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CoStar’s People of Note (Oct. 31-Nov. 6)

November 5, 2010

This week’s People of Note includes the following markets: Houston, Los Angeles, New York City and Seattle. NEW YORK CITY SL Green Names Mead as Financial Chief James E. Mead joined SL Green Realty Corp. in New York City as chief financial officer…

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CoStar’s People of Note (Oct. 31-Nov. 6)

November 5, 2010

This week’s People of Note includes the following markets: Houston, Los Angeles, New York City and Seattle. NEW YORK CITY SL Green Names Mead as Financial Chief James E. Mead joined SL Green Realty Corp. in New York City as chief financial officer…

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CoStar’s People of Note (Oct. 24-30)

October 29, 2010

This week’s People of Note includes the following markets: Atlanta, Baltimore, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Columbus, Houston, Jacksonville, National, North Carolina, San Francisco, Southwest Florida, Tampa and Virginia. Colliers…

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David Isenberg: An Officer of the (KBR) Court

October 22, 2010

I have written before on the lawsuit by National Guardsman against KBR regarding the alleged their poisoning by exposure to sodium dichromate at Qarmat Ali project. So here is an update taken from the most recent filings submitted by the plaintiffs’ lawyers in Texas and Oregon. Evidently KBR is being uncooperative and is refusing to provide documents required under the legal discovery process, or so the plaintiff lawyer’s allege. What KBR knew about the toxic poisons at KBR’s Qarmat Ali project in 2003 and how long its knowledge was concealed from the men on the site, including Plaintiffs, is the central issue in this case. KBR defendants have repeatedly pointed to the comprehensive nature of prior discovery in related matters as grounds to block discovery in this case, an attempt already rejected by the Court. What became apparent when the United States Army Litigation Command in May 2010 provided to Plaintiffs a number of reports (including “SITREPS” indicating weeks of previously undisclosed site assessments by KBR at Qarmat Ali from the end of March 2003 onward) is that KBR’s discovery responses in both this and related discovery have been significantly underwhelming. This is particularly true for the initial April-May 2003 site assessments, for which KBR’s witnesses also claim a memory “black hole” in testimony taken as recently as last month in this case. For more than three months, Plaintiffs have repeatedly asked KBR, Inc. to produce the remaining “SITREPS” and “site assessments” its employees made at Qarmat Ali. Consistent with its previous conduct in this case, KBR has not only failed to comply with Plaintiffs’ request but has unilaterally ceased providing Plaintiffs with discovery since September 24, 2010. This Court should not permit KBR to interfere with the truth-exposing provisions of the Federal Rules of Civil Procedure and should compel KBR to provide Plaintiffs with their requested discovery. Better yet is this exchange: B. Rod Kimbro’s June 21, 2003 Email KBR’s failure to produce Rod Kimbro’s June 21, 2003 email is another demonstration of its refusal to abide by the Federal Rules of Civil Procedure. Plaintiffs deposed Rod Kimbro (“Kimbro”), who is a former employee of KBR and had conducted environmental safety work at Qarmat Ali. During Kimbro’s deposition, Kimbro revealed that he had retained a copy of a June 21, 2003 email raising a red flag to KBR’s managers about the presence of sodium dichromate at Qarmat Ali and the danger resulting therefrom. Not only had KBR failed to disclose Kimbro’s email in response to Plaintiffs’ discovery requests but, despite the fact that Kimbro had specifically provided KBR’s attorney with a copy of his email two days prior to his deposition, KBR only provided Plaintiffs with a copy of Kimbro’s email after its existence was disclosed by Kimbro during his deposition. The manner in which Kimbro’s email was disclosed is indicative of subterfuge: Answer: I had prepared a number of reports. I also had a number of e-mails that I had sent to Dr. Lee concerning Qarmat Ali. And when I left KBR’s employment I kept copies of those. And I provided copies of those to KBR’s attorneys and we discussed those documents. Question: When did you provide those documents, e-mails that you told us about? Answer: I don’t know the exact day, but it was within the last month. Mr. Doyle: Mr. Jones, has every single one of those documents been provided? Mr. Jones: We produced them to you, yes. I don’t know what the Bates label range is. He may have given me a document or two yesterday that was new to me. Mr. Doyle: Okay. Have we been provided that or is there a reason why we haven’t been provided it right now? Mr. Jones: Because you have – don’t have a document request for this deposition. Mr. Doyle: Okay. Mr. Jones: But we produced to you — Mr. Doyle: Just so we’re clear – Mr. Jones: Right. Mr. Doyle: — are you really telling us that materials this gentleman evaluated working KBR Qarmat Ali are not encompassed within the outstanding discovery requests that were required to be supplemented timely? Mr. Jones: No. I’m not saying that. What I’m saying is, we have produced all the documents that he gave us to – what was it – a month or two ago that’s been produced to you. Mr. Doyle: Okay. You just mentioned some additional documents. Mr. Jones: Right. If he gave us anything new, I haven’t produced that to you yet. Mr. Doyle: Okay. Is there a reason why we can’t get a copy now? Mr. Jones: No. Mr. Doyle: Are you going to give us a copy? Mr. Jones: Yes. We’ll have to make copies. Okay? Mr. Doyle: Is there a reason why we’re waiting until the middle of the deposition to get it if you’ve had this for some period of time? See Pls’ Ex. C, Kimbro Dep. pp. 20-22 (emphasis added). Aside from the fact that Kimbro’s email that was necessarily on KBR’s electronic server and Kimbro “may have” provided this email to KBR a couple of days prior to his deposition, there are a number of aspects of KBR’s conduct that indicate that it was attempting to undermine improperly Plaintiffs’ discovery efforts. Most notably, as demonstrated by the fact that KBR’s attorney had not made copies of Kimbro’s June 21, 2003 email that he “may have” had in his possession, KBR had no intention of disclosing Kimbro’s email to Plaintiffs. Finally, even a cursory examination of Kimbro’s email demonstrates its importance to this litigation and KBR’s motive to hide it. After Kimbro notes that Mark Daniels (“Daniels”) had asked him to evaluate the use of sodium dichromate at Qarmat Ali, Kimbro notes: Sodium dichromate has been replaced as a commonly utilized corrosion inhibitor in the US due to its toxicity and disposal issues. Sodium dichromate is a strong irritant and a potential carcinogen. The MCL for Total [sic] chromium in drinking water is 0.1 mg/L. The MSDS for sodium dichromate and materials contaminated with sodium dichromate would be considered hazardous waste in the US. During our inspection of the chlorine tanks at the water treatment plant, I observed areas of soil that had been discolored yellow east and southeast of the chlorine drums and on the west side of the chlorine tank storage area. The areas are potentially contaminated with sodium dichromate spilled during the looting activities which occurred at the water treatment plant. Due to the potential toxicity of sodium dichromate I suggest that the areas of soil stained yellow be cordoned off and that samples be collected and tested to determine the concentration of hexavalent chromium and total chromium in these areas. If it is determined that the yellow soils are contaminated with sodium dichromate, I recommend that these soils be excavated and placed in drums; the drums being labeled and stored in a secure area. The excavation should proceed at least one foot in all directions past the yellow staining. And from the filing from the Oregon lawyer it seems that KBR prepared its project managers for their depositions a little too well: In Doha, Qatar, plaintiffs took the depositions of KBR managers involved in overseeing KBR’s Qarmat Ali project. All reside in Houston, Texas but were produced for deposition by KBR in Doha, Qatar in September. KBR’s work at Qarmat Ali commenced no later than April 2003, and the managerial witnesses admitted to varying degrees with the project from the outset. Each of the KBR managers deposed (James Gregory Badgett, Charles Edward Johnson, and William Van Ostrand) admitted to relying on a “summary” or “timeline” provided by KBR’s counsel to prepare for their testimony under oath. Each gave nearly identical testimony when questioned by KBR’s counsel. On cross-examination, the witnesses also testified to a nearly identical memory “black hole” for assessments, findings, and information about what KBR confirmed at its Qarmat Ali project in March, April, and May of 2003. Despite the specific reliance on the “summary” or “timeline”, counsel refused to produce the specific document relied upon and instructed each witness not to answer questions regarding the content of the document.

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Vivian Norris de Montaigu: Green Energy Boys Not So Different Than the Good Ole Oil Boys

October 8, 2010

I just saw the film, Wall Street: Money Never Sleeps last night, sitting next to one of the heads of technology for a major bank, and we both had the same feeling at the end of the film. Basically all of the good ole banking boys (there was one woman in those Fed meetings… that is the real problem in the financial world, not enough women!) in cahoots with the black gold kingpins were focusing on oil shale and African oil field investments. But the young “hero” of the film was just as greedy in wanting to focus on green energy. Someone explain to me how, if they were going to altruistically donate their $100 million investment in fusion, they were going to afford that Manhattan penthouse apartment, no matter how bohemian it was!? Or perhaps they were living off the Soros/Papa gone to London hedge fund money Gordon Gekko had made for them. Either way, Greed is Still Good was still the message twenty years later and that is the problem! Perhaps the best part of the film was the founder of the financial firm based on Lehman’s Fuld mixed in with a little bit of old school Wall Street throwing himself in front of the subway train. I had just said to my French banker friend that somehow the French still actually felt real remorse, and “moral hazard” still had real meaning. I mean the head of the will-not-be-mentioned French bank which just helped send a trader to jail had a nervous breakdown and left his post. And the Connecticut-based French financial advisor who lost his clients huge amounts of money with Madoff offed himself. I’m not saying suicide is the answer, I’m just saying these guys actually took a hit and “admitted” they screwed up royally. There is some kind of honor in actually paying personally, emotionally for hurting people and having not done one’s due diligence. Most of the financial greed seekers just hit the ground running greedily again after losing money on their empty bubble-based swaps, flips and derivatives. There is no moral hazard of any kind! Of course they think they can get away with it because they can. And once they have gutted our country they will just move on to London if they have not already or Paris (where I see and hear more and more New Yorkers and bankers every day!) or Asia or bunker down in their 100,000 acre estancia in Paraguay. What worries me about the new Green Good Ole Boys is the Self-Righteous holier than Thou trope that they are doing so much good for the planet that it does not matter if they are indeed moral humans (or not). Those who made millions and billions in the dirty Wall Street old energy way are just green-wahsing themselves and, in some cases just making more money creating what could be the green energy bubble. I will not name names but there are quite a few now living in multimillion dollar West Coast homes pretending to be so wonderful and evolved and green when in reality it’s just a bunch of male egos, including former politicos who are running things in the new green world. And as a woman from Texas who grew up with a close look at how the Oil Good Ole Boys operated all my life, I am frankly even more scared of the Green Tech Good Ole Boys. At least with the oilmen, I knew what I was dealing with and they did not even try to hide that they were focused on power, control, profits and sexist, macho gun-toting racist everything. The Green Boys actually pretend to be about Equality and Sustainability and Democracy, but they are just as obsessed as the oil and Wall Street guys with accumulating more, having more power and “buying” arm candy, all with a do-gooder smile on their faces. This hypocrisy is going to ruin us sooner or later. The Green Boys could make some real changes, firstly by being more inclusive of women executives leading the way, whether in finance or running the green energy companies. They could also start building green energy companies in places where the good ole boy system needs to be challenged and though there are some green biotech companies in places like Houston, I would invite the green boys to help rebuild the poverty stricken Gulf Coast area with electric car factories and green energy plants. But will old fashioned attitudes still limit the presence of women in the new energy sector? When there are too many official real working women around on the private (green?) jets, that kind of ruins the deal. I mean the wedding rings have to stay on and all that. In Houston, there used to be (still is?) a private men’s club called the Normandy Club, which I believe was in the basement of the Texas Commerce Tower or some old bank or oil company building downtown, where the deals would be signed over lunches with scotch and mistresses and sexy waitresses and lawyers coming down with papers from the offices above all to be signed in the atmosphere of a boys’ club. Be it the golf playing or the hunting or the boys’ weekends in Cabo, nothing has really changed as the new Green boys have their own hierarchy of politicos and start-up dudes to fawn over. And that money racing to finance them also comes from the male-dominated banking sphere. Not a lot of women present however. And this is a real problem, because we need real women in positions of power with the real ability to change things. Not the Meg Whitman types, but those who did not have to play the man’s game to succeed, but who actually are just plain smart, and not scared of confronting the status quo. We don’t need Tea Party reactionaries and Sarah Palinites but serious, thoughtful women we can all respect. If a woman had bought the Chicago Tribune and the LA Times instead of Sam Zell, I hope and imagine she would not have placed a bunch of macho sexist idiots in control, who aided women who literally kissed and slept their way up the ladder, to run what should be considered a respectable business which has a huge responsibility to actually keep Americans informed! Who raised these people? And what kind of corporate culture keeps this kind of insanity going? This is going to be the ruin of our country, putting egos like these and unevolved, sexist men in charge of the backbone of our financial, energy and media sectors!?! Then they go and fire the security folks who reported the misdoings instead of the abusive executives! What is the world coming to?! If these guys keep getting away with it they will keep doing it. It has to be stopped Countries in Scandinavia demonstrate that you can have an extremely successful and sustainable business and energy sector and still promote women to positions of real authority and even grow when the rest of the world is falling apart. Interestingly enough there is more private-public cooperation. In our purely private capitalistic system, part of the problem is that men tend to run things. I studied this when writing a dissertation on Globalization and Media. I want to see successful brilliant women alongside our President helping make serious decisions about the future of our country, and I want to see them in the boardrooms and running this new green energy sector! Get some modern humans in there, and some real women. Or we are headed for more of the same old same old and the United States will be going nowhere fast.

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U.S. Concrete Hires Chief Financial Officer

October 1, 2010

HOUSTON, TX–(Marketwire – October 1, 2010) –  U.S. Concrete, Inc. ( PINKSHEETS : RMIXQ ) today announced that James C. Lewis has been named Senior Vice President and Chief Financial Officer. Mr. Lewis has over 20 years of senior financial management experience. Most recently, Mr. Lewis was Vice President and Treasurer with McDermott International, Inc., a global engineering and construction company with over $6 billion in annual revenue and operations in 20 countries. He holds a BBA in finance from the University of Houston and an MBA from the University of Texas and will begin his role immediately.

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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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Lincoln Buys 239,200-SF Energy Crossing I in Houston

September 27, 2010

Lincoln Property Co. purchased Energy Crossing I, a 239,166-square-foot office building at 15021 Katy Freeway in Houston, from M&I Bank. The price was not disclosed. Lincoln acquired the property on behalf of a public pension fund. The sale included…

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Lincoln Buys 239,200-SF Energy Crossing I in Houston

September 27, 2010

Lincoln Property Co. purchased Energy Crossing I, a 239,166-square-foot office building at 15021 Katy Freeway in Houston, from M&I Bank. The price was not disclosed. Lincoln acquired the property on behalf of a public pension fund. The sale included…

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CoStar’s People of Note (Sept. 19-25)

September 23, 2010

This week’s People of Note includes the following markets: East Bay, Houston, Indianapolis, Philadelphia and San Francisco. EAST BAY, SAN FRANCISCO Cassidy Turley Names New Head of S.F. Office Cassidy Turley BT Commercial appointed Greg Moss as…

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CoStar’s People of Note (Sept. 12-18)

September 16, 2010

This week’s People of Note includes the following markets: Atlanta, Greenville/Spartanburg, Houston, Los Angeles, Phoenix, New York City, South Florida and Westchester. ATLANTA Davis Achieves Executive VP Rank at Grubb Grubb & Ellis Co. promoted…

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HVAC Manufacturer Custom Air Products & Services, Inc. Names Blake Robert Lacy as VP of Industrial Products

September 16, 2010

Texas Native Back Home as VP of Industrial Products for the Noted and Prestigious HVAC Manufacturer Custom Air Products & Services, Inc. Located in Houston, Texas

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HVAC Manufacturer Custom Air Products & Services, Inc. Names Blake Robert Lacy as VP of Industrial Products

September 16, 2010

Texas Native Back Home as VP of Industrial Products for the Noted and Prestigious HVAC Manufacturer Custom Air Products & Services, Inc. Located in Houston, Texas

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IHOP Lawsuit: Pancakes vs. Prayer

September 16, 2010

KANSAS CITY, Mo. — The International House of Pancakes is suing another IHOP, the International House of Prayer, saying the church mission shouldn’t be allowed to take advantage of the restaurant chain’s famous name and acronym. The Kansas City Star reports that the chain says it sued only after the church mission refused repeated requests to stop using the IHOP acronym. Restaurant spokesman Patrick Lenow said the church has expanded and some branches are serving food. The lawsuit was filed last week in federal court in Los Angeles. Gary Cooper, a former Houston attorney who until recently served as the church mission’s chief financial officer, said he didn’t think the lawsuit had any legal basis. The religious group, which promotes its belief in daily, continuous prayer, has drawn thousands of people to Kansas City since it opened 10 years ago. ___ Information from: The Kansas City Star, http://www.kcstar.com

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Video: Parker Says Houston `Beginning to Pull Out of Recession’: Video

September 14, 2010

Sept. 14 (Bloomberg) — Houston Mayor Annise Parker talks about the city’s economy and budget issues. She speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Excerpt. Source: Bloomberg)

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‘Somos Muchos’: Toyota Offers Free Hispanic Pride Stickers

September 7, 2010

TORRANCE, Calif. — Toyota Motor Corp., hoping to solidify its standing as the top brand for Hispanic buyers in the U.S., is offering drivers a series of stickers that celebrates their Hispanic heritage. The decals contain the phrase “somos muchos,” or “we are many,” followed by cultures, regions and popular descriptors from all over Latin America, such as “somos muchos Mexicanos” and “somos muchos Hondurenos.” The decals, designed to be stuck on bumpers or windows, come in more than 100 different versions and are available in the U.S. and Puerto Rico. Toyota is offering the stickers free on the Spanish-language version of its Facebook page. It’s also distributing them at upcoming festivals in Los Angeles, Houston, Dallas, Miami, New York and Chicago. Toyota is the top brand among Hispanic buyers in the U.S., according to vehicle registration data gathered by R.L. Polk and Associates. The automaker says it has held that title since 2004. In a recent speech to the National Council of La Raza, Toyota President Yoshi Inaba said one of every four Hispanic car buyers in the U.S. bought a Toyota last year.

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Allen Stanford’s Execs Knew He Was Bilking Investors: Witness

August 25, 2010

HOUSTON — Executives who worked with Texas financier R. Allen Stanford were aware of problems at his now defunct Caribbean bank, including fabricated investment reports and that Stanford secretly used money from investors to fund loans to himself, two financial experts testified Wednesday. The accountants were questioned about Stanford’s financial dealings during a court hearing in which a federal judge was to decide if Stanford and two executives – under indictment on charges they bilked investors out of $7 billion in a massive Ponzi scheme – will continue having their legal bills paid for by an insurance policy. The insurer, Lloyd’s of London, says the policy doesn’t pay on charges of money laundering, one of the many counts Stanford and Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller, face in a federal indictment. Stanford and the ex-executives say they are not guilty and that Lloyd’s should honor the policy, which so far has paid more than $15 million in legal fees to them in their criminal and civil cases. The hearing before U.S. District Judge Nancy Atlas, which began Tuesday and might last through the end of the week, is providing a preview of the upcoming criminal trials in the case. Stanford and the former executives are accused of orchestrating a colossal pyramid scheme by advising clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns. Stanford’s businesses were headquartered in Houston. The two accountants, both certified fraud examiners, were hired by Lloyd’s to examine the bank’s records. One of them, Mark Berenblut, testified that in reviewing e-mails between Kuhrt and other company executives that contained copies of monthly investment reports, he found that the figures used to show investor income coming into the bank were being manipulated. Attorneys for Lloyd’s, mirroring claims by prosecutors, say the bank’s balance sheets were made up and the work of reverse engineering. “My belief is these numbers are artificial. They have been set with a predetermined objective in mind,” said Berenblut. Another examiner, Alan Westheimer, earlier testified that Kuhrt and Lopez told him they knew money deposited into the bank was being used to fund personal loans to Stanford and that this wasn’t being reported to investors. Prosecutors have accused Stanford of secretly diverting more than $1.6 billion in investor funds as personal loans to himself to pay for his lavish lifestyle. Westheimer, who interviewed Kuhrt and Lopez after being hired by their attorneys in preparation for the hearing, told attorneys for Lloyd’s the two men also told him Stanford had asked them to keep confidential a $63.5 million land purchase in 2008 the financier had made in the Caribbean. Prosecutors in the criminal case contend the value of the land purchase was later artificially inflated to $3.1 billion to boost the bank’s revenues and hide financial losses. Stanford has contended the land purchase was legitimate and he had planned to use it to build a super exclusive resort. Kuhrt and Lopez have tried to put the blame for what happened at the bank on James Davis, Stanford’s former chief financial officer, who has pleaded guilty in the case and is cooperating with prosecutors. Attorneys for Stanford have said the financier didn’t have direct involvement in the daily workings of his companies and was sometimes out of the loop. Westheimer said Kuhrt and Lopez told Davis about their concerns with the loans and that it was Davis’ idea to inflate the value of the $63.5 million land purchase. Stanford and the two ex-executives are not testifying at the hearing, asserting their Fifth Amendment right against self-incrimination. Stanford’s trial, being handled by another Houston federal judge, is set to begin Jan. 24. The others will be tried after that. Besides money laundering, Stanford and his one-time colleagues have also been indicted on charges of wire and mail fraud.

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Gulf Oil Spill Investigators Focus On Who Knew What, And When

August 23, 2010

HOUSTON (AP) — Federal investigators seeking the cause of the rig explosion that led to BP’s massive Gulf oil spill focused Monday on communication and chain of command, wondering at times whether the key players knew enough to handle an emergency. They also questioned whether a piece of failed equipment designed to prevent the disaster was inspected on schedule. Details about the so-called blowout preventer, which was supposed to lock in place to prevent a spill in the case of an explosion, will be important as investigators pull it from the seabed to analyze. Testimony about the frantic moments after the spill, when a distraught worker told the rig manager “she just blew, she just blew,” will also be key to understanding what happened April 20. That’s when the Deepwater Horizon rig exploded, killing 11 workers and subsequently spewing 206 million gallons of oil into the Gulf. Two men who testified Monday were key to the successful operation of the complex deepwater rig. But Neil Cramond, who oversees BP’s marine operations in the Gulf, acknowledged he rarely had contact with Paul Johnson, who managed the rig for owner Transocean Ltd., which leased it to BP. Cramond also testified that captains of rigs like the Deepwater Horizon are ultimately responsible for crew safety and environmental matters, but are not always involved in decisions about how to deal with drilling operations and potential risks. Members of the joint U.S. Coast Guard-Bureau of Energy Management, Regulation and Enforcement investigative panel are trying to figure out what caused the explosion and how regulation, safety and oversight can be improved to prevent another such catastrophe. Investigators asked Johnson about whether maintenance of the blowout preventer had been up to code. Johnson testified that a September 2009 safety audit did not include a complete inspection of the device, and so “I don’t think it’s a complete audit.” A few months later, however, as the rig was being moved to the well, the blowout preventer was inspected. But investigators questioned whether this was in line with the three- to five-year timetable laid out in regulatory codes. Meanwhile, Cramond’s description of how responsibilities and communication were divided among the parties responsible for the sunken rig raised eyebrows at times among the investigators. While questioning Cramond, a Coast Guard official wondered if there was anyone who had a “big picture” of what was going on. He said he was concerned the captain was responsible for keeping the crew and vessel safe and preventing pollution, but had “little say and awareness of what’s going on in terms of risk.” “I believe what you’ve outlined is an accurate picture,” Cramond said, noting such arrangements are standard in the oil and gas industry. He insisted, however, that records will show that on a number of occasions he communicated concerns about safety problems to the people who needed to know about them. Asked if the Deepwater Horizon was properly manned at the time of the explosion that killed 11 workers, he replied: “I have no information that would say otherwise.” Johnson, whose responsibilities included training and personnel, was not on board the Deepwater Horizon when it exploded. He said he only visited the rig three days each month and was not able to monitor real-time data from it at his location on shore. The blast knocked out communication between him and the captain and offshore installation manager, he testified. Eventually, he managed to talk to one of the rig workers who told him he had insulation in his eyes and was struggling to see and hear. “I asked what happened,” Johnson testified. “He said, ‘I don’t know Paul, she just blew, she just blew.’ At that point I know he was crying so I just shut the conversation down.” In March, barely a month before the accident, one of Cramond’s employees visited the Deepwater Horizon to ensure Transocean had resolved safety violations found in a random audit a year earlier that forced the rig to shut down for five days. Cramond said 63 of 70 issues had been resolved, and the remainder were minor problems that the company was given six months to resolve. Cramond, however, could answer almost no questions regarding the drilling side of the operation, insisting his responsibility was largely to determine whether the vessel was able to remain seabound. He did, however, acknowledge that several systems and pieces of equipment overlapped, saying a Transocean employee was ultimately responsible for having a broader idea of what was happening on the rig as a whole. Asked if there was a process in place to ensure direct communication between the different parties overseeing the rig’s operation, Cramond said: “I can’t completely answer that question.” In addition to operating the rig that exploded, BP owned a majority interest in the ruptured undersea well. Anadarko Petroleum held a minority interest in the well. The hearings in Houston were scheduled to run through Friday. They are the fourth set of hearings by the panel, which isn’t expected to issue any conclusions for months. The temporary cap placed on the blown-out well in mid-July has kept oil from spewing, and the final sealing should take place after Labor Day. Engineers are preparing to first remove the failed blowout preventer — a key piece of evidence — and replace it with another. After that, they will complete the drilling of a relief well, then will plug the blown-out well for good by pumping mud and cement into the bottom. There are three pieces of pipe from the well inside the blowout preventer that engineers want to remove before attempting to replace it, retired Coast Guard Adm. Thad Allen, the government’s point man on the spill response, told reporters Monday. Tests will be run to determine the best way to remove the pipes, he said.

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Social Security Keeps 20 Million Americans Out Of Poverty, Report Finds

August 13, 2010

As Social Security approaches its 75th anniversary on Saturday, the program is playing an especially vital role in reducing poverty across America during the worst economic crisis since the Great Recession. If benefits were to be significantly cut, 19.8 million more Americans would be thrust in poverty, according to a recent report by the Center on Budget and Policy Priorities. In addition to supporting the elderly, Social Security is currently keeping more than 1 million children and more than 5 million adults below the age of 65 above the poverty line. Cuts to Social Security would be especially devastating for older women, the report shows. While 11.9 percent of women over the age of 65 are currently below the poverty line, nearly half of them would be poor if they no longer received benefits. Veronica Daniels, 62, of Houston, Texas, says a reduction in her Social Security benefits would be calamitous. An engineer with over 37 years of experience, Daniels lost her job in 2007 and has not been able to find steady work since. After blowing through most of her savings on a major surgery and dental emergency without the help of health insurance, she was forced to start collecting Social Security early to stay afloat. “I wanted to wait until I was 66 to start collecting it, because I will lose about 25% of my benefits by doing it this way, but I had no choice,” Daniels told HuffPost. “If the government cut my benefits right now, it would be horrible for me. I’m making just enough to cover basic expenses and save about a hundred dollars or so a month for medical emergencies. I can’t really afford to be squeezed.” Daniels said she lost her house to foreclosure in 2009, and she now lives in a one-bedroom apartment in Houston with no sofa and only a small folding table to eat on. She worries that once the prices of food and housing and utilities go up, she will no longer be able to pay her modest rent. “I’m hoping to live until my 80s, but it’s gonna be really tough to make ends meet by myself,” she said. “Social Security will cover the basics, but what if something happens and I need more? Will I be homeless? I’m just crossing my fingers and hoping to hell I don’t get seriously sick.” Daniels and millions other Americans who depend on Social Security are watching closely as a bipartisan commission set up by President Obama mulls over the idea of cutting funds to the program to reduce the deficit. HuffPost’s Ryan Grim reported that nearly 85 percent of American adults polled oppose cuts to Social Security, according to a recent survey conducted by GfK Roper, and 72% “strongly oppose” the idea. Daniels belongs firmly in the latter category. “I get so damn disgusted,” she told HuffPost. “I don’t understand how they can even think about cutting the benefits they’ve promised you and you’ve planned on your whole life. They want to treat us as less than humans.”

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Brooke Stephens: The Missing Mandate: Financial Literacy

August 11, 2010

As legislators and lobbyists congratulate themselves on the 2300 pages of legalese drafted to reform Wall Street banks and the financial services industry, not one paragraph addresses a major reason why the meltdown occurred: how American consumers learn to manage money. According to several mortgage banking studies, nearly 70 percent of the victims of foreclosure admit they did not understand the terms of the deal they signed or the long-term impact on their lives. Congress had plenty of chances to address this problem. More than 30 bills focused on financial literacy have been introduced since 2006. All of them died in Senate or House committees. None were included in this recent reform bill. Money, like sex, is supposed to be taught at home but in a 2008 Charles Schwab study, 69% of parents interviewed reported they were more prepared to discuss sex than money with their children. Parents groomed on three decades of TV advertising whose vocabulary is liberally sprinkled with four letter words –shop, sale– cannot teach what they don’t know. Now they are miserably discovering two new four-letter words: debt and poor. These nonstop shoppers learned the hard way how one afternoon of reckless spending at the mall can take a decade to pay off. Money management is a lifetime skill that has to be taught, nurtured and developed like personal hygiene and proper table manners, yet only 18 percent of US school systems have required any personal finance classes in their curriculum. Sixth graders don’t need to know the intricacies of credit default swaps but they are quite capable of learning comparison shopping, planning a budget based on a weekly allowance and understanding the difference between wants and needs. Sallie Mae’s survey of 2008 college graduates indicated that 84% said they needed more financial education to manage their affairs. More than 300 nonprofit national agencies advocate for financial literacy under the Consumer Federation of America. They depend heavily on private grants, corporate partnerships and volunteer trainers; thus, their influence on schools and public policy is limited. The present economic debacle has made state education departments aware of the blatant need for financial education. Currently, 38 states are considering financial literacy for their high school curricula; only nine states have made it mandatory. Funding, as always, has all states grasping for any lifeline to address this issue—which can be a mistake. Enter Wells Fargo, Bank of America, Chase and Citigroup and their foundations. They have partnered with the National Council on Economic Education to distribute “one size fits all” financial literacy material for high school students with little or no diversity in its content. What is appropriate for upscale students in Greenwich or Grosse Point where students check stocks on their Blackberries will not work for children of immigrant families in the South Bronx or Houston’s ninth ward where parents use check cashing stores and pay bills with money orders. The solution is simple and twofold: create a national financial fitness campaign like the President’s physical fitness program. NCEE could sponsor a financial knowledge challenge focusing on pragmatic concepts of daily finances, investing and planning for money issues that arise in everyone’s life. Imagine how different the last few years would have been if a national financial literacy program had become an educational mandate after the 1987 market crash. Fewer foreclosures and bankruptcies and less credit card debt for a start. The four letter words our children should begin learning in primary school are: cash, cost, save, plan and know (what you’re signing) which can begin with something like the hundred pennies game created for six-year-olds by Girls Incorporated in their “Money Matters” after school program launched in 1999 with phenomenal continued success. Financial literacy funding could come from fines charged to Wall Street bankers for their malfeasance; the recent $300 million paid by Goldman Sachs would be a nice beginning. Secretary of Education Arne Duncan would find this a slam-dunk since his entrance into educational administration was as executive director of the Ariel Financial Academy in urban Chicago. Duncan’s recent partnering with the Treasury Department to support financial education is a small beginning but not nearly enough. The kindergarten constituency can’t vote, pay taxes or hire a lobbyist, but they will inherit the current debt. We should arm them with some tools to cope with that impending problem. Grade school students love finding innovative solutions to money problems and the challenge of how to stretch and save dollars. Working with young children also means they don’t bring their parents’ money anxiety into the classroom so they don’t know yet how hard finances can be. For them whether it’s a major recession or the hundred pennies game, it’s just a game. A life-changing game.

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Carl Barbier, Judge Who Owned Bonds In Gulf Oil Spill Companies, Will Handle Most Spill Lawsuits

August 10, 2010

NEW ORLEANS — A federal judge in New Orleans was picked Tuesday to preside over more than 300 lawsuits filed against BP PLC and other companies over the Gulf oil spill, in a move that should please many of the plaintiffs’ lawyers and their clients. The U.S. Judicial Panel on Multidistrict Litigation’s order said 77 cases plus more than 200 potential “tag-along” actions will be transferred to U.S. District Judge Carl Barbier with his consent. The judicial panel’s order says the federal court based in New Orleans is the best place for the litigation even though some attorneys had favored Houston, Miami, Gulfport, Miss., and other cities. “Without discounting the spill’s effects on other states, if there is a geographic and psychological ‘center of gravity’ in this docket, then the Eastern District of Louisiana is closest to it,” the panel wrote. BP favored Houston, where its U.S. operations are based, but some of the plaintiffs’ attorneys who appeared before the seven-member panel last month in Boise, Idaho, said that might appear unfair to spill victims. BP spokesman Scott Dean said the company respects the panel’s decision. “We look forward to the cases proceeding as expeditiously and efficiently as possible in the selected venues,” Dean said in a statement. Separately, the judicial panel transferred three lawsuits filed by BP shareholders over stock losses to U.S. District Judge Keith Ellison in Houston. However, Barbier will be handling the bulk of the cases spawned by the April 20 explosion on the Deepwater Horizon oil rig, which killed 11 workers and left millions of gallons of oil spewing into the Gulf Of Mexico. Many of the suits were filed on behalf of shrimpers, commercial fishermen, charter captains, property owners, environmental groups, restaurants, hotels and others who claim they have suffered economic losses since the spill. Relatives of workers killed in the blast also have sued. Rig owner Transocean Ltd., well contractor Halliburton Co. and Cameron International, maker of the well’s failed blowout preventer, also have been named as defendants in many of the suits. Transocean said it supports the decision. “The purpose of multidistrict litigation is to consolidate, coordinate, and streamline related litigation filed in different federal forums, while promoting coordination with state litigation. We look forward to this ruling doing just that and, accordingly, we will continue to address the issues in their appropriate venues,” the company said in a statement. The panel said it is “quite comfortable” with its selection of Barbier, describing him as an “exceptional jurist,” even though some companies already have tried to disqualify him from hearing some cases. “We have every confidence that he is well prepared to handle a litigation of this magnitude,” the panel wrote. The 5th U.S. Circuit Court of Appeals refused last month to order Barbier to recuse himself from dozens of spill-related suits even though he owned corporate bonds issued by two of the companies sued in the cases. Barbier said his ownership of debt instruments issued by Halliburton and Transocean didn’t give him a financial interest in the companies. Only four New Orleans-based federal judges are available to hear the cases because some of the court’s judge have recused themselves, in part because of their oil and gas industry investments. Daniel Becnel Jr., a Reserve, La.-based attorney whose legal team has filed more than a dozen suits over the spill, downplayed the notion that many southeast Louisiana jurors would be inclined to favor plaintiffs over companies. “Just as many people are working for the oil and gas industry,” he said. The judicial panel discounted the argument that New Orleans and Houston “might not present a level playing field for all parties.” “When federal judges assume the bench, all take an oath to administer justice in a fair and impartial manner to all parties equally,” the panel wrote. Tony Buzbee, a Houston-based lawyer who represents several Deepwater Horizon rig workers, had favored Texas as the venue for the cases but also considers New Orleans a fair forum for the cases to be heard. “I know Judge Barbier is held in very high regard,” he said. “It’s good that it was decided quickly and sent to a respected judge. Now it’s time to get to work.” Robert Wiygul, an Ocean Springs, Miss.-based environmental lawyer who has filed several suits over the spill, said the $20 billion claims fund BP set up at the White House’s urging will eliminate some of the claims in federal court and challenge lawyers to decide if their clients are better off resolving their claims outside the courtroom. “That’s not good for the lawyers, but it may be good for the people,” he said.

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Elizabeth Warren Backed By Coalition Of Academics To Head New Consumer Agency

August 3, 2010

A coalition of professors across the country has emailed President Barack Obama in support of Elizabeth Warren as head of the nascent Bureau of Consumer Financial Protection. The 141 professors, representing disciplines from law, economics, management, sociology, and political science, sent the email this morning praising Warren’s “scholarly expertise” and effective management. The list includes Warren’s former employers at Harvard University, University of Texas, University of Houston and University of Michigan, as well as her alma mater, Rutgers Law School. As pressure mounts for the White House to choose the first leader of the consumer oversight panel, the academics join a growing chorus of Congressmen and reformers pushing Warren. In addition, 26 prominent economists and experts sent a similar letter to Obama , urging him to name Warren. As reported by HuffPost , Treasury Secretary Timothy Geithner has expressed his opposition to her nomination though he’s praised her in public. This morning, he told “Good Morning America” that he thought she would be “a very effective, very capable leader” — but stopped short of endorsing her. Opposed to her nomination are some prominent Democrats, including the bill’s author Chris Dodd, leading Senate Banking Committee Republicans Richard Shelby and Bob Corker and financial industry trade groups. In their email, Warren’s academic colleagues write: “Professor Warren’s integrity and genuine concern for the plight of ordinary American families are sorely needed in Washington. We believe that Elizabeth Warren is the ideal choice to head the Bureau of Consumer Financial Protection.” READ the letter: Dear Mr. President, We are professors of many disciplines, including law, economics, management, sociology, and political science, who specialize in subjects relevant to the Bureau of Consumer Financial Protection (the “Bureau”) established by the Dodd-Frank Act. We write to urge you to appoint Elizabeth Warren as the Bureau’s first Director. Professor Warren is an eminent legal scholar and a nationally renowned expert on consumer finance. She has authored over one hundred and twenty scholarly articles and books. These include a best-selling personal finance book for middle class families and teaching materials that help educate thousands of law students every year. This scholarly expertise, along with her work as Chair of the Congressional Oversight Panel for TARP, has given Professor Warren a broad, and perhaps unique, perspective on how effective consumer protection is essential for the safety and soundness of the financial system and the health of the American economy. She is an effective manager with clear vision and the ability to coordinate complex projects, as demonstrated by her groundbreaking scholarly studies, her work as reporter for the National Bankruptcy Review Commission, and her leadership of the Congressional Oversight Panel. In both her scholarship and her public service, Professor Warren draws her conclusions from careful analysis of data. She listens carefully to alternate hypotheses and she is responsive to criticism. She speaks plainly and honestly. She owes no allegiance to the financial services industry or other special interest groups. Professor Warren’s integrity and genuine concern for the plight of ordinary American families are sorely needed in Washington. We believe that Elizabeth Warren is the ideal choice to head the Bureau of Consumer Financial Protection.

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Video: Boyd Says Continental’s Gate Scanners Are More Efficient: Video

July 28, 2010

July 28 (Bloomberg) — Michael Boyd, president of aviation consulting firm Boyd Group International Inc., discusses Continental Airlines Inc.’s tests of subway-style gates at its hometown hub in Houston that let travelers board planes without using an agent. Boyd speaks with Jon Erlichman and Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Video: Van Nieuwenhuise Discusses BP Well Pressure Readings: Video

July 22, 2010

July 22 (Bloomberg) — Don Van Nieuwenhuise, director of Petroleum Geoscience Programs at the University of Houston, discusses pressure readings at BP Plc’s sealed Macondo well in the Gulf of Mexico. Van Nieuwenhuise talks with Lizzie O’Leary on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Susan Klein: The Controversy Surrounding the Criminal Probe into the Gulf Oil Spill

July 19, 2010

Now that oil is no longer pouring into the Gulf, everyone can breathe easier –except the people responsible for the spill. They may go to prison. The Justice Department has a criminal investigation underway. Admittedly, governmental investigations of business torts are more likely to result in fines than prison time. Joseph Hazelwood, who captained the Exxon Valdez when it ran aground, was the only person indicted in connection with that accident and he was sentenced to community service after being convicted on a misdemeanor charge. The BP spill is different, of course. Eleven people died when the Deepwater Horizon caught fire, and the environmental damage is unprecedented. The feds may reasonably decide that the magnitude of the catastrophe requires a high profile criminal prosecution, the same conclusion President Bush’s Justice Department reached in the wake of the Enron debacle. Still, if history provides any guidance, years will pass before anyone is indicted and few people, if any, will spend much time in prison. We know that a criminal investigation is underway because Eric Holder, the Attorney General, has said so many times. He first announced it at a press conference on June 1. Since then, he has commented on it and clarified its scope, emphasizing that BP is not the only potential target . Both for launching the investigation and discussing it openly, Holder has taken serious heat. Initially, political opponents of the Obama Administration contended that the investigation diverted BP’s attention from its efforts to plug the well and deal with the consequences of the spill. The merits of this allegation never were clear. Even before the probe was acknowledged, BP’s managers knew the EPA would punish the company severely. The reputational damage and civil consequences flowing from the spill were also known to be enormous. BP’s executives must also have expected a criminal investigation. In 2007, the company pled guilty to felony violations of the Clean Water Act after a refinery outside Houston, Texas exploded, killing 15, injuring 170, and ultimately saddling BP with $373 million in criminal and civil fines. The prospect of being prosecuted criminally may even have strengthened BP’s resolve to make every possible effort to get matters under control. The U.S. Sentencing Guidelines, which apply to every federal criminal felony conviction, mandate significantly lower sentences and fines for corporations and individuals who cooperate with federal investigators. Reductions are even greater (and may include deferred or non-prosecution agreements, called DPAs and NPAs) when corporations police themselves by creating compliance programs and reporting potential federal criminal and civil violations before to getting caught. Conservatives also slammed Holder for publicly acknowledging the investigation. They claimed, first, that he departed from Justice Department policy which, they said, is neither to confirm investigations nor to deny them. They also charged that, by speaking about the investigation in public, Holder caused BP’s stock to tank. Finally, several commentators and editorial boards criticized Holder for participating in the negotiations, headed by President Obama, which led to the creation of the $20 billion BP victim compensation fund. The Washington Post argued that Holder’s “presence inevitably raised the specter of the criminal probe — and the possibility that it could be used to pressure BP on the size and terms of the fund.” Texas Representative Joe Barton (in)famously characterized to BP as the victim of a “shakedown.” In a column endorsed by Sarah Palin and many others, conservative commentator Thomas Sowell argued along the same lines, while raising the level of hyperbole considerably. Sowell accused President Obama of following in Adolf Hitler’s footsteps by using a crisis as an excuse for subjecting a private enterprise to an illegal and unprincipled exercise of raw power. None of these criticisms makes sense to us. Start with the claim that Holder acted wrongly by acknowledging that a probe was underway. True, the general policy of the Justice Department is to disclose neither the existence of a criminal investigation nor its details. But in two sections (1-7.401C and 1-7.530B), the U.S. Attorneys’ Manual expressly recognizes that “[t]here are exceptional circumstances when it may be appropriate to have press conferences … about ongoing matters before indictment or other formal charge, … includ[ing] cases where … the heinous or extraordinary nature of the crime requires public reassurance that the matter is being promptly and properly handled by the appropriate authority.” Disciplinary rules governing public statements by prosecutors similarly permit communications needed to inform the public of the nature and extent of the government’s response to high-profile crimes. The BP oil spill is the worst environmental disaster in U.S. history. If a crime was committed in connection with it, then the crime was extraordinary by definition and is obviously a matter of great public interest. By confirming the existence of the investigation, Holder acted properly and responsibly. Now consider the charge that Holder’s public statements caused the value of BP’s shares to tumble. Assuming the charge is correct (something that is not self-evident, given the fairly continuous decline in the price of BP stock from April 23rd to June 25th), one must ask, So what? Holder is the highest law enforcement officer in the land. The criticism supposes that he should have acted so as to enhance the value of a private company rather than to protect the public interest. That can’t be right. Public officials are supposed to advance the public good. Shareholders can protect themselves from these extraordinary occasions which require public disclosure by diversifying their stock holdings. Finally, consider the charge that Obama and Holder acted improperly by using the crisis to twist BP’s arm. Although we certainly believe that governmental coercion of private persons, including companies, should be regulated by law, when creating the compensation fund the federal government neither confiscated BP’s money nor coerced the company into paying victims of the spill. Thomas Sowell recognized this, but he thought it an irrelevant nicety. In fact, this is the heart of the matter. The compensation fund is creature of a contract between BP and the federal government. Like all contracts, this one created value for both sides. President Obama showed Americans that he was focused on the disaster and trying to protect them. BP showed the world that its word was good. Hoping to salvage some measure of goodwill, BP had verbally promised to cover losses stemming from the spill. The agreement to create the compensation fund made that promise formal. It also gave BP an opportunity to stretch out its payments and reduce the volume of spill-related civil litigation greatly. As an article in the New York Times pointed out, in return for agreements not to sue, BP is offering to quickly reimburse victims for their full economic losses, thereby sparing them years of delay and the burden of paying attorneys. The compensation fund is an example of mutual gain, not Hitler-esque subjugation. Years or decades will pass before all civil and criminal liabilities stemming from the disaster in the gulf are resolved. Real arm-twisting will occur at many points. Plaintiffs’ attorneys will threaten BP with enormous punitive damage awards to squeeze as much money as they can from BP for their clients. The federal government will hit the responsible companies with billions in penalties and may threaten to put their executives in prison. Fortunately, given the magnitude of the disaster, intense media interest, reporting requirements for public companies, and the transparency of the compensation fund, the negotiations that resolve these complaints will likely be open and above board. Attorney General Holder can and should be involved in these negotiations. Global settlements, DPAs and NPAs, which have been utilized under both Republican and Democratic Administrations, provide many advantages when compared to criminal prosecutions and concurrent civil regulatory actions by multiple federal agencies. Such agreements encourage full disclosure to the investing public, allow targeted reform of mismanaged or corrupt corporations, ensure restitution to victims, and may protect shareholders and employees from bankruptcy proceeding, all while minimizing the collateral consequences on the current law-abiding customers, shareholders, and the general public. Attempting this type of negotiation in the wake of a national disaster of this magnitude is something that cannot be done on the down low.

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Susan Klein: The Controversy Surrounding the Criminal Probe into the Gulf Oil Spill

July 19, 2010

Now that oil is no longer pouring into the Gulf, everyone can breathe easier –except the people responsible for the spill. They may go to prison. The Justice Department has a criminal investigation underway. Admittedly, governmental investigations of business torts are more likely to result in fines than prison time. Joseph Hazelwood, who captained the Exxon Valdez when it ran aground, was the only person indicted in connection with that accident and he was sentenced to community service after being convicted on a misdemeanor charge. The BP spill is different, of course. Eleven people died when the Deepwater Horizon caught fire, and the environmental damage is unprecedented. The feds may reasonably decide that the magnitude of the catastrophe requires a high profile criminal prosecution, the same conclusion President Bush’s Justice Department reached in the wake of the Enron debacle. Still, if history provides any guidance, years will pass before anyone is indicted and few people, if any, will spend much time in prison. We know that a criminal investigation is underway because Eric Holder, the Attorney General, has said so many times. He first announced it at a press conference on June 1. Since then, he has commented on it and clarified its scope, emphasizing that BP is not the only potential target . Both for launching the investigation and discussing it openly, Holder has taken serious heat. Initially, political opponents of the Obama Administration contended that the investigation diverted BP’s attention from its efforts to plug the well and deal with the consequences of the spill. The merits of this allegation never were clear. Even before the probe was acknowledged, BP’s managers knew the EPA would punish the company severely. The reputational damage and civil consequences flowing from the spill were also known to be enormous. BP’s executives must also have expected a criminal investigation. In 2007, the company pled guilty to felony violations of the Clean Water Act after a refinery outside Houston, Texas exploded, killing 15, injuring 170, and ultimately saddling BP with $373 million in criminal and civil fines. The prospect of being prosecuted criminally may even have strengthened BP’s resolve to make every possible effort to get matters under control. The U.S. Sentencing Guidelines, which apply to every federal criminal felony conviction, mandate significantly lower sentences and fines for corporations and individuals who cooperate with federal investigators. Reductions are even greater (and may include deferred or non-prosecution agreements, called DPAs and NPAs) when corporations police themselves by creating compliance programs and reporting potential federal criminal and civil violations before to getting caught. Conservatives also slammed Holder for publicly acknowledging the investigation. They claimed, first, that he departed from Justice Department policy which, they said, is neither to confirm investigations nor to deny them. They also charged that, by speaking about the investigation in public, Holder caused BP’s stock to tank. Finally, several commentators and editorial boards criticized Holder for participating in the negotiations, headed by President Obama, which led to the creation of the $20 billion BP victim compensation fund. The Washington Post argued that Holder’s “presence inevitably raised the specter of the criminal probe — and the possibility that it could be used to pressure BP on the size and terms of the fund.” Texas Representative Joe Barton (in)famously characterized to BP as the victim of a “shakedown.” In a column endorsed by Sarah Palin and many others, conservative commentator Thomas Sowell argued along the same lines, while raising the level of hyperbole considerably. Sowell accused President Obama of following in Adolf Hitler’s footsteps by using a crisis as an excuse for subjecting a private enterprise to an illegal and unprincipled exercise of raw power. None of these criticisms makes sense to us. Start with the claim that Holder acted wrongly by acknowledging that a probe was underway. True, the general policy of the Justice Department is to disclose neither the existence of a criminal investigation nor its details. But in two sections (1-7.401C and 1-7.530B), the U.S. Attorneys’ Manual expressly recognizes that “[t]here are exceptional circumstances when it may be appropriate to have press conferences … about ongoing matters before indictment or other formal charge, … includ[ing] cases where … the heinous or extraordinary nature of the crime requires public reassurance that the matter is being promptly and properly handled by the appropriate authority.” Disciplinary rules governing public statements by prosecutors similarly permit communications needed to inform the public of the nature and extent of the government’s response to high-profile crimes. The BP oil spill is the worst environmental disaster in U.S. history. If a crime was committed in connection with it, then the crime was extraordinary by definition and is obviously a matter of great public interest. By confirming the existence of the investigation, Holder acted properly and responsibly. Now consider the charge that Holder’s public statements caused the value of BP’s shares to tumble. Assuming the charge is correct (something that is not self-evident, given the fairly continuous decline in the price of BP stock from April 23rd to June 25th), one must ask, So what? Holder is the highest law enforcement officer in the land. The criticism supposes that he should have acted so as to enhance the value of a private company rather than to protect the public interest. That can’t be right. Public officials are supposed to advance the public good. Shareholders can protect themselves from these extraordinary occasions which require public disclosure by diversifying their stock holdings. Finally, consider the charge that Obama and Holder acted improperly by using the crisis to twist BP’s arm. Although we certainly believe that governmental coercion of private persons, including companies, should be regulated by law, when creating the compensation fund the federal government neither confiscated BP’s money nor coerced the company into paying victims of the spill. Thomas Sowell recognized this, but he thought it an irrelevant nicety. In fact, this is the heart of the matter. The compensation fund is creature of a contract between BP and the federal government. Like all contracts, this one created value for both sides. President Obama showed Americans that he was focused on the disaster and trying to protect them. BP showed the world that its word was good. Hoping to salvage some measure of goodwill, BP had verbally promised to cover losses stemming from the spill. The agreement to create the compensation fund made that promise formal. It also gave BP an opportunity to stretch out its payments and reduce the volume of spill-related civil litigation greatly. As an article in the New York Times pointed out, in return for agreements not to sue, BP is offering to quickly reimburse victims for their full economic losses, thereby sparing them years of delay and the burden of paying attorneys. The compensation fund is an example of mutual gain, not Hitler-esque subjugation. Years or decades will pass before all civil and criminal liabilities stemming from the disaster in the gulf are resolved. Real arm-twisting will occur at many points. Plaintiffs’ attorneys will threaten BP with enormous punitive damage awards to squeeze as much money as they can from BP for their clients. The federal government will hit the responsible companies with billions in penalties and may threaten to put their executives in prison. Fortunately, given the magnitude of the disaster, intense media interest, reporting requirements for public companies, and the transparency of the compensation fund, the negotiations that resolve these complaints will likely be open and above board. Attorney General Holder can and should be involved in these negotiations. Global settlements, DPAs and NPAs, which have been utilized under both Republican and Democratic Administrations, provide many advantages when compared to criminal prosecutions and concurrent civil regulatory actions by multiple federal agencies. Such agreements encourage full disclosure to the investing public, allow targeted reform of mismanaged or corrupt corporations, ensure restitution to victims, and may protect shareholders and employees from bankruptcy proceeding, all while minimizing the collateral consequences on the current law-abiding customers, shareholders, and the general public. Attempting this type of negotiation in the wake of a national disaster of this magnitude is something that cannot be done on the down low.

Read the full article →

36 Arrested In Massive $251 Million Medicare Scam

July 16, 2010

MIAMI — Federal authorities said Friday they are conducting the largest Medicare fraud bust ever in five different states and arrested dozens of suspects accused in scams totaling $251 million. Several doctors and nurses were among those arrested in Miami, New York City, Detroit, Houston and Baton Rouge, La., accused of billing Medicare for unnecessary equipment, physical therapy and HIV treatments that patients typically never received. Ninety-four suspects were indicted, and authorities said 36 people had been arrested as of Friday morning. More than 360 agents participated in Friday’s raids, announced by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius at a health care fraud prevention summit in Miami. Officials said they chose Miami because it is ground zero for Medicare fraud. Authorities indicted 33 suspects in the Miami area, accused of charging Medicare for about $140 million in various scams. “With today’s arrests we’re putting would-be criminals on notice: health care fraud is no longer a safe bet,” Holder said Friday. Cleaning up an estimated $60 billion to $90 billion a year in Medicare fraud will be key to paying for President Barack Obama’s proposed health care overhaul. Federal officials have promised more money and manpower to fight fraud, setting up strike forces in several cities. Around the country, the schemes have morphed from the typical medical equipment scam in which clinic owners billed Medicare dozens of times for the same wheelchair, while never giving the medical equipment to patients. Now, officials say, the schemes involve a sophisticated network of doctors, clinic owners, patients and patient recruiters. Violent criminals and mobsters are also tapping into the scams, seeing Medicare fraud as more lucrative than dealing drugs and having less severe criminal penalties, officials said. For instance, agents bugged a medical center in Brooklyn, N.Y., where eight people are charged with running a $72 million scam that submitted bogus claims for physical therapy for elderly Russian immigrants. Clinic owners paid patients, including undercover agents, in exchange for using their Medicare numbers and a bonus fee for recruiting new patients. Recording devices captured hundreds of kickback payments in a private room where a man sat at a table and did nothing but pay patients all day, authorities said. The so-called “kickback” room had a poster on the wall resembling Soviet-era propaganda, showing a woman with a finger to her lips and two messages in Russian: “Don’t Gossip” and “Be on the lookout: In these days, the walls talk.” With the surveillance, the walls “had ears and they had eyes,” U.S. Attorney Loretta Lynch said at a news conference in Brooklyn. In a separate Brooklyn case, authorities indicted six patients who shopped their Medicare numbers to various clinics. More than 3,744 claims were submitted on behalf of one woman in the past six years. The patients did not receive the services billed to Medicare, authorities said. “Today’s arrests illustrate how health care fraud schemes can replicate virally and migrate rapidly across communities,” said Daniel R. Levinson, inspector general of the U.S. Department of Health and Human Services, which oversees Medicare. Federal authorities launched a strike force in Miami in 2007 to target the problem. The program has since expanded to seven cities and is responsible for more than 720 indictments that collectively have billed the Medicare program for more than $1.6 billion. Miami-Dade County received about $520 million from Medicare in home health care payments intended for the sickest patients in 2008, which is more than the rest of the country combined, according to a federal report. Only 2 percent of the patients live here. It used to take 90 days before the government detected a scam. By then, the crooks were long gone, sometimes with millions of dollars. Now authorities get billing data as it’s submitted, allowing them to catch suspects in real time, “as opposed to the typical pay and chase model we’ve had for years,” said Gerald Roy, assistant inspector general for investigations. __ Associated Press Writer Tom Hays in New York contributed to this report.

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David Isenberg: The GAO Transcripts, Part 13: Houston, We’ve Had A Problem

July 15, 2010

No, this is not about the Apollo 13 mission. But this is the thirteenth installment of the Government Accountability Office interview transcripts that were prepared pursuant to the July 2005 GAO report ” Rebuilding Iraq: Actions Needed To Improve Use of Private Security Providers .” It is pretty obvious that the company in this transcript is Kellogg Brown and Root Services, Inc., (KBR), as evidenced by language like this, “The only reports seen in Houston office are serious reports that have to be given to the client. Serious reports involve the destruction of government property, USG embarrassment, or death/injury of contractor personnel.” I can’t help but wonder what KBR thinks constitutes “USG embarrassment;” KBR contractors in possession of child porn ? Personally, treating US troops like trash by running burn pits that may have given them cancer seems pretty embarrassing to me. Reading some of the below language one understands that getting adequate security for the logistics contractors was frequently a big problem. For example, “___________ that they are not receiving the amount of force protection ___________ contractually entitled to in coalition sectors… On Army camps, 1st tier subcontractors working with entitled to the same level of protection granted to below first tier subcontractors as unsure about the level protection provided to contractors by the military. He assumes that if the subcontractor were on the base, then they would get the same level of service as first tier subcontractors. But, most second and third tier subcontractors typically do not live on ___________ mps/sites.” Sometimes the lack of adequate security could negatively impact supply missions as this passage illustrates: ___________ is heard about situations in which the ratio for convoy security was not sufficient. ___________ acquiesced to this statement, saying that he was not sure if the Army’s status quo requirements provide enough protection to securely cross convoys. He said that J ___________ would better be able to answer that question. ___________tated that in the early days there could be as many as 1,000 trucks backed up awaiting security details. Because convoy transportation is so insecure, ___________ as an air shuttle run that goes to five locations in Iraq. ___________ noted that there is a problem with “free wheelers” in Iraq. “Free wheelers” are contractors that don’t want to wait for US Army protection for their convoys. ___________ ___________ ___________ ___________ ___________ ___________ At least in the early days, according to this interview, private security contractors were left on their own. “The general expectation among the multinational coalition forces is that ___________ fend for themselves; PSCs are the lowest priority for coalition services.” Standard disclaimer: I have put in ( _____ ) to reflect those words of phrases which have been blacked out in the transcript. I have also put in the underlining as it appeared in the original transcript. As in the transcript, I have left out letters from various words, even when it seems obvious what the word is. Prepared by: Kate Walker Index: Type bundle index, here Date Prepared: August 24, 2004 DOC Number: Type document number here Reviewed by: Type reviewer name here DOC Library: Type library name here Job Code: 350544 Record of Interview Title ___________ coordination with Military Purpose To understand how ___________ and its subcontractors coordinated with the military Contract Method Face-to-face Contact Place ___________ Contact Date August 11, 2004 Participants ___________ ___________ ___________ ___________ ___________ ___________ Carole Coffee, GAO Dave Grover, GAO William McPhail, GAO Steve Sternlieb, GAO Kate Walker, GAO Comments/Remarks: ___________ a military contractor that provides ___________ the US Army under the___________ contracts. Under this contract, the Army is supposed to provide ___________ with security protection. In addition to this protection, ___________ subcontracts for security with the ___________ a private security firm based out of ___________ . In this meeting, a number of ___________ fficials spoke with us about the current situation in Iraq, their experiences with the US military and the subcontractor relationships. ___________ did most of the talking. ______________________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ major contributors ___________ utilized a PowerPoint presentation to review the questions that we had sent to them in advance. (Analyst Note: Presentation included in Interview Notes.) ___________ resence in Theatre ___________ urrently has ___________ rsonnel in theatre ___________ rotates its employees in and out of field on yearlong rotations. Some people choose to stay the whole rotation. Page 1 Record of Interview Regional security managers handle sectors of Iraq. The security manager manages main camps and sites in Kuwait, Iraq, ___________ is th ___________ in Iraq. ___________ ___________ to the military officials almost hourly. Security coordinators are typically US expatriates with security clearances that work at Army camps. While their roles and responsibilities vary with their location, their primary job is to serve as the senior liaison with the US military and make sure that force protection measures are in place. Security technicians write reports and conduct analysis of security situations. ___________ has a regional office in ___________ at the ___________ which is protected by US military parameter defense troops ___________ rks out of the ___________ office. ___________ subcontracts with the ___________ for security protection. Military Force Protection: Who is responsible? The military provides protection for ___________ tractors. This protection is delegated to coalition forces in the sector closest the contractors. Currently, coalition forces provide limited perimeter protection. ___________ otes that coalition forces lack of quick response teams and that some coalition sectors could be stronger. ___________ that they are not receiving the amount of force protection ___________ contractually entitled to in coalition sectors. The military also provides protection for first tier subcontractors located on Army bases, and sometimes will also provide protection for second and third tier contractors if they are located on an Army base. ______________ What level of protection is provided? Under the provisions of the ___________ contract, the US military is required to provide its contractors with the same level of protection as that provided to the military troops. The level of protection is decided cooperatively based on ___________ rforms vulnerability assessments. If KBR had concerns, their first response would be to talk to ___________ they wouldn’t go direct y to the military. If that attempt elicited no response, ____________then go to the PCO in writing. On Army camps, 1st tier subcontractors working with entitled to the same level of protection granted to elow first tier subcontractors as unsure about the level protection provided to contractors by the military. He assumes that if the subcontractor were on the base, then they would get the same level of service as first tier subcontractors. But, most second and third tier subcontractors typically do not live on ___________ mps/sites. In general, ___________ eceived good cooperation and support from the U.S. military. While there have been some minor incidents ___________ unaware of any major situations in which ___________ sn’t received good support from the military. ___________ no ___________ have a very “symbiotic relationship” with the military as most of its employees were former military officials. ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Page 2 Record of Interview ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ______________________ ___________ ___________ ___________ Military Force Protection: Convoys The US military is responsible for establishing security requirements and coordinating details for contractor convoys ___________ rks “hand and glove” with their military counterparts to help assess whether convoy standards meet adequate protection levels. If ___________ sn’t satisfied with the level of security offered by the military ___________ to contact their prime security manger. The manager can then talk to the commander. The military is also responsible for coordinating dedicated detail for convoy travels from point A to point B. MOW has a dedicated team for convoy/personnel movements that coordinates with the military, ___________ ployees and subcontractors. ___________ _________________________________ ___________ ______________________ believe that convoy details are dedicated to specific regions, resulting in convoy handoffs at checkpoints between sectors. Military requirements for convoys are written into Fragmentary Orders (FRAG Orders). Specific force protection requirements are based on the size of the convoy. (Analyst note: See page 7 of the ___________ Force Discussions PowerPoint presentation.) ___________ is heard about situations in which the ratio for convoy security was not sufficient. ___________ acquiesced to this statement, saying that he was not sure if the Army’s status quo requirements provide enough protection to securely cross convoys. He said that J ___________ would better be able to answer that question. ___________tated that in the early days there could be as many as 1,000 trucks backed up awaiting security details. Because convoy transportation is so insecure, ___________ as an air shuttle run that goes to five locations in Iraq. ___________ noted that there is a problem with “free wheelers” in Iraq. “Free wheelers” are contractors that don’t want to wait for US Army protection for their convoys. ___________ ___________ ___________ ___________ ___________ ___________ One of the most dangerous roads to travel in Iraq right now is the 13km road from Biop to the Green Zone. This is a military supply route/army supply route (MSR/ASR) that needs to be protected. The MSR/ASR is not secure right now. ___________ that even in secure places there is still rock throwing, etc., that is thwarting progress. ___________ provided the following anecdote to illustrate his point. He spoke with a victim of the 9 April 2004 convoy attack that it was the 5th convoy that he had been in that had been attacked. ___________ eported that the convoy experience is different in different parts of Iraq. The South is unlike the West, East, or North. The PMO keeps a tally of convoy attacks. ___________ operational center ir ___________ keeps tabs on attacks on contracts for ___________ Multinational Coalition Force Protection: Convoys The general expectation among the multinational coalition forces is that ___________ fend for themselves; PSCs are the lowest priority for coalition services . Convoy movements have to be Page 3 Record of Interview scheduled, Unscheduled/non-regular convoy protection is nearly non-existent. The company will not move unless they are secure. ___________ that if their inability to move impedes their ability to fulfill the contract they would bring it up with their contracting officer. ___________ thinks that the convoy protection is under charter of ___________ While ___________ elieves that there are areas in convoy protection that could be stronger, they have not yet reached the threshold where they can say they are not getting adequate protection and need to subcontract for security. Weapons: It is against ___________ and ______________________ovisions for ___________ mployees to hold guns; ___________ employees are not shooters. If anyone is found with a gun, he/she is fired immediately. Subcontractors protecting ___________ch as the ___________ ___________ wever, can have weapons if they are required in the scope of work (SOW) for the subcontractor. Subcotractors have run into a number of problems acquiring weapons. ___________ ___________ ontract reported that, “it is very difficult to get weapons; availability is everything.” The requirements are based on cost importation and custom issues include: o 7.62 mm for rifles o Minimum 9 mm for side arms o Some AK47/45 and MP5 can be allowed depending on subcontractor location ___________ reported th ___________ subcontracted had originally planned to import and lease their weapons on day rate, but UN embargo prohibits importation of weapons. Ultimately, the ___________ ___________ contractor, ended up buying in country, forensically clean weapons and register them on government property books. ___________ formed us that a FRAGO had been issued defining which small arms/personal weapons could be used in Iraq. This FRAGO also required those operating or owning guns in Iraq to have weapons cards. (Analyst note: We have a copy of this FRAGO issued in September 2003 in our files.) Camp Protection ___________ unaware of any contractors living outside military camps in Iraq. There is a concern that high-rise hotels are too dangerous, when but 500-600 people are cycling in at a time, ___________ few choices other than housing them at a hotel. At complexes with a large number of people can hire PSC, but they have to be unarmed. There is no security at such hotels other than unarmed military. Recently, ___________s been warned about the security situation in Kuwait. There is some intelligence that the local insurgents were specifically striking contractors. Records of Activity: Military Reporting FRAG orders are distributed by and to all military. Records of Activity: Daily Reports ______________________ daily report about all personnel at each o___________ its subcontractors’ work locations by pay rate. He also has a roster of all personnel present for Page 4 Record of interview duty and their registered weapons. Activities are well recorded. The most common incidents vary depending on your location. o North: rockets, improvised explosive devices (IEDs), mortars. o Baghdad: Everything, vehicle borne IEDs, IEDs, kidnappings, small arms fi (SAF), rockets, mortars, attacks on camps, convoys, aircraft South: Occasional mortar attacks, hijackings, theft, vandalism Records of Activity: Operations Reports Operations reports have evolved over time and give security managers insight into what types of issues different bases are facing . They are provided and maintained in the security managers’ offices in Iraq. The ___________ ubmits operations reports as well. The ___________s also absolutely required to provide an after-accident and incident reports. ___________ gested that the new Project Manager would be the best person to talk regarding operations reports. The only reports seen in Houston office are serious reports that have to be given to the client. Serious reports involve the destruction of government property, USG embarrassment, or death/injury of contractor personnel. Serious incident and operations reports also go to the PC0. ___________ not contractually required to report security concerns to the PCO. ___________ as lost 42 ___________ people (including subcontractors) to date in theatre. Anytime a service person in injured or killed, ___________reports to the PCO. ___________ does not know, however, what the PCO does with that information. ___________ ports both ___________ nd subcontractor information to the PCO. ___________ general sentiment is that nobody has a grip on the contractors’ facilities, etc. because PSCs are not required by contract to report anything. (Analyst note ___________ suggested tha ___________would be the best person to ask ___________ ports to the client if anyone dies.) Intelligence Sharing: Among PSCs Currently, there are no contractual requirements that PSC communicate with each other, but intelligence sharing between all major companies is occurring. Note, however, that those companies perceived as “fly-by-night types” by major companies are not included in this communication. Emergency Action Plans: Al ___________ ocations have an emergency action plan. ___________ reports, however, that many military units have not created a coordinated emergency action plan with their contractors. ___________ CONTRACT Force Protection The origina ___________ nd PCO Oil Contract required that the Services Theater Command provide ___________ with force protection “commensurate with that given to Service/Agency civilians.” As this force has been found insufficient, the ___________ contract now has a hybrid of military security augmented by private security subcontractors. ___________ private security supplements the guard force in camps, provides escort security to move to work sites, and temporary perimeters at worksites supplemental security protects itself, its subcontractors, and DOD civilians. Coalition Forces still, however, provide a secure perimeter for the areas where ___________ ts subcontractors, and DOD personnel sleep. The ___________ came aboard the ___________ ontract ___________ ___________ rovides security for pipelines ___________s unaware of any subcontractors f___________ roviding private security for oil. Page 5 Record of interview

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Oil Companies Reap Billions From Subsidies

July 3, 2010

When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes. The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.

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Trammell/Principal JV Sells Houston Office for $94M

July 1, 2010

A joint venture between Trammell Crow Co. and Principal Real Estate Investors sold Energy Center I, a 13-story, 332,000-square-foot office property in Houston, TX, to Wells REIT II for $94 million, or approximately $283 per square foot. TCC developed…

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Trammell/Principal JV Sells Houston Office for $94M

July 1, 2010

A joint venture between Trammell Crow Co. and Principal Real Estate Investors sold Energy Center I, a 13-story, 332,000-square-foot office property in Houston, TX, to Wells REIT II for $94 million, or approximately $283 per square foot. TCC developed…

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AboveNet Names Eric Nickla as Executive Director of Sales for Central Region

June 22, 2010

Company Expands Central Region to Include Chicago, Austin, Dallas and Houston Metro Markets

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Anadarko Says BP Should Pay After Being Reckless

June 19, 2010

By Edward Klump June 19 (Bloomberg) — Anadarko Petroleum Corp. , the Texas oil company that owns 25 percent of the damaged well pouring crude into the Gulf of Mexico, said BP Plc , the project’s operator, should pay the costs from the spill because it acted recklessly and unsafely at the drilling site. BP didn’t monitor or react to warning signs as the Macondo well was drilled, Chief Executive Officer Jim Hackett said yesterday in a statement. BP is responsible for damages under such conditions, Anadarko said. “BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement,” Hackett said in the statement. BP said in a statement that it “strongly disagrees” with Anadarko ’s position. Chief Executive Officer Tony Hayward said his company expects other parties that may have responsibility for costs and liabilities to meet their obligations. “These allegations will neither distract the company’s focus on stopping the leak nor alter our commitment to restore the Gulf Coast,” Hayward said in yesterday’s statement. Dudley Appointed The well is gushing as much as 60,000 barrels of oil a day, according to a government estimate. The leak was triggered by an April 20 explosion at a drilling rig leased to BP by Transocean Ltd. Costs of the spill may climb to as much as $50.8 billion if the well is capped at the end of August, according to a June 16 research note from ClearView Energy Partners LLC , a Washington- based policy analysis firm. BP appointed Robert Dudley , a U.S. citizen, to take charge of cleanup operations related to the spill in the Gulf of Mexico earlier this month. Hayward will remain in charge of the company. Hayward has shown strong leadership “from the very beginning” of the disaster, Dudley said in an interview yesterday at BP’s Washington office. BP Chairman Carl-Henric Svanberg told Sky News yesterday that Hayward was no longer controlling the day-to-day operations of the cleanup. Anadarko by yesterday’s market close had plunged 42 percent in New York trading since April 20. Partners’ Accountability BP’s partners should be held accountable and should set aside money to pay their share, U.S. Representative Edward Markey said yesterday in an interview for Bloomberg Television’s “Political Capital With Al Hunt.” BP has announced plans to eliminate its dividend for three quarters, raise $10 billion from asset sales and put $20 billion into a fund to pay claims related to the spill. Mitsui Oil Exploration Co., which is 70 percent-owned by Japan’s second-biggest trading house, Mitsui & Co. , has a 10 percent stake in the well. BP owns 65 percent. “With regard to the issue of the escrow account, drawing an immediate conclusion about the underlying matters at hand would be premature,” a Mitsui Oil Exploration subsidiary said in a statement. Co-owners of the project entered into a written agreement that BP would act as the operator and all parties would share the costs based on their ownership interests, including expenses to clean up any spill resulting from drilling, BP said in its statement. 1 Billion Barrels? The ruptured well may hold as much as 1 billion barrels, the Times reported, citing Rick Mueller , an analyst at Energy Security Analysis in Massachusetts. BP previously estimated the field contained 50 million to 100 million barrels of oil, the U.K. newspaper said. The Wall Street Journal reported BP used a well design that has been called “risky” by Congressional investigators in more than one out of three of its deepwater wells in the Gulf of Mexico, according to an analysis of federal data. The design was used in the well that exploded, the paper said. The co-owners also filed documents with the U.S. government certifying that each would be “jointly and severally liable” along with any other responsible parties for oil spill removal costs and damages in accordance with the Oil Pollution Act of 1990, according to BP’s statement. Anadarko will consider what its remedies may be, John Christiansen , an Anadarko spokesman, said yesterday in an interview. Those options may include not paying BP’s bills or litigation. Anadarko previously said it was reviewing an invoice from BP on spill costs. Hackett said that Anadarko recognizes it has “obligations under federal law related to the oil spill but will look to BP to continue to pay all legitimate claims as they have repeatedly stated that they will do.” Increased Risk? Also yesterday, Moody’s Investors Service said it downgraded Anadarko’s long-term debt rating to non-investment grade, dropping it to Ba1 from Baa3, with further reductions possible. Hackett, in a telephone interview yesterday, called the decision by Moody’s “premature and unwarranted.” He said Anadarko has a “strong financial position.” U.S. Representatives Henry Waxman of California and Bart Stupak of Michigan said in a June 14 letter to BP that “time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense.” If that happened, the lawmakers said, “BP’s carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig.” In a televised address June 15, President Barack Obama vowed he would make BP set aside however much is needed to “compensate the workers and business owners who have been harmed as a result of his company’s recklessness.” ‘Chief Villain’ The extent to which BP is seen as “the chief villain of the entire world helps Anadarko,” said Jeff Rensberger, a professor at the South Texas College of Law. A finding of negligence requires a determination that a party to a contract did something a reasonable person wouldn’t while gross negligence shows more recklessness, he said. Even if BP is at fault, Rensberger said, Anadarko might still be liable if it’s determined that abnormally hazardous activities occurred at a project in which the company has an interest. Anadarko also said yesterday that it will donate to Gulf Coast charities or civic agencies any revenue it is entitled to receive from oil recovered in cleanup efforts. To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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Anadarko Says BP Was `Reckless,’ Looks to Oil Company to Pay Spill Claims

June 18, 2010

By Edward Klump June 18 (Bloomberg) — Anadarko Petroleum Corp. , the Texas oil company that owns 25 percent of the damaged well pouring crude into the Gulf of Mexico, said BP Plc should pay all the damages associated with the disaster because it was caused by the company’s “reckless decisions.” The company was “shocked” by information disclosed publicly that shows BP operated unsafely and didn’t monitor and react to warning signs as the Macondo well was drilled, Anadarko Chief Executive Officer Jim Hackett said today in a statement. The company said a joint-operating agreement provides that BP is responsible for damages under such conditions. “BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement,” Hackett said in the statement. U.S. Representatives Henry Waxman of California and Bart Stupak of Michigan said in a June 14 letter to BP that “time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense.” If that happened, the lawmakers said, “BP’s carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig.” Anadarko also said today that it will donate to Gulf Coast charities or civic agencies any revenue it is entitled to receive from oil recovered in cleanup efforts. Toby Odone , a spokesman for BP, said he couldn’t immediately comment. To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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From Fluor to Booms to Costner, BP Cleanup Means Some Clean Up

June 18, 2010

By Mark Drajem and Katarzyna Klimasinska June 18 (Bloomberg) — Michigan’s depressed economy nearly toppled Grand Rapids-based awning maker Prestige Products. In April, the company’s fortunes changed when executive Brian Rickel got a phone call from an old contact at BP Plc . It was 10 days after the BP-leased Deepwater Horizon rig had exploded, and the company needed help containing the gush of oil. Six weeks later, Prestige has rented a factory, filled it with millions of dollars of new equipment, and hired 74 workers, up from six in April. Using material similar to the vinyl in awnings, Prestige is churning out 12,000 feet a day of booms, the floating barriers that help contain oil slicks. Prestige hopes to double its output, if it can hire 50 additional workers. “We’re in Michigan,” Rickel said in an interview. “The economy has been horrible for everybody here. But the expertise is here and we cashed in on it.” The spill in the Gulf of Mexico will inflict billions of dollars’ worth of damage on the economies of Louisiana, Alabama, Mississippi and Florida by destroying fisheries, halting oil drilling, and scaring off tourists. But for scores of businesses — from small fry like Prestige to construction giant Fluor Corp. — there’s money to be made in the aftermath of the worst oil spill in U.S. history, Bloomberg Businessweek reports in its June 21 issue. Help Wanted Signs It’s a dichotomy present across the Gulf region. A sign on a shuttered seafood shop in Grand Isle, Louisiana, blames BP and President Barack Obama for its woes. Nearby motels and repair shops display Help Wanted signs for maids and mechanics to help with the crush of cleanup activity. Local caterers are aggressively advertising, trying to persuade BP to hire them to feed spill-response workers gathering on the coast. Rene Vegas, owner of Bridge Side Cabins & Marina, also in Grand Isle, says his summer sport fishing season is lost due to the fast-expanding oil slick. So, like many area businesses, he’s shifting his focus. Vegas has begun stocking rubber boots, hard hats and ropes to sell to cleanup crews. Troy Petrovich, co-owner of T+T Boat Rentals in Buras, Louisiana, has seen demand for his marine-related services spike. Before the spill, “I kept calling, putting out more phone calls” in search of oil-company customers, Petrovich said. “Now my phone is ringing pretty steady; everybody is looking for boats.” T+T has rented out all 10 of its boats to oil companies and raised the daily rate to $450 from $325. ‘Mop Up Oil’ Plenty of other companies aren’t waiting for business to come to them. Shortly after the spill began, MOP Environmental Solutions Inc. , a Bath, New Hampshire-based maker of a substance it claims absorbs up to 30 times its weight in oil, sent four employees to the Gulf to conduct demonstrations for cleanup officials. The MOP workers came armed with fish tanks, oil and the absorbing material in the trunks of their cars. Some of the company’s shareholders hired a local pilot to fly around the region with a banner reading, “We mop up oil.” After weeks of being pestered, BP purchased its first three truckloads of the oil-absorbent material for $155,000, MOP President Charles Diamond said. The company didn’t have to wait as long to get a full hearing as actor Kevin Costner . Costner’s company, Ocean Therapy Solutions Inc., uses barge-based turbines to separate water from oil. He first demonstrated the centrifuges to BP officials at a technology conference 10 years ago, but wasn’t given the go- ahead to test the gear in open water until earlier this month. Now Ocean Therapy says it has sold 32 of the centrifuges to BP. Corexit, Skimmers Another beneficiary of the cleanup is Nalco Holding Co. More than one million gallons of Nalco’s chemical dispersant Corexit, which breaks up oil slicks, have been used in the Gulf. The company sold $40 million of Corexit to BP through the week of May 15, according to spokesman Charlie Pajor . Some faraway businesses are profiting from producing or deploying equipment to get rid of the oil residue. The Slickbar Products division of Finland’s Lamor Corp. sent employees to Mississippi to help install its skimmers, which collect oil from the water, onto shrimp boats. Its oil-boom plant in Seymour, Connecticut, is operating at a pace not seen since the Exxon Valdez spill in 1989. Slickbar has made more booms in the past month than it had in the previous 12 months, Chief Executive Officer Stephen Reilly said. There’s activity on land as well. Irving, Texas-based Fluor has a contract to supply BP with workers to clean up tar on Alabama and Florida beaches. So far it has hired 1,200 workers in Alabama and 2,400 in Florida, all of them off unemployment rolls in those states, said spokesman Brian Mershon . Fluor plans to increase its Florida workforce to 4,100. Birds, Shipwrecks The Shaw Group Inc., a Baton Rouge-based power-plant builder that has a $360 million contract to construct barrier islands along the Gulf Coast, is hiring staffers to count birds on nearby islands and map shipwrecks. The cleanup rush isn’t generating just blue-collar work. The Pensacola, Florida, law firm of Levin Papantonio Thomas Mitchell Echsner Rafferty & Proctor has hired an airplane to fly a banner over beaches reading “Prosecute BP” and is offering free claims evaluations. “There are probably hundreds of lawyers who are working to generate claims on the BP spill,” said Fredric Levin, a partner in the firm. Washington’s K Street lobbying crowd also stands to benefit as federal regulators crack down on drillers. Transocean Ltd., owner of the Deepwater Horizon rig, has hired former Oklahoma congressman Bill Brewster ’s firm, Capitol Hill Consulting Group , to represent its interests, according to a regulatory filing on May 10. BP Employees Litigation or legislative changes may generate years of billings. For now, businesses in the affected area are taking advantage of the spill work while they can. Marina owner Vegas says he has as many as 60 BP employees and contractors staying at his marina, which normally caters to sport fishermen and beachgoing families. “The motel is booked, the motel is doing fine,” he said. “But when they leave in January or December, we’re in trouble.” To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net

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KKR May Acquire $400 Million Stake in Texas Shale Formation From Hilcorp

June 14, 2010

By Cristina Alesci June 14 (Bloomberg) — KKR & Co. , the buyout firm run by Henry Kravis and George Roberts , may purchase about $400 million of Texas shale assets from Hilcorp Energy Co., two people with direct knowledge of the talks said. KKR and Hilcorp , a closely held exploration and production company based in Houston, may partner to develop the formation known as Eagle Ford in the southern part of the state, which has unconventional gas deposits, according to one of the people who declined to be identified because the deal is private. KKR’s purchase of a stake may be announced as early as today, the person said. KKR spokeswoman Kristi Huller said she couldn’t comment. Calls to Hilcorp over the weekend weren’t returned. Unconventional gas is the industry term to describe fuel trapped in shale formations, coal beds and impermeable sandstone rock. Marc Lipschultz , global head of KKR’s energy and infrastructure business, is looking for oil and gas investments as the New York-based buyout firm exits a 1-year-old minority stake in East Resources Inc. That developer, focusing on the Appalachian basin’s Marcellus Shale area, agreed last month to sell itself to Royal Dutch Shell Plc for $4.7 billion. “Now is an excellent time to own and invest in oil and gas assets and operations, and we are seeing many promising opportunities in today’s environment.” Lipschultz said in a June 1 statement about the sale. KKR purchased the stake in Warrendale, Pennsylvania-based East Resources for about $350 million in June 2009, a person familiar with the transaction said at the time. ‘Much More Oil’ Eagle Ford is about 50 miles wide and 400 miles long, extending from Texas’s southern border to the eastern part of the state, according to the Railroad Commission of Texas, which regulates the oil industry. The formation delivers natural gas and “appears to produce much more oil” than other shale fields, the agency wrote in a description on its website. Companies including Exxon Mobil Corp. and BP Plc are snapping up unconventional gas reserves, betting that prices for the cleaner-burning fuel will rise as governments curb carbon dioxide emissions and as more accessible areas dwindle. Private-equity managers have resumed deal making after an almost three-year slump. Buyout firms have announced $31 billion in transactions this year, more than five times the amount in the same period in 2009, according to data compiled by Bloomberg. In February, KKR said it will partner with Premier Natural Resources LLC, the Tulsa, Oklahoma-based company founded by former executives of Vintage Petroleum Inc., to seek oil and gas investments in North America. KKR began making acquisitions in the energy industry in 1985, when it bought Union Texas Petroleum. In 2007, the firm and TPG, a Fort Worth, Texas-based private-equity firm, agreed to buy power producer TXU Corp., now Energy Future Holdings, for $45 billion in the largest leveraged buyout on record. To contact the reporter on this story: Cristina Alesci in New York at Calesci2@bloomberg.net .

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Bill Maher On BP Oil Spill: ‘I Feel Oily … I Feel Their Sh*t On Me’ (VIDEO)

June 11, 2010

Friday marked Bill Maher’s last show of the season, and while the BP oil spill has been a subject on “Real Time” from week to week, this time Maher defined it as the subject. “I have been holding my nose about this oil issue. Every week, I do not want to talk about it and we do. But you know, this is the last show of the season, my last time to vent, so I kind of had a change of heart this week, and this whole show might just be about how much oil sucks,” he said at the opening of the show’s panel segment. “And I feel oily. Now that those pictures come in of the wildlife, I feel dir– I feel their shit on me. I feel like someone from Greenpeace should scrub me down every night.” Rachel Maddow, Newsweek editor Jon Meacham and former Senate Majority Leader Bill Frist (R-Tenn.) joined Maher on the panel, and when he asked what would have to happen for the gulf catastrophe to have some meaning, all three turned to the obvious answer — a major step forward on a comprehensive alternative-energy policy. “We’re trying to drill all of our oil, or a huge proportion of our oil, from the place where we get all our shrimp and oysters. And that’s awkward, it turns out,” Maddow quipped. Maher let loose on a host of villains-of-the-week during the segment, laughing at Blanche Lincoln’s claim that her vote was “not for sale” and calling the Houston oilman, lifelong game hunter and recent estate-tax dodger Dan Duncan a “world-class asshole.” But the panel zeroed in on the Senate filibuster as the reason why President Obama, in Maher’s words, “had to lie, basically.” “I saw this week that Lindsey Graham is pulled out of the global warming bill, and the whole reason Obama was coming out in favor of more drilling was as a sop to the conservatives. To try to get Lindsey Graham on his side, somebody like that, to get a couple of Republican vote, which would not be necessary if we did not have this filibuster nonsense, if you didn’t need 60 votes to pass anything. That’s why this president said something. That’s why he had to lie, basically. And the lie was, drilling has never been safer. And we know for a fact, actually, drilling has never been more dangerous. Not just this spill, but before this spill.” Frist employed several less-than-coherent defenses of Senate procedure and minority rights (most notably: “In the Senate, you can do anything that can’t be done”), but Maddow laid the blame at his party’s door for paralyzing Congress by procedural means. “And Republicans should have to answer for that,” she said, “because it’s a really stupid way to run the country.” Later on, Maher targeted the political canard of “running a state like a business,” which he and Maddow pointed out can be foolish given the cross-purposes of government and private enterprise. And Arizona won the final showdown in Maher’s “Stupidest State” contest, edging out Texas to receive a trophy of a man with his head up his ass. Maher claimed he’d send the trophy to Arizona Gov. Jan Brewer. WATCH:

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Gulf Oil Spill: BP’s Failures Amplified By Numerous Gaffes

June 11, 2010

HOUSTON — BP is already fighting an oil gusher it can’t contain and watching its mighty market value wither away. Its own bumbling public-relations efforts are making a big mess worse. Not only has it made a series of gaffes – none greater than the CEO’s complaint that “I’d like my life back” – the company hasn’t even followed its own internal guidelines for damage control after a spill. Executives have quibbled about the existence of undersea plumes of oil, downplayed the potential damage early in the crisis and made far-too-optimistic predictions for when the spill could be stopped. BP’s steadiest public presence has been the ever-present live TV shot of the untamed gusher. What BP has lacked, crisis management experts say, has been much of a show of human compassion. “All crises are personal,” said Richard Levick, who runs a public relations firm, Levick Strategic Communications, that advises companies. “Action and sacrifice is absolutely critical.” The best move for BP’s image, of course, would be to stop the leak. That has proved difficult enough, with one fix after another failing and estimates of the severity of the spill growing by the week. Failing a solution, Daniel Keeney, president of a Dallas-based PR firm, suggested putting CEO Tony Hayward in a hard hat and life vest, helping crews contain and clean up the spill. “You want to get him right in the thick of things, even if he looks somewhat uncomfortable doing it,” Keeney said. Levick suggested BP could have cut gas prices at its stations along the Gulf Coast – a show of financial solidarity. BP has taken a stab at soothing angry Americans, airing a slick, multimillion-dollar national TV spot this week in which Hayward pledges: “We will make this right.” Hayward also promised BP would clean up every drop of oil and “restore the shoreline to its original state.” President Barack Obama said the money spent on the ads should have gone to cleanup and compensating devastated fisherman and small business owners. And even those efforts violate the company’s own prescription for damage control. Its own spill plan, filed last year with the federal government, says of public relations: “No statement shall be made containing any of the following: promises that property, ecology or anything else will be restored to normal.” On top of everything else, BP can’t figure out what to say about its dividend. Lawmakers in the U.S. insist the company must look after the devastated people of the Gulf before paying its shareholders. But in Britain, legions of retirees count on the steady payouts. And earlier this week when Wall Street freaked out over the prospect of billions of dollars in BP liabilities and sent its stock to its lowest point since the mid-1990s, the company response was positively tone-deaf. “The company is not aware of any reason which justifies this share price movement,” the company said early Thursday, after its stock was hammered on New York and European exchanges. Almost from the beginning, BP has been as unable to control its public message as it has the spill itself. Hayward was ridiculed for telling reporters “I’d like my life back” earlier in the crisis, remarks the families of some of the 11 men killed in the explosion of the Deepwater Horizon rig felt were insensitive. He also suggested that the environmental impact of the spill would be “very, very modest.” Former Shell chairman John Hofmeister said it might have been more appropriate for senior U.S. executives of the company to take the heat. Hayward is an Englishman, and BP is based in Britain. “I think it was a mistake for Tony Hayward to come and put his physical presence in the U.S.,” Hofmeister said. “The U.S. has its own culture and traditions. Foreign companies can come and do business there, but they are not necessarily welcomed.” BP’s chief operating officer, Doug Suttles, an American, was rolled out for interviews, but his aides grumbled Hayward was stealing the spotlight. Hayward’s decision to present a video explaining BP’s “top kill” attempt took the company’s Louisiana command by surprise. As for Suttles himself, he insisted this week that there were no massive underwater oil plumes in “large concentrations” from the spill. To NBC, he offered that it “may be down to how you define what a plume is here.” The government had said three tests confirmed oil as far as three-fifths of a mile below the surface of the Gulf, at least 40 miles away from the site of the gushing well. Suttles also predicted the spill would be reduced to a “relative trickle” by early next week. BP later sought to walk the comments back, saying the company was optimistic but that getting the spill to a trickle would take more time. By late this week, the government had reported that the spill was spewing the equivalent of the Exxon Valdez disaster into the Gulf every two weeks or less, with the catastrophe nearing the end of its second month. Since the April 20 explosion, BP has parachuted its own staff, plus staff from at least two independent public-relations firms, to deal with the deluge of round-the-clock media inquiries. Early on in the crisis, BP and government officials held daily in-person briefings with media, allowing questions. In recent days and weeks, officials have increasingly resorted to teleconferences with reporters and have limited the ability to ask questions and the number of questions that could be asked. In Houston, where BP has set up a U.S. command center, company PR officials have grown weary of reporters going directly to engineers and other higher-ups for information, at times trying to insist media go through them first. Spokesman Robert Wine said in an e-mail to The Associated Press that media visits to the Houston center are “very carefully controlled and sparingly arranged” by design. “The rooms that are shown are full of the teams who WILL make a difference on the result of this crisis,” Wine wrote. “Every second they are not helping with media visits is time they are not doing the `day job.’” In the meantime, BP has been buying up spill-related search terms on Google and Yahoo, so that links to its own oil-response sites pop up first. BP says the idea is to help people on the Gulf find the right forms and people quickly and effectively. Others suggest it’s a move to steer searchers away from bad press for BP. “It is clearly trying to protect its brand image,” said Matthew Whiteway, director of campaign management at London consulting firm Greenlight, which says 95 percent of BP’s search listings are rated very negative. Crisis management experts say the only reliable way to repair BP’s badly tarnished image is the obvious one – to plug the hole. “Crisis management is about fixing the problem. It’s not about looking good,” said Tony Jaques, a crisis management consultant in Melbourne, Australia. “BP has done some things that have not been smart, but really, what would they have done to look good in this kind of situation anyway?” ___ McClam reported from New York. Associated Press writers Michael Liedtke in San Francisco, Tamara Lush in New Orleans and Jane Wardell in London contributed to this report.

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BP Atlantis Should Stay in Operation Amid U.S. Safety Probe, Salazar Says

June 11, 2010

By Laurel Brubaker Calkins June 11 (Bloomberg) — BP Plc ’s Atlantis oil and natural- gas platform in the Gulf of Mexico should remain in production while regulators investigate a whistleblower’s allegations that the installation is unsafe, U.S. Secretary of the Interior Kenneth Salazar said. The U.S. Minerals Management Service, which oversees offshore drilling, will decide after completing its probe whether to shut Atlantis, which produces 200,000 barrels of oil and 180 million cubic feet of gas daily, Salazar said. “The Department of Interior is currently undertaking an exhaustive investigation, at the request of Congress, to determine whether BP maintains a complete and accurate set of required engineering drawings for the BP Atlantis platform and its associated subsea components,” Salazar said in papers filed yesterday in federal court in Houston. Former BP employee Kenneth Abbott sued Salazar, the Interior Department, MMS and its regional chief Michael Saucier last month for failing to act on his warnings about BP’s second- largest Gulf platform. Abbott sued in conjunction with Food & Water Watch, an environmental watchdog group, to force MMS to shut down Atlantis until BP can prove the platform meets federal engineering and safety requirements. BP is struggling to cap an unrelated well about 100 miles (161 kilometers) north of Atlantis after the Deepwater Horizon drilling rig caught fire and sank in April. The resulting oil spill is the largest in U.S. history. The London-based company insists the Atlantis platform is safe and in compliance with federal regulations. The MMS probe should be finished by mid-September, Salazar said. ‘10 Percent Complete’ “Given the quantity of records and need for MMS to focus on responding to the Deepwater Horizon accident, the investigation is only approximately 10 percent complete,” Salazar said. Abbott, who managed Atlantis’s engineering documentation database until he left BP in early 2009, said MMS failed to respond when he brought his safety concerns to the agency last year and again this year. MMS initiated the probe in February, at the request of 19 congressional representatives who learned of Abbott’s complaint. The agency had said it would report its findings in May. Abbott claims almost 90 percent of the platform’s engineering and safety documents lacked final approval, as required by U.S. law. Atlantis’s operators have no “as-built” drawings on the platform’s actual construction, leaving them vulnerable to mistakes in an emergency, he said. “We maintain that without these documents, rig operators are flying blind,” Mikal Watts , one of Abbott’s lawyers, said in a statement last week. “We are now into hurricane season and that ups the odds for situations requiring immediate, accurate response to problems. Crews can’t do that if they don’t have accurate, ‘as built’ documents to refer to.” The case is Abbott v. Salazar, 4:10-cv-01759, U.S. District Court, Southern District of Texas (Houston). To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com .

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Killer Undersea Oil Plumes From BP’s Leaking Well Lurk in Gulf of Mexico

June 8, 2010

By Jessica Resnick-Ault June 8 (Bloomberg) — Undersea plumes of oil that can kill off marine life have been confirmed stretching for miles in the Gulf of Mexico from BP Plc’s leaking Macondo well, according to findings researchers will announce today. Water samples collected by the R/V Weatherbird II vessel show biodegraded crude oil in two undersea plumes about 22 miles (35 kilometers) northeast of BP’s seabed leak, according to The National Oceanic and Atmospheric Administration and the University of South Florida. “Very specifically, we can now say there is biodegraded oil in the depths of the Gulf of Mexico,” Vickie Chachere, a spokeswoman for the University, said. She couldn’t confirm how much oil the plumes may contain. Researchers have said the oil slick washing ashore is a small portion of what has leaked and the undersea crude can wipe out marine life while remaining invisible from the surface. The tests are the second confirmation of the existence of oil plumes in the Gulf, which BP Chief Executive Officer Tony Hayward has disputed. Research by Samantha Joye at the University of Georgia, and analyzed at Texas A&M University, also confirmed the presence of undersea oil. Hayward said June 6 that there was “no evidence” of the plumes in the Gulf of Mexico. The company is waiting for confirmation from NOAA and the Environmental Protection Agency, Robert Wine , a BP spokesman in Houston, said in a telephone interview yesterday. NOAA ’s confirmation is expected today, when the agency jointly presents data from the University of South Florida. ‘Huge Volumes’ The oil was found in two layers of the ocean at 400 meters and 1,000 meters. The university’s scientists tracked the plumes for tens of kilometers, starting 35 kilometers north-northeast of the well, Chachere said. “These are huge volumes of oil, many kilometers of oil, and to have oil in many cubic kilometers of water suggests a very significant total amount,” said Ian MacDonald, an oceanographer at Florida State University in Tallahassee, who is doing separate research on the spill. MacDonald estimates the well is leaking 26,500 barrels to 30,000 barrels a day, six times more than the figure that BP and the government used from April 28 to May 27. On June 7, the company captured more than 7,500 barrels in a 12-hour period, during which excess oil leaked around the cap. Hayward said June 6 crude oil naturally floats in water, and that crude seen in the water column was in the process of making its way to the surface, according to reports in the Associated Press. Chemical Dispersants Scientists maintain that oil could have become trapped in the water column due to the company’s unprecedented application of chemical dispersants, natural phenomenon, or a combination of the two. BP has applied more than a million gallons of dispersant to the spill, and has almost another half-million gallons on hand to apply if needed, according to a statement from the Unified Command made up of BP and U.S. Coast Guard officials. The dispersants have been applied to oil at the surface, as well as to crude gushing out of the well on the sea floor. The dispersants may have caused the crude oil to sink more than it normally would have. “There would be a threshold where putting dispersant in the oil would modify the viscosity,” said Nicholas Wienders, a professor in the oceanography department at Florida State University. If the viscosity of the oil was changed, it could react differently to the ocean’s circulation, and behave in ways not normally expected, he said. Trapped Oil Natural density differences in water layers could also have trapped the oil, said Nancy Rabalais , executive director of the Louisiana Universities Marine Consortium. The pressure being applied to crude surging out of the well may also change its dispersion, said MacDonald of Florida State University. As the oil is forced out of the broken pipe at hundreds of miles an hour, it hits the relatively lower-pressure area near the sea floor that breaks the oil into particles about the thickness of a human hair, MacDonald said. Their small size, exposure to significant pressure, and cold temperatures near the sea floor may all contribute to oil sinking, he said. “There is no scientific doubt about the processes that would form mid-water plumes,” he said. BP and the Coast Guard haven’t gauged the pressure of the leaking oil, making it more difficult for scientists to predict and track plumes, said MacDonald. “It’s another example of both BP and the Government being derelict in their duty,” he said. Captain Brent “Hollywood” Shaver, 59, who operates a charter fishing boat in Florida and Alabama waters, laughed when asked about BP’s comment that there aren’t underwater oil plumes. “They’re crazy,” he said in a June 7 interview. “You know, when you spill diesel fuel in the water they always tell you not to put dish soap on it because it just makes it sink. That’s what is happening here. It’s sinking.” To contact the reporter on this story: Jessica Resnick-Ault in New York at jresnickault@bloomberg.net

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Obama Seeking `Ass to Kick’ in Oil Spill, Cites `Corner Cutting’ on Safety

June 8, 2010

By Nicholas Johnston June 8 (Bloomberg) — President Barack Obama , citing possible safety shortcomings before the nation’s worst environmental disaster, said he is looking for “whose ass to kick” in response to the BP Plc spill. In an interview for broadcast today on NBC’s “Today” show, Obama said there may have been “some corner cutting” on safety on the doomed oil rig and promised a full investigation. The president said the three trips he has taken to the Gulf Coast to speak with people affected by the spill have helped him understand who needs to be held responsible, “so I know whose ass to kick,” he told “Today” host Matt Lauer , according to excerpts released by NBC. The president has toughened his language talking about BP and the spill after the White House faced questions about whether Obama was acting forcefully enough in response to the disaster. In a June 3 interview with CNN’s Larry King , Obama said he was “furious at this entire situation,” yet said it wasn’t productive for him “to just spend a lot of my time venting and yelling at people.” About BP Chief Executive Officer Tony Hayward , who had made comments minimizing potential environmental damage from the Gulf of Mexico leak and discussing its impact on his life, Obama said he “wouldn’t be working for me.” “The fact of the matter is there is going to be a thorough review, and I don’t want to prejudge it, but the initial reports indicate there may be situations in which not only human error was involved, but you also saw some corner cutting in terms of safety,” Obama said in the interview. Criminal Investigation BP officials didn’t return a call to the company’s Houston media center after business hours and spokesman Mark Salt didn’t immediately respond to an e-mail requesting comment. Attorney General Eric Holder has also launched a criminal investigation into the accident and promised prosecutions “to the fullest extent of the law.” Having made three trips to Louisiana since the Deepwater Horizon oil rig exploded and sank in April, Obama said he traveled to the Gulf region to talk to fishermen about ways to deal with the crisis. “I don’t sit around just talking to experts because this is a college seminar,” Obama said. “We talk to these folks because they potentially have the best answers, so I know whose ass to kick.” BP has spent $1.25 billion so far on the worst oil spill in U.S. history, or about $27 million a day. The company said it captured 11,100 barrels on June 6 from the leaking well on the ocean floor, more than the previous day and about half of the top end of the estimated spill rate. Soiled Coast The spill has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said June 5. Obama convened members of the Cabinet at the White House yesterday to discuss the spill, where he called for BP to quickly settle compensation claims from victims of the disaster. “We also have to make sure that every single person that has been affected by this is properly compensated and made whole,” Obama said in the NBC interview. The federal government last week said it has billed BP $69 million for initial costs related to the disaster. The spill may cost the company as much as $37 billion in cleanup and litigation costs, Credit Suisse estimated on June 2. To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Natural Gas Shale Well `Blowout’ Raises Specter of Next BP Energy Markets

June 6, 2010

By David Wethe and Asjylyn Loder June 7 (Bloomberg) — A Pennsylvania natural gas well “blowout” last week helped drive prices to a 14-week high on concern that tighter restrictions on offshore drilling following BP Plc’s Gulf of Mexico spill will spread onshore. The incident on June 3 at the project operated by EOG Resources Inc. shot flames and drilling fluids 75 feet (23 meters) into the air, the state Department of Environmental Protection said in a statement on June 5. The well is in the Marcellus Shale gas find in Clearfield County, about 122 miles northeast of Pittsburgh. With offshore exploration curtailed, dependence on shale gas may grow, amplifying the impact of any disruptions. A “blowout” is the industry’s term for a surge of pressurized oil or gas that causes an eruption and is what caused the explosion and fire at BP’s Macondo well in the Gulf April 20, resulting in the biggest oil spill in U.S. history. “The shale problem is a bullish factor in the market,” said Carl Larry , president of Oil Outlooks & Opinions LLC in Houston. “A lot of people are starting to worry about the Gulf production of gas. The more we cut back on Gulf production, the more we rely on shale production.” Natural gas for July delivery climbed 10.7 cents on June 4, or 2.3 percent, to settle at $4.797 per million British thermal units on the New York Mercantile Exchange. Natural gas rose 11 percent week last week, the biggest gain since the week ended Dec. 18. EOG shares sank 6.1 percent to $102.99 in New York trading following the incident. Shale Output Shale gas production in the U.S. rose 71 percent in 2008 from 2007 to 2.02 trillion cubic feet, or about 10 percent of total U.S. output, according to the most recent Energy Department data . EOG said in a statement that the Pennsylvania gas well experienced a “control issue” at about 8 p.m. New York time on June 3 and was secured by 12:15 p.m. the next day. No injuries were reported, the company said. The Pennsylvania Department of Environmental Protection termed the incident a “blowout.” “The event at the well site could have been a catastrophic incident that endangered life and property,” John Hanger , secretary of the department, said in a statement last week. “This was not a minor accident, but a serious incident that will be fully investigated by this agency with the appropriate and necessary actions taken quickly.” National Fuel Gas Co. of Buffalo, New York, said June 4 that one of its subsidiaries is an equal partner with EOG in the well. BP Effect The BP spill is “drawing attention to” the risks associated with oil and gas production, said U.S. Representative Maurice Hinchey , a Democrat from New York. Hinchey has sponsored legislation to require drillers to disclose the chemicals used in hydraulic fracturing, in which drilling fluid is forced into the earth at high pressure to crack the shale and release the gas. The regulation, put in place in 1974, was scrapped in 2005, he said. Environmentalists were quick to compare the BP and EOG blowouts and call for tighter regulation of the growing use of hydraulic fracturing. “We see a lot of parallels,” said Amy Mall, a senior policy analyst with the Natural Resources Defense Council , a New York-based advocacy group. “This is a very complex process with a lot of risks and involves a lot of complicated technology. The strongest standards need to be in place.” More Oversight ClearView Energy Partners LLC, a Washington-based policy analysis firm, said it expects members of Congress who are critical of hydraulic fracturing to use the EOG accident as grounds for greater regulation. “Odds for explicit regulation have now increased,” Kevin Book, managing director at ClearView, wrote in a research note last week. Oil and natural-gas rigs operating in the U.S. Gulf of Mexico plunged by 50 percent last week to a 16-year low, according to data published by Baker Hughes Inc. after President Barack Obama suspended operations at 33 exploratory wells. The halt in deepwater development took the Gulf rig count down to 23, the lowest level since August 1993. Oil drilling plunged to 9 rigs from 27 a week earlier, and gas rigs fell to 14 from 19. Obama ordered the halt May 27 at the same time he extended a moratorium on deepwater drilling permits by six months, canceled pending lease sales in the Gulf and off the coast of Virginia and suspended exploration in two areas off Alaska. Gulf Spill The Gulf spill started after an offshore platform leased by BP exploded in April and sank, tearing holes in underwater pipes that have since been spewing 12,000 to 19,000 barrels of oil a day into the Gulf, according to government scientists. “The BP oil spill has raised the profile for any incident, anywhere, anytime,” said Tim Evans , an energy analyst at Citi Futures Perspective in New York. “Nobody wants to be labeled as the next BP.” Companies can expect heightened scrutiny for incidents that would have been ignored as minor before the BP accident, Evans said. The New York state Department of Environmental Conservation is completing rules for extracting the gas. Applications from companies such as Chesapeake Energy Corp. are on hold in New York until the rules are ready. The regulations will be tougher for companies seeking to drill in watersheds that serve New York City and Syracuse. Both systems are exempt from federal rules that require filtration plants. To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net Asjylyn Loder in New York at aloder@bloomberg.net .

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BP Increases Gulf Oil-Capture Rate to 10,500 Barrels a Day, Hayward Says

June 6, 2010

By Edward Klump and Aaron Clark June 6 (Bloomberg) — BP Plc said it increased the amount of oil being captured from its leaking well in the Gulf of Mexico to 10,500 barrels yesterday and expects to increase that quantity in the next few days. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels a day into the Gulf. BP said yesterday it collected 6,077 barrels in the previous 24-hour period ending at midnight June 4. The spill is the worst oil spill in U.S. history. A “cap” over the well is capturing “probably the vast majority” of the leaking oil , Chief Executive Officer Tony Hayward told the Broadcasting Corp. today in an interview in London. BP has “a further containment system to implement this week,” he said, adding that a permanent and hurricane-proof mechanism will be in place by the end of the month. Oil from the gushing well will remain in the water into the fall, U.S. Coast Guard Admiral Thad Allen said today on CBS’s “Face the Nation” broadcast. “There will be oil out there for months to come,” Allen said. “This spill is holding everyone hostage. This is a siege. It’s going to go on for a long time.” Improvement Expected After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said yesterday on its website. “Improvement in oil collection is expected,” the London- based company said today on its website . “We’re hoping to improve it over the next few days,” BP spokesman Mark Salt said in a telephone interview today. Allen said yesterday in a news conference that four vents on the cap remained open, allowing oil to flow through the cap and into the ocean. BP will try to close the vents when pressure is stabilized, he said. The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, according to Allen. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.” The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. History Lesson “History has taught us here to be cautiously optimistic, not overly optimistic,” Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said yesterday. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday. Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. Obama, Hayward President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. BP’s Hayward told the BBC he hadn’t spoken directly to Obama since the Deepwater Horizon rig exploded. “There is no need for that,” Hayward said. “I have spoken to his key lieutenants.” BP and the Obama administration are working “hand-in-hand” to resolve the spill, Hayward said. Hayward told the Sunday Telegraph newspaper in an interview published today that he doesn’t fear the threat of jail as a result of a criminal probe into the spill and that he expects to be in his job a year from now. Kuwait Investment Kuwait Investment Authority, the country’s sovereign wealth fund, isn’t considering selling its 1.75 percent stake in BP and believes there is no threat to the company’s future as a result of the spill, the Al-Rai newspaper reported today. Businesses and workers losing income from the Gulf of Mexico oil spill should be getting money more quickly from BP, the Coast Guard’s Allen said today. The company must “get better at claims processing and helping these people that need money,” Allen said on CBS today. “I know that’s not what they do as a corporation but they have got a responsibility,” Allen said. BP has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. ‘First Call’ Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .; Aaron Clark in New York at aclark27@bloomberg.net

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BP Is Capturing 10,000 Barrels a Day From Gulf Spill, Chief Hayward Says

June 6, 2010

By Edward Klump June 6 (Bloomberg) — BP Plc plans to increase the oil- capture rate from its leaking well in the Gulf of Mexico as the company tries to contain the worst oil spill in U.S. history. BP is collecting around 10,000 barrels of crude a day, Chief Executive Officer Tony Hayward told the British Broadcasting Corp. today in a live interview in London. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels into the Gulf every day. A “cap” over the well is capturing “probably the vast majority” of the leaking oil , Hayward said. BP has “a further containment system to implement this week,” he said, adding that a permanent and hurricane-proof mechanism will be in place by the end of the month. U.S. Coast Guard Admiral Thad Allen said yesterday in a news conference that four vents on the cap remained open, allowing oil to flow through the cap and into the ocean. BP will try to close the vents when pressure is stabilized, Allen said. On June 4, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. BP said yesterday that it collected 6,077 barrels of crude in the 24-hour period of June 4. “They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said. Improvement Expected After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said yesterday on its website. “Improvement in oil collection is expected over the next several days,” the London-based company said yesterday on its website . The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.” The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. History Lesson “History has taught us here to be cautiously optimistic, not overly optimistic,” Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said yesterday. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday. Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. Obama, Hayward President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. BP’s Hayward told the BBC he hadn’t spoken directly to Obama since the Deepwater Horizon rig exploded. “There is no need for that,” Hayward said. “I have spoken to his key lieutenants.” BP and the Obama administration are working “hand-in-hand” to resolve the spill, Hayward said. The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. ‘First Call’ Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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BP Increases Capture Rate From Leaking Gulf Oil Well

June 5, 2010

By Edward Klump June 5 (Bloomberg) — BP Plc increased the amount of oil it is capturing from its leaking oil well in the Gulf of Mexico to thousands of barrels a day as it tries to reduce the damage from the worst oil spill in U.S. history. BP said it collected 6,077 barrels of crude in the 24-hour period ended at midnight last night. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels into the Gulf every day. Four vents on a “cap” over the well remain open, allowing oil to flow through the cap and into the ocean, U.S. Coast Guard Admiral Thad Allen said today in a news conference. BP will try to close the vents when pressure is stabilized, Allen said. Yesterday, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. “They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said. After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said today. “Improvement in oil collection is expected over the next several days,” the London-based company said today on its website . The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said yesterday on CBS’s “Early Show.” “That’s possible with this design.” Jagged Cut The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. “History has taught us here to be cautiously optimistic, not overly optimistic,” said Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, according to the Coast Guard. Tar Balls, Patties Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped yesterday in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. More Claims Paid The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said today on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. BP Chief Executive Officer Tony Hayward told investors yesterday on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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BP Increases Capture Rate From Leaking Gulf Oil Well, Trying to Get

June 5, 2010

By Edward Klump June 5 (Bloomberg) — BP Plc increased the amount of oil it is capturing from its leaking oil well in the Gulf of Mexico to thousands of barrels a day as it tries to reduce the damage from the worst oil spill in U.S. history. BP said it collected 6,077 barrels of crude in the 24-hour period ended at midnight last night. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels into the Gulf every day. Four vents on a “cap” over the well remain open, allowing oil to flow through the cap and into the ocean, U.S. Coast Guard Admiral Thad Allen said today in a news conference. BP will try to close the vents when pressure is stabilized, Allen said. Yesterday, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. “They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said. After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said today. “Improvement in oil collection is expected over the next several days,” the London-based company said today on its website . The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said yesterday on CBS’s “Early Show.” “That’s possible with this design.” Jagged Cut The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. “History has taught us here to be cautiously optimistic, not overly optimistic,” said Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, according to the Coast Guard. Tar Balls, Patties Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped yesterday in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. More Claims Paid The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said today on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. BP Chief Executive Officer Tony Hayward told investors yesterday on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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Bristol-Myers Sprycel Drug Beats Gleevec in Leukemia Patients, Study Says

June 5, 2010

By Shannon Pettypiece June 5 (Bloomberg) — Bristol-Myers Squibb Co. ’s cancer pill Sprycel worked better and faster at eliminating leukemia cells than Novartis AG’s Gleevec, the standard treatment for the blood malignancy, a study of newly diagnosed patients found. Bristol-Myers said it plans to use the finding to seek expanded U.S. approval for Sprycel as an initial treatment for the form of blood cancer called chronic myelogenous leukemia or CML. Sprycel is already approved as a second-line option for patients who fail to benefit from Gleevec. The expanded use could more than double sales of Sprycel by 2015 to $900 million, said Tony Butler , an analyst with Barclays. Novartis is also racing to get a next generation leukemia drug, Tasigna, approved as a first-line therapy. Gleevec, Novartis’s second best-selling drug with 2009 sales of $3.9 billion, revolutionized the treatment of CML nine years ago, turning it from a fatal to chronic disease for many patients. Now, the arrival of two new drugs could cut Gleevec’s market share 25 percent in the next five years, Butler said in a report. “Sprycel could become the next frontline drug for CML and could replace Gleevec,” said Hagop Kantarjian , a leukemia specialist at the University of Texas MD Anderson Cancer Center in Houston, who studied the drug. “For anyone who has a new diagnosis, they should consider this new kind of inhibitor as a viable option that could be better.” Results from the Sprycel study were released today at the American Society of Clinical Oncology annual meeting in Chicago. Tasigna cut levels of a protein linked to chronic myeloid leukemia in three times as many patients as those taking Gleevec after 18 months, Basel, Novartis reported yesterday in a statement. Regulatory Decision Due U.S. regulators are due to make a decision this year on whether to clear Tasigna for newly diagnosed patients, Basel, Switzerland-based Novartis said in April. Like Sprycel, Tasigna already is approved for patients who don’t benefit from Gleevec. New York-based Bristol-Myers plans to seek U.S. regulatory approval this year for Sprycel, the company said in March. The study released today focused on Sprycel’s ability to attack cells with a defective chromosome in the bone marrow called the Philadelphia chromosome, named after the city where it was discovered. In CML, which affects about 5,000 people a year in the U.S., the Philadelphia chromosome produces a gene called Bcr-AbL, which leads to the overproduction of white blood cells. Gleevec, Sprycel and Tasigna stop this chain of events. Cell Signal Target Gleevec was the first drug approved that is designed to suppress a cell signal known to cause cancer rather than poison the tumor cells, as with chemotherapy. Before Gleevec became available, CML patients lived an average of three to five years, according to the American Society of Hematology. With new treatments that have become available over the past decade, 95 percent of CML patients live at least five years. “Gleevec is a great drug, you will never hear me say anything negative about Gleevec, but in this trial Sprycel did even better,” said Renzo Canetta , Bristol-Myers’s vice president of oncology clinical research. “We think Sprycel can offer something more.” In the study, 77 percent of patients taking Sprycel had a confirmed complete cytogenetic response, meaning no cells with the Philadelphia chromosome could be found, compared with 66 percent taking Gleevec. An absence of tumor cells is an indicator of longer survival, said Canetta in a telephone interview. The study followed 519 newly diagnosed patients for at least 12 months. Side Effects Patients given Sprycel were more likely to have a loss of platelets and fluid build-up in the lungs while patients taking Gleevec were more likely to have fluid retention under the skin. Patients taking Gleevec were also more likely to have nausea, rash and muscle pain. Doctors will probably need longer-term data on the benefit of Sprycel and Tasigna over Gleevec for 24 to 36 months before they routinely prescribe the newer treatments as a first-line therapy, said Seamus Fernandez , an analyst with Leerink Swann & Co. in a research report. Price may also keep doctors and patients on Gleevec, said Kantarjian. When generic copies of Gleevec enter the market in 2015 it will cause the price to fall from its average wholesale price of $4,340 for a month’s supply. That price difference could sway some patients to try Gleevec first instead of Sprycel, Kantarjian said. The wholesale price of Sprycel is $6,950 at the 100-milligram dose, Bristol-Myers said. Gleevec Still ‘Reassuring’ “I don’t think this is going to be the end of Gleevec,” Kantarjian said in a telephone interview. “The long-term follow up with Gleevec is very reassuring. Gleevec will also become generic in four to five years so the price difference could become significant.” Bristol-Myers also reported data today that showed its experimental skin cancer drug ipilimumab almost doubled the number of patients alive after two years compared with another experimental treatment called gp100, developed by the National Cancer Institute. Bristol-Myers said it hopes to start selling the medicine by the end of 2012. If approved, ipilimumab could generate more than $1 billion in annual sales, analysts said. To contact the reporter responsible for this story: Shannon Pettypiece at spettypiece@bloomberg.net .

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New Orleans Judge Sells Investments to Avoid Oil Spill Conflict

June 4, 2010

By Laurel Brubaker Calkins June 4 (Bloomberg) — A New Orleans federal judge presiding over lawsuits related to the Gulf of Mexico oil spill said he sold his investment in companies linked to the disaster to avoid any appearance he might be biased. “So there is no perception of a conflict in these cases, yesterday I instructed my broker to sell the few Transocean and Halliburton bonds in my account,” U.S. District Judge Carl Barbier said in an e-mail. BP Plc and Transocean Ltd. oil-spill lawsuits may be combined before a judge from outside the Gulf Coast states, because judges in the region are withdrawing from cases, citing conflicts of interest. Six of 12 active judges assigned to the federal judicial district based in New Orleans already have removed themselves from spill-damage lawsuits, according to a court official and public records. The judges found conflicts tied to oil investments or personal relationships with lawyers or companies involved. Several additional federal judges in districts based in Lafayette, Louisiana, Mobile, Alabama and Pensacola, Florida, have also disqualified themselves from oil-spill cases, according to public records. Barbier said the judicial code of conduct forbids federal judges from owning common stock in a corporation involved in any case that comes before them. ‘Not Required’ “However, recusal is not required if the stock is part of a mutual fund unless the judge participates in the management of the fund,” Barbier said. “Nor is recusal required because of ownership of debt instruments such as corporate debentures or bonds.” Barbier’s portfolio contained Transocean Sedco Forex Notes and Halliburton Co. debentures, according to financial disclosure forms posted by Judicial Watch, a self-styled conservative advocacy group based in Washington. More than 170 proposed class-action lawsuits, representing potentially thousands of claims, have been filed in courthouses from Texas to Florida. The plaintiffs include fishing industry workers, property owners and coastal businesses harmed by the oil spill caused by the sinking of the Deepwater Horizon in April. BP, the owner of the offshore lease, and Transocean, the rig owner, are named in virtually all the cases. Halliburton Energy Services Inc., which provided cementing services to the well, and Cameron International Corp. , which supplied blowout prevention equipment, are also named in most of the lawsuits. Federal Judicial Panel A federal judicial panel will hear arguments in July over whether all oil-spill cases should be consolidated into a single multidistrict litigation proceeding before one judge. One group of plaintiffs’ lawyers has asked that a judge be brought in from outside the Gulf Coast to preside over the oil- spill litigation, because of the number of judges within the region stepping aside over conflicts of interest. “Plaintiffs have been informed that most or all of the judges in the district have a conflict and cannot preside” over the oil-spill cases, lawyers with Weitz & Luxenberg PC of New York, said in a request for the multidistrict-litigation panel to consolidate the cases in New Orleans, which the lawyers called “the epicenter of this disaster.” The attorneys suggested U.S. District Judge Shira Scheindlin , also of New York, be brought to Louisiana to preside over the combined spill cases. Scheindlin previously handled the consolidation of more than 200 lawsuits over drinking water supplies contaminated by a gasoline additive. Some of the world’s largest energy companies were defendants in that litigation, including a unit of BP, the company with primarily liability for damages from the Gulf spill. The case is In Re: Oil Spill By the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, U.S. Judicial Panel on Multidistrict Litigation, MDL-2179, Washington. To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com .

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