8 percent. The Nasdaq is up 1.6 percent.

While analysts have warned that the market could retest the lows hit early last month, there's no doubt a growing sense on Wall Street the economy, at least stateside, might be bottoming out.

"The market mindset is: OK, we're not in a tailspin," said Jack A. Ablin, chief investment officer at Harris Private Bank.

The benchmark 10-year Treasury note fell nearly 1 point, sending its yield up to 2.76 percent from 2.66 percent late Wednesday. The dollar fell against other major currencies after the European Central Bank cut its key interest rate by less than expected. Gold prices also fell.

Oil prices benefited from the better-than-expected economic news. Light, sweet crude jumped $4.25 to settle at $52.64 a barrel on the New York Mercantile Exchange.

Overseas markets also logged big gains. Japan's Nikkei stock average rose 4.4 percent, while Hong Kong's Hang Seng index jumped 7.4 percent. In Europe, Britain's FTSE 100 rose 4.3 percent, Germany's DAX index rose 6.1 percent, and France's CAC-40 rose 5.4 percent.

Original here

Why numbers no longer win arguments

2009-04-03T08:22:00.000-07:00

Numbers used to be cold, hard and clinical - a clincher in any argument. Now look at them: fluffy, soft and left meaningless by woolly-headed thinking, says Michael Blastland in his regular column.

Numbers lack warmth. Cold as last year's love, they sit counting their fingers. Think of numbers and what do you see? Dust and ledgers and the yellow fingers of a parched accountant.

No longer. Numbers have had the mother of makeovers. No ordinary scrubbing up, shiny PR or new logo, this transformation is complete: they have turned into their opposite.

Once they stood aloof. Now they gush. Now you can't shut them up for heart-felt passion. They cry and cheer and sneer and shout. Formerly a counterweight to emotion, they are often now nothing but. The one thing they don't do is count.

A number in the news is no longer a cold fact, it is a killer fact, with all the murderous zeal that word implies. Journalists everywhere know the meaning of the phrase, the dagger of detail that runs the opposition through: the 23% up! The £16m wasted! The 140,000 children!

'5.0, 50... how many fingers am I holding up?"

For an example, try 271. I have it on reliable authority that this is the percentage increase in the money supply in the US in five months. There, he's gone cold on me again, you're thinking. But stay a moment. This is the killer fact in a piece by a smart, famous former senior advisor to President Clinton.

The point is obvious. The economy is in weirdness overdrive, things are out of control, cash is flooding through nook and cranny, but barely a cent is spent.

Feel the peril. 271%!

This was no typo. That the writer really believed the magnitude is apparent when he says that 271% is nearly three times higher.

But mull that number. Let it count its fingers a while. This is actually an increase of nearly four times (£100 increased by 271% is £371. A 300% increase is four times bigger, not three). Imagine nearly four times as many dollars in five months. Four times, seriously? What would your salary look like x4? Or GDP?

The actual number in the US statistics was 27.1%. He had moved the decimal point. This is wrong with bells on, but with no evidence of any reflection on the absurdity. I have a number therefore I need not think.

A moment for the number to do what numbers are supposed to do, to count and take seriously the counting, must suggest - mustn't it? - that an increase in the money supply of 271% in five months might be credible in a basket-case inflationary hell but not in America.

Perilous age?

My favourite example of this tendency is the heavyweight newspaper report that an increase in retirement age for men from 65 to 67 would mean one in five who formerly lived long enough to claim a pension would now die before they were eligible.

This column aspires to sobriety. The facts might be shocking, the tone will not. Today is an exception.

One in five? Twenty per cent of men die in the space of two years? They'd be turning up their toes all over the golf course, 100,000 of them more than usual. Being 65 would be more dangerous than the front line in Afghanistan.

This column aspires to sobriety. The facts might be shocking, the tone will not. Today is an exception. Today, I'll be frank, the column is like its subject - a great Neanderthal grunt.

It will, from time to time, no doubt be wrong too. But these don't feel like mistakes, they feel like a reality-check failure, a breathless dash into print without passing the corner shop of normal life, all because the number appears to fit the mood.

So 271 doesn't mean 271, it means "wow!" The word "million"' likewise lost its currency years ago. "Billions" might go the same way. As with cliches, so with figures, inflationary use means they buy you less impact. Debts used to be bad, now they're toxic, regardless of whether they might make a good return. A plain old bad debt will never sound as problematic again. A billion will seldom sound so large.

Numbers become, in other words, the very thing numbers are supposed not to be: fur balls of undigested intellectual gunk. Writers who use them this way might as well say: "The government admits the figure is, like, you know, cor! oooooh!"

How big is huge?

Or here's an idea. Why not replace figures with emoticons - a smiley or a frown? These numbers do not measure. They are arrows pointing limply, like vague adjectives, fuzzy conveyors of warmth or fear that beam at you with pride, or scowl with cynicism, expressive of how the writer feels but not of the world he or she claims to feel about.

Is the end nigh, if your colleagues present you with one of these?

Is this a scandal? Not really. Our treatment of numbers is not like our treatment of the old. It's hard, except in rare cases, to be outraged by abused statistics. And in truth there's nothing new here. But we'd do well to remember that numbers often represent people. To be careless of how we describe them in figures is to be careless of the truth about them, which in turn is not to care.

In a new book about energy, Professor David MacKay sees a problem in another subject many care about: the environment. He notes a news report about CO2-reducing LED traffic lights. The energy savings, the report said, could be "huge". Here are adjectives as if they were numbers. "Huge" being how big, exactly?

Professor MacKay found that traffic lights account for about 0.03% of UK energy consumption. Let's say the huge savings cut that by a third. That's 1/10,000th of the total.

One response is that every little helps. Mr MacKay replies that every big helps rather more - but it's no good being dim to the distinction.

How do we get away with it? In the first case because we have a number - and that beats thinking any time; in the second because we don't - and so elide the evidence entirely.

Numbers are often used without a sense of proportion. Proportion is often invoked without a sense of the numbers. But isn't proportion what numbers are for? Perhaps it's time to take out some of the heat.

Add your comments on this story, using the form below.

I've always felt that "billion" should be replaced (in the US) with "thousand million." More money, more words. Not that anyone has taken up my suggestion...
Chris, Kansas City, Missouri USA

As for replacing figures with emoticons - I recently encouraged the amendment of a presentation that had "meaningless" figures (i.e. meaningless except to technical experts) to have smiley faces next to good figures, average faces for average, and sad or angry faces for bad and very bad figures. The original figures were left in for reference and transparency (well, for anyone who would know what they meant), but the interpretation was very useful for those who would not know whether a given figure was good or bad. My aim was not propaganda (besides, there was the risk of being patronising) but rather to just provide a genuinely useful interpretation of technical figures.
Conal, Ireland

As a physicist we get trained from the start that every number must have scale and comparison - something that you rarely see in the media. Pet favourite of mine is the standard of quoting percentages on values where the population is less than 100 (ie action X up 50% year on year - when last year it occurred twice and this year three times).
Sam, London

The classic misuse of numbers for sensational effect is in the phrase "children as young as...". It tells you nothing meaningful except they've managed to find one child of that age. All the others could be any higher age. The BBC is as guilty of this as anyone.
Colin McKenzie, London UK

I think that the increasing abuse of numbers by the press over the past 10 years to perpetrate their profitable new form of "shock-and-awe" journalism has been atrocious. One in five people does this! 80% of people don't know that! No context, no further investigation, and certainly no counter-point to the main story: today's reporter often seems to just grab a number, jump to a conclusion, and then embark on a page of sensationalisation, in the knowledge that the unthinking masses will buy their paper/magazine/whatever just to find out how bad it really is.
Adam the accountant, Edinburgh

Proportion and context, this has been the missing element all throughout this 'downturn' in the economy. The press have helped whip up the public into an ill-informed frenzy due to the lack of proportion and context for which they report a lot of these numbers which has scared us into recession.
Mark Johnson, Leeds, England

As an example of numbers that are often used without a sense of proportion, take the substantial budget deficit the UK government will run in the coming year. The actual numbers in billions of pounds will sound alarming - and they are. But as a percentage of our national income, the new borrowing will be around 10% - and in more "normal" recessions such as the early 1990s recession, the proportion reached 6% of GDP. And we survived that and even prospered in the years thereafter.

So OK, debt as a proportion of GDP will be higher than for decades; but dangerously higher? That's a question we can discuss, but it's better to discuss the relative proportions than merely to talk of the absolute figure. The other example where proportion is used without a sense of the numbers is in the latest medical research. "If you eat this food or drink this drink, your chances of falling prey to some terminal illness is increased x%."

But what were the chances of falling prey to that particular illness? Often very low. To get a sense of the actual risk, ask the researcher what the average life expectancy for the group in question would be if they followed the researcher's advice, and what it would be if they didn't. We might find out that the difference would be a matter of months, rather than years - in other words, the increased risk is hardly worth worrying about.
Richard, Beckenham, Kent

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Want to keep your job? Be happy.

2009-04-03T08:17:00.001-07:00

By Becky Fleischauer

Does the recession with its rampant layoffs and cutbacks make your job look better all the time? Believe it or not, donning a pair of "recession goggles" can be good for your career and your mental health. Research shows that an attitude of gratitude in trying times can not only help you keep your job, but get you the job you want.

It's a counterintuitive concept, for sure. In today's economic maelstrom, the most common responses are panic, fear, anger, distrust, and even hostility. But a Harvard Business Review article "How to Protect Your Job in a Recession" studied the characteristics of recession survivors and found that those who avoided being cut were cheerful, likable, generous contributors, and not necessarily the most skilled and proficient.

"Just don't be the guy who's always in a bad mood, reminding colleagues how vulnerable everyone is. Who wants to be in the trenches with him?" caution authors Janet Banks and Diane Coutu.

Workplace relationship expert Courtney Anderson agrees, and observes that tolerance for bad actors – particularly those higher up the food chain – is shrinking.

"The handwriting is on the wall for them in a lot of organizations," says Ms. Anderson, founder of Courtney Anderson & Associates, a human resources firm in Austin, Texas. "When times are good, companies will tolerate a lot. But in this economy, every single decision is double- and triple-checked. It will be tough for the really poor managers to make it through,"

This could explain why the ax is falling higher up the management chain.

Companies are looking to save more money, and bigger salaries yield larger savings. Today's unemployment rate for college-educated workers, 4.1 percent, is the highest it's been since the US Bureau of Labor Statistics began tracking the data in 1992. It is more than twice its prerecession level, according to the Center for Economic and Policy Research, putting the risk of being unemployed proportionately higher for college-educated workers than for less-educated ones.

When productivity is in decline, Anderson says, other factors gain more value in the decisionmaking process about who stays and who goes.

"I used to go to organizations," Anderson says, "and they would describe a horrible situation: 'Felicia curses people out, she yells and is mean, but she delivers.' They would want me to figure out how to keep the person and be flexible because the person delivered. Now, with the current macroeconomic picture, they won't put up with it. There is a financial opportunity to get rid of the people who create problems."

Anderson says corporate leaders are now placing more value on workers who add positive energy to the atmosphere beyond increasing sales and visibility. She says that includes placing those who are grouchy and unpleasant on the layoff list, but also the person who never says anything, the colleague who is invisible and flies under the radar.

"All variations of not contributing and making it a positive, efficient workplace are being considered," Anderson says.

If striking a cheerful pose in tough times doesn't come naturally, consider that it does require conscious effort. And even the act of trying to be happy can make a difference.

"If you stay positive, you'll have more influence on how things play out," advise Ms. Banks and Ms. Coutu.

Banks is a veteran of at least a dozen corporate downsizings, and Coutu has studied resilience in many settings. They say survivors and those who leverage layoffs to their advantage focus on anticipating the needs of customers and those above and below them inside the office.

During periods of numerous layoffs, vacuums occur at all levels, leaving many opportunities to help your boss and the company get more accomplished.

"Prove your value to the firm by showing your relevance to the work at hand," Banks and Coutu note, "which may have shifted since the economy softened."

The key to donning recession goggles is to make decisions you won't regret when the recession fades and more prosperous times return.

"We should affirm to ourselves each day why we are doing what we do," Anderson says. "If you are truly, truly miserable, even in a bad economy, you may be better off doing something else: taking a break, going back to school, or working part time. It's valid to ask ourselves: 'Do I enjoy this? Why am I here?' Reevaluate."

She reminds us that if you find you are in a job exclusively for the paycheck – that is, uh, OK. It is a superb reason to go to work and be satisfied in this economy.

"You can still go to work and have a good day," Anderson says. Especially pay day. "Bad times remind us all of the basics.... We shouldn't take things for granted."

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Inside the Magic Kingdom

2009-04-03T08:13:00.000-07:00

Ed Grier has one of the busiest jobs in America. He ensures day-to-day business operations at the world’s first and most iconic theme park run smoothly. We are speaking of Disneyland. “It’s multi-faceted, very complex, and it never stops,” he explains to Business Management’s Ben Thompson.

It is his first week in Anaheim, and Ed Grier is doing the usual rounds in the park – speaking with staff, meeting and greeting guests, and generally getting acclimated to how things operate. Grier is getting a good feel of the place. Only on the job a couple of days, he has just flown in from Disney’s Tokyo resort to take on the role of President at the California attraction. While the jetlag has just recently disappeared, having a visible presence in the park is vital to his new role, and with Disney, interaction with staff and guests is expected on a daily basis for senior management. “Hello Mr Grier,” beams the little old lady in front of him. “Welcome to Southern California.”

Remembering the incident, he grins. “She was so knowledgeable about the park, about the history of the place, about current developments,” he recalls. “I, on the other hand, was just amazed that anyone would even know who I was, let alone recognize me amongst all the thousands of other people there in the park and after only a few days in the role.” In the land of the mouse, it’s clear that the big cheese has an extremely high profile.

There was no need to be so surprised. This is the number one theme park destination in the western United States. The second most popular in the world. The Disneyland Resort contributes over $3.6 billion in third-party annual economic impact to Southern California and supports around 65,700 jobs. Spurring decades of development in Anaheim, Disney has been the catalyst for its transformation from what one local resident describes as “just a town on the way to the beach” into a tourist destination unparalleled by many much larger. “Tourism is a significant business in California,” explains Executive Director of the California Travel and Tourism Commission, Caroline Beteta. “In addition to representing California’s reputation for fun and one-of-a-kind experiences, the Disneyland Resort also creates tens of thousands of jobs and generates billions of dollars for our economy.”

It is true that most of the gains have been related to tourism and sports, but it is likely that the profile Disney gave Anaheim helped in attracted many other businesses as well. It is absolutely no wonder that the arrival of a new face to the Disneyland big seat is big news for Anaheim residents. The resort’s location has proved invaluable to the local area’s economy. It brings in almost 15 million visitors per year, who generate approximately $225 million in taxes for Southern California.

The business of fun

“The Disneyland Resort is a vital component of California’s nearly $80 billion tourism market,” explains Director of the Center for Entertainment and Tourism at California State University, Fullerton, Cynthia King. “There aren’t many other players that create the kind of resort atmosphere they do.”

It is a massive operational challenge to manage the 430-acre site. The area is the home of two theme parks, three hotels and a shopping, dining and entertainment district known as Downtown Disney. Additionally, the park also has its own administrative center monorail. “It’s analogous to running a small city – and not so small of a city when you think about what happens here,” laughs Grier. “It operates 24 hours a day, and we have over 20,000 cast members that work at the resort. Add in the thousands of visitors that come through our gates every day and it makes the day-to-day business operations very complex.”

Grier is a proud 25-year Disney veteran and has run business operations on three continents. He has been in this role in Anaheim just over two years. His prior responsibilities are various, and surely contributed to his preparedness for his current role. They included a stint at Disneyland Paris where he was a component of a marketing team assigned to increase awareness of the resort throughout Europe, and most recently a period of time in charge of Walt Disney Attractions Japan. This is where he ran the business operations for the Tokyo Disney Resort. It’s been a long journey since he joined the company in 1981 as an auditor at the Florida location. One thing Grier will hold fast to, however, is that all of his previous roles have provided important lessons in what it takes to run a multimillion-dollar theme park.

“It’s maybe been an unusual route to the top, but I think each one of those experiences has really prepared me for this job because I need to have a huge grasp of all those different disciplines,” he explains. “A grounding in finance is really helpful; understanding business operations is essential to running the resort; and a knowledge of the marketing aspects of what we do here is hugely important, too. Most importantly, though, you need to have a sense of fun.”

Fun is certainly not something your average person would associate with an accountant, one now in charge of all business operations, but the combination of imagination with a results-oriented business goal has been vital to Disney’s success decade over decade, and Grier is the embodiment of this ethos. In order to maintain that sense of magic that Disneyland is famous for it takes hard work in addition to inspiration. “We have a tremendous heritage here, but at the same time we always need to be looking forward to the future,” he explains. “So while we try to stay very consistent with what we deliver to our guests, over time the park evolves and I think that’s one of the things we really focus on – how to evolve the parks and make sure they’re relevant to our guests today and tomorrow.”

Harnessing creativity

Of course, being able to draw upon the huge well of creative talent across the Disney brand is a tremendous asset in this regard. “We may take a hit movie, for example, and make a great stage show or attraction out of it. Disney’s all about telling stories, so if we can tell the right story we’ve no doubt that our designers – Imagineers, as we call them – can find a way to make sure we tell that story in a very entertaining, very immersive way that our guests will enjoy.”

One example is the recently opened Toy Story Mania! attraction. Based on the Pixar characters, the ride is one of the most technologically sophisticated attractions yet developed by Walt Disney Imagineering, costing an estimated $80 million to design and build. In it, park guests wear 3D glasses aboard spinning vehicles that travel through virtual environments based on classic carnival midway games. “It was a great example of how we took a successful element from elsewhere in the brand and said: ‘How can we tell this story in the context of the resort? How can we use new technology to make sure our guests are immersed in great storytelling, in a ride that’s very repeatable because it’s different every time you go on it?’ I think anytime we have a great story to tell, we have to use the technologies not for technology’s sake, but to help bring an attraction to life.”

Another example of this is the resort’s repurposing of its 1959 submarine ride attraction. Closed since 1998 due to maintenance issues, the ride was overhauled and re-imagined as the Finding Nemo Submarine Adventure. “Creativity really drives this company, no matter where it comes from – the movies division, consumer products, music, it doesn’t matter. We can tap in to that inventiveness and turn it into something new and valuable for our guests. So I think that’s one of the big strengths of the company: the synergy between all the different divisions, and the fact that we have a brand behind us that is powered by the value of great ideas.”

In 2007, Disney announced a multi-year, billion-dollar expansion program for the Anaheim resort. In addition to building 250 more rooms to the property’s Grand Californian hotel, the expansion will be bringing more of Walt Disney into Disney’s California Adventure, celebrating the hope and optimism of California that attracted Walt to this land of opportunity in the 1920s. The new, interactive Walt Disney Story attraction will set the stage for the unfolding story of Walt that will permeate the park, while other attractions include an amazing Little Mermaid attraction, a groundbreaking, signature night-time spectacular and new viewing area for 9000, and the addition of the 12-acre Cars Land inspired by the hit Disney/Pixar animated film. Extensive landscaping, new retail and dining will create an even richer environment throughout the park in ways that reinforce guests’ connection with Walt, and will also add new various challenges for business operations.

“We want out guests to have that same emotional connection with Disney’s California Adventure that they have with the Disneyland park,” says Grier. “It’s a great park right now, with some of the highest-rated attractions in all our parks – the Tower of Terror, Soaring Over California, The Aladdin Show, and of course Toy Story Mania! – but we want to expand it and maintain our status as the premier resort destination in Southern California. It’s about making the resort as a whole a multi-day experience. So over the next 12-18 months, we’ll be going through the whole planning process, the sequence of opening up new shows and attractions, and that’s gonna keep me pretty busy for the next few months.”

The heart of the park

In his role running the business operations, Grier admits to getting up at around 5am every day in order to squeeze in a session at the gym – often accompanied by his children, who he says “push me pretty hard” – before heading to the office in plenty of time for when the day’s guests arrive. It’s a pretty daunting schedule, made up of meetings with direct reports on the business operations team, overseeing marketing strategy decisions, planning for the future – and of course, those all-important park walks. “ I try to spend time out in the parks as much as I can, talking to our cast and guests,” he insists. “It’s really valuable. So much of what we do here is based on how our customers experience the resort, so spending time in the parks and talking to our cast members firsthand gives me a great insight into what happens in our resort and how well we’re doing.”

For one thing, some of those employees have been working at the park since the day it opened in 1955. “ We have cast members that have worked here for 50 years, and they take tremendous pride in what they do,” he confirms. “Harnessing their knowledge is vital to the ongoing success of the park – they understand where we’ve been, and they’ve seen a lot of different things. So they have a lot to offer.” As a result, making time to actually sit down with cast members from across the resort to get an idea of what they’re thinking – on ways to enhance the visitor experience, on how to improve business operations or how to do things more efficiently – is vital. “Anything they want to bring up they can bring up in those meetings. And surprisingly, they’re very honest. They tell me what they think, because that’s the atmosphere I like to provide. I try to be very approachable, so they can tell me what’s on their mind; it’s hugely beneficial.”

And it’s not just the customer-facing employees that make a difference to the way the park is run. In addition to his early starts, Grier often stays behind after the park has closed to the public in order to interact with and get feedback from what Disney calls ‘the third shift’ – the army of workers who come in after dark to carry out essential maintenance work and ensure the resort is ready for new guests the following day. “ The parks are beautiful even when the guests are in it, but it’s a special place when you’re there at night with the third shift team. They do a tremendous job, and they’re really the unsung heroes because they’re gone by the time the sun comes up and the guests are starting into the park.”

This, says Grier, is where much of the essential work that goes into maintaining a world-class resort takes place – from the clean-up operation to the disposal of waste, from the painting of the façade to the upkeep of the décor – and includes vital safety checks and maintenance work for the multitude of rides and attractions. “They have a nightly checklist of things to do, and there is a huge amount of information they have to keep track of in making sure that things are done correctly,” he says. “We’re making a statement to the guests, and to ourselves, too, that our parks are beautiful, that our parks are well maintained, and that creating the right atmosphere is important. Once you enter one of our parks it takes you to a different time and place, and that’s what it’s all about.

“It is a huge responsibility to make sure we maintain our heritage,” he continues. “Disneyland is such a vital part of the local community – more so, I think, than any of the other parks – and also holds a special place in the hearts of anyone who has been here to visit. And it’s the only park that Walt Disney actually walked in, so it’s a huge responsibility, one that I cherish.”

Rewarding work

Indeed, it is significant that at the heart of a business so embedded in the local community lies its most important asset: people. Of the 65,700 jobs supported by the resort, 20,000 are direct resort employees, 3800 are third-party employees at the resort and 41,900 are employed directly or indirectly by Anaheim Resort Area businesses. The resort generates over $1 billion in annual employee wages and vendor payments, including more than $500 million in annual payroll for jobs at the resort and $430 million in annual payroll for jobs with third-party hotels and retailers. Cast members volunteer thousands of hours every year for the local community. And city planners work hand-in-hand with senior management to ensure the resort expands in a socially, environmentally and economically beneficial fashion.

For Grier, this sense of collaboration, of being part of a community, is what makes his role so special. “The most rewarding thing from me is that everything we do here – the recruiting, the training, the marketing, the service, the design and development – makes a visible difference to the resort,” he concludes. “I can look out my window and see the impact of what we do, whether we’re building a new attraction that the guests are gonna love, reducing the time spent waiting in lines through our FastPass system, enhancing the range of services on offer – and that gives me a huge sense of pride, just to see the impact of the decisions that we collectively make. It takes a lot of hard work to get to this level of excellence, so that’s very satisfying.”

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Chicago Sun-Times files for bankruptcy

2009-04-03T08:11:00.000-07:00

By James P. Miller

The Sun-Times has filed for protection from creditors under Chapter 11 of the federal bankruptcy code. (Tribune photo by E. Jason Wambsgans / May 18, 2008)

Sun-Times Media Group Inc., reeling from a painful revenue decline and tax liabilities that date back to the looting of the company during the tenure of former CEO Conrad Black, disclosed Tuesday that it has filed for protection from creditors under Chapter 11 of the federal bankruptcy code.

The publisher of the Chicago Sun-Times and other Chicago-area papers emphasized that it will continue to operate its newspapers and online sites as usual "while it focuses on further improving its cost structure and stabilizing operations" during the Chapter 11 financial reorganization.

Tuesday's filing can't be characterized as a surprise. Many observers have marveled that the company has been able to stay on its feet as long as it has, given the pressures it faces.

The bankruptcy comes on the heels of a proxy fight that led to the ouster earlier this year of almost all of Sun-Times Media's former board members, and the subsequent exit of CEO Cyrus Freidheim, the turnaround expert brought in two years earlier to revive the company's fortunes.

Freidheim had been given the unenviable job of cleaning up the mess left after Conrad Black and his lieutenant, David Radler, diverted millions of dollars' in company revenue into their own pockets. Sun-Times' fortunes were also damaged by an embarassing and costly circulation-overstatement scandal that occurred when Radler was publisher of the Chicago Sun-Times.

Black and Radler were eventually convicted on criminal fraud charges and jailed, but the financial fallout from their actions has been an additional burden as Sun-Times Media fought to stay viable in a newspaper industry that has seen its century-old financial model upended.

Like other newspaper companies, Sun-Times has slashed repeatedly at its staffing levels in order to reduce costs, as ad revenues continued to dwindle because of recessionary pressures and an ongoing migration of advertisers' spending to less-costly Internet platforms.

Left-over issues from the Black era also played a role. Sun-Times Media recently paid $21 million to settle a lawsuit filed by a Canadian company that claimed Black deceived it when it purchased Canadian newspapers from the Chicago holding company several years ago. And although some tax claims from the company's financial footwork during the Black era have been resolved, others linger.

"Unfortunately," said Jeremy Halbreich, Chairman and interm CEO of the company, the "deteriorating economic climate, coupled with a significant pending IRS tax liability dating back to previous management, has led us to today's difficult action."

Sun-Times executives, he added, "firmly believe that filing for Chapter 11 protection and exploring the potential sale of assets or new investment in the company offers us the best opportunity to protect our respected media properties for the long term."

In seeking the shelter of Chapter 11, Sun-Times Media joins Chicago-based Tribune Co. -- the much larger media holding company that prints the rival Chicago Tribune daily -- which entered bankruptcy in December.

Tribune is being buffeted by the same negative industry trends that have hit Sun-Times Media, to be sure.

But Tribune's Chapter 11 filing was sparked not by operating losses, (it remains profitable by some measures) but rather by an inability to keep up with heavy debt payments born out of the company's highly leveraged buyout in late 2007.

Real estate mogul Sam Zell led the LBO that took Tribune private, but he and the other investors failed to foresee the extent to which Tribune's once voluminous cash flow would weaken as industry conditions eroded.

In recent months, the one-two punch of structural change and economic decline has caused some papers to simply fold, as the Denver-based Rocky Mountain News did recently; or to go to a much-diminished, website-only format, as the Seattle Post-Intelligencer has opted to do.

Chapter 11 filings remain relatively rare in the newspaper business, although Yardley, Pa.-based publisher Journal Register has taken that path. In Southern California, the owners of the San Diego Union-Tribune recently took the unusual option of selling the financially stressed paper to private-equity interests.

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Should You Buy a Home Right Now?

2009-04-03T08:08:00.000-07:00

by Jason Lankow

(Photo by Chad Jones)

Conventional wisdom says that buying is preferable to renting. Instead of throwing money away on a home, you can invest in your future and have the sense of fulfillment that comes from owning a home. Turns out, conventional wisdom is wrong. Today, many long-term renters are in a much stronger financial position than many recent homebuyers, and the last thing these homeowners are feeling is contentment. But the combination of firesale prices on homes, the drop in mortgage rates, and government assistance in the form of the first time home buyer tax credit, may have you reconsidering the idea of buying your own home. Is now a good time?

The Good

Here are a few of the reasons why now is a better time to buy a home than it has been at any point in the past few years:

Tax Credits

In the stimulus plan signed by President Obama, there is a first-time home buyer tax credit of $8,000, provided that you stay in the home for 36 months. This isn’t a tax deduction like your mortgage interest, which reduces your taxable income - a tax credit actually reduces your total income taxes owed. In addition, some states, such as California, are offering tax credits for home buyers that will further reduce your tax liability. Keep in mind that the federal program ends on December 1st of this year, and while it could easily end up being extended, it isn’t a given.

Rates last week dipped to an all-time low when the Fed announced that it would continue buying additional mortgage backed securities. Even though they ticked back up slightly in the past few days, with full income documentation and good credit, you can easily get down to 4.5% on a conventional 30 year fixed if you have 20% down, and if you want to get into an FHA loan, you can more typically get around 5.0% with a down payment of only 3.5%. Be careful when shopping for rates online, and think twice before giving out personal information. It is far better to ask friends and family for a strong personal recommendation, and use the information that you see on sites such as bankrate.com to approximate where your rate should be. Keep in mind that everyone’s scenario is different and there are a lot of new rate adjustments for conventional loans that didn’t exist in prior years, so you can easily end up paying 1 point (or percentage of the loan amount) for a loan that might cost your friend zero points for the same rate on the same day with the same lender.

Because You Don’t Absolutely Need to Buy

The best time to shop for a home is when you don’t need to. You can be as aggressive as you want to on your offer, and time is on your side because prices aren’t going to go back up overnight. If you are patient, you can find a home that you love, and just make sure that you can comfortably afford it and have a long-term plan to keep the property.

The Bad

These are factors that should not be driving your motivation to purchase a home right now:

Timing the Market Bottom

The same advice that applies to the stock market applies to the housing market. Don’t try to time it. If you have played around with the stock market in the past year and tried to catch a falling knife in the hopes of maximizing your return, you can probably look at the scars on your financial statements and let it serve as a reminder not to time the bottom. The turnaround in prices is gradual, and you are not going to miss out on an instant, overnight spike in real estate prices, no matter how fast the bank-owned properties are selling locally.

The Illusion of the Discount

Perhaps a new development popped up three years ago and was so shiny and perfect that you would have taken a third job to afford it. Now, the model that you love has popped up for $400,000 and all of the recent sales were at $450,000. In a stable market, that is great, but if you live in a declining market, you have now become the new comparable sale that any listings in the development in the near future will be measured against. So, if you buy this place for $400,000, and your new neighbor decides to move, they now will likely be advised by their real estate agent to price their property at or below your price in order to sell quickly. The same holds true for purchasing bank-owned properties. Bank-owned sales may be somewhat less frequent and given slightly less weight in determining the next sales prices in your neighborhood. However, if you buy in a neighborhood with a relatively high level of short sales and foreclosures, that great deal you just got on the bank-owned property just set the bar lower for the whole neighborhood.

The Ugly

If you don’t know what you are doing or have enough of a cash reserve to justify the risk, this real estate market can eat you alive, especially if you are short-sighted.

Fix It and Flip It

Unless you are lightning fast, experienced at managing renovation projects and holding plenty of cash that you are comfortable risking, that late night real estate fix-and-flip infomercial that was recorded in 2003 should not be considered your ticket to financial freedom. Of course there are gurus who have been waiting for this opportunity, and you are driving around listening to Robert Kiyosaki on iTunes with your Bluetooth intact looking for the bargain of the century. Just do your research, and don’t think that any particular property is the last opportunity you will ever have to get a great deal.

Until you see your local median price leveled off or even slightly increasing for a few months consecutively, you are dependent on sweat equity, which in many cases is wiped out by a few homes in the neighborhood going into foreclosure and further reducing home prices. Again, this market has become hyperlocal, down to the subdivision. In Orange County for example, prices for stronger neighborhoods may be down only 10% in the last year while properties less than a mile away have been cut in half or more in extreme cases.

Are you really ready?

How much are you paying now for rent? You should look at a good principal and interest calculator or talk to your lender to get the whole picture, including monthly amounts for taxes, insurance, any applicable homeowners association dues, and any applicable mortgage insurance. This is important even if you plan on paying taxes and insurance on your own (rather than impounding them and making monthly payments to the lender) because you will want to make sure to budget monthly to set aside for these expenses. So, if you are paying $1,500 currently for rent, and the new home will be $2,500, put your budget to the test and see how well your finances run when you put the amount of the increased housing expense (in this case $1,000) into your savings account. Take it out right when you pay your rent, and don’t touch it. This is a great test of how much you can really comfortably afford, and of course has the nice side effect of padding your savings for a few months before you start shopping for a home.

Of course, if you have a long-term plan to be in the home, the fluctuations and potential decrease in value in the near term doesn’t need to get you down, as the only price that matters is the price you are able to sell for when you need or want to move.

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Hiding a Mountain Of Debt

2009-04-03T08:04:00.000-07:00

By David S. Broder

With a bit of bookkeeping legerdemain borrowed from the Bush administration, the Democratic Congress is about to perform a cover-up on the most serious threat to America's economic future.

That threat is not the severe recession, tough as that is for the families and businesses struggling to make ends meet. In time, the recession will end, and last week's stock market performance hinted that we may not have to wait years for the recovery to begin.

The real threat is the monstrous debt resulting from the slump in revenue and the staggering sums being committed by Washington to rescuing embattled banks and homeowners -- and the absence of any serious strategy for paying it all back.

The Congressional Budget Office sketched the dimensions of the problem on March 20, and Congress reacted with shock. The CBO said that over the next 10 years, current policies would add a staggering $9.3 trillion to the national debt -- one-third more than President Obama had estimated by using much more optimistic assumptions about future economic growth.

As far as the eye could see, the CBO said, the debt would continue to grow by about $1 trillion a year because of a structural deficit between the spending rate, averaging 23 percent of gross domestic product, and federal revenue at 19 percent.

The ever-growing national debt will require ever-larger annual interest payments, with much of that money going overseas to China, Japan and other countries that have been buying our bonds.

Reacting to this scary prospect, the House and Senate budget committees took the paring knife to some of Obama's spending proposals and tax cuts last week. But many of the proposed savings look more like bookkeeping gimmicks than realistic cutbacks. The budget resolutions assume, for example, that no more money will be needed this year to bail out foundering businesses or pump up consumer demand, even though estimates of those needs start at $250 billion and go up by giant steps.

Republicans on the budget committees offered cuts that were larger and, in some but not all instances, more realistic.

But the main device the Democratic budgeteers employed was simply to shrink the budget "window" from 10 years to five. Instantly, $5 trillion in debt disappeared from view, along with the worry that long after the recession is past, the structural deficit would continue to blight the future of young working families.

The Democrats did not invent this gimmick. They borrowed it from George W. Bush, who turned to it as soon as his inherited budget surpluses withered with the tax cuts and recession of 2001-02. But Obama had promised a more honest budget and said that this meant looking at the long-term consequences of today's tax and spending decisions.

There are plenty of people in Congress for whom the CBO report was no surprise, and some of them have proposed a solution that would confront this reality. Kent Conrad, the chairman of the Senate Budget Committee, and Judd Gregg, its ranking Republican, have offered a bill to create a bipartisan commission to examine every aspect of the budget -- taxes, defense and domestic spending, and, especially, Medicare, Medicaid and Social Security. Congress would be required to vote promptly, up or down, on its recommendations, or come up with an alternative that would achieve at least as much in savings.

In the House, Democrat Jim Cooper of Tennessee and Republican Frank Wolf of Virginia have been pressing a similar proposal but have been regularly thwarted.

The roadblock in chief is Nancy Pelosi, the speaker of the House. She has made it clear that her main goal is to protect Social Security and Medicare from any significant reforms. Pelosi has not forgotten how Democrats benefited from the 2005-06 fight against Bush's effort to change Social Security. Her party, which had lost elections in 2000, 2002 and 2004, found its voice and its rallying cry to "Save Social Security," and Pelosi is not about to allow any bipartisan commission to take that issue away from her control.

The price for her obduracy is being paid in the rigging of the budget process. The larger price will be paid by your children and grandchildren, who will inherit a future-blighting mountain of debt.

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General Motors CEO resigns as part of bailout deal

2009-04-03T07:55:00.000-07:00

(CNN) -- General Motors CEO Rick Wagoner announced his resignation early Monday -- the latest change for the troubled automaker.

General Motors CEO Rick Wagoner's resignation statement is on the GM Web site.

White House and GM sources had told CNN Sunday that Wagoner would resign as part of the federal government's bailout strategy for the troubled automaker.

"On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have," Wagoner said in a statement posted to the GM Web site.

He is being replaced by GM's president and chief operating officer, Fritz Henderson. Kent Kresa will serve as interim chairman.

"Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM'ers worldwide to succeed," Wagoner said.

The Obama administration gave General Motors and Chrysler failing grades Monday for their turnaround efforts and promised a sweeping overhaul of the troubled companies. The government plans to give the automakers more money, but it is also holding out the threat of a "structured bankruptcy."

The federal government will provide operating funds for both automakers for several weeks, during which time the companies will have to undergo significant restructuring, administration officials said late Sunday night.

President Obama is expected to make a formal announcement Monday morning about his plans for the companies, which have already been given $17.4 billion.

GM will get 60 days and Chrysler 30 days in which to make a final push toward proving they can run viable businesses. If Chrysler succeeds, it will receive a $6 billion loan. In GM's case, the officials would not specify how much money the carmaker might receive.

In the case of both companies, the officials said, stakeholders -- and particularly debt holders in both companies -- had not done enough to relieve the automakers of ongoing financial burdens.

"We have made very clear that we expect a very, very substantial reduction in liability for both companies," one official said.

The administration held out the possibility of a so-called structured bankruptcy as an option.

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Sixteen feared dead in North Sea helicopter crash

2009-04-03T07:54:00.001-07:00

by Guy Jackson

LONDON (AFP) – Sixteen people were feared dead Thursday after a helicopter transporting them from an offshore oilfield crashed off the northeast coast of Scotland.

Rescuers retrieved eight bodies from the North Sea after Wednesday's crash but eight people remained missing after the search was called off at 10:00 pm -- eight hours after the helicopter went down.

Scottish First Minister Alex Salmond said late Wednesday that the outlook for the missing was "extremely bleak".

About 15 vessels had been combing the area for survivors, but the search was called off until dawn on Thursday.

"We can confirm that eight bodies have been recovered from the North Sea after a helicopter came down around 35 miles off the coast of Crimond," police said in a statement Wednesday.

"The remaining eight persons are unaccounted for," they said.

Oil giant BP said the helicopter was operating on its behalf. Carrying 14 passengers and two crew, it had been flying from the Miller oilfield, about 270 kilometres off the Scottish coast, back to the mainland when it crashed.

It went down just before 2:00 pm, the Maritime and Coastguard Agency (MCA) said.

Salmond expressed shock and sadness at the accident, telling reporters in Aberdeen: "Eight bodies have been recovered and I am afraid to say the outlook for the other eight people involved is extremely bleak."

He said the North Sea provided "enormous riches, millions, billions of pounds" in oil and gas.

"But it's incidents like this that remind us that there is another price, and that's the price in human life, which has been played out over the years," he said.

Queen Elizabeth II sent a private letter of condolence to the families of the victims, a Buckingham Palace spokeswoman said.

A BP spokesman said the firm was working closely with the coastguard and had put in place all its emergency response systems.

The Super Puma helicopter was operated by offshore aviation firm Bond, which was not immediately available for comment.

Another helicopter operated by the firm also went down in the North Sea with 18 people on board in February, although no one was injured.

An official report into that incident found a warning system which would have told pilots they were close to the water in foggy conditions had failed to sound.

Salmond said it would be "foolish to speculate" on what caused Wednesday's crash but said it was "catastrophic".

A spokeswoman for Scotland's emergency services said late Wednesday that it was unlikely someone could survive in the sea for much longer, even wearing special suits as the missing were.

Aberdeen Airport is one of the world's busiest heliports and dozens of flights serve the oil platforms off from the airport every week.

The Super Puma has been involved in a number of incidents over the past 20 years.

Eleven men were killed in February 1992 when a Super Puma taking oil workers from Shell's Cormorant Alpha platform to a nearby barge crashed into the sea immediately after takeoff, 100 miles northeast of Shetland.

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Shoplifting couple go on Dr. Phil, get house raided

2009-04-03T07:45:00.000-07:00

The Dr. Phil Show aired a segment yesterday about a couple from San Marcos, California who are jobless and make a living by shoplifting, often in other states to avoid being recognized. The couple, identified as “Laura” and “Allen” have three small children and brag that they’ve made about $100,000 a year by stealing and re-selling stolen goods. The show billed them as “the most successful shoplifters on the West Coast” and they claim that they’ve amassed $1 million in stolen goods over the seven years they’ve been running this racket.

“Laura” and “Allen” revealed some of the bold ways they pilfer from stores, even inviting cameras to come along on a multi-state spree. Their methods include using store bags that they smuggle in, using their children as decoys, and running “buy 1 get one” schemes where one of them will buy an item and pass the receipt off to the other, who will grab a second item for free. They’ve never been caught.

The couple went on the show without disguising their faces or voices, and said they’re coming out with this now in order to stop their life of crime. Dad of three and professional thief “Allen” told Dr. Phil why they’re going public: ” Putting it out in the open and knowing that everybody has seen us now, it will help us to not want to go to the stores, because we’re going to feel like they’re going to recognize us now. I think it’s something to help us to stop, because my cover’s blown.”

It looks like “Allen” got his wish because his house got raided last week. His real name is Matthew Eaton:

A couple whose house was raided by a fraud task force may be linked to their appearance on the “Dr. Phil” television show.

A couple appeared on an episode of the TV show titled “Shoplifting Confessions” Nov. 19, saying they were “professional shoplifters” who have amassed nearly $1 million in stolen goods, according to the show’s Web site. They were identified as Laura and a man who used the names Matthew and Allen.

A lawyer representing Laura and Matthew A. Eaton of San Marcos said the couple appeared on the show in November, but declined to say whether they were guests on that episode or to discuss it further.

A spokesman for the San Diego Regional Fraud Task Force, which conducted the raid on the house on the 1400 block of Leslie Court on Thursday, wouldn’t disclose the reason for the raid or if it was connected to the TV show.

“It’s still early on in the investigation,” said Greg Meyer, special agent in charge of the U.S. Secret Service San Diego Field Office. “There have been no arrests at this point and no indictments at this point.”

According to the TV show’s Web site, a woman named Laura said the couple stole goods in other states, such as Arizona and Nevada, to avoid being recognized.

[From SignOnSanDiego.com]

Allen/Matthew bragged on Dr. Phil about stealing “lots of Lego stuff.” TMZ uncovered his eBay account, in which he’s sold thousands worth of Lego goods and has a 100% positive rating.

Dr. Phil had an expert on the show that said these two aren’t kleptomaniacs because they steal items with the intention to resell and run a scheme, not for the pure urge to steal. Their crimes are federal because they crossed state lines to steal, and Dr. Phil’s security expert said they face “thousands” of indictments. You have to wonder why they decided to come forward now. They know they’re going to lose their kids if they both go to jail, which seems highly likely. They could have just stopped on their own and got jobs, but that way they wouldn’t have bragging rights and a brief taste of fame.

Written by Celebitchy

Original here

Death of USC student stuns campus

2009-04-03T07:43:00.000-07:00

Lawrence K. Ho / Los Angeles Times

Carmen Bachan, mother of hit-and-run victim Adrianna Bachan, 18, holds up a photograph of her daughter at a Monday news conference. “If anybody knows anything, I want them to help me,” she said.

Police and relatives call on the public's help in locating the driver in the fatal hit-and-run accident in a busy intersection near the school.

By Ari B. Bloomekatz

The death of a USC student and the critical injury of another in a violent hit-and-run accident left the urban campus reeling Monday as authorities and relatives called on the public for help in locating the driver and the badly damaged car.

"We need to find the vehicle," said LAPD Deputy Chief Kirk Albanese. "We need to find it quickly."

The accident, which occurred at the intersection of Jefferson Boulevard and Hoover Street at 3 a.m. Sunday, left Adrianna Bachan, 18, dead and Marcus Garfinkle, 19, clinging to life. According to witnesses, Garfinkle was carried about 500 feet on the vehicle's windshield before the driver stopped and a passenger removed him from the car. The vehicle then sped off.

At a Monday news conference, Bachan's mother, Carmen Bachan, held up pictures of her daughter and pleaded, "If anybody knows anything, I want them to help me."

Police say the driver had run a red light before the accident. Investigators and relatives said they were shocked by the cold behavior of the driver and passenger.

"The passenger got out of the car and threw the young man on the street after they destroyed my baby," Carmen Bachan said.

Albanese said investigators were looking for a black sedan -- possibly a Lexus, a Honda Accord or a Toyota Corolla -- that sustained heavy damage to its front end and a cracked windshield. Officers have already begun canvassing auto repair shops and have told employees to keep an eye out for the vehicle.

The intersection at Jefferson and Hoover is one of the busiest near USC. Scores of students walk, ride bicycles or skateboard across it each day, to and from class. It was far from deserted early Sunday morning when the two first-year students found themselves in the path of a speeding car.

Will Sturgeon, a 19-year-old freshman in environmental studies, said he was walking back to campus from a party when he heard a loud crash.

"We look over and we see this girl in the air and hitting the ground," he said. Sturgeon and others called authorities while a friend blocked traffic. Sturgeon and the friend flagged down a passing fire engine, he said.

Sturgeon said he thought the two students might have crossed the street outside of the crosswalk, because Bachan's body ended up about 15 yards away from it.

News of the accident quickly spread through the campus.

"A lot of people were talking about it on campus. It's in the Daily Trojan and it's all over people's Facebook" pages, said freshman Gieselle Allen, 19, who is studying screenwriting. "I just think it's sad."

Other students said it was difficult to fathom how the driver could speed off without helping the students.

"Everybody is pretty shocked," said Robert Hooks, 21, a senior who is studying political science.

"How do you just leave somebody on the side of the road like that?"

The daughter of a Croatian father and a Cuban mother, Bachan was born in Los Angeles. She grew up in Montecito and went to Santa Barbara High School, Carmen Bachan said. She said her daughter was an honors student and played soccer at the school.

Before Monday's news conference began, Carmen Bachan squeezed Albanese's hand as the officer tried to console her.

"Do you have children?" she asked.

"Yes," he said.

"Think if they died!" Carmen Bachan said. "Think if they died!"

Kelly Wirht, chapter president of Bachan's sorority, Pi Beta Phi, said a candlelight vigil had been planned for Monday night. In a written statement, she said that everyone in the house "is saddened at the tragic loss of its sister."

"Adrianna was both an amazing woman and an outstanding member of our chapter," she said. "She will be greatly missed."

Michael Jackson, USC's vice president of student affairs, said university officials have been proactive in trying to cope with the heavy amount of pedestrian and vehicle traffic around campus and will install a light within the next few months at 28th and Hoover streets, where another student was struck and injured earlier this year.

Jackson said the Jefferson-Hoover intersection sees an enormous amount of pedestrian traffic because some 10,000 students live north of Jefferson Boulevard.

"Just imagine," he said. "That's a lot of people going back and forth."

Jackson said university officials have worked with the city to improve the intersection and that a new system was implemented within the last couple of years that allows pedestrians to cross at several points while all traffic is stopped.

He said officials are planning to reexamine the spot after Sunday's fatality, but that it's difficult to stop someone from running a red light.

Original here

North Korea has nuclear warheads - International Crisis Group analyst Daniel Pinkston

2009-04-03T07:41:00.000-07:00

INTELLIGENCE agencies have obtained information that North Korea has assembled several nuclear warheads for its medium-range Rodong missiles capable of targeting Japan, an analyst says.

Daniel Pinkston, senior analyst with the Brussels-based International Crisis Group, said he had received the information from agencies he declined to identify.

"Intelligence agencies believe the North Koreans have assembled nuclear warheads for Rodong missiles, which are stored at underground facilities near the Rodong missile bases," Mr Pinkston said.

He said the agencies believe that probably five to eight warheads have been assembled.

Mr Pinkston said the agencies did not reveal the source of their information to him.

"It might be right, it might be wrong - but if others believe it is true, it has implications for the psychological aspects of deterrence," he said, describing the assessment as "quite significant".

In public at least, intelligence officials have not previously said that the communist North - which tested a nuclear weapon in 2006 - has the capability to manufacture nuclear warheads.

The North is preparing to test-fire its longest-range missile the Taepodong-2 within the next few days, but is not believed to have created any atomic warhead for this.

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NASA in Colbert conundrum over Space Station

2009-04-03T07:39:00.000-07:00

By Irene Klotz

CAPE CANAVERAL, Florida (Reuters) - NASA's outreach to the public to drum up interest in the International Space Station started innocently enough with an online contest to name the station's new living quarters.

But Stephen Colbert, a comedian who poses as an ultra right-wing news commentator on cable television's Comedy Central, nosed into the act with a grass-roots appeal that has backed the staid U.S. space agency into a corner.

The comedian's supporters cast 230,539 write-in votes to name the new module at the $100-billion space outpost "Colbert." The top NASA-suggested name, "Serenity," finished a distant second, more than 40,000 votes behind.

Contest rules stipulate that the agency retains the right to basically do whatever it wants, but it may not be that easy.

Last week, U.S. Representative Chaka Fattah, a Pennsylvania Democrat, called on NASA to do the democratic thing and use the name that drew the most votes.

"NASA decided to hold an election to name its new room at the International Space Station and the clear winner is Stephen Colbert," Fattah said in a statement. "The people have spoken, and Stephen Colbert won it fair and square -- even if his campaign was a bit over the top."

NASA is taking some time to ponder its next move.

"We have a plan and we're working with some folks and in a couple of weeks you'll know what the answer is," NASA's associate administrator Bill Gerstenmaier said.

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10 Most Outrageous Insurance Frauds

2009-03-24T13:00:00.000-07:00

In the movies they are played by Pierce Brosnan and Gene Hackman and justify art stealing or snatching of old Nazi German gold. In real life however they are unattractive and miserable figures devoted to the unglamorous and unforgiving life of insurance frauds. They do not have punch lines or happy endings, but their actions speak of great intelligence and/or tremendous stupidity. Here are 10 rascals that are the masterminds behind the most outrageous insurance frauds our time has ever seen. You decide who is who.

10. Tramesha Lashon Fox – Gave A for Arson

Tired of paying the bills on her car, high school chemistry teacher Tramesha Lashon Fox offered two of her underachieving students the grade A if they would “steal” her car and set it on fire. Naturally the two students took the offer but must have screwed something up. Fox not only lost her car, but also her job and freedom in the process.

9. Dr. Andrew Cubria – 750 unnecessary operations later

He may not have won an award for one of the largest fraudsters, but he was one of the cruelest. This cardiologist made a living by performing invasive, painful, and dangerous heart surgery on perfectly healthy people. He paid recruiters to visit homeless shelters and public housing to find indigents, seniors, and drug addicts. These vulnerable people were paid cash to show up at his clinic to submit to a battery to tests, and finally, invasive heart procedures.

In fact, he performed 750 operations on healthy people, and 2 of his “patients” died. He worked at Chicago’s Edgewater Medical Center, and federal prosecutors did not believe he worked alone. All of these illegal, unnecessary, and dangerous procedures were performed to defraud health insurance companies and public health services of millions of dollars.

8. Charles Gavett - The 9/11 Scheme

Charles Gavett did not get famous for the size of his insurance fraud, but for his audacity and bad taste. While most of the US grieved for the dead, Gavett claimed that his wife, Cindy, died in the World Trade Center attacks on September 11, 2001. However, she was really alive and safe in their home. They lived in a fairly small community, and their plans to collect $200,000 from their mortgage life insurance policy were thwarted when neighbors reported they had seen her in town since the attacks.

7. Curtis Donald Keene – Burried his cotton picker

This Georgian farmer managed to bury his cottom picker, a monster of eight ton, in an attempt to claim some insurance money.

6. Sex, greed and $200 million

Martin Frankel’s story contains of sex, greed, and a $200 million dollar fraud. Considering this and then how Frankel looks, we just had to include him on this list. He was fired from one of his first jobs, in the 1980’s, for misrepresenting himself in electronic trades, but by that time he had managed to impress the brokerage owner’s friends, and he had even taken the brokerage owner’s wife as a mistress.

One of these friends staked Frankel with their own savings and Frankel continued to suck investors into his schemes. By the end of this career as an insurance fraud, Frankel had about $205 million and two loyal mistresses to show for it.

5. John Stonehouse – the master of cheesy staged suicides

The british Labour politician with teeth hygiene like no other, John Stonehouse did what any man with debts and a whining wife would do. He staged his suicide and fled to Australia to start a new life with his mistress. The suicide was especially dramatic as he left nothing but his clothes on a beach to make it seem like drowning. Stonehouse was later arrested and convicted of insurance fraud.

4. Carla Patterson – The dead mouse in soup incident

Cracker Barrel once received a complaint from a customer named Carla Patterson. She had found a dead mouse in her soup, thus accusing the restaurant company of violating obvious health regulations. In it for her was $500,000 in insurance money from the restaurant. But when the mouse turned out not to have any soup in its lungs and had not been boiled, Patterson abandoned her claims and received one year in prison.

3. Ronald Evano – The glass eater

Boston resident Ronald Evano actually ate glass to convince his insurance company to pay up. Evano stated that he found the glass in the food and beverage he was eating. The insurance company did not fall for it and sent Evano packing for a 62 month jail sentence. Next time maybe he should try a simpler con.

2. John Darwin - “I think I’m a missing person”

In 2000, John Darwin went missing during a canoeing trip. Assumed deceased by the police Darwin’s life insurance was collected by his wife and life went on to see another day. Five years later a man showed up at a London police station claiming he had amnesia and under the belief of being a filed missing person. As it turned out this man was no other than John Darwin, who after half a decade hiding in Panama could no longer fight his longing for good ‘ol England.

Darwin had thus faked his own death, together with the misses, so that she could collect John’s quite wealthy life insurance. They had not told anybody, not even their children who genuinely thought their father was dead. A well planned life insurance scheme, unveiled only by a photo of the couple in Panama after Darwin’s disappearance.

1. Antoinette Millard – The Saudi Princess from Manhattan

No doubt suffering from poor psychological health, Manhattan girl and investment banker Lisa Walker one day decided to take on the fake and fictive identity of Antoinette Millard – a Saudi princess who had converted to Judaism. In addition to intense mingling with the New York social elite, Millard also tried to convince here insurance company that she had been mugged on jewelry worth $262,000. Princess Millard became such a social phenomenon in New York that even magazine New York Social Diary mentioned the princess.

When the insurance company finally filed the princess’ insurance claim as fraud, Millard confessed her elaborate scheme, blaming it on anything from 9/11 to her rough childhood.

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You Want to Tax What? Government Gets Desperate

2009-03-24T12:57:00.000-07:00

By ALICE GOMSTYN
ABC NEWS Business Unit

In Chicago, surveillance cameras may someday help the city to fine more uninsured drivers. In Ohio, a city court is limiting its new cases because it can't afford more printer paper. In California, there's a loud call to tax marijuana sales. And in Georgia, one lawmaker says he's not giving up on his proposal for a state strip club surcharge.

Government officials desperate for cash are turning to all sorts of unusual efforts to make and save money.

(ABC News Photo Illustration)

Across the country, these and other unusual money-saving and money-making efforts have been volleyed by government officials desperate for funding.

"A new wave of creativity is sweeping across budget offices these days," said Pat Hagan, national audit partner for state and local governments at Deloitte and Touche LLP.

Because the recession has cut so sharply into property tax, sales tax and income tax revenues, Hagan said, state and local officials are looking for nontraditional sources of cash.

"There are funny stories, although they're quite serious topics," he said.

Among the efforts drawing the most attention are so-called "sin taxes" -- taxes on products or services that many associate with vices like alcohol, smoking, pornography, strip club visits and in Nevada's case, prostitution.

Some sin taxes, though, Hagan said, aren't as effective as proponents may hope because they target only a limited number of people -- those who smoke or visit strip clubs.

Certain efforts to cut government spending, likewise, may result in only limited savings.

But, Hagan added, "Sometimes people want to do this in their communities because it sends the right signal that these are tough times, and you don't want your government to be spending frivolously."

Following is a look at unusual efforts -- both large and small -- to help governments boost their bottom lines.

Strip and Save?

It's been dubbed the "pole tax," but Georgia State Sen. Jack Murphy insisted his money-making proposal is really a surcharge, not a tax.

The Republican lawmaker is asking the state government to charge a $5 fee per visit to patrons of strip clubs. The revenue from the surcharge, he said, would go to fund new rehabilitation centers for teenage prostitutes.

"This bill is strictly to try to get some of these 13-, 14-year-olds off the street to give them a place to go, give them some therapy," he said.

If Georgia was flush with cash, Murphy said, he wouldn't include a proposed funding source -- the surcharge -- in his campaign for new rehab centers.

But right now, according to the Georgia governor's office, the state is $2.6 billion in the red.

"I couldn't see sending forth a bill without having some sort of funding source in it because we need money," Murphy said.

It's unclear how far Murphy's proposal will get. The bill didn't make headway in the state legislature, so now, the state senator said, he'll try to attach it as an amendment to more successful bills.

Making Money Off Marijuana

Proponents for the legalization of marijuana have a fresh argument on their side: Legalizing the drug would open it to regulation and, of course, taxes.

Democratic California assemblyman Tom Ammiano has proposed a bill in the state assembly that would do just that.

"With the state in the midst of an historic economic crisis," Ammiano said in a recent statement, "the move toward regulating and taxing marijuana is simply common sense. This legislation would generate much needed revenue for the state" and provide other benefits, such as freeing up police to pursue "more serious crimes."

A marijuana tax is projected to bring in $1.3 billion in new revenue to the state each year, but that hasn't swayed opponents to legalization.

Groups like Save Our Society From Drugs argue that legalizing marijuana would increase other costs, such as health care, and would lead to societal consequences, including more crime.

Paper Cuts in the Courtroom

Even in the digital age, court proceedings are flush with paperwork. Unfortunately for the Morrow County Municipal Court in Ohio, it doesn't have much paper to work with.

The court stopped requesting new paper supplies after the county went $2,600 in arrears on its office supply bill, leading Judge Lee McClelland to make a headline-grabbing decision: The court wouldn't take any new cases -- be they from the county prosecutor or average Joe plaintiffs bringing a lawsuit -- unless people bringing the cases also brought their own paper.

"It sounds kind of simple, but without paper everything stops," McClelland told ABCNews.com. "We're trying to conserve what we do have so the court doesn't come to a grinding halt."

Since McClelland first announced the policy last week, he's received two donations of paper -- that is, paper not tied to new or pending cases -- but supplies are still tight, he said.

"We're working on day to day right now," he said.

License Plates and Parties

Iowa lawmakers recently solicited suggestions from the public on how the state could cut spending. The response, provided through a Web site, has been encouraging, said Iowa House Minority Leader Kraig Paulsen, a Republican.

"We've been pretty excited about both the quantity and the quality of suggestions," he said.

Iowa House Republicans have seriously considered about two dozen of the public's suggestions, including a proposal to cut the state's license plate requirement from two per vehicle -- one plate on the front and another on the back -- to just one.

"Not only does it save you production costs, my guess is there's also some logistics costs, as well as far as shipping them and making sure you keep them paired up," Paulsen said. "If there was just one, you have 50 percent of products you have to handle."

Another suggestion was to crack down on state government office parties that use state funds to pay for supplies.

While Paulsen acknowledged that parties may provide a morale boost in tough times, he said state employees should pool their own cash to pay for them.

"The taxpayers of Iowa don't need to be funding parties in the state offices," he said. "At least on the surface, it just appears to be something that's flat wrong."

Shining a Red Light on Insurance Scofflaws

By now, many drivers have become grudgingly familiar with the surveillance cameras perched near traffic signals in different parts of the country.

They're there to catch and record the license plates of motorists running red lights. The traffic tickets that are issued as a result of the lights can provide governments with a valuable source of revenue.

Now, the city of Chicago is considering deriving another stream of revenue from the traffic cams: They could be used, proponents say, to catch and fine insurance scofflaws.

The license plate numbers that the cameras catch would be run through a database that would check whether the corresponding vehicle was insured. If not, its owner could be slapped with a fine of up to $500.

Jonathan Miller, the president of InsureNet, an auto insurance verification service, projected that Chicago could see an annual windfall of at least $200 million from such a program.

Others said the program would provide more than just fiscal benefits. It could encourage more people to get insurance.

Charging for 911

Emergencies cost money. Now officials at the Fire Department of the city of Santa Rosa, Calif. hope that the public will help defray the cost.

The department is proposing that Santa Rosa residents pay a $4 per month "subscription" to fund 911 calls. Residents who choose not to subscribe would be billed $350 for each 911 call they make.

"We're into our third round of budget reductions with layoffs and we're looking for every opportunity we can to try to fill a gap in the revenue coming in compared to the cost of service going out," said Deputy Fire Chief Mark McCormick.

McCormick said that 15 California cities have similar subscription programs that have proved successful. Contrary to what some expect, he said, the programs haven't led to a decrease in 911 calls.

But at least one city concluded that 911 subscriptions were a bad idea: Ventura, Calif., dropped its program late in 2008 after encountering billing problems, complaints and a lawsuit.

Soda, iTunes and Haircuts

In New York, some unusual tax ideas have gotten the boot thanks to government stimulus funds. Last week, New York Gov. David Paterson announced that he and state legislature leaders agreed to use more than a billion dollars of stimulus money in lieu of Paterson's proposals to tax sugary drinks, haircuts, manicures, bowling, skiing and online music downloads, among other products and services.

But New York isn't in the clear yet, Paterson said.

"[Officials] cannot treat a temporary windfall from Washington as an excuse to avoid the tough choices we must inevitably make to get our fiscal house in order," he said in a recent statement. "Federal funding will cover only a fraction of our overall budget deficit, and the economic outlook remains uncertain."

Original here

China calls for new reserve currency

2009-03-24T12:56:00.000-07:00

By Jamil Anderlini in Beijing

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.

To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.

Today, the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organisations.

China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions.

Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.

Mr Zhou said the proposal would require “extraordinary political vision and courage” and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.

Dutch FinMin targets bonuses; ING in staff appeal

2009-03-24T12:55:00.000-07:00

By Catherine Hornby

AMSTERDAM (Reuters) – The Dutch Finance Ministry will seek to curtail bonuses among senior management at financial companies receiving government support, while ING (ING.AS) is asking some staff to give back their 2008 bonuses.

In a letter to parliament, Bos outlined stricter measures to regulate bonus policies at firms receiving government support, noting persistent social discontent regarding the bonus culture of the financial sector.

"A cultural change needs to take place with regards to remuneration policy, particularly in financial institutions receiving support from the government or who were taken over by the government," Bos wrote in the letter.

He said measures to regulate the bonuses of executive board members in firms receiving financial support should also apply to senior management, and he would aim to prevent bonuses being paid to managers in 2009.

He said he would keep the option of going to court open, if necessary, and said he would urge the Dutch Central Bank and market regulator AFM to urgently pay attention to payments at financial institutions, in their role as supervisors.

From Europe to the United States, bonus payments at firms that were bailed out by taxpayers have become a focus of anger during the economic slump.

Millions of people took to the streets in France last week to protest excessive rewards in times of financial meltdown, and a scandal also erupted around American International Group (AIG) (AIG.N) over bonuses to executives of a financial products unit.

A spokesman for ING said on Monday it had launched a "moral appeal to management to hand in bonuses for 2008," confirming an earlier report in Dutch daily De Volkskrant that ING was asking 1,200 employees to return their bonus payments.

The company has also deferred bonuses for 2009 until a new remuneration policy is set, which is due in 2010.

"We will then look back to 2009 and if we made a profit the bonuses will be paid in line with the new policy," the ING spokesman said.

ING received a 10 billion euro ($13.69 billion) capital injection from the Dutch state in October last year and executive board bonuses for 2008 were scrapped.

However, it has faced criticism for bonus payments to staff in 2008, which amount to about 300 million euros.

The Dutch government has also provided a capital injection to insurer Aegon (AEGN.AS), and offers a loan guarantee scheme for banks. Fortis' (FOR.BR) Dutch activities, including ABN AMRO, were nationalized in October.

($1=.7302 Euro)

(Additional reporting by Harro Ten Wolde; Editing by Jon Loades-Carter and Simon Jessop)

Original here

Sweden Says No to Saving Saab

2009-03-24T12:53:00.000-07:00

Adam Ihse/Agence France-Presse

Demonstrators in Trollhattan, Sweden, protested on Feb. 26 against the threat of job cuts at the Saab factory there. The loss of 750 jobs was announced two weeks later.

By SARAH LYALL

TROLLHATTAN, Sweden — Saab Automobile may be just another crisis-ridden car company in an industry full of them. But just as the fortunes of Flint, Mich., are permanently entangled with General Motors, so it is impossible to find anyone in this city in southwest Sweden who is not somehow connected to Saab.

Which makes it all the more wrenching that the Swedish government has responded to Saab’s desperate financial situation by saying, essentially, tough luck. Or, as the enterprise minister, Maud Olofsson, put it recently, “The Swedish state is not prepared to own car factories.”

Such a view might seem jarring, coming as it does from a country with a reputation for a paternalistic view of workers and companies. The “Swedish model” for dealing with a banking crisis — nationalizing the banks, recapitalizing them and selling them — has been much debated lately in the United States, with free-market defenders warning of a slippery slope of Nordic socialism.

But Sweden has a right-leaning government, elected in 2006 after a long period of Social Democratic rule, that prefers market forces to state intervention and ownership. That fact has made the workers of Trollhattan wish the old socialist model were more in evidence.

“I don’t think the government knows the situation in this town, how many people depend on Saab,” said Therese Doeij, 25, a clerk at a photo shop who has several friends who work at the company. “To them it’s just a factory. They don’t see the people behind it.”

Governments all over the world are confronting the disintegration of the global automobile market in different ways, with loans, bailouts and takeovers.

But Sweden’s approach has been particularly hard-nosed, and particularly unequivocal.

Why is the government apparently dead set against helping Saab, an iconic brand that stands as a global symbol of Sweden, with Ikea, Volvo and Abba?

That is what Paul Akerlund, the local chairman of the automobile workers’ union, wonders.

“I’m a little surprised,” he said. “They say the market should help itself, but the market has collapsed around the whole world. It’s an extraordinary situation.”

He added, with a note of accusation in his voice, “In Germany, France and England, the government is going in to help the car manufacturers.”

Swedish officials have condemned what they see as protectionism by other European countries that have pledged to prop up their own failing car industries. They have also been scathing about General Motors, Saab’s owner, and the last thing they want is to seem to be bailing out a despised foreign company.

Struggling for its own survival, G.M. has said it will completely pull out of Saab by the end of 2009, a course that Ms. Olofsson, the enterprise minister, described as tantamount to declaring “that they wash their hands of Saab and drop it into the laps of the Swedish taxpayers.”

She said: “We are very disappointed in G.M., but we are not prepared to risk taxpayers’ money. This is not a game of Monopoly.”

Saab lost about $343 million last year. It is now going through a Swedish process known as reorganization, a step short of bankruptcy, as it tries to persuade its creditors to prop it up while it looks for a buyer. Joe Oliver, a spokesman, said in an interview that “around six serious investors,” from Sweden and abroad, had expressed interest.

Time is running out.

But the prospect of failure is too awful for Trollhattan’s mayor, Gert-Inge Andersson, to even contemplate. In a city of about 54,000 people, Saab employs 4,000.

“I’m being optimistic, because I can’t envision a time when Saab doesn’t exist,” Mr. Andersson said in an interview in City Hall.

His son worked at Saab for a decade; his daughter’s boyfriend works there now. “Saab is our identity,” he said. “We have lived with it for many years, and it’s very important to all of us.”

Saab was always known for its innovative engineering. But analysts say that in recent years, with General Motors’s emphasis on volume rather than individuality, it has lost its edge.

“Under G.M.’s ownership, they denuded the intellectual content behind the brand,” said Peter Wells, who teaches at Cardiff Business School in Wales and specializes in the automotive industry. “Its products are not exciting enough, and Saab doesn’t have a strong brand identity anymore.”

The numbers speak all too loudly. Saab sold just 93,295 vehicles worldwide last year, 21,383 of them in the United States. As global demand plummets, the expectations for this year are even more dire. The company announced this month that it planned to lay off 750 workers in Trollhattan.

This is not a rich city. Besides Saab, the largest employer is the municipal government. The houses run mostly to modest wooden two-story structures and low-rise brick apartment buildings. But about 40 percent of the people here drive Saabs, Mayor Andersson said. On a cold evening last month, 3,000 people held a torchlight ceremony to show their support for the company.

Leave the tourist office and you come immediately to the Saab Museum. A shining, sparkling valentine to a company and an industry, it features treasures like the groundbreaking turbo engine unveiled at the 1977 Frankfurt automobile show, and the prototype of the very first Saab car, from 1947 — Ur-Saab, its license plate says proudly. All the cars here, even the rarest and most precious, are still driven from time to time by enthusiasts.

Some 50,000 tourists visit each year, said Ola Bolander, who works at the museum. Saab sponsors a festival for its fans every other year; 20,000 came to the last one, in 2007. “Saab has always been a bit different, a bit more interesting,” Mr. Bolander said. “It’s gone its own way, and it’s in the heart of the Swedish people.”

Sweden has nine million people. Labor leaders say Saab’s collapse would disproportionately affect southwest Sweden, an industrial belt that is also home to Volvo. But it would reverberate through the rest of the economy, which depends heavily on industrial exports, jeopardizing perhaps tens of thousands of jobs.

Sweden is famous for its generous unemployment provisions, which include retraining for laid-off workers. But unemployment is quickly rising. Tomas Eneroth, a member of Parliament and the spokesman for industry and trade for the opposition Social Democrats, said the government’s tough line was foolish.

“The fact that they are so passive,” he said, “is every day now making it worse and jeopardizing the possibility of having Saab still in Sweden.”

Around the corner from City Hall, Johann Riden, a sales clerk in an electronics store, said about half his customers worked either at Saab or at companies that do business with Saab.

“I have friends there, my colleagues have family there, and my friends have family there,” said Mr. Riden, 32. “If you look around, you see Saab everywhere.”

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Energy Efficiency Could Save Us $168 Billion

2009-03-24T12:51:00.000-07:00

Written by Jerry James Stone

Energy efficiency initiatives that reduce electricity and gas usage could save consumers and businesses up to $168 billion, says the American Council for an Energy-Efficient Economy (ACEEE). The report comes on the heels of the Campaign for an Energy-Efficient America: a group of business leaders, industry groups, and environmental advocates calling on Congress to enact a federal energy efficiency target.

“Energy efficiency is one of the most effective ways to address our nation’s energy and climate challenges while creating jobs and saving Americans money,” stated Steven Nadel, Executive Director of ACEEE. “In these difficult economic times, investment in energy efficiency makes more sense than ever and should be a top priority for our nation’s leaders.”

ACEEE’s report, Laying the Foundation for Implementing a Federal Energy Efficiency Resource Standard, analyzes both 2008 economic and energy data. If a federal energy efficiency resource standard (EERS) were adopted, one that demanded a electricity reduction of 15-percent and a natural gas reduction of 10-percent, 262 million metric tons of greenhouse gas emissions could be prevented. That is the equivalent of taking 48 million cars off the road for one year.

Other benefits include 220,000 net permanent jobs and 390 power plants that won’t need to be built.

The Campaign for an Energy-Efficient America supports a federal EERS, included in both House and Senate versions (H.R. 889 and S. 548) of the Save American Energy Act, introduced by Rep. Edward Markey (D-MA) and Sen. Charles E. Schumer (D-NY).

“As this coalition shows, the idea of a national energy efficiency standard draws support from a wide range of business and environmental groups in order to save money for consumers, create long-term jobs that cannot be outsourced, and reduce greenhouse gas emissions,” said Reid Detchon, Executive Director of the Energy Future Coalition, a nonpartisan public policy initiative that seeks to speed the transition to a new energy economy.

Currently 19 states have adopted individual EERS programs, but the real potential comes from a federal implementation. ACEEE analyzed the benefits of a federal EERS for each state by 2020. For example:

Florida will create more than 19,500 new jobs and save $14 billion in energy costs.
Illinois will create more than 6,500 new jobs and save $3.6 billion in energy costs.
Indiana will create more than 5,000 new jobs and save $3.6 billion in energy costs.
North Carolina will create nearly 6,500 new jobs and save $3 billion in energy costs.
Tennessee will create more than 5,000 new jobs and save $3.5 billion on energy costs.

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Cafe owner thrives with no-pricing policy

2009-03-24T12:50:00.000-07:00

By amzolt

I hang out at a local café (you may have noticed I use many imaginative dialogues at the beginning of posts and they’re almost always in a café). I also do some of my own work at the café plus volunteering a little marketing and promotion—basically, I like the place.

However, this creeping, crawling economic downturn (aka recession or crunch) hit the owner of Java Street Café pretty hard. I’ve spent hours talking business with him and watched as a bright and friendly man became progressively morose and extremely exhausted (when a business has hard times, paying employees becomes a problem and the owner has to not only run the business but literally Work it).

Months went by, things getting worse, while the owner, Sam, in spite of the grueling conditions, continued to try various ideas to attract customers…

Finally, last week, an idea he’d been experimenting with became a what-the-hell—”I can’t lose more than I already have”—Decision:

Take All The Prices Off The Menu—let people pay whatever they feel is a Fair Price!

Sam had his back against the wall, he was willing to try just about anything, and he “happened” to choose and made a commitment to act on what could seem like a very crazy idea…

That was last week…

Since then, he’s been interviewed on CNN twice, phone interviewed on MSNBC and Fox, appeared on all four of the local channels, been on three out-of-state radio talk shows, will be appearing in a morning cooking segment on the local Fox affiliate, and received calls of thanks from three other states and Canada…

As if that weren’t enough, the blogosphere is starting to warm up to the story and it’s on the edge of tipping into the viral realm.

Why?

Because it’s “crazy” and unusual?

Nope.

That may have been the initial and conscious decision of the media but, after watching it happen and, especially, watching his customers react, the real and deeper reason for all the interest certainly seems to be related to a nearly archaic principle—Business Ethics…

Sam’s customer’s have a variety of reactions when he takes their order then says, “O.K., what do you think is a fair price for what you just ordered ?”:

“Huh?”

“Me?”

“What’s your usual price?”

“Oh, my! I have to think about it?”

“You’re kidding, right?

Sam’s not kidding, they do have to think about it, his “usual” price is now “your price”, and, when the day is done, the under-payers and the over-payers even out and he’s collecting what he used to get when he had prices…

Of all the various reactions, my personal favorite, and the one that sings of ethics in business during hard times, is what the woman from Missouri said, when she called to thank Sam for his decision:

“After I saw the story on CNN, I cried…”

Spiritual Quote:

“As a practical step in contributing to a dialogue about development and social transformation that explicitly takes account of spiritual values and perspectives, some 100 influential development organizations, international and government agencies, religious representatives, and academics recently gathered in New Delhi to participate in a colloquium on the theme of Science, Religion and Development. The primary goal of the event was to explore how a unified interaction between scientific methods and religious insights can promote the building of human capacity, particularly in the areas of governance, education, technology and economic activity.”
2001 Jun 11, Universal House of Justice, Overcoming Corruption

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The World's Cheapest Car Debuts in India

2009-03-24T12:48:00.000-07:00

By JYOTI THOTTAM / PUNE

In New Delhi in the early 1970s, my family traveled by scooter in the classic, death-defying Indian fashion. My father would drive, with me, a toddler, standing in front gripping the handlebars and my mother seated pillion, my infant sister in her arms. My father was a civil engineer and my mother a nurse, and in India at that time, cars for a young family were far out of reach.

More than 30 years later, I recently listened to Ratan Tata, chairman of one of India's largest companies, describe a family just like mine as the inspiration for the Nano, the ultra-cheap "people's car" that Tata Motors officially launches today. "What sparked it off was riding in a car and looking at them and saying, 'surely there's a safer way that these people can be transported,'" Tata recalls. (See the dozen most important cars of all time.)

That incident was the beginning of a six-year quest by Tata Motors, India's largest automaker, to develop a car for the common man costing less than Rs 100,000 (about $2,000), roughly the same price as a motorcycle. Many thought Tata was bound to fail, that a car so cheap wouldn't be much of a car at all. The Maruti 800, India's best-selling sub-compact, costs almost twice as much. The chairman of Suzuki Motor, Osaka Suzuki, once said: "Tata will not be able to make a one-lakh car." (Lakh is an Indian word for 100,000.)

The company has proven the doubters wrong. The Nano is going on sale at Tata's 470 outlets in India; the base model does indeed carry a sticker price of Rs 100,000. Now, with global car sales in the worst slump in decades — Tata Motors itself is experiencing financial difficulties — the battered automotive industry is looking to the debut of the world's cheapest car for clues to a future that could revolve around smaller, more fuel-efficient and more cheaply produced vehicles. (See the 50 worst cars of all time.)

In an exclusive March 5 interview with TIME, Tata downplayed the tough market conditions and the impact that sagging consumer demand could have on Nano sales. Although car loans are harder to come by in India due to the credit crisis, the country's economy is still growing. "If I had conceived a million-dollar supercar today, I think you'd have every reason to question whether that's the right product at the right time in the planet that we are living in today," Tata says. The Nano, he argues, is the right car for this difficult time. "What has happened in the changing economic situation globally reinforces, if nothing else, the fact that a low-cost car has a place."

Tata Motors engineers developed the Nano by redesigning every component to minimize cost and weight, while trying to maintain performance and comfort. To see how well they accomplished their mission, I was offered the chance to drive a Nano on a test track at Tata Motors' main plant in the western Indian city of Pune. (See pictures of the Nano.)

The first thing you notice is that the dashboard holds just two gauges: speedometer and fuel level. This is the basic model, and it's stripped down to the bare essentials. But driving the car is surprisingly easy. The gearshift is smooth, the car accelerates adequately and you never feel cramped or low to the ground. The Nano doesn't feel like a cheap, lightweight car that's going to tip over with the first sudden turn.

Outside the Tata Motors facility, our photographer got to drive a fully equipped, bright yellow Nano along the highways, cobbled avenues and side streets of Pune. This car had air conditioning, worth the extra money in India (optional-equipment costs had not been released at the time this was written), but running the aircon sapped some of the power of the tiny, two-cylinder engine. Other drawbacks of the car: The storage space is hard to access because the hatchback doesn't open, the brakes aren't progressive, and the car we drove pulled slightly to the left even though there were just 40 km on its odometer. (See pictures of muscle cars.)

Those quibbles are unlikely to make a difference to potential buyers. The Nano's target customers are people riding two-wheelers, and for most of them, this is the only car they could hope to buy. Even without spending anything on marketing so far, Tata executives expect demand to far exceed their initial annual production capacity of 45,000 Nanos. Tata Motors had planned to build about 250,000 cars a year, but the company was forced to shut down its original Nano factory last fall after protests by people displaced by its construction turned violent. That disruption forced Tata Motors to relocate its main Nano production line and delayed the launch. Because plants in Pune and Pantnagar are now producing the car in reduced numbers, the company is bracing for long waiting lists and disappointed customers.

The lower volume means the Nano will do little for Tata Motors' revenue and profits, at least initially. Vaishali Jajoo, a senior automotive research analyst at Angel Broking, an investment firm in Mumbai, says that even at projected output of about 250,000 cars a year, she expects the Nano will add just 3% to annual sales. Because the profit margin on Nano sales is small, "It will take at least four to five years to break even" by recouping development costs, Jajoo says. Fully equipped Nanos have higher margins, but the company has not yet decided how many of those it will produce. A company spokesman declined to comment on analyst reports regarding the Nano's launch, calling them "speculative."

Initially, the Nano will be sold only in India. The company plans to begin selling a European version in 2011. It has no plans yet to export the Nano to the U.S., although that has not been ruled out.

The Nano's slow start comes at a time when Tata Motors is struggling financially due to slumping demand. The company in the quarter ending Dec. 31 reported a $58.5 million loss, its first loss in seven years. Loans for Tata Motor's $2.3 billion purchase of loss-making luxury car brands Jaguar and Land Rover from Ford Motor are coming due. "That's a major cash-flow crunch for them," Jajoo says. Jaguar and Land Rover sales have tanked. The company is pursuing several options to meet its obligations, including getting a bailout from the British government. (Vote for the 2009 TIME 100 Finalists.)

The Nano certainly won't solve Tata Motors' immediate problems. But Tata says he hopes the groundbreaking vehicle will in the long run help redefine not only how much cars cost, but also how they are made. The future of the car industry, he says, lies in design and marketing — not manufacturing, which involves high costs and increasingly can be farmed out to other companies. If the Nano really takes off, Tata Motors may try "distributed manufacturing" — selling Nano kits to be assembled and sold by independent dealers. This, says Tata, would be a step toward fully outsourced manufacturing. "What I tried to describe on the Nano is an attempt to look at that as a business model," Tata says. A new way of doing business may be something the beleaguered auto industry needs even more than a cheap new car.

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Why It's Getting Harder to Evade Taxes

2009-03-24T12:44:00.000-07:00

By ADAM SMITH

Politicians don't usually like being interrupted during interviews. But sometimes it's worth making an exception. During a sit-down conversation with TIME last week, British Prime Minister Gordon Brown happily broke off to read a faxed letter handed to him by an aide. As anticipated, the note, from the Swiss President, brought welcome news: Switzerland was finally relaxing its decades-old banking-secrecy laws. "That is a major step forward," Brown enthused, brandishing the fax between his fingers. "This," he said, marks "the beginning of the end of tax havens."

That may be too optimistic. There will always be some corner of the globe offering itself up as a place people can squirrel away their money. But Brown is right that Switzerland's decision to share information with other countries in cases of suspected tax evasion is revolutionary, not least because the Alpine nation's identity is so closely tied to its famously discreet banks. And Switzerland wasn't the only one making concessions last week. Andorra, Austria, Liechtenstein and Luxembourg all pledged to meet the same international standards on cooperation. Singapore and Hong Kong had promised much the same a few days earlier.

They had to do something. With the global downturn squeezing tax revenues, and state bailouts putting taxpayers on the hook for billions of dollars, patience for banking systems that offer shelter to tax dodgers has finally run out. U.S. and European officials have been falling over each other with their promises to go after tax cheats. With the issue on the agenda for next month's meeting in London of the Group of 20 (G20) nations, change was almost inevitable. "Given the crisis, and the imminence of the G20 meeting," says Angel Gurría, secretary-general of the Paris-based Organisation for Economic Cooperation and Development (OECD), which drew up the international standards for transparency and information exchange on tax in 2004, "it was time to move. The important thing is they all moved together."

It's hard to feel sorry for the jurisdictions being squeezed. Offering low or no taxes to foreign firms and individuals parking money with them; snubbing requests for information from overseas tax authorities; or indeed both, offshore financial centers provide the perfect conditions for anyone who wants to hide cash illegally from the taxman back home. That cheats governments out of money to build roads and schools and hospitals, not to mention the funds to bailout banks. Accurate estimates for the value of assets held offshore are as hard to pin down as the havens themselves. The Tax Justice Network, an independent London-based group, thinks the figure could be as high as $11.5 trillion, while U.S. Democratic Senator Carl Levin, who introduced an anti-tax-haven bill in Congress earlier this month, estimates that the U.S. government loses some $100 billion in revenue every year because of offshore tax dodges.

Governments have sometimes managed to claw back lost income. UBS, Switzerland's biggest bank, last month paid $780 million in fines and handed over the names of about 300 U.S. clients to American authorities after admitting the Swiss bank helped customers evade tax. And data bought by German authorities from a whistle-blower in Liechtenstein last year revealed hundreds of cases of suspected tax evasion. One of those caught out: former Deutsche Post boss Klaus Zumwinkel, who was convicted of tax evasion in January and received a suspended sentence and a $1.3 million fine.

Keen to clean up its image in the wake of the scandal, Liechtenstein agreed in December to share information with U.S. authorities in cases of suspected tax evasion by U.S. citizens. That's unusual. In the past, requests for data from offshore financial centers have mostly fallen on deaf ears. In Switzerland, tax fraud is considered a crime, but tax evasion is not. That's meant that bank secrecy can be waived in suspected cases of fraud but not in cases of suspected evasion.

Until now. Under the OECD's standards for cooperation, information is shared with foreign authorities on a case-by-case basis, and only where requests for data are targeted and justified as part of an ongoing investigation. In other words, "it doesn't mean I can send you the Yellow Pages and ask you to give me information on every name that appears," says the OECD's Gurría. The procedure "doesn't lend itself to frivolous requests."

Some argue that going after tax havens is nothing more than a distraction from much bigger issues with which the G20 will be grappling — pesky things such as stabilizing financial markets, reforming the global financial system and returning the economy to stable growth. Focusing on tax havens would be "nothing short of a catastrophe, when you've got an opportunity to make a difference," Martin Broughton, president of British employers' group the CBI, told the Financial Times this month. Tax havens, said Broughton, are "totally irrelevant" to getting out of the current slump.

But the OECD's Gurría scoffs at the idea that tax havens are red herrings. Tackling secrecy in offshore centers "is part of the process, part of the effort," he says. "If we're getting together to save the banks, if we're getting together to give guarantees and we're getting together in order to coordinate stimulus packages, how is it possible we can't agree on the fact that we all treat each other in a relatively comparable way when it comes to taxes?"

That's true. But another possible reason for the cleanup's timing is that politicians know that getting tough on tax evaders won't lose them any votes. With taxpayers shouldering enormous bailouts in recent months, tapping into their feelings of unfairness is a popular move. "There is a real sense that the tax burden is not falling on the richest" in Europe, says Nicolas Véron, a finance scholar at the Bruegel think tank, in Brussels. "At the same time, a number of governments know they will have to raise taxes, and are trying to get some of it back into the country."

A recent OECD update on progress toward meeting international standards chided Austria, Singapore and Switzerland, among others, for not doing enough. The threat of blacklisting by the G20 and of retaliatory measures, such as tougher financial-reporting requirements for companies engaging with offshore centers, was apparently enough to make the holdouts see the light.

The OECD says it will now consider removing Liechtenstein and Andorra from its list of "uncooperative" jurisdictions and also hints that even Monaco — the third member of that list — "may be prepared to move in the same direction." But the organization will need to keep a close eye on the countries pledging greater openness. Dozens of jurisdictions have promised to move on transparency and information sharing in recent years, but not all have followed through. Panama, for one, has done little to honor its commitments to the OECD. Gibraltar, too, has shown similar disdain for the standards.

Authorities in such places might do well to consider the thoughts of Anne Bolomey, a retired civil servant in the small Swiss town of Morges, many of whose citizens work for banks in nearby Lausanne and Geneva. Switzerland's decision to relax its precious banking secrecy means the country avoids "isolating ourselves even further from our European neighbors. And in any case," says Bolomey, sipping tea in a local café, "having a reputation as a tax haven is not something Switzerland should be known for." With reporting by Helena Bachmann / Morges, Leo Cendrowicz / Brussels and Catherine Mayer / London

Secret Stash

$100 billion Annual tax revenues the U.S. is estimated to lose to offshore tax abuse

$11.5 trillion Estimated value of assets taxpayers in all countries hold offshore

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More women needing cash go from jobless to topless

2009-03-24T12:41:00.001-07:00

By KAREN HAWKINS, Associated Press Writer

CHICAGO – As a bartender and trainer at a national restaurant chain, Rebecca Brown earned a couple thousand dollars in a really good week. Now, as a dancer at Chicago's Pink Monkey gentleman's club, she makes almost that much in one good night.

The tough job market is prompting a growing number of women across the country to dance in strip clubs, appear in adult movies or pose for magazines like Hustler.

Employers across the adult entertainment industry say they're seeing an influx of applications from women who, like Brown, are attracted by the promise of flexible schedules and fast cash. Many have college degrees and held white-collar jobs until the economy soured.

"You're seeing a lot more beautiful women who are eligible to do so many other things," said Gus Poulos, general manager of New York City's Sin City gentleman's club. He said he got 85 responses in just one day to a recent job posting on Craigslist.

The transition to the nightclub scene isn't always a smooth one — from learning to dance in five-inch heels to dealing with the jeers of some customers.

Some performers said they were initially so nervous that only alcohol could calm their nerves.

"It is like giving a speech, but instead of imagining everyone naked, you're the one who's naked," Brown, 29, said.

Eva Stone, a 25-year-old dancer at the Pink Monkey, said dealing with occasional verbal abuse from patrons requires "a thick skin."

Makers of adult films cautioned that women shouldn't rush into the decision to make adult movies without considering the effect on their lives.

"Once you decide to be an adult actress, it impacts your relationship with everyone," said Steven Hirsch, co-chairman of adult film giant Vivid Entertainment Group. "Once you make an adult film, it never goes away."

The women at the Pink Monkey say dancing at a strip club might not have been their first career choice, but they entered the business with their eyes wide open. The job gives them more control and flexibility than sitting in a cubicle, and "it's easy, it's fun and all of us girls ... look out for each other," Brown said.

In this economy, "desperate measures are becoming far more acceptable," said Jonathan Alpert, a New York City-based psychotherapist who's had clients who worked in adult entertainment.

For some, dancing is temporary, a way to pay for college loans or other bills. Others say they've found their niche.

Dancers at the upscale Rick's Caberet clubs in New York City and Miami can make $100,000 to $300,000 a year — in cash — even with the economic downturn, club spokesman Allan Priaulx said.

Priaulx said 20 to 30 women a week are applying for jobs at the New York club, double the number of a year ago.

Rhode Island's Foxy Lady held a job fair Saturday, seeking to fill about 35 positions for dancers, masseuses, bartenders and bouncers. The Providence Journal reported that more than 150 job seekers showed up to apply for work at the strip club. Foxy Lady co-owner Tom Tsoumas said a recent promotion to cut prices helped the club regain business lost due to the bad economy, forcing it to hire more employees.

Still, analysts say, the industry isn't immune to the economic recession. Business is down an estimated 30 percent across all segments, including adult films, gentleman's clubs, magazines and novelty shops, said Paul Fishbein, president of AVN Media Network, an adult entertainment company that has a widely distributed trade publication and an award show.

"In the past, people have said this industry is recession-proof," said Eric Wold, director of research for financial services firm Merriman Curhan Ford. "I definitely don't see that; maybe recession-resistant."

Strip club dancers and managers said they're drawing in the same number of customers, but fewer high rollers.

"They're not getting the big spenders," said Angelina Spencer, executive director of the Association of Club Executives, a trade group for adult nightclubs. "They're not getting the guys who come in and drop $3,000 to $4,000 a night anymore."

Still, the clubs' operating structure leaves them with low overhead and profit margins of up to 50 percent, Wold said.

Dancers are independent contractors, paying clubs a nightly flat fee depending on how long they work. At the Pink Monkey, for example, dancers who arrive at 7 p.m. Sunday through Thursday pay a $40 "house fee," while women who don't arrive until midnight pay $90. And they keep their tips.

Wold and others say it's almost impossible to estimate the size of the adult entertainment industry because few companies are publicly traded. He does pay close attention to three that are: Lakewood, Colo.-based VCG Holding and Houston-based Rick's Caberet, which own clubs, and New Frontier Media, a Boulder, Colo.-based adult film producer and distributor.

All three are profitable.

Rick's Caberet had $60 million in revenue in its 2008 fiscal year, up from $32 million the year before, Wold said, and he estimates VCG will have $57 million for last year, compared with $40.5 million in FY2007. New Frontier Media generates more than $400 million in consumer buying a year.

Larry Flynt, whose half-billion dollar Hustler empire publishes magazines, produces and distributes films and operates a casino, said he's continued to do well. But he doesn't expect those who are solely in the film business to survive.

"A lot of the small studios are out of business now, there's no doubt about that," Flynt said.

Adult magazines also are struggling along with the larger publishing industry, and have to cut pages like everyone else.

But the economic realities aren't keeping jobseekers away.

Vivid Entertainment's Hirsch said the number of women in his business has doubled in the last couple years, with roughly 800 working as adult actresses. "It is more competitive than I've seen it in 25 years," he said.

That doesn't mean all the newcomers are planning on lengthy careers in the industry.

Stone, who has a bachelor's degree in graphic design, took up dancing four years ago to help pay her student loans. She plans to go to graduate school this year to pursue a master's in education.

Brown, meanwhile, has a ready answer for those critical of her career choice.

"I have job security," she said.

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WaMu sues FDIC for more than $13 billion over forced sale

2009-03-24T12:39:00.000-07:00

Stephen C. Webster

Washington Mutual, the bankrupt, seized and "under investigation" financial institution which saw some operations forcibly sold off to JPMorgan Chase in 2008, is suing the agency that guarantees Americans' deposits, and that agency is running low on funds.

Washington Mutual (WaMu), formerly one of the nation's most prestigious banks and alleged holder of over $307 billion in assets, is suing the Federal Deposit Insurance Corporation for more than $13 billion over the roll-up of its banking division into JPMorgan Chase & Co.

Washington Mutual was seized by federal regulators in Sept. 2008; the company filed for bankruptcy immediately thereafter. The ensuing investigation "one of the largest and most complex federal investigations ever undertaken in Western Washington," a US Attorney told the Seattle Times

"In a complaint filed with the U.S. District Court for the District of Columbia, the thrift's former parent accused the FDIC of having on January 23 made a 'cryptic disallowance' of its claims, prompting the lawsuit," reported Reuters.

"It also accused the FDIC of agreeing to an unreasonably low price in arranging the a $1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver."

"On a Friday night in September 2008, the government forced WaMu into a shotgun marriage with new owners at pennies on the dollar. The FDIC seized the bank and then sold it to JPMorgan Chase for $1.9 billion," reported MSNBC.

"[A] federal task force continues to comb through a mountain of documents looking into possible criminal charges against WaMu executives. It's looking for fraud in how the company built such an unstable business based on subprime mortgages."

When banks insured by the FDIC are seized or declare bankruptcy, the agency returns depositors' funds up to $100,000.

"The thing is, the FDIC that is supposed to pay customers is running low — there have just been a lot of bank failures..." noted NPR's Jim Zarroli when JPMorgan Chase agreed to purchase WaMu's banking division.

On the same day the United States saw its 20th bank failure of 2009.

An FDIC spokesman would not comment on the suit to Reuters.

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Post Office Offering Early out, Cutting Managers

2009-03-24T12:36:00.000-07:00

By RANDOLPH E. SCHMID Associated Press Writer

Battered by the economy, the post office is offering early retirement to 150,000 workers, cutting management and closing offices, the agency said Friday.

In this file photo, people use mail services at the James Farley Post Office building in New York...

(Spencer Platt/Getty Images)

The Postal Service lost $2.8 billion last year and is facing even larger losses this year, despite a rate increase — to 44 cents for first-class mail — scheduled to take effect May 11.

The agency said it will reduce management staff nationwide by 15 percent, with more than 1,400 processing, supervisor and management posts at 400 facilities being eliminated.

And another 150,000 postal workers will be offered early retirement.

The agency also made early retirement offers last year but unions discouraged their members from accepting the offers and they were not widely used. The post office did not say if the new proposal would include financial incentives.

The American Postal Workers Union issued a statement Friday saying: "Retirement is a personal matter, and the union defers to the decisions of employees who meet the qualifications."

However, the union said it continues to challenge the Postal Service's authority to offer voluntary early retirement without including severance pay.

The 80 district across the country will be reduced by six with the closings in Lake Mary, Fl.; North Reading, Mass.; Manchester, N.H.; Edison, N.J.; Erie, Pa.; and Spokane, Wash.

District offices handle administrative functions and officials said the closing should not affect local mail delivery. The closings were expected to take about five months.

The first quarter of the fiscal year — October through December — is usually the post office's busiest, but it still posted a loss of $384 million for the period.

Officials said the economic recession contributed to a 5.2 billion piece mail volume decline compared to the same period last year. If there is no economic recovery, the Postal Service projects volume for the year will be down by 12 billion to 15 billion pieces of mail.

The post office said that over the past year it has cut 50 million work hours, stopped construction of new postal facilities; froze salaries for postal executives, began selling unused facilities and cut post office hours.

In addition, it is negotiating an agreement with the National Association of Letter Carriers to adjust carrier routes to reflect diminished volume.

Postmaster General John Potter has even asked Congress to consider allowing the agency to cut mail delivery back to five days-a-week to save money.

The post office does not receive a taxpayer subsidy for its operations.

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On the Net:

Postal Service: http://www.usps.com

Israel army 'used human shields'

2009-03-24T12:35:00.000-07:00

The offensive in Gaza meant operating in areas with large civilian populations

United Nations investigators have accused the Israeli army of using an 11-year-old boy as a human shield during its recent Gaza offensive.

Their report says troops ordered the boy to walk in front of them for several hours under fire, entering buildings and opening suspect packages.

The UN team responsible for protection of children in war zones says it found "hundreds" of similar violations.

Israel has denied the charges, saying morals are "paramount" in its army.

Israel's ambassador to the UN criticised the report as "unable or perhaps unwilling" to address attacks against its civilians by Palestinian militants.

The lead investigator, Sri Lankan lawyer Radhika Coomaraswamy, said the incident with the boy in the Gaza neighbourhood of Tel al-Hawa on 15 January was a violation of Israeli and international law.

The report... wilfully ignores and downplays the terrorist and other threats we face

Aharon Leshno Yaar
Israeli Ambassador

Her report also accuses Israeli soldiers of shooting Palestinian children, bulldozing a home with a woman and child still inside, and shelling a building they had ordered civilians into a day earlier.

She cited the case of one family where the father was ordered out of his home and shot. Soldiers then fired on the family inside, killing one child and wounding the mother and three children.

She added that her report contained "just a few examples of the hundreds of incidents" that had been verified by UN officials in the Gaza Strip.

Ethic standards

An Israeli military spokesman dismissed the UN findings as inaccurate and politically motivated.

"We are an army to which morals and high ethical standards are paramount," Capt Elie Isaacson said.

"The report claims to examine Israel's actions while it wilfully ignores and downplays the terrorist and other threats we face," Ambassador Aharon Leshno Yaar told the UN's 47-nation Human Rights Council.

Ms Coomaraswamy, who is the secretary-general's special envoy for protecting children in armed conflict, said the UN is also investigating claims the Palestinian militant group Hamas used human shields during the three-week Gaza conflict.

Israel's military last week ordered an inquiry after some soldiers admitted killing unarmed Palestinian civilians during the operation which ended on 18 January.

Medical authorities say more than 1,300 Palestinians died in the Israeli offensive. It is not known how many of them were combatants belonging to militant groups.

The dead including some 440 children, 110 women, and dozens of elderly people. Israel has blamed Hamas for using civilians as human shields, which Hamas has denied.

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