investigation

North Korea Sank South’s Warship, Panel Says, Putting Pressure on China

May 19, 2010

By Bomi Lim May 20 (Bloomberg) — North Korea was behind the torpedo attack that sank one of South Korea’s warships in March, a multinational panel said, a finding that puts pressure on China to support international sanctions against its political ally. “The evidence points overwhelmingly to the conclusion that the torpedo was fired by a North Korean submarine,” the investigation team for the March 26 sinking, which claimed the lives of 46 sailors, said today in a statement. “There is no other plausible explanation.” The 1,200-ton Cheonan was split apart by an “external underwater explosion caused by a torpedo made in North Korea,” said the 25-member team, which included experts from the U.S., U.K., Sweden and Australia. Evidence tying North Korea to the sinking, the deadliest attack blamed on the nation in more than two decades, may add weight to efforts by the U.S., Japan and South Korea to isolate the regime of Kim Jong Il . China, which has veto power on the United Nations Security Council, is the main ally of North Korea, providing the trade and aid that keeps the regime afloat. U.S. Secretary of State Hillary Clinton is to visit South Korea next week, followed by the leaders of China and Japan. South Korean President Lee Myung Bak held telephone conversations this week with his counterparts in the U.S. and Japan, and said the investigation team secured “definitive evidence that no one can deny.” The investigation team said it has collected “conclusive evidence” of torpedo parts with markings in the Korean language that are consistent with those seen on a previously obtained North Korean torpedo. The parts also matched the technical drawings and specifications in North Korea’s pamphlets used for overseas buyers of military equipment, the team said. Torpedoes from Russia and China carry markings in their own languages, the report said. Intelligence reports confirmed that a submarine group, together with a support ship, left a North Korean base 2-3 days before the attack and returned to base 2-3 days afterwards. Submarines from neighboring countries were all in or near their home bases, the report said. North Korea said yesterday South Korea’s accusation that the communist country sank the ship was a “smear campaign” and vowed to counter any military move. North Korea on April 17 denied it had anything to do with the incident near the western sea border, where naval skirmishes occurred in 1999, 2002 and November last year. South Korea may raise the issue at the UN Security Council, Foreign Minister Yu Myung Hwan said on April 20. North Korea is already under UN sanctions banning arms trade after carrying out its second nuclear test in 2009. China is North Korea’s principal trading partner and major ideological ally, having fought alongside the country in its 1950-1953 war against South Korean and U.S.-led UN troops. About 28,500 U.S. soldiers are still stationed in South Korea. To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

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Toyota Study Finds No Evidence Electronics Caused Acceleration, Lentz Says

May 19, 2010

By Jeff Plungis May 19 (Bloomberg) — Toyota Motor Corp. hasn’t found any electronics flaws to explain sudden, unintended acceleration after examining more than 2,000 vehicles, the company’s U.S. sales chief will tell a House panel tomorrow. Toyota conducted 600 on-site inspections and more than 1,400 at its dealerships, James Lentz , president of Toyota Motor Sales USA Inc., said in remarks prepared for a House Energy and Commerce Committee hearing and released today. “Significantly, none of these investigations have found that our Electronic Throttle Control System with intelligence was the cause,” Lentz said. Toyota, the world’s largest automaker, has been the subject of a series of congressional hearings since February for its handling of sudden-acceleration cases. The Toyota City, Japan- based automaker has recalled more than 8 million vehicles worldwide to fix sticky pedals and misshapen floor mats linked to the flaw. Some complaints about acceleration came from customers who double- or triple-stacked floor mats, Lentz said in the prepared remarks. The company needs to tell customers that higher engine speeds are normal when vehicles are being started in the cold or when air conditioning kicks in, he said. Some customers had concerns about differences in how cars drive after software updates, while others have complained about how repaired accelerator pedals feel, Lentz said. Toyota has completed more than 3.5 million recall repairs, Lentz said. With a new quality-assurance chief based in North America, its design, manufacturing and after-market support will be more effective, he said. In cases where company examinations haven’t turned up any evidence of a problem, Toyota will closely monitor the customer’s complaints for further investigation, Lentz said. To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net .

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Banks, Ratings Agencies Said to Have Been Subpoenaed by New York’s Cuomo

May 13, 2010

By Karen Freifeld May 13 (Bloomberg) — Goldman Sachs Group Inc., Morgan Stanley, UBS AG and five other banks were subpoenaed by New York Attorney General Andrew Cuomo over whether they misled ratings agencies about mortgage-backed securities, according to a person familiar with the investigation. Cuomo is probing the relationships between the banks and the major ratings agencies, which also were subpoenaed, said the person, who declined to be identified because the investigation is ongoing. The subpoenas were sent yesterday, the person said. State and federal regulators since at least 2008 have been looking into why Moody’s Investors Service, Standard & Poor’s and Fitch Ratings gave top grades to subprime-mortgage backed securities and collateralized debt obligations that later plummeted in value. Earlier today, the New York Times reported the subpoenas. To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net

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Andrew Cumo Investigating Whether Banks Duped Rating Agencies

May 12, 2010

NEW YORK — The New York attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities, according to a person familiar with the investigation. Attorney General Andrew Cuomo is trying to figure out if banks provided the agencies with false information in order to get better ratings on the risky securities, said the person, who spoke on condition of anonymity because the investigation has not been made public. Cuomo’s office is investigating Goldman Sachs Group Inc., Morgan Stanley, UBS AG, Citigroup Inc., Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now part of Bank of America Corp. Spokesmen from the banks were immediately available to comment. During the housing boom, Wall Street banks often packaged pools of risky subprime mortgages together. The securities were then typically given top-notch ratings and investors purchased them, in part, because of their high ratings. The ratings, given out by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, are used as a guide for investors to judge how risky an investment might be. As the housing market collapsed and more customers fell behind on repaying their mortgages, the securities began to fail. The securities have been widely blamed for exacerbating the credit crisis and costing investors and the banks themselves billions of dollars in losses. The ratings agencies have come under fire for having given such high ratings to securities that soured. The attorney general’s probe comes as federal regulators are investigating whether some of the banks misled investors when marketing and selling the securities and other investments that were tied to mortgages. The Securities and Exchange Commission charged Goldman Sachs with fraud over its packaging of mortgage securities. Goldman is facing a separate criminal investigation into the same securities. Goldman has denied the charges and plans to defend itself. Earlier this week it was reported that federal prosecutors are investigating whether Morgan Stanley misled investors about its role in a pair of $200 million derivatives whose performance was tied to mortgage-backed securities. The increased scrutiny over how banks managed, packaged and portrayed mortgage securities and derivatives comes as Congress discusses a major overhaul of financial regulations. Politicians have said an overhaul would add more transparency to investments and trading.

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Andrew Cumo Investigating Whether Banks Duped Rating Agencies

May 12, 2010

NEW YORK — The New York attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities, according to a person familiar with the investigation. Attorney General Andrew Cuomo is trying to figure out if banks provided the agencies with false information in order to get better ratings on the risky securities, said the person, who spoke on condition of anonymity because the investigation has not been made public. Cuomo’s office is investigating Goldman Sachs Group Inc., Morgan Stanley, UBS AG, Citigroup Inc., Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now part of Bank of America Corp. Spokesmen from the banks were immediately available to comment. During the housing boom, Wall Street banks often packaged pools of risky subprime mortgages together. The securities were then typically given top-notch ratings and investors purchased them, in part, because of their high ratings. The ratings, given out by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, are used as a guide for investors to judge how risky an investment might be. As the housing market collapsed and more customers fell behind on repaying their mortgages, the securities began to fail. The securities have been widely blamed for exacerbating the credit crisis and costing investors and the banks themselves billions of dollars in losses. The ratings agencies have come under fire for having given such high ratings to securities that soured. The attorney general’s probe comes as federal regulators are investigating whether some of the banks misled investors when marketing and selling the securities and other investments that were tied to mortgages. The Securities and Exchange Commission charged Goldman Sachs with fraud over its packaging of mortgage securities. Goldman is facing a separate criminal investigation into the same securities. Goldman has denied the charges and plans to defend itself. Earlier this week it was reported that federal prosecutors are investigating whether Morgan Stanley misled investors about its role in a pair of $200 million derivatives whose performance was tied to mortgage-backed securities. The increased scrutiny over how banks managed, packaged and portrayed mortgage securities and derivatives comes as Congress discusses a major overhaul of financial regulations. Politicians have said an overhaul would add more transparency to investments and trading.

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U.S. Stocks Tumble on Concern Over Europe, Trading Systems

May 7, 2010

By Rita Nazareth May 7 (Bloomberg) — U.S. stocks slid, completing the biggest weekly decline in more than a year, after concern that Europe’s debt crisis is worsening triggered a plunge yesterday which undermined confidence in financial trading mechanisms. American Express Co. , Hewlett-Packard Co. and Cisco Systems Inc. lost more than 3 percent to lead declines in the Dow Jones Industrial Average. Apple Inc. lost 4.2 percent as Nokia Oyj said it sued the maker of iPhone and iPad patent infringement. All 10 industry groups in the Standard & Poor’s 500 Index fell today and benchmark gauges of U.S. equities erased their gains for 2010. “It’s a confidence crisis,” said Quincy Krosby , chief market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees about $667 billion. “You’ve got yourself in a vortex of negativity in Europe. In the U.S., the investigation of yesterday’s trading is definitely an overhang. It’s a very precarious scenario. The market is waiting for a viable solution.” The Standard & Poor’s 500 Index , which sank 3.2 percent yesterday for its biggest loss in a year, tumbled another 1.5 percent to 1,110.88 at the 4 p.m. close today in New York. The Dow fell 139.89 points, or 1.3 percent, to 10,380.43 after tumbling as much as 279 points. The VIX , as the Chicago Board Options Exchange Volatility Index is known, jumped 25 percent to 40.95, the highest level in a year. The VIX surged 86 percent this week, the most in its 20-year history. $1 Trillion Dip Yesterday’s selloff briefly erased more than $1 trillion in market value from U.S. stocks and sent the Dow down almost 1,000 points before equities pared declines. Regulators plan to examine whether securities professionals triggered yesterday’s stock-market plunge or exploited the turmoil to profit illegally, two people with direct knowledge of the matter said. One Securities and Exchange Commission memo, according to people who saw it, discusses a theory raised yesterday by NYSE Euronext spokesman Ray Pellecchia , who said sudden price moves in multiple stocks reached so-called liquidity replenishment points. That prompted the exchange to slow trading in those shares as it tried to ensure an orderly market. Such incidences allow other exchanges to ignore NYSE price quotes. Trades sent to electronic networks then fueled the drop, Larry Leibowitz , chief operating officer of NYSE Euronext, said. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the decline snowballed as orders went to venues lacking liquidity to match them, he said in an interview yesterday. Canceled Trades Nasdaq OMX Group Inc. said it will cancel trades of 296 securities that fell or rose more than 60 percent from their prices at 2:40 p.m. New York time yesterday, just before U.S. equities plummeted. The S&P 500 lost 6.4 percent this week and the Dow tumbled 5.7 percent, the biggest declines for both since early March 2009. The S&P 500 is still up 64 percent from its 12-year low that month. The biggest U.S. fund managers say the bull market in stocks should weather Europe’s widening sovereign debt crisis even as it spurs the largest surge in volatility since the collapse of Lehman Brothers Holdings Inc. Employment in the U.S. increased in April by the most in four years and the unemployment rate unexpectedly rose as thousands of people entered the labor force, indicating the recovery is becoming self-sustaining. Payrolls jumped 290,000 last month, more than the median estimate of economists surveyed by Bloomberg News, after a revised 230,000 increase in March, the Labor Department said. The jobless rate rose to 9.9 percent last month from 9.7 percent. ‘Bull Market Is Intact’ “The bull market is intact,” said James Paulsen , who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “There’s economic momentum now. Volatility is going to stay elevated for a while, but there’s a chance we see new highs for stocks before the year is out.” While equities may post more losses as countries from Greece to Spain struggle to cut deficits, managers at Birinyi Associates Inc. and First Citizens BancShares Inc. say declines are a buying opportunity. The retreat has made American stocks more attractive by reducing valuations as the economy and corporate profits recover, said Thomas Lee , chief U.S. equity strategist at JPMorgan Chase & Co. Technology shares had the biggest decline in the S&P 500 among 10 industries, dropping 2.3 percent. Apple fell 4.2 percent to $235.86. Nokia said it sued the company in Wisconsin for infringement of Nokia patents processed and transmitted by Hugin AS. Leap Wireless Leap Wireless International Inc. slumped 15 percent to $14.26. Citigroup Inc. cut its rating on the pay-as-you-go mobile-phone carrier to “hold” from “buy” and Credit Suisse Group AG advised investors to bet against the stock. Bigger rival MetroPCS Communications Inc. dropped 11 percent to $7.15. AES Corp. plunged 7.7 percent to $9.89. The U.S. power producer with operations in more than two dozen countries lowered its 2010 forecast, projecting earnings excluding some items of 95 cents a share at most. That trailed the average analyst estimate of $1.02. “Volatility is going to be with us,” said Art Hogan , chief market analyst at New York-based Jefferies & Co. “We might catch a bit of a rally because stocks are attractively valued and the domestic economy is better than we thought. But a lot of what caused the selloff is still there. People will be nervous.” To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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Massey Asks Board Member Gabrys to Investigate Mining Firm’s Safety Record

May 4, 2010

By Mario Parker May 4 (Bloomberg) — Massey Energy Co. , owner of the West Virginia coal mine where 29 people were killed last month, asked board member Richard Gabrys to lead an investigation into the company’s safety record and the circumstances surrounding an FBI probe of the accident. Gabrys will lead a committee to examine the facts related to the accident at the Richmond, Virginia-based company’s Upper Big Branch mine and the Federal Bureau of Investigation’s inquiry. He will provide an initial report at the company’s May 18 annual meeting , Massey said in a statement. “We have asked the Gabrys Committee to examine Massey’s track record on safety, facts related to the UBB tragedy and the related investigations by various agencies, including the FBI,” Massey board director Bobby Inman wrote in a letter to CTW Investment Group. CTW yesterday asked Massey to convene a special committee of independent directors to investigate the circumstances and facts surrounding an FBI probe into the April 5 blast at Upper Big Branch, located in Montcoal, West Virginia, the worst U.S. coal mining disaster in 40 years. Massey said the committee will “have access to outside legal counsel and may, if it so chooses, retain relevant experts,” which it hasn’t done so far. CTW, which last month asked for the resignation of Massey Chief Executive Officer Don Blankenship , said Gabrys heading the investigation is “highly problematic” because he sits on the board’s safety committee. FBI Probe “We believe Mr. Gabrys should be disqualified to serve as chair,” CTW said. Massey said the investment group is “waging a politically motivated campaign” to disrupt Massey and its board. The company is being investigated by the FBI for possible bribery of state and federal inspectors, according to a person familiar with the probe. More than a dozen current and former employees have been interviewed by the FBI, a second person familiar with the matter, who wasn’t authorized to speak publicly, said April 30. Massey said in an April 30 statement that it has “no knowledge of criminal wrongdoing” and that it’s not uncommon for a major accident to lead to a “comprehensive investigation” by law enforcement agencies. CTW Investment Group works with pension funds that hold Massey shares. Massey fell $2.12, or 5.7 percent, to $35.37 on the New York Stock Exchange. The shares have dropped 35 percent since April 5. To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net .

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American Citizen From Pakistan Faces Charges Over Times Square Bomb Plot

May 4, 2010

By Henry Goldman and Mark Tannenbaum May 4 (Bloomberg) — A U.S. citizen of Pakistani origins is due in a New York court today to face charges over the attempted car bombing in Times Square on May 1. Faisal Shahzad will appear in Manhattan federal court on “formal charges,” the U.S. attorney’s office for the southern district of New York said in an e-mailed statement, without being more specific. Agents from the Department of Homeland Security arrested Shahzad at New York’s John F. Kennedy International Airport last night as he was attempting to board a flight to Dubai, U.S. Attorney General Eric Holder said at an early morning news conference in Washington. The announcement came less than three days after a botched bombing attempt that led police to evacuate parts of Times Square. “This investigation is ongoing, as are our attempts to gather useful intelligence, and we continue to pursue a number of leads,” Holder said. “But it’s clear that the intent behind this terrorist act was to kill Americans.” Shahzad had recently returned from a five-month trip to Pakistan, where he had a wife, the Associated Press reported citing unidentified law enforcement officials. Pakistan’s Dawn television reported today that the suspect had family links in the port city of Karachi, and visited it last year. Homeland Security Secretary Janet Napolitano , in an interview on NBC TV, said it’s “premature to rule in or out” links to international terrorism. Investigators have no evidence that Pakistani Taliban sympathizers were responsible for the attempt, although a group describing itself as such took credit for it, Police Commissioner Raymond Kelly said. Passengers Removed Dubai-based Emirates Airlines said in an e-mailed statement today that U.S. authorities removed three passengers from a New York to Dubai flight last night and carried out “full security procedures” including the screening of the plane, passengers and baggage. Agents from the Federal Bureau of Investigation and New York City police detectives arrested Shahzad for “allegedly driving a car bomb into Times Square on the evening of May 1,” the Department of Justice said in a statement today. The 1993 Nissan Pathfinder was sold for cash about three weeks ago at a Connecticut shopping mall in a sale arranged through the Craigslist website, CNN reported, citing an unidentified person in law enforcement with knowledge of the investigation. Investigators interviewed the former owner of the bomb- carrying sport-utility vehicle, New York City Mayor Michael Bloomberg said. The person was tracked through the car’s vehicle identification number, which was stripped from the dashboard, Police Commissioner Raymond Kelly said. The number is also typically stamped on parts such as the engine block. ‘Intended to Terrorize’ The attempted bombing “was intended to terrorize,” Robert Gibbs , the White House press secretary, said yesterday. Gibbs said today that President Barack Obama was notified about Shahzad’s arrest at around midnight. The intended detonator, Kelly said, was a can filled with consumer-grade fireworks. The car also held two containers of gasoline and three propane tanks, wired with two clocks, the commissioner said. A man described as about 40 years old was seen on a neighborhood surveillance camera as he hurried through Shubert Alley , a pedestrian walkway between West 44th and West 45th Streets, steps from where the explosive-laden car was parked on May 1, he said. The man can be seen on the video removing a dark shirt, revealing a red T-shirt underneath, Kelly said. He placed the outer shirt in a bag and walked from the scene “in a furtive manner,” the commissioner said. Safe as Ever Police also collected images of the vehicle as it traveled along West 45th Street before being left at a curb near several Broadway theaters, the mayor said. “This city is as safe as it’s ever been,” Bloomberg said. “Is it perfectly safe? No, but we always will have events, we’ve had 11 or so in the last eight years, and every time we have responded appropriately. We keep changing our procedures, we keep studying what happens overseas, and we so far have done the right thing.” The police presence has been increased in the Times Square area. Bloomberg urged tourists and New Yorkers to continue visiting the area and “enjoy a Broadway show.” The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; Mark Tannenbaum at mtannen@bloomberg.net .

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American Citizen From Pakistan Faces Charges Over Times Square Bomb Plot

May 4, 2010

By Henry Goldman and Mark Tannenbaum May 4 (Bloomberg) — A U.S. citizen of Pakistani origins is due in a New York court today to face charges over the attempted car bombing in Times Square on May 1. Faisal Shahzad will appear in Manhattan federal court on “formal charges,” the U.S. attorney’s office for the southern district of New York said in an e-mailed statement, without being more specific. Agents from the Department of Homeland Security arrested Shahzad at New York’s John F. Kennedy International Airport last night as he was attempting to board a flight to Dubai, U.S. Attorney General Eric Holder said at an early morning news conference in Washington. The announcement came less than three days after a botched bombing attempt that led police to evacuate parts of Times Square. “This investigation is ongoing, as are our attempts to gather useful intelligence, and we continue to pursue a number of leads,” Holder said. “But it’s clear that the intent behind this terrorist act was to kill Americans.” Shahzad had recently returned from a five-month trip to Pakistan, where he had a wife, the Associated Press reported citing unidentified law enforcement officials. Pakistan’s Dawn television reported today that the suspect had family links in the port city of Karachi, and visited it last year. Homeland Security Secretary Janet Napolitano , in an interview on NBC TV, said it’s “premature to rule in or out” links to international terrorism. Investigators have no evidence that Pakistani Taliban sympathizers were responsible for the attempt, although a group describing itself as such took credit for it, Police Commissioner Raymond Kelly said. Passengers Removed Dubai-based Emirates Airlines said in an e-mailed statement today that U.S. authorities removed three passengers from a New York to Dubai flight last night and carried out “full security procedures” including the screening of the plane, passengers and baggage. Agents from the Federal Bureau of Investigation and New York City police detectives arrested Shahzad for “allegedly driving a car bomb into Times Square on the evening of May 1,” the Department of Justice said in a statement today. The 1993 Nissan Pathfinder was sold for cash about three weeks ago at a Connecticut shopping mall in a sale arranged through the Craigslist website, CNN reported, citing an unidentified person in law enforcement with knowledge of the investigation. Investigators interviewed the former owner of the bomb- carrying sport-utility vehicle, New York City Mayor Michael Bloomberg said. The person was tracked through the car’s vehicle identification number, which was stripped from the dashboard, Police Commissioner Raymond Kelly said. The number is also typically stamped on parts such as the engine block. ‘Intended to Terrorize’ The attempted bombing “was intended to terrorize,” Robert Gibbs , the White House press secretary, said yesterday. Gibbs said today that President Barack Obama was notified about Shahzad’s arrest at around midnight. The intended detonator, Kelly said, was a can filled with consumer-grade fireworks. The car also held two containers of gasoline and three propane tanks, wired with two clocks, the commissioner said. A man described as about 40 years old was seen on a neighborhood surveillance camera as he hurried through Shubert Alley , a pedestrian walkway between West 44th and West 45th Streets, steps from where the explosive-laden car was parked on May 1, he said. The man can be seen on the video removing a dark shirt, revealing a red T-shirt underneath, Kelly said. He placed the outer shirt in a bag and walked from the scene “in a furtive manner,” the commissioner said. Safe as Ever Police also collected images of the vehicle as it traveled along West 45th Street before being left at a curb near several Broadway theaters, the mayor said. “This city is as safe as it’s ever been,” Bloomberg said. “Is it perfectly safe? No, but we always will have events, we’ve had 11 or so in the last eight years, and every time we have responded appropriately. We keep changing our procedures, we keep studying what happens overseas, and we so far have done the right thing.” The police presence has been increased in the Times Square area. Bloomberg urged tourists and New Yorkers to continue visiting the area and “enjoy a Broadway show.” The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; Mark Tannenbaum at mtannen@bloomberg.net .

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U.S. Citizen of Pakistani Origin Arrested in Times Square Bomb Plot Probe

May 4, 2010

By Henry Goldman and Mark Tannenbaum May 4 (Bloomberg) — U.S. law enforcement authorities said they arrested a naturalized American citizen from Pakistan in connection with the attempted car bombing in Times Square this past weekend. Agents from the Department of Homeland Security arrested Faisal Shahzad at New York’s John F. Kennedy International Airport as he was attempting to board a flight to Dubai, U.S. Attorney General Eric Holder said at an early morning news conference in Washington. The announcement came less than three days after a botched bombing attempt that led police to evacuate parts of Times Square. “This investigation is ongoing, as are our attempts to gather useful intelligence, and we continue to pursue a number of leads,” Holder said. “But it’s clear that the intent behind this terrorist act was to kill Americans.” Agents from the Federal Bureau of Investigation and New York City police detectives arrested Shahzad for “allegedly driving a car bomb into Times Square on the evening of May 1,” the Department of Justice said in a statement early today. The 1993 Nissan Pathfinder was sold for cash about three weeks ago at a Connecticut shopping mall in a sale arranged through the Craigslist website, CNN reported, citing an unidentified person in law enforcement with knowledge of the investigation. Vehicle ID Investigators interviewed the former owner of the bomb- carrying sport-utility vehicle, New York City Mayor Michael Bloomberg said. The person was tracked through the car’s vehicle identification number, which was stripped from the dashboard, Police Commissioner Raymond Kelly said. The number is also typically stamped on parts such as the engine block. The attempted bombing “was intended to terrorize, and I would say that whomever did that would be categorized as a terrorist,” Robert Gibbs , the White House press secretary said yesterday. The intended detonator, Kelly said, was a can filled with consumer-grade fireworks. The car also held two containers of gasoline and three propane tanks, wired with two clocks, the commissioner said. A man described as about 40 years old was seen on a neighborhood surveillance camera as he hurried through Shubert Alley , a pedestrian walkway between West 44th and West 45th Streets, steps from where the explosive-laden car was parked May 1, he said. ‘Furtive Manner’ The man can be seen on the video removing a dark shirt, revealing a red T-shirt underneath, Kelly said. He placed the outer shirt in a bag and walked from the scene “in a furtive manner,” the commissioner said. Police also collected images of the vehicle as it traveled along West 45th Street before being left at a curb near several Broadway theaters, the mayor said. Investigators have “no evidence” that a group of Pakistani Taliban sympathizers were responsible for the attempt, although a self-described group took credit for it, Kelly said. He noted authorities have ruled out the group’s involvement in other attempted and successful attacks around the world after receiving similar messages in the past. Homeland Security Secretary Janet Napolitano , in an interview on NBC TV, said it’s “premature to rule in or out” that the bombing attempt is linked to international terrorism. “This city is as safe as it’s ever been,” Bloomberg said. “Is it perfectly safe? No, but we always will have events, we’ve had 11 or so in the last eight years, and every time we have responded appropriately. We keep changing our procedures, we keep studying what happens overseas, and we so far have done the right thing. And you can never guarantee 100 percent.” The police presence has been increased in the Times Square area. Bloomberg urged tourists and New Yorkers to continue visiting the area and “enjoy a Broadway show.” The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; Mark Tannenbaum at mtannen@bloomberg.net .

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Google’s $750 Million AdMob Purchase Said to Be Opposed by U.S. FTC Staff

April 30, 2010

By Jeff Bliss and Dina Bass April 30 (Bloomberg) — The U.S. Federal Trade Commission staff has recommended filing an antitrust suit challenging Google Inc. ’s $750 million acquisition of AdMob Inc., according to three people familiar with the matter. The recommendation was submitted to the five-member commission, which will decide whether to follow the staff’s advice or approve the deal. The people familiar with the matter spoke on condition of anonymity. Peter Kaplan, an FTC spokesman, declined to comment. The FTC staff signaled last month it was leaning toward urging a court challenge when it was disclosed the agency was seeking sworn declarations from Google’s competitors and advertisers. “We’re continuing to talk with the FTC about our acquisition of AdMob,” said Google spokesman Adam Kovacevich . “We’re confident that they’ll conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes.” The concern is that Mountain View, California-based Google, owner of the world’s most popular web search engine, would reduce competition in the market for advertising on mobile phones. AdMob, based in San Mateo, California, sells ads that appear on web pages and applications on mobile phones. Advertisers have expressed concern the deal would lead to higher rates. “We want it to be competitive,” said Simon Buckingham , chief executive officer of Appitalism Inc., a New York-based software developer. “I’m not going to have any choices” if the purchase goes through. Mobile Advertising Google’s purchase of AdMob would form the largest mobile- advertising company. The companies combined had 21 percent of the U.S. market in 2009, according to Karsten Weide , an analyst with researcher IDC in San Mateo. The market has been doubling or more in size annually, Weide said. A bipartisan group of House lawmakers today asked for an FTC briefing on the investigation. “The need for a thorough review is particularly pressing given Google’s dominant position in search advertising” and “its growing influence over other forms of online advertising,” the lawmakers wrote in a letter to House Energy and Commerce Committee Chairman Henry Waxman , a California Democrat. Democrats John Barrow of Georgia, Frank Pallone of New Jersey and Bruce Braley of Iowa and Republicans Steve Scalise of Louisiana and Mike Rogers of Michigan signed the letter. On April 12, Google Chief Executive Officer Eric Schmidt said Apple Inc.’s move into mobile advertising shows the market is competitive and that federal regulators should permit the AdMob purchase. Apple is planning to offer iAd, an advertising platform to compete with AdMob. To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

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Madoff Sons, Brother Could Face Charges: AP

April 30, 2010

NEW YORK — Federal authorities will charge at least two employees from disgraced financier Bernard Madoff’s former firm in the coming weeks — and Madoff’s brother and two sons could be next, two people familiar with the probe into Madoff’s financial fraud told The Associated Press. Madoff’s brother, Peter, and sons Andrew and Mark — executives in the Madoff firm’s legitimate market-making and proprietary-trading business — are likely to face tax fraud charges later this year, but may escape more serious securities fraud charges if authorities fail to come up with solid evidence they knowingly participated in the massive fraud, the people said. The people, who asked not to be identified because the investigation hasn’t been completed, declined to name the two employees or specify possible charges. Four other employees and an outside accountant already have been charged with helping Madoff pull off a multibillion-dollar Ponzi scheme that spanned decades and burned thousands of investors. The 71-year-old Madoff is serving a 150-year prison term after admitting that his secretive investment advisory service at Bernard L. Madoff Investment Securities never bought any securities. Instead, he created phantom wealth by using new investments to pay returns to existing clients. There was no response to requests for comment Friday from lawyers for Madoff’s brother and sons. The Madoffs have vehemently denied wrongdoing in past bankruptcy court filings and in their attorneys’ statements. The U.S. Attorney’s office in Manhattan declined on Friday to discuss the status of the investigation. Although it doesn’t specify the tax crimes the family could face, a criminal complaint filed in February against Madoff’s operations chief, Daniel Bonventre, implicates Madoff relatives without naming them. Under Bonventre’s watch, it says, the firm “extended more than 15 loans, totaling over $50 million, to Madoff family members and key employees” for the purchase of luxury homes, and “purported to forgive most of these loans after a few years.” The firm, it adds, also “made millions of dollars in payments directly from the Ponzi Scheme Accounts to Madoff, family members and certain employees, including Bonventre. These payments were separate and apart from payments made through the payroll system. … (Bonventre) did not record, or cause others to record, these transactions at all.” Bonventre has pleaded not guilty to charges he banked nearly $300,000 in undeclared income derived from the fraud. The 16-month Madoff investigation is grinding forward, with FBI agents still camped out on the 17th floor of a Manhattan skyscraper that once was home to Madoff’s financial empire. The agents and prosecutors also continue to cultivate Frank DiPascali, a chief Madoff aide, as their star cooperator. As part of a plea deal, DiPascali’s “continued cooperation” has been of “substantial assistance to the government in its investigation and prosecution of others,” prosecutors wrote in a February letter to a federal judge in Manhattan. A trustee liquidating Madoff’s assets has alleged in a civil case that it would have been impossible for the brother and sons not to know about a scheme that enriched the family, and has demanded they return ill-gotten gains to victims. In responding court papers, attorneys for Peter Madoff called the accusations “a sensationalistic attempt to lump together members of the Madoff family and create liability by association.” Likewise, the sons have insisted they were in the dark. Court papers credit them with contacting “authorities within hours of learning of their father’s betrayal of their trust (and that of his investors).” Federal authorities have said in the past that Madoff’s wife Ruth probably won’t be prosecuted because – unlike her sons and brother-in-law – she had no official position or responsibility in the business. ___ Associated Press writer Larry Neumeister contributed to this report.

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Goldman’s Tourre Is Said to Agree to Testify in Senate With CEO Blankfein

April 21, 2010

By Lorraine Woellert April 21 (Bloomberg) — Fabrice Tourre , the Goldman Sachs Group Inc. banker at the center of fraud allegations against the firm, has agreed to testify and may defend his actions at a Senate hearing next week, said two people briefed on the plan. Tourre, who was accused by the U.S. Securities and Exchange Commission of misleading investors in a collateralized debt obligation, will appear before the Senate Permanent Subcommittee on Investigations on April 27 along with Goldman Sachs Chief Executive Officer Lloyd Blankfein , said the people, who declined to be identified because the plan isn’t public. Tourre, 31, will tell the panel he did nothing wrong, one of the people said. Goldman Sachs, the most profitable firm in Wall Street history, was sued by the SEC on April 16. Regulators claimed the company and Tourre misled investors by failing to disclose that Paulson & Co., the hedge fund run by billionaire John Paulson , helped select loans for the CDO and then bet against them. Tourre, the only individual named in the SEC case, was “principally responsible” for creating and marketing the CDO known as Abacus 2007-AC1, the agency said in its complaint. “The whole building is about to collapse anytime now,” Tourre wrote to a friend in a January 2007 e-mail, according to the complaint. “Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!” ‘All Necessary Steps’ Goldman Sachs, which is contesting the SEC’s claims, has said it “will take all necessary steps to defend the firm.” Tourre and Blankfein have agreed to speak publicly because they want to show Goldman Sachs has nothing to hide, the people said. Tourre “believes that he indicated” to investors that Paulson was interested in taking a “short” position on the deal, meaning he was betting against it, Greg Palm , Goldman Sachs’s co-general counsel, said this week. Pamela Chepiga , Tourre’s lawyer at Allen & Overy LLP, didn’t return phone calls and e-mails seeking comment. Goldman Sachs spokesman Lucas van Praag didn’t respond to a request for comment. Senator Carl Levin , the Michigan Democrat who leads the investigation subcommittee, is holding hearings to explore the causes of the worst economic crisis since World War II. Witnesses from credit-rating companies Moody’s Corp. and Standard & Poor’s will testify on April 23. Tourre will be interviewed by the committee’s staff before appearing at the hearing, one of the people said. The panel’s chief counsel, Elise Bean, declined to comment. Risky Strategy The strategy of speaking publicly, especially before a panel of politicians, carries risks, said Benjamin Brafman , a criminal defense lawyer in New York. “The atmosphere in the financial sector today is very bad, the cosmetics are horrific,” Brafman said in an interview. “Some of the people on this committee are going to be gunning for anyone who shows up.” Brafman said the complexities of the case could trip up any witness who isn’t fully prepared. “You may be truthful with what you have to say but you may not be completely accurate. You are then stuck with a transcript that can always be used against you in future proceedings,” he said. To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net .

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EU Steps Up Pressure on China for Higher Yuan on Concerns About Recovery

April 17, 2010

By Ben Sills and Jonathan Stearns April 17 (Bloomberg) — The European Union added to pressure on China to let its currency rise on concerns that the value of the yuan threatens Europe’s economic recovery. Olli Rehn , EU Monetary Affairs commissioner, called on China to change its stance on its exchange rate and the European Commission, the bloc’s executive arm in Brussels, opened an inquiry into whether the Chinese are paying trade-distorting subsidies to paper manufacturers. “A certain rebalancing of the value of the renminbi would be very important for the global economy and also for the Chinese economy,” Rehn told reporters in Madrid today before a meeting of finance officials from Europe and Asia. “It would be good to see certain reforms in this regard.” China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years. A higher yuan would boost China’s capacity for buying European goods and may trigger a broader adjustment, allowing other Asian countries to let their currencies appreciate without losing competitiveness against the world’s third-biggest economy. European Central Bank council member Axel Weber called for “serious and clear” talks with the Chinese government geared toward securing a higher yuan in a taped television program that aired today on Mexico’s ForoTV network. Chinese Goods The commission’s inquiry focuses on alleged payments to makers of coated fine paper used for books and brochures and follows an investigation into whether the manufacturers sell in Europe at below cost, a practice known as dumping . The EU has imposed anti-dumping duties on dozens of Chinese goods from textiles and chemicals to ironing boards and bicycles while stopping short of ever threatening to apply levies to counter government aid. China is “deeply dissatisfied” with the probe and will “closely monitor” developments in the investigation, the country’s Ministry of Commerce said in a statement posted on its Web site today. The Chinese delegation failed to show up for today’s meeting in Madrid after their travel plans were upset by the volcanic ash cloud that grounded flights across Europe. U.S. lawmakers have urged President Barack Obama to step up pressure on China, accusing officials in Beijing of keeping the currency artificially weak to gain export advantage. Chinese President Hu Jintao told Obama on April 13 in Washington that the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan. Yuan’s Peg The Chinese should allow appreciation to prevent their economy from overheating, according to Singapore Prime Minister Lee Hsien Loong . The yuan’s peg to the U.S. dollar has caused “a lot of angst” even as it helped boost the nation’s exports “temporarily,” Lee said in an interview with the Charlie Rose television show on PBS. “They shifted to a more conservative position over the last two years, and fixed to the U.S. dollar. But after a while, it causes overheating in the economy,” Lee said in the interview. “In this situation, I think they really should revert to where they were before the crisis and allow the yuan to go up gently again.” The Chinese government will decide on the valuation of its currency and is seeking a stable yuan to control speculative capital inflows, Yao Jian , spokesman for the Ministry of Commerce, told reporters April 15. To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.net ; Jonathan Stearns in Madrid at + jstearns2@bloomberg.net .

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Gartmore May Face Client Withdrawals as Manager Investigated, Merrill Says

March 31, 2010

By Andrew Macaskill and Gavin Finch March 31 (Bloomberg) — Gartmore Group Ltd. may suffer client withdrawals following the suspension of Guillaume Rambourg , who helps oversee its two biggest hedge funds, Bank of America Merrill Lynch analyst Philip Middleton said. “Franchise damage would arguably be irrational, but it is, in our view, a scenario worth at least considering,” Middleton said in a note to clients today as he put his “buy” rating on the shares under review. Gartmore’s European hedge funds “have been a flagship product for the company” and are “a key plank of Gartmore’s expansion strategy.” Gartmore plunged 31 percent yesterday following the announcement of the investigation. The shares climbed 3.9 percent to 120.5 pence as of 10:34 a.m. in London trading today. The probe of Rambourg relates “to breaches of internal procedures regarding directing trades,” the firm said in a statement yesterday. It isn’t connected with last week’s arrests of seven people suspected of insider trading, the London-based money manager said. “Gartmore has not identified any information to date which suggests that Gartmore’s clients have suffered any loss as a result of these breaches,” the firm said. Roger Guy will oversee the assets Rambourg managed in the meantime. Caroline Villiers , a spokeswoman for Gartmore, wasn’t immediately available for comment. Rambourg joined Gartmore in 1995 and focused on European equities. He co-managed the firm’s $2.3 billion Alphagen Capella fund with Guy since it started in 2000. The pair managed 8.1 billion pounds ($12.2 billion), 37 percent of Gartmore’s assets and accounted for 40 percent of the firm’s revenue, according to company filings. Rambourg is an essential employee whose departure “could impact more heavily on Gartmore’s business than the loss of others,” according to the company’s prospectus. Rambourg owns about 11.8 million Gartmore shares, making him the second- largest employee investor behind Guy. To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net

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Novum Statement on FSA Insider Trading and Hedge Fund Fraud Case

March 26, 2010

New York (HedgeCo.net) – The Financial Services Authority (FSA) visited the offices of independent UK securities stockbroker, Novum Securities, on the 23 of March in relation to an investigation into a single member of Novum’s staff, who has been with the firm since July 2009. Novum Securities said that they have, “been cooperating fully with the investigation and will continue to do so.” In what is being called the largest insider trading crackdown in Britain’s history, an operation was carried out this week by 143 FSA personnel together with officers from the Serious Organised Crime Agency (SOCA). Documents and computers were seized from both residential and business premises, according to reports. A junior trader at hedge fund Moore Capital was arrested and an employee at Deutsche Bank was also taken for questioning. All together, 6 men were arrested on suspicion of being involved in a sophisticated and long-running insider dealing ring, the FSA said in a statement. Alex Akesson Editor for HedgeCo.net alex@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds ! Tags: Developing Stories , Hedge Fund Fraud , HedgeCo News Related posts No related posts.

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Google Rivals Asked for Statements as FTC Probes Company’s AdMob Purchase

March 10, 2010

By Todd Shields and Dina Bass March 10 (Bloomberg) — U.S. regulators are seeking sworn declarations from Google Inc. competitors and advertisers as part of their probe of the Internet company’s bid to buy AdMob Inc., indicating the government may challenge the deal, said people with direct knowledge of the matter. The Federal Trade Commission is investigating whether Google’s proposed purchase of AdMob would reduce competition in the market for Internet advertising on mobile phones. At least two companies are being asked to sign statements, said the people, who declined to be identified because the probe isn’t being conducted in public. The declarations put on paper information that Google rivals gave the FTC in its investigation of the $750 million purchase of AdMob, announced in November. AdMob sells ads that appear on Web pages and applications on mobile phones. The agency is assessing whether the purchase would let Google parlay its dominance in Internet searches on computers to phones. Agency officials typically collect declarations “when they think there is some significant chance” the agency will ask a court to block a merger, or seek to modify a deal, said Stephen Calkins , a former general counsel at the FTC who is now a professor of law at Wayne State University’s law school in Detroit. Even so, it’s not uncommon for the agency to collect affidavits and then not litigate, he said. FTC Discussions Claudia Bourne-Farrell , an FTC spokeswoman, declined to comment. Google, owner of the most-used Internet search engine, said it is continuing to talk with the FTC and provide information. “We’re not going to discuss the details of that process,” Adam Kovacevich , a spokesman for the Mountain View, California- based company, said in a statement. “We’re confident that they’ll conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes.” Google rose $9.94 to $570.13 at 2:02 p.m. New York time in Nasdaq Stock Market trading. The stock had declined 9.6 percent this year before today. Google and AdMob combined would form the largest mobile- advertising company — the companies combined had 21 percent of the U.S. market in 2009, according to Karsten Weide , an analyst with researcher IDC in San Mateo, California. Google said on Dec. 23 that the agency had asked for more information about the transaction. “It’s difficult to envision a scenario where this development, if true, is positive for Google-AdMob,” said Thomas Ensign , counsel in the antitrust, competition and trade practice of Freshfields Bruckhaus Deringer LLP in Washington. “But it doesn’t necessarily mean the agency is going to challenge the deal.” Google’s negotiations with the FTC may persuade the agency’s staff that the deal won’t harm competition, Calkins said. When the investigation is concluded, it’s up to the agency’s commissioners to decide whether to challenge the deal in court. To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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Ex-McKesson Chairman McCall Gets 10-Year Prison Term for Securities Fraud

March 6, 2010

By Karen Gullo March 6 (Bloomberg) — Former McKesson Corp. Chairman Charles McCall was sentenced to 10 years in prison for participating in a fraud to inflate sales revenue a decade ago that cost investors $8.6 billion, one of the largest white- collar crimes at the time. U.S. District Judge William H. Alsup , at yesterday’s sentencing hearing in San Francisco, also ordered McCall, 65, to pay a $1 million fine. He didn’t require McCall to pay restitution to San Francisco-based McKesson, the largest U.S. drug distributor, saying the company could pursue that in a civil lawsuit against its ex-chairman. The prison term was the minimum sentence allowed for McCall’s crimes and five years less the government sought, Alsup said. The scheme to inflate revenue was created by others, yet McCall let it continue, the judge said. “He knew what was going on even if he wasn’t a co- conspirator,” Alsup said. “He had the duty if not the power to say ‘Stop.’” McCall was convicted in November of five of six counts of securities fraud and circumventing accounting rules for conduct that included hiding backdated sales contracts from auditors. Prosecutors said McCall and others used the contracts to recognize revenue before accounting rules allowed it so the company could meet financial projections. Inflated Revenue The practice improperly inflated revenue figures at San Francisco-based McKesson, the biggest U.S. drug distributor, and HBO & Co., a software maker led by McCall that was acquired by McKesson in 1999. When McKesson disclosed in April 1999 that sales had been prematurely booked, leading to a restatement, the shares lost 47 percent of their value. McCall was indicted in 2003 and was acquitted of conspiracy in 2006 by a federal jury. Jurors in the first trial failed to reach an agreement on accusations of securities fraud, falsifying books and circumventing accounting rules. Prosecutors retried him last year. “He continues to maintain that he didn’t commit a crime” and will appeal his conviction, Ted Wells , McCall’s attorney, said at the hearing yesterday. Five former McKesson executives pleaded guilty in the investigation. The company, which wasn’t named in the criminal cases, agreed to pay $960 million in 2005 to settle investor lawsuits . Jim Lyons , an attorney for McKesson, said the company agreed with a court report prepared to assist Alsup in sentencing that recommended McCall pay $10 million in restitution. The company hasn’t filed a lawsuit against McCall in federal court in Delaware, Lyons said at the hearing. The case is U.S. v. McCall, 3:00-cr-00505, U.S. District Court, Northern District of California (San Francisco). To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net .

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Turkey Jails Eight More Army Officers as Erdogan Prepares to Meet Military

February 25, 2010

By Steve Bryant Feb. 25 (Bloomberg) — A Turkish court ruled that eight more army officers should be jailed pending charges of plotting a coup, in a case that has heightened tension between the Islamist-rooted government and the armed forces. The eight current and retired officers were remanded in custody by the Istanbul court last night, joining another 12 charged the previous day, the state-run Anatolian news agency said. Police detained about 50 officers in nationwide raids this week. President Abdullah Gul is hosting a meeting between top general Ilker Basbug and Prime Minister Recep Tayyip Erdogan in Ankara at 11 a.m. in a bid to ease tensions. Turkish stocks gained after falling the most in two weeks yesterday as the investigation widened divisions between Erdogan and the army, which has ousted four governments since 1960 and sees itself as the defender of Turkey’s secular rules. The prime minister, whose Justice and Development Party has roots in political Islam, says Turkey must reduce army influence in politics to qualify for European Union membership. Gul’s call for a meeting suggests he wants to “soothe the ongoing tension,” Inan Demir , chief economist for Finansbank AS in Istanbul, wrote in an e-mailed report. The meeting may “serve to ease the acute phase of the ongoing political conflict and provide the markets with a much-needed respite.” The main ISE National 100 index gained 1.1 percent at 10:20 a.m. after dropping 3.4 percent yesterday. Yields on two-year Turkish bonds fell 3 basis points after rising 7 points to 9.01 percent yesterday, the highest since Feb. 2. Ibrahim Firtina and Ozden Ornek , former heads of the Air Force and Navy, appeared before the Istanbul court today, the NTV news channel reported. ‘Uncharted Territory’ “Turkey is clearly in uncharted territory now and it is very difficult to predict how this crisis could evolve,” Wolfango Piccoli , analyst for Eurasia Group in London, said in an e-mailed report yesterday. “If the court decides to formally charge Firtina and Ornek and order them to be jailed pending trial, the crisis could further escalate.” Erdogan, who turns 56 tomorrow, has chipped away at the military’s powers since coming to power. He ended army control over the National Security Council in 2003 and that same year ignored the generals’ objections to a United Nations plan for the reunification of Cyprus. Opposition parties yesterday called for early elections to resolve the crisis. Erdogan called an election in 2007 after the army criticized his choice of Abdullah Gul as president because of his Islamist past. Justice won with 47 percent of the vote, the biggest share any Turkish party had drawn in almost 40 years, and promoted Gul to the presidency. Declining Support The party’s vote declined to 39 percent in local polls in March 2009. The next election is due by July 2011. Deputy Prime Minister Bulent Arinc said on Feb. 22 that the government intends to serve its full term. This week’s arrests are the latest in a two-year investigation that has seen scores of ex-officers, journalists and academics jailed and put on trial on charges of planning a coup. They follow a report in the Taraf newspaper on Jan. 21 that army officers drafted a plan in 2003 to stage bombings to undermine confidence in Erdogan’s government. Basbug said on Jan. 25 the allegations were part of a campaign of psychological warfare designed to undermine public trust in the forces. He said the army is committed to democracy and that coups are “a thing of the past.” To contact the reporters on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net ;

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Abuses In Student Debt Industry: Help Us Investigate

February 17, 2010

We at the Investigative Fund are partnering with a team of graduate students at the Stabile Center for Investigative Journalism at Columbia University. The topic of their investigation is the student lending and debt collection industry, and they are asking for your help: We’re interested in hearing if you – or someone you know – have had problems dealing with your debt collector. We’re also interested in your dealings with the government’s mediator, known as the Department of Education’s Ombudsman office. Your stories and tips will help us investigate.

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Abuses In Student Debt Industry: Help Us Investigate

February 17, 2010

We at the Investigative Fund are partnering with a team of graduate students at the Stabile Center for Investigative Journalism at Columbia University. The topic of their investigation is the student lending and debt collection industry, and they are asking for your help: We’re interested in hearing if you – or someone you know – have had problems dealing with your debt collector. We’re also interested in your dealings with the government’s mediator, known as the Department of Education’s Ombudsman office. Your stories and tips will help us investigate.

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Abuses In Student Debt Industry: Help Us Investigate

February 17, 2010

We at the Investigative Fund are partnering with a team of graduate students at the Stabile Center for Investigative Journalism at Columbia University. The topic of their investigation is the student lending and debt collection industry, and they are asking for your help: We’re interested in hearing if you – or someone you know – have had problems dealing with your debt collector. We’re also interested in your dealings with the government’s mediator, known as the Department of Education’s Ombudsman office. Your stories and tips will help us investigate.

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Tokyo Prosecutors May Indict Ozawa Aides, Raising Pressure for His Ouster

February 3, 2010

By Sachiko Sakamaki Feb. 4 (Bloomberg) — Prosecutors today will likely indict three former or current aides to Ichiro Ozawa , the Democratic Party of Japan ’s top campaign strategist, increasing pressure on Prime Minister Yukio Hatoyama to remove him. Tokyo prosecutors will charge DPJ lawmaker Tomohiro Ishikawa , 36, Ozawa aide Takanori Okubo , 48, and former aide Mitsutomo Ikeda, 32, for failing in 2004 to report 400 million yen ($4.4 million), part of which was used to buy land in Tokyo for Ozawa’s fund-raising group, newspapers including the Nikkei reported today without citing anyone. Ozawa will not be charged, the Nikkei said. The case has contributed to Hatoyama’s falling popularity since taking office less than five months ago. He has repeatedly voiced support for Ozawa, who has denied doing anything illegal, and called into question the investigation. The three defendants are in custody and must be charged by today. “Japanese prosecutors don’t act according to political motivation,” said Norio Munakata, a former Tokyo prosecutor who headed the office’s special investigation unit in the early 1990s. “But if there’s no proof of money laundering, the public won’t support the prosecution.” Hatoyama, who is grappling with keeping the world’s second- largest economy from sliding back into recession, has resisted calls for Ozawa to relinquish his post as party secretary- general ahead of July’s elections for the upper house of parliament. Ozawa engineered the DPJ’s landslide lower-house victory in August, when it ousted the Liberal Democratic Party from more than a half-century of almost unbroken government rule. Seventy-six percent of the public thinks Ozawa should quit his post if any aides are indicted, according to a Mainichi newspaper poll published Feb. 1. The survey also said Hatoyama’s approval rating fell to 50 percent from 55 percent last month. Hatoyama drew criticism for his Jan. 16 comment that Ozawa should “fight” the investigation. The next day he said he wasn’t trying to influence the prosecutors’ office, which boasts a conviction rate of more than 90 percent. Ozawa’s troubles began last March when Okubo, his chief accountant, was arrested then indicted for allegedly falsely reporting 35 million yen in donations from Nishimatsu Construction Co. Ozawa, then the party’s head, resisted calls for him to step down for two months before doing so in May. To contact the reporters on this story: ] Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net

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Continental Airlines to Blame Air France for Fatal Concorde Crash at Trial

February 2, 2010

By Heather Smith Feb. 2 (Bloomberg) — Continental Airlines Inc . lawyers at a criminal trial starting today will blame Air France SA for the Concorde crash outside Paris 10 years ago that killed 113 people and hastened the end of supersonic passenger travel. Continental, the fourth-biggest U.S. carrier, will tell jurors in Pontoise, France, that the Air France Concorde caught fire before its tire was torn by a metal strip from a Continental plane. The Houston-based airline’s lawyer, Olivier Metzner , said burn marks on the runway show the tire explosion didn’t cause the crash, for which prosecutors blame Continental. “It’s clear that the Concorde caught fire before meeting it, so it wasn’t due to the wear strip,” Metzner said in an interview last week in Paris. “Since 1980, we have known that the Concorde has problems with its wheels. It was the fault of Air France maintenance.” Concorde flights were grounded for 16 months following the crash, returning to service as air travel demand was in decline following the Sept. 11 terrorist attacks. Traffic never recovered on the supersonic jetliner, favored by celebrities including Princess Diana and former Beatle Paul McCartney . The last commercial flight was in October 2003. The passengers on the July 25, 2000, Air France Flight AF4590 were part of a German charter headed to New York’s John F. Kennedy International Airport to join a cruise to Ecuador. The plane carried 100 passengers and nine crew members, according to court documents describing the investigation. Four people were killed in a hotel the plane crashed into. Image Damage Continental, which is charged with separate counts of manslaughter and injury, could be fined as much as 375,000 euros ($521,000). While lawyers for Air France and Continental said passengers’ families have been financially compensated for their losses, the French airline may ask the court to appoint an expert to assess how much its image suffered following the accident. The French investigation found the plane ran over a wear strip that fell from a Continental DC-10 that had taken off from the same runway. The strip punctured one of the Concorde’s tires, which exploded, sending debris into fuel tanks and causing the fire that crashed the plane, the investigation found. The strip had been improperly attached to its plane and was made of titanium, an unauthorized replacement material, the investigation found, according to court documents. ‘Science Fiction’ “The truth is what the investigators said happened,” Fernand Garnault , a lawyer for Air France, said in an interview last week. Continental’s allegations “are very well-done science fiction.” Paris-based Air France, which bought KLM Royal Dutch Airlines in 2004 to become Europe’s biggest airline, faced some criticism in the report for inadequately responding to six tire explosions since 1995, after previous incidents prompted stronger tires to be added. Nicolas Petteau , an Air France-KLM Group spokesman, referred questions to Garnault. George Hamlin , president of Fairfax, Virginia-based aviation consultant Hamlin Transportation Consulting , said runway debris isn’t an unusual problem and that the French are treating the case differently than the U.S. would have. “This is a criminal matter in France, and in the U.S., it would not be,” Hamlin said. “This is not an unusual problem at airports, it’s called FOD, foreign object damage.” Retired Jets The Concordes were jointly developed by the U.K. and France and put in service in 1976. They were flown by British Airways Plc and Air France and were to herald the new age of supersonic passenger travel. As maintenance costs soared and demand to be one of the 100 passengers on each flight declined, the program faltered and the airlines retired their 12 aging jets, which reached a cruising speed of 1,350 miles an hour, or twice the speed of sound, at a height of 60,000 feet (18 kilometers). Five men are also charged with manslaughter along with Continental. Prosecutors have charged the mechanic who affixed the wear strip and a manager who oversaw the unit at Continental. “Continental Airlines welcomes the opportunity to refute in court the theory that a wear strip from one of its aircraft was the cause of the Concorde accident,” Nick Britton , a spokesman for Continental, said in an e-mail yesterday. “The evidence will show that neither Continental nor its employees were responsible for the accident.” In addition, two men who worked on the Concorde program and a former French civil aviation official are accused of failing to address the chance the Concorde’s wheels could explode following five incidents in 1979 and two in 1993. All deny they were responsible for the deaths and injuries. Overweight Continental will rebut the accusations by criticizing several factors as having combined to produce the accident. The plane was overweight due to excess fuel and improperly accounted for luggage, aggravating the problem, Metzner said, while not challenging that the strip fell from a Continental flight. In addition, a component that holds the wheels at proper angles went missing on one wheel unit after a maintenance check- up four days before the flight. Both factors were dismissed in the investigation report. Continental said they should not have been, and that investigators refused to pursue alternative theories for the crash. “The more a plane is overweight, the more fragile it is,” Metzner said. As for the missing wheel component, “they say that it’s an object that serves no purpose, a decoration. They created a pointless part for the Concorde? All this is just blah blah blah.” To contact the reporter on this story: Heather Smith in Paris at hsmith26@bloomberg.net

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TARP’s Barofsky Increased Misconduct Probes 41 Percent in Fourth Quarter

February 1, 2010

By Joshua Gallu Feb. 1 (Bloomberg) — Investigations of misconduct related to the $700 billion Troubled Asset Relief Program expanded in the fourth quarter as the U.S. rescue fund’s watchdog increased opened cases by 41 percent. Special Inspector General Neil Barofsky began 25 criminal and civil probes in the quarter, and had 77 total active cases, according to a quarterly report to Congress published yesterday. Through the third quarter of 2009, Barofsky’s Washington-based office opened 61 cases with 54 active, he said at the time. Examiners are looking into possible wrongdoing linked to the financial-industry bailout, including insider trading, accounting violations, mortgage fraud, obstruction of justice and money laundering, according to the report. Barofsky didn’t identify the targets of pending investigations, though details of some cases have emerged separately. Barofsky confirmed last week he is probing whether the Federal Reserve Bank of New York improperly limited release of information about payments to American International Group Inc.’s counterparties when the insurer was rescued. AIG’s first rescue was an $85 billion credit line from the New York Fed. The bailout was expanded three times and is now valued at $182.3 billion. Barofsky is also working with the Securities and Exchange Commission, Justice Department and the Federal Bureau of Investigation on the investigation into Bank of America’s merger with Merrill Lynch, the report said. Barofsky is opening a branch office in New York and satellite offices in Los Angeles and San Francisco to support probes. Calls to Barofsky’s toll-free hot line rose 41 percent in the quarter, to 9,900, according to the report. To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net

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Ethiopian Air Plane Carrying 90 Crashes Into Sea After Takeoff From Beirut

January 25, 2010

By Massoud A. Derhally and Jason McLure Jan. 25 (Bloomberg) — An Ethiopian Airlines plane with 90 people on board crashed into the Mediterranean Sea after taking off from Beirut, Lebanon, early this morning. Eleven bodies have been recovered and no survivors have been found, Lebanese army Brigadier Saleh Haj Suleiman said by phone. Search operations are ongoing about 8 kilometers (5 miles) off the coast, he said. “Weather conditions are very harsh,” Suleiman said. “We hope, God willing, to find some survivors.” The passengers on flight ET409 included 51 Lebanese and 23 Ethiopians, the carrier said on its Web site . The eight crew members were all Ethiopian. The Boeing Co. 737-800 left Beirut’s Rafik Hariri International Airport for Addis Ababa, the Ethiopian capital, at 2:35 a.m. and lost contact with air traffic control shortly afterward. Flames were seen coming from the aircraft before the crash near Na’ameh town, south of Beirut, according to the state-run Lebanese National News Agency. Lebanon has been lashed with heavy rains, thunderstorms and high winds for much of the past two days. “It was manageable weather otherwise the crew wouldn’t have taken off,” Chief Executive Officer Girma Wake told reporters at a briefing in Addis Ababa. “On behalf of Ethiopian Airlines and myself I am sorry that this happened.” Lebanese President Michel Suleiman said terrorism was unlikely to have been the cause during a press conference in Beirut. Boeing Investigation The other passengers onboard the plane comprised two Britons and one each from Turkey, France, Russia, Canada, Syria and Iraq, state-owned Ethiopian Airlines said. The Lebanese National News Agency put the number of Lebanese citizens onboard at 54, saying that some held dual citizenship. The wife of the French ambassador to Lebanon was among those on the plane, said Anne-Charlotte Dommartin, a spokeswoman for the French embassy in Beirut. The flight was due to take off at 2:10 a.m. At Bole International Airport in Addis Ababa, people have been told to wait for further information on possible survivors, said Tedros Abdissa, whose 35-year-old cousin Tegist Shokur was onboard the flight. Possible Survivors “She was a domestic servant and her employer beat her up so she chose to leave,” he said in an interview at the airport. The crashed plane was made in 2002 and leased from CIT Aerospace in September, Girma said. Addis Ababa-based Ethiopian Airlines said it had dispatched investigators to the scene of the crash. Boeing is working with the U.S. National Transportation Safety Board to assist Lebanese authorities with the investigation, spokeswoman Sandy Angers said in an e-mailed reply to Bloomberg News questions. Ethiopian Airlines operates a fleet of 37 planes, most of them Boeing aircraft, according to its Web site . It also has orders outstanding for planes including 10 787 Dreamliners, 12 Airbus SAS A350s and 5 Boeing 777s, according to the site. The airline and Boeing announced a deal for 10 737s on Jan. 22. The carrier hasn’t suffered a fatal crash since November 1996, when 125 people died during a hijacking of a Boeing 767 bound for Abidjan, Ivory Coast, according to the Flight Safety Foundation . To contact the reporter on this story: Massoud A. Derhally in Beirut, Lebanon at mderhally@bloomberg.net

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Keith Thomson: For Sale: Beethoven’s Skull

January 18, 2010

In 1917, Margaretha Zelle, the spy better known as Mata Hari, was executed by firing squad. Her skull became part of the collection at the Museum of Anatomy in Paris. In 2000, the museum’s archivists discovered that the skull was missing, probably stolen. The case remains unsolved. I wondered: Why would anyone steal a skull? Or even want one? Little did I know. Skull collecting is a veritable subculture. One man’s macabre relic is another man’s Barry Bonds seventy-first home-run ball. And craniomania is nothing new. In Cranioklepty (Unbridled Books, 2009), author Colin Dickey explains: “From 1790 to the mid-nineteenth century, interest in phrenology sparked a bizarre and intense fascination with the human skull, and in particular the skulls of great men.” It drove other men to skullduggery, literally. Notable victims include composers Franz Joseph Haydn and Wolfgang Amadeus Mozart, and English philosopher Thomas Browne. According to Dickey, Browne stands as an icon in the history of cranioklepty because of his concern over the desecration of his final resting place. “Who knows the fate of his bones, or how often he is to be buried?” Browne wrote, adding, “To be gnawed out of our graves, to have our skulls made drinking-bowls, and our bones turned into pipes to delight and sport our enemies, are tragic abominations.” In the course of my investigation of this realm, I learned that Ludwig van Beethoven’s skull is for sale. The seller is California businessman Paul Kaufmann, who first became aware that his family possessed the item in 1990. While searching among his late mother’s possessions, he happened on an ancient, pear-shaped box labeled “Beethoven.” Years of investigation by historians and scientists make a compelling case that the box was labeled accurately. Exhibit A: Kaufmann’s great-great uncle was a physician closely involved in the 1863 exhumation of Beethoven (and Franz Schubert) largely for scientific study; according to several accounts, the physician kept Beethoven’s skull. Exhibit B: Tests of existing strands of the composer’s hair point to a DNA match. For Exhibits C through Z, see Dickey’s book. In 2005, Kaufmann loaned the skull, which is in fragments, to the Ira F. Brilliant Center for Beethoven Studies at San José State University, so that tests might be conducted to learn about Beethoven’s medical condition and cause of death. Now Kaufmann would like to find a permanent home for the skull. “The objective is to share it with the public,” he told me. “In my heart it should be in a museum.” He also hopes that a compatible institution will pay in excess of $100,000. According to Dickey, Brilliant Center director William Meredith, and other experts I spoke to, it’s difficult to place a cash value on the skull, though Kaufmann may meet his goal at auction. In 1978, a skull purported to belong to theologian Emanuel Swedenborg sold at Sotheby’s for $3,200. Earlier this month, Christie’s planned to auction a skull that had been used as a ballot box by Yale’s secret Skull and Bones society. Before withdrawing the item due to a title claim, the company estimated it would sell for $10,000 to $20,000 . Kaufmann told me that Sotheby’s turned him down, reluctant to again deal in body parts. (I’ve been in touch with Sotheby’s officials but have yet to receive a comment.) But a prominent British vendor, whom Kaufmann preferred not to name, is eager to conduct the sale. Christie’s may be a contender as well. A Christie’s spokesperson, Erin McAndrew, told me via e-mail: “Christie’s policy is in keeping with applicable local and federal laws in each jurisdiction in which we sell. Every item is considered on a case by case basis in accordance with that policy.” “Out of respect for the dignity of Beethoven,” Dickey says, “I think most people would be happy to see [the skull] go to some resting place.” An obvious choice would be Vienna’s Central Cemetery, where the rest of Beethoven’s body is interred. While agreeing that the skull deserves to be treated with reverence, Meredith questions reinterment, at least in the short term. “Is it kept as something that will help us understand the person better, or is it kept as a souvenir? People often willingly leave their body parts to science so as to advance medical knowledge and understanding. Beethoven specifically asked his doctor to reveal to the world what his medical condition was.” For now, Kaufmann asks that interested parties contact the Brilliant Institute. And there is new meaning in the Chuck Berry lyrics “Roll over Beethoven and tell Tchaikovsky the news.” Reprinted with permission of The Ira F. Brilliant Center for Beethoven Studies, San José State University

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Societe Generale Ordered to Stop Sales, Trading of Derivatives in India

January 17, 2010

By Pooja Thakur and Abhishek Shanker Jan. 18 (Bloomberg) — Societe Generale SA’s Indian unit was ordered to stop selling or trading offshore derivatives by the nation’s capital markets regulator, which said the bank failed to provide fair and complete information about its trades. The Securities & Exchange Board of India gave Societe Generale, France’s second-largest bank, 30 days to reply or file an objection to the order, according to a statement posted on its Web site Jan. 15. The Paris-based company is the second overseas bank to be suspended from trading derivatives by the regulator in just over a month. Barclays Plc suspended sales of its exchange-traded notes linked to Indian stocks following a Dec. 9 order. Both banks gave incorrect details on the sale of so-called participatory notes, the regulator said. “Societe Generale completely failed in obtaining correct and complete information from the counterparties it deals with,” the regulator’s statement said. “Societe Generale is required to show cause as to why appropriate proceedings including cancellation of its certificate of registration as a foreign institutional investor should not be initiated.” The French bank said in a statement that it’s “cooperating fully” with the investigation and aims to provide all the information required within the 30-day period demanded by the regulator. Melody Jeannin , a spokeswoman in Paris, declined to comment beyond the statement. Jonathan Williams , Barclays Capital’s Singapore-based spokesman, said today that the firm was cooperating with the regulator. He declined to provide any additional information. Shares of Reliance Both banks reported incorrect data on transactions involving instruments linked to shares of Reliance Communications Ltd. to Hythe Securities Ltd., according to the regulator’s statements. Foreign institutional investors have 7.84 trillion rupees ($171.3 billion) in assets under management, with participatory notes — or derivatives used by foreign investors to buy Indian stocks — accounting for 16.5 percent of the total as of November, according to data from the Securities & Exchange Board of India. The iPath MSCI India Index Exchange Traded Notes, whose sales were discontinued by London-based Barclays, were the second-largest exchange-traded product linked to Indian equities, with assets of $1.1 billion, according to data compiled by Bloomberg. Derivatives are securities whose value is derived from an underlying asset such as stocks, bonds, commodities or currencies. To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net ; Sumit Sharma in Mumbai at sumitsharma@bloomberg.net

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China Refers Case of Rio Tinto’s Stern Hu to Prosecutors, Australia Says

January 11, 2010

By Bloomberg News Jan. 11 (Bloomberg) — China, the world’s largest iron ore buyer, referred the investigation of four Rio Tinto Group executives, including Australian Stern Hu , to prosecutors, Australia’s government said. Chinese authorities “informed our Shanghai Consulate General that the investigation phase has now concluded,” the Department of Foreign Affairs and Trade said today in an e- mailed statement. The case is now in the hands of the Shanghai People’s Procuratorate, which will decide whether it should be brought to trial, the department said. Hu, head of Rio’s iron ore business in China, and three Chinese colleagues were formally arrested in August for allegedly stealing secrets related to the steel industry, a publication run by the prosecutors’ office said Aug. 12. The case has strained ties between Australia and China. “Everyone will be taking note, including the Americans and particularly the suppliers of raw materials to China such as the Africans, Indians and anyone who looks to do big resource-based business with China,” Peter Arden , a Melbourne-based senior mining analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. in Melbourne, said before today. Review Period With the conclusion of the investigation, police will make a recommendation to prosecutors and then lawyers of the accused will be given a copy of the report, Tao Wuping , who represents detained Rio employee Liu Caikui , said by phone. Tao said prosecutors hadn’t told him that the investigation had ended. Lu Feng, a news officer at the Shanghai Municipal Public Security Bureau, the city’s police force, said they will make a statement on the investigation, without elaborating or confirming the Australian government’s remarks. “We are not in a position to say how long this phase of the case will take and are not prepared to speculate about the outcome,” Australia said today. Details of the charges are not likely to be known until the prosecutors make a decision on whether to send the case to trial, the department said. Prosecutors may review the case for one-and-a-half months before court hearings, Shanghai-based lawyer Zhai Jian said Aug. 19. Zhai’s firm represents two of the employees, Ge Minqiang and Wang Yong . The four were originally accused of the theft of state secrets, a charge that wasn’t included in the August arrest statement. Legal Process The transfer of the case to prosecutors “is the next stage in a continuing legal process under Chinese law,” Sam Walsh , head of Rio Tinto’s iron ore unit, said in an e-mailed statement. “It would not be appropriate for the company to comment any further at this point in the case other than to affirm our hope that matters proceed in an expeditious and transparent manner.” Managers are maintaining regular contact with the families of the detained employees, Rio’s statement said. Rio ships iron ore to China from its Australian mines. The company has about a third of its assets in Australia and its shares are traded there and in London. China is the biggest buyer of Australia’s iron ore. Chinese companies have continued to invest in Australia since the arrests. In October, China’s Yanzhou Coal Mining Co. won Australian government approval for its A$3.5 billion ($3.3 billion)takeover of Felix Resources Ltd. Exxon Mobil Corp. agreed in August to sell 2.25 million metric tons a year of liquefied natural gas to China from Australia’s Gorgon project for 20 years. Hu is a classically trained violinist who chose his English first name after virtuoso Isaac Stern , according to a person familiar with the executive. The four employees have been held since July 5 after police searched Rio’s Shanghai office, according to a Rio official who declined to be named. Hu, born in 1956 in Tianjin, is married with two children. He began work for Rio in the mid-1990s and was first based in Beijing where he managed relations with the company’s steel mill customers in northern China. — Rebecca Keenan , Helen Yuan . With assistance from Jesse Riseborough and Robert Fenner in Melbourne. Editors: Tan Hwee Ann , Jacob Lloyd-Smith . To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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Qantas Chief Joyce Says No Signs of Illegal Activity by Staff in Vietnam

January 8, 2010

By Nichola Saminather Jan. 9 (Bloomberg) — Qantas Airways Ltd. , Australia’s largest airline, said there are no indications of illegal activity by employees of its Jetstar Pacific unit currently prevented from leaving Vietnam. “There’s absolutely no indication that there’s any illegal activity here,” Chief Executive Officer Alan Joyce told reporters in Sydney today. “Once the investigation is complete, I’m sure, with the fuel hedging issues, they will come to the conclusion that no illegal activity had taken place.” Joyce said that investigations into Jetstar Pacific won’t affect its other operations. Qantas owns 27 percent of Jetstar Pacific while the majority is controlled by the Vietnamese government. The Vietnamese carrier’s Chief Financial Officer Tristan Freeman and Chief Operating Officer Daniela Marsilli have been prevented from leaving the country while former CEO Luong Hoai Nam has been detained by Vietnamese authorities. Nam’s detention comes amid an investigation into a $31 million loss on fuel hedging, Tuoi Tre newspaper reported yesterday, citing a state audit. The Australian government is helping Freeman and Marsilli through the embassy in Hanoi, Deputy Prime Minister Julia Gillard said on Channel Nine’s Weekend Today program. Consular Assistance “We are providing consular assistance, doing everything we can trying to get to the bottom of the reason for their detention and resolve the issue,” she said. Qantas has the right to increase its stake in the airline to 30 percent this year after first acquiring an 18 percent holding in July 2007, the company said yesterday. The airline, which was formerly known as Pacific Airlines, became profitable in June 2009 and has six planes serving seven destinations within Vietnam. Luong Hoai Nam, who left the position of CEO in November, has a holding of less than 1 percent in Jetstar Pacific, according to Qantas spokeswoman Olivia Wirth . Vietnam’s State Capital Investment Corp. , the government’s investment arm, holds a majority stake in the carrier, which competes with state-owned Vietnam Airlines Corp. Melbourne-based Jetstar, which is wholly owned by Qantas, is the airline’s low-cost carrier. The company this week agreed with AirAsia Bhd. to cooperate on purchasing planes, parts and ground handling services to lower operating costs. To contact the reporter on this story: Nichola Saminather in Sydney at Nsaminather1@bloomberg.net .

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FBI Arrests Two Men in New York City Bomb Scheme, Terrorism Investigation

January 8, 2010

By Patricia Hurtado (Corrects spelling of name to Medunjanin in second paragraph.) Jan. 8 (Bloomberg) — Two men were arrested as part of a probe into an alleged terrorist plot targeting New York that was foiled last year, a spokesman for the Federal Bureau of Investigation’s New York office said. Adis Medunjanin and Zarein Ahmedzay were placed under arrest early today, the FBI’s James Margolin said in a phone interview. Both are expected to appear before a federal judge in Brooklyn later today, said Robert Nardoza , a spokesman for Brooklyn U.S. Attorney Benton Campbell . Nardoza declined to say what charges the men would face. The men were arrested in connection with Najibullah Zazi, an Afghan man who authorities said trained at an al-Qaeda terrorist camp. Zazi and two other men were arrested in September over an alleged plot to detonate a bomb in New York around the anniversary of the Sept. 11 terrorist attacks. Authorities said Zazi had purchased components to make an improvised bomb and carried instructions for an incendiary device on a laptop computer. Attorneys for Medunjanin and Ahmedzay couldn’t immediately be reached for comment. To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

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China’s Probe of Rio Tinto’s Hu, Colleagues May Be Completed by Next Week

January 5, 2010

By Bloomberg News Jan. 6 (Bloomberg) — China’s police investigation of four Rio Tinto Group executives, including Australian Stern Hu , is scheduled to be completed next week, according to the Australian government and lawyers representing two of the detainees. “The police probe must finish next week” according to legal procedures, Shanghai-based Tao Wuping , who represents Liu Caikui , said by phone. The investigation into all four employees will end at the same time if they were detained on the same day, lawyer Zhai Jian, who represents Ge Minqiang, said. Hu, head of Rio’s iron ore business in China, and three Chinese colleagues were formally arrested in August for allegedly stealing secrets related to the steel industry, a publication run by the prosecutors’ office said Aug. 12. His arrest has strained ties between Australia and China. “I hope it is drawing to a fast conclusion, both from a point of view of our relationship with China and from the point of view of Stern Hu and his family,” Australia’s Resources and Energy Minister Martin Ferguson told reporters in Sydney today. The investigation period is due to be completed on Jan. 11, Australia’s Department of Foreign Affairs and Trade said in an e-mailed statement today. Extensions are possible, the department also said. In November, Australia said the investigation had been extended by two months. After the police investigation is completed, prosecutors will review the case for one-and-a-half months before court hearings, lawyer Zhai said in August. The prosecutor review period can also be extended, Zhai had said. The fourth detainee is Wang Yong . China, the world’s largest buyer of iron ore, is Australia’s biggest trading partner with two-way trade valued at A$83 billion ($76 billion) in the 12 months ended June 30. London-based Rio is the second-biggest exporter of iron ore, used to make steel. Rio Tinto’s spokesman David Luff declined to comment when contacted today. — Helen Yuan , Jesse Riseborough in Melbourne. With assistance from Rebecca Keenan in Melbourne and James Paton in Sydney. Editors: Tan Hwee Ann , Andrew Hobbs . To contact the Bloomberg News Staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net ; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net .

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Obama to Get Initial Assessments on Northwest Airlines Terrorism Incident

December 31, 2009

By Nicholas Johnston Dec. 31 (Bloomberg) — President Barack Obama said he will review later today initial assessments of the attempted bombing of a U.S. airliner on Christmas Day and will meet with agency heads Jan. 5 to discuss the investigation. In a statement released in Hawaii where he is vacationing with his family, Obama said he spoke today with Homeland Security Secretary Janet Napolitano and John Brennan, his adviser for homeland security and counterterrorism. To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Air Travelers to U.S. Face Stay-Seated Rule After Christmas Bomb Attempt

December 26, 2009

By Jonathan D. Salant and Jeff Bliss Dec. 26 (Bloomberg) — Airline passengers traveling to the U.S. from other countries were ordered to remain seated for the last hour in flight, and were limited to one carry-on item in response to an attempted terrorist attack yesterday on a Northwest Airlines flight to Detroit from Amsterdam. New U.S. Transportation Security Administration rules also prohibit passengers from getting anything from their carry-on bags or having anything in their laps in the final hour of flight, the agency said. Air Canada and British Airways informed passengers of the rules in statements on their Web sites. “Clearly, aviation remains in the target zone,” said Kip Hawley , a former TSA administrator. U.S. authorities took Umar Farouk Abdulmutallab , a 23-year- old Nigerian, into custody after he allegedly set off a device containing explosive materials on Flight 253. He was charged in a formal complaint today with attempting to destroy an aircraft and with placing a destructive device on board the plane. President Barack Obama , who is on vacation in Hawaii, conferred by telephone with national security and counter- terrorism officials on the investigation and “heightened air travel safety measures,” according to a statement from White House spokesman Bill Burton . “The president will continue to actively monitor the situation,” Burton said. Additional Screening Travelers to the U.S. should expect additional screening and longer check-in times, Homeland Security Secretary Janet Napolitano said in a statement. Former Federal Aviation Administration security chief Billie Vincent said it’s easier for terrorists to target international flights coming into the U.S. rather than those going out. “The closer you are to areas of major political instability, the closer you are to being able to get your hands on those things that you need,” Vincent said. Paul Flaningan , a spokesman for Dallas-based Southwest Airlines Co., said the limits on passengers’ moving about the cabin applied only to carriers flying to the U.S. from overseas. Southwest operates only within the U.S. “From a regulatory standpoint, these rules haven’t affected our operations to date,” Flaningan said. “We’ve really felt no operational impact.” The Senate Commerce Committee and the House Homeland Security Committee will hold hearings next month on the incident, the committees’ chairmen, Senator Jay Rockefeller , a West Virginia Democrat, and Representative Bennie Thompson , a Mississippi Democrat, said in separate statements today. To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; Jeff Bliss in Washington jbliss@bloomberg.net .

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Jamaica Runway Overshoot Spotlights `Critical Moments’ During Rain Landing

December 23, 2009

By Mary Jane Credeur and John Hughes Dec. 23 (Bloomberg) — Landing in the rain like the American Airlines jet that overshot a Jamaican runway gives pilots only “critical moments” to determine whether they can stop safely. The incident late yesterday at Jamaica’s Kingston airport spotlighted how a watery tarmac can add to the danger in one of the riskiest phases of flight, aviators and investigators said. Overshooting a runway has led to fatal crashes at least 18 times since 1995, according to the Airdisaster.com Web site. “You’ve got just a few seconds, maybe 5 or 7, as soon as those wheels touch down to decide whether to power up and take off again,” said Mike Stark, an Atlanta pilot who has flown for 23 years, including Boeing Co. 767 and 757 jets. “Otherwise you’re committed to the landing.” American Flight 331’s 148 passengers and 6 crew members all survived when the Boeing 737 plowed through an embankment and a perimeter fence and came to rest about 10:22 p.m. local time with its nose on a road separating the airport from the Caribbean Sea, said Tim Smith , an airline spokesman. Turbulence rocked the plane en route from Miami, and a “fairly hard” rain was falling when the twin-engine jet landed, Smith said. He said Fort Worth, Texas-based American doesn’t know if weather contributed to the accident. Eighty passengers were treated at hospitals and released, and 3 were admitted for observation, said Andrea Huguely , a spokeswoman for AMR Corp. ’s American. The U.S. National Transportation Safety Board dispatched investigators to the scene, as did the Federal Aviation Administration, an NTSB spokesman, Ted Lopatkiewicz , said in an e-mail. Parallels With Driving Just as motorists must adjust their driving in rain or snow, pilots are trained to make allowances when wet runways lengthen their planes’ stopping distance. Yesterday’s accident may have involved hydroplaning, with the jet’s wheels sliding along the runway surface, said Jim Hall , a former NTSB chairman who isn’t involved in the investigation in Jamaica. “It’s very similar to when you lose control of an automobile on a slick surface and all of a sudden you have no control over the movement and your ability to stop the aircraft,” Hall said. Immediately upon landing, there will be a few seconds in which the wheels touch the ground without bearing the full weight of the plane, said Dick Healing , a former NTSB member. Water Buildup “These are critical moments before the thrust-reversers and flap configurations reduce lift and you can put the plane heavily on the runway,” Healing said. “If you get aquaplaning at that time, and water can accumulate very quickly so you might not know it’s there, the entire conditions of that landing can change instantly.” Landing is among the most difficult skills to master for pilots, because flying low and slow enough to ease a plane onto the ground leaves little margin for error. If pilots conclude that a runway is too short to land safely, they’re taught to apply full power immediately and climb. “You see the runway markers counting down 2,000 feet and 1,000 feet and by then it’s too late and you better be standing on the brakes and praying,” said Stark, the Atlanta pilot. He said his closest call came with 500 feet of runway remaining. The main runway at Kingston’s Norman Manley International Airport is 8,910 feet (2,716 meters) long, according to the facility’s Web site. American said that while the fuselage of the Boeing 737 in Jamaica buckled and cracked, it was otherwise intact. The landing gear also was damaged. Huguely, the spokeswoman, said one engine detached from the wing, as it’s designed to do in a heavy impact. Stark said the damage suggested that the American jet may not have touched down at the start of the runway, robbing it of room to roll out while pilots applied the brakes. “The plane was full with bags and people and cargo and it was wet and maybe they landed a little fast and long, and by the time you realize it, you can’t do anything,” Stark said. To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net ; John Hughes in Washington at jhughes5@bloomberg.net

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AIG Autopsy: Eliot Spitzer Calls For Investigation Like Swiss UBS

December 19, 2009

Inquiring minds want to know … where’s the inquiry? Three prominent former prosecutors are calling for the government to make AIG release internal emails that could cast light on the insurance giant’s collapse, which ended with a $180 billion government bailout and gave taxpayers 80% ownership of the company. Giving the public access to the information would allow for a unique “open source” investigation and provide many answers about AIG, but it still wouldn’t address a fundamental question raised by one of the prosecutors. “Why wasn’t a post-mortem required, as the Swiss Banking Federation did of UBS?” asked Eliot Spitzer in an email to the Huffington Post . The former attorney general and governor of New York noted, “That was a very comprehensive report.” UBS released the results of their investigation in April of 2008 after writing down several billion dollars in U.S. subprime mortgages. While it references the Swiss Federal Banking Commission, an employee at UBS expressed doubt that the Swiss National Bank, which helped rescue the private bank, “gave them much choice.” Spitzer has also asked Phil Angelides, chairman of a congress-appointed Financial Crisis Inquiry Commission, to examine the internal investigations of certain companies. “There are serious privilege issues here,” he acknowledged. “But the public interest should somehow override it in at least a limited way.” He further suggested that the Treasury could have — and maybe should have — made such transparency a condition for TARP recipients. “Our real economy was held hostage to the saving of the financial sector,” said Rob Johnson, Director of Economic Policy at the Roosevelt Institute. He doesn’t believe private investors in the financial sector would tolerate the same treatment that taxpayers face now. “The American people paid $180 billion and we own AIG,” he argued. “No more evasive action from Bernanke, Geithner, and the president. Who are they protecting?” READ THE UBS REPORT: UBS Write Down Report –

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AlliedBarton Security Services Appoints Chris Swecker to Board of Directors

December 14, 2009

CONSHOHOCKEN, PA–(Marketwire – December 14, 2009) – AlliedBarton Security Services, www.AlliedBarton.com , the industry’s premier provider of highly trained security personnel, announces the appointment of Chris Swecker, Esq., a retired Assistant Director at the Federal Bureau of Investigation (FBI), to the Board of Directors of AlliedBarton’s parent company, Allied Security Holdings LLC. Chris Swecker served 24 years with the FBI before retiring as Assistant Director of the FBI’s Criminal Investigative Division. His tenure with the FBI included serving as Acting Executive Assistant Director with responsibility for nine FBI divisions encompassing over half the FBI’s total resources. Swecker also served as the FBI’s On Scene Commander in Iraq where he led a team of FBI Agents examining counter-intelligence and terrorism matters. Following his career with the FBI, Swecker was Corporate Security Director for Bank of America where he led

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Berlusconi May Spend Second Night in Hospital After Attack on Milan Street

December 14, 2009

By Steve Scherer and Lorenzo Totaro Dec. 14 (Bloomberg) — Italian Prime Minister Silvio Berlusconi may remain in a Milan hospital until tomorrow after suffering cuts to his face and a broken nose in an attack at a political rally. Berlusconi had a headache this morning and “and asked for today’s newspapers” after waking up, Paolo Klun, the head of communications at San Raffaele hospital in Milan, said in an interview. The attack yesterday required stitches to his lip, damaged his front teeth and partially fractured his nose, his spokesman Paolo Bonaiuti said. Police are holding a man identified as Massimo Tartaglia, 42, who has been undergoing psychiatric treatment for 10 years. Tartaglia allegedly threw a statuette of the Milan cathedral at Berlusconi as the premier shook hands with supporters near the church known as the Duomo, said Armando Spataro , the Milan prosecutor heading the investigation. Political tensions are running high in Italy. Thousands of protesters called for Berlusconi’s resignation at a Rome rally last week, and a Mafia turncoat recently accused Berlusconi of ties to organized crime. Sex scandals and corruption cases have helped push his popularity to its lowest level since April 2008. Berlusconi has denied any wrongdoing and said Italian judges are out to destroy him politically and topple his government. Psychological Problems Tartaglia has no criminal record and was not politically active. He suffered from psychological problems since he was 18, but had never been aggressive or violent, his father Alessandro Tartaglia told SKY TG24. He also said he called the San Raffaele hospital last night to apologize to Berlusconi. Television news programs showed images of a bloodied Berlusconi with cuts and gashes on his face. “For months there has been a campaign of hatred against Berlusconi,” said Defense Minister Ignazio la Russa, who was with the prime minister at the time of the attack. President Giorgio Napolitano and most opposition politicians condemned the attack. Napolitano renewed a call for politicians to tone down their rhetoric and said in a statement that debate should “remain within responsible limits of self- control and civil confrontation.” Climate of Violence Some in the opposition accused Berlusconi of creating a climate of violence that may have contributed to the attack. “Berlusconi cannot consider himself a victim,” Rosy Bindi , chairwoman of the opposition Democratic Party , told La Stampa in an interview today. “He is among the creators of this climate.” The attack was an “insane act that we need to condemn,” said Antonio Di Pietro , a former magistrate and leader of another opposition party, Italian Values . “But it’s another thing entirely discussing the faults of a government which contributes to a climate of hatred.” Italian police will meet today to review Berlusconi’s security detail and “examine minute by minute what happened yesterday,” Deputy Interior Minister Alfredo Mantovano said in an interview on television network Canale 5. The government had received information from intelligence services about possible threats to Berlusconi, Mantovano said. To contact the reporters on this story: Steve Scherer at sscherer@bloomberg.net

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Pakistan Will Deport Six U.S. Men When Inquiry Over, Punjab Minister Says

December 11, 2009

By James Rupert Dec. 11 (Bloomberg) — Pakistan will deport six U.S. citizens arrested there this week for seeking training as jihadist guerrillas, said Punjab province Home Minister Rana Sanaullah. While the United States is pressing for an early deportation of the men, who are from the Washington, D.C., suburbs, Pakistan will expel them “only after the investigation is complete,” Sanaullah said in a telephone interview. — Editors: Mark Williams . To contact the reporter on this story: James Rupert in New Delhi at jrupert3@bloomberg.net .

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Ecommerce Scams: Hundreds Of Well-Known Sites Scam Customers, Report Shows

November 17, 2009

Senator Rockefeller released the results of an investigative report into “Aggressive Sales Tactics on the Internet and Their Impact on American Consumers” in advance of a hearing on the subject by the US Senate Committee on Commerce, Science, and Transportation. The research examines “controversial e-commerce business practices that have generated high volumes of consumer complaints” and focused on sales tactics that “charge millions of American consumers for services the consumers do not want and do not understand they have purchased,” according to the Staff Report . A controversial practice known as “post-transaction marketing” was at the center of the research into the e-commerce business practices. TechCrunch offers context on how “post-transaction marketing” works: Background: hundreds of well known ecommerce companies add post transaction marketing offers to consumers immediately after something is purchased on the site. Consumers are usually offered cash back if they just hit a confirmation button. But when they do, their credit card information is automatically passed through to a marketing company that signs them up for a credit card subscription to a package of useless services. The “rebate” is rarely paid. The report reveals that numerous well-known e-commerce companies have earned millions of dollars through post-transaction marketing “scams”, including sellers such as 1800Flowers.com, Fandango, FTD, Orbitz, Priceline, Shutterfly, Buy.com, Barnes & Noble, Expedia, as well as many, many more. The chart below, taken from the committee’s report, highlights a number of the companies that have received income from post-transaction marketing, along with an approximation of how much money they’ve received through the practice: In the Staff Report summarizing the investigation’s findings, the committee writes, Eighty-eight e-commerce companies have earned more than $1 million through using these tactics, including 19 that have made more than $10 million. Classmates.com has made more than $70 million using these controversial practices. Senator Rockefeller issued a statement on the report, saying: After six months, this Committee has found that the companies we are investigating have figured out very clever ways to manipulate consumers’ buying habits so they can make a quick buck. American consumers have been complaining for years about these misleading practices and asking for answers – and rightly so. Millions of Americans are getting hit with these mystery charges every month – we have to do all we can to protect the hard working families relying on us to look out for their wallets and well-being. Get the full report and read the Press Release from the US Senate Committee on Commerce, Science, and Transportation here. TechCrunch has additional reporting on the committee’s findings. Read comments from customers about post-transaction marketing scams here.

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Obama Targets Financial Fraud in Executive Order Creating U.S. Task Force

November 17, 2009

By Justin Blum Nov. 17 (Bloomberg) — The Obama administration today announced a coordinated federal attack to combat financial fraud. President Barack Obama issued an executive order creating a task force drawing upon numerous government agencies to investigate and prosecute cases. The government-wide initiative, announced at a Justice Department news conference in Washington, replaces a corporate fraud task force created under President George W. Bush in 2002. The aim is “to prevent another meltdown from happening,” Attorney General Eric Holder said. “We will be relentless in our investigation of corporate and financial wrongdoing.” The U.S. recession has caused an increase in economic crimes, including mortgage fraud, white-collar crime and health- care fraud, according to the Justice Department’s inspector general. The task force will be led by the Justice Department and include representatives from agencies including the Securities and Exchange Commission, the Treasury Department and the Department of Housing and Urban Development. To contact the reporter on this story: Justin Blum in Washington at jblum4@bloomberg.net

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Marvell Technology Investigates Employee Named in Galleon Hedge Fund Probe

November 14, 2009

By Linda Sandler and David Glovin Nov. 14 (Bloomberg) — Marvell Technology Group Ltd. is conducting an internal investigation after employee Sam Miri was named as a recipient of payoffs for inside information by a hedge fund manager who pleaded guilty in the investigation of Galleon Group, company spokeswoman Diane Vanasse said. Miri received payoffs in return for inside information, according to Ali Far , a hedge-fund manager who admitted to insider trading and is helping prosecutors in a probe of the industry. Far told a judge while pleading guilty on Oct. 19 that he had paid Miri for tips. A transcript of that hearing became publicly available Nov. 11. Vanasse declined to say if Miri had been placed on leave during the company’s inquiry. “All I can say is we’re looking into it,” she said yesterday. A call to Miri’s home number wasn’t immediately returned. An e-mail to his work address was returned with a message saying he would be away from Nov. 3 to Nov. 10. Far, 48, who once worked for Galleon Group founder Raj Rajaratnam and co-founded Spherix Capital LLC in 2007, traded on inside information about companies including Atheros Communications Inc. from 2003 to 2009, he told the judge. He didn’t specify what type of inside information Miri provided in exchange for payment. Tippers were paid in cash with money wired by Spherix’s broker to their accounts held at Phillip Capital, he told the judge. Phillip Capital, a financial services firm, is affiliated with Singapore-based Phillip Securities. Amy Foo, a spokeswoman at Phillip Securities Pte , and Far’s lawyer, Steven Kobre , didn’t return calls and e-mails seeking comment. Marvell , which is located in Santa Clara, California, and registered in Hamilton, Bermuda, makes the processor that runs Blackberry smart phones. The case is U.S. v. Far, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net ; David Glovin in New York federal court at dglovin@bloomberg.net .

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Marvell Technology Investigates Employee Named in Galleon Insider Probe

November 13, 2009

By Linda Sandler Nov. 13 (Bloomberg) — Marvell Technology Group Ltd. is conducting an internal investigation after employee Sam Miri was named as a recipient of payoffs for inside information by a hedge fund manager who pleaded guilty in the investigation of Galleon Group, company spokeswoman Diane Vanasse said. Miri received payoffs in return for inside information, according to Ali Far , a hedge-fund manager who admitted to insider trading and is helping prosecutors in a probe of the industry. Far told a judge while pleading guilty on Oct. 19 that he had paid Miri for tips. A transcript of that hearing became publicly available Nov. 11. Vanasse declined to say if Miri had been placed on leave during the company’s inquiry. “All I can say is we’re looking into it,” she said today. A call to Miri’s home number wasn’t immediately returned. An e-mail to his work address was returned with a message saying he would be away from Nov. 3 to Nov. 10. Marvell , which is located in Santa Clara, California, and registered in Hamilton, Bermuda, makes the processor that runs Blackberry smart phones. The case is U.S. v. Far, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net .

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Lieberman to Lead U.S. Senate Investigation of Fort Hood Shooting Motives

November 8, 2009

By John Hughes Nov. 8 (Bloomberg) — A U.S. Senate panel will investigate motives in the deadly shooting at Fort Hood and whether any warning signs should have led to the suspect’s discharge from the Army, Senator Joe Lieberman said. The suspect, Major Nidal Malik Hasan , an Army psychiatrist, was in intensive care with gunshot wounds after he allegedly went on a shooting rampage Nov. 5 inside the Army base in Texas, killing 13 people and injuring 30. Lieberman, chairman of the Homeland Security and Governmental Affairs Committee, said his panel will conduct an investigation into Hasan’s motives that also will “ask whether the Army missed warning signs that should have led them to essentially discharge him.” Lieberman said alleged past statements by Hasan, 39, justifying suicide bombings, along with witness reports that he shouted “Allahu Akbar,” or God is great, while firing, raise concerns that the suspect had become “self-radicalized” and that authorities should have dealt with him before the shooting. “If the reports that we’re receiving of various statements he made, acts he took, are valid, he had turned to Islamist extremism,” Lieberman, a Connecticut independent, said on the “Fox News Sunday” program. “If that is true, the murder of these 13 people was a terrorist act.” General George Casey , the U.S. Army Chief of Staff, said the investigation needs to continue before anyone can speculate on motives. Asked on ABC’s “This Week” by host George Stephanopoulos whether it’s unknown if the shooting was a terrorist act or a case of someone who just “snapped,” Casey replied, “You are exactly right, and I don’t think we should speculate on one or the other, or any other possibilities.” Muslim Faith Casey, when asked about the role Hasan’s Muslim faith may have played in the shooting, said the issue was something “we need to be very careful about.” “The speculation could potentially heighten backlash against some of our Muslim soldiers,” Casey said. “What happened at Fort Hood was a tragedy, but I believe it would be an even greater tragedy if our diversity becomes a casualty here.” Senator Lindsey Graham , a South Carolina Republican, said on CBS’s “Face The Nation” that the investigation should examine whether “clear signals” were missed and that the evidence trail should be followed without overreaction. ‘Just About Him’ “At the end of the day, maybe this is just about him,” Graham said of Hasan. “It’s certainly not about his religion, Islam. It’s not about the Army. It’s not about the war.” Senator Jack Reed , a Rhode Island Democrat, said on the same program that there are about 3,000 men and women of Muslim faith serving in the military, and that some have been wounded and others killed in the U.S. wars in Iraq and Afghanistan. “This is not about theology,” Reed said. “I think, again, what we will find is that someone who has deep psychiatric problems, they’re not unique to the Army.” President Barack Obama and his wife, Michelle, will travel to Fort Hood Nov. 10 to attend a memorial service. U.S. Attorney General Eric Holder said Hasan may be tried by a military rather than a civilian court. To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

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Barclays, BNP Paribas May Have $300 Million Losses From K1, Warrant Shows

October 30, 2009

By Karin Matussek and Jann Betinga Oct. 30 (Bloomberg) — Helmut Kiener , the K1 Group hedge- fund firm founder arrested earlier this week, may have duped Barclays Plc out of as much as $240 million and BNP Paribas SA out of $60 million, according to the warrant for his arrest. Kiener may have used $220 million from Barclays contrary to agreements with funds in the group, according to the arrest warrant issued by a court in Wurzburg, Germany. The money is “for the most part” gone, according to the document obtained by Bloomberg News. A separate deal with Barclays generated about $20 million of management fees for Kiener, according to the document. K1 Group is at the center of an international criminal investigation after saddling banks, which also include JPMorgan Chase & Co. and Societe Generale SA, with about $400 million of losses, people with knowledge of the probe said. European and U.S. authorities are investigating whether K1, which manages funds of hedge funds, deceived the banks to inflate investments, according to the people, who declined to be identified because the investigation isn’t public. Kiener was arrested on Oct. 28, and the court in Wurzburg yesterday ruled he must remain in custody. A spokeswoman for Munich-based law firm Lutz Libbertz, which represents Kiener, said his lawyers will file a request for release. She said the firm will comment in detail on the allegations later. BNP suffered losses from a $60 million investment starting in April 2007, according to the warrant. Kiener may have also deceived BNP when receiving management fees, the warrant said, without specifying an amount. BNP Paribas’s spokeswoman Carine Lauru declined to comment on the amount. BNP Paribas has said it’s cooperating with authorities. Barclays Capital spokesman Daniel Hunter declined to comment. Calls to the court and to prosecutors in Wurzburg seeking comment weren’t answered. To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net .

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K1′s Kiener, Salesman Turned Hedge Manager, at Center of $400 Million Loss

October 28, 2009

By Tom Cahill, Josh Fineman and Jann Bettinga Oct. 29 (Bloomberg) — Helmut Kiener went from selling advertising for telephone books and getting paid by the ad to starting a German hedge-fund firm that would eventually make bets using millions borrowed from such banks as Barclays Plc , JPMorgan Chase & Co. and BNP Paribas SA . Police and prosecutors yesterday raided Kiener’s ivy- covered villa near Frankfurt, part of a joint German-U.S. investigation into what may be losses amounting to $400 million, people familiar with the probe said. A woman who identified herself as Kiener’s wife declined to comment when a Bloomberg News reporter rang the door bell last night. Neither Kiener nor anyone at his firm, K1 Group , has been publicly accused of wrongdoing in connection with the probe. The firm claimed returns of 825 percent from 1996 through June this year, according to its Web site, compared with a 49 percent gain for the Standard & Poor’s 500 Index over the same period. Germany’s financial regulator, BaFin, had tried since 2001 to stop K1 from soliciting German investors, according to spokesman Sven Gebauer . “Kiener has been grilled several times before, and he always won,” Karl-Heinz Lipsky, a broker at Fluehli, Switzerland-based Fair Mobil Concept GmbH who has done business with Kiener for almost four years, said in a telephone interview. “Kiener was under fire from BaFin for years.” The Kiener investigation comes as regulators in the U.S. and Europe, urged on by Germany, plan to tighten controls on the $1.4 trillion hedge fund industry. It follows the conviction of New York money manager Bernard Madoff and charges against Texas financier R. Allen Stanford , both accused of moving funds off- shore to obscure multibillion-dollar frauds. Billionaire hedge- fund manager Raj Rajaratnam was charged with insider-trading earlier this month. Stanford and Rajaratnam have both denied wrongdoing. Circular Transactions The inquiry focuses on whether Kiener’s firm engaged in circular transactions with a network of investment firms in the U.K., the U.S. and other countries to create the illusion that K1 had more money available to backstop loans from the banks, said the people familiar with the investigation, who declined to be identified because the probe isn’t public. Prosecutors in Wuerzburg, Germany, are investigating Kiener for fraud and breach of trust, their spokesman, Dietrich Geuder, said in a telephone interview yesterday, declining to provide more details. Kiener wasn’t available to comment yesterday. Daniel Hunter, a spokesman for London-based Barclays, the U.K.’s second-biggest bank, said the bank is cooperating with the investigation. David Wells , a spokesman for New York-based JPMorgan, the second-biggest U.S. bank by assets, declined to comment as did Carine Lauru , a spokeswoman for Paris-based BNP Paribas. Kiener’s Strategy Kiener’s firm had almost $1 billion under management, Army Yan, a K1 executive in Hong Kong, told Hedgeweek , a trade publication, in February. “From our point of view, risk is to be managed, but we do not like to put investors’ money at risk,” Yan was quoted as saying. “Our target is to deliver annual returns of 8 to 12 percent with minimal volatility. We see some managers aggressively taking market risk to increase their performance, which is not in line with our style.” Kiener started K1 in 1995 while still working as an advertising salesman for Frankfurt-based Trias Werbeagentur, where he earned commissions on ads he sold for German telephone books, said Juergen Weismueller, who is in charge of the firm’s workforce. Weismueller, 58, said Kiener was an “average” salesman at the firm, where he worked from 1988 to 2000. ‘Nothing Suspicious’ Kiener, 50, received a psychology degree from Johann Wolfgang Goethe University in Frankfurt in 1987, where his studies included “ statistical chance theory ,” according to K1’s Web site, which was taken down yesterday. “He’s among the few guys who have been here for a while and are a factor in the market,” said Andreas Schuermann, head of risk at Conservative Concept Portfolio Management AG , a hedge fund manager based outside Frankfurt. “It was a known fact in the market that he had trouble financing the leverage he was running in his fund. There was nothing suspicious about that, or anything to suggest something criminal.” Kiener developed what K1’s Web site described as a “semi- automatical allocation system” using statistics to help pick hedge-fund investments. He called his technique the “K1 Fund Allocation System,” a term he trademarked in Germany. “He had a pretty good black box to identify good investment opportunities,” said Michael Smolek , head of advisory firm Nito U.K. Asset Management, which helped find salespeople to market K1 funds. “He was pretty good in picking out good investments.” Regulatory Action From 2001, BaFin and its predecessors tried to stop Kiener and companies associated with him from soliciting German investors. The regulator initially ordered Kiener to stop collecting capital in Germany for a K1 fund company, arguing that it lacked a license. In 2003 and 2004, BaFin issued orders against K1 companies based in Germany and the British Virgin Islands, on the grounds that they lacked proper authorization. The firms challenged the orders in court, and two of them, K1 Global Ltd. and K1 Invest Ltd., had BaFin’s order overturned, according to the regulator. Police took away white boxes loaded with documents from Kiener’s home yesterday. The fund manager, who is married and has two daughters, was described as private and “totally secluded” by neighbors who asked not to be identified by name. His house has a castle-like tower and a Mercedes S600 visible in the garage. ‘Locust’ Invasion Germany doesn’t rank among the top five European nations that are homes for hedge funds, and its politicians have often been openly hostile to the industry, referring to the funds as “locusts.” When Werner Seifert , former chief executive of Deutsche Boerse AG, published a book recounting his experience battling a U.K.-based activist firm, the Children’s Investment Fund Management UK LLP, he entitled his account “The Invasion of the Locusts.” “It’s absolutely embarrassing that this happens in Germany, which has always wanted to be tough on hedge funds,” said Jacob Schmidt , founder of Schmidt Research Partners Ltd., a London-based hedge fund advisory firm. To contact the reporters on this story: Tom Cahill in London at tcahill@bloomberg.net Joshua Fineman in New York at jfineman@bloomberg.net ; Jann Friedrich Bettinga in Frankfurt at jebettinga@bloomberg.net .

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Galleon Tip-Seeking on Intel Known to Prosecutors Since 2001 Khan Case

October 24, 2009

By Karen Gullo, Joel Rosenblatt and David Scheer Oct. 24 (Bloomberg) — Galleon Group LLC, the hedge fund firm at the center of a $20 million insider trading prosecution, came to the attention of prosecutors by 2001 for allegedly soliciting internal data on Silicon Valley companies. That year the government charged tipster Roomy Khan , a former Intel Corp. employee, with passing nonpublic information about the chipmaker’s backlog and billing reports, product pricing and sales to the Manhattan-based fund in 1998, according to a criminal complaint filed in federal court in San Jose, California in February 2001. An unidentified representative of Galleon Management Inc. sought the information from Khan , according to the document. In March 1998, Khan faxed documents from Intel’s Santa Clara, California, offices to a machine at Galleon, prosecutors said in the complaint. Khan pleaded guilty to wire fraud in 2001. Raj Rajaratnam , Galleon Group’s co-founder, was charged with insider trading on Oct. 16, 2009. “It’s surprising that the government would only go after one side of the case” in 2001, Peter J. Henning , a professor at Wayne State University Law School, said in an interview. He said that, given Khan’s conviction, the government would have been expected “to pay a lot more attention to Galleon since 2001 — and on the flip side you’d expect Galleon to be much more careful.” When a tipster is charged, the government normally moves quickly to go after the recipient of the inside information, Henning said. Khan Informant Information provided by Khan was central to the investigation that led to the arrests of billionaire Rajaratnam, an Intel unit executive and four others in the alleged insider- trading scheme, according to a person familiar with the probe, who asked not to be identified because Khan’s name wasn’t disclosed by the government. Rajaratnam was charged in federal court in New York with Rajiv Goel , a director at Intel Capital, and former directors at a Bear Stearns Cos. hedge fund, in what prosecutors have called the biggest-ever insider trading case involving hedge funds. Rajaratnam also was sued by the U.S. Securities and Exchange Commission. According to prosecutors who used wiretaps of Rajaratnam to build their case, tips to the hedge fund manager came from insiders and others at hedge funds, investor relations firms, and companies including Intel, International Business Machines Corp. , McKinsey & Co., and companies whose shares were traded in the scheme. Rajaratnam Rajaratnam has said he is innocent. His lawyer, Jim Walden , declined to comment yesterday. Chuck Mulloy , an Intel spokesman, also declined to comment. Rebekah Carmichael , a spokeswoman for U.S. Attorney Preet Bharara in New York, and Jack Gillund, a spokesman for the U.S. Attorney’s office in San Francisco, declined to comment. Galleon Management didn’t hold Intel shares as of March 31, 1998, according to the firm’s regulatory filings at the time. By the end of June that year, it accumulated a $39 million stake in Intel, the firm’s largest holding in any single company, the filings show. Over the next nine months, Intel’s stock climbed 60 percent as the chipmaker’s sales and revenue surged on demand for computers in the dot-com boom. Regulatory filings show Galleon reduced its stake to $20.7 million by the end of 1998, and no longer held Intel stock at the end of March 1999. Guilty Plea Khan pleaded guilty in 2001 to one count of wire fraud and was sentenced the following year to six months of home detention, fined $30,000 and ordered to pay $120,000 in restitution, said Joseph Schadler, a spokesman for the Federal Bureau of Investigation, in a phone interview yesterday. The maximum penalty for wire fraud is 20 years in prison and a $250,000 fine. Records of Khan’s criminal case are under seal in federal court in San Jose. Khan, identified by an Oct. 16 SEC complaint as “Tipper A,” is a hedge-fund manager who worked for Galleon in the 1990s and sought to rejoin Rajaratnam in late 2005 when she faced financial difficulties, according to that agency. Khan is identified in the criminal case against Rajaratnam as “CW,” for cooperating witness. The cooperating witness began helping the FBI in November 2007 in its inside trading probe in the hope of receiving a reduced sentence, according to court documents. The witness used inside information to trade securities and had tipped Rajaratnam since 2006, prosecutors said. The person helped federal investigators by “making consensual recordings of four telephone conversations” with Rajaratnam, according to court papers. The witness agreed to plead guilty to charges of conspiracy and securities fraud. Khan, who in May sold her house in Atherton, California, couldn’t be located for comment. Possible Explanation One possible explanation of why nine years passed before someone at Galleon was charged is that prosecutors and the SEC couldn’t demonstrate that the firm traded on the specific information that Khan provided, Henning said. He said it’s also possible that federal securities regulators couldn’t show the information would be material, or something that investors would want to know when making decisions. The 2001 conviction may hurt the government’s insider trading case against Rajaratnam, Henning said, because it raises questions about her reliability and trustworthiness. Those questions in turn mean the government will have to rely more on documentary evidence and wiretaps, he said. “Having a prior conviction, that’s fodder for the defense,” Henning said. “They may not use her as a witness, she may be too tainted.” The case is U.S. v. Kahn, 01-20029, U.S. District Court, Northern District of California (San Jose). To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net ; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net ; David Scheer in New York at dscheer@bloomberg.net .

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Perot-Linked Employee Is Sued by SEC for Alleged Insider Trading on Dell

September 23, 2009

By David Scheer and Jeff Kearns Sept. 23 (Bloomberg) — An employee at a firm affiliated with former U.S. presidential candidate H. Ross Perot was sued by U.S. regulators on claims he illegally made “extremely large and profitable” bets on Perot Systems Corp. based on confidential information about Dell Inc. ’s $3.9 billion bid. The Securities and Exchange Commission filed the lawsuit against Reza Saleh , 53, today at federal court in Dallas. Saleh, an employee of company known as Perot Investments Inc., reaped an $8.6 million profit, the suit said. “This offense was brazen and blatant; our response was swift and certain,” Stephen Korotash , an SEC attorney who handled the investigation, said in an e-mailed statement. “Insider trading hurts investors and harms the integrity of our markets.” Investor demand for Perot’s call options surged in the week before Dell unveiled its biggest-ever acquisition on Sept. 21, sending Perot’s stock up 65 percent to $29.56 that day. Call options, which convey the right to buy stock at a specified price by a certain date, can return more to investors when takeovers are announced than directly buying the target company’s stock. Dell, the second-biggest maker of personal computers, offered $30 a share in cash for Perot, the computer-services provider founded by H. Ross Perot. The acquisition expands Round Rock, Texas-based Dell into the health-care information- technology business, giving the company access to customers such as hospitals and insurance companies. The volume of trading in Perot’s call contracts rose to 8,279 last week, almost double the number during the previous three months combined, according to data compiled by Bloomberg. On Sept. 18, the last day U.S. markets were open before the takeover, trading jumped to a seven-year high. There was no immediate response to messages left at two phone numbers listed in Internet directories for Saleh in Richardson, Texas, which the SEC identified as his home town. The regulator said it didn’t know whether he has a lawyer. Goldman Sachs Group Inc. and Baker Botts LLP advised Perot on the transaction, while Morgan Stanley and Vinson & Elkins LLP helped Dell. To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net .

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Andrew Cuomo To Charge Bank Of America Over Merrill Bonuses

September 14, 2009

NEW YORK (AP) — The New York Attorney General’s office is preparing charges against several high-ranking Bank of America executives over the bank’s alleged failure to disclose details about its acquisition of Merrill Lynch, according to a person familiar with the investigation. Separately, a federal judge on Monday rejected a $33 million settlement BofA reached with the Securities and Exchange Commission over disclosures tied to bonus payments at Merrill. BofA agreed to acquire Merrill in a hurried deal a year ago at the height of the credit crisis.

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Andrew Cuomo To Charge Bank Of America Over Merrill Bonuses

September 14, 2009

NEW YORK (AP) — The New York Attorney General’s office is preparing charges against several high-ranking Bank of America executives over the bank’s alleged failure to disclose details about its acquisition of Merrill Lynch, according to a person familiar with the investigation. Separately, a federal judge on Monday rejected a $33 million settlement BofA reached with the Securities and Exchange Commission over disclosures tied to bonus payments at Merrill. BofA agreed to acquire Merrill in a hurried deal a year ago at the height of the credit crisis.

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