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Bank of America redefines ARMS LENGTH to include DUAL …

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What is the best loan to get a multi family unit of 7 units? Loans …

by admin on June 3, 2011

There is only one particular type of lender that is accessible to you in this case and that is a commercial lender that offers with apartment lending . There are a number of national lenders that specialize in lending on apartments. …

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What is the best loan to get a multi family unit of 7 units? Loans …

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What is the best loan to get a multi family unit of 7 units? Loans …

June 3, 2011

There is only one particular type of lender that is accessible to you in this case and that is a commercial lender that offers with apartment lending . There are a number of national lenders that specialize in lending on apartments. …

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Ray Brescia: When Cities Sue: Local Governments Take a Bank to Court

May 23, 2011

From the time of early English common law, the era of the colonial and early American courts and straight through to the present, state and local governments have used litigation to rein in harmful and abusive practices. Over the years, such government-led lawsuits have sought to punish a range of conduct, from driving horses unsafely on the roads to polluting streams and wells. Long before there were zoning or building codes, municipalities brought nuisance actions against harmful practices, like operating a slaughterhouse in a residential neighborhood or releasing too much smoke or dust from a factory. Today, cities are using the courts, sometimes successfully, sometimes not, to fight the proliferation of illegal handguns, climate change and even predatory lending. In recent weeks, and using fair lending laws, communities trying to fight back against what is alleged to have been discriminatory subprime lending during the height of the mortgage frenzy of the last decade have won significant victories in the courts, perhaps paving the way for more cities to follow suit. In these two cases — the first filed by the mayor and City Council of Baltimore, Maryland, and the second filed jointly by the City of Memphis and the surrounding Shelby County, Tennessee — these local governments have charged Wells Fargo bank with engaging in predatory bank practices that fall along racial lines. The plaintiffs accuse the bank of offering loans to borrowers of color on terms that were less beneficial than those offered white borrowers. This practice is known as “reverse redlining”: the targeting of communities of color for loans on unfair terms. This is often juxtaposed against the practice of “redlining”: when banks neglect to serve communities of color. And the two practices often follow each other. A community is redlined, and traditional banks fail to serve it. Then that same community is reverse redlined, with predatory lenders flourishing in that same market, facing few legitimate competitors. Subprime lending during the mortgage frenzy of the last decade had a particularly racial overtone. A national study ( PDF ), conducted by the Federal Reserve, of lending in 2006 shows that African-American borrowers were nearly three times as likely in that year to be saddled with subprime loans as their white counterparts. When controlling for many borrower characteristics, including income, the figure changes, but not by much: African-American borrowers were still twice as likely as whites to take out a subprime loan. And this phenomenon hit middle-income African Americans particularly hard. A study , by the New York Times , of lending in the New York City region showed that middle-income African-Americans were roughly five times as likely to take out a subprime loan as were whites of similar, or even lower, incomes. Furthermore, a recent study conducted by this author showed a connection between African-American median incomes and foreclosure rates. The higher a state’s median income for African-Americans within the state, along with several other factors including the size of the African-American population in that state, generally tended to correspond to higher foreclosure rates in that state. These findings suggest that predatory lending was more prevalent in states where the African-American middle class was stronger and larger, erasing decades of wealth gains made in these communities, particularly those made in the late 1990s. The Baltimore and Memphis lawsuits take aim at reverse redlining practices carried out in communities of color. The plaintiffs in each case plotted out the course of Wells Fargo’s lending in their communities to allege that the bank engaged in reverse redlining by lending on unfair terms in communities of color. Allegations by the plaintiffs also suggest that Wells Fargo was more likely to foreclose on mortgages found in predominantly African-American communities as compared to primarily white communities. Moreover, the plaintiffs have produced affidavits from former Wells employees that allege that bank staffers referred to subprime loans as “ghetto loans” and borrowers of color as “mud people.” In the Baltimore lawsuit, the judge handling the case has put the plaintiffs through their paces, having dismissed the complaint several times. But each time he has offered them a chance to refile their papers to sharpen their allegations and draw a closer connection between the bank’s lending, the wave of foreclosures that has hit the city and the costs the city claims to have experienced as a result of these practices. The plaintiffs allege that these foreclosures have dragged down property values in the city, forced the government to spend thousands of dollars on fire and police services and lowered the tax base. The bank counters that it is blameless for the general economic decline of the city, and the plaintiffs cannot draw a direct relationship between Wells Fargo’s practices and the particular damages the city claims it has suffered. The court has now said that the plaintiffs’ allegations identify specific properties where Wells made subprime loans to particular borrowers of color who would have qualified for prime loans. It is alleged that these subprime terms led first to default, then foreclosure. The Baltimore plaintiffs seek compensation from the bank for the drain on municipal coffers resulting from these practices. Weeks ago, the bank’s most recent motion to dismiss was denied , and the case permitted to proceed. In the case filed by the City of Memphis and Shelby County, the plaintiffs make similar arguments, tying bank practices to increased municipal and county expenditures. The judge there also recently denied the bank’s efforts to dismiss that lawsuit. The plaintiffs in these cases have now passed a critical hurdle in their attempt to hold at least one bank accountable for what the litigants allege were predatory practices that have cost local governments across the country dearly, saddling them with the job of cleaning up after the subprime debacle. These cases now move to the discovery phase of the litigation, where the plaintiffs will have a chance to demand internal bank documents and emails and conduct interviews with bank officials. This process may yield information about such practices, not just in these communities but also nationwide, and may give rise to claims by other jurisdictions. Local governments and state attorneys general should watch these cases closely to assess the viability of bringing similar actions in their own backyards.

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David Callahan: Will New York’s Attorney General Finally Nail the Banks?

May 17, 2011

Eric Schneiderman has big shoes to fill as New York State Attorney General. Eliot Spitzer famously used this post to crack down on Wall Street after the excesses of the dot com era, going after the likes of Henry Blodget and AIG’s Hank Greenberg. Schneiderman’s immediate predecessor, Andrew Cuomo, busted up a “pay for play” operation at the New York state pension fund, sending former state comptroller Alan Hevesi and others to prison. So how will Schneiderman make his mark? Well, judging by news reports on Tuesday, the New York AG is hoping to be the first law enforcement official to hold the big banks accountable for the subprime mortgage crisis — starting with Bank of America, Goldman Sachs, and Morgan Stanley. This move confirms what many New Yorkers already know about Eric Schneiderman: He is a committed progressive and also a fighter. That’s not so common in a state where top Democrats often act like moderate Republicans. (Exhibit A: Governor Cuomo’s grossly unfair budget that lowers taxes on the rich while enacting draconian cuts to education and health care.) Schneiderman is tapping into the public’s deep frustration that nobody — and I mean nobody — has yet been held criminally responsible for the systematic deception, conflicts of interest, and excessive risk-taking that surrounded the securitization of subprime mortgage debt by Wall Street banks. Schneiderman’s intervention is clearly needed. For various reasons, detailed recently in an extraordinary New York Times investigation , federal authorities have totally dropped the ball in ensuring justice following the financial crisis. In contrast, the Savings and Loans scandal of the 1980s resulted in no fewer than 800 bank officials going to jail. Major figures in the last wave of corporate scandals also went to prison, including Bernie Ebbers of Worldcom, Jeffrey Skilling of Enron, and Dennis Kozlowski of Tyco. The Times article notes that while criminal intent is difficult to prove: legal experts point to numerous questionable activities where criminal probes might have borne fruit and possibly still could. Investigators, they argue, could look more deeply at the failure of executives to fully disclose the scope of the risks on their books during the mortgage mania, or the amounts of questionable loans they bundled into securities sold to investors that soured. This is where Schneiderman comes in. Thanks to the Martin Act of 1921, which was revived by Eliot Spitzer, the New York AG has wide powers to go after the banks. The Act includes a broad definition of fraud and, crucially, it doesn’t require prosecutors to prove criminal intent to defraud — which is required under federal securities laws. As a primer on the Martin Act explained in 2004: the only elements needed to establish a Martin Act violation are a misrepresentation or omission of material fact when engaged in to induce or promote the issuance, distribution, exchange, sale, negotiation or purchase of securities. Proving that banks shaded the truth about mortgage-backed securities should not be very hard. Many on Wall Street suspected or knew these assets were toxic even as they continued to promote them to investors. All Schneiderman needs to do, it would seem, is find evidence of these private doubts and then contrast them to public cheerleading and he has his case. Veteran observers of Wall Street chicanery will recall the simplicity of Eliot Spitzer’s case against the investment analysts Jack Grubman and Henry Blodget. Spitzer subpoenaed the email traffic of these guys and found them ridiculing the very stocks they were promoting at the behest of their investment banker masters. I bet the same kinds of emails can be found about mortgage-backed securities. Now the bad news: Even if Schneiderman finds some smoking guns, it’s unlikely that anyone will face a judge and jury, much less prison, as a result of the AG’s investigation. Why? Because actually trying these cases would be hugely expensive and time consuming, requiring resources that may be beyond the AG’s office. Recall that Enron’s Jeff Skilling and Ken Lay spent as much as $70 million defending themselves against charges that they misrepresented Enron’s financial position and the case dragged on for years before a conviction. Even Eliot Spitzer didn’t bring any Wall Street big shots to trial on criminal charges. Instead, he got them to agree to civil settlements in which they paid large penalties to the government — although not as large as the fortunes they made. Blodget and Grubman both walked away from their confrontations with Spitzer as wealthy men. And, in their settlements with the AG, they didn’t admit to any wrongdoing. If there is justice from Schneiderman’s worthy effort, it is not likely to be satisfying.

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Rajaratnam Conviction Serves As Powerful Warning Shot On Wall Street

May 11, 2011

NEW YORK — The conviction of billionaire hedge fund manger Raj Rajaratnam on all 14 counts in a sprawling, unprecedented insider trading case will serve as a powerful warning shot to Wall Street, legal and financial experts say. The case against Rajaratnam, formerly the head of the Galleon Group, centered on an extensive network of tips he received over the course of at least six years, giving his hedge fund unauthorized insight into pending mergers and acquisitions, upcoming quarterly earnings at other companies and other transactions. The government estimated that Rajaratnam’s firm, once one of Wall Street’s biggest hedge funds, netted more than $63 million in gains and avoided losses over the time period. Experts said that Rajaratnam’s offense was so egregious that his conviction doesn’t represent a shift in how the law defines insider trading, but rather, the government’s willingness and ability to go after and convict such offenses. “This was the least gray case I’ve ever seen. There was overwhelming evidence,” said John C. Coffee, Law Professor at Columbia University and director of its Center on Corporate Governance. Rajaratnam plans to appeal the case because evidence was obtained through wire-taps and not, Coffee points out, because of the content of the charges themselves. “The definition of insider trading is not really involved with this case,” he said. “It is a case about whether or not the evidence was lawfully obtained.” The billion dollar question for investors and analysts is whether the conviction will cause hedge funds — particularly those that use expert networks to help determine investing decisions — to fundamentally reassess the way they operate? “For well-counseled hedge funds, that reassessment began many many months ago,” said Joseph A. Grundfest, a Professor of Law and Business at Standford University who previously served as a commissioner of the Securities and Exchange Commission. Grundfest said hedge funds he does business with began increasing transparency and scrutinizing the use of expert networks when Rajaratnam was arrested and charged with more than a dozen securities fraud and conspiracy to commit securities in October, 2009. At that time, the U.S. Attorney’s Office called the case “the largest hedge fund insider trading case in history.” The case also marked the first time that wiretaps were used as part of a major insider trading investigation. More than 40 recordings collected over the years figured heavily into the case against Rajaratnam, including a tape showing that he had received information about an expected quarterly loss at Goldman Sachs from Goldman board member Rajat Gupta. Some of the most significant testimony in the trial came from Anil Kumar, a former McKinsey & Co. consultant who pleaded guilty to conspiracy and securities fraud and later agreed to cooperate with the government in the case. According to the Wall Street Journal : Mr. Kumar’s four days of testimony provided the cornerstone of the government’s case, including damaging testimony from the consultant that he was paid $500,000 a year by Mr. Rajaratnam through an offshore account to an account in his housekeeper’s name in exchange for insider tips. One such tip, involving the acquisition of ATI Technologies Inc. by Advanced Micro Devices Inc. in 2006, generated Galleon profits of nearly $23 million. The strength of the conviction on all counts serves, Grundfest says, as a game-changer and a powerful bargaining tool for the government in all future cases of insider trading. “Now, the U.S. attorney will be able to sit down with the defendant and say [two] word[s]: Raj Rajaratnam. And that changes the complexion of the conversation. The government has now demonstrated that in situations that it has wiretaps and cooperating witnesses, they can convict.” Not everyone is convinced of the verdict’s power on Wall Street. Charles Ferguson, director of the Academy Award-winning Inside Job , said that the focus on Rajaratnam’s trial is misguided. “The total amounts of money and the consequences in insider trading are trivial,” says Ferguson, according to The New York Times , “compared to the damage caused by the behavior that caused the financial crisis[.]” But many argue that the deterrence factor of a criminal conviction — Rajaratnam faces a minimum of 15-1/2 years — is symbolically huge. “The one thing we do know is that finance professionals are uniquely susceptible to general deterrents,” said Coffee. “The street criminal may have very little alternative — it’s either sell drugs or stay poor — but the person running a hedge fund sees the high risks involved that this case dramatically communicates. Looking at this case, he learns that expert networks that continue for a while have a good chance of getting revealed.” Rajaratnam is only one of 26 people charged in the Galleon case so far, and a second trial of three former securities traders, including a former Galleon hedge employee, is scheduled to start next week. Coffee expects that we will see more convictions in the coming months. As for whether there are hedge fund managers feeling anxious about the morning’s news, Coffee put it simply: “This is good news for honest expert network firms, bad news for those that were crossing the line. Good news for hedge funds not seeking insider information, bad news for those that were,” Coffee said. “Professionals learn what is lawful based on who goes to prison and for what. This is a vivid message that you can go to prison for insider trading even if you are a sophicsticated business professional.” After the financial crisis, Bernie Madoff, years of slow economic growth and high unemployment, this is a message that will be likely welcomed by many, both on Wall Street and off. “We’ve just been bombarded with a whole seiries of ponzi schemes, meltdowns and people making an enormous amount of money,” said David Larcker, professor of accounting at the Stanford Graduate School of Business and author of Corporate Governance Matters. “The government is saying here ‘look, let’s pull it back to the middle here and show the population that we are serious about this — that you can’t just do anything you want.’”

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Ian Fletcher: Appeasers or Cold Warriors: Must America Confront China?

May 11, 2011

My last article , a review of Eamonn Fingleton’s provocative (but hard to dismiss) book In the Jaws of the Dragon: America’s Fate Under Chinese Hegemony , has drawn enough comment that I feel I should respond. There have been basically two schools of response: 1) Yes, China is eating our lunch, but it’s our own fault and when will we stop being such fools that we let them do it? By the way, can at least a few token traitors from corporate America go in front of a firing squad at Ft. Leavenworth? It’s 1930s-style appeasement all over again. 2) Lay off the warmongering. China isn’t a threat now, won’t be in future, and you’re either a yellow-peril racist or a neocon pining for a new Cold War. And did I mention Bush lied last time, and right-wingers are trying to lie us into another war? Oh and yes, the economic interests of all nations are in harmony. To be sure, I can’t be certain of the sincerity of all of the latter responses, as Beijing is known to employ an army of amateur Internet propagandists, known as the “50 cent party” after the per-post fee they receive, whose job it is to spread commentary favorable to the regime’s interests on the web. But at least some of the above responses appear to be genuine, and even if they are not, they still represent a possible interpretation of the facts and some corresponding policy choices for the U.S. So we’d better take them seriously. Let’s begin by remembering that America’s past political mistakes don’t, on their own, prove anything about the present. For example, there is no doubt that the U.S. was at one time seriously prejudiced against Asian peoples. But dismissing American fears of China today as mere racial prejudice is silly: we’re not imagining China’s nuclear warheads, its dictatorial government, or its predatory mercantilism. Even if racism is a part of the motivation of some of China’s critics–it may be; I can’t read people’s minds–this doesn’t make their criticisms false, just dishonorably motivated. Similarly, have a care with the Cold War analogy and the ghost of McCarthy. Granted, there are people in the U.S. who are spoiling for an enemy. I recall attending a conference in Washington–it was in 1997 or 1998–in which there was literally a panel discussion entitled “Should We Make China the New Soviet Union?” Hmm… I recall thinking at the time that China either is or isn’t whatever it is, and Americans don’t have much option to “make” it anything otherwise. I still think so. Even if vested interests in the U.S. want to ramp up defense spending and some people just can’t face the day without an enemy to crusade against, again this doesn’t make them wrong, just dishonorably motivated. I also can’t resist noting at this juncture that, perverse though it sounds, having an enemy is not always entirely a bad thing. It’s painfully obvious, in retrospect, that the vast surge of broadly-shared middle class prosperity, not just here in the U.S. but in Western Europe, at mid-century was in large part a riposte to Communism engineered by America’s ruling elite. Minus the competition with Stalin, I’m not entirely sure they would have built Levittown. You think it’s an accident that inequality surged as the credibility of the Soviet threat receded? And that’s not to mention the fact that the Pentagon created most of the effective industrial policy the U.S. had during this era. Might a drawn-out competition with China similarly force America to get its act together and deliver decent economic performance for its own citizens and the foreign peoples in its sphere of influence? It just possibly might, especially as the success of the East Asian model of planned-economy capitalism is intellectually killing the mythology of laissez faire that is strangling this country right now. Sometimes it takes rivalry to bring out the best in people–even the USA. Another theme that often came up about China was that “authoritarianism, no matter how strong it looks at the moment, can’t last. Freedom is on the march, and there is a mile-long list of dead tyrants to testify to that.” Sounds inspiring, and it’s an easy idea to drape in red, white, and blue. But this analysis is misleading in the case of China, barring some extremely unexpected events. The authoritarian societies of the past have tended to fail for specific reasons–problems which the regime in Beijing is very carefully avoiding: 1) They were personalist dictatorships that depended upon the vigor of a single despot whose luck eventually ran out. 2) They were stuck in the past, and did not adapt to modern technology. In this category go traditional societies from Spain to Zululand. 3) They went broke because they didn’t understand economics and thought they could create wealth by political fiat. In this category goes the USSR and all its imitators. 4) They got arrogant and blundered into wars they couldn’t win. In this category go Hitler, Mussolini, and Saddam Hussein. In China’s case, we can rule out #1 and #2 above with ease. Problem #4, of course, refers, from our present vantage point, to the future, as we cannot be absolutely sure they won’t do something stupid militarily. But the evidence appears to weigh against it. Beijing for now appears to be a disciplined player of the game which, while certainly willing to use force (ask Tibet!), isn’t going to romp into strategic catastrophe from sheer excess testosterone. War? Personally, my suspicion is that a corrupt deal will be struck by the rulers (I mean the real rulers, not necessarily the elected government in our case) of China and the U.S., and there will no violent clash between the two nations. Too unprofitable. I can certainly gin up scenarios for the opposite, but these get tendentious. Much easier for two elites to unite on their true common ground: aggrandize their own money and power, and the populations they rule take the hindmost. Behind closed doors, I think they already realize how much they have in common.

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Christopher Corson: Less Rhetoric and More of the Law in the NLRB’s Boeing Action

May 9, 2011

The complaint that the National Labor Relations Board (NLRB) issued against the Boeing Company on April 20th has touched off a storm of comment and controversy, much of it wrong. We need to get past rhetoric and look at what the case is really about. In every state in our nation, the law provides important protections for individual workers when they act together to improve their work lives for themselves and their families. The law also says that employers cannot retaliate against workers who engage in protected activities. If retaliation were permitted, there would be no protection. For many years, Boeing employees in the State of Washington have worked through their union, the International Association of Machinists and Aerospace Workers, to improve their work lives at the company — all while helping Boeing prosper by building the best commercial airliners in the world. Equally undisputed is that such activity was protected by law. So when Boeing itself announced that legally protected activities of its workers were the principal reason for moving a substantial portion of the company’s 787 Dreamliner assembly to South Carolina, the company committed unlawful retaliation. The case is that simple. Some commentators cry that the government is trying to tell a company where to put work. Boeing did not violate the law simply by moving 787 assembly. The violation was doing so in response to actions by its employees that the law protects. As the NLRB complaint states , “the relief requested by the Acting General Counsel does not seek to prohibit Respondent from making non-discriminatory decisions with respect to where work will be performed…” Commentators also cry that this case is just a Democratic administration favoring labor. But the rights at stake in this case belong to workers in every state, regardless of their politics and even regardless of whether they are unionized. The NLRB is the law enforcement agency that is supposed to enforce the laws that Boeing broke. Do big companies not have to follow the rule of law? Sadly, there are also commentators who are trying to recast the NLRB’s complaint as pitting northern states against southern ones. Retaliation against workers for exercising protected rights is as unlawful in South Carolina as it is in Washington. The NLRB should enforce the law whenever and wherever retaliation against workers takes place. We in the Machinists are proud to fight for our members at Boeing. We are just as proud to fight every day for our members who work in South Carolina and all across the South. We want Boeing and every other company that employs our members to prosper in the global economy, because that means jobs for our members and economic strength for America. But when any company violates legal protections for workers, the rule of law says there should be consequences. Boeing’s actions are properly before the NLRB, which should decide the case according to the law. The rhetoric should quiet down.

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Banks Whittle Away at CRE Assets While Waiting To Jump Back Into Lending

April 28, 2011

Coming out of the first quarter, most U.S. banks still view commercial real estate as an anathema to be further banished from their books, or at least kept off their rolls. However, for the first time in a long time, they have started talking about the day when that won’t be the case. And that day could come sometime in the second half of this year. In a review of first-quarter banking results and earnings conference calls, banks said they’re looking…

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LISTEN: The Decade’s Home Prices Converted Into Musical Notes

April 26, 2011

The Case-Shiller home price index is a powerful way to look at the story of housing in America. You can see the boom and bust all in one simple graph. But when we go on the radio to talk about home prices, a graph isn’t much good to us — nobody can see it. So we converted the Case-Shiller graph into musical notes.

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Blackwater Prosecution Resurrected By Appeals Court

April 22, 2011

WASHINGTON — An appeals court on Friday resurrected the case against four Blackwater Worldwide guards involved in a 2007 shooting in a Baghdad public square that killed 17 Iraqi citizens. A federal trial judge in Washington, Ricardo Urbina, threw out the case on New Year’s Eve 2009 after he found the Justice Department mishandled evidence and violated the guards’ constitutional rights. But a three-judge panel of the U.S. Court of Appeals ruled Friday that Urbina wrongly interpreted the law. It ordered that he reconsider whether there was any tainted evidence against four of the five defendants _former Marines Evan Liberty of Rochester, N.H.; Donald Ball of West Valley City, Utah; and Dustin Heard of Knoxville, Tenn.; and Army veteran Paul Slough from Keller, Texas. The Justice Department has dismissed charges against the fifth defendant, Nick Slatten, a former U.S. Army sergeant from Sparta, Tenn. Blackwater security contractors were guarding U.S. diplomats when the guards opened fire in Nisoor Square, a crowded Baghdad intersection, on Sept. 16, 2007. Seventeen people were killed, including women and children, and 20 others wounded in a shooting that inflamed anti-American sentiment in Iraq. Blackwater said the guards were innocent and responding to an ambush by insurgents. Prosecutors said the shooting was unprovoked. The U.S. rebuffed Iraqi demands that the U.S. contractors face trial in Iraqi courts. After a lengthy investigation, U.S. prosecutors charged the five contractors with 14 counts of manslaughter and took a guilty plea from a sixth, Jeremy Ridgeway of California. Urbina’s dismissal outraged many Iraqis, who said it showed Americans considered themselves above the law. Since the shooting, the Moyock, N.C.-based Blackwater has renamed itself Xe Services and overhauled its management. There was no immediate comment from defense attorneys, who said they were reviewing the ruling.

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Air Force Looks to China When American Manufacturing Falls Short

April 20, 2011

Michael Mandel , the chief economist for BusinessWeek, was recently doing some research for a textbook he’s revising when he stumbled upon a surprising entry in the Federal Registry. On March 21, the U.S. Air Force waived the “Buy American” provision of the American Recovery and Reinvestment Act of 2009 for a construction project at Eielson Air Force Base in Alaska. As workers tried to build a few stimulus-backed housing units, it became apparent that a number of simple domestic items couldn’t be procured from American manufacturers – namely, ceiling fans, shower rods, towel racks, toilet-paper holders, and all manner of screws and fixtures. According to the registry entry, a contracting official has determined that the above items of manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. The domestic nonavailability determination for these products is based on extensive market research and thorough investigation of the domestic manufacturing landscape. This research identified that these products are manufactured almost exclusively in China. In fiscal year 2009, more than 44,000 waivers of federal “Buy American” provisions were granted, worth nearly $14 billion. On his blog, Mandel writes that the Air Force waiver in particular “certifies the weakness of domestic manufacturing in America,” though he also questions whether all the household items listed are actually unavailable in the U.S., given that, according to him, the American production of nuts and bolts has been climbing in recent years. Similarly, the Alliance for American Manufacturing (AAM) wonders whether there isn’t a “single American manufacturer” producing the screws required for the Eielson project. “There’s a great deal of evidence that many agencies, including the Department of Defense, don’t look very wide or deep for procurement,” AAM’s Executive Director, Scott Paul, told HuffPost. “Some agencies are much more aggressive about enforcing it than others.” But in this case, it seems the collated screws in question are certifiably unavailable in the States. Jennifer Baker Reid of the Industrial Fasteners Institute, a trade group for nuts-and-bolts manufacturers, says such screws are “largely, if not entirely, imports” from China nowadays. The waiver, Reid says, “appears to have been issued appropriately based on market research.” That’s not to say Reid’s group hasn’t had other bones to pick with federal agencies over the stimulus package’s “Buy American” stipulation. Her group complained to the Environmental Protection Agency over some 2009 waivers granted for fasteners for stimulus-funded wastewater treatment upgrades. In that case, Reid says her group had two U.S. manufacturers who could have supplied the necessary fasteners. “These waivers have come out fast and furious without checking to see if a U.S. supplier is available,” she says. In the case of the Eielson project, it may be more troubling that the Air Force did its due diligence and still couldn’t find a supplier. “It’s not like China has a competitive advantage in making screws,” says Paul. “Shame on us if we can’t make them.”

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Foreclosure Foul-Up Wins Florida Man a Free Home

April 14, 2011

Amid all the foreclosure horror stories, every now and then we hear about a good outcome, whether it’s by winning a lawsuit through a homestead loophole, because the lender didn’t properly serve the owners, or because it doesn’t really own the mortgage. Or in the case of one underwater Florida homeowner once facing foreclosure, the bank is simply walking away. The house is his, free and clear.

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Couple Heads Off Foreclosure by Fighting Back

April 12, 2011

A New Jersey couple fought a lender’s foreclosure proceedings and ended up being able to keep their home. George Elghossain and his wife, Mona, successfully defended against a mortgage loan servicer that tried to foreclose on their 4-bedroom home. The April 4 court decision set a precedent for other homeowners in the state who now should be able to cite this case for having their own foreclosures dismisse

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Rajaratnam’s Unlikely Defender

April 12, 2011

NEW YORK (Grant McCool) – Hedge fund manager Raj Rajaratnam hopes a “Superman” will be able to help him win over the jury at his insider trading trial. The judge ruled on Tuesday that American social activist and educator Geoffrey Canada, who appeared in the award-winning 2010 documentary film “Waiting for ‘Superman’” can attest to Rajaratnam’s character. His Harlem Children’s Zone in New York has benefited from the Galleon Group founder’s philanthropy and board service. Canada, along with other nationally-known figures such as Microsoft founder Bill Gates, appeared in the film that won a best documentary award at the 2010 Sundance Film Festival. “I will allow the character witness because the government itself has raised the issue of alleged greed by the defendant,” U.S. District Judge Richard Holwell said before the jury came into the courtroom on the second day of the defense’s case. In what federal prosecutors have described as the biggest probe of insider trading at hedge funds, Rajaratnam is charged with conspiracy and securities fraud in a case in which 19 out of 26 defendants have pleaded guilty. Prosecutors contend Sri Lankan-born Rajaratnam made an illicit $63.8 million. If convicted, the 53-year-old hedge fund manager could be sentenced to up to 20 years in prison. The defense began presenting its side of the case on Monday. Before that, the jury heard five weeks of government evidence, including FBI phone taps and three friends-turned-prosecution witnesses, as prosecutors tried to show that between 2003 and March 2009 Rajaratnam gained an unfair trading advantage from highly-placed corporate insiders. Rajaratnam’s chief defense lawyer, John Dowd, had asked the judge on Monday if he could call Canada because prosecutor Jonathan Streeter told jurors at the trial’s March 9 opening that the case was about “greed and corruption.” Dowd said jurors should also hear about Rajaratnam’s philanthropy. Canada is expected to testify this week. The defense has not decided whether to call Rajaratnam to testify. The Manhattan federal court jury could hear closing statements by Friday. Meanwhile, the jury heard more on Tuesday from former Galleon chief operating officer Rick Schutte, the third witness called by the defense since it began its side of the case. A defense lawyer, Michael Starr, talked Schutte through dozens of emails, stock research reports and documents, some marked “Galleon confidential.” Starr asked Schutte to explain to the jury such terms as “a core long position” and “trading around a position.” Through Schutte, defense lawyers are portraying Galleon as a tightly-run firm in which Rajaratnam demanded discipline, challenged analysis and studied research and public data to make trading decisions. Before Schutte began his testimony on Monday, the defense called two witnesses to try to discredit the earlier testimony for the government of a former Galleon portfolio manager, Adam Smith. He has pleaded guilty to criminal charges in the case. The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184. (Reporting by Grant McCool, editing by Dave Zimmerman) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Joe Keefe: Saying "No" to All-Male Corporate Boards

April 6, 2011

Each year, we hear the latest, discouraging figures on the glacial progress women have made in cracking the male-dominated board rooms of corporate America. According to a recent Catalyst study, women hold only 3 percent of the CEO positions and 15 percent of the board positions among Fortune 500 companies. It is time to ask why progress has been so slow and what can be done differently to accelerate it. This failure is not due to lack of effort. Many well-motivated individuals and organizations have worked for years to alter this state of affairs, deploying a range of strategies aimed at encouraging companies to embrace gender diversity on their boards. There is also considerable evidence that the paucity of women on corporate boards and management teams is costing us, as numerous studies underscore the nexus between greater board and management diversity, on the one hand, and improved corporate governance and financial performance, on the other. When women are at the table, the discussion is richer, the decision-making process is better, management is more innovative and collaborative, and the organization is stronger. This is particularly the case with a critical mass of women in leadership roles. Moreover, the persistence of male-dominated boardrooms takes place against a backdrop of abysmal failures in corporate governance. The recent financial crisis is only the latest reminder that many boards of directors are simply not doing their job. And if this is true, then the old canard that “there aren’t enough qualified women” to fill more board seats can be turned on its head: After all, the (mostly) men who led so many of our largest financial institutions to ruin turn out not to have been very “qualified” either. But there is one indisputable fact about non-diverse boards that we never seem to acknowledge, perhaps because the truth hurts: we elect them. That’s right, even those of us who think that gender discrimination is wrong, and that women should be better represented in corporate board rooms — we elect these non-diverse boards, often unwittingly, year after year. How is that? Well, all publicly traded corporations send out a proxy ballot to their shareholders in advance of their annual general meeting, with a list of director nominees to serve on the company’s board. The shareholders — or at least those who vote — then ordinarily rubber stamp this list of director nominees, which means, in most cases, either no women or a slate of nominees where women are grossly underrepresented. Why do we rubber stamp all-male boards while we profess to believe that more diverse boards are needed? Because we either don’t vote our proxies at all or we assign them to someone else who votes them for us, sometimes contrary to our values and our interests. If we own stock directly, many of us simply throw away the proxy ballot when it arrives in the mail. If we invest in stocks or mutual funds through a broker or investment adviser, or invest in a 401(k) or 403(b) plan at work, or in an IRA, we generally assign responsibility for voting our proxies to an agent. In either case, we are these companies’ shareholders, and if we believe there needs to be greater gender diversity on corporate boards, then we need to start taking rather than abdicating responsibility. We need to become part of the solution rather than part of the problem. There is a simple way to do this. We can withhold support for all-male director slates, or instruct whoever is voting our proxies to withhold such support. If enough investors ask this of their investment advisers, or their retirement plan administrators at work, or their mutual fund managers, then we can begin to make a difference. In fact, if we each wrote a letter to the companies, and enclosed it with our proxy ballot, letting them know why we are saying “no” to their board, the companies we own would begin to get the picture. Companies will respond to investor pressure. They will listen to their shareholders if enough of us are willing to raise our voices. When it comes to increasing gender diversity on America’s corporate boards, the business case is clear. Companies — and their shareholders — will actually be better off. Let your voice be heard. Take the time to vote your proxies for greater gender equality. Jacki Zehner was the youngest woman, and first female trader, to be become a partner at Goldman Sachs and is Co-Chair of Women Moving Millions. Joe Keefe is the President and CEO of Pax World Funds.

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John R. Talbott: Warren Buffet Is Not God

April 1, 2011

Warren Buffet is involved in a situation in which he is deciding whether one of his employees, David Sokol, did something wrong and possibly illegal when he bought close to $10 million in Lubrizol stock prior to Buffet’s firm, Berkshire Hathaway, making an offer to buy the company. Buffet should be careful in his defense of Sokol that it wasn’t just Sokol who did something wrong here and quite possibly illegal. In a letter to Berkshire’s shareholders , Buffet defends Sokol by saying that Sokol notified Buffet of his substantial position in Lubrizol prior to Buffet’s decision to acquire the company, and that Sokol had no authority to give final approval for acquisitions at Berkshire. Green-lighting a potential merger candidate was solely the purview of Buffet, his vice-chairman, Charlie Munger , and the Berkshire board. But, does Buffet have the power himself to decide what is legal and illegal activity inside his firm or is that a subject better handled by the law and regulators? If CEOs are given the role of deciding illegal activity wouldn’t that motivate them to hush most things up rather than risk their firm’s reputation? Maybe the employee knows where other bodies are buried in the firm and so it is in everyone’s interest to forget the whole matter and just move on. David Sokol was a full time employee of Berkshire Hathaway who was assigned the task of finding suitable merger candidates for the firm. He was often identified as the possible successor to Buffet himself . To see who harmed whom here, imagine if I (Buffet) hired you (Sokol) full-time for a salary of $5 million a year to scour the world and find houses that were undervalued that I would then purchase. In your work on my behalf, for which you were very well compensated, you came across a beautiful home that you purchased for yourself for $1 million dollars. You then showed the home to me and told me I could have it for $1.5 million, which was a good deal for me as we both knew that the home was worth at least $2 million once you made a few minor improvements. Who was harmed? First, the seller of the home (Lubrizol shareholders) who ended up only getting $1 million for their home that you knew might well be acquired by me for up to $1.5 million. Next, I was harmed because the purchase ended up costing me $1.5 million instead of the $1 million it may have if you had acted properly in your role as my agent and employee and not as principal for your own interests. Finally, let’s say that I don’t own the company outright that did the buying of these homes, but that I (Buffet) am the CEO of a publicly traded company (Berkshire Hathaway) and that I have public shareholders to be concerned with as well. In this case, I am in no position to act as judge and jury in determining your innocence or guilt because I am no longer the only party harmed. I myself have fiduciary responsibilities to my shareholders for they also lost money by not only paying your salary but compensating you for your renegade principal activities in the housing market. So Buffet in this case does not have the authority to decide unilaterally if Sokol violated the law or whether to forgive him. His actions not only hurt other Berkshire shareholders who Buffet must protect, they hurt Lubrizol shareholders who cannot be expected to be protected by Buffet acting as lord and master of the law in this case. And it is not just insider trading laws that may have been broken here, it raises the issue of legal responsibilities of an employee to his firm and others whether that employee is David Sokol or Warren Buffet. This case is at the heart of much of what went wrong on Wall Street in this crisis. Employees of publicly traded firms, like Sokol and Buffet, got very confused as to what their responsibilities were to their shareholders, other firms’ shareholders and to society in general. Regulations were removed such that it was up to individuals to decide what was in their best interest versus what was best for others. Conflicts are certain to arise when the party making the decisions to act is the party making the judgment as to whether and how to mete out punishment. Buffet cannot play both roles, even though at times he does seem to be omniscient and all powerful. John R. Talbott is a best selling author. His new book is entitled, “How I Predicted the Global Economic Crisis*: The Most Amazing Book You’ll Never Read”. You can read more about the new book and order it at www.johnrtalbott.com or at Amazon.com .

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Carl Davis: The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic

April 1, 2011

Virtually every state in the country has a tax system that heavily favors the rich. Despite this fact, only a handful of states responded to the revenue slump brought on by the Great Recession with any sort of tax increase on this favored group. What gives? With so many states looking for ways to balance their budgets, why isn’t there more interest in finally making the rich pay their fair share? The answer lies partially in one of the most effective, yet most absurd anti-tax scare tactics to be used in recent memory: the so-called “millionaire migration” epidemic. State lawmakers across the country have heard again and again that wealthy taxpayers will pull up stakes and move in response to just about any progressive state tax increase. In most cases, however, even a cursory look at the facts shows that these fears are unjustified. With tax day nearly upon us once again, let’s take just a moment to make those facts known. In New York, it was a business-backed group called the Partnership for New York City that first began spreading misinformation about the state’s income tax surcharge on the rich. In a February report , the Partnership claimed that “New York’s high taxes risk pushing jobs, tax revenue, and talent to neighboring states. …Since the imposition of New York’s surcharge in 2009, there has been a 9.4% decrease in the state’s taxpayers who are worth $1 million or more, decreasing from 381,786 in 2007 to 345,892 in 2009.” That sounds pretty scary, but the same data used by the Partnership shows that every state in the country saw its millionaire population decline between 2007 and 2009, and that a whopping forty-three states experienced declines exceeding New York’s 9.4 percent drop. Apologies for stating the obvious, but these declines were a predictable result of the recent recession. Making matters worse, the original press release accompanying this data made very clear that the U.S. as a whole saw its millionaire population decline by nearly 14 percent between 2007 and 2009. It’s therefore a little strange, to say the least, that the Partnership would interpret New York’s 9.4 percent drop as providing any evidence whatsoever that could be useful in its crusade against taxing high-income earners. Oregonians also had to listen to their share of uninformed anti-tax nonsense during the course of the last few months — this time coming from pundits living clear on the other side of the country. In December of last year the Wall Street Journal ‘s editorial board suggested that a recent voter-approved income tax increase on upper-income families caused up to 10,000 Oregonians to pack their bags and head to Texas. Their “evidence” in support of this claim? 10,000 fewer taxpayers were affected by the tax increase than the state originally expected. Of course, there’s at least one other perfectly reasonable explanation for why fewer Oregonians would be affected: the recession lowered their incomes enough to bring them beneath the starting point for the new tax brackets (only taxpayers earning more than $125,000 – or $250,000 in the case of married couples — were affected by the tax increase). Unfortunately for the Journal , the data strongly suggest that this is the case. After just a quick glance at the data, my group — the Institute on Taxation and Economic Policy (ITEP) — found that while the state’s revenue estimators overestimated the size of Oregon’s “rich” population by roughly 34,000, it also underestimated its middle- and low-income population by more than 60,000. Simply put, some 26,000 more Oregonians filed tax returns than the state originally expected. They just earned less income than usual due to the weak economic climate. What makes this story especially troubling is that, as in New York, there was very clear evidence available refuting the Journal ‘s claims — had anyone there taken the time to look for it. Almost a full week before the Journal ‘s piece was published, the Oregon House Revenue Committee held a hearing in conjunction with the release of the new data at issue. As is usually the case, that hearing gave the state’s revenue estimators an opportunity to offer some very useful context , such as the fact that the 10,000 return discrepancy was due to taxpayers being “driven down the income distribution because [of lower than expected capital gains income], and they [moved] from the affected category to the unaffected categories.” No discussion of millionaire migration would be complete without a look back at the debacle in Maryland. Thanks in no small part to a pair of misleading editorials published by the Wall Street Journal , Maryland’s legislature failed to approve legislation early last year that would have extended its temporary tax bracket on incomes over $1 million. Since then, much of the hubbub surrounding the Maryland “millionaires’ tax” has died down, but the effect that the Journal ‘s misinformation campaign had on shaping the conventional wisdom on “millionaire migration” makes the issue worth revisiting. As in New York and Oregon, the question in Maryland revolved around whether high-income taxpayers were migrating or simply becoming less rich. When the Maryland Comptroller released data showing a roughly 30% drop in millionaire filers between 2007 and 2008 (the year Maryland’s “millionaires’ tax” first took effect), the Journal enthusiastically seized on this figure as proof that the “redistributionists” and “class warriors” had failed in their scheme to “soak the rich.” To its credit, the Journal did exercise a modicum of caution in its first two editorials by reminding its readers that much of this decline was due to the recession, though it continued to insist that the “millionaires’ tax” just had to have something to do with this drop as well. ITEP responded to the Journal in multiple reports and an unpublished letter to the editor explaining that more detailed data, provided by the Comptroller’s office upon request, indeed confirmed that the vast majority of “migrating” millionaires had simply moved to a lower tax bracket. Fast forward to last December when the Journal revived the Maryland migration myth in the context of Oregon. This time, the Journal threw caution to the wind and stated flatly that “one-third of [Maryland's] millionaire households vanished from the tax rolls after [tax] rates went up.” Of course, this flew in the face of its published claim from nine months earlier that: “one-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008.” But that was back before the Journal forgot about the recession. (For the record: even the “one-in-eight” figure was an exaggeration .) In all three of these states — New York, Oregon, and Maryland — the anti-tax crowd ignored a lot of fairly obvious evidence running counter to their claims. Unfortunately, that’s the way it’s been whenever the “millionaire migration” issue has made its way into statehouse debates. Any shred of “evidence,” no matter how meaningless or out of context, has been seized upon by those seeking to construct the anti-tax, vote-with-your-feet narrative they desperately wish was true. With so much bad information floating around, it’s not surprising that most states have been reluctant to eliminate the massive preferences for the wealthy built into their tax systems. But what lawmakers need to know — and what the Wall Street Journal and others have been refusing to tell them — is that once you scratch the surface of the millionaire migration issue, it becomes abundantly clear that the anti-tax side’s claims have no substance. It’s long past time to stop letting the millionaire migration myth get in the way of progressive tax reform.

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Al Norman: Yes, Wal-Mart Is Too Big to Sue

March 30, 2011

You have your answer now, in case there was any doubt. When the U.S. Supreme Court votes in late June to decertify the class of low-income women who are suing Wal-Mart for sex discrimination, here is what the public will conclude from the media headlines: Wal-Mart has been found not guilty of unfair treatment of its women workers — when in fact the case was on the issue of “standing” of a class of plaintiffs, not really the merits of the evidence. The case dragged these low-income women through the courts for ten years, and in the end the Big Corporation beat them. Wal-Mart can now continue to pay women lower wages with impunity, because the “Janie Q’s” — as Wal-Mart calls its female employees — are going to get nowhere pursing their cases individually. These women will become legal untouchables once this class action is shattered. Wal-Mart politically is too big to sue, and all the other corporate giants that filed amicus briefs in support of Wal-Mart are also too big to sue. After the first day of oral arguments, the media concluded that Wal-Mart had won. NPR, for example , said the Justices had created a “wall of doubt” about the plaintiffs’ claims of discrimination, and that the Dukes plaintiffs had been “bombarded” with tough questions by the justices. According to one Forbes op-ed piece, the plaintiffs’ lawyer was “roasted.” In a press release last month, the plaintiffs argued that Wal-Mart had “a corporate culture that is rife with gender stereotypes,” with “highly subjective policies enforced on a daily basis by its Home Office to ensure consistency in results.” This tension between subjectivity and consistency seemed to trouble the Supreme Court. “Well, which is it?” Judge Antonin Scalia asked the plaintiffs. Either individual managers are on their own, “or else a strong corporate culture tells them what to do.” The United Food & Commercial Workers have urged Scalia to step down, since his son works for a prominent Wal-Mart law firm that deals with employment issues. Justice Samuel Alito seemed to suggest that Wal-Mart’s employment profile was “absolutely typical of the entire American workforce,” so if Wal-Mart was in violation of gender discrimination laws, then so was the entire retail industry. Even if that were true, does that mean that the workers at Wal-Mart have lost their right to litigate for gender equity? If every employer is wrong, does that make discrimination in this case right? Analysts in the media are suggesting that this large class of women does not have enough legal glue to be bound together as a class. They are suggesting that even though the lower courts found enough “commonality” in these women’s situations to certify them as a class, that the Supreme Court will not, and Wal-Mart will be able to walk away from their “associates” claiming that it was local renegade managers who wronged them, not the company. Wal-Mart wants the public to believe that managers ‘do their own thing’ and that this multi-billion corporation is run like a large unruly family where Father Knows Nothing. We used to call such a portrayal corporate deniability. Some observers will no doubt want to wait a couple of months to see how the Bush-dominated court rules in this case. But based on what I’ve seen from the justices already, the writing is on the Wal. This is perhaps the strongest argument why Wal-Mart needs to have a union. With collective bargaining in place, these 1.5 million ‘associates’ would have been able to tell their local managers that the sexual pay and promotion discrimination had to end. It’s the only way to balance out the enormous power managers clearly have over the workers who were forced to sue them to get their attention. Al Norman is the author of The Case Against Wal-Mart, and is the founder of Sprawl-Busters .

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Supreme Court Hears Argument In Wal-Mart Sex Bias Lawsuit

March 29, 2011

WASHINGTON — The Supreme Court on Tuesday questioned a massive sex discrimination lawsuit on behalf of at least 500,000 women claiming that Wal-Mart favors men over women in pay and promotions. The justices suggested that they are troubled by lower court decisions allowing the class-action lawsuit to proceed against the world’s largest retailer. Justice Anthony Kennedy, often a key vote on the high court, said he is unsure “what the unlawful policy is” that Wal-Mart engaged in to deprive women of pay increases and promotions comparable to men. Billions of dollars are at stake in the case. Class actions create pressure on businesses to settle claims and create the potential for large judgments. Wal-Mart denies it discriminates against its female employees. But Joseph Sellers, the lawyer for the women, said that lower courts were persuaded by statistical and other evidence put forth so far in the 10-year-old lawsuit. Sellers said a strong corporate culture at Wal-Mart’s Bentonville, Ark., headquarters that stereotyped women as less aggressive than men translated into individual pay and promotions decisions at the more than 3,400 Wal-Mart and Sam’s Clubs stores across the country. “The decisions are informed by the values the company provides,” Sellers said. Justice Antonin Scalia said he felt “whipsawed” by Sellers’ description. “Well, which is it?” Scalia asked. Either individual managers are on their own, “or else a strong corporate culture tells them what to do,” he said. Theodore Boutrous Jr., representing Wal-Mart, said that the class-action nature of the case deprives the company of its legal rights because it is being forced to defend the treatment of women employees regardless of the jobs they hold, or where they work in the Wal-Mart chain. “There is absolutely no way there can be a fair process here,” Boutrous said. He pointed to a group of at least 544 women who serve as store managers who “are alleged to be both discriminators and victims.” Justice Ruth Bader Ginsburg said that at this stage of the lawsuit, the issue is not proving discrimination, but showing enough evidence to go forward. “We’re talking about getting a foot in the door,” Ginsburg said, a standard she called not hard to meet. The 78-year-old justice, who made her name by bringing discrimination claims, said it was possible that Wal-Mart could refute the claims at a trial. But several of her colleagues appeared to agree with Boutrous that even subjecting Wal-Mart to a trial would be unfair. A decision should come by summer. The case is Wal-Mart Stores Inc. v. Dukes, 10-277.

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Walmart Sex Bias Suit Heads To Supreme Court

March 28, 2011

WASHINGTON — Christine Kwapnoski hasn’t done too badly in nearly 25 years in the Wal-Mart family, making more than $60,000 a year in a job she enjoys most days. But Kwapnoski says she faced obstacles at Wal-Mart-owned Sam’s Club stores in both Missouri and California: Men making more than women and getting promoted faster. She never heard a supervisor tell a man, as she says one told her, to “doll up” or “blow the cobwebs off” her make-up. Once she got over the fear that she might be fired, she joined what has turned into the largest job discrimination lawsuit ever. The 46-year-old single mother of two is one of the named plaintiffs in a suit that will be argued at the Supreme Court on Tuesday. At stake is whether the suit can go forward as a class action that could involve 500,000 to 1.6 million women, according to varying estimates, and potentially could cost the world’s largest retailer billions of dollars. But the case’s potential importance goes well beyond the Wal-Mart dispute, as evidenced by more than two dozen briefs filed by business interests on Wal-Mart’s side, and civil rights, consumer and union groups on the other. The question is crucial to the viability of discrimination claims, which become powerful vehicles to force change when they are presented together, instead of individually. Class actions increase pressure on businesses to settle suits because of the cost of defending them and the potential for very large judgments. Columbia University law professor John Coffee said that the high court could bring a virtual end to employment discrimination class actions filed under Title VII of the Civil Rights Act of 1964, depending on how it decides the Wal-Mart case. “Litigation brought by individuals under Title VII is just too costly,” Coffee said. “It’s either class action or nothing.” Illustrating the value of class actions, Brad Seligman, the California-based lawyer who conceived of and filed the suit 10 years ago, said the average salary for a woman at Wal-Mart was $13,000, about $1,100 less than the average for a man, when the case began. “That’s hugely significant if you’re making $13,000 a year, but not enough to hire a lawyer and bring a case.” The company has fought the suit every step of the way, Seligman said, because it is the “biggest litigation threat Wal-Mart has ever faced.” A trial judge and the federal appeals court in San Francisco, over a fierce dissent, said the suit could go forward. But Wal-Mart wants the high court to stop the suit in its tracks. The company argues it includes too many women with too many different positions in its 3,400 stores across the country. Wal-Mart says its policies prohibit discrimination and that most management decisions are made at the store and regional levels, not at its Bentonville, Ark., headquarters. Theodore J. Boutrous, Wal-Mart’s California-based lawyer, said there is no evidence that women are poorly treated at Wal-Mart. “The evidence is the contrary of that,” Boutrous said. The company is not conceding that any woman has faced discrimination, but says that if any allegations are proven, they are isolated. “People will make errors,” said Gisel Ruiz, Wal-Mart’s executive vice president for people, as the company calls its human resources unit. “People are people.” Ruiz paints a very different picture of the opportunities offered women at Wal-Mart. She joined the company straight from college in 1992. “In less than four years, I went from an assistant manager trainee to running my own store,” she said. “I’m one of thousands of women who have had a positive experience at Wal-Mart.” Kwapnoski, who works at the Sam’s Club in Concord, Calif., is one of two women who continue to work at Wal-Mart while playing a prominent role in the suit. The other is Betty Dukes, a greeter at the Wal-mart in Pittsburg, Calif. “It’s very hard for anyone to understand how difficult that is and what courage that is,” Seligman said of Kwapnoski and Dukes. “They’re Public Enemy No. 1 at Wal-Mart and they are known for their involvement in this lawsuit. Nevertheless, they get and up and go to work every day.” Kwapnoski didn’t want to discuss any issues she faces at work as a result of the suit. She said she has seen some changes at Wal-Mart since the suit was filed in 2001. The company now posts all its openings electronically. “It does give people a better idea of what’s out there, but they still can be very easily passed over.” she said. “But before you didn’t even know the position was open.” The suit, citing what are now dated figures from 2001, contends that women are grossly underrepresented among managers, holding just 14 percent of store manager positions compared with more than 80 percent of lower-ranking supervisory jobs that are paid by the hour. Wal-Mart responds that women in its retail stores made up two-thirds of all employees and two-thirds of all managers in 2001. Kwapnoski said she and a lot of women were promoted into management just after the suit was filed, although she has had only a couple of pay increases in the nine years since. She is the assistant manager in her store’s groceries and produce sections. Now, she said, promotions are back to the way they were before, favoring men over women. She said she’s hoping the long-running court fight will force Wal-Mart to recognize that, stories like Ruiz’s aside, women are not valued as much as men are and that her bosses will begin to “make sure that good men and good women are being promoted, not just men.” ___ Online: Array

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Supreme Court To Take Up Sex Bias Claim Against Wal-Mart

March 27, 2011

WASHINGTON — Christine Kwapnoski hasn’t done too badly in nearly 25 years in the Wal-Mart family, making more than $60,000 a year in a job she enjoys most days. But Kwapnoski says she faced obstacles at Wal-Mart-owned Sam’s Club stores in both Missouri and California: Men making more than women and getting promoted faster. She never heard a supervisor tell a man, as she says one told her, to “doll up” or “blow the cobwebs off” her make-up. Once she got over the fear that she might be fired, she joined what has turned into the largest job discrimination lawsuit ever. The 46-year-old single mother of two is one of the named plaintiffs in a suit that will be argued at the Supreme Court on Tuesday. At stake is whether the suit can go forward as a class action that could involve 500,000 to 1.6 million women, according to varying estimates, and potentially could cost the world’s largest retailer billions of dollars. But the case’s potential importance issue goes well beyond the Wal-Mart dispute, as evidenced by more than two dozen briefs filed by business interests on Wal-Mart’s side, and civil rights, consumer and union groups on the other. The question is crucial to the viability of discrimination claims, which become powerful vehicles to force change when they are presented together, instead of individually. Class actions increase pressure on businesses to settle suits because of the cost of defending them and the potential for very large judgments. Columbia University law professor John Coffee said that the high court could bring a virtual end to employment discrimination class actions filed under Title VII of the Civil Rights Act of 1964, depending on how it decides the Wal-Mart case. “Litigation brought by individuals under Title VII is just too costly,” Coffee said. “It’s either class action or nothing.” Illustrating the value of class actions, Brad Seligman, the California-based lawyer who conceived of and filed the suit 10 years ago, said the average salary for a woman at Wal-Mart was $13,000, about $1,100 more than the average for a man, when the case began. “That’s hugely significant if you’re making $13,000 a year, but not enough to hire a lawyer and bring a case.” The company has fought the suit every step of the way, Seligman said, because it is the “biggest litigation threat Wal-Mart has ever faced.” A trial judge and the federal appeals court in San Francisco, over a fierce dissent, said the suit could go forward. But Wal-Mart wants the high court to stop the suit in its tracks. The company argues it includes too many women with too many different positions in its 3,400 stores across the country. Wal-Mart says its policies prohibit discrimination and that most management decisions are made at the store and regional levels, not at its Bentonville, Ark., headquarters. Theodore J. Boutrous, Wal-Mart’s California-based lawyer, said there is no evidence that women are poorly treated at Wal-Mart. “The evidence is the contrary of that,” Boutrous said. The company is not conceding that any woman has faced discrimination, but says that if any allegations are proven, they are isolated. “People will make errors,” said Gisel Ruiz, Wal-Mart’s executive vice president for people, as the company calls its human resources unit. “People are people.” Ruiz paints a very different picture of the opportunities offered women at Wal-Mart. She joined the company straight from college in 1992. “In less than four years, I went from an assistant manager trainee to running my own store,” she said. “I’m one of thousands of women who have had a positive experience at Wal-Mart.” Kwapnoski, who works at the Sam’s Club in Concord, Calif., is one of two women who continue to work at Wal-Mart while playing a prominent role in the suit. The other is Betty Dukes, a greeter at the Walmart in Pittsburg, Calif. “It’s very hard for anyone to understand how difficult that is and what courage that is,” Seligman said of Kwapnoski and Dukes. “They’re Public Enemy No. 1 at Wal-Mart and they are known for their involvement in this lawsuit. Nevertheless, they get and up and go to work every day.” Kwapnoski didn’t want to discuss any issues she faces at work as a result of the suit. She said she has seen some changes at Wal-Mart since the suit was filed in 2001. The company now posts all its openings electronically. “It does give people a better idea of what’s out there, but they still can be very easily passed over.” she said. “But before you didn’t even know the position was open.” The suit, citing what are now dated figures from 2001, contends that women are grossly underrepresented among managers, holding just 14 percent of store manager positions compared with more than 80 percent of lower-ranking supervisory jobs that are paid by the hour. Wal-Mart responds that women in its retail stores made up two-thirds of all employees and two-thirds of all managers in 2001. Kwapnoski said she and a lot of women were promoted into management just after the suit was filed, although she has had only a couple of pay increases in the nine years since. She is the assistant manager in her store’s groceries and produce sections. Now, she said, promotions are back to the way they were before, favoring men over women. She said she’s hoping the long-running court fight will force Wal-Mart to recognize that, stories like Ruiz’s aside, women are not valued as much as men are and that her bosses will begin to “make sure that good men and good women are being promoted, not just men.” ___ Online: Briefs in the case: http://tinyurl.com/4ckzfz5

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Pension Funds Leading Investor Lawsuit Against Goldman Sachs

March 26, 2011

(Reuters) – A Manhattan federal judge on Friday named three pension funds as co-lead plaintiffs in an investor lawsuit against Goldman Sachs Group Inc (GS.N) to recover losses tied to the Wall Street’s bank’s alleged misleading statements about Abacus, a product linked to subprime mortgages. U.S. District Judge Paul Crotty designated the Arkansas Teachers Retirement System, the West Virginia Investment Management Board, and the Plumbers and Pipefitters National Pension Group in Alexandria, Virginia to lead six consolidated lawsuits against Goldman and various of its officers and directors. Crotty said the funds had the largest financial losses connected with the case of any of the proposed plaintiffs. The funds are represented by the law firms Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP. The litigation arose after the U.S. Securities and Exchange Commission last April 16 sued Goldman and Fabrice Tourre, one of its vice presidents, over Abacus, a 2007 collateralized debt obligation transaction. In its civil complaint, the SEC accused Goldman and Tourre of failing to tell investors that the hedge fund Paulson & Co helped choose bet against securities underlying Abacus. The investors contended that the charges, Goldman’s failure to disclose it had earlier received a “Wells notice” indicating that charges might be brought, and news of a possible U.S. Department of Justice probe caused the bank’s shares to fall 21 percent in just over two weeks. Goldman agreed last July to settle the SEC case for $550 million, without admitting wrongdoing. Tourre, the only individual sued in the case, has also denied wrongdoing, and is still defending against the SEC lawsuit. Other investor lawsuits over Abacus have been brought against Goldman or company officials in other jurisdictions. The case is In re: Goldman Sachs Group Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 10-03461. (Reporting by Jonathan Stempel, editing by Bernard Orr) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Six Cars Worse Than Their Predecessors

March 17, 2011

In its annual automotive issue, Consumer Reports awards scores to each new car available on the market, and though you’d think that a new model would score higher than the one it replaces, that isn’t always the case. In fact, CR points out six 2011 model year vehicles that received substantially lower scores under its methodology than their predecessors.

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Dan Rather: Too Big to Sue

March 10, 2011

Never underestimate the power of an employee who feels wronged. One of the striking ideals of the American experiment in democracy is that we should all be equal under the law, whether we are a middle-aged African-American woman struggling to make ends meet or a multi-billion dollar international corporation. On March 29, that ideal will be on display when the United States Supreme Court hears oral arguments in the case of Dukes v. Walmart . Walmart is of course well known. Dukes is Betty Dukes, a 61-year-old Walmart “greeter” from California who says she has been discriminated against on the basis of her gender. And Dukes is not alone. Over a million other women who have worked at Walmart, most as hourly wage earners, are part of the Dukes’ class action lawsuit . But the Supreme Court will not be deciding the merits of their discrimination case. What’s at stake is the very definition of what a class action can be. And that has everyone from the captains of big business, to the leaders of the U. S. Chamber of Commerce, to civil rights lawyers very interested in the outcome. Walmart’s argument is that lawsuit shouldn’t be allowed because a class action that covers so many women, working in different stores, in different states, in different jobs, is just too broad. Lawyers who support the company add that if there is discrimination at a particular store then the women who worked there could come together for a much smaller class action suit. But lawyers supporting the women say that the only way to fight a corporate giant like Walmart is through strength in numbers. And the reason why the lawsuit includes so many individuals is because Walmart is so big and so many women say they’ve been denied opportunities just because of their sex.  They say that if the case isn’t allowed to proceed, the Supreme Court will be establishing that some businesses are too big to sue. For most of her years at Walmart,  Betty Dukes told us, she barely made a living wage, requiring her to share a home with her mother. She’s an ordained Baptist minister, who often preaches at her local church.   The case, which has been litigated for almost 10 years, has been a strain on Dukes.  But she is the inspiration for the case that has been dubbed “Betty versus Goliath.” The women claim a statistical analysis of Walmart’s pay and personnel records proves that women were promoted and paid less at every stage, in every region of the country. They gathered statements from employees  – including those from women who’d made it into management of the stores.  Among the claims:  One reported that a male manager told her “women should be home barefoot and pregnant and women weren’t qualified to be managers because men had an extra rib.” another stated that a senior vice president told her that she would not advance because she did not “hunt, fish, or do other typically-male activities” another was told that her male co-worker received a larger raise “because [he] had a family to support.” We wanted to hear Walmart respond directly to these questions, but after weeks of asking them for an on camera interview, they said no. (For me that raises another question, is Walmart too big to talk?) Betty Dukes’ lawyer, Brad Seligman told us, “Walmart’s goal is very clear.  They want to make it impossible for any large class action to be brought for the very simple reason that a company this large, a large class action is the only thing that’s going to change them. “So yes Walmart is like a Goliath,” Dukes added, “but I do not fear Goliath by any stretch of the imagination.” She says she has faith that the justice system in the country will work for women like her. And when the Supreme Court meets to decide her fate, Betty Dukes says she plans to be in attendance. Dan Rather Reports airs Tuesdays on HDNet at 8 p.m. and 11 p.m. ET. This episode is also available on iTunes .

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Chevron Wins Temporary Victory In Rainforest Contamination Case

March 8, 2011

NEW YORK — A federal judge on Monday extended his temporary order banning collection of an $18 billion judgment by the courts in Ecuador against Chevron, saying the oil company could face irreparable harm because it appeared that lawyers for Ecuadoreans who sued over rainforest contamination were going to try to quickly collect the award. U.S. District Judge Lewis Kaplan said evidence had established that lawyers for 30,000 Ecuadoreans planned to move swiftly to pursue multiple enforcement actions and asset seizures around the globe, including in areas where Chevron would not be immediately able to challenge the actions. He said that without his order, “Chevron would be forced to defend itself and litigate the enforceability of the Ecuadorean judgment in multiple proceedings. There is a significant risk that assets would be seized or attached, thus disrupting Chevron’s supply chain, causing it to miss critical deliveries to business partners.” The judge said such a disruption would also damage a business reputation and relationships the company had developed over the past 130 years. Kaplan ordered Chevron to post a $21.8 million bond to cover the cost of any delay in enforcement of the award should it be determined that the damages are legitimate. Kaplan’s ruling came after Chevron sued lawyers and others involved in the Ecuadorean litigation, saying they violated racketeering laws by manipulating Ecuadorean courts into issuing an unfair judgment against the company. After the lawsuit was filed, Ecuadorean Judge Nicolas Zambrano issued his award last month. Karen Hinton, a spokeswoman for the Ecuadoreans, called Kaplan’s ruling “a slap in the face to the democratic nation of Ecuador and the thousands of Ecuadorean citizens who have courageously fought for 18 years to hold Chevron accountable for committing the world’s worst environmental disaster.” She said Kaplan’s failure to consider key evidence or schedule a hearing to learn more facts was a “trampling of due process” and “an inappropriate exercise of judicial power.” She said Kaplan had disregarded Zambrano’s “scholarly and comprehensive” 188-page opinion and ignored key evidence that Chevron had committed a series of frauds in Ecuador to “cover up its unlawful conduct.” In a 127-page opinion of his own, Kaplan cited evidence of what he described as possible misconduct by an American lawyer for the Ecuadoreans. Yet, he said, neither the lawyer “nor any of the other key actors has denied Chevron’s allegations or attempted here to explain or justify under oath their recorded statements and written admissions.” The judge said there was “a great deal of posturing on both sides” and added that “a good deal of the rhetoric and argument in this case … must be viewed with a critical eye.” Kaplan said he solicited the views of the U.S. Department of State on Feb. 9 but the department politely declined to express any view. Chevron, which has never operated in Ecuador, found itself a party in the litigation after acquiring Texaco Inc. in 2001. Lawsuits had accused Texaco of contaminating Ecuadorean land during three decades of oil exploration and extraction. San Ramon, Calif.-based Chevron has maintained that a 1998 agreement Texaco signed with Ecuador after a $40 million cleanup absolves it of liability. The Ecuadorean plaintiffs say the cleanup was a sham and didn’t exempt third-party claims. Chevron has vowed to appeal in Ecuador. Kaplan said his order prevents the plaintiffs from trying to collect the award or seize Chevron assets prior to his issuance of a final order in the case. Hinton said the Ecuadorean plaintiffs believe Kaplan cannot bar them from enforcing the judgment in any country, except the United States.

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Lehman Brothers Battles With Investors

March 4, 2011

LONDON (By Sarah White) – A legal tussle between defunct Lehman Brothers (LEHMQ.PK) and investors in highly complex debt vehicles has drawn attention from financial professionals and British football clubs alike. The dispute reaches beyond the obscure clauses in the instruments caught up in the row, with consequences for the order in which creditors get paid out in a bankruptcy — a source of contention in football insolvencies too. Billions of dollars of derivatives are at stake, and risk losing their worth if the case goes against investors. A similar, widely-trailed case settled in the United States last year had already sparked alarm among lawyers, noteholders, and academics watching the securitization industry. One Manhattan federal court judge, calling for a review of a decision on the case last September before a settlement with Lehman was reached, cited its “potentially game-changing effect on the structured finance business.” She added that it had “potentially far-reaching ramifications for the international securities markets and has triggered significant uncertainty in the financial community.” The dispute centers on a series of credit-linked notes, part of only one of Lehman’s synthetic collateralized debt obligation (CDO) programs — known as Dante — valued at $12.5 billion at the time of the firm’s collapse in September 2008. The stakes are high for those owed money by Lehman, for whom derivative deals are a big chunk of what they are hoping to claw back. The creditors are pitted against a group of Australian investors known as Belmont in a UK appeal to the Supreme Court, where three days of hearings ended this week. A verdict is expected to emerge after several weeks, lawyers close to the case said. Both Lehman and the investors are hoping to seize the assets backing the deals, and any final ruling would set a precedent for how the priority of payments in billions of dollars worth of similar deals are worked out. LOOMING DOWNGRADES Investors need a validation of so-called flip clauses in the notes they hold, designed to reorder payment priorities in bankruptcies and allowing them to jump in ahead of Lehman. Trouble looms if they lose, as noteholders in deals with similar structures would find they had no guarantee of being paid out when other parties default. “Certainly for anything that is rated, the rating agencies may seek to downgrade in some cases. They are watching very carefully what happens with the litigation,” said Jennifer Marshall, a partner at Allen & Overy specializing in insolvency, whose clients have followed the case. “For non-rated transactions, I’m sure you’d find parties coming back to the table wanting to renegotiate.” The synthetic CDOs, which expose investors to a pool of insurance contracts on debt known as credit-default swaps, were in the main rated triple-A. Some of the legal arguments at stake in the exotic-sounding financial deals could also have a bearing for football clubs. The British taxman and the Premier League, the top league in the country, are intervening in proceedings, hoping for clarity on the priority of payments when clubs go bust. Footballers are usually paid out first, to the detriment of the taxman — a situation the UK Revenues and Customs department may be able to reverse if it can cite legal precedents. But a conclusion may yet take time to emerge. Lehman managed to settle with another group of Australian investors caught up in the Dante CDO row last November, after U.S. bankruptcy judge James Peck ruled in Lehman Brothers Holdings Inc.’s favor, but UK courts found against it. Should Lehman lose its appeal at the Supreme Court, a transatlantic battle between the U.S. and British courts could be revived, if litigation heads back to the United States. Lawyers would have to work out which rulings to abide by, adding an extra lawyer of complexity to Lehman’s sprawling bankruptcy workout, the biggest and costliest in U.S. history. (Editing by David Cowell) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Oracle Wins $1.3 Billion Over Stolen Files

March 3, 2011

SAN FRANCISCO (Reuters) – SAP AG (SAPG.DE: Quote, Profile, Research, Stock Buzz) has been ordered to pay Oracle Corp (ORCL.O: Quote, Profile, Research, Stock Buzz) $1.3 billion for stealing files in Silicon Valley’s priciest legal controversy — and San Francisco’s top federal prosecutor may raise the stakes even more. Newly installed Attorney Melinda Haag in San Francisco is now personally reviewing a criminal copyright investigation, which is independent of the civil case won by Oracle last year, one attorney familiar with the probe said. The decision on whether to prosecute that case comes as Haag tries to make Northern California a hub of white collar enforcement that rivals New York. And it is just those types of headline-grabbing, high impact prosecutions that observers say have been lacking from federal gumshoes in the Bay Area. In an interview with Reuters, Haag, who took over the job last August, said big prosecutions send a message, and it is important for her office to send them. “High profile cases have deterrent value just because people are paying attention,” she said. Haag would not confirm or deny any criminal investigation surrounding SAP. Spokespeople for SAP and Oracle declined to comment. With its robust financial services sector, high-tech giants and biotech start-ups, Northern California has long been viewed as a natural location for corporate crime enforcers. But when the FBI recently banged down doors in Silicon Valley to nab insider trading defendants, San Francisco federal prosecutors found themselves making perfunctory court appearances on bail, before the cases were shipped back East for the heftier legal battles. The realm of insider trading — particularly the case around hedge fund Galleon — is probably the most glaring example of Manhattan federal prosecutors taking the lead over their Bay Area colleagues. Hedge fund founder Raj Rajaratnam heads to trial in New York next week, even though a swath of the alleged criminal conduct, related guilty pleas, and a probe of expert networks used by hedge funds have come from Silicon Valley, generating strong business for California defense lawyers. Haag flashes a wry grin at the Galleon case and notes that New York took charge before she became U.S. Attorney. “If the misconduct occurred here, the witnesses are here, and the evidence is here, the case should be handled here,” Haag said. “New York may beg to differ, and we may have to have some conversations down the road.” Ten years ago, current FBI director Robert Mueller was U.S. Attorney in San Francisco and the office was front and center in several cases, eventually taking a big role in the Enron Task Force. But under Mueller’s successor, Kevin Ryan, several experienced white collar prosecutors — including Haag — left for private practice. White collar crime case charges dropped by half in five years to a low of 62 in fiscal year 2005, according to U.S. Department of Justice statistics. The case figures started to come back up under Joseph Russoniello, Haag’s immediate predecessor, but the best known recent Bay Area federal case is the upcoming perjury trial against baseball home run king Barry Bonds over performance enhancing drugs. Haag’s ambitions also face some budget realities. Eight job offers to prospective prosecutors — which were already accepted by the candidates — have been held up in Washington due to a hiring freeze, Haag said. “HIGH BAR” IN SAP CASE A criminal copyright case against SAP could be tough. The allegations against SAP have been public since Oracle sued in 2007, claiming that an SAP subsidiary wrongfully downloaded millions of Oracle’s files. SAP is seeking to reduce the $1.3 billion verdict. Even though SAP admitted to liability in the civil case, if federal prosecutors brought a case against the company or any individuals they would have to prove an element of willfulness that Oracle didn’t, said Eric Goldman, a professor at Santa Clara University School of Law. “Willfulness in a criminal context is a very high bar,” Goldman said. Speaking generally, Haag said prosecutors’ speed is an important factor in encouraging tech companies to come forward when they are hacking victims. Otherwise they may remain silent. “Sometimes these companies do make a business decision that they don’t want to report it; they don’t want the publicity,” she said. Haag has added two prosecutors to a group devoted to health care fraud in the district, which has been a Justice Department priority nationally. It was part of a larger office reorganization that had some prosecutors still settling into new offices in January. That process, Haag acknowledged, led to lost time, and she knows that charging cases is the key to publicizing her office’s efforts. “My mantra with people here is this is a wonderful case, a great case that you’re investigating, and no one knows about it,” Haag said. “So let’s get it resolved.” (Reporting by Dan Levine, editing by Gerald E. McCormick) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: Beijing Property Boom Forces Migrant Workers Underground

February 18, 2011

Feb. 18 (Bloomberg) — Rising rents in Beijing are forcing many of the city’s migrant workers into small dwellings underground. China’s inflation accelerated in January as prices excluding food rose the most in at least six years, bolstering the case for more interest-rate increases to tame overheating risks in the fastest-growing major economy. Bloomberg’s Margaret Conley reports. (Source: Bloomberg)

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Video: Sangamo Gene Tests Inspired by One Man’s AIDS ‘Cure’

February 11, 2011

Feb. 11 (Bloomberg) — Sangamo Biosciences Inc. is developing a new form of gene therapy driven by the case of patient Timothy Brown who may be the only person that’s ever been cured of AIDS. Brown received a stem-cell transplant in Berlin in 2007 that transferred genetic material to him from one of the 2 percent of people with natural immunity to HIV, Bloomberg Businessweek reports in its Feb. 14 issue. He’s been off treatment since then, and no trace of the AIDS virus has been found in his body, according to Brown’s hematologist. Bloomberg’s Shannon Pettypiece reports. (Source: Bloomberg)

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Apple’s D.C. Lobbying Efforts Get Fierce

February 4, 2011

Its 2010 [Apple's] lobbying spend was about $1.6 million; Microsoft’s was $6.9 million. But while it might seem that any lobbying Apple might need to do in Washington could be easily accomplished by a phone call from one of its directors–one in particular–evidently that’s not the case. Because the company has hired a new lobbying firm to help deal with its D.C. concerns: Fierce, Isakowitz and Blalock.

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Video: Blumenthal Opens First London Restaurant With Lion Dance

February 1, 2011

Feb. 1 (Bloomberg) — Eric Coleman reports on the opening of Chef Heston Blumenthal’s first London restaurant. Dinner by Heston Blumenthal at the Mandarin Oriental Hyde Park is a British brasserie serving historically inspired dishes that can be traced back as far as 1390 in the case of Rice & Flesh, a starter with saffron, calf tail and red wine.

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Andrew Winston: Wal-Mart Plays With Our Food

January 31, 2011

Every week, 140 million people — about the population of England and Germany combined — shop in a Wal-Mart store. Soon, all of these people will be eating healthier, and the environmental impact of their food will be lessened. That’s because in recent months, the world’s largest grocer (and company) has started to fundamentally change the food on its shelves. Wal-Mart’s recent announcements continue a five-year campaign to green the supply chain, but they add in some interesting new twists as well. The entire agricultural sector, and everyone who, well, eats, will feel the ripples of these moves. Some of Wal-Mart’s initiatives increase profitability while hitting sustainability goals; for others, the societal benefits are real, but the business benefits are not as clear, at least on the surface. Three initiatives in particular demonstrate a strategic focus on food sustainability. (1) In October, Wal-Mart announced that it would double the amount of locally-sourced produce on its shelves . There’s some legitimate debate about whether shortening distances alone really reduces the environmental footprint (a fascinating new study says that cutting back on meat is far more effective in lowering impact than buying local). But Wal-Mart says the initiative will reduce spoilage and increase shelf-life. Those changes, by reducing the total amount of food needed, will certainly reduce overall environmental impacts throughout the value chain. As is the case with most of Wal-Mart’s sustainability initiatives, this one fits the company’s mission and strategy perfectly. It will reduce environmental impacts, but also reduce logistics and supply chain costs (in part because what’s noticeably absent from this announcement is anything about increasing sales of organic food, which usually costs more). Wal-Mart can pass on these operating savings to customers, so it all fits nicely within the company’s normal business model. But some more recent announcements are not as clear-cut on the business side. (2) Last week, Wal-Mart said it will both lower the prices of fruit and vegetables (saving customers $1 billion) and reduce the amount of saturated fat, sugar, and salt in its private label products . On the latter point, Wal-Mart was not the first to the table, with companies such as Kraft and Pepsi setting similar goals last year. It’s more of a stretch to fit this announcement neatly into a sustainable/profitable business framework. The sustainability benefits are real — on the green side, reducing ingredients like sugar should have sizable ripple effects up the supply chain in saved energy and water. The business benefits are in there also, but are fuzzier. Improving health of course fits a social goal, but it also demonstrates caring for your customers, which can drive loyalty, sales, and brand value. It’s also not purely cheeky to suggest that keeping your customers alive longer, and healthier, will help your bottom line. (3) The third recent announcement falls much more clearly in the pure corporate social responsibility world. In a fascinating display of smart philanthropy, Wal-Mart is helping the hungry by helping food banks lower their energy bills . The company donated $2 million to 16 food banks to, in the company’s words , “upgrade their lighting, refrigeration or heating and air conditioning with equipment that performs better, uses less energy and costs less to operate.” Wal-Mart estimates annual energy savings of $625,000, which will buy 300,000 more meals every year from now on. The $2 million donation is in reality dwarfed by Wal-Mart’s own $2 billion of cash and in-kind donations to reduce hunger. But I hope that this extremely clever model of philanthropy — where you give a gift that keeps on giving — will take hold even more. Lowering the footprint and operating costs for non-profits is pure win-win. In short, as is always the case, sustainability initiatives do not fit neatly into one box within a company. Are they for social good or to make money? The answer is, invariably, yes. Again, pressing its supply chain to do more, faster, is what Wal-Mart has always done, but in recent years the pressure has been focused on sustainability. All these food initiatives expand on that approach, but also show Wal-Mart “walking the walk” and finding opportunities for smart philanthropy to round out the story. It’s a robust strategy for covering many angles on the sustainable food movement. The benefits to all possible bottom lines are substantial. If Wal-Mart and the other companies in its supply chain succeed in reducing fat, sugar, and salt in food; improving access to food for the poor; and sourcing it locally and using less energy to do so, both the planet and its inhabitants will be healthier. This post first appeared at Harvard Business Online .

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Banks Lose Pivotal Mortgage Case

January 8, 2011

The highest court in Massachusetts ruled against U.S. Bancorp and Wells Fargo & Co. Friday in a pivotal mortgage foreclosure case that could spark more turmoil and uncertainty in a housing market already mired in depression. The Supreme Judicial Court affirmed a lower court judge’s ruling invalidating two mortgage foreclosure sales because the banks, in their capacity as trustees for mortgage securities, did not prove that they actually owned the mortgages at the time of foreclosure. The decision, which highlights the failure of financial firms to adhere to the rules that govern mortgage-backed securities, is likely to lead more borrowers to sue bank servicers and trustees for wrongful foreclosures. It’s unclear what the ruling means for people who were forced from their homes after defaulting on their loans or for those who purchased houses in foreclosure sales. “There are now thousands of these homes that have been purchased through foreclosures handled in a very similar fashion where the titles are defective,” said Ward P. Graham, a Massachusetts title attorney who co-authored a friend-of-the-court brief in the case on behalf of the Real Estate Bar Association for Massachusetts, Inc. Last fall, the banking industry’s foreclosure machine came under intense scrutiny with revelations that low-level employees called “robo signers” powered through hundreds of foreclosure affidavits a day without verifying a single sentence. At the time, analysts warned that the banks’ allegedly fraudulent document procedures could imperil their ability to prove that they owned the mortgages. The Massachusetts ruling stokes those concerns. “This decision is going to raise serious problems in hundreds of thousands of foreclosure cases,” said homeowner-defense attorney Thomas Cox, a Maine attorney who was one of the first to put the robo signing scandal in the national spotlight. “It has the potential to require that foreclosures be done over, and I think there’s going to be significant turmoil nationally. There’s going to be major uncertainty.” In the Massachusetts case, the Supreme Judicial Court found that the banks, who were not the original mortgagees, did not show that they held the mortgages at the time of foreclosure. As a result, the court found, the banks did not demonstrate that the foreclosure sales were valid. The banks argued that the securitization documents they submitted were sufficient to prove they owned the mortgages before the publication of the notices of sale and the foreclosure sales. Wells Fargo said in a statement Friday that as trustee of a securitized pool of loans, it expected those servicing the loans to abide by all applicable state laws, including those governing foreclosure sales. The San Francisco bank was a trustee of the securitized trust in question. American Home Mortgage Servicing Inc., was the servicer. In a separate statement U.S. Bancorp said the judgment has no financial impact on the company. “The issues addressed by the court revolved around the process of servicing the loan on behalf of the securitization trust, which was performed in this case by the servicer, American Home Mortgage,” the bank, which is based in Minneapolis, said. It later issued another statement saying that as a trustee of the securitization trust that it has no responsibility for the terms of the underlying mortgage, foreclosure procedure, the conduct of the servicer, the process by which the mortgage is transferred to the trust, or the sufficiency of the mortgage documentation.” American Home Mortgage Servicing, which is based in Coppell, Texas, said in a statement that the “decision is of limited applicability because it is based on law that is unique and specific to Massachusetts. The decision does not extend to foreclosures in other states.” Attorney Paul Collier III, who represents Antonio Ibanez, one of the homeowners in the case, said the ruling affects thousands of mortgages in Massachusetts and could have a far-reaching impact on the nation’s banking industry. “For homeowners and foreclosures in general, it means that any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void. Those homeowners, like Mr. Ibanez, still own the property,” Collier said. It’s up to lawmakers to take action to remove the uncertainty over mortgages raised by the decision, said Massachusetts Secretary of State William Galvin. Without legislative action, the court’s ruling will have a “chilling effect” on the real estate market, he said. The broader implications of the case sent bank stocks lower, with Wells Fargo stock falling 65 cents, or 2 percent, to close at $31.50. It earlier traded as low as $30.64. Stock in U.S. Bancorp slid 20 cents to close at $26.09, after dropping as much as 2.4 percent after the ruling.

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The Rise And Fall Of U.S. Gasoline (PHOTOS)

December 20, 2010

Experts say U.S. gasoline demand is at the start of a long-term decline, and while U.S. consumers have gotten used to rising gas prices and falling demand for U.S. gas in the new millennium, that hasn’t always been the case. Here’s a quick timeline on the history of U.S. gas from the AP:

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Video: Russian Fugitive Prepares to Fight Extradition From U.K.

November 16, 2010

Nov. 16 (Bloomberg) — Bloomberg’s Ryan Chilcote reports on the case of Yevgeny Chichvarkin, the co-founder of Russian mobile-phone retailer OOO Evroset, who is living in London but wanted in Russia on charges of kidnapping and extortion.

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French Women Lose Battle To Stop Renault From Calling Their Electric Car ‘Zoe’

November 10, 2010

PARIS — It could be the French version of “A Boy Named Sue” – a car named Zoe. A judge ruled Wednesday that the automaker Renault can call its new electric car Zoe, much to the chagrin of some French women and girls with that first name. Parents of two children named Zoe Renault (pronounced ZOH-eh ruh-NO) had argued in court that their children could end up enduring a lifetime of teasing and annoyance – just like the fictional youth named Sue in the famous Johnny Cash song. The families, who are not related to the car company, wanted Renault to choose another name for the model. “There’s a line between living things and inanimate objects, and that line is defined by the first name,” lawyer David Koubbi told The Associated Press in an interview. “We’re telling Renault one very simple thing: First names are for humans.” But a judge found against Koubbi’s clients in a fast-track proceeding, ruling that the parents would only have a case it they could prove that naming the car “Zoe” would cause the children “certain, direct and current harm.” Koubbi said he would appeal the decision. He insisted that while it’s clear the Zoe Renaults of the world would be most affected by the release of the car – slated for 2012 – all of France’s estimated 35,000 Zoes would feel the sting. “Can you imagine what little Zoes would have to endure on the playground, and even worse, when they get a little bit older and someone comes up to them in a bar and says, ‘Can I see your airbags?’ or ‘Can I shine your bumper?’” Koubbi said. The lawyer said Renault named it the Zoe ZE because of the electric-powered auto’s zero emissions. Renault, one of France’s two main carmakers, has already given several of its cars female first names – including its compact hatchback Megane and its mini Clio. Both are popular girls’ names in France, but there was no organized opposition to either name. The fight over Zoe, which means “life” in Greek, has gotten considerable media attention in France, where a petition on a Facebook page called “Zoe’s not a car name” has garnered more than 6,000 signatures. First names are a serious matter in France, which formerly restricted parents’ choices to a specific list of traditional names. The rules have since been loosened, but even today officials can oppose parents’ choices on the grounds that ridiculous names can hurt their future. In June, Renault CEO Carlos Ghosn said he was aware of the issue and wanted to avoid any controversy that could potentially hurt the car’s sales. “We don’t want our car to come on the market with a name which is a handicap,” he told Europe-1 radio. Still, a Renault official emphasized that there’s no plan to change the car’s name. “We ordered several studies that showed that it’s not a handicap for the car, so there’s no reason to make any changes,” said the official, who declined to give his name in accordance with company policy. “We’re very happy with the judge’s decision.” Attorney Koubbi said the two Zoes at the heart of the case are 2 and 8 years old and their parents were not seeking any damages. Koubbi, who has represented French celebrity clients, took the case on a pro bono basis. Why? Because his stepdaughter’s name is Zoe. ___ Associated Press writer Pierre-Antoine Souchard in Paris contributed to this report.

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Vitaliy N. Katsenelson: Post-Steroid Economics

October 28, 2010

During the ’80s and ’90s, ignorance was bliss. The global economy was growing nicely, and analyzing it (or even paying attention to market cycles) seemed like a waste of time, as the economy came in only three flavors: good, great and awesome. Even if you misread the flavor, the downside was that you’d just make a little less money. Value investors prided themselves on being bottom-up-only analysts, focused on scrutinizing individual stocks, while top-down analysis — making investment decisions by looking only at the macro picture — became unfashionable, viewed as market timing. (I know the above statement may sound a bit over the top, but over the years I have read and listened to dozens of interviews with famous and successful investors who declared that they do bottom-up-only analysis and don’t pay attention to the economy.) Prolonged and virtually uninterrupted growth brought complacency, excesses, and debt. Bottom-up-only analysis worked until it stopped working, as investors discovered during the recent crisis that the global economy can come in additional flavors: bad, horrible, and downright nasty. Today the cost of misreading the economy is much higher. Two years ago the Great Recession waltzed in to the great surprise of homeowners, the Fed and the banks, and everyone discovered that house prices don’t always go up. The financial sector, the lifeblood of our economy, started to drown in the sea of bad debt. As the troubles in that sector began to spill into the real economy, the government felt it had no choice but to step in, and the bailouts and stimuli began. Today it is hard to take a walk through our economy and not meet a friendly Uncle Sam; he is everywhere. He’s buying long-term bonds and thereby keeping long-term interest rates artificially low. Since he took over the defunct (for all practical purposes) Fannie Mae and Freddie Mac, he is the U.S. mortgage market, because those organizations account for the bulk of mortgages originated. Of course, he is also on the hook for their losses. Our dear Uncle Sam rolls in style. He doesn’t know how to bail out or stimulate on the cheap. U.S. government debt (at least, the debt that is on the balance sheet) leapt from about 60 percent of GDP before the Great Recession to more than 100 percent in 2010. The party of over-leveraged consumers has been crashed by an over-leveraged government. To understand the consequences of the Great Recession, consider this analogy: The U.S. economy is like a marathon runner who runs too hard and pulls a hamstring, but finds himself with another race to run. So he’s injected with some industrial-strength steroids, and away he goes. As the steroids kick in, his pace accelerates as if the injury never happened. He’s up and running, so he must be okay. This is the impression we get, judging from his speed and his progress. What we don’t see is what is behind this athlete’s terrific performance: the steroids, or, in the case of our economy, the stimulus. Obviously, we can keep our fingers crossed and hope the runner has recovered from his injury, but there are problems with this thinking. Let’s address them one by one: • Serious steroid intake exaggerates true performance. Economic stimulus creates an appearance of stability and growth, but a lot of it is teetering on a very weak foundation of government intervention. • Steroids are addictive; once we get used to their effects, it is hard to give them up. When the first home-buyer tax credit expired, it was extended for anyone with the patriotic ambition to buy a house. It is hard to give up stimulus, because the immediate consequences are painful, but long-term gain has to be purchased by short-term discomfort. • The longer we use steroids, the less effective they are. Take Japan, which was on the stimulus bandwagon for more than a decade. With the exception of tripled government debt, Japan has nothing to show for its efforts; the economy is mired in the same rut it was in when the stimulus started. • Steroids damage the body and come with significant side effects. In the case of the economy, the side effects are higher future taxes and increased government debt, which brings on higher interest rates and thus below-average economic growth. The hopes that we’ll transition from government steroid injections back to an economy running on its own are overly optimistic. So what does this mean for investors? When we purchase a stock, we are buying a stream of future cash flows. By doing only bottom-up analysis, investors implicitly assume that external factors (the winds and hurricanes of the global economy) have no impact on these cash flows. That is a brave and careless assumption, especially in a post-steroid world. Instead, investors should take a more holistic approach, mixing bottom-up insights with top-down analysis. Follow me on Twitter

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Al Norman: Wal-Mart’s Infant Formula Scam

October 20, 2010

Wal-Mart Moms are not going to like this story. The world’s largest retailer was sued by the state of New Jersey two years ago for selling infant formula and over-the-counter drugs after the product expiration date. On top of that, Wal-Mart was selling items on sale that scanned in the cash register at incorrect prices. To settle the case and get it out of the headlines, Wal-Mart signed a Consent Order on October 19, 2010, in which it agrees to pay $775,000. This lawsuit has been going on since 2008. The same lawsuit included Target as a defendant, along with a third retailer that has since gone out of business. Target settled their case a year ago, and paid $375,000 to the state. Most of Wal-Mart’s money ($500,000) will be civil penalties. Another $160,000 will go to pay the legal bills of the state of New Jersey, and $40,000 for the cost of state investigations into the case. The final $75,000 will go into a new consumer education initiative, which may consist of: donations by Wal-Mart to selected New Jersey consumer education programs; placement of media advertisements by Wal-Mart; and donations by Wal-Mart to selected New Jersey elementary and secondary schools for consumer education. According to New Jersey Attorney General Paula T. Dow, Wal-Mart sold or offered to sell expired infant formula and non-prescription drugs to consumers. A court ruled last August that the Attorney General and New Jersey Division of Consumer Affairs had proven four of the eight counts in their lawsuit. It appears that Wal-Mart’s settlement offer was timed to shut down a trial that was about to begin in Hudson County, New York over other counts that the AG had leveled at the retailer — what Dow referred to as “various instances of unconscionable business practices.” No details on the “unconscionable” practices were spelled out in the AG’s press release announcing the settlement. As part of the agreement, Wal-Mart will have to periodically inspect its over-the-counter drugs and infant formula, and make sure its products are sold at their posted price at the point of check out. According to the settlement, Wal-Mart agreed to check the expiration dates on non-prescription drugs on a monthly basis, with all products’ expiration dates checked twice a year, and verify monthly online that each stores has completed its expired non-prescription drug check. Wal-Mart also agreed that its store managers will use a first-in, first-out method for the sale of infant formula and non-prescription drugs, and department managers will verify expiration dates on shelved infant formula containers when they restock such merchandise. The retailer agreed to remove infant formula from its shelves one month prior to the date of expiration; and remove non-prescription drugs from shelves at least three months prior to the date of expiration. The company will also follow uniform practices for destroying or returning to the manufacturing any OTC drugs or infant formula that are removed from shelves. Wal-Mart also has to guarantee the price accuracy of its products to ensure that merchandise is not “displayed, offered for sale and/or sold at a price that exceeds the price posted at the point of display or otherwise.” Wal-Mart says it will operate a “Pricing Credibility Program,” which authorizes cashiers to give consumers the lower of the scanned or advertised price on merchandise when a scanning or pricing error is discovered at checkout. Department managers are required to conduct an investigation of the error to make sure that it can be investigated and the shelf label can be corrected. Within the next month, all store managers at New Jersey Wal-Mart stores will be briefed on the summary of the Consent Order. Wal-Mart also is required to post “through a conspicuous link on its internal website for managers and associates” in each Wal-Mart store a summary of the Order. “This settlement puts the onus on Wal-Mart to check expiration dates when stocking its shelves, to periodically recheck stocked items, and then remove from sale any infant formula or non-prescription drugs that are past expiration,” said Attorney General Dow in a press release. “A responsible retailer should do no less and we expect full compliance at Wal-Mart’s 54 New Jersey stores.” But if Wal-Mart was a responsible retailer, this lawsuit would never have been filed in the first place. As is customary in such out-of-court settlements, Wal-Mart admitted no wrongdoing. But Wal-Mart settles cases it knows it is likely to lose. This case is similar to one six years ago in New Jersey in which Wal-Mart entered into a Consent Order regarding infant formula that had expired and over-the-counter drugs. For its part, a chastised Wal-Mart had little to say after the Final Consent Judgment. “Our customers depend on us to provide a good shopping experience with products and prices they can trust,” a company spokesman said, “so we’re committed to doing even more to make sure correct prices are posted and to remove products from our shelves well before their expiration dates. We also will conduct random price accuracy checks in stores throughout the state.” Wal-Mart has to be extremely careful of the trust relationship it maintains with its customers. If Wal-Mart Moms feel they have to carefully check the price and expiration date of each product they put into their cart, it undermines that trust. The fact that Wal-Mart was selling out-of-date infant formula is about the worst product you could pick to sow doubt among the Wal-Mart Moms. Wal-Mart is relying on the hope that its shoppers will have a much shorter memory than the Attorney General of New Jersey. But the “infant formula scam” is a sloppy operations error for a company that prides itself on flawless execution. That’s why it was worth $775,000 to shorten this story’s shelf-life, Al Norman is the founder of Sprawl-Busters. He has been helping communities fight big box sprawl for 17 years. His book “Slam Dunking Wal-Mart” is a grassroots classic on how to battle the giant retailers.

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Dan Dorfman: The Joys and Horrors Of QE2

October 18, 2010

In football, they call it a Hail Mary Pass — a last-minute act of desperation in which a quarterback throws a very long forward pass which has only a minimal chance of success. That’s essentially how economist Madeline Schnapp of West Coast liquidity tracker TrimTabs Research, partially owned by Goldman Sachs, views the widely expected second round of quantitative easing, or, as it’s called, QE2. What excites so many people is that QE2 is supposed to be a significant economic booster. In brief, the Federal Reserve prints money, which is used to buy long-term debt from banks that gives them more capital to lend and lower interest rates. In turn, that injection of this liquidity supposedly will goose the economy, stimulating more job creations, more housing sales and higher wages and salaries. The QE2 program — estimated at between $500 billion $1 trillion — is expected to be announced November 3 at the Fed’s Federal Open Market Committee meeting. The first such easing, QE1, an estimated $1.5 trillion, took place in March of last year. As you can tell by the ongoing sluggishness of the economy, it has hardly been a bell-ringer. Still, Wall Street, despite the failure of the initial easing, is gung-ho on QE2 as an economic panacea, evidenced by the fact that it recently embarked on an aggressive buying spree, driving up the Dow from 10,000 at the end of August to above 11,140. Schnapp, dubbed by some as Lady Dracula for her generally grim economic outlook, surprisingly had some cheery things to say about QE2, but she hedged them with a big IF. She believes that “if QE2 turns out to be successful, then we are already at a bottom.” Assuming this is the case, she sees some noteworthy advances on the economic front between now and the end of 2011. Chief among them: A rise in the GDP nominal growth rate (adjusted for inflation) from 1.5% to 3%. A drop in the unemployment rate from 9.6% to 8%, or from about 15 million jobless workers to 12 million. Growth in consumption from 2.7% to 3.9%. A rise in the annual rate of new and existing home sales from 4.7 million to 5.5 million. A decline in housing inventories from 11.4 months worth to 8.5 months. A drop in mortgage delinquencies from seven million to six million. A decrease in foreclosures from 1.5 million to 800,000. “Obviously, if the government throws enough money at the economy to drive down interest rates, there are bound to be benefits,” observes Schnapp. “I’m not jumping up or down, but near term it will bring about some modicum of growth as the government chooses pleasure over pain.” But longer term, she hastens to add, “this is a pact with the devil and we could end up in tears.” Her big concern, she says, is the Fed is now traveling in uncharted waters and there are huge risks of serious unintended consequences that may blunt or reverse near-term gains. In essence, she notes, the Fed is shifting its focus from its legislative dual mandate of maximum employment and price stability to specific inflation targeting. In particular, she takes note of wage inflation (in which demand for goods and services exceeds available supply, driving up wages), and she expresses fear the Fed’s actions may stimulate other types of inflation, as well, which could extract a cruel price on pensioners and savers. Interestingly, while many economic pundits debate the prospects of both inflation and deflation, Schnapp warns that QE could, in effect, lay the groundwork for out-of-control inflation, triggering sharply higher prices for oil, food and raw materials, which, she notes, could force the Fed to raise interest rates in a weak economy. Taking note of the rising costs of such commodities as oil, cotton, gold, silver, copper and coffee, Schnapp says higher prices are already here and she thinks we could be looking down the pike at an inflation rate of 4% to 5%, versus a current level of just above 1%. And this kind of a spike, she notes, could force us into another recession, as was the case in the early 1980s. Given the risks, Schnapp says, “QE2 seems like an act of faith and the monetary equivalent of an afterlife.” My thought about all of this: Based on the books and stories I’ve read and the movies I’ve seen, pacts with the devil always turn out to be a hellish experience. What do you think? E-mail me at Dandordan@aol.com

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David Callahan: Crime Pays: The SEC’s Slap on the Wrist for Angelo Mozilo

October 17, 2010

Let’s say a business leader makes hundreds of millions of dollars through criminal practices that end up wiping out the wealth of myriad homeowners and contributing to the biggest economic crisis in 70 years. Then, as punishment, he is forced to fork over $67.5 million — and yet faces no prison time. Has justice been done? Well, if you listen to the SEC — and plenty of media commentators, too — the settlement just reached with former Countrywide CEO Angelo Mozilo was tough stuff. It was reportedly among the largest fines ever imposed on an individual by the SEC. To be sure, $67.5 million is big money. Except in comparison to the fortune that Mozilo made presiding over one of the shadiest mortgage firms of all time — reportedly a half billion dollars. Time magazine didn’t just name Mozilo one of the “25 people to blame for the financial crisis,” it put him on the top of the list. Countrywide has been sued by nearly a dozen state attorney generals for its predatory lending practices. The company, now owned by Bank of America, has also been hit by a blizzard of other suits. One reason that Mozilo got away with so much is that he effectively bribed numerous regulators and lawmakers, of both parties, with dirt cheap mortgages through his so-called “Friends of Angelo” program. Ultimately, Mozilo wasn’t even nailed for his mortgage practices. They SEC got him for insider trading and securities fraud, alleging that Mozilo unloaded Countrywide’s stock on unwitting investors as the company began to tank — all the while saying that everything was fine. As is common in these cases, Mozilo did not acknowledge any wrongdoing as part his settlement with the government. That outcome is reminiscent of how the corrupt financial analysts, Jack Grubman and Henry Blodget, were let off the hook. Both settled with regulators after playing key roles in the dotcom scandals of the 1990s. When those settlements were reached, many observers predicted — myself included — that the absence of any personal punishment for the analysts would encourage future greed and lawlessness. Now the cycle is being repeated. It is hard to see how the Mozilo settlement will deter future wrongdoing. Indeed, it could have the contrary effect. If you can make a great fortune behaving badly, get busted, and still end up with most of that future, then you’ve come out way ahead. At least in financial terms. In defense of the SEC, complex white-collar cases can be difficult to win at trial. Especially when the defendant can spend limitless amounts of money on the best legal team. And that truth, too, is well known among well-heeled criminals. So in the end, here’s the calculus that might run through the mind of an executive considering breaking the law in order to make a huge fortune: First, they probably will never get investigated. But if they do get investigated, they probably will never go to trial. But if their case does come to court, they stand a decent chance of winning by hiring superior legal firepower. And even if they lose in court, their sentence may be short and they may still end up very wealthy. (See: Michael Milken). None of this is to say that Angelo Mozilo doesn’t have regrets. Like many central figures in big financial scandals, he doesn’t seem like an especially bad guy. He grew up the son of a butcher and worked his way to the top of the mortgage business over many years. His intentions seemed noble at earlier points in his career, as he talked about making homes more affordable to low-income Americans. Mozilo also raised questions about Countrywide’s practices. As the New York Times describes, In its complaint, the S.E.C. cited a series of e-mails written by Mr. Mozilo starting in 2006 that decried some of Countrywide’s lending practices even as the company’s executives publicly boasted about its high-quality loans. “In all my years in the business, I have never seen a more toxic product,” Mr. Mozilo wrote in an April 17, 2006, e-mail to Mr. Sambol [his chief financial officer], referring to loans that allowed borrowers with poor credit histories to buy homes without putting any money down. Mr. Mozilo also warned his colleagues about the dangers of a popular type of adjustable-rate mortgage that let borrowers pay a fraction of the typical monthly charge. In an April 2006 e-mail, Mr. Mozilo wrote that he had “personally observed a serious lack of compliance within our origination system as it relates to documentation and generally a deterioration in the quality of loans originated.” And yet Mozilo let Countrywide’s subprime mortgage machine march on — ultimately to disaster. Mozilo’s story is yet more testimony to the seductive power of big money in an age of lax regulation. It would be nice to think that this age has come to a close. But Mozilo’s light punishment, with the clear message that crime pays, will help ensure that is not the case.

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Foreclosure Freeze Started With One Small Case In Maine

October 15, 2010

All of this is largely because Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent.

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Price reversal is the case in US stock markets

October 7, 2010

Price reversal is the case in US stock markets

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Supreme Court Takes On Corporate Privacy Case With AT&T

September 28, 2010

WASHINGTON — The Supreme Court is getting involved in an unusual freedom of information dispute over whether corporations may assert personal privacy interests to prevent the government from releasing documents about them. The court on Tuesday agreed to a request from the Obama administration to take up a case involving claims made by telecommunications giant AT&T to keep secret the information gathered by the Federal Communications Commission during an investigation. The administration wants the high court to rule that corporations may not claim a personal privacy exception contained in the federal Freedom of Information Act. The exception may be used only by individuals, the administration said in a brief signed by Elena Kagan, the newest justice who served in the Justice Department until last month. Kagan will not take part in the case, which will be argued early next year. AT&T wants the FCC to keep secret all the information it gathered from the company during an investigation into its participation in the federal E-Rate program, which helps schools and libraries get Internet access. The FCC had released some of the information under an open records request, but withheld some, citing FOIA exemptions that cover trade secrets and humans’ right to privacy. A federal appeals court sided with AT&T. COMPTEL, a trade group representing some AT&T competitors, filed the FOIA request that led to the court ruling. The trade association and several groups that support transparency in government backed the administration’s plea to the court to hear the case. The case is FCC v. AT&T, 09-1279.

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Antonia Juhasz: Chevron throws book at shareholder activist (me).

September 28, 2010

On May 26, I was arrested at Chevron’s annual shareholder meeting. Chevron, a California-based company, held the meeting at its Houston office — the old Enron building. On Thursday, my lawyer, and the lawyers of the four others arrested at the meeting, go to court in a preliminary hearing. Chevron has asked the Houston prosecutors for jail time. Today, John Letzing of MarketWatch wrote what I believe to be a very important article: “Chevron throws book at shareholder activist. Are criminal charges the best way to deal with a meeting disruption?” challenging the decision by Chevron to “throw the book” at one of its shareholders for the “crime” of voicing criticism at its annual shareholder meeting. Letzing writes of the unusual choice by Chevron: “Juhasz’s prosecution may result in an odd instance of a company having one of its stockholders incarcerated, and raises questions about the best way for firms to deal with activists who buy in, just to make a statement. “‘This is very, very unusual,’ says Sanjai Bhagat, a professor at the University of Colorado at Boulder’s Leeds School of Business. ‘I’m a little puzzled as to why management would take such unusually strong steps.’” “Boston University Prof. James Post said he can’t recall a similar case where a company pursued a shareholder activist with criminal charges, and for good reason: ‘A company almost never wins in a case like that.’” The article has already received over 100 comments. While far too many focus on questioning my gender (I guess my short San Francisco hairdo doesn’t translate well across the nation!), most stay to the point, which, in most of the instances thus far, seems to be agreeing with Chevron. There are important exceptions, including this one from “Larry Lynn,” who writes: “I have decided to have my family trust divest any Chevron/Standard stocks. Chevron/Standard is willing to compromise everything in order to enhance their bottom line. Halliburton had the courtesy to relocate to Dubai. If Chevron/Standard will not act in the intrest of the citizens of the United States, kick them out and shut them down.” Your Comments Are Welcome! Due to the constraints imposed upon me by the case, I cannot write about the case here. But you can learn much more on my websites: http://www.TyrannyofOil.org and http://www.GlobalExchange.org/chevron .

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Lehman Lawyers Could Collect $2 Billion From Bankruptcy

September 14, 2010

It seems there are always those who gain from others’ misery. In this case, the lawyers and accountants circling Lehman Brothers stand to make more than $2 billion in fees for unwinding what was once one of Wall Street’s largest investment banks, the Financial Times reports. And that’s despite the fact that the services are being provided at discount rates.

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Craig Newmark: eBay vs craigslist: "Goliath bloody, David still standing"

September 10, 2010

Well, most of the reporting on this case was based on reading a bad press release, rather than reading the judge’s opinion. Judge for yourself, it’s linked to by the honest material here . The judge says “craigslist leaves this field with something less than total victory.” Not total victory, just a little less. The judge kinda split the baby, but said we acted in good faith. We’ll keep fighting the good fight in California.

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Andrew Kreig: Victims In $3.6 Billion Ponzi Protest Court Process

August 24, 2010

Victims of the $3.6 billion financial fraud by Minnesota businessman Tom Petters are justifiably angry about the federal victim-restitution process that began after his 2008 arrest. The feds used hardball tactics to install well-connected cronies in key positions, which should trouble anyone who fears the precedent if their own finances get trapped in such a dispute nationally. Most remarkable was that the federal judge supervising the case named the prominent local attorney Douglas Kelley to be court receiver and U.S. trustee. This was even though Petters, above as shown shortly after his arrest in 2008, had previously hired Kelley to defend his companies. Victims are so disturbed at such decision-making and what they regard as excessive legal fees by Kelley and his team that some of them financed The Second Fraud , a documentary about their case that premieres Aug. 25 at the Uptown Theater in Minneapolis for a one-night showing. On behalf of the Justice Integrity Project , I’m on a seven-person panel assembling there to discuss the case after the movie. Kelley and at least four other representatives of the government or Petters defense were invited, but none have confirmed. Here’s a look at the discussion about this fascinating case: For more than a decade, Tom Petters masterminded the first multi-billion dollar U.S. “Ponzi scheme” ever discovered. Authorities raided his companies on Sept. 24, 2008 after a tip from his former receptionist-lover, who’d received $8 million in bonuses during her ascendancy into his executive ranks. Petters, a college drop-out now aged 53, received 50-year prison term in April. This ended his huge donations to leading politicians in both major parties, his swank lifestyle, and his control of such well-known companies as Polaroid and Sun Country Airlines. But Second Fraud filmmaker Ryan Frost says: Ultimately we discovered a tangled web of local professionals: judges, politicians and lawyers, some of which may have knowingly or unknowingly allowed the Petters fraud to perpetuate in the first place. Now these groups are left in charge to clean up the mess. As hundreds of years of legal precedent are blatantly ignored, creditors and victims are crying foul from the sidelines as they are swindled a second time by the very system that is in place to protect them. On Friday, I published a column as part of my legal reform group’s research on such situations nationally. During the post-film panel, I’ll be among those arguing that Petters oversight so far fails to provide the legal checks-and-balances among various litigants we need to protect the victims of such cases. First-hand accounts will come from Chicago hedge fund manager Thane Ritchie and New Jersey liquidator William Procida, who was elected by creditors such as Richie to be receiver via a process in Illinois promptly after the fraud was discovered. Procida, who says he’s handled the liquidation of billions of dollars of assets, will describe how Kelley used his twin roles as Petters attorney and as a former prosecutor to consolidate power in unusual ways. Among them was the decision by U.S. District Judge Ann Montgomery to issue an order that empowered Kelley, her former law school classmate and colleague at the Justice Department. The order also granted Kelley judge-like immunity, thereby limiting the ability of various parties to force oversight. Count me among those who don’t understand the fascination with handing off complex problems in this way, even to well-credentialed private attorneys. To be sure, a special master is a longstanding concept. But this kind of vast power potentially has life-or-death consequences for companies and people alike, with too few due process rights. Kelley essentially runs the show in Minnesota for victims nationwide. Kelley is subject largely to post-decision review by the judge, who named him ex parte in a private meeting. Creditors claim the Petters assets are being chewed up in legal fees, forfeitures to federal government and other controversial transactions. In response, Kelley argues in his occasional public remarks that his decision-making balances the best interests of all to obtain optimal returns. Neither Kelley nor the judge has responded to my invitations for comment. Others on the post-film panel with its creator Frost will be law professor Richard Painter, bankruptcy expert Garrett Vail and longtime journalist James Merriner, author of the spiked ad campaign decrying court oversight of the Petters case. The moderator is Bill Hillsman, founder of the ad agency that created Minnesota’s campaign victories for underdog Senate Democratic candidate Paul Wellstone in 1992 and third-party gubernatorial candidate Jesse Ventura in 1998. Nationally, some take the problem of excessive bankruptcy fees as a big problem. The American Bankruptcy Institute published a report in July entitled, “When a Pig Becomes a Hog….” Without mincing words, the report quotes a Texas judge as saying last year: “At some time [the] Court must draw the line as to what is reasonable and what is not.” The judge concluded, “When a pig becomes a hog it is slaughtered.” That’s Texas talk, and perhaps a little rough for sensibilities elsewhere. But $3 billion in missing assets with only lawyers to help can be worse than tough talk. For some, it’s grim reality.

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Ken Lewis BLASTS Merrill Lynch-Bank Of America Merger Lawsuit, Calls It ‘Implausible’

August 21, 2010

NEW YORK — Lawyers for former Bank of America CEO Ken Lewis said in a court filing that a lawsuit accusing him of misleading investors during the company’s 2009 merger with Merrill Lynch was “implausible” and “inconsistent,” and should be tossed out. The filing was a response to a civil lawsuit submitted by New York Attorney General Andrew Cuomo in February which accused Lewis and Bank of America of failing to properly disclose losses and bonuses at Merrill before the deal closed. At the time, attorneys for Lewis had called the suit “misguided,” but they elaborated on that criticism in a lengthy legal filing Wednesday that both praised the merger as “an unmitigated financial and strategic success” and condemned Cuomo for distorting the facts. “Some have looked to assign blame for every aspect of the financial crisis, even where this is no evidence of misconduct,” they wrote. “This case is a product of that dynamic and does not withstand either legal or factual scrutiny.” It added that Cuomo’s claim that Lewis was motivated by greed and hubris, “flies in the face of the actual facts and rational logic.” Lewis, they noted, held millions of shares of Bank of America stock, and stood to lose a lot if the merger wasn’t successful. Cuomo’s office released a statement saying it stood by its allegations. The statement said Lewis’ recent court filings, “do nothing to change this office’s view of the case.” The civil suit makes a variety of claims about misconduct by Lewis and other bank officials, including Joe Price, who is now head of the company’s consumer banking division. Among other things, it said the executives misled shareholders about $15 billion in losses at Merrill in the fourth quarter of 2008, failed to disclose $3.6 billion in year-end bonuses for Merrill employees, and then overstated losses to get a better bailout package from the U.S. government. The case is pending before a state court in Manhattan.

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